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We help people smile!
2017 Annual Report
Our
Story
Brand Builders,
Global Innovators
We create, develop and market
innovative brands that enrich
lifestyles around the world.
Our vision is driven by the
values of integrity, creativity,
innovation and passion.
The heart of what we do is
enriching lives and creating
long-term business value,
by building world-class lifestyle
brands on a global scale.
Contents
Chairman’s Report
Financial Report
2
6
1
Funtastic Annual Report 2017 Chairman’s
Report
On behalf of the
Board of Directors
of Funtastic
Limited I am
pleased to present
to you our 2017
Annual Report
Review of operations
during the past three years, the
company embarked on a major
turnaround strategy to reduce the
reliance on the concentrated retail
environment in australia and its high
dependency on agency business.
Whilst the market environment
has continued to be difficult both
domestically and internationally
the results have been extremely
disappointing. However, four
significant achievements have been
delivered in the last several months
that have finally delivered the
platform/foundations we have been
working towards and effectively
enable the company to better
influence and control its own future.
1.Debt Level
as announced to the market
the company has been in long
negotiations with its Bankers the
national australia Bank with
regards to the future and structure
of the debt. thanks to the significant
support of the naB who have been
with the company over many years,
we concluded on 30 august 2017
a debt restructure resulting in a
$36 million reduction by way of
a debt forgiveness. the full impact
of this is discussed in the recent
capital Raising documents and will
be included in the January 2018
half year accounts.
this is a significant outcome for
the company as the structure of
the balance sheet now has more
appropriate gearing levels for a
business of its size and it enables
the company to be a smaller and
more nimble operation.
2
2.Capital Raising
the debt restructure has allowed
the company to go to the market
and successfully raise $8.2 million
in equity, completed on the
19 august 2017. the significance
of the restructure has allowed
the company to resource it
balance sheet more appropriately.
We welcome both our existing
and new shareholders to the
expanded registry.
as outlined in the documents, this
capital has been used to finalise the
debt restructure, and provide the
first significant injection of new
working capital into the business
for several years.
3.Sale of a part of the
International Business
On 31 July 2017, an agreement
was entered to sell a segment
of the international business for
$2.1 million aud by way of a
management buy‑out to key
personnel based in Hong Kong.
this transaction subsequently
settled on 7 september 2017.
this will result in a general
reduction in overheads and
major reduction in cash burn
of $3.5 million per annum as the
operation has been reduced and
streamlined to focus on owned
brands and product more aligned
to the businesses core values and
methods of operation.
3
Funtastic Annual Report 2017 Chairman’s
Report
Continued
4.Reductions in Fixed Costs
the company over the past 18
months has reviewed, refocused
and rebuilt its fixed cost base. the
changes have included significant
staff reductions in head count and
exited several leases and long‑term
contracts that were no longer
appropriate and weighed on the
businesses bottom line. in June, it
relocated its Head Office to smaller
premises in mount Waverley at
a cost more appropriate both to
the size of the operation and in line
with current market conditions.
cumulatively the fixed cost base
has been reduced by an annualised
$3.9 million, in addition to the
savings from the disposal of the
international assets.
The Board’s key strategies for
FY18 performance include:
1. enhancing current licencing
portfolio by re‑establishing
key relationships.
2. international foot print to
be reset.
3. strong brand/portfolio
management both domestically
and internationally.
4. Leverage re‑set cost base and
balance sheet to attract new
business partners for FY19.
5. new and streamlined senior
management team.
4
Outlook
Following significant and sustained
efforts, the company is now
significantly more stable than
in previous financial periods, with
a better structured Balance sheet,
enhanced internal controls, sound
cash management principles, and
reduced excess inventories and
a significantly lower fixed cost
base. the first quarter has
started positively and the Board
is confident that the company
will meet its targets for 2018
as a profitable entity.
as noted last year, the company
remains committed to its strategy
of re‑defining its core business and
rightsizing the organisation for the
future with the appropriate focus
on the right products and markets.
the organisation has gone through
significant structural changes
appointing key people in positions
aligned to the company’s long‑term
strategy. this has resulted in
increased employee engagement
with sound commitment and
capabilities supported by
appropriate incentive programs.
the company continues to focus
on developing a strong, diverse and
relevant range of new and innovative
products enabling the company to
effectively leverage its cost base.
the directors would like to thank
all our staff, shareholders, bankers,
suppliers, key agency partners and
customers for their ongoing loyalty,
support and patience. We look
forward to a much more
prosperous FY18.
shane tanner
Chairman of the Board
27 october 2017
5
Funtastic Annual Report 2017 Contents
Company Information
Corporate Governance Statement
Directors’ Report
Remuneration Report (Audited)
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Consolidated Statement of profit or loss
and other Comprehensive Income
Consolidated Statement of Financial position
Consolidated Statement of Changes in equity
Consolidated Statement of Cash Flows
notes to the Financial Statements
note 1:
Significant accounting policies
note 2: Application of new and revised
Accounting Standards
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/(loss) for the year
note 8:
Income tax
note 9: Current Assets – trade and other Receivables
note 10: Current assets – Inventories
note 11: other Assets
7
8
15
21
31
32
36
37
38
39
40
41
41
49
50
51
52
53
53
54
57
58
59
note 12: Assets held for sale
note 13: non-current assets – plant and equipment
note 14: non-current assets – Goodwill
note 15: non-current Assets – other Intangibles
note 16: Assets pledged as security
note 17: Borrowings
note 18: provisions
note 19: other liabilities
note 20: leasing arrangements
note 21: equity
note 22: earnings per share
note 23: Dividends on equity instruments
note 24: license guarantee commitments
note 25: operating leases
note 26: Subsidiaries
note 27: notes to the cash flow statements
note 28: Financial Instruments
note 29: Share-based payments
note 30: Key management personnel compensation
note 31: Related party transactions
note 32: Remuneration of Auditors
note 33: parent entity disclosures
note 34: Subsequent events
note 35: General Information
Additional stock exchange information
59
60
60
61
62
62
63
64
64
65
66
66
67
67
68
71
72
77
79
79
80
81
82
82
83
6
Company Information
Directors
shane tanner
Chairman and Independent Non-Executive Director
stephen Heath
Independent Non-Executive Director
Grant mackenzie
Executive Director and Chief Operating and Financial Officer
nir Pizmony
Managing Director and Chief Executive Officer (resigned as CEO 31 July 2017,
Independent non-executive Director effective from 31 July, resigned Director 28 September 2017)
Linda norquay
Independent Non-Executive Director (resigned 3 March 2017)
Company Secretary
Grant mackenzie
Registered Office
level 2 307 Ferntree Gully Road
Mount Waverley Vic 3149
Principal Administrative Office
level 2 307 Ferntree Gully Road
Mount Waverley Vic 3149
Share Registry
Boardroom Limited
Grosvenor place, level 12,
225 George Street
Sydney nSW 2000
Auditors
Grant thornton
level 30, 525 Collins Street
Melbourne Vic 3000
Bankