Appendix 4E (rule 4.3A) – Preliminary Final Report for the year ended 31 July 2014
Name of Entity:
ABN:
Current Financial Period Ended:
Previous Corresponding Reporting Period:
Funtastic Limited
94 063 886 199
Year ended 31 July 2014
Year ended 31 July 2013
Results for Announcement to the Market
Revenue from ordinary activities from continuing operations
Revenue from ordinary activities from discontinued operations
Net loss from ordinary activities after tax from continuing operations (all attributable to members of
Funtastic Limited)
Net loss from ordinary activities after tax from discontinued operations (all attributable to members
of Funtastic Limited)
Dividend Information
Interim Dividend – Current reporting period
Final Dividend – Current reporting period
Final Dividend Dates
Ex-dividend date
Record date
Payment date
Details of any dividend reinvestment plan (DRP) in operation
The last date for receipt of an election notice for participation in any dividend reinvestment plan
Net Tangible Liabilities
Net tangible assets per security
$’000
Up/Down
% Movement
124,589
37,867
(10,010)
(25,697)
Up
Down
Down
Down
7.6%
(25.5%)
(216.1%)
(581.5%)
Amount per
Share
(cents)
Franked
amount per
Share (cents)
Tax rate for
Franking Credit
nil
nil
nil
nil
n/a
n/a
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
31 July 2014
31 July 2013
0.06 cents
0.5 cents
Other information
This report is based on the consolidated financial statements which have been audited by Deloitte Touche Tohmatsu.
For a brief explanation of any figures above please refer to the Announcement on the results for the year ended 31 July 2014 and the attached Annual
Financial Report
Annual Report
for the financial year ended
31 July 2014
ACN 063 886 199
Introduction
On behalf of the Board of Directors of Funtastic Limited we present to you our 2014 Annual Report.
The Period in Review
The twelve months ended 31 July 2014 had a number of significant challenges however the Board has continued to
implement their strategy of growth through the continued development and ownership of our own brands and intellectual
property as Funtastic’s core capability has evolved from being a distributor to a global manufacturer and brand builder. This
has seen continued growth in revenue and profitability from our own brands on a global basis.
The twelve months ended 31 July 2014 have been more challenging than expected. Whilst there were exceptional results for
Chill Factor, this was insufficient to offset the soft performance of some of our core agency brands in a continued soft
Australian retail environment. The growth in International markets was substantial, but the benefits were offset by additional
costs incurred in changing distributor in the US as well as increased investment to drive the growth.
On the 31st July 2014 the company sold the Madman group of companies. The performance of the Madman division was
significantly lower than prior year primarily driven by the costs associated converting DVD’s from a sale and return basis to
consignment. The full impact on the Group’s reported result after tax, after taking into account current year’s performance,
cost to change to consignment and final write-down, was a loss after tax of $25.7m. The proceeds of the sale have been used
to reduce debt and strengthen the balance sheet.
Following a continued soft period of trading in Australia from last financial year, the company commenced a program to
reduce Inventory levels at lower than the carrying values. Whilst the program will continue into the next financial year, the
carrying value of the Inventory has been reduced to facilitate the various initiatives. This will improve the cash flow and
reduce the warehousing costs going forwards.
The Group’s reported result under IFRS was a disappointing loss after tax of $35.7m. The Group’s Earnings Before Interest,
Depreciation and Amortisation (EBITDA) from continuing operations was a loss of $820k, compared to profit of $16.8m in the
previous year. The loss includes the write down of inventory and additional costs incurred to clear excess trade inventory.
Despite the poor performance the key achievements during the year which will provide a sound platform to build the
business for the future were:
1. Sale of the Madman Entertainment group of companies.
2. Top line growth of 31% in International markets.
3. Top line growth of 37% for own brands.
4. Reduction of Net debt of $16.8m during the year.
Outlook
The Board is confident that the company will return to profit in 2015 financial year following a re-alignment of the business
structure with greater focus on the key drivers of the business.
Whilst the Australian retail sector is expected to remain soft, the company has strengthened its product portfolio through the
addition of brands such as Rainbow Loom, as well as new products within our own and key agency partners which have
resulted in a broader customer and consumer base.
Funtastic will continue to experience strong growth outside Australia through its own brands with a continued expansion of
the Company’s geographic footprint.
There has been a shift in resources in order to improve operating efficiency, develop new products and enhance our brand
building capabilities that will not only enhance the long term performance of our own brands but that of our key agency
partners.
The Directors would like to thank all of our staff, shareholders, suppliers, key agency partners and customers for their
ongoing loyalty and support.
Shane Tanner
Chairman of the Board
2
TABLE OF CONTENTS
Company Information
Corporate Governance
Directors’ Report
Remuneration Report (Audited)
Auditor’s Independence Declaration
Independent Auditors’ Report
Directors’ Declaration
Consolidated Statement of Profit or Loss and other Comprehensive Income for the year ended 31 July 2014
Consolidated Statement of Financial Position as at 31 July 2014
Consolidated Statement of Changes in Equity for the year ended 31 July 2014
Consolidated Statement of Cash Flows for the year ended 31 July 2014
Notes to the Financial Statements 31 July 2014
NOTE 1:
Application of New and Revised Accounting Standards
NOTE 2:
Significant Accounting Policies
NOTE 3:
Critical Accounting Judgments and Key Sources of Estimation Uncertainty
NOTE 4:
Segment Information
NOTE 5:
Discontinued Operations
NOTE 6:
Revenue
NOTE 7:
Profit for the Year
NOTE 8:
Income Tax
NOTE 9:
Finance Costs
NOTE 10:
Current Assets – Trade and Other Receivables
NOTE 11:
Current Assets – Inventories
NOTE 12:
Other Assets
NOTE 13:
Other Financial Assets
NOTE 14:
Non-current Assets – Plant and Equipment
NOTE 15:
Non-current Assets – Goodwill
NOTE 16:
Non-current Assets – Other Intangibles
NOTE 17
Assets Pledged as Security
NOTE 18:
Current Liabilities – Trade Payables
NOTE 19:
Borrowings
NOTE 20:
Provisions
NOTE 21:
Deferred Purchase Consideration
NOTE 22:
Other Liabilities
NOTE 23:
Other Financial Liabilities
NOTE 24:
Leasing Arrangements
NOTE 25:
Issued Capital
NOTE 26:
Accumulated Losses
NOTE 27:
Reserves
NOTE 28:
Earnings Per Share
3
5
6
12
18
28
29
31
32
33
34
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36
36
39
48
49
50
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52
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55
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59
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TABLE OF CONTENTS
NOTE 29:
Dividends on Equity Instruments
NOTE 30:
Lease Commitments
NOTE 31:
Operating Leases
NOTE 32:
Subsidiaries
NOTE 33:
Notes to the Cash Flow Statements
NOTE 34:
Financial Instruments
NOTE 35:
Share-based Payments
NOTE 36:
Key Management Personnel Compensation
NOTE 37:
Related Party Transactions
NOTE 38:
Remuneration of Auditors
NOTE 39:
Parent Entity Disclosures
NOTE 40:
Subsequent Events
NOTE 41:
Contingent Liabilities
NOTE 42:
General Information
Additional stock exchange information as at 26 September 2014
70
70
71
72
75
77
82
86
86
88
89
89
90
90
91
4
Company Information
Directors
Company Secretary
Registered Office
Principal Administrative Office
Share Registry
Auditors
Bankers
Solicitors
Shane Tanner
Chairman and Independent Non-Executive Director
Nir Pizmony
Managing Director and Chief Executive Officer (appointed
CEO on 1 August 2014)
Stewart Downs
Managing Director and Chief Executive Officer (resigned 31
July 2014)
Paul Wiegard
Executive Director (resigned 31 July 2014)
Craig Mathieson
Non-Executive Director
Stephen Heath
Independent Non-Executive Director
Linda Norquay
Independent Non-Executive Director
Grant Mackenzie
Executive Director (appointed 6 August 2014)
Grant Mackenzie (appointed 1 November 2013)
James Cody (resigned 1 November 2013)
Level 2 Tower 2 Chadstone Place
1341 Dandenong Road Chadstone Vic 3148
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Level 8, 446 Collins Street
Melbourne VIC 3000
Deloitte Touche Tohmatsu
550 Bourke Street
Melbourne Vic 3000
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500 Bourke Street
Melbourne Vic 3000
Clarendon Lawyers
Level 17, Rialto Tower
525 Collins Street
Melbourne VIC 3000
5
Corporate Governance Statement
Limited
Funtastic
The Corporate Governance principles that guide the
(“Funtastic” or
operations of
“Company”) are detailed in this statement. Funtastic
respects and endorses the ASX Corporate Governance
Council’s Principles and Recommendations. The Board
believes that it has been compliant with the spirit of the
ASX Corporate Governance Council’s Principles and
Recommendations throughout the 2014 financial year.
The ASX principles that have been adopted are outlined
below. Where an alternative approach has been adopted,
this is outlined within the relevant section. All these
practices unless otherwise stated, were in place for the
entire year.
Role and Responsibility of the Board
The Board of Directors is elected by the shareholders to
represent the interests of all shareholders, collectively,
and in this regard, its primary purpose is to safeguard the
financial security of Funtastic.
Although responsibility for the operation of the Funtastic
business is delegated to management, the Board remains
responsible for, amongst other things:
establishing, monitoring and modifying Funtastic’s
corporate strategies;
ensuring best practice corporate governance;
appointing the Chief Executive Officer and approving
Board Membership
The members of the Board and details regarding their
appointment, removal, term of office, attendance at
Board meetings and other committee meetings, skills and
experience are detailed in the Directors’ Report. The
Board composition is determined using the following
principles:
the Board should comprise between 3 and 9 directors;
the maximum age for directors is 72;
the Board should comprise directors with a broad
range of skills and experience; and
the term of any appointment is subject to continuing
shareholder approval.
that are
The directors believe that limits on tenure may cause loss
of experience and expertise
important
contributors to the efficient working of the Board. As a
consequence, the Board does not support arbitrary limits
on tenure and regards nominations for re-election as not
being automatic but based on the needs of Funtastic. The
constitution sets out the rules to which Funtastic must
adhere to and which include rules as to the nomination,
appointment and re-election of directors. The constitution
provides for two of the directors to retire and stand for
re-election each year at the Annual General Meeting.
Directors appointed during the year by the Board stand
for re-election at the next Annual General Meeting.
performance
of
Funtastic’s
Board and Director Independence
succession plans;
the
monitoring
management;
ensuring that appropriate risk management systems,
internal control and reporting systems and compliance
frameworks are in place and are operating effectively;
monitoring financial results;
ensuring that business is conducted ethically and
transparently;
approving decisions concerning Funtastic’s capital,
including capital restructures and dividend policy; and
ensuring effective external disclosure policies so that
the market is fully informed on all matters that may
influence the share price.
Board members have complete and open access to
management. The Company Secretary provides advice
and support to the Board and is responsible for the
Company’s day to day governance framework.
Structure of the Board
The Board comprises four non-executive directors and
two executive directors (the Chief Executive Officer and
the Chief Finance Officer/Chief Operating Officer). The
details of each director’s qualifications, experience and
skills are set out on page 12 of the Annual Report.
The chairman of the Board is a non-executive director and
is elected by the Board. The chairman is responsible for
the management of the affairs of the Board and
represents the Board in periods between Board meetings.
6
The Board has assessed the criteria for independence as
outlined in the ASX Corporate Governance Council’s best
practice recommendation 2.1. Independent directors of
Funtastic are those not involved in the day to day
management of the company and are free from any real
or reasonably perceived business or other relationship
that could materially interfere with the exercise of their
unfettered and independent judgement.
Currently, three of the six directors are considered to be
independent. It is the Board’s view that Mr Shane Tanner,
Ms Linda Norquay and Mr Stephen Heath are
is not
independent directors. Mr Craig Mathieson
considered to be an independent director due to him
being a substantial shareholder.
Mr Nir Pizmony and Mr Grant Mackenzie are Executive
independent
Directors and are deemed not to be
directors.
Regardless of whether directors are defined as
to bring
independent, all directors are expected
independent views and judgement to Board deliberations.
that
The Board strongly believes
the degree of
commitment, depth of experience and independence of
thought present in the current structure is appropriate
and will best serve the company and all its shareholders
at this stage of its development. The Board periodically
assesses the independence of each director.
Corporate Governance Statement
Board and Director Independence (continued)
Independent Professional Advice (continued)
Funtastic operates in an entrepreneurial environment and
requires, and benefits from, the passionate involvement
of directors who have been either instrumental in the
business, and or who have specialised knowledge of, and
expertise in, this business sector.
Funtastic has noted the ASX Corporate Governance
Council’s best practice recommendation that
listed
companies have an independent director as Chairman of
the Audit, Risk and Compliance Committee. This
Committee is comprised of four non-executive directors.
Mr Craig Mathieson is the chairman of the committee.
The Board considers that three independent directors on
the committee are sufficient for the independence of the
committee.
Work of Directors
Materials for Board meetings are circulated in advance.
The agenda is formulated with input from the Chief
Executive Officer and the Chairman. Directors are free to
nominate matters for inclusion on the agenda for any
Board or Board committee meeting.
The Board is provided with reports from management on
the financial performance of each business unit. The
reports include details of all key financial results reported
against budgets approved by the Board, with regular
updates on forecasts for the year. The Chief Executive
Officer and Chief Financial Officer attest to the integrity of
the financial reports provided to the Board each meeting.
Similarly, the written statement provided to the Board, in
relation to Funtastic’s full year accounts states that
Funtastic’s financial reports present a true and fair view,
in all material respects. Further,
it confirms that
Funtastic’s financial condition and operational results are
in accordance with relevant accounting standards.
Non-executive directors spend approximately thirty days
each year on Board business and activities including Board
and committee meetings, visits to operations and meeting
employees, customers, business associates and other
stakeholders.
The Chairman regularly meets with the Chief Executive
Officer to review key issues and performance trends
affecting the business of Funtastic.
Conflict of Interest
In accordance with the Corporations Act 2001 and
Funtastic’s Constitution, directors must keep the Board
advised on an ongoing basis, of any interest that could
potentially conflict with those of Funtastic. Where the
Board believes that a significant conflict exists, the
director concerned does not receive the relevant Board
papers and is not present at the meeting while the item is
being considered.
Independent Professional Advice
Each director has the right to seek
professional advice at the expense of Funtastic.
independent
Prior written approval of the chairman is required, which
will not be unreasonably withheld. All directors are made
aware of the professional advice sought and obtained.
Communication and disclosure
The company complies with all relevant disclosure laws
and Listing Rules prescribed by the ASX and has policies
and procedures designed to ensure accountability at a
senior management level for that compliance.
The Company Secretary is accountable to the Board,
through the Chairman, on compliance and governance
matters.
Funtastic is committed to effective communication with
its investors so as to give them ready access to balanced
and understandable information.
Director competencies
The Board plans annual self-assessments of its collective
performance, and its subcommittees. This exercise takes
into consideration the collective directors’ competency,
skills, experience and expertise. Where necessary,
Funtastic will provide the required resources to assist
directors in improving their performance.
the Company’s
New directors are provided with a letter of appointment
setting out
their
responsibilities, rights and the terms and conditions of
their appointment. All new directors participate in an
induction program which covers the operation of the
Board and
its committees and financial, strategic,
operations and risk management issues.
expectations,
Ethical Standards
All directors, officers and employees are expected to
perform their duties professionally and act with the
utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of Funtastic and
its brands. The Board oversees the identification and
implementation of procedures and development of
policies in respect of the maintenance of appropriate
ethical standards. Funtastic has a Code of Conduct, which
sets out the standards as to how directors and employees
of Funtastic are expected to act. Employees are required
to read the updated Employee Code of Conduct in the
performance of
sign an
acknowledgement stating that they have read and
understood this document.
their duties and
to
Dealings in Funtastic shares by Directors, Officers
and Employees
The Board permits directors to acquire shares in Funtastic.
It is recommended that all employees do not buy or sell
shares in the company at any time they are aware of any
material price sensitive information that has not been
made public, and are reminded of the laws against
“insider trading”.
7
Corporate Governance Statement
Dealings in Funtastic shares by Directors, Officers
and Employees (continued)
Certain “Designated Officers”, including all directors and
senior executives, are also prohibited from trading during
certain “blackout” periods. These blackout periods are:
a) From the close of the accounts (on 31 January each
year) to 2 business days after the publication to the
ASX of the half-year financial results; i.e. the Appendix
4D (a 2-business day blackout period would apply
from the publication to the ASX of the final half-year
financial report in the event that they were materially
different from the Appendix 4D results);
b) From the close of the accounts (on 31 July each year)
to 2 business days after the publication to the ASX of
the full-year financial results; i.e. the Appendix 4E (a 2-
business day blackout period would apply from the
publication to the ASX of the final full-year financial
report in the event that they were materially different
from the Appendix 4E results); and
c) Forty eight hours after the public release of any
market guidance update.
Exceptions to this prohibition can be approved by the
Chairman (for other directors) or the Company Secretary
(for all other employees) in circumstances of financial
hardship. Prohibitions also apply to financial instruments
related to Funtastic shares and to trading in the shares of
other entities using
through
employment with Funtastic.
information obtained
In accordance with provisions of the Corporations Act
2001 and the Listing Rules of the Australian Stock
Exchange (ASX), directors or their related entities advise
the ASX of any transaction conducted by them in buying
or selling any shares in Funtastic.
Diversity
Funtastic is an equal opportunity employer and makes its
recruitment decisions based on the best person for the
role with no discrimination on the grounds of gender or
any other factor. The company is committed to being a
business which is an appealing and rewarding place to
work for men and women.
Funtastic has established a Diversity Policy which is
published on the company’s website. As at 31 July 2014
the group’s mix of employees was as follows:
General employees
Middle managers
Senior managers
Board
Total
Female Male
Total
48
11
9
1
69
13
10
18
6
47
61
21
27
7
116
8
Diversity (continued)
Funtastic has elected not to establish targets with regard
to gender mix within its workforce on the grounds that, as
a small business such targets could place unreasonable
to operate
restrictions on
effectively.
the company’s ability
Ethical Compliance
that all
to ensure
its best endeavours through contract
Funtastic uses
negotiations
its products are
manufactured in accordance with local and internationally
accepted labour, environmental and employment laws.
Funtastic is working to ensure that manufacturing occurs
under working conditions that meet legal standards and
without the use of child, forced or prison labour.
Nomination Committee
The current members of the Nomination Committee are
Mr Shane Tanner (Chairman), Mr Craig Mathieson, Ms
Linda Norquay and Mr Stephen Heath.
in ensuring that the Board
The role of the Nomination Committee is to assist the
is comprised of
Board
individuals who are best able
the
responsibilities of a Director, having regard to the law and
the highest standards of governance, by:
to discharge
assessing the skills, knowledge, experience and
diversity required on the Board and the extent to
which they are represented;
establishing processes for the identification of suitable
candidates for appointment to the Board; and
overseeing succession planning for the Board.
Nomination Committee Charter and
Responsibilities
The principal purposes of the Committee are to:
establish a formal and transparent procedure for the
selection and appointment of new directors to the
Board;
regularly review the succession plans in place for
membership of the Board to ensure that an
appropriate balance of skills, experience and expertise
is maintained;
review the time commitment required from a non-
executive director and whether non-executive
directors are meeting this requirement; and
take all reasonable steps to ensure that all individuals
nominated for appointment to the Board as a non-
executive director, expressly acknowledge prior to
their election, that they are able to fulfil the
responsibilities and duties expected of them.
committee
The
appropriate, from external experts.
seeks advice and guidance, as
Corporate Governance Statement
Audit, Risk and Compliance Committee
The members of the Audit, Risk and Compliance
Committee are Mr Craig Mathieson (Chairman), Mr Shane
Tanner, Ms Linda Norquay and Mr Stephen Heath.
Audit, Risk and Compliance Committee Charter and
Responsibilities
The Committee’s key responsibilities and functions are to:
monitor the company’s relationship with the external
auditor (including the rotation of external auditor
personnel on a regular basis) and the external audit
function generally;
oversee the adequacy of internal control systems in
relation to the preparation of financial statements and
reports; and
oversee the process of identification and management
of business, financial and commercial risks.
Meetings of the Audit, Risk and Compliance
Committee
The Audit, Risk and Compliance Committee may have in
attendance or by
such members of
invitation
management or others as it may deem necessary to
provide appropriate information or explanations.
The Audit, Risk and Compliance Committee meet at least
three times per year and more frequently if required. The
External Auditor attends Audit, Risk and Compliance
Committee meetings when requested by the Audit, Risk
and Compliance Committee Chairman.
Reporting by the Audit, Risk and Compliance
Committee
The Chairman of the Audit, Risk and Compliance
Committee ordinarily reports to the full Board after
committee meetings. The Audit, Risk and Compliance
its role and
Committee reports matters regarding
responsibilities, including:
the system of internal control, which management has
established to safeguard the company’s assets;
processes are in place such that accounting records
are properly maintained in accordance with statutory
requirements; and
processes exist to reasonably guarantee that financial
information provided to investors and the Board is
reliable and free of material misstatement.
The following are intended to form part of the normal
procedures for the Committee’s audit responsibility:
recommending to the Board the appointment and
removal of the external auditors and reviewing the
terms of engagement;
approving the audit plan of the internal and external
auditors;
Reporting by the Audit, Risk and Compliance
Committee (continued)
monitoring the effectiveness and independence of the
external auditor; obtaining assurances that the audit is
conducted in accordance with the Auditing Standards
and all other relevant accounting policies and
standards;
providing recommendations to the Board as to the
need for and the role of an internal audit function;
reviewing and appraising the quality of audits
conducted by the internal and external auditors and
confirming
and
responsibilities;
respective
authority
their
monitoring the relationship between management
and the external auditors;
determining the adequacy, effectiveness, reliability,
and appropriateness of administrative, operating and
internal control systems and policies;
evaluating
compliance with approved policies,
controls, and with applicable accounting standards
and other requirements relating to the preparation
and presentation of financial results;
overseeing financial reporting and disclosure practice
and the resultant information; and
reviewing (in consultation with management and
external auditors)
the
accounting principles adopted by management in the
composition and presentation of financial reports and
approving all significant accounting policy changes.
the appropriateness of
Recognising and managing risk
The responsibility for risk management and oversight is
coordinated through the Audit, Risk and Compliance
in conjunction with management. The
Committee,
committee’s specific
function with respect to risk
management is to review and report to the Board that:
the company’s ongoing risk management program
effectively identifies areas of potential risk;
adequate policies and procedures are designed and
implemented to manage identified risks; and
appropriate remedial action is undertaken to redress
areas of weakness.
The following are intended to form part of the normal
procedures for the Committee’s risk responsibility:
determine the adequacy and effectiveness of the
management reporting and systems used to monitor
adherence to policies and guidelines and
limits
approved by the Board for management of financial
risks;
determine the adequacy and effectiveness of financial
and operational
risk management systems by
reviewing risk registers and reports from management
and external auditors;
9
Corporate Governance Statement
Recognising and managing risk (continued)
Management Certification Process (continued)
evaluating the structure and adequacy of business
is compliance with
there
regulations;
relevant
laws and
Funtastic’s risk management, internal compliance and
systems are operating efficiently and
control
effectively in all material respects; and
all material business risks have been identified and
communicated to the Board.
Internal Audit Function
The internal audit function is absorbed within the head
office finance function. The finance function is able to
conduct internal control reviews and assessments as and
when required by the Audit, Risk and Compliance
Committee. The Board received and reviewed the
minutes of the meetings of all Board committees
including the Audit, Risk and Compliance Committee.
The external audit function is separate and independent
of the above functions.
Remuneration and Evaluation Committee
The members of the Remuneration and Evaluation
Committee are Mr Stephen Heath (Chairman), Mr Craig
Mathieson, Mr Shane Tanner and Ms Linda Norquay.
The Remuneration and Evaluation Committee
is
appointed by the Board primarily to monitor, review,
assess, recommend and approve:
remuneration policies and practices which will serve
to attract and retain executives and directors who will
create value for shareholders. These policies and
reward
practices should
executives and directors, having regard to the
performance of the Company, the performance of the
individual,
remuneration
environment;
responsibly
fairly and
general
and
the
succession planning for Senior Executives who report
directly to the Chief Executive Officer;
the remuneration, superannuation and
incentive
policies for Senior Executives who report directly to
the Chief Executive Officer; and
all equity and cash-based remuneration plans.
The Remuneration and Evaluation Committee provides
additional support for the human resources strategy of
Funtastic. It assists the Board by ensuring that the
appropriate people, people related strategies, policies
and procedures are in place to support Funtastic’s vision
and values and its strategic and financial goals.
continuity plans;
determine the appropriateness of insurances on an
annual basis;
reviewing and making recommendations on the
strategic direction, objectives and effectiveness of
financial and operational risk management policies;
overseeing the establishment and maintenance of
processes to ensure that there is:
an
system of
adequate
control,
management of business risks and safeguard of
assets; and
internal
a review of internal control systems and the
operational effectiveness of the policies and
procedures related to risk and control.
evaluating exposure
to
investigations of allegations of fraud or malfeasance;
fraud and monitoring
reviewing
corporate
governance practices
for
completeness and accuracy;
determining the adequacy and effectiveness of legal
compliance systems; and
providing recommendations as to the reporting of and
propriety of related party transactions.
Management Certification Process
A management certification process has been introduced
across the business. The process serves the following
purposes:
provide assurance to the Board to support their
approval of the annual financial reports;
formalise the process by which the executive team
sign-off on those areas of risk responsibility delegated
to them by the Board; and
ensure a true and fair view of Funtastic’s financial
statements.
The key steps in the certification process are as follows:
completion of a questionnaire by key management
covering information that is critical to the financial
statements, risk management and internal controls;
and
review by the Audit, Risk and Compliance Committee
of all exceptions and management comments.
Certification by the Chief Executive Officer and Chief
Financial Officer to the Board that:
the financial statements provide a true and fair view,
in all material respects of Funtastic’s
financial
condition and operating results;
the financial statements provide a sound system of
risk management and internal compliance and control;
10
Corporate Governance Statement
Remuneration and Evaluation Committee Charter
and Responsibilities
The committee is responsible for monitoring, reviewing,
reporting and recommending to the Board with respect to
each of the following:
the company's policy for determining executive and
non-executive
remuneration,
directors’
superannuation, and
incentives as well as any
retention or other compensation payments, and any
proposed amendments to the policy;
remuneration includes base pay, incentive payments,
equity awards, retirement rights and service contracts;
the implementation of the remuneration policy;
the proposed specific remuneration for each non-
executive and executive director, including the Chief
Executive Officer, having regard to independent advice
and the remuneration policy. The committee will need
to determine whether any shareholder approvals are
required. The
individual non-
remuneration of
executive directors will ultimately be determined by
in aggregate by the
the Board and approved
shareholders in accordance with the Corporations Act
2001 and the ASX Listing Rules;
the proposed specific remuneration and other benefits
for the direct reports of the Chief Executive Officer
and the design of all
including
performance hurdles; and
the total proposed payments from any executive
incentive plan.
incentive plans,
The committee seeks advice and guidance, from external
experts, as appropriate.
The review of the performance of the Chief Executive
Officer is undertaken by the Remuneration and Evaluation
Committee, which recommends to the Board any
remuneration adjustment or incentive payment.
The review of the performance of senior management is
undertaken by the Chief Executive Officer who provides a
recommendation to the Remuneration and Evaluation
Committee on any remuneration adjustments or incentive
payments. The committee provides its recommendation
to the Board for approval.
Remuneration Policy
Funtastic’s remuneration policies and practices in relation
to directors and senior management are disclosed in the
remuneration report contained in the Directors’ Report.
Remuneration Disclosure
The Remuneration Report contained in the Directors’
Report discloses the directors’, non-executive directors’
and key management personnel’s remuneration, benefits,
incentives and allowances where relevant.
11
Directors’ Report
Directors
Your Directors present their report on the Group consisting of Funtastic Limited and the entities it controlled at the end of, or
during, the year ended 31 July 2014.
The following persons were directors of Funtastic Limited during or since the end of the financial year:
Director
Shane Tanner
FCPA, ACIS
Chairman and Independent Non-
executive director
Nir Pizmony
Managing Director and Chief Executive
Officer
Stewart Downs (Resigned 31 July 2014)
Managing Director and Chief Executive
Officer
Craig Mathieson
B.Bus
Non-executive director
Paul Wiegard (Resigned 31 July 2014)
Executive Director
Particulars
Appointed to the Board in March 2009 as an Independent Non-executive
director and appointed as Chairman of the Board effective from the AGM on 21
May 2010. Mr Tanner is Chairman of the Nomination Committee and a member
of the Remuneration and Evaluation Committee and the Audit, Risk and
Compliance Committee.
He is Chairman of Vision Eye Institute Ltd and Paragon Care Ltd. Mr Tanner is a
former CEO of Mayne Nickless Diagnostic Services and Director of Sterihealth
Ltd. Mr Tanner has a vast commercial and financial experience.
Appointed to the board in August 2009 as an Executive director. He was
appointed as Chief Executive Officer, succeeding Stewart Downs, effective 1
August 2014. Mr Pizmony has over twenty-five years experience in consumer
products. He has founded, developed and subsequently sold two successful toy
companies. Mr Pizmony’s knowledge and reputation in the toy industry is well
proven both in Australia and globally.
Joined the Board in August 2009. Mr Downs has been the Chief Executive
Officer of Funtastic Limited since February 2009 until his resignation on 31 July
2014.
Mr Downs has had an expansive career in branded consumer businesses across
Australia, New Zealand and Asia successfully leading turnarounds in Australia
and developing new businesses in Asia. He has held roles across sales,
marketing, finance and in the last 10 years senior general management
positions.
He has a Bachelor of Business and Commerce majoring in Economics, Business
Administration and Accountancy.
Appointed to the board in August 2009 as a Non-executive director. Mr
Mathieson is Chairman of the Audit, Risk and Compliance Committee, a member
of the Remuneration and Evaluation Committee and of the Nomination
Committee.
Mr Mathieson is CEO of The Mathieson Group. He was Managing Director of
DMS Glass from 2001 to 2007. He has a banking and commercial background
gained while working with the Business Banking division of ANZ Bank and the
Property Finance division of St George Bank.
leading
Appointed to the Board in October 2011. Mr Wiegard is a founder and joint
Managing Director of Madman Entertainment, the
independent
theatrical, rights management and home entertainment company in Australasia
and a division of Funtastic, until its sale on 31 July 2014. Mr Wiegard is also a
Board member of the Australian Video Software Distributors, the Melbourne
International Film Festival and the Australian
Independent Distributors
Association. Mr Wiegard brings an impressive depth of knowledge and
experience of the entertainment industry. Mr Wiegard was an executive
director until his resignation on 31 July 2014 as a consequence of the sale of
Madman Entertainment.
12
Directors’ Report
Stephen Heath
Independent Non-executive director
Linda Norquay
B.Com, CA, GAICD
Independent Non-executive director
Appointed to the Board in October 2010 as an Independent Non-executive
director. Mr Heath is a member of the Audit, Risk and Compliance Committee,
the Nomination Committee and Chairman of the Remuneration and Evaluation
Committee.
Mr Heath has extensive retail experience comprising 18 years across iconic
Australian retail brands including Harvey Norman, Rebel Sport, and Godfreys.
Mr Heath was previously Managing Director of International Cleaning Solutions
Holdings which has retail and wholesale interests in Australia, New Zealand, and
the UK. Prior to this Mr Heath was CEO of Rebel Sport during its public listing on
the ASX. Mr Heath also spent 5 years with Sharp Corporation managing the
retail accounts of major retailers such as Harvey Norman, Myer, David Jones and
Kmart. Mr Heath is currently Managing Director and CEO of Fantastic Holdings
Limited.
Appointed to the Board in September 2011 as an Independent Non-executive
director. Ms Norquay is a member of the Audit, Risk and Compliance
Committee, the Nomination Committee and the Remuneration and Evaluation
Committee.
Ms Norquay is currently Chief Financial Officer at Illyria Pty. Ltd. Ms Norquay
brings a wealth of financial and strategic experience to Funtastic Limited and
has previously held senior financial and management roles at Allco Finance
Group, Macquarie Bank Limited and Barclays Bank Plc in London.
Grant Mackenzie (Appointed 6 August
2014)
B.Acc, CA, MBA, GAICD
Executive Director
Appointed as Chief Financial Officer and Company Secretary on 1 November
2013, as Chief Operating Officer on 1 August 2014 and joining the Board of
Directors on 6 August 2014. Mr Mackenzie has over 20 years experience in
various senior executive roles with significant experience in brand management.
His most recent role prior to joining Funtastic was the Finance Director for
Brown-Forman Australia.
Directorships of other listed companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial period
are as follows:
Director
Shane Tanner
Craig Mathieson
Stephen Heath
Company Secretary
Company
Vision Eye Institute Ltd
Paragon Care Limited
Period
2004 to current
2005 to current
Great Western Exploration Ltd
2011 to current
Fantastic Holdings Limited
2013 to current
Mr Mackenzie was appointed to the position of Company Secretary on 1 November 2013. He succeeded Mr James Cody, who
resigned on the same date.
Principal activities
The Group’s principal continuing activity during the period was as a brand builder and distributor of toys, sporting,
confectionary and homeware products, operating globally.
13
Directors’ Report
Subsequent events
There has not been any other matter or circumstance occurring subsequent to the end of the financial year 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 future financial years.
Environmental regulations
The Group is not required to hold any Environmental Protection Authority Licences.
Review operations
Key strategic achievements:
• Continued expansion and development of the Chill FactorTM brand.
• Continued success of Funtastic owned brands and intellectual property, revenue up 36%.
• Sale of Madman Entertainment.
• International business growth.
• Reduction of debt by $16.8m.
Key operating achievements:
• Restructured focussed company structure.
• Expanded range of Chill Factor TM products.
• Exciting development of Pillow Pets, and stationery lines.
• Building a stronger manufacturing capability in Hong Kong and China.
• Initiation of Inventory reduction program.
• Strengthened operating procedures.
Key financial results continuing operations:
• NPAT(i) loss of $10.0m.
• EBITDA(i) loss of $0.8m.
• Finance costs fall by 31% to $4.1m.
• Underlying borrowings reduced by $16.8m.
Key Financials (Continuing Activities)
AUDm
Revenue
EBITDA(i)
PBT(i)
NPAT(i)
Basic EPS (cents)
Dividend per share (cents)
ROE(ii)
FY14
124.6
(0.8)
(9.3)
(10.0)
(1.51)
N/A
(41.8)%
FY13
115.7
16.0
6.4
8.6
1.60
0.10
16%
% Change
8%
105%
246%
216%
194.%
N/A
57.8%
Net Debt ($m)
Gearing(iii)
-
(i)Includes $1.6m gain on sale of QuickSmart IP and assets in March 2014 (2013: includes $3.3m gain on early settlement of deferred
acquisition consideration);
(ii)NPAT/average shareholder equity;
(iii)Net debt/shareholder equity;
(iv)Net Debt/EBITDA;
(v)EBIT/finance cost;
31.7
48.6
47%
47%
35%
14
Directors’ Report
Outlook
The Board is confident that performance will improve in FY15, where there were a number of significant costs incurred in
FY14 and where improved controls will avoid similar expenditure in the future. The Company structure has been stream-lined
to provide greater focus on the key issues of the business.
The overall retail environment is not expected to improve dramatically, however the Company has strengthened its portfolio
enabling growth in a broader customer and consumer base. The growth in International markets will continue with additional
new products, line extensions and additional markets.
Dividends
During the year, the Directors declared and paid a final dividend on the 27 November 2013 for the year ended 31 July 2013 of
0.5 cents per share. In respect of the financial year ended 31 July 2014, no dividends have been declared.
Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission,
relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report and Financial Statements
have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest
dollar.
Share Options
Options granted to directors and executives of the Company
During or since the end of the financial year, the Company granted options for no consideration over unissued ordinary
shares in the Company to the following Directors and Executives, as part of their remuneration:
Directors and executives
Number of options
granted during the year
Number of ordinary
shares under option
Directors
P. Wiegard
N. Pizmony
Executives
T. Anderson
G. Mackenzie
P.S. Lopez
100,000
6,333,333
100,000
300,000
1,000,000
-
5,000,000
-
300,000
1,200,000
(i), The ESLS is treated in substance as an option for accounting purposes and is therefore disclosed as share options in the Directors’
Report, Remuneration Report and in the Notes to the financial statements. Further details on the ESLS are set out in Note 35 of the
financial statements.
Unissued shares under option
At the date of this report, unissued shares of the Company under option are:
(a) Executive share options (ESOPs) – Nil balance
Number of
options held
Date of
forfeiture
Forfeited
shares
Vested,
forfeited
shares
Share
price at
forfeiture
date
Exercise
price
Value of
forfeited
options
4,000,000
31/07/2014
4,000,000
1,333,333
$0.077
$0.135
1,000,000
31/07/2014
1,000,000
-
$0.077
$0.207
5,000,000
5,000,000
1,333,333
-
-
-
KMP
Stewart Downs
James Cody
Total
15
Directors’ Report
Unissued shares under option
(b) Employee share loan scheme (ESLS)
Grant date
8 July 2013
Number of shares
Exercise price(i)
Vesting date
Expiry date(ii)
27 January 2014
1,700,000
$0.1660 6 6 November 2016
2,700,000
1,000,000
$0.1599
1 January 2016
N/A
N/A
Of the 2,400,000 options granted on 8 July 2013, 1,400,000 had been forfeited due to resignations of employment. On 27
January 2014, 2,200,000 options were granted. Out of these, 500,000 had been forfeited due to resignations of employment.
None of these forfeited shares had vested and they had a nil value at the forfeited dates.
(c)
Unissued options
Grant date
23 December 2013
23 December 2013
Number of shares
Exercise price
Vesting date
Expiry date
2,500,000
2,500,000
5,000,000
$0.100
31 December 2013
31 December 2014
$0.135
31 December 2013
31 December 2014
On 23 December 2013, unlisted options of 6,333,333 were issued to Mr Nir Pizmony with shareholder approval as an
incentive component of Mr Nir Pizmony’s remuneration package. On 10 August 2014, 1,333,333 vested options have expired.
(i)Refer to Note 35 of the accompanying notes for further details on the ESLS exercise price
(ii)The expiry date is on the date the employee ceases employment with the Company
Indemnity of officers and auditors
During the financial year the Company paid a premium in respect of a contract insuring the directors of Funtastic Limited and
all executive officers of the Company and of any related body corporate against a liability incurred as such director, secretary
or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of
the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law
indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability
incurred by such an officer or auditor.
Meetings of Directors
The number of meetings of the Company’s directors held during the year ended 31 July 2014 and the number of meetings
attended by each director were:
Remuneration Committee
Board of directors
Audit, Risk and Compliance Committee
S Tanner
S Downs
C Mathieson
N Pizmony
L Norquay
S Heath
P Wiegard
A
1
-
1
-
1
1
-
B
1
-
1
-
1
1
-
A
11
11
10
10
12
10
10
B
12
12
12
12
12
12
12
A
2
-
2
-
2
2
-
B
2
-
2
-
2
2
-
Columns A indicates the number of meetings attended during the year the Director was a member of the Board and/or Committee(s).
Columns B indicates the number of meetings eligible to attend during the year the Director was a member of the Board and/or
Committee(s).
There is also a Nominations Committee but no meetings were held during the year since no changes to Board composition were
contemplated.
16
Directors’ Report
Directors’ shareholdings
Securities in the Company or in a related body corporate in which directors have a relevant interest as at the date of this
report were:
Director
S Tanner
S Downs
C Mathieson
N Pizmony
S Heath
P Weigard
L Norquay
G Mackenzie
Option holdings
Issuing entity
Ordinary Shares
Share Options
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
500,000
2,672,776
111,382,853
29,238,601
666,667
1,900,698
N/A
-
-
-
-
5,000,000
-
-
-
Funtastic Limited
3,568,405
300,000
The number of options over ordinary shares in the Company held during and after the end of the financial year by each
director of Funtastic Limited and each of the key management personnel (KMP) of the Group, including their related entities,
are set out in the Remuneration Report.
The Board has discretion to waive any vesting conditions or other restrictions to the ESLS in accordance with the ESLS plan
rules provided such amendments do not widely prejudice the rights of existing participants.
Changes in state of affairs
On 31 July 2014, the Company executed and completed a sale agreement to dispose of Madman Entertainment (“Madman”).
The sale consideration was $21,500,000, plus or minus ‘Working Capital Adjustment’ (amount by which Completion Working
capital exceeds or less than the Target Working Capital of $14,143,000). The loss recognised in these financial statements is
$23,824,000.
Other than the above, there was no significant change in the state of affairs of the consolidated entity during the financial
year.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in Note 38 to the financial statements. The directors are satisfied that the provision of non-audit services, during the year, by
the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 38 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit, Risk and Compliance Committee, for the following
reasons:
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the
Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on
page 30 of this annual report.
17
Directors’ Report
Remuneration Report (Audited)
Details of key management personnel
The following directors and key management personnel of the Group during or since the end of the financial year were:
Name
Shane Tanner
Stewart Downs
Position
Period in position during the year
Chairman and Independent Non-executive Director
Full year
Managing Director and Chief Executive Officer
Resigned 31 July 2014
Craig Mathieson
Non-executive Director
Nir Pizmony
Executive Director
Full year
Full year
Stephen Heath
Linda Norquay
Paul Wiegard
Tim Anderson
James Cody
Managing Director and Chief Executive Officer
Appointed 1 August 2014
Independent Non-executive Director
Independent Non-executive Director
Full year
Full year
Executive Director
Resigned 31 July 2014
Joint Managing Director – Madman Entertainment
Resigned 31 July 2014
Chief Financial Officer & Company Secretary
Resigned 1 November 2013
Pedro Sangil Lopez
Group Manager – Asia
Full year
Grant Mackenzie
Chief Financial Officer & Company Secretary
Chief Operating Officer
Appointed 1 November 2013
Appointed 6 August 2014
Remuneration policy for directors and executives
Principles of Compensation
The Remuneration and Evaluation Committee makes specific recommendations to the Board on compensation packages and
other terms of employment for directors and other senior executives. The Board then considers these recommendations and
makes appropriate determinations, with compensation packages set at a level that is intended to attract and retain
executives capable of managing the consolidated entity’s diverse operations.
Compensation of the senior executives is reviewed on an annual basis by the Remuneration and Evaluation Committee
having regard to personal and corporate performance and relevant comparative information. Compensation for senior
executives comprises both fixed compensation and an “at risk” component. The “at risk” component comprises a short term
incentive payment based on a combination of the company’s results and individual performance levels, and a long term
incentive component pursuant to the Funtastic Executive Share Option Plan and the Funtastic Employee Performance Share
Rights Plan and Employee Share Loan Scheme (ESLS).
The payment of short-term incentives is dependent on the achievement of operating and financial targets set at the
beginning of each year and assessed on an annual basis by the Board.
Compensation and other terms of employment for senior executives are formalised in service agreements.
The Group’s executive remuneration is directly related to the performance of the Group through the linking of short and long
term incentives to certain financial performance measures. These performance measures, as described below, are selected
by the Board of directors and considered relevant to the management of the diverse operations of the Group and to
effectively align the long-term interests of the Directors, executives and shareholders. The performance conditions are
assessed periodically by the Remuneration and Evaluation Committee to ensure they remain relevant.
Compensation and company performance
Funtastic Limited’s Net Profit after Tax (NPAT) and Diluted Earnings per Share (EPS) growth have been the central
performance measures for the Company’s incentive plans for executives since listing. Other measures include revenue
growth, return on average funds employed, net operating cash flow, total shareholder return and other business objectives.
In 2014 no Short Term Incentive (‘STI”) eligible payments were made (2013:$nil).
18
Directors’ Report
Remuneration Report (Audited) (continued)
Compensation and company performance (continued)
The table below shows the Group’s earnings in the reporting period and the previous four financial periods/years as well as
an indication of the Group’s value over the corresponding period:
Year ended(iii)
31 July 2014
Year ended(iii)
31 July 2013
Year ended(iii)
31 July 2012
Year ended(iii)
31 July 2011
7 months(iii)
ended
31 July 2010
NPAT ($’000)(i)
EPS Basic (Cents)(ii)
Diluted EPS (Cents)(ii)
Total Dividends ($’000)
Year End Share Price ($)
(35,707)
13,962
10,436
(38,205)
(3,579)
(5.39)
(5.39)
3,335
0.077
2.58
2.57
2,702
0.17
2.77
2.77
Nil
0.16
(11.2)
(11.2)
Nil
0.07
(1.05)
(1.05)
Nil
0.22
Shares on Issue (No.)
669,869,723
644,569,723
537,799,605
340,997,682
340,997,682
Market Capitalisation ($’000)
51,580
109,577
86,048
23,870
75,019
(i)NPAT from group operations
(ii)Basic & Diluted EPS from group operations
(iii)Includes Madman Entertainment group of companies
Components of Compensation
Fixed Compensation
The terms of employment for all executive management contain a fixed compensation component, which is expressed in
local currency. This fixed component is set in accordance with the market rate for a comparable role by reference to
appropriate external benchmark
individual’s responsibilities, performance,
qualifications, experience and location. An executive’s compensation is also reviewed on promotion.
information and having regard to an
Fixed compensation includes contributions to superannuation and pension plans in accordance with relevant legislation or as
contractually required. Fixed compensation is structured as a total employment cost package which may be delivered to the
executive as a mix of cash and prescribed non-financial benefits at the executive’s discretion. There are no guaranteed pay
increases in any senior executive’s contract.
Benefits for termination of employment may be payable subject to the circumstances of the termination and within the
terms of the employment contract.
At risk Compensation
Annual Bonus
The annual cash bonus represents the actual entitlements payable under Funtastic’s annual short-term incentive plan
(STI). Details are set out below of the amount available for the bonus and the performance conditions that were required
to be satisfied in order for the bonus to be payable.
The STI plan is a cash-based plan that involves linking specific targets (predominantly financial) with the opportunity to
earn incentives based on a percentage of fixed compensation.
Performance measurements have been applied to each component of STI and accordingly, entitlements were
determined with regard to the executive’s level and area of responsibility. Performance against the objectives was
determined and incentives and entitlements assessed against the audited financial results.
The STI is weighted where 50% is payable in the event that the Group’s earnings before interest, tax, depreciation and
amortisation (EBITDA) for the 12 months from 1 August 2013 to 31 July 2014 exceeds the groups financial objectives and
50% where EBITDA exceeds the growth stretch target. Each individual’s bonus is based on a percentage of their total
package as follows:
Stewart Downs
-
- Nir Pizmony
- Grant Mackenzie
50%
50%
40%
-
-
-
Paul Wiegard
Tim Anderson
Pedro Sangil Lopez
50%
50%
30%
19
Directors’ Report
Remuneration Report (Audited) (continued)
Remuneration of Key Management Personnel compensation
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment
benefits
Other long-term
employee benefits
Share-based payments
Year ended
31 July 2014
Salary and
fees
$
Directors
Shane Tanner
Stewart Downs
Craig Mathieson
Nir Pizmony
Stephen Heath
Linda Norquay
Paul Wiegard
Sub-Totals
Executives
James Cody(1)
Tim Anderson
Pedro Sangil Lopez
Grant Mackenzie(ii)
Sub-Totals
TOTALS
(i) 3 months.
(ii) 9 months.
123,600
487,750
56,697
377,982
61,957
61,800
321,101
1,490,887
94,953
317,956
207,170
234,114
854,193
2,345,080
Cash Bonus
$
-
-
-
-
-
-
-
-
-
-
53,349
-
53,349
53,349
Non-
monetary
benefits
$
-
16,378
-
-
-
-
-
16,378
-
797
-
-
797
17,175
Superannuation
$
-
51,380
5,261
35,072
220
-
29,794
121,727
8,652
26,515
2,591
21,748
59,506
181,233
Options Under
Employee Share loan
scheme
$
Total
$
Consisting of
options /PSRs
%
-
123,600
0.00%
(807)
865,747
(0.01)%
-
-
-
-
61,958
680,114
62,177
61,800
(403)
357,337
(403)
256,497
(403)
351,710
14,760
277,870
3,234
259,096
17,188 1,145,173
15,978 3,358,906
0.00%
37.75%
0.00%
0.00%
(0.01)%
11.97%
(0.01)%
(0.01)%
5.31%
1.24%
1.61%
8.51%
Long service
leave
$
Termination
Benefits
$
-
-
(17,735)
328,781
-
10,294
-
-
6,845
(596)
-
-
-
-
-
(1,560)
154,855
Options
$
-
-
-
256,766
-
-
-
-
-
-
-
-
-
-
-
154,855
483,636
256,766
6,845
-
-
5,285
4,689
20
328,781
256,766
(1,210) 2,212,733
Directors’ Report
Remuneration Report (Audited) (continued)
Remuneration of Key Management Personnel compensation
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment
benefits
Other long-term
employee benefits
Year ended
31 July 2013
Salary and
fees
$
Cash Bonus
$
Non-monetary
benefits
$
Superannuation
$
Long service leave
$
Share-based payments
Termination
Benefits
$
Options
$
Options Under
Employee Share loan
scheme
$
Consisting of
options /
PSRs
%
Total
$
Directors
Shane Tanner
Stewart Downs
Craig Mathieson
Nir Pizmony
Stephen Heath
Linda Norquay
Paul Wiegard
Sub-Totals
Executives
James Cody
Tim Anderson
Pedro Sangil Lopez
Sub-Totals
TOTALS
123,600
484,985
56,697
380,323
58,872
61,800
321,101
1,487,378
324,295
319,695
220,251
864,241
2,351,619
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,504
-
-
-
-
-
5,504
12,612
-
-
12,612
18,116
-
123,600
807
518,555
-
-
-
-
61,816
414,857
61,816
61,800
403
356,546
1,210
1,598,990
403
403
403
358,461
351,020
223,321
1,209
932,802
2,419
2,531,792
-
1.22
-
-
-
-
0.11
0.42
3.63
0.11
0.18
1.48
0.81
-
25,000
5,119
34,127
2,944
-
28,992
96,182
20,795
24,872
2,667
48,334
-
2,259
-
407
-
-
6,050
8,716
356
6,050
-
6,406
144,516
15,122
21
Directors’ Report
Remuneration Report (Audited) (continued)
Share Options/Share Performance Right Plans
The Company’s long-term incentive arrangements (LTI) are designed to link executive compensation with growth in
shareholder value through the grant of options or rights over equity securities (shares) in the Company. Options are granted
under the Company’s Executive Share Option Plan (ESOP) which was approved by shareholders and directors of the Company
on 2 August 2000. Performance Share Rights are granted under the Funtastic Employee Performance Share Rights Plan
(EPSR) which was established in 2005.
Participation in the ESOP and/or EPSR is offered to executives who are able to influence, or who have the potential to
influence, the generation of shareholder wealth, as assessed against the LTI performance hurdles.
In general, eligible executives are offered annual grants under the plans which in total are designed to be the equivalent of
up to 30% of their annual fixed compensation on an annualised basis.
Options and/or rights are granted for no consideration. The performance periods, performance hurdles and other terms and
conditions are set by the Board for each grant of options or rights. The options or rights vest and become exercisable only
when the specific criteria for each grant are met.
Share Options/Performance Share Rights granted
During the financial year, the following share-based payment arrangements were in existence:
Share-based
payment
Share option
Share option
Share option
Share option
Share option
Share option
Share option
Share option
Series
ESOP 33(i)
Grant date
Expiry date
20/03/2008
02/09/2013
ESOP 35
21/08/2009
10/08/2014
Grant date
average
fair value
Number of
shares at
31 July 2014
Vesting date
Performance
conditions
$0.115
$0.072
1,333,333
-
31/08/2011
21/08/2012
09/11/2011 &
09/11/2012
ESOP 37
ESLS(ii),(iii)
ESLS(ii),(iii)
Unlisted(ii)
Unlisted(ii)
Unlisted(ii)
01/04/2010
01/04/2015
$0.119
-
08/07/2013
27/01/2014
N/A
N/A
$0.1599
200,000
01/01/2016
$0.1660
1,300,000
06/11/2016
23/12/2013
10/08/2014
$0.1350
1,333,333
23/12/2014
23/12/2013
31/12/2014
$0.1000
2,500,000
31/12/2014
23/12/2013
31/12/2014
$0.1350
2,500,000
31/12/2014
2
3
4
N/A
N/A
N/A
N/A
N/A
Total
(i)Executive Share option (ESOP) series 33 lapsed on 2 September 2013. No options were exercised. The fair value of these options at 2
9,166,666
September 2013 was $nil.
(i)There are no performance conditions attached to this share option. The only vesting condition is for participants to remain in
employment until 1 January 2016 for tranche 1 and 6 November 2016 for tranche 2. The design of the ESLS is to link executive
compensation with continuing service commitment to Funtastic and growth in shareholder value.
(ii)The expiry date is on the date the employee ceases employment with Funtastic whether vested or not.
The performance conditions attached to the Company’s share options and Performance Share Rights are outlined below:
Share Options - Performance condition 3 (type 3)
For each of the three years, one third of the options will vest on the anniversary of employment provided there is a 30%
compound share growth based on the exercise price of 13.5 cents. In such case the following performance hurdles are
required to be achieved:
a) in year 1 the share price to be no less than 17 cents;
b) in year 2 the share price to be no less than 23 cents; and
c) in year 3 the share price to be no less than 30 cents.
If the performance hurdle rate is not achieved for any particular year the allocation of options for that year will still vest if the
cumulative performance hurdle for the following year or years is achieved. In such cases the vested options roll over to the
year when the cumulative performance hurdle is achieved.
22
Directors’ Report
Remuneration Report (Audited) (continued)
Share Options - Performance condition 3 (type 3) (continued)
Performance hurdles will be achieved if the requisite share price is maintained for any six months of the relevant 12 month
period, based on the volume weighted average market price of the shares on the ASX for each month commencing on the
first day of employment with Funtastic.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one
ordinary share.
The exercise price of options is based on the weighted average price at which the company’s shares are traded on the
Australian Stock Exchange during the five days immediately before the options are granted. Amounts receivable on the
exercise of options are recognised as share capital.
Share Options - Performance condition 4 (type 4)
Type 4 options are identical to type 3 options in every regard, except that for each of the three years, one third of the options
will vest on the anniversary of employment provided there is a 30% compound share growth based on the exercise price of
20.7 cents. In such case the following performance hurdles are required to be achieved:
a) in year 1 the share price to be no less than 27 cents;
b) in year 2 the share price to be no less than 35 cents; and
c) in year 3 the share price to be no less than 45 cents.
Employee Share Loan Scheme
During the 2013 financial year, the Company established the Funtastic Employee Share Loan Scheme (ESLS). At the Board’s
discretion, eligible employees were invited to participate in the scheme.
The Funtastic Employee Share Loan Scheme Trust (Trust) was established for the purpose of purchasing and holding shares
on behalf of participants to satisfy exercises made under the ESLS operated by Funtastic. Under the ESLS, an interest free
limited recourse loan (a loan where the participant’s risk will be limited to the shares issued to the participant under or in
connection with the plan) to the value of the grant date issue price per share was granted to each participant. Each
participant directs Funtastic to pay the loan amount to the trustee of the Trust and the trustee to use the loan amount to
acquire shares on behalf of the Participant, which are held until the exercise date of the option under which they were
purchased
The loan is repayable by the participant when the options become exercisable, being after the vesting date and subject to the
satisfaction of the vesting conditions. When the options are exercisable, in the event that the balance of the loan is less than
the estimated market value of shares that secure the loan less estimated transaction costs, a participant may request
Funtastic to sell the shares on the ASX and that the funds received from the sale of those shares, less any costs incurred in
connection with the sale and less the loan balance be remitted to the participant.
The shares are eligible to participate in dividends declared by the Company. Any dividends paid will be utilised to reduce the
carrying value of each scheme participant's individual loan balance on the dividend payment date.
In the event that the loan balance is greater than the sale proceeds, a participant may request Funtastic to transfer the
shares which secure the loan to the participant provided that the participant remits any outstanding balance of the loan to
Funtastic as repayment of the loan.
In the event that an employee ceases employment with Funtastic, is entitled to vested shares and does not direct Funtastic
to sell or transfer such Shares to the participant and the balance of the loan is greater than the estimated proceeds amount,
Funtastic must buy back and cancel such shares with the consideration from the buyback being the full satisfaction of the
then outstanding balance of the loan. The participant will have no further entitlements to or in respect of the shares.
No performance conditions are attached to the ESLS and the only vesting condition is a service condition which requires
participants to remain in employment until 1 January 2016 for Tranche 1 and 6 November 2016 for Tranche 2. The options
become exercisable only when the vesting conditions are met. (See Note 35)
The expiry date of the ESLS options is on the date the employee ceases employment with Funtastic. Further details on the
ESLS, the ESLS Trust and the ESLSs interest free limited recourse loan are set out in Note 35 of the financial statements.
The board has discretion to waive any vesting conditions or other restrictions attached to the ESLS in accordance with the
ESLS plan rules provided that such amendments do not unduly prejudice the rights of existing participants
23
Directors’ Report
Remuneration Report (Audited) (continued)
Shares provided on exercise of remuneration options
No ESOP or ESLS options were exercised during the current financial year or preceding financial year.
Key management personnel equity holdings
The number of ordinary shares and options over ordinary shares in the company held during the financial year by each
director of Funtastic Limited and each of the key management personnel of the consolidated entity, including their related
entities, are set out below.
Share options
Year ended
31 July 2014
Executive Directors
Balance at
the start of
the year
Granted
during
the year
Shares
expired
during the
year
Shares forfeited
during the year
Balance at
the end of
the year
Vested and
exercisable at
the end of the
year
Stewart Downs
4,600,000
-
(200,000)
(3,066,667)
1,333,333
1,333,333
Nir Pizmony
Paul Weigard
Executives
Tim Anderson
James Cody
-
6,333,333
200,000
100,000
200,000
1,200,000
100,000
-
Pedro Sangil Lopez
200,000
1,000,000
Grant Mackenzie
-
300,000
-
-
-
-
-
-
-
6,333,333
(300,000)
(300,000)
(1,200,000)
-
-
-
-
-
1,200,000
300,000
-
-
-
-
-
-
Totals
6,400,000
7,833,333
(200,000)
(4,866,667)
9,166,666
1,333,333
Balance at
the start of
the year
Granted
During
the year
Shares
expired
during the
year
Shares forfeited
during the year
Balance at
the end of
the year
Vested and
exercisable at
the end of the
year
Year ended
31 July 2013
Executive Directors
Stewart Downs
4,200,000
400,000
Nir Pizmony
Paul Wiegard
Grant Mackenzie
Executives
Tim Anderson
James Cody
Pedro Lopez
Totals
-
-
-
-
1,000,000
-
-
200,000
-
200,000
200,000
200,000
5,200,000
1,200,000
Performance Share Right holdings
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,600,000
1,333,333
-
200,000
-
200,000
1,200,000
200,000
-
-
-
-
-
-
6,400,000
1,333,333
There were no Performance Share Rights held by management personnel of the Group at the beginning and/or during the
financial year (2013: nil).
24
Directors’ Report
Remuneration Report (Audited) (continued)
Key management personnel equity holdings (continued)
Ordinary shares
The numbers of shares in the company held during the financial year by each key management personnel of the Group,
including their related entities, are set out below.
Year ended 31 July
2014
Directors
Shane Tanner
Stewart Downs(i)
Nir Pizmony
Craig Mathieson
Steven Heath
Linda Norquay
Paul Wiegard(i)
Executives
James Cody (i)
Tim Anderson(i)
Pedro Sangil Lopez
Grant Mackenzie
Totals
Balance at the start of
the year
Shares purchased
privately during the
year
Disposal during the
year
Balance at the end
of the period
400,000
-
30,185,131
111,382,853
666,667
-
-
-
-
-
-
142,634,651
100,000
-
-
-
-
-
-
-
-
3,634,733
3,568,405
7,303,138
-
-
(946,530)
-
-
-
-
-
-
-
-
500,000
-
29,238,601
111,382,853
666,667
-
-
-
-
3,634,733
3,568,405
(946,530)
148,991,259
Year ended 31 July
2013
Balance at the start of
the year
Shares purchased
privately during the
year
Disposal during the
year
Balance at the end of
the period
Directors
Shane Tanner
Stewart Downs
Nir Pizmony
Craig Mathieson
Steven Heath
Linda Norquay
Paul Wiegard
Executives
James Cody
Tim Anderson
Pedro Sangil Lopez
Totals
400,000
2,672,776
30,685,131
111,382,853
666,667
-
1,900,698
-
1,555,870
-
149,263,995
(i) Resigned during the year ended 31 July 2014
25
-
-
-
-
-
-
-
-
-
-
-
-
-
(500,000)
-
-
-
-
-
-
-
400,000
2,672,776
30,185,131
111,382,853
666,667
-
1,900,698
-
1,555,870
-
(500,000)
148,763,995
Directors’ Report
Remuneration Report (Audited) (continued)
Service Agreements
Remuneration and other terms of employment for the Chairman, Managing Director, Non-Executive Directors, Chief
Executive Officer and the other executives are formalised in service agreements/employment letters. Each of these allow for
the provision of performance-related cash bonuses, other benefits including car allowances and participation, when eligible,
in the Funtastic Limited Employee Share Option Plan, the Funtastic Limited Employee Performance Share Rights Plan and/or
the Funtastic Limited Employee Share Loan Scheme.
Other major provisions of the service agreements relating to the remuneration of Directors and Executives are set out below:
Shane Tanner – Chairman & Independent Non-executive Director
Term of the agreement - Full-Time permanent and no specific term.
Payment of a termination benefit on early termination by the employer is not applicable.
Stewart Downs – Managing Director and Chief Executive Officer (resigned 31 July 2014)
Term of the agreement - full-time permanent and no specific term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6
months’ base salary.
Notice period 6 months.
Craig Mathieson – Non-executive Director
Term of the agreement - full-time permanent and no specific term.
Payment of a termination benefit on early termination by the employer is not applicable.
Nir Pizmony – Executive Director. As Managing Director, Chief Executive Officer (appointed 1 August 2014)
Term of the agreement - full-time permanent and no specific term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6
months’ base salary.
Notice period 6 months.
Paul Wiegard – Executive Director (resigned 31 July 2014)
Term of the agreement - full-time permanent and no specific term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6
months’ base salary.
Notice period 6 months
Stephen Heath – Non-executive Director
Term of the agreement - full-time permanent and no specific term.
Payment of a termination benefit on early termination by the employer is not applicable.
Linda Norquay – Non-executive Director
Term of the agreement - full-time permanent and no specific term.
Payment of a termination benefit on early termination by the employer is not applicable.
James Cody - Chief Financial Officer and Company Secretary (resigned 1 November 2013)
Term of the agreement - full-time permanent and no specific term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 3
months base salary.
Notice period 3 months.
Tim Anderson – Joint Managing Director - Madman Entertainment (resigned 31 July 2014)
Term of the agreement – full-time permanent and no specified term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6
months base salary.
Notice period 6 months
Pedro Sangil Lopez – Group Manager - Asia
Term of the agreement – full-time permanent and no specified term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6
months base salary.
Notice period 6 months
26
Directors’ Report
Remuneration Report (Audited) (continued)
Service Agreements (continued)
Grant Mackenzie - Chief Financial Officer & Company Secretary (appointed 1 November 2013). As Chief Operating Officer
(appointed 6 August 2014)
Term of the agreement - full-time permanent and no specific term.
Payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 12
weeks base salary.
Notice period 12 weeks.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act
2001.
On behalf of the Directors,
Shane Tanner
Chairman of the Board
Melbourne
30 September 2014
27
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX 111
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
The Board of Directors
Funtastic Limited
Level 2, Tower 2, Chadstone Place
1341 Dandenong Road,
CHADSTONE VIC 3148
30 September 2014
Dear Board Members
Funtastic Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Funtastic Limited.
As lead audit partner for the audit of the financial statements of Funtastic Limited for the financial year
ended 31 July 2014, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Chris Biermann
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
28
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX 111
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Funtastic Limited
Report on the Financial Report
We have audited the accompanying financial report of Funtastic Limited, which comprises the
statement of financial position as at 31 July 2014, the statement of profit or loss and other
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year
as set out on pages 31 to 90.
Directors’ Responsibility for the Financial Report
The directors of the company 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 Note 2, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, 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 company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
29
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Funtastic Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of Funtastic Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 July 2014
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 18 to 27 of the directors’ report for the
year ended 31 July 2014. 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.
Opinion
In our opinion the Remuneration Report of Funtastic Limited for the year ended 31 July 2014,
complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Chris Biermann
Partner
Chartered Accountants
Melbourne, 30 September 2014
30
Directors’ Declaration
The directors declare that:
a) in the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable;
b) in the directors’ opinion the attached financial statements are in compliance with International Financial Reporting
Standards, as stated in Note 2 to the financial statements;
c) in the directors’ opinion, the attached financial statements and Notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the Group; and
d) the directors have been given the declarations required by section 295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418 and has
entered into a deed of cross guarantee as contemplated in that order. The nature of the deed of cross guarantee is such that
each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the
deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC
Class Order applies, as detailed in Note 32 to the financial statements will, as a Group, be able to meet any obligations or
liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors,
Shane Tanner
Chairman of the Board
Melbourne
30 September 2014
31
Consolidated Statement of Profit or Loss and other Comprehensive Income
for the year ended 31 July 2014
Note
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Continuing operations
Revenue
Cost of goods sold
Gross profit
Investment income
Warehouse and distribution expenses
Marketing and selling expenses
Administration expenses
Gain on early settlement of deferred consideration
Gain on sale of QuickSmart
Earnings before interest, taxation, depreciation and
amortisation expenses (EBITDA)
Finance costs
Depreciation and amortisation expenses
(Loss) profit before income tax
Income tax benefit (expense)
(Loss) profit for the year from continuing operations
6
7
9
7
8
Discontinued operation
(Loss) profit from discontinued operation, net of tax 5
(Loss) profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign
operations
(Loss) profit on cash flow hedges taken to equity
Other comprehensive (loss) income for the year (net of tax)
Total comprehensive (loss) income for the year attributable
to members of Funtastic
Earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Earnings per share – continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
124,589
(90,689)
33,900
619
(8,678)
(11,579)
(16,652)
-
1,570
(820)
(4,052)
(4,418)
(9,290)
(720)
(10,010)
(25,697)
(35,707)
37
(359)
(322)
115,738
(72,688)
43,050
612
(8,173)
(10,385)
(12,330)
3,272
-
16,046
(5,852)
(3,817)
6,377
2,248
8,625
5,337
13,962
173
1,962
2,135
(36,029)
16,097
(5.39)
(5.39)
(1.51)
(1.51)
2.58
2.57
1.60
1.59
28
28
28
28
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying
notes.
32
Consolidated Statement of Financial Position as at year ended 31 July 2014
Note
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Current Assets
Cash
Trade and other receivables
Inventories
Other financial assets
Other assets
Current tax assets
Total Current Assets
Non-Current Assets
Plant and equipment
Goodwill
Other intangibles
Deferred tax assets
Other investment
Other assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade payables
Borrowings
Provisions
Deferred purchase consideration
Other liabilities
Other financial liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Deferred tax liabilities
Other liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
33
10
11
13
12
8
14
15
16
8
12
18
19
20
21
22
23
19
20
8
22
25
26
27
4,909
17,138
16,375
-
7,853
5
46,280
1,568
49,995
17,379
12,654
29
469
82,094
128,374
17,280
29,357
884
-
4,584
180
52,285
7,299
485
235
310
8,329
60,614
67,760
4,305
36,024
23,964
1,552
10,362
139
76,346
2,919
78,845
21,049
12,876
-
15,765
131,454
207,800
19,968
43,169
1,830
924
20,411
663
86,965
9,708
1,093
6,300
787
17,888
104,853
102,947
208,372
(141,515)
903
67,760
204,497
(102,473)
923
102,947
The above statement of financial position should be read in conjunction with the accompanying notes.
33
Consolidated Statement of Changes in Equity as at year ended 31 July 2014
Share
Capital
$’000
Accumulated
Losses
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity-settled
Employee
Benefits
Reserve
$’000
Cash Flow
Hedging
Reserve
$’000
Total
$’000
Balance at 1 August 2012
186,725
(113,733)
(1,186)
1,616
(1,665)
71,757
Payment of dividends
Profit for the year
Other comprehensive gain
Total comprehensive income
Recognition of share-based
payments
-
-
-
-
-
Issue of ordinary shares under the
share placement
15,000
Issue of ordinary shares under
dividend re-investment
Issue of ordinary shares for asset
acquisition
Share issue costs
Tax effect of costs
2,702
586
(736)
220
(2,702)
13,962
-
13,962
-
-
-
-
-
-
-
-
173
173
-
-
-
-
-
-
-
-
-
-
23
-
-
-
-
-
-
-
(2,702)
13,962
1,962
2,135
1,962
16,097
-
-
-
-
-
-
23
15,000
2,702
586
(736)
220
Balance at 31 July 2013
204,497
(102,473)
(1,013)
1,639
297
102,947
-
-
(3,335)
(35,707)
(359)
(322)
(359)
(36,029)
-
-
302
3,875
67,760
Payment of Dividends
Loss for the year
Other comprehensive loss
Total comprehensive (loss)
income
Recognition of share-based
payments
-
-
-
-
-
Issue of ordinary shares re Chill
Factor Global acquisition
3,875
(3,335)
(35,707)
-
(35,707)
-
-
-
-
37
37
-
-
-
-
-
-
302
-
Balance at 31 July 2014
208,372
(141,515)
(976)
1,941
(62)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
34
Consolidated Statement of Cash Flows for the year ended 31 July 2014
the year ended 3 20
Note
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Income taxes paid
Interest and other costs of finance paid
Net cash inflow from operating activities
33(c)
Cash Flows from Investing Activities
Interest and other investment income received
Payments for acquisition of businesses
Payments for plant and equipment
Payments for other intangible assets
Proceeds from sale of business
5, 33(d)
Proceeds from sale of plant and equipment
Net cash inflow (outflow) from investing activities
Cash Flows from Financing Activities
Proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Dividends paid to owners of the Company
Borrowings transaction costs
Share issue transaction costs
Net cash (outflow) inflow from financing activities
Net increase in Cash Held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held
in foreign currencies
Cash and cash equivalents at the end of the year
33
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
167,558
(162,268)
151,584
(140,393)
5,290
(76)
(3,432)
1,782
619
(529)
(198)
(2,894)
21,861
-
18,859
-
2,700
(19,469)
(3,283)
(130)
-
(20,182)
459
4,305
145
4,909
11,191
(311)
(5,266)
5,614
612
(5,133)
(2,072)
(3,422)
-
1
(10,014)
18,287
5,000
(13,121)
(2,687)
(156)
(736)
6,587
2,187
2,257
(139)
4,305
The above statement of cash flows should be read in conjunction with the accompanying notes.
35
Notes to the Financial Statements 31 July 2014
NOTE 1:
Application of new and revised Accounting Standards
1.1
periods)
Standards and Interpretations affecting amounts reported in the current period (and/or prior
The following new and revised Standards and Interpretations have been adopted in the current year and may have affected
the amounts reported in these financial statements.
a) Standards affecting presentation and disclosure
(i)
AASB 13 ‘Fair value measurement’ (2011)
AASB 13 provides a single source of guidance on how fair value is measured and disclosed, and replaces the fair value
measurement guidance that is currently dispersed throughout Australian Accounting Standards. The scope of AASB 13 is
broad; the fair value measurement requirements of AASB 13 apply to both financial instrument and non-financial instrument
items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements,
except for share-based payment transactions that are within the scope of AASB 2 ‘Share-based Payment’, leasing
transactions that are within the scope of AASB 117 ‘Leases’, and measurements that have some similarities to fair value but
are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment
assessment purposes). The Group has applied AASB 13 for the first time in the current financial year.
(ii)
AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management
Personnel Disclosure Requirements’
AASB 2011-4 removes the individual key management personnel disclosure requirements in AASB 124 ‘Related Party
Disclosures’. As a result, the Group only discloses the key management personnel compensation in total and for each of the
categories required in AASB 124.
In the current year, the individual key management personnel disclosure previously required by AASB 124, is now disclosed in
the remuneration report due to an amendment to Corporations Regulations 2001 issued in June 2011.
b) Standards and Interpretations affecting the reported results or financial position
(i)
AASB 10 ‘Consolidated Financial Statements’
AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated
financial statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10 changes the definition of
control such that an investor controls an investee when (i) it has power over an investee; (ii) it is exposed, or has rights, to
variable returns from its involvement with the investee; and (iii) has the ability to use its power to affect returns. All three of
these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has
been included in AASB 10 to explain when an investor has control over an investee.
AASB 10 does not have a material impact on the reported results or financial position as entities that are not wholly-owned
are dormant or not operational.
(ii)
AASB 12 ‘Disclosure of Interests in Other Entities’
AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,
associates and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more extensive
disclosures in the consolidated financial statements
AASB 12 does not have a material impact on the reported results or financial position as entities that are not wholly-owned
are dormant or not operational.
36
Notes to the Financial Statements 31 July 2014
NOTE 1:
Application of new and revised Accounting Standards (continued)
1.2
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
Standard/Interpretation
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
AASB 9
amending standards(i)
‘Financial
Instruments’, and the relevant
AASB 1031 ‘Materiality’ (2013)
AASB 2012-3 ‘Amendments to Australian Accounting
Standards – Offsetting Financial Assets and Financial
Liabilities’
AASB 2013-3 ‘Amendments to AASB 136-Recoverable
Amount Disclosures for Non-Financial Assets’
AASB 2013-4 ‘Amendments to Australian Accounting
Standards – Novation of Derivatives and Continuation of
Hedge Accounting’
AASB 2013-5 ‘Amendments to Australian Accounting
Standards – Investment Entities’
AASB 2013-9 ‘ Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality and
Financial Instruments’
INT 21 ‘Levies’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’
- Part A: ‘Annual Improvements 2010-2012 and
2011-2013 Cycles’
- Part B:
‘Defined Benefit Plans: Employee
Contributions (Amendments to AASB 119)
- Part C: ‘Materiality’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’- Part D: ‘Consequential Amendments’ arising
from AASB 14’
AASB 2014-1 ‘Amendments to Australian Accounting
Standards’ – Part E: ‘Financial Instruments’
AASB 14 ‘Regulatory Deferral Accounts’
1 January 2017
1 January 2014
31 July 2018
31 July 2015
1 January 2014
31 July 2015
1 January 2014
31 July 2015
1 January 2014
31 July 2015
1 January 2014
31 July 2015
1 January 2014
1 January 2014
31 July 2015
31 July 2015
1 July 2014
31 July 2015
1 January 2016
31 July 2017
1 January 2015
1 January 2016
31 July 2016
31 July 2017
(i)The AASB has issued the following versions of AASB 9 and the relevant amending standards:
AASB 9 ‘Financial Instruments’ (December 2009), AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9’,
AASB 2012-6 ‘Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures’
AASB 9 ‘Financial Instruments’ (December 2010), AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9
(December 2010)’, AASB 2012-6 ‘Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and
Transition Disclosure’.
In December 2013 the AASB issued AASB 2013-9 ‘Amendment to Australian Accounting Standards – Conceptual Framework, Materiality
and Financial Instruments’, Part C – ‘Financial Instruments’ This amending standard has amended the mandatory effective date of AASB 9
to 1 January 2017. For annual reporting periods beginning before1 January 2017, an entity may early adopt either AASB 9 (December 2009)
or AASB 9 (December 2010) and the relevant amending standards.
At the date of authorisation of the financial statements, the following IASB standards and IFRIC Interpretations were also in
issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued.
The potential impact of the above Standards on the reported results or financial position are yet to be assessed.
37
Notes to the Financial Statements 31 July 2014
NOTE 1:
Application of new and revised Accounting Standards (continued)
1.2
Standards and Interpretations in issue not yet adopted (continued)
Standard/Interpretation
Accounting for Acquisitions of
Operations (Amendments to IFRS 11)
Interests
in Joint
Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38)
IFRS 15 ‘Revenue from Contracts with Customers’
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
1 January 2016
31 July 2017
1 January 2016
1 January 2017
31 July 2017
31 July 2018
38
Notes to the Financial Statements 31 July 2014
NOTE 2:
Significant accounting policies
Going concern basis (continued)
Statement of compliance
These financial statements are general purpose financial
statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of
the
the
consolidated financial statements of the Group.
financial statements comprise
law. The
For the purpose of preparing the consolidated financial
statements the Company is a for profit entity.
Accounting Standards
include Australian Accounting
Standards. Compliance with Australian Accounting
Standards ensures that the financial statements and notes
comply with International Financial Reporting Standards
(IFRS).
The financial statements were authorised for issue by the
directors on 30 September 2014.
The Company is a company of the kind referred to in ASIC
in
Class Order 98/0100, dated 10 July 1998, and
in the
accordance with that Class Order amounts
director’s report and the financial report are rounded off
to the nearest thousand dollars, unless otherwise
indicated.
Basis of preparation
The financial report has been prepared on the basis of
historical cost, except for derivative financial instruments
that have been measured at fair value. Cost is based on
the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars,
unless otherwise stated.
Going concern basis
Despite the poor performance in the current financial
year, the loss from continuing operations of $9,290,000
(2013: profit $6,377,000) was primarily driven by a write-
down in the carrying value of the inventory and additional
discounts to clear excess retail inventory.
The sale of Madman Entertainment at the end of the
financial year has enabled the Group to restructure the
organisation, continue to develop and grow owned
brands and drive growth of the key agency brands.
Various initiatives have been implemented which will
reduce the operational costs in the longer term and
improve the working capital of the business.
The sale of Madman Entertainment has also enabled the
Group to significantly reduce its debt. The Group is
currently in the process of undertaking a review of its
borrowing facilities with the objective of establishing
appropriate facilities that are aligned with the future
growth plans of the company. This review is being
undertaken with the support of the National Australia
Bank.
39
is a net current asset deficiency of
Whilst there
$6,005,000 (2013: $10,619,000), the financial statements
have been prepared on a going concern basis, due to the
fact that of the total current borrowings of $36,656,000
(2013: $52,877,000), $25,427,000 (2013: $30,479,000)
relate to trade finance facilities that will be available to
the Group until at least 31 October 2015.
The Group had operating cash inflows of $1,782,000 for
the period (2013: $5,614,000), and is expected to return
to a profit with steady long term growth, improved
working capital and continuing reduction of debt.
(a) Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and entities
controlled by the Company (its subsidiaries) (referred to
as “the Group” in these financial statements). Control is
achieved when the Company:
Has the power over the investee;
is exposed, or has rights, to variable returns from its
involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above.
When the Company has less than majority of the voting
rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee
unilaterally. The Company considers all relevant facts and
circumstances in assessing whether or not the Company’s
voting rights in an investee are sufficient to give it power,
including:
the size of the Company’s holding of voting rights
relative to the size and dispersion of holdings of the
other vote holders;
potential voting rights held by the Company, other
vote holders or other parties;
rights arising from other contractual arrangements;
and
any additional facts and circumstances that indicate
that the Company has, or does not have, the current
ability to direct the relevant activities at the time
decisions need to be made, including voting patterns
at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the
Company losses control of the subsidiary. Specifically,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated
statement of profit or loss and other comprehensive
Notes to the Financial Statements 31 July 2014
(a) Basis of consolidation (continued)
(b)
Income tax (continued)
income from the date the Company gains control until the
date the Company ceases to control the subsidiary.
loss and each
Profit or
component of other
comprehensive income are attributed to the owners of
the Company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to the
owners of the Company and to the non-controlling
interests even if this results in the non-controlling interest
having a deficit balance.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies.
All intra-Group assets and liabilities, equity, income and
expenses and cash flows relating to transactions between
in full on
members of the Group are eliminated
consolidation.
(b)
Income tax
Current tax
(i)
The income tax expense or revenue for the year is the tax
payable or receivable on the current year’s taxable
income based on the national income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between
the tax bases of assets and liabilities and their carrying
amounts in the financial statements and to unused tax
losses.
(ii) Deferred tax
Deferred tax is accounted for using the balance sheet
liability method. Assets and liabilities are recognised for
temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates which are enacted, or
substantively enacted, for each jurisdiction. The relevant
tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure
the deferred tax asset or liability.
An exception is made for certain temporary differences
arising from the initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation
to these temporary differences
in a
transaction, other than a business combination, that at
the time of the transaction did not affect either
accounting profit or taxable profit or loss.
if they arose
The carrying amount of deferred tax assets is reviewed at
the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
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 controlled entities where the
parent entity 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.
(iii) Current and deferred tax for the period
Current and deferred tax balances attributable to
amounts recognised directly in equity are also recognised
directly in equity.
in
the
tax-consolidated
(iv) Tax Consolidation
The company and its wholly-owned Australian resident
entities are part of a tax-consolidated Group under
Australian taxation law. Funtastic Limited is the head
entity
Tax
expense/revenue, deferred tax liabilities and deferred tax
assets arising from temporary differences of the members
of the tax-consolidated Group are recognised in the
separate financial statements of the members of the tax-
consolidated Group using the “separate taxpayer within
Group” approach by reference to the carrying amounts in
the separate financial statements of each entity and the
tax values applying under tax consolidation.
Group.
Due to the existence of a tax funding arrangement
between the entities in the tax-consolidated Group,
amounts are recognised as payable to or receivable by the
company and each member of the Group in relation to
the tax contribution amounts paid or payable between
the parent entity and the other members of the tax-
consolidated Group in accordance with the arrangement.
Further information about the tax funding arrangement is
detailed in Note 8 to the financial statements.
(c) Foreign currency translation
Functional and presentation currency
(i)
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. Financial statements are presented in Australian
is Funtastic Limited’s functional and
dollars, which
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign
currencies are recognised
income statement,
except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
in the
Translation differences on non-monetary items, such as
equities held at fair value through profit or loss, are
reported as part of the fair value gain or loss.
40
Notes to the Financial Statements 31 July 2014
(c) Foreign currency translation (continued)
(e) Revenue (continued)
(iii) Group companies
The results and financial position of all the Group entities,
(none of which has the currency of a hyperinflationary
economy), that have a functional currency different from
into the
the presentation currency, are translated
presentation currency as follows:
assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
income and expenses for each profit or loss presented
are translated at the average exchange rates (unless
this is not a reasonable approximation of the
(iii) Group companies (continued)
cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other currency instruments designated
as hedges of such investments, are taken to equity. When
is sold or borrowings repaid a
a foreign operation
proportionate share of such exchange differences are
recognised in the profit or loss as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising on the
acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the
closing rate.
Interest income is recognised on a time proportionate
basis using the effective interest rate method.
Management fee revenue is recognised in accordance
with the entitlement to fees for the management services
provided and is brought to account on an accrual basis.
(f) Rental Income
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over
the lease term.
(g) Plant and Equipment
Plant and equipment are stated at cost less accumulated
depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the item.
Depreciation is calculated on a straight line or diminishing
value basis to write off the net cost of each item of plant
and equipment over the shorter of its expected useful life
and the lease term. Estimates of remaining useful lives are
made on a regular basis for all assets, with annual
reassessments for major items.
The cost of improvements to or on leasehold properties is
amortised over
the
improvement to the Group. The expected useful lives are
as follows:
the estimated useful
life of
Plant and equipment:
2.5 - 10 years
Leasehold improvements:
5 Years
(d) Cash and cash equivalents
(h) Loans and receivables
Cash and cash equivalents includes cash on hand and
deposits at call which are readily convertible to cash on
hand and are subject to an insignificant risk of changes in
value. Bank overdrafts are shown within borrowings in
current liabilities in the balance sheet.
(e) Revenue
Revenue is measured at the fair value of the consideration
received or receivable. Revenue is reduced for estimated
customer returns, discounts, rebates and GST paid.
to
the
specified
Revenue from the sale of goods is recognised when a
Group entity has delivered products to the customer.
Delivery does not occur until the products have been
shipped
risks of
obsolescence and loss have been transferred to the
customer and the customer has accepted the products in
accordance with the sales contract, the acceptance
provisions have
lapsed or the Group has objective
evidence that all criteria for acceptance have been
satisfied.
location,
the
Commission revenue is recorded when the consideration
is receivable based on when the goods have been
dispatched to a customer by the third party.
41
Trade, loans and other receivables, are measured at
amortised cost, less allowance for doubtful debts, rebates
and settlement discounts, where appropriate.
Collectability of trade receivables is reviewed on an
ongoing basis. Debts which are known to be uncollectible
are written off. An allowance for doubtful receivables is
established when there is objective evidence that the
Group will not be able to collect all amounts due
according to the original terms of the receivables. The
amount of the allowance is recognised in the profit or
loss.
(i)
Inventories
Inventories are stated at the lower of cost and net
realisable value. Costs are assigned to individual items of
stock on the basis of weighted average costs. Net
realisable value represents the estimated selling price less
all estimated costs of completion and costs necessary to
make the sale.
(j)
Trade payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial
Notes to the Financial Statements 31 July 2014
(j)
Trade payables (continued)
(l)
Leased Non-Current Assets (continued)
year for which an invoice has been processed through the
Group’s payables system and the amount remains unpaid.
The amounts are unsecured and usually paid within 30
days of recognition.
(k) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
(k) Goods and services tax (continued)
the cost of acquisition of an asset or as part of an item
of expense; or
for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the tax authority is included as a current asset or liability
in the balance sheet.
Cash flows are included in the cash flow statement on a
gross basis. The GST components of cash flows arising
financing activities which are
from
recoverable from, or payable to, the tax authority are
classified as operating cash flows.
investing and
(l)
Leased Non-Current Assets
A distinction is made between finance leases which
effectively transfer from the
lessee
substantially all the risks and benefits
incidental to
ownership of leased non-current assets (finance leases),
and operating leases under which the lessor effectively
retains substantially all such risks and benefits.
lessor to the
Finance leases are capitalised (Note 24). A leased asset
and a liability are established at the lower of fair value
and the present value of minimum lease payments. Lease
payments are allocated between the principal component
of the lease liability and the interest expense, so as to
achieve a constant rate of interest on the remaining
balance of the liability.
The leased assets are amortised on a straight line basis
over the term of the lease, or where it is likely that the
economic entity will obtain ownership of the asset, the
life of the asset. Leased assets held at the reporting date
are being amortised over five years
Lease payments are allocated between
interest
(calculated by applying the interest rate implicit in the
lease to the outstanding amount of the liability) and
reduction of the liability.
Operating lease payments are charged to the profit or loss
account on a straight line basis over the period of the
lease.
42
In the event that lease incentives are received to enter
into operating leases, such incentives are recognised as a
liability. The aggregate benefits of
incentives are
recognised as a reduction of rental expense on a straight-
line basis over the lease term, except where another
systematic basis is more representative of the time
pattern in which economic benefits from the leased asset
are consumed.
(m) Share-based payments
Share-based compensation benefits are provided to
employees via the Funtastic Executive Share Option Plan,
Employee Performance Share Rights Plan and the
Employee Share Loan Scheme.
The fair value of options and performance share rights
granted under the Funtastic Executive Share Option Plan,
Funtastic Employee Performance Share Rights Plan and
Employee Share Loan Scheme
is recognised as an
employee benefit expense with a corresponding increase
in equity. The fair value is measured at grant date and
recognised over the period during which the employees
become unconditionally entitled to the options (vesting
period).
The fair value at grant date is independently determined
using an appropriate option pricing model that takes into
account the exercise price, the term of the option, the
vesting and performance criteria, the impact of dilution,
the non-tradeable nature of the option, the share price at
grant date and expected price volatility of the underlying
share, the expected dividend yield, total shareholder
performance hurdles and the risk-free interest rate for
the term of the option.
The fair value of the options, performance share rights
and schemes granted excludes the impact of any non-
market vesting conditions (for example, profitability and
sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that
are expected to become exercisable. At each balance
sheet date, the entity revises its estimate of the number
of options that are expected to become exercisable. The
employee benefit expense recognised each period takes
into account the most recent estimate.
Upon the exercise of options or performance share rights,
the balance of the share-based payments reserve relating
to those options is transferred to share capital.
The market value of shares issued to employees for no
cash consideration under the employee share scheme is
recognised as an employee benefits expense with a
corresponding increase in equity when the employees
become entitled to the shares.
(n) Borrowings
Other financial
initially measured at fair value, net of transaction costs.
including borrowings, are
liabilities,
Notes to the Financial Statements 31 July 2014
(n) Borrowings (continued)
(q) Business combinations (continued)
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
the Group in exchange for control of the acquiree.
Acquisition related costs are recognised in profit or loss as
incurred.
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the
financial liability, or, where appropriate, a shorter period.
(o) Borrowing costs
Borrowing costs are recognised as expenses in the period
in which they are incurred. Borrowing costs include:
interest on bank overdrafts and short-term and long-
term borrowings;
(o) Borrowing costs (continued)
finance lease charges; and
certain exchange differences arising from foreign
currency borrowings.
(p) Employee benefits
(i) Wages and salaries and annual leave
A liability is recognised for benefits accruing to employees
in respect of wages and salaries, annual leave and long
service leave where it is probable that settlement will be
required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee
benefits expected to be settled within 12 months, are
measured at their nominal values using the remuneration
rate expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits
which are not expected to be settled within 12 months
are measured at the present value of the estimated future
cash outflows to be made by the Group in respect of
services provided by employees up to reporting date.
(ii) Defined contribution plans
Contributions to defined contribution superannuation
plans are expensed when incurred.
(iii) Profit sharing and bonus plans
Liabilities for profit sharing and bonus plans are expected
to be settled within 12 months and are measured at the
amounts expected to be paid when they are settled.
(iv) Employee benefit on-costs
Employee benefit on-costs, including payroll tax, are
recognised and included in employee benefit liabilities
and costs, when the employee benefits to which they
relate are recognised as liabilities.
(q) Business combinations
Acquisitions of subsidiaries and businesses are accounted
for using the acquisition method. The consideration for
each acquisition is measured as the aggregate of the fair
values (at the date of exchange) of assets given, liabilities
incurred or assumed, and equity instruments issued by
43
Where applicable, the consideration for the acquisition
includes any asset or liability resulting from a contingent
consideration arrangement, measured at its acquisition
date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify
as measurement period adjustments (see below). All
other subsequent changes in the fair value of contingent
consideration classified as an asset or
liability are
accounted for in accordance with relevant Standards.
Changes in the fair value of contingent consideration
classified as equity are not recognised.
identifiable assets,
The acquiree’s
liabilities and
for
contingent
recognition under AASB 3(2008) are recognised at their
fair value at the acquisition date, except that:
liabilities that meet the conditions
deferred tax assets or liabilities and liabilities or assets
related
to employee benefit arrangements are
recognised and measured in accordance with AASB
112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’
respectively;
liabilities or equity
instruments related to the
replacement by the Group of an acquiree’s share-
based payment awards are measured in accordance
with AASB 2 ‘Share-based Payment’; and
assets (or disposal Groups) that are classified as held
for sale in accordance with AASB 5 ‘Non-current Assets
Held for Sale and Discontinued Operations’ are
measured in accordance with that Standard.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional
amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted
during the measurement period (see below), or additional
assets or
liabilities are recognised, to reflect new
information obtained about facts and circumstances that
existed as of the acquisition date that, if known, would
have affected the amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete
information about facts and circumstances that existed as
of the acquisition date, and is subject to a maximum of
one year.
Where settlement of any part of cash consideration is
deferred, the amounts payable
in the future are
discounted to their present value as at the date of
exchange. The discount rate used
is the entity’s
incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent
financier under comparable terms and conditions.
Notes to the Financial Statements 31 July 2014
(r)
Intangible assets
(s) Goodwill (continued)
any
and
amortisation
Intangible assets acquired separately or in a business
combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its
fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any
accumulated
accumulated
impairment losses. Internally generated intangible assets,
excluding capitalised development costs, are not
capitalised and expenditure is recognised in profit or loss
incurred.
in the year
in which the expenditure
Amortisation of
is
recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation
method are reviewed at the end of each annual reporting
period, with the effect of any changes in estimate being
accounted for on a prospective basis. Intangible assets are
amortised as follows:
intangible assets
the Group’s
is
Software
Patents
Trademarks
Licensed distribution agreements
Brand names
3-7 years
20 years
10-15 years
1-3 years
Indefinite
(s) Goodwill
Goodwill arising in a business combination is recognised
as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of
the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree and the fair
value of the acquirer’s previously held equity interest in
the acquiree (if any) over the net of the acquisition date
amounts of the identifiable assets acquired and the
liabilities assumed.
If, after reassessment, the Group’s interest in the fair
value of the acquiree’s identifiable net assets exceeds the
sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value
of the acquirer’s previously held equity interest in the
acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment
at least annually. For the purpose of impairment testing,
goodwill
is allocated to each of the Group’s cash
generating units (CGUs), or groups of CGUs, expected to
benefit from the synergies of the business combination.
CGUs (or groups of CGUs) to which goodwill has been
allocated are tested for impairment annually, or more
frequently if events or changes in circumstances indicate
that goodwill might be impaired.
If the recoverable amount of the CGU (or group of CGUs)
is less than the carrying amount of the CGU (or groups of
CGUs), the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the CGU (or
groups of CGUs) and then to the other assets of the CGU
(or groups of CGUs) pro-rata on the basis of the carrying
amount of each asset in the CGU (or groups of CGUs). An
impairment loss recognised for goodwill is recognised
44
immediately in profit or loss and is not reversed in
subsequent periods.
On disposal of an operation within a CGU, the attributable
amount of goodwill is included in the determination of
the profit or loss on disposal of the operation.
(t) Derivative financial instruments
The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate and
foreign exchange rate risk, including forward contracts
comprising foreign exchange forward contracts and
options and
interest rate swaps. Further details of
derivative financial instruments are disclosed in Note 34
to the financial statements.
loss
is entered
immediately unless the derivative
Derivatives are initially recognised at fair value on the
into and are
date a derivative contract
subsequently re-measured to their fair value at each
reporting date. The resulting gain or loss is recognised in
profit or
is
designated and effective as a hedging instrument, in
which event, the timing of the recognition in profit or loss
depends on the nature of the hedge relationship. The
Group designates certain derivatives as either hedges of
the fair value of recognised assets or liabilities or firm
commitments (fair value hedges), or hedges of highly
probable forecast transactions or hedges of foreign
currency risk of firm commitments (cash flow hedges).
The fair value of hedging derivatives is classified as a
current asset or current liability if the remaining maturity
of the hedge relationship is less than 12 months and as a
non-current asset or a non-current
if the
remaining maturity of the hedge relationship is more than
12 months.
liability
(i) Cash flow hedges
The Group designates certain hedging
instruments,
derivatives in respect of foreign currency, as cash flow
hedges.
the
relationship between
At the inception of the hedge relationship, the entity
the hedging
documents
instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking
various hedge transactions. Furthermore, at the inception
of the hedge and on an ongoing basis, the Group
documents whether the hedging instrument is highly
effective in offsetting changes in fair values or cash flows
of the hedged item.
Note 34 contains details of the fair values of the
derivative
for hedging purposes.
Movements in the hedging reserve in equity are also
detailed in the statement of changes in equity.
instruments used
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges is recognised in equity in the hedging reserve. The
gain or
is
recognised immediately in other comprehensive income.
loss relating to the
ineffective portion
Notes to the Financial Statements 31 July 2014
(t) Derivative financial instruments (continued)
(u) Financial assets (continued)
(i) Cash flow hedges (continued)
(i) Impairment of financial assets (continued)
Amounts accumulated in equity are recycled in the
statement of profit or loss in the periods when the
hedged item will affect profit or loss (for instance when
the forecast sale that is hedged takes place). However,
when the forecast transaction that is hedged results in the
recognition of a non-financial asset
(for example,
inventory) or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity
and included in the measurement of the initial cost or
carrying amount of the asset or liability.
instrument expires or
is sold or
When a hedging
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 statement of profit or
loss. 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 statement of profit or loss.
(u) Financial assets
All financial assets are recognised and derecognised on
trade date where the purchase or sale of the financial
asset is under a contract which terms require delivery of
the investment within the timeframe established by the
market concerned, and are initially measured at fair value,
plus transaction costs, except for those financial assets
classified as fair value through profit or loss (FVTPL) which
are initially measured at fair value.
Financial assets are classified as at FVTPL when the
financial asset is either held for trading or it is designated
as at FVTPL. A financial asset is classified as held for
trading if:
it has been acquired principally for the purpose of
selling it in the near term; or
financial
on initial recognition it is part of a portfolio of
identified
the Group
instruments
manages together and has a recent actual pattern of
short-term profit-taking; or
it is a derivative that is not designated and effective as
a hedging instrument.
that
Financial assets at FVTPL are stated at fair value, with any
gains or losses arising on re-measurement recognised in
profit or loss. The net gain or loss recognised in profit or
loss incorporates any dividend or interest earned on the
financial asset. Fair value is determined in the manner
described in Note 34.
(i) Impairment of financial assets
Financial assets are assessed for indicators of impairment
at each balance sheet date. Financial assets are impaired
where there is objective evidence that as a result of one
or more events that occurred after the initial recognition
of the financial asset the estimated future cash flows of
the investment have been impacted. For financial assets
carried at amortised cost, the amount of the impairment
45
is the difference between the asset’s carrying amount and
the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by
the impairment loss directly for all financial assets with
the exception of trade receivables where the carrying
amount is reduced through the use of an allowance
account. When a trade receivable is uncollectible, it is
written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited
to profit or loss.
If in a subsequent period the amount of impairment loss
decreases and the decrease can be related objectively to
an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed
through profit or loss to the extent the carrying amount of
the investment at the date of the impairment is reversed
does not exceed what the amortised cost would have
been had the impairment not been recognised.
(v) Financial instruments issued by the Group
(i) Equity instruments
Equity
instruments are classified as either financial
liabilities or as equity in accordance with the substance of
the contractual arrangement. Transaction costs arising on
the issue of equity instruments are recognised directly in
contributed equity.
(ii) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are
stated at fair value, with any resultant gain or loss
recognised
loss
recognised in profit or loss incorporates any interest paid
on the financial liability. Fair value is determined in the
manner set out in Note 34.
loss. The net gain or
in profit or
(iii) Other financial liabilities
Other financial liabilities, including borrowings, are
initially measured at fair value net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the
financial liability, or, where appropriate, a shorter period.
(w) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to
settle the obligation, and a reliable estimate can be made
of the amount of the obligation.
Notes to the Financial Statements 31 July 2014
(w) Provisions (continued)
The amount recognised as a provision is a best estimate
of the consideration required to settle the present
obligation at reporting date, taking into account the risks
and uncertainties surrounding the obligation. Where a
provision is measured using the cash flows estimated to
settle the present obligations, its carrying amount is the
present value of those cash flows.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it is
virtually certain that recovery will be received and the
amount of the receivable can be measured reliably.
A restructuring provision is recognised when the Group
has developed a detailed formal plan for the restructuring
and has raised a valid expectation in those affected that it
will carry out the restructuring by starting to implement
the plan or announcing its main features to those affected
by it. The measurement of a restructuring provision
includes only the direct expenditures arising from the
restructuring, which are those amounts that are both
necessarily entailed by the restructuring and not
associated with the ongoing activities of the entity.
(x) Onerous contracts
The Group enters
into royalty contracts with key
suppliers. The terms of the royalty agreements require
minimum levels of royalty payments to be offset against
the minimum guarantees received at the start of the
contract. An onerous contract is deemed to exist for the
Group if, after calculating the net contribution relating to
the products sold under the specific contract, there is a
shortfall between the minimum guarantee and the actual
royalty derived (or forecast to be derived in future
periods) from the reported sales. Net contribution is
calculated after taking into account net sales revenue,
cost of goods sold, applicable royalties and direct selling
costs. If the royalty shortfall cannot be recovered from
the resulting net contribution a provision for onerous
contracts is made through profit or loss.
(y)
Impairment of tangible and intangible assets (other
than goodwill)
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the
recoverable amount of the CGU to which the asset
belongs. Where a reasonable and consistent basis of
allocation can be identified, corporate assets are also
allocated to
individual CGU, or otherwise they are
allocated to the smallest group of CGU for which a
reasonable and consistent allocation basis can be
identified.
(y)
Impairment of tangible and intangible assets (other
than goodwill) (continued)
Recoverable amount is the higher of fair value less cost to
sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted. If the
recoverable amount of an asset (or CGU) is estimated to
be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount.
An impairment loss is recognised immediately in the profit
and loss.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (CGU) is increased to the
revised estimate of its recoverable amount, but only to
the extent that the increased carrying amount does not
exceed the carrying amount that would have been
determined had no impairment loss been recognised for
the asset (CGU) in prior years.
(z) Discontinued operations
A discontinued operation is a component of the Group’s
business, the operations and cash flows of which can be
clearly distinguished from the rest of the Group and
which:
represents a separate major
geographical area of operations;
is part of a single co-ordinated plan to dispose of a
separate major line of business or geographical area of
operations; or
is a subsidiary acquired exclusively with a view to re-
sale.
line of business or
Classification as a discontinued operation occurs upon
disposal or when the operation meets the criteria to be
classified as held-for-sale, if earlier.
When an operation
is classified as a discontinued
operation, the comparative statement of profit or loss
and other comprehensive income is re-presented as if the
operation had been discontinued from the start of the
comparative year.
The assets or disposal group, are measured at the lower
of their carrying amount and fair value less costs to sell.
Any impairment loss on a disposal group, is first allocated
to goodwill, and then to remaining assets and liabilities on
a pro-rata basis, except that no loss is allocated to
inventories, financial assets and deferred tax assets which
continue to be measured in accordance with the Group’s
other accounting policies. Gains or losses on disposal are
recognised in profit or loss.
46
Notes to the Financial Statements 31 July 2014
(aa) Determination of fair values
A number of the Group’s accounting policies and
disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair
values have been determined for measurement and/or
disclosure purposes, based on the methods as stated
below. When applicable, further information about the
assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
In estimating the fair value of an asset or liability, the
Group uses market observable data to the extent it is
available. Where it is not available, the Group engages
third party qualified valuers to perform the valuation.
The fair value of the asset or liability is the price that
would be received to sell the asset or paid to transfer the
liability.
An entity shall use valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the use
of unobservable inputs.
To increase consistency and comparability in fair value
measurements and related disclosures, the Company has
adopted the fair value hierarchy established in AASB 13
‘Fair Value Measurement’ that categorises fair value
measurement into three levels:
Level 1 fair value measurements are those derived
from quoted prices (unadjusted) in active markets for
identical assets or liabilities.
Level 2 fair value measurements are those derived
from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly (ie. as prices) or indirectly (ie. derived
from prices).
Level 3 fair value measurements are those derived
from valuation techniques that include inputs for the
asset or liability that are not based on observable
market data (unobservable inputs).
Valuation techniques used to measure fair value shall be
applied consistently. However, a change in a valuation
technique or its application (eg a change in its weighting
when multiple valuation techniques are used or a change
in an adjustment applied to a valuation technique) is
appropriate if the change results in a measurement that is
equally or more representative of fair value in the
circumstances.
47
Notes to the Financial Statements 31 July 2014
NOTE 3:
Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in Note 2, the directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of
the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
i) Impairment of goodwill in continuing business segments
The Group tests annually or when impairment indicators are identified, whether goodwill has suffered any impairment, in
accordance with the accounting policy. The recoverable amount of the Funtastic Australia and Funtastic Brands cash-
generating units have been determined based on fair value less cost to sell calculations. The Madman CGU was disposed of
during the financial year. These calculations require the use of assumptions. A significant change to these assumptions may
affect the recoverable amount of the cash generating units.
ii) Recoverability of prepaid and committed royalty and license agreements
In order to secure product distribution rights the Group is required to prepay for royalties relating to licensed products. The
Group reviews the recoverability of prepaid royalty and license agreements (Note 12) on an annual basis. The Group takes
into account current and projected market sell through in assessing the recoverability of royalty commitments.
iii) Settlement of license audits
Product license agreements contain audit rights for licensors. At year end in respect of licensor audits the Group has
provided for the best estimate of royalty payable. The final amounts payable will be subject to negotiation with the licensor
and may differ to the amounts provided for.
iv) Recoverability of inventory
The Group periodically assesses whether the net realisable value (NRV) of its inventories is reasonable in light of changing
market conditions, particularly the recent softening of the retail industry. Whilst the Group has provided to recognise the
best estimate for the amount for which its inventory will be realised, the final amounts will be subject to the prevailing
market conditions and may differ from the amounts provided for.
v) Taxation losses recognised as asset
The Group has recognised deferred tax asset in respect to revenue tax losses of approximately 2 years future profits based on
the expected future taxable income. The final amount recoverable will depend on the losses being available under the
‘continuity of ownership test’ and the Group achieving this future taxable income. Refer to Note 8 for details of tax losses
taken up as at 31 July 2014.
vi) Discontinued operations
On 31 January 2014, the operation of Madman Entertainment became a ‘discontinued operation’ for the first time as a result
of management’s plan to sell the business. On 31 July 2014, the Company entered into and completed, a sale agreement to
dispose of Madman Entertainment. Consequently, Madman Entertainment ceased to be a subsidiary of the Company at 31
July 2014.
Included in Other debtors is an amount of $3.8m relating to the working capital adjustment due from the Purchaser on final
settlement in respect to the Madman sale.
48
Notes to the Financial Statements 31 July 2014
NOTE 4:
Segment information
Under the requirements of AASB 8 ‘Operating Segments’; information reported to the Group’s Chief Executive Officer for the
purposes of resource allocation and assessment of performance is more specifically focused on the following categories of
products:
• Funtastic Australia
• Funtastic Brands
The Funtastic Australia reportable segment distributes licensed toys, sporting equipment, nursery equipment and
confectionary. The Funtastic Brands reportable segment designs and sources unique product offerings for worldwide
distribution.
On 31 July 2014 the Madman Entertainment reportable segment was sold. Accordingly, Madman Entertainment has been
reclassified as a Discontinued Operation in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued
Operations’.
The following is an analysis of the Group’s revenue and results from continuing operations by reportable operating segment
for the financial year under review.
Continuing operations
Funtastic Australia
Funtastic Brands
Central administration
Finance costs
Depreciation and amortisation expenses
Other revenue
Gain on early settlement of deferred
acquisition consideration
Gain on sale of Quick Smart
Continuing segment revenue and (loss)
profit before income tax
Income tax (expense) benefit
Consolidated segment revenue and (loss)
profit after tax for the year
Revenue
Segment profit/(loss)
Year ended
30 July 2014
$’000
Year ended
30 July 2013
$’000
Year ended
30 July 2014
$’000
Year ended
30 July 2013
$’000
90,650
33,299
88,594
25,433
123,949
114,027
-
-
-
-
-
-
640
1,711
-
-
-
-
124,589
115,738
-
-
1,166
4,204
5,370
(8,379)
(4,052)
(4,418)
619
-
1,570
(9,290)
(720)
15,073
4,160
19,233
(7,070)
(5,852)
(3,817)
612
3,271
-
6,377
2,248
124,589
115,738
(10,010)
8,625
The revenue reported above represents revenue generated from external customers. There were no intersegment sales
during the period.
Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of central administration costs
and directors’ salaries, investment revenue and finance costs, income tax benefit (expense), and gains or losses on disposal
of associates..This is the measure reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance.
49
Notes to the Financial Statements 31 July 2014
NOTE 4:
Segment information
Geographical Information
The Group operates in two principal geographical areas – Australia and Hong Kong. The Group’s revenue from external
customers and information by geographical location is as follows:
Revenue from External Customers
Australia
Hong Kong
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
90,650
33,299
123,949
88,594
25,433
114,027
Information about major customers
Included in revenues of Funtastic Australia of $90,650,000 (2013: $88,594,000), are revenues of approximately $74,022,490
(2013: $75,284,000), which arose from sales to the segment’s four largest customers.
Included in revenues of Funtastic Brands of $33,299,000 (2013: $25,433,000) are revenues of approximately $14,310,050
(2013: $18,693,000) which arose from sale to the segment’s four largest customers.
NOTE 5:
Discontinued operations
On 31 July 2014, the Company entered into a sale agreement to dispose of Madman Entertainment. The comparative
consolidated statement of profit or loss and other comprehensive income has been restated to show the discontinued
operation separately from continuing operations.
The Group has recognised a loss before tax on the sale of the Madman Entertainment operations of $29,441,000 as at 31 July
2014 of which $24,163,000 had been recognised in the books and records of the Company as at 31 January 2014.
Consideration received
Sale consideration – Madman
Cash asset – Madman
Total amount received from sale of businesses
Deferred consideration - Madman
Total proceeds from sale of businesses
Costs to sell
Net proceeds from sale of businesses
Results of discontinued operation
Revenue
Expenses
Results from operating activities
Tax
Result from operating activities, net of tax
Loss on sale of discontinued operation
Tax benefit on loss on sale of discontinued operation
$’000
21,500
(1,603)
19,897
3,772
23,669
(1,205)
22,464
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
37,867
(40,369)
(2,502)
632
(1,870)
(29,441)
5,614
50,807
(43,156)
7,651
(2,314)
5,337
-
-
(Loss) profit for the year from discontinued operations
(25,697) 5,337
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(3.88)
(3.88)
0.98
0.98
50
Notes to the Financial Statements 31 July 2014
NOTE 5:
Discontinued operations (continued)
Cash flows from (used in) discontinued operation
Net cash from operating activities
Net cash used in investing activities
Net cash flows for the year
Effect of disposal on the financial position of the Group
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
2,671
(1,596)
1,075
1,268
(1,058)
210
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Trade receivables
Current tax assets
Inventories
Other assets
Intangible assets
Plant and equipment
Trade payable
Provisions
Other liabilities
Net assets disposed of
Goodwill relating to Madman (CGU)
Net asset effect of disposal of Madman to the Group
Less: net proceeds from sale of business
Loss on disposal of Madman Entertainment, before tax
NOTE 6:
Revenue
The following is an analysis of the Group’s revenue for the year from continuing operations.
4,153
121
3,043
24,860
1,737
910
(6,606)
(1,184)
(3,979)
23,055
28,850
51,905
(22,464)
29,441
-
-
-
-
-
-
-
-
-
-
-
-
-
Revenue from the sale of goods
Gross revenue
Less settlement discounts and rebates
Commissions received
Other
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
140,044
(16,095)
123,949
637
3
640
128,532
(14,505)
114,027
1,276
435
1,711
124,589
115,738
51
Notes to the Financial Statements 31 July 2014
NOTE 7:
Profit for the year
(Loss) profit for the year from continuing operations has been arrived at after charging/(crediting):
Investment Income
Interest from bank deposits
Rental income
Impairment loss recognised on trade receivables
Depreciation and amortisation expense
Depreciation of plant & equipment
Depreciation of leasehold improvements
Amortisation of other intangible assets
Amortisation of product development costs/trademarks
Total depreciation and amortisation expense
Research and development costs expensed as incurred
Employee benefits expense
Defined contribution plans
Equity-settled share-based payments
Termination benefits
Other employee benefits
Total employee benefits expense
NOTE 8:
Income tax
Note
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
15
604
619
135
691
279
2,969
479
4,418
884
806
302
558
9,824
11,490
21
591
612
530
653
199
2,445
520
3,817
645
671
21
117
9,920
10,729
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
(a) Income tax expense relating to continuing operations
Tax expense comprises:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax
expense of prior years
48
-
48
Deferred tax expense comprises:
Deferred tax expense on current period revenue losses, unrecognised
1,139
97
87
184
-
Deferred tax benefit recognised on previously unrecognised and unused tax
losses
Deferred tax (benefit) expense relating to the origination and reversal of
temporary differences
Adjustments recognised in the current year in relation to the deferred tax of
prior years
Deferred tax reclassified from equity to profit or loss
Total tax expense (benefit) relating to continuing operations
-
(2,658)
(734)
(75)
342
720
3,390
(2,474)
(690)
(2,248)
52
Notes to the Financial Statements 31 July 2014
NOTE 8:
Income tax (continued)
(b) Income tax recognised in profit or loss
The expense for the year can be reconciled to the accounting profit as follows:
(Loss) profit from continuing operations
Tax expense at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable) in calculating taxable
income:
Expenses that are not deductible in determining taxable loss
Effect of current year’s unrecognised and unused tax losses
Effect of previously unrecognised and unused tax losses
Effect on previously unrecognised and unused capital losses
Effect of different tax rates of subsidiaries operating in other jurisdictions
Other
Adjustments recognised in the current year in relation to the deferred tax of prior
years
Income tax expense (benefit) recognised in profit or loss
Balance of unrecognised unused revenue tax losses
(c) Income tax recognised directly in equity
Deferred Tax (liability)/asset:
Financial instruments treated as cash flow hedges
Relating to share issue expenses deductible over 5 years
(d) Current tax balances
Current tax assets and liabilities
Income tax receivable from /(payable) to tax office:
Other – overseas subsidiaries
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
(9,290)
(2,787)
968
3,057
-
(471)
28
-
795
(75)
720
24,463
54
315
369
6,377
1,913
560
344
(3,002)
(981)
(74)
(381)
(1,621)
(627)
(2,248)
13,782
(207)
509
302
5
139
53
Notes to the Financial Statements 31 July 2014
NOTE 8:
Income tax (continued)
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
(e) Deferred tax balances
Deferred tax assets comprises:
Revenue tax losses
Temporary differences
Deferred tax liabilities comprises:
Temporary differences
Net deferred tax asset
Deferred tax assets/(liabilities) arise from the following:
Provisions – receivables
Provisions – employee benefits
Provisions – onerous contracts
Revenue tax losses
Accruals
Prepaid royalties
Other provisions
Foreign exchange
Cash flow hedges
Section 40 -880 deductions (capital raising)
Other
10,161
2,493
12,654
(235)
12,419
229
199
153
10,161
74
(180)
1,385
(54)
54
315
83
12,419
10,161
2,715
12,876
(6,300)
6,576
138
481
260
10,161
103
(5,883)
997
(207)
(207)
509
224
6,576
Unrecognised taxable temporary differences associated with investments and interests
Under the tax law, the taxable profit made by a tax-consolidated group in relation to an entity leaving the group depends on
a range of factors, including the tax values and/or carrying values of the assets and liabilities of the leaving entities, which
vary in line with the transactions and events recognised in each entity. The taxable profit or loss ultimately made on any
disposal of the investments within the tax-consolidated group will therefore depend upon when each entity leave the tax-
consolidated group and the assets and liabilities that the leaving entity holds at that time.
The Group considers the effects of entities entering or leaving the tax-consolidate group to be a change of tax status that is
only recognised when those events occur. As a result temporary differences and deferred tax liabilities have not been
measured or recognised in relation to investments remaining within the tax-consolidated group.
Tax consolidation
(i) Relevance of tax consolidation to the Group
The Company and its wholly-owned Australian resident entities formed a tax-consolidated Group with effect from 1 January
2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated Group is Funtastic
Limited. The members of the tax-consolidated Group are identified in Note 32.
(ii) Nature of tax funding arrangement and tax sharing agreement
Entities within the tax-consolidated Group have entered into a tax funding arrangement and a tax sharing agreement with
the head entity. Under the terms of the tax funding arrangement, Funtastic Limited and each of the entities in the tax-
consolidated Group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability
or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to the other entities in
the tax consolidated Group.
The tax sharing agreement entered into between members of the tax-consolidated Group provide for the determination of
the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if
an entity should leave the tax consolidated Group. The effect of the tax sharing agreement is that each member’s liability for
54
Notes to the Financial Statements 31 July 2014
NOTE 8:
Income tax (continued)
Tax consolidation (continued)
tax payable by the tax consolidated Group is limited to the amount payable to the head entity under the tax funding
arrangement.
Tax Losses
As at 31 July 2014 the Australian Group has carried forward revenue tax losses of approximately $57,332,000 (2013:
$47,655,000). As at 31 July 2014 a deferred tax asset of $10,161,000 (2013: $10,161,000) has been booked relating to
revenue tax losses of $33,873,000 (2013: $33,873,000). Following the assessment of the probability of recovery, having
considered future taxable income and current tax legislation with respect to carrying forward revenue tax losses, the balance
of tax losses available at 31 July 2014 of $23,463,000 has not been booked as a deferred tax asset in these financial
statements.
The utilisation of deferred tax asset is dependent on the Company generating future taxable profits in excess of the profits
arising from the reversal of existing temporary differences.
The directors are of the opinion that this is a reasonable position to maintain as the Company has forecast taxable profits
over the next three financial years which will utilise these assets.
NOTE 9:
Finance Costs
Continuing operations
Interest on bank overdrafts and loans
Fair value losses on interest rate swaps designated as cash flow hedges
transferred from equity
Discontinued operations
Interest on bank overdrafts and loans
NOTE 10:
Current assets – Trade and other receivables
Trade receivables(i)
Allowance for doubtful debts
Allowance for credit notes, rebates and settlement discounts
Other receivables
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
4,606
(554)
4,052
-
5,484
368
5,852
-
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
21,193
(763)
(4,242)
16,188
950
17,138
42,927
(461)
(7,855)
34,611
1,413
36,024
(i)The average credit period on sales of goods is 56 days (2013: 72 days). No interest is charged on the trade receivables.
The Group has provided for any receivable considered uncollectible and therefore deemed to be not recoverable.
Included in the Group’s trade receivable balance are debtors with a carrying amount of $2,797,288 (2013: $3,482,386) which are past due
at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the Group
believes the amounts are recoverable.
55
Notes to the Financial Statements 31 July 2014
NOTE 10:
Current assets – Trade and other receivables (continued)
Age of receivables that are past due but not impaired
30-60 days
60-90 days
90-120 days
Total
Average age (days)
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
1,954
195
648
2,797
68
1,840
-
1,642
3,482
78
The Group does not hold any collateral over these balances.
The Group reviews trade debtors on an ongoing basis and makes a provision against specific debtors based on management’s
assessment of the debtors’ ability to settle the debt.
The Group reviews the provision for credit notes, rebates and settlement discounts on an ongoing basis and makes
allowances for individual customers based on historical sales, trading terms and expected returns, settlement discounts and
rebates.
Movement in Allowance for doubtful debts, credit notes, rebates and settlement discounts
Rebates, credit
notes & settlement
discounts
Doubtful debts
$’000
$’000
2014
Balance at beginning of year
Utilised
Reclassified from accruals
Provisions raised
Balance as at 31 July 2014
2013
Balance at beginning of year
Utilised
Reversed
Provisions raised
Balance as at 31 July 2013
(461)
133
(300)
(135)
(763)
(595)
664
-
(530)
(461)
(7,855)
4,131
-
(518)
(4,242)
(7,126)
6,282
183
(7,194)
(7,855)
Total
$’000
(8,316)
4,264
(300)
(653)
(5,005)
(7,721)
6,946
183
(7,724)
(8,316)
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due
to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision
required in excess of the allowance for doubtful debts.
56
Notes to the Financial Statements 31 July 2014
NOTE 11:
Current assets – Inventories
Finished goods
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
16,375
23,964
The cost of inventories recognised as an expense during the year in respect of continuing operations was $90,689,000 (2013:
$72,688,000).
Note
5
NOTE 12: Other Assets
Current other assets
Prepaid royalties
Prepayments
Deferred sale consideration
Other
Non-current other assets
Product development costs
Trademarks
Prepaid royalties
Other
NOTE 13: Other financial assets
Current
Derivatives that are designated and effective as hedging instruments carried at
fair value - foreign currency forward contracts
Consideration receivable on sale of business
Year end
31 July 2014
$’000
Year end
31 July 2013
$’000
716
3,305
3,772
60
7,853
129
130
-
210
469
6,580
3,512
-
270
10,362
660
198
14,907
-
15,765
Year end
31 July 2014
$’000
Year end
31 July 2013
$’000
-
-
-
1,352
200
1,552
These are classified as Level 2 fair value measurement. Future cash flows are estimated based on forward exchange rates
(from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate
that reflects the credit risks of various counter parties.
NOTE 14: Non-current assets – Plant and equipment
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold improvements – at cost
Less: accumulated depreciation
Net book value at 31 July
57
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
2,805
(2,136)
669
1,773
(874)
899
1,568
4,383
(2,962)
1,421
2,207
(709)
1,498
2,919
Notes to the Financial Statements 31 July 2014
NOTE 14: Non-current assets – Plant and equipment (continued)
Reconciliations
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current
financial year are set out below:
31 July 2014
Cost
Opening Balance
Additions
Disposals
De-recognition on disposal of a subsidiary
Net foreign exchange difference
Closing Balance
Accumulated Deprecation
Opening Balance
Disposals
De-recognition on disposal of a subsidiary
Depreciation
Net foreign exchange difference
Closing Balance
Written Down Value
Opening Balance
Closing Balance
31 July 2013
Cost
Opening Balance
Additions
Disposals
Net foreign exchange difference
Closing Balance
Accumulated Deprecation
Opening Balance
Disposals
Depreciation
Net foreign exchange difference
Closing Balance
Written Down Value
Opening Balance
Closing Balance
Total
$’000
6,589
692
(521)
(2,162)
(20)
4,578
(3,670)
561
1,252
(1,174)
21
(3,010)
2,919
1,568
5,816
1,515
(789)
47
6,589
(3,374)
769
(1,045)
(20)
(3,670)
2,442
2,919
Plant & Equipment
$'000
Leasehold
Improvements
$'000
2,206
124
(12)
(545)
-
1,773
(708)
3
221
(390)
-
(874)
1,498
899
2,500
92
(407)
21
2,206
(794)
387
(301)
-
(708)
1,706
1,498
4,383
568
(509)
(1,617)
(20)
2,805
(2,962)
558
1,031
(784)
21
(2,136)
1,421
669
3,316
1,423
(382)
26
4,383
(2,580)
382
(744)
(20)
(2,962)
736
1,421
58
Notes to the Financial Statements 31 July 2014
NOTE 15: Non-current assets – Goodwill
Gross carrying amount
Balance at the beginning of financial year
De-recognition on disposal of a subsidiary
Balance at the end of financial year
Net book value
Balance at the beginning of financial year
Balance at the end of financial year
Allocation of goodwill to cash generating units
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
78,845
(28,850)
49,995
78,845
49,995
78,845
-
78,845
78,845
78,845
Goodwill is allocated to the Group’s cash generating units (CGUs). The carrying amount of goodwill allocated to CGUs is as
follows:
Cash generating unit
Funtastic Australia
Funtastic Brands
Madman Entertainment
Total
Year ended
31 July 2014
Year ended
31 July 2013
$’000
44,769
5,226
-
49,995
$’000
44,769
5,226
28,850
78,845
The Funtastic Limited consolidated entity has two cash generating units (CGU’s); Funtastic Australia and Funtastic Brands,
with carrying amounts of goodwill and intangible assets identified in each CGU. The Madman Entertainment CGU was
disposed of during the year. Refer to Note 5.
Each CGU is required to perform an impairment test annually on goodwill and other indefinite life intangible assets as
required by AASB 136. The recoverable amounts of the CGU’s and related goodwill and intangibles were determined having
regard to the fair value less cost of disposal approach.
The fair value less cost of disposal was considered more appropriate than value in use calculation approach used in prior
reporting periods for each CGU. The rationale for the change is due to the significant changes in the management and
operations of the Company following the sale of Madman Entertainment, the Company has restructured the business and
continues to expand support operations out of Hong Kong as well as international markets. Fair value less cost of disposal is
the price that would be received to sell an asset in the ordinary transaction between market participants at the
measurement date less incremental costs to sell.
The fair value less cost of disposal approach using maintainable earnings assumes the CGU’s will benefit from prior
investment, generating improved earnings across acquired brands, and intellectual property required to expand markets for
the Company’s products.
Funtastic Australia
In determining EBITDA multiple of 10.5 for Funtastic Australia CGU, consideration was given to:
external sources in regard to trading multiples of comparable entities with significant branding in the Australian market;
exposure of own brands internationally; and
comparative entities which have strong agency brands that were wholesaled into the Australian market.
59
Notes to the Financial Statements 31 July 2014
NOTE 15: Non-current assets – Goodwill (continued)
Cash generating unit (continued)
Funtastic Australia (continued)
To calculate the fair value less cost of disposal, an amount of 1.5% was used in estimating the costs associated with disposing
of the Funtastic Australia CGU.
Maintainable earnings for the Funtastic Australia CGU are based on normalised sales and gross margins for 2015. Sales
projected are consistent with 2014 and margins used are consistent with those achieved in 2012 and 2013.
During the year neither goodwill nor intangibles were impaired at the end of the reporting period. The breakeven multiple is
8.1. Sensitivity analysis on reasonably possible changes in assumptions did not result in an outcome where impairment would
be required. Based on this assessment, the Directors are of the opinion that the recoverable amount of the Funtastic
Australia’s CGU, goodwill and intangibles currently exceed their carrying values.
Funtastic Brands
In determining EBITDA multiple of 11.3 for Funtastic Brands CGU, consideration was given to:
external sources in regard to trading multiples of comparable entities with own brands engaged in international markets;
entities with manufacturing capabilities that service international markets with own products; and
Comparable entities that are of a similar size to Funtastic were used.
To calculate the fair value less cost of disposal, an amount of 1.5% was used in estimating the costs associated with disposing
of the Funtastic Brands CGU.
Maintainable earnings for the Funtastic Brands CGU are based on normalised sales and gross margins for 2015. Sales growth
being consistent with those achieved in 2013 and 2014.
During the year neither goodwill nor intangibles were impaired at the end of the reporting period. The breakeven multiple is
4.0. Sensitivity analysis on reasonably possible changes in assumptions did not result in an outcome where impairment would
be required. Based on this assessment, the Directors are of the opinion that the recoverable amount of the Funtastic Brand’s
CGU, goodwill and intangibles currently exceed their carrying values.
NOTE 16: Non-current assets – Other intangibles
Brand names(i)
Software costs
Accumulated amortisation and impairment(ii)
Chill Factor – Trademarks and patents
Accumulated amortisation and impairment (ii)
Licenses, distribution agreements & supplier relationships
Accumulated amortisation and impairment(ii)
60
Year ended
31 Jul 2014
$’000
Year ended
31 Jul 2013
$’000
1,015
5,650
(4,040)
1,610
10,423
(537)
9,886
9,925
(5,057)
4,868
17,379
1,015
5,967
(3,814)
2,153
11,341
-
11,341
9,627
(3,087)
6,540
21,049
Notes to the Financial Statements 31 July 2014
NOTE 16: Non-current assets – Other intangibles (continued)
Cost
Balance at 1 August 2013
Additions
Revaluation adjustment
De-recognition on disposal of
a subsidiary
Disposals
Balance at 31 July 2014
Balance at 1 August 2012
Additions
Disposals
Balance at 31 July 2013
Software(ii)
$’000
5,967
2,360
-
(2,211)
(466)
5,650
4,941
1,303
(277)
5,967
Accumulated amortisation and impairment
Balance at 1 August 2013
Amortisation expense
Net foreign exchange
difference
De-recognition on disposal of
a subsidiary
Disposals
Balance at 31 July 2014
Balance at 1 August 2012
Amortisation expense
Disposals
Balance at 31 July 2013
Net book value
As at 31 July 2013
As at 31 July 2014
(3,814)
(972)
(4)
474
276
(4,040)
(3,594)
(496)
276
(3,814)
2,153
1,610
Brand
names(i)
$’000
1,015
-
-
-
-
1,015
1,015
-
-
1,015
-
-
-
-
-
-
-
-
-
Chill Factor
Trademarks
and patents(iii)
Licenses,
distribution
agreements
and supplier
relationships(ii)
$’000
$’000
11,341
207
(1,125)
-
-
10,423
-
11,341
-
11,341
-
(537)
-
-
-
(537)
-
-
-
-
9,627
319
-
-
(21)
9,925
8,814
813
-
9,627
(3,087)
(1,970)
-
-
-
(5,057)
(1,053)
(2,034)
-
(3,087)
6,540
4,868
Total
$’000
27,950
2,886
(1,125)
(2,211)
(487)
27,013
14,770
13,457
(277)
27,950
(6,901)
(3,479)
(4)
474
276
(9,634)
(4,647)
(2,530)
276
(6,901)
21,049
17,379
1,015
1,015
11,341
9,886
(i)
(ii)
Brand names acquired and separately identified as part of the acquisition of Mike & Jack confectionery in May 2006. The Group
intends to continue the use of the brand names for an indefinite period and are therefore not amortised but are subject to an annual
test for impairment. The key assumptions used in the fair value less cost to sell calculations are stated in Note 15.
The amortisation expense has been included in the line item ‘amortisation’ in the statement of profit or loss and other
comprehensive income. Useful lives used in the calculation of amortisation of computer software costs are between 3 and 7 years.
Distribution agreements have useful lives in the range of 1-3 years.
(iii) Chill Factor trademarks and patents were acquired on 31 July 2013. The useful lives have been assessed as being between 10-15
years for trademarks and 20 years for patents.
61
Notes to the Financial Statements 31 July 2014
NOTE 17: Assets pledged as security
In accordance with the security arrangements of liabilities as disclosed in Note 19 to the financial statements, all assets of the
Group, except goodwill and deferred tax assets, have been pledged as security. The Group does not have the right to sell or
re-pledge the assets.
NOTE 18:
Current Liabilities – Trade payables
Trade payables(i)
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
17,280
19,968
(i)The average credit period on purchases of certain goods from international suppliers ranges from 4 weeks to 4 months. There is no
interest charged on trade payables. The Group has financial risk management policies in place to ensure that, as often as possible, all
payables are paid within a reasonable timeframe.
NOTE 19: Borrowings
Secured – at amortised cost
Note
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Current
Bill finance
Debtors finance
Finance lease liabilities
Trade finance
Less: capitalised transaction costs
Total Current
Non-current
Bill finance
Finance lease liabilities
Less: capitalised transaction costs
Total Non-current
Current borrowings
Non-current borrowings
24
24
3,665
4,783
265
20,644
-
29,357
7,000
299
7,299
-
7,299
29,357
7,299
36,656
12,729
15,238
46
15,241
(85)
43,169
9,600
129
9,729
(21)
9,708
43,169
9,708
52,877
The Trade finance, Bill finance and Debtors finance facilities are secured by a first ranking registered mortgage debenture
over all assets and undertakings of the Group. See Note 17
On 31 July 2014 the overall facilities were extended to 31 October 2015. Due to the nature of the debtor and trade finance
facilities, amounts are continually repaid and redrawn based on normal trade debtor and trade creditor terms. Amounts due
at 31 July 2014 in respect of these facilities have been disclosed as current borrowings in the statement of financial position.
62
Notes to the Financial Statements 31 July 2014
NOTE 19: Borrowings (continued)
On completion of the Madman Entertainment sale, the level of debt facility was reduced as follows:
Bill finance
Debtors finance
Trade finance
$’000
8,000
-
5,000
13,000
Financing Arrangements
During 2014 the Group’s senior lender, National Australia Bank, agreed to vary the terms of the existing facilities agreement
to vary the timing of the 2014/2015 borrowing repayments. During November 2013 the Group negotiated an extension to
the existing facilities to 31 October 2015.
The current interest rates are 5.78% on the debtors finance facility, 7.49% on the trade finance facility and 5.97% on the bill
finance facility (2013: 8.49%, 7.67% and 6.41% respectively)
Financing Arrangements – Controlled Entities
All facilities are secured by a first ranking mortgage debenture of the Group. Refer to Note 34 Financial Instruments for
further details regarding the lending covenants associated with the borrowings.
NOTE 20:
Provisions
Current
Employee benefits(i)
Onerous lease contracts(ii)
Licensor audits(iii)
Total Current
Non-current
Employee benefits(i)
Onerous lease contracts(ii)
Total Non-current
Note
31
31
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
526
236
122
884
213
272
485
1,369
1,173
236
421
1,830
462
631
1,093
2,923
63
Notes to the Financial Statements 31 July 2014
NOTE 20:
Provisions (continued)
Balance at 1 August 2013
Additional provisions recognised
Reductions resulting from re-measurement or settlement
without cost
Balance at 31 July 2014
Balance at 1 August 2012
Reductions resulting from re-measurement or settlement
without cost
Reductions arising from payments/other sacrifices of future
economic benefits
Balance at 31 July 2013
Onerous lease
contracts(ii)
$’000
867
-
(359)
508
1,299
(91)
(341)
867
Licensor
Audits(iii)
$’000
421
54
(353)
122
1,546
Total
$’000
1,288
54
(712)
630
2,845
(1,125)
(1,216)
-
421
(341)
1,288
(i) The provision for employee benefits represents annual leave and long service leave entitlements accrued and compensation claims
made by employees.
(ii) Represents the present value of the directors’ best estimate of the future outflow of economic benefits that will be required to satisfy
obligations in respect to onerous lease contracts (Note 31).
(iii) Product license agreements contain audit rights for licensors. At year end, in respect of licensor audits the Group has provided for the
best estimate of amounts payable. The final amounts payable will be subject to negotiation with the licensor and may differ to the
amounts provided in the annual report.
NOTE 21: Deferred purchase consideration
Current
Deferred purchase consideration - business acquisition (KPM)
NOTE 22: Other Liabilities
Current
Accrued royalties
GST payable
Lease incentives
Payroll accruals
Other creditors
Other accrued expenses
Non-current
Lease incentives
Note
Note
31
31
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
-
-
924
924
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
924
-
160
367
125
3,008
4,584
310
310
3,925
132
187
309
10,517
5,341
20,411
787
787
64
Notes to the Financial Statements 31 July 2014
NOTE 23: Other financial liabilities
Note
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Current
Derivatives that are designated and effective as hedging
instruments carried at fair value:
Foreign currency forward contracts
Interest rate swaps
Disclosed in the financial statements as:
Current other financial liabilities
34
44
136
180
180
-
663
663
663
These are classified as Level 2 fair value measurement. Future cash flows are estimated based on forward exchange rates
(from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate
that reflects the credit risks of various counter parties.
NOTE 24:
Leasing arrangements
The Group leases certain of its equipments under finance lease. The average lease term is 5 years. Of the three leases the
Group has an option to purchase the equipment at the end of the lease terms in respect to one of the contracts. The Group’s
obligations under finance leases are secured by the lessors’ title to the leased assets.
Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from 0.0% to 8.9%
(2013: 0.0% to 8.9%) per annum.
Finance lease liabilities
Not later than one year
Later than one year and not later than
five years
Less: Future finance charges
Present value of minimum lease
payments
Included in the consolidated financial
statements:
Current borrowings
Non-current borrowings
Minimum Lease payments
Present value of minimum
lease payments
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
272
318
590
(26)
564
50
142
192
(17)
175
265
299
564
-
564
46
129
175
-
175
Year ended
Year ended
31 July 2014
31 July 2013
Note
$’000
$’000
19
19
265
299
564
46
129
175
65
Notes to the Financial Statements 31 July 2014
NOTE 25:
Issued Capital
Included in the Company and consolidated financial statements
Share Capital
Year ended
Year ended
31 July 2014
31 July 2013
$’000
$’000
667,169,723 fully paid ordinary shares (2013: 642,169,723)
208,372
204,497
Fully paid ordinary shares carry one vote per share and carry the rights to dividends.
Movements in Ordinary Share Capital included in the Company and consolidated financial statements:
2014
2013
Number of
shares(i)
Share capital
$’000
Number of
shares(i)
Share capital
$’000
Opening balance 1 August
644,569,723
204,497
537,799,605
186,725
Institutional Placement (June 2012)
Slushy Magic US/Canada distribution
rights (April 2013)
Dividend Reinvestment Plan (DRP) (May
2013)
DRP Underwriting (May 2013)
Shares issued under ESLS 1 in June 2013
Institutional Placement (July 2013)
Chill Factor Global (October 2013)
ESLS 1 forfeiture in November 2013
Shares issued under ESLS 2 in January
2014
ESLS 1 cancellations on 31 July 2014
ESLS 2 cancellations on 31 July 2014
Closing balance 31 July
Treasury shares
Adjusted closing balance
-
-
-
-
-
-
25,000,000
(200,000)
2,200,000
(1,200,000)
(500,000)
669,869,723
(2,700,000)
667,169,723
-
-
-
-
-
-
3,875
-
-
-
-
-
2,577,136
4,144,496
9,413,192
2,400,000
88,235,294
-
-
-
-
-
(25)
586
824
1,800
-
14,587
-
-
-
-
-
208,372
644,569,723
204,497
-
(2,400,000)
-
208,372
642,169,723
204,497
(i) Includes shares issued under the Employee Share Loan Scheme through the Employee Share Plan Rules
Dividend Reinvestment Plan
The company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their
dividend entitlements satisfied by the issue of new ordinary shares rather than being paid in cash.
Share Purchase Plan
There were no Share Purchase Plans offered to shareholders during the current year.
Options
Executive Share Options
At 31 July 2014, executives held options over 9,166,666 ordinary shares of the Company, of which 2,666,666 will expire on 10
August 2014, 5,000,000 will expire on 31 December 2014, and the remaining 1,500,000 do not have expiry dates. At 31 July
2013, executives held options over 6,400,000 ordinary shares of the Company, of which 200,000 expired on 2 September
2013, 4,666,667 were forfeited due to resignations/ terminations of employment, and 1,533,333 do not have expiry dates.
Refer to the Remuneration Report in the Directors’ Report for details.
Share options granted under the Executive Share Option Plan (ESOP) carry no rights to dividends and no voting rights.
Further details of the ESOP, including details of shares issued under the scheme, are set out in Note 35.
66
Notes to the Financial Statements 31 July 2014
NOTE 25:
Issued Capital (continued)
Options (continued)
Ordinary Options - MGA Entertainment (HK) Limited
On 19 January 2004, Funtastic issued 1,500,000 Ordinary Options pursuant to a distribution agreement with MGA
Entertainment (HK) Limited. The agreement was in respect of the exclusive distribution of Bratz toys, electronics, sporting
goods and related products for the Australia and New Zealand region. These options expired on 19 January 2014.
Employee Share Loan Schemes
On 27 January 2014, Funtastic Limited granted 2,200,000 options over ordinary shares of the Company under the Employee
Share Loan Scheme (ESLS). The options expire on the date a participant ceases employment with Funtastic.
The ESLS Trust was established for the purpose of purchasing and holding shares on behalf of participants. The trust is
consolidated into the group financial statements at each report date. Upon acceptance of the ESLS invitation, these shares
are granted to participants and held by the trust to satisfy Funtastic’s obligation under the ESLS. The share issue in respect of
the ESLS shares is represented by treasury shares taken out of authorised unissued shares. Further details of the ESLS are set
out in Note 35.
Rights
Employee Performance Share Rights
At 31 July 2013 employees held rights over 10,000 ordinary shares of the Company which expired on 2 September 2013.
Share options granted under the Employee Performance Share Rights Plan (EPSR) carry no rights to dividends and no voting
rights. Further details of the EPSR, including details of shares issued under the scheme, are set out in Note 35.
NOTE 26: Accumulated losses
Opening balance
Net (loss) profit after tax for the year
Dividends paid
Balance at the end of financial year
NOTE 27: Reserves
Foreign currency translation reserve
Equity-settled benefits reserve
Cash flow hedging reserve
Foreign currency translation reserve
Balance at the beginning of the period
Translation of foreign operations
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
(102,473)
(113,733)
(35,707)
(3,335)
13,962
(2,702)
(141,515)
(102,473)
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
(976)
1,941
(62)
903
(1,013)
37
(976)
(1,013)
1,639
297
923
(1,186)
173
(1,013)
Exchange differences relating to the translation from United States dollars and Hong Kong dollars, being the functional
currencies of the Group’s foreign controlled entities in USA (not a principal place of business), into Australian dollars, are
brought to account by entries made directly to the foreign currency translation reserve.
67
Notes to the Financial Statements 31 July 2014
NOTE 27: Reserves (continued)
Equity settled benefit reserve
Balance at the beginning of the period
Share based payments
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
1,639
302
1,941
1,616
23
1,639
The equity-settled benefit reserve arises on the grant of share options and performance share rights to executives and other
beneficiaries under the Executive Share Option, Employee Performance Share Rights Plans and Employee Share Loan
Scheme. Amounts are transferred out of the reserve and into issued capital when the options or rights are exercised. Further
information about share-based payments is made in Note 35 to the financial statements.
Cash flow hedging reserve
Balance at the beginning of the period
Gain recognised:
Forward exchange contracts
Interest rate swaps
Transferred to profit or loss(i):
Forward exchange contracts
Interest rate swaps
Transferred to initial carrying amount of hedged item:
Forward exchange contracts
Interest rate swaps
Deferred tax liability arising on hedges
Year ended
31 July 2014
$’000
297
983
727
564
(554)
(2,379)
129
171
(62)
Year ended
31 July 2013
$’000
(1,665)
701
695
(394)
368
1,581
(624)
(365)
297
(i)Gains and losses from Interest swaps, transferred from equity to profit or loss during the period are included in Finance costs in the
Statement of Profit or Loss and Other Comprehensive Income. Gains and losses from Forward exchange contracts, transferred from equity
to profit or loss during the period are included in the Cost of Goods Sold in the Statement of Profit or Loss and other Comprehensive
Income.
Net gain (loss) on forward exchange contracts, recognised in Cost of Goods Sold
Finance (income) Costs
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
564
(554)
10
(394)
368
(26)
68
Notes to the Financial Statements 31 July 2014
NOTE 28:
Earnings per share
Basic earnings per share
From continuing operations
From discontinued operations
Total Earnings per share
Diluted earnings per share
From continuing operations
From discontinued operations
Total Earnings per share
Basic earnings per share calculation:
The earnings and weighted average number of ordinary shares used in the
calculation of earnings per share are as follows:
Net (loss) profit after tax for the year – continuing operations
Net (loss) profit after tax for the year – discontinued operations
(Loss) profit used in the calculation of total basic EPS from continuing operations
31 July 2014
Cents per
share
31 July 2013
Cents per
share
(1.51)
(3.88)
(5.39)
(1.51)
(3.88)
(5.39)
1.60
0.98
2.58
1.59
0.98
2.57
31 July 2014
$’000
31 July 2013
$’000
(10,010)
(25,697)
(35,707)
2014
No. ’000
8,625
5,337
13,962
2013
No. ’000
Weighted average number of ordinary shares outstanding during the year used in
the calculation of basic earnings per share, 667,169,723 (2013: 642,169,723).
662,740
542,003
Diluted earnings per share calculation:
Weighted average number of ordinary shares outstanding during the year used in
the calculation of basic earnings per share, 667,169,723 (2013: 642,169,723).
662,740
542,003
Add: Shares deemed to be issued for no consideration in respect of:
Employee Share Loan Scheme
-(i)
243
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
662,740
542,246
(i)The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary
shares for the purposes of diluted earnings per share calculation. Potential ordinary shares are anti-dilutive when their conversion to
ordinary shares would increase earnings per share or decrease loss per share from continuing operations.
Potential options - non-dilutive
31 July 2014
No. ‘000
31 July 2013
No. ‘000
7,667
7,667
6,710
6,710
Potential options – non-dilutive is made up of: ESOP 1,333,333 shares; and Unlisted options 6,333,333 shares.
69
Notes to the Financial Statements 31 July 2014
NOTE 29: Dividends on equity instruments
Recognised amounts
Fully paid ordinary shares
Interim dividend
Unrecognised amounts
Fully paid ordinary shares
Final dividend
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
Year ended
31 July 2014
Year ended
31 July 2013
Cents
per
Share
Total
‘$000
Cents
per
share
0.5
0.5
0.5
0.5
0.5
0.5
3,335
3,335
-
-
-
-
Year ended
31 July 2014
$‘000
19,302
-
Total
‘$000
2,702
2,702
3,223
3,223
Year ended
31 July 2013
$’000
20,733
1,381
The above amount represents the balances of the franking account as at the end of the financial year, adjusted for:
franking credits that will arise from the payment / (refund) of income tax payable as at the end of the year;
franking debits that will arise from the payment of dividends proposed as at the end of the year; and
franking credits that may be prevented from being distributed in the subsequent financial year.
NOTE 30:
Lease Commitments
Lease Commitments
Non-cancellable operating lease commitments are disclosed in Note 31 to the financial statements. The total due under
finance lease arrangements as at 31 July 2014 was $564,000 (2013: $175,000) and are disclosed in Note 19.
License guarantee commitments
Under the terms of various License Agreements the company guarantees the minimum levels of royalty payments. The
commitment in relation to these guarantees is as follows:
Not later than one year
Later than one year but not later than two years
Year ended
31 July 2014
$‘000
Year ended
31 July 2013
$‘000
513
286
799
1,075
186
1,261
The expected future payments in relation to these license agreements are recognised as a liability as at 31 July 2014 (Note
22).
70
Notes to the Financial Statements 31 July 2014
NOTE 31: Operating Leases
The operating leases are non-cancellable leases with respect to office and warehouse premises with lease terms of between
six months and six years, some with options to extend. All operating leases with options to extend contain market review
clauses in the event that the Group exercises its option to renew. The Group does not have an option to purchase the leased
asset at the expiry of the leased period. The Group has entered into a non-cancellable sub-lease arrangement in respect to a
warehouse premise.
Minimum lease payments recognised as an expense:
Year ended
31 July 2014
$‘000
Year ended
31 July 2013
$‘000
Minimum lease payments
Sub-lease payments received
Commitments in relation to non-cancellable operating leases contracted
for but not capitalised in the accounts are payable as follows:
No later than 1 year
Later than 1 but not later than 5 years
Later than 5 years
Sub-lease receivables in relation to non-cancellable operating leases
contracted for but not capitalised in the accounts are receivable as follows:
No later than 1 year
Later than 1 but not later than 5 years
Net commitments payable under non-cancellable operating leases
contracted for but not capitalised in the accounts:
No later than 1 year
Later than 1 but not later than 5 years
Liabilities recognised in respect of non-cancellable operating leases
Onerous lease contracts:
Current
Non-current
Lease incentives:
Current
Non-current
Note
20
20
22
22
71
1,515
(604)
911
3,725
5,444
-
9,169
(607)
(1,176)
(1,783)
3,118
4,268
7,386
2,258
(591)
1,667
2,980
7,938
-
10,918
(607)
(1,845)
(2,452)
2,374
6,092
8,466
Year ended
31 July 2014
$‘000
Year ended
31 July 2013
$‘000
236
272
160
310
978
236
631
187
787
1,841
Notes to the Financial Statements 31 July 2014
NOTE 32:
Subsidiaries
Name of Entity
Company
Funtastic Limited(i). (iii)
Subsidiaries
JNH Australia Pty Limited(ii),(iii)
Fun International Limited
Funtastic International Limited
Funtastic (NZ) Pty Limited(ii),(iii)
Dorcy Irwin Pacific Pty Limited(ii),(ii)
Funtastic Employee Share Loan Scheme Trust(iv)
Dorcy Investments Pty Limited(iii)
Irwin Pacific Pty Limited(ii)
Dorcy NZ Pty Limited(v)
Madman Entertainment Pty Limited(vi)
Madman Productions Pty Limited(vi)
Madman Interactive Pty Limited(vi)
The AV Channel Pty Limited(vi)
Funtastic USA Pty Limited (formerly Judius Pty
Limited)(ii),(iii)
My Paint Box Inc
Madman NZ Limited(vi)
NSR (HK) Limited(iii)
Hkeepod (HK) Limited
Safety Products International Pty Limited(ii),(v)
Chill Factor Global Pty Limited(ii), (iii)
Hydro-Turbine Developments Pty Limited(ii), (iii)
Fun Toy Products Consulting (Shenzhen) Company
Limited
Country of
Incorporation
Australia
Australia
Hong Kong
Hong Kong
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
USA
New Zealand
Hong Kong
Hong Kong
Australia
Australia
Australia
China
Equity Holding
Year ended
31 July 2014
%
Year ended
31 July 2013
%
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
75
100
100
100
(i) Funtastic Limited is the head entity within the tax consolidated Group
(ii) These companies are members of the tax consolidated Group
(iii) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Funtastic Limited pursuant to ASIC Class Order
98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. The subsidiaries became a party to
the deed of cross guarantee on 23 July 2008.
(iv) During 2013 the Board established the Funtastic Employee Share Loan Scheme Trust for the purpose of purchasing and holding shares
on behalf of participants in accordance with ESLS Rules. The assets of the scheme are held separately from those of the Company and
are administered by trustees appointed by the Company. The Trust is consolidated into the Group financial statements at each
reporting date.
(v) The value attributed to the minority interest is $nil (2013).
(vi) Subsidiaries disposed of during the year, part of the Madman Entertainment Group. Refer to Note 5 for details.
72
Notes to the Financial Statements 31 July 2014
NOTE 32:
Subsidiaries (continued)
The consolidated Statements of Profit or Loss and other Comprehensive Income and Statements of Financial Position of the
entities party to the deed of cross guarantee are:
Statement of profit or loss and other Comprehensive Income
Year ended
31 July 2014
$‘000
Year ended
31 July 2013
$‘000
Continuing operations
Revenue
Cost of goods sold
Gross profit
Investment income
Warehouse and distribution expenses
Marketing and selling expenses
Administration expenses
Gain on early settlement of deferred consideration
Gain on sale of QuickSmart
Earnings before interest, taxation, depreciation and amortisation expenses
(EBITDA)
Finance costs
Depreciation and amortisation expenses
(Loss) profit before income tax
Income tax benefit
(Loss) profit for the year from continuing operations
(Loss) from discontinued operations
(Loss) profit for the year
Other comprehensive income
Items that subsequently may be reclassified to profit or loss:
Loss on equity settled benefits transferred from/taken to equity
(Loss) profit on cash flow hedges taken to equity
Other comprehensive (loss) income for the year (net of tax)
Total comprehensive (loss) income for the year
123,269
(89,894)
33,375
619
(10,083)
(11,490)
(15,815)
-
1,572
(1,822)
(3,689)
(4,108)
(9,619)
632
(8,987)
(24,291)
(33,278)
(302)
(322)
(624)
(33,902)
111,665
(75,194)
36,471
612
(10,032)
(10,982)
(8,810)
3,272
-
10,531
(5,449)
(2,958)
2,124
2,139
4,263
5,181
9,444
(23)
1,962
1939
11,383
73
Notes to the Financial Statements 31 July 2014
NOTE 32:
Subsidiaries (continued)
The consolidated Statements of Financial Position of the entities party to the deed of cross guarantee are:
Statement of Financial Position
Current Assets
Cash
Trade and other receivables
Inventories
Other assets
Other financial assets
Total Current Assets
Non-current Assets
Property, plant and equipment
Goodwill
Other intangibles
Other investments
Deferred tax assets
Other assets
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Deferred purchase consideration
Other liabilities
Other financial liabilities
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Deferred tax liabilities
Other liabilities
Total Non-current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
(i)At 31 July 2014, the Deed excludes Madman Entertainment Group.
74
Year ended
31 July 2014(i)
$‘000
Year ended
31 July 2013
$‘000
4,797
15,813
16,095
15,349
-
52,054
1,276
49,995
17,351
29
12,876
-
81,527
133,581
16,189
29,357
782
-
3,784
180
50,292
7,299
1,002
235
541
9,077
59,369
74,212
208,372
(136,040)
1,880
74,212
3,756
28,276
21,456
11,969
7,541
72,998
2,526
78,845
21,049
-
12,841
9,258
124,519
197,517
14,991
43,170
1,784
924
12,951
663
74,483
7,883
1,093
6,296
745
16,017
90,500
107,017
204,497
(99,427)
1,947
107,017
Notes to the Financial Statements 31 July 2014
NOTE 33: Notes to the cash flow statements
a) Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments
in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year
as shown in the cash flow statement is reconciled to the related items in the Statement of Financial Position as follows:
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
4,909
4,305
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
8,000
22,000
10,665
-
11,000
3,300
1,250
56,215
4,783
20,644
10,665
-
7,726
2,199
38
46,055
3,217
1,356
3,274
1,101
1,212
10,160
56,215
17,000
15,300
19,600
2,729
11,000
3,300
425
69,354
15,238
15,241
19,600
2,729
8,905
3,273
181
65,167
1,762
59
2,095
27
244
4,187
69,354
Cash and cash equivalents
b) Financing facilities
Total Financing Facilities Available
National Debtor Finance Facility
Trade Refinance Facility
Commercial Bill Facility
Lego Bill Facility
Letters of Credit
Bank Guarantees
Other Facilities
Reconciliation of Total Financing Facilities
Facilities Used at Balance Date
National Debtor Finance Facility
Trade Refinance Facility
Commercial Bill Facility
Lego Bill Facility
Letters of Credit
Bank Guarantees
Other facilities
Facilities Unused at Balance Date
National Debtor Finance Facility
Trade Refinance Facility
Letters of Credit
Bank Guarantees
Other Facilities
Total Financing Facilities
75
Notes to the Financial Statements 31 July 2014
NOTE 33: Notes to the cash flow statements (continued)
c) Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
(Loss) profit after income tax
Gain on early settlement of Lego deferred settlement costs
Income tax expense recognised in profit or loss
Amortisation
Depreciation
Finance Costs recognised in profit or loss
Share options expense
Loss on sale of non-current assets
Impairment loss recognised on trade receivables
Interest revenue
Net loss on assets designated as held for sale
Gain on QuickSmart sale and other
Changes in net assets and liabilities, net of effects from acquisition and
disposal of businesses:
Decrease in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in prepayments and other current assets
(Decrease)/increase in trade creditors
Decrease in provisions
(Decrease)/increase in other liabilities
Cash generated from operations
Income tax paid
Interest Paid
Net cash inflow from operating activities
Year ended
31 July 2014
$’000
(35,707)
-
89
3,963
1,173
4,052
302
90
135
(619)
23,825
(1,570)
14,892
4,470
35
(12,972)
(370)
3,502
5, 290
(76)
(3,432)
1,782
Year ended
31 July 2013
$’000
13,962
(3,272)
67
2,594
1,501
5,852
23
19
530
(612)
-
-
1,760
(9,296)
(4,359)
4,777
(2,224)
(130)
11,192
(311)
(5,267)
5,614
d) Cash consideration received on sale of businesses
Madman Entertainment
QuickSmart
Net cash received on sale of businesses
Note
5
Year ended
31 July 2014
$’000
19,897
1,964
21,861
Year ended
31 July 2013
$’000
-
-
-
76
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximizing the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which comprises the borrowings detailed in Note 19, cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital, accumulated losses and
reserves as disclosed in Notes 25, 26 and 27 respectively.
The Board reviews the capital structure on a regular basis. As part of this review the cost of capital and the risks associated
with each class of capital is considered. The Group balances its overall capital structure through the payment of dividends,
new share issues and share buy-backs as well as the issue of new debt and the repayment of debt.
During the year ended 31 July 2014, the Company received waivers in relation to a number of breaches to covenants based
on the pre-existing business, including Madman Entertainment. The Company completed the sale on 31 July 2014 and
negotiated with its external financiers new covenants as at this date .
Significant accounting policies
Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 2 to the financial statements. These policies were consistent
throughout the current year and the previous year.
Categories of financial instruments
Financial assets
Derivative instruments in designated hedge accounting relationships
Cash and cash equivalents
Loans and receivables
Financial liabilities
Derivative instruments in designated hedge accounting relationships
Non-derivative financial liability
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
-
4,909
18,589
180
58,289
1,351
4,305
36,363
663
92,997
Financial risk management objectives
The Group’s finance function provides services to the business, co-ordinates access to domestic and international financial
markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which
analyse exposures by degree and magnitude of risk. These risks include market risk (including currency risk, interest rate risk),
credit risk and liquidity risk.
The Group seeks to minimise the effects of these risks, by using various financial instruments to hedge these exposures. The
use of financial instruments is governed by the Group’s policies approved by the Board of Directors, which provide written
principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial
instruments and the investment of excess liquidity.
Compliance with policies and exposure limits is reviewed on a continual basis. The Group does not enter into any trade
financial instruments, including derivative financial instruments, for speculative purposes.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest
rates. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk and
foreign currency risk, including:
Foreign exchange forward contracts to hedge the exchange rate risk arising on the import of goods denominated in US
dollars; and
Interest rate swaps to mitigate the risk of rising interest rates.
At a Group level, market risk exposures are measured through sensitivity analysis and stress scenario analysis.
In 2014, while there has been a recent depreciation of the Australian dollar against the US dollar, and falling variable interest
rates there has been no material change to the Group’s exposure to market risk or the manner in which it manages and
measures the risk.
77
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments (continued)
Foreign currency risk management
Foreign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. The Group’s exposure to foreign exchange risk arises from the net investment in the
United States operations and the undertaking of certain transactions denominated in foreign currencies.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting
date is as follows:
US dollars
NZ dollars
Euro
Other
Foreign currency sensitivity
Liabilities
Assets
2014
$’000
12,798
-
257
-
2013
$’000
9,899
176
413
-
2014
$’000
2013
$’000
8,199
13,023
-
-
115
902
-
85
The Group is mainly exposed to the US dollar, Euro and the HK dollar. The following table details the Group’s sensitivity to a
10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate which
represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change
in foreign currency rates. A positive number indicates an increase in profit or loss where the Australian dollar strengthens
against the respective currency. For a weakening of the Australian dollar against the respective currency there would be an
equal and opposite impact on profit or loss and the balances below would be equal and opposite. A positive number
indicates an increase in other equity where the Australian dollar weakens against the respective currency. For a
strengthening of the Australian dollar against the respective currency there would be an equal and opposite impact on other
equity and the balances below would be negative.
10% increase in AUD against foreign
currency
Profit or Loss(i)
Other equity(ii)
10% decrease in AUD against foreign
currency
Profit or Loss(i)
Other equity(ii)
USD Impact
EURO Impact
NZ Impact
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
$’000
2013
$’000
560
415
284
1,615
(685)
(296)
(347)
(745)
(23)
-
29
-
(37)
-
46
-
-
-
-
-
66
-
(81)
-
(i)This is mainly attributable to the exposure outstanding in USD receivables and payables at year end.
(ii)This is mainly as a result of the changes in fair value of derivative instruments designated as cash flow hedges.
78
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments (continued)
Forward foreign exchange contracts
The settlement dates, dollar amounts to be received/(paid) and contractual rates of the Group’s outstanding contracts at
balance date are:
Average Exchange
Rate
Foreign Currency
Contract Value
Fair Value
Outstanding contracts
2014
2013
2014
2013
2014
2013
2014
2013
Buy US dollar
0-12 months
Buy Euro
0-12 months
Total
AUD/USD
US/Euro
$’000
US/Euro
$’000
A$’000
A$’000
A$’000 A$’000
0.9094
0.9923
3,500
11,461
3,849
11,550
3,804
12,865
AUD/Euro
US/Euro
$’000
US/Euro
$’000
A$’000
A$’000
A$’000 A$’000
-
0.7352
-
250
-
340
-
376
3,500
11,711
3,849
11,890
3,804
13,241
The Group has entered into contracts to purchase inventory from overseas suppliers. These forward foreign exchange
contracts are for terms not exceeding 12 months to hedge the exchange rate risk arising from these anticipated future
purchases, which are designated into cash flow hedges.
At balance date these purchase contracts were liabilities of the Group of $44,000 (2013: $1,352,000 asset).
During the year ended 31 July 2014 a gain on hedging instruments for the Group of $983,000 (31 July 2013: gain $701,000)
has been brought to account in other current financial assets (Note 13) and liabilities (Note 23). An amount, net of tax, was
transferred to equity (Note 27). It is anticipated these purchases will take place during the year to 31 July 2015 at which stage
the amount deferred in equity will be included in the carrying amount of the finished goods inventory. It is anticipated that
the finished goods inventory will be sold within 12 months after purchase at which stage the amount deferred in equity will
impact profit or loss.
Interest rate risk management
Interest rate risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group is exposed to interest rate risk as it borrows funds at both fixed and floating
interest rates. The risk is managed by the use of interest rate swap contracts. Hedging activities are evaluated regularly to
align with interest rate views and defined risk appetite, ensuring optimal hedging strategies are applied, by either positioning
the statement of financial position or protecting interest expense through different interest rate cycles.
The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management
section below.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates to the Group at the reporting
date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting
period. The Group considers the likelihood of a 50 basis point increase or a 50 basis point decrease to be reasonable when
reporting interest rate risk internally to key management personnel, as this represents management’s best estimate of the
possible change in interest rates.
At reporting date, if interest rates had been 50 basis points higher or 50 basis points lower and all other variables were held
constant, the Group’s:
Net profit after taxation would increase/(decrease) by $386,000/($386,000) respectively (2013: $405,000/($405,000)).
This is mainly due to the Group’s exposure to interest rates on its variable rate borrowings; and
Equity would increase by $28,000/$23,000 (2013: $220,000/($30,000) increase/(decrease), respectively). This is due to
the Group’s interest rate swap entered into on 4 February 2013.
79
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments (continued)
Interest Rate Swap Contracts
Bank loans of the Group currently bear an average variable interest rate of 6.82% (2013: 7.37%). It is the Group’s policy to
protect part of the loans from exposure to increasing interest rates. Accordingly, the Group has entered into an interest rate
swap contract under which it is obliged to receive interest at variable rates and to pay interest at fixed rates. The contract is
settled on a net basis and the net amount receivable or payable at the reporting date is included in financial assets/liabilities.
The floating rate on the interest rate swap is the Australian bank bill swap rate (BBSW).
The contract requires settlement of net interest receivable or payable quarterly. The settlement dates coincide with the
dates on which interest is payable on the underlying debt.
The swap currently in place covers 73% of the total debt outstanding with its senior lender and is timed to expire on 31
October 2014 (2013: swap in place covered 60% of the long term loan principal outstanding). The fixed interest rate is 4.02%
(2013: 4.02%) and the variable rate is the bank bill rate of the term of the underlying bill which at balance date was 2.71%
(2013: 2.69%).
As at 31 July 2014, the notional principal amounts and the periods of expiry of the interest rate swap contracts for the Group
were as follows:
Less than 1 year
1-2 years
2-3 years
Average contracted fixed
interest rate
Notional principal
amount
Fair value
2014
%
4.02
-
-
4.02
2013
%
-
4.02
-
4.02
2014
$’000
30,000
-
-
2013
$’000
-
30,000
-
2014
$’000
(136)
-
-
2013
$’000
-
(663)
-
30,000
30,000
(136)
(663)
The interest rate swap contract exchanging floating rate interest amounts for fixed rate interest amounts is designated as a
cash flow hedge in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The
interest rate swap and the interest payments on the loan occur simultaneously and the amount deferred in equity is
recognised in profit or loss over the loan period.
Credit risk management
Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure and the
credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties.
Trade receivables consist of a large number of customers spread across diverse industries. Ongoing credit evaluation is
performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance is
purchased.
The Group has a credit risk exposure to a small number of major ASX listed corporations for which credit guarantee insurance
is not purchased. Ongoing credit evaluation is performed on the financial condition of these accounts receivable.
The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the
Group’s maximum exposure to credit risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity
management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and
reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
80
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments (continued)
Liquidity and interest tables - financial liabilities
The following table detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows.
Weighted
average
effective
interest rate %
Less than 1
month
$’000
1 – 3
months
$’000
3 months to
1 year
$’000
1 – 5 years
$’000
5+ years
$’000
Total
$’000
2014
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate
instruments
2013
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate
instruments
-
3,823
13,824
3,986
-
6.82
7.87
2,558
6,256
-
2,131
5,990
12,371
14,643
34,723
208
4,194
5,302
7,433
-
3,994
21,450
12,690
1,880
7.37
7.67
3,069
6,432
3,738
3,111
7,300
14,363
15,278
43,160
9,206
7,043
25,634
12,034
-
-
-
-
-
-
-
-
21,633
10,945
26,143
58,721
40,014
16,350
38,827
95,191
Liquidity and interest tables - financial assets
The following table details the Group’s expected maturity for its non-derivative financial assets. The table below has been
drawn up based on the understood contractual maturities of the financial assets including interest that will be earned on
those assets except where the Group anticipates that the cash flow will occur in a different period.
Weighted
average
effective
interest rate %
Less than 1
month
$’000
1 – 3
months
$’000
3 months to
1 year
$’000
1 – 5 years
$’000
5+ years
$’000
Total
$’000
2014
Non-interest bearing
Variable interest rate
instruments
2013
Non-interest bearing
Variable interest rate
instruments
-
3,413
13,653
1,523
2.71
4,909
8,322
-
13,653
-
7,204
28,819
2.75
4,305
11,509
-
28,819
-
1,523
340
-
340
-
-
-
-
-
-
-
-
-
-
-
-
18,589
4,909
23,498
36,363
4,305
40,668
81
Notes to the Financial Statements 31 July 2014
NOTE 34:
Financial Instruments (continued)
Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in
accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable
current market transactions; and
The fair value of derivative instruments, are calculated using quoted prices. Where such prices are not available,
discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional
derivatives and option pricing models for optional derivatives is used.
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximates their fair values.
Fair value measurements recognised in the consolidated statement of financial position
Fair value measurements are discussed in Note 3 and in the notes specific to that asset or liability.
NOTE 35:
Share-based payments
Executive Share Option Plan (ESOP)
A scheme under which shares may be issued to executives was approved by a resolution of shareholders and directors of the
company on 2 August 2000. Options are granted under the plan for no consideration. Options are granted over varying
periods and on conditions attributable to each issue of options. The entitlements to the options are as soon as they become
exercisable. The options are not exercisable until certain criteria are met. Refer to the Share options/share performance
right plans of the Remuneration section of the Directors’ Report, for details.
ESOP options are valued using a trinomial option pricing model. Options granted under the plan carry no dividend or voting
rights. When exercisable, each option is convertible into one ordinary share.
The exercise price of options is based on the weighted average price at which the company’s shares are traded on the
Australian Stock Exchange during the five days immediately before the options are granted. Amounts receivable on the
exercise of options are recognised as share capital.
No options were granted under the plan during the current financial year or preceding financial year.
Fair value of options granted
Fair values have been determined in accordance with AASB 2 ‘Share-based Payments’ where the value of options is
determined at grant date and are included in remuneration on a proportionate basis from grant date to vesting date.
The model inputs for options granted include:
Option Number
Grant date
Vesting date
Expiry date
Exercise price
Stock price at issue
Expected life (years)
Volatility
Risk free rate
Dividend yield
Vesting period (years)
Average fair value at grant date
35
21/08/2009
37
01/04/2010
21/08/2012
09/11/2011 & 09/11/2012
10/08/2014
01/04/2015
$0.135
$0.200
4.4
60%
6.60%
4.00%
N/A
$0.072
$0.207
$0.230
4.4
72%
5.48%
4.00%
N/A
$0.119
82
Notes to the Financial Statements 31 July 2014
NOTE 35:
Share-based payments (continued)
Fair value of options granted (continued)
The following reconciles the outstanding share options granted under the Executive Share Option Plan at the beginning and
end of the financial year:
Opening balance 1 August
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Expired during the financial year
Closing balance at 31 July
Exercisable at end of year
2014
2013
Weighted
average
exercise price
$
Weighted
average
exercise price
$
Number of
options
0.161
5,200,000
0.161
-
-
-
-
-
0.161
-
-
-
-
-
-
-
-
5,200,000
1,333,333
0.161
0.161
Number of
options
5,200,000
-
(3,666,667)
-
(200,000)
1,333,333
1,333,333
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant
date.
Employee Performance Share Rights
During 2005 the company established the Funtastic Employee Performance Share Rights Plan (EPSR).
Rights are granted under the plan for no consideration. Rights are granted over varying periods and on conditions
attributable to each issue of right. The entitlements to the EPSRs are available as soon as they become exercisable.
The rights are not exercisable until certain performance criteria are met as follows:
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant
date.
Rights granted under the plan carry no dividend or voting rights.
When exercisable, each right is convertible into one ordinary share.
No consideration is payable by participants if the performance measures are achieved and the shares are granted.
There were no rights granted under the plan during the current or preceding financial year.
There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant
date.
EPSR Balance outstanding at the end of the financial year
EPSR
type
2
EPSR
type
2
EPSR
Number
Grant
date
2014
Expiry
date
35
03/07/2008
02/09/2013
EPSR
Number
Grant
date
2013
Expiry
date
35
03/07/2008
02/09/2013
83
Exercise
price
$nil
Exercise
price
$nil
Fair value
at grant
date
$0.39
Balance at
end of
Financial
year
nil
Fair value
at grant
date
Balance at
end of
Financial
year
$0.39
10,000
Notes to the Financial Statements 31 July 2014
NOTE 35:
Share-based payments (continued)
Employee Performance Share Rights (continued)
Fair value of performance rights granted
The following reconciles the outstanding EPSRs granted under the Employee Performance Share Rights Option Plan at the
beginning and end of the financial year:
Year Ended
31 July 2014
Year ended
31 July 2013
Balance at the beginning of the financial year
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Number of
EPSRs
10,000
-
-
-
Expired during the financial year
(10,000)
Balance at the end of the financial year
Exercisable at the end of the financial year
-
-
Weighted
average
exercise price
$
-
-
-
-
-
-
-
Weighted
average
exercise price
$
-
-
-
-
-
-
-
Number of
EPSRs
10,000
-
-
-
-
10,000
-
Employee Share Loan Scheme
During the 2013 financial year, the Company established the Funtastic Employee Share Loan Scheme (ESLS).
The Funtastic Employee Share Loan Scheme Trust (Trust) was established for the purpose of purchasing and holding shares
on behalf of participants to satisfy exercises made under the ESLS operated by Funtastic. Under the ESLS, an interest free
limited recourse loan to the value of the grant date issue price per share was granted to each participant. Each participant
directs Funtastic to pay the loaned amount to the trustee of the Trust and the trustee to use the loan amount to acquire
shares on behalf of the participant.
The loan is repayable by the participant when the options become exercisable, being after the vesting date and subject to the
satisfaction of the vesting conditions. When the options are exercisable, and in the event that the balance of the loan is less
than the estimated market value of shares that secure the loan less estimated transaction costs, the participant may request
Funtastic to sell the shares on the ASX and that the proceeds received from the sale of those shares, less any costs incurred in
connection with the sale and less the loan balance be remitted to the participant.
In the event that the loan balance is greater than the sale proceeds, the participant may request Funtastic to transfer the
shares which secure the loan to the participant provided that the participant remits any outstanding balance of the loan to
Funtastic as repayment of the loan.
In the event that an employee ceases employment with Funtastic, is entitled to vested shares and does not direct Funtastic
to sell or transfer such shares to the participant, and the balance of the loan is greater than the estimated proceeds amount,
Funtastic must buy back and cancel such shares with the consideration from the buyback being the full satisfaction of the
then outstanding balance of the loan. The participant will have no further entitlements to or in respect of the shares.
During the vesting period, dividends paid (less the estimated net tax payable on such dividends) are used to repay the
principal of the loan granted to the participant. Dividends of $0.05 per share or total of $11,000 were paid during the year,
on 27 November 2013 (2013: $nil).
The scheme is treated for accounting purposes as in substance options and therefore the ESLS are valued using a Black
Scholes option pricing model.
The options are not exercisable until the service vesting condition is met and the only vesting condition is for participants to
remain in employment until 1 January 2016. The expiry date of the options is on the date the employee ceases employment
with Funtastic.
84
Notes to the Financial Statements 31 July 2014
NOTE 35:
Share-based payments (continued)
Employee Share Loan Scheme (continued)
Each participant may direct the trustee on how the voting rights attached to shares held by the Trustee on behalf of the
participant should be exercised.
ESLS shares outstanding at the end of the financial year
Grant
date
8/07/2013
27/01/2014
Grant
date
8/07/2013
Expiry
date
N/A
N/A
Expiry
date
N/A(i)
2014
Exercise
price(ii)
$0.1599
$0.1660
2013
Exercise
price
$0.1599
Fair value
at grant
date
$0.1599
$0.1660
Fair value
at grant
date
$0.1599
Balance at
end of
Financial
year
1,000,000
1,700,000
2,700,000
Balance at
end of
Financial
year
2,400,000
2,400,000
(i)The expiry date is the date the employee ceases employment with Funtastic whether vested or not. The options granted under the ESLS
do not have an expiry date and can be exercised at any date after vesting conditions have been met
(ii)The exercise price represents the issue price per share offered to participants upon invitation to participate in the ESLS. As part of the
ESLS, an interest-free, limited recourse loan to each participant was offered for the purpose of acquiring shares in Funtastic. Further details
on the loan are set out above. Dividends paid or payable if any, (less the estimated net tax payable on such dividends) are used or will be
used to repay the principal of the loan granted to the participant. No dividends have been paid or are currently payable in relation to the
ESLS since the inception of the scheme.
Fair value of ESLS options granted
Fair values have been determined in accordance with AASB2 ‘Share-based Payments’ where the value of options is
determined at grant date and are included in remuneration on a proportionate basis from grant date to vesting date. ESLS
options are valued using a Black Scholes option pricing model. The model inputs for options granted include:
Option Number
Grant date
Vesting date
Expiry date
Exercise price
Stock price at issue
Expected life (years)(i)
Volatility
Risk free rate
Dividend yield
Vesting period (years)
Average fair value at Grant date
Tranche 1
8/07/2013
01/01/2016
N/A
$0.1599
$0.1599
N/A
55.55%
3.00%
N/A
2.5
$0.0502
Tranche 2
27/01/2014
16/11/2016
N/A
$0.1660
$0.1660
N/A
55.55%
3.00%
N/A
2.5
$0.0634
85
Notes to the Financial Statements 31 July 2014
NOTE 35:
Share-based payments (continued)
Fair value of ESLS options granted (continued)
The following reconciles the outstanding share options granted under the Employee Share Loan Scheme at the beginning and
end of the financial year:
Balance at the beginning of the financial year
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Expired during the financial year
Balance at the end of the financial year
Exercisable at the end of the financial year
2014
2013
Weighted
average
exercise price
$
$.01599
$0.1660
-
-
-
-
-
Number of
options
2,400,000
2,200,000
(1,900,000)
-
-
2,700,000
-
Weighted
average
exercise price
$
-
0.1599
-
-
-
Number of
options
-
2,400,000
-
-
-
2,400,000
0.1599
-
-
During the year, 2,200,000 ESLS options were granted to employees. No ESLS options vested at the reporting date for the
current or preceding financial year.
The weighted average remaining contractual life of the share options outstanding as at 31 July 2014 is 1.5 years.
Aggregate proceeds received from employees on the exercise of options and recognised as issued capital in the financial
period was $nil.
Market value of shares issued to employees on the exercise of options as at their issue date in the financial period was
$0.077.
NOTE 36: Key management personnel compensation
Details of key management compensation
The aggregate compensation made to key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
NOTE 37: Related party transactions
a) Equity interests in related parties
Equity interests in subsidiaries.
Year ended
31 July 2014
$
Year ended
31 July 2013
$
2,415,604
2,351,619
181,233
4,689
483,636
272,744
144,516
15,122
-
20,535
3,357,906
2,531,792
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 32 to the financial statements.
b) Transactions with Key Management Personnel
Key management personnel compensation
Details of key management personnel compensation are disclosed in Note 36 to the financial statements.
Loans from key management personnel
86
Notes to the Financial Statements 31 July 2014
NOTE 37: Related party transactions (continued)
b) Transactions with Key Management Personnel (continued)
Outstanding loans from key management personnel of the Group or from their related entities are:
Nir Pizmony(i)
(i)Funtastic Limited repaid the shareholder loan in full on 30 August 2013
c) Transactions with key management personnel of the Group
Year ended
31 July 2014
$
Year ended
31 July 2013
$
-
912,822
Profit for the year includes the following items of revenue and expense that resulted from transactions, other than
compensation or equity holdings, with key management personnel or their related entities:
Consolidated revenue includes the following amounts arising from transactions with
key management personnel of the Group or their related parties:
Gross revenue
Interest revenue
Consolidated profit includes the following amounts arising from transactions with key
management personnel of the Group or their related parties:
Cost of goods sold
Interest expense
Other expenses
Total assets arising from transactions with key management personnel or their related
parties:
Current – Other (prepaid expenses)
Current – Inventories
Total liabilities arising from transactions other than compensation with key
management personnel or their related parties:
Trade payables
Year ended
31 July 2014
$
Year ended
31 July 2013
$
-
-
-
1,210
-
1,210
5,126,923
6,938,661
4,225
969
67,176
-
5,132,117
7,005,837
Year ended
31 July 2014
$
Year ended
31 July 2013
$
838,353
1,616
839,969
-
-
-
-
-
1,890,148
1,890,148
The above transactions were performed at arm’s length.
During the financial year, the Group recognised the following transactions with key management personnel:
Sales of $nil (2013: $1,210) to Petite Living Pty Limited a company related to Mr Craig Mathieson and Mr Stewart Downs;
Purchases of $5,004,639 (2013: $6,938,661) from Madman Printing Pty Limited a company related to Mr Tim Anderson
and Mr Paul Wiegard;
87
Notes to the Financial Statements 31 July 2014
NOTE 37: Related party transactions (continued)
c) Transactions with key management personnel of the Group (continued)
As a result of the acquisition of NSR (HK) Limited, a company related to Mr Nir Pizmony, in the previous year, the Group
assumed responsibility for the loans advanced to NSR by its Shareholders. Funtastic Limited repaid the shareholder loan
in full on 30 August 2013. As at 31 July 2014 the amount owing under this arrangement was $nil (2013: $912,822). The
loan is denominated in US dollars and attracts interest at a rate linked to the Group’s cost of borrowing. Interest accrued
as at 31 July 2014 was $nil (2013: $187,255) of which $4,225 (2013: $67,176) relates to the financial year ended 31 July
2014.
During the financial year, Paul Wiegard, Managing Director for Madman, has advanced payments for prepaid royalties on
behalf of Madman Entertainment for total value of USD 795,000 (AUD 1,010,064). These suppliers are not related in any
way to Paul Wiegard nor were they related parties of Funtastic Limited. Repayment of the loans to Paul Wiegard were
made/effected from proceeds of the sale of Madman on 31 July 2014.
d)
Transactions with other related parties
Transactions between Funtastic Limited and other entities in the wholly-owned Group during the financial years ended 31
July 2014 and 31 July 2013, that were eliminated on consolidation, consist of:
sales made by Funtastic Limited;
loans advanced and interest charged by Funtastic Limited;
payments made by KMP on behalf of Funtastic Limited;
advances made by KMP on behalf of Funtastic Limited
management services provided by Funtastic Limited;
management services provided to Funtastic Limited; and
payment to/from Funtastic Limited for the above services.
NOTE 38: Remuneration of Auditors
Auditor of the parent entity
Audit and review of the financial reports of the entity
Audit of the financial report of overseas subsidiary(i)
Preparation of tax return
General taxation services
Other advisory services
The auditor of Funtastic Limited is Deloitte Touche Tohmatsu.
(i) Related practice of parent entity auditor.
88
Year ended
31 July 2014
$
Year ended
31 July 2013
$
230,000
30,000
53,000
-
268,048
581,048
255,000
52,061
42,828
65,000
104,000
518,889
Notes to the Financial Statements 31 July 2014
NOTE 39:
Parent entity disclosures
Financial Position
Assets
Current assets
Non-current assets
Liabilities
Current liabilities
Non-current liabilities
Equity
Issued capital
Accumulated losses prior to 31 July 2011
Loss (profits) reserved from 1 August 2011
Reserves:
Equity-settled benefits
Cash flow hedging
Financial Performance
Profit for the year – continuing operations
(Loss)/profit for the year - discontinued operations
Other comprehensive income
Total comprehensive income
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
39,145
81,278
120,423
(51,998)
(8,296)
(60,294)
(208,372)
123,755
26,368
(1,941)
62
(60,128)
40,016
132,368
172,384
(80,332)
(17,846)
(98,178)
(204,497)
123,755
8,472
(1,639)
(297)
(74,206)
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
7,266
(21,827)
(624)
(15,185)
2,767
5,181
1,985
9,933
Commitments for expenditure
There were no commitments to acquire property, plant and equipment at 31 July 2014. Contingent liabilities as disclosed in
Note 41 relate to the parent entity as well as the Group.
NOTE 40:
Subsequent Events
There has not been any matter or circumstance occurring subsequent to the end of the financial period 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 future financial years.
89
Notes to the Financial Statements 31 July 2014
NOTE 41:
Contingent Liabilities
Contingent Liabilities
Legal Proceedings
Year ended
31 July 2014
$’000
Year ended
31 July 2013
$’000
1,031
551
An entity of the Group is subject to a legal claim from the liquidators of a company which sold intellectual property to the
Group entity prior to it being placed into liquidation on 31 May 2011.
On 22 May 2014, the liquidators filed a statement of claim in the Supreme Court of New South Wales in which they have
claimed that the transfer of intellectual property was a voidable transaction and seek the return of the intellectual property
transferred.
The Group entity filed a defence against the claim on 22 August 2014. The Directors believe, that the original transfer of
assets was a legal transaction and, based on legal advice received, determined that no liability arises from this transaction.
Accordingly no provision has been made in respect to this claim in these financial statements.
The Company is subject to a royalty claim totalling $911,000, in respect to disputed IP ownership on a product line. The
maximum exposure would be $480,000, representing the royalty rate across the product sales in dispute. The Company filed
a defence against this claim on 17 July 2014, and the Directors believe, based on legal advice received, that the sales in
dispute are not subject to any royalty claim. Accordingly, no provision has been made in respect to this claim in the financial
statements.
The Company is also subject to a patent infringement claim issued on 22 July 2014. This claim has not been quantified and
based on current legal advice, the claim lacks merit. No provision has been made in respect to this claim in the financial
statements
Final Madman working capital adjustment
As part of the share sale agreement Funtastic are required to provide final completion accounts and where an objection is
received have a period in which to resolve any amount in dispute. Where there is no resolution the parties are to appoint an
independent accountant to validate the accounts. Funtastic has received notice of objection on the 29th September 2014
from the purchaser and likely that an independent review will be required.
NOTE 42:
General Information
Funtastic Limited (the Company) is a limited company incorporated in Australia. The addresses of its registered office and
principal place of business are disclosed in the introduction to the Annual Report. The principal activities of the Company
and its subsidiaries (the Group) are described in Note 4.
al stock exchange information as at [insert date]
90
Additional stock exchange information as at 26 September 2014
Distribution of equity securities
Analysis of numbers of equity security holders by size of holdings:
Range
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Ordinary Shares
Holders
Options
Performance share rights
754
1,450
709
1,228
410
4,551
-
-
-
-
3
3
-
-
-
-
-
-
Substantial holders
Substantial holders in the Company are set out below:
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
BELL POTTER NOMINEES LTD
Shares
%
99,774,978
79,164,645
70,473,971
64,822,412
50,190,414
15.479
12.282
10.933
10.057
7.787
91
Additional stock exchange information as at 26 September 2014
Twenty largest quoted equity security holders
Shares
%
1
2
3
4
5
6
7
8
9
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
J P MORGAN NOMINEES AUSTRALIA LIMITED
BELL POTTER NOMINEES LTD
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
G HARVEY NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
G HARVEY NOMINEES PTY LTD
PIZ BY PIZ PTY LTD
10 MR HOD PIZEM
11
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
12 MR NIR PIZMONY & MS MARIA LUTGARDA PIZMONY
13
14
15
CITICORP NOMINEES PTY LIMITED
CJ PRODUCTS LLC
RENSH PTY LTD
16 DDV SUPERANNUATION NOMINEES PTY LTD
17
18
19
20
PHILRENE PTY LTD
ABN AMRO CLEARING SYDNEY
GRANT MACKENZIE
CHRISTOPHER IAN WALLIN
Unquoted equity securities
Options issued under the Employee Share Loan Plan
Unissued options issued as incentive component of Executive Remuneration
Voting Rights
The voting rights attaching to each class of equity securities are set out below:
Ordinary shares
99,474,978
73,136,334
50,190,414
41,835,997
36,852,306
26,470,587
15,610,232
13,820,687
11,401,470
10,010,234
9,460,750
8,733,683
7,978,992
6,959,137
6,000,000
5,700,438
5,221,821
4,196,986
3,454,120
3,192,494
14.910
10.962
7.523
6.271
5.524
3.968
2.340
2.072
1.709
1.500
1.418
1.309
1.196
1.043
0.899
0.854
0.783
0.629
0.518
0.478
Number on Issue
2,700,000
5,000,000
Number of
holders
7
1
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Options and Performance Share Rights
No voting rights.
92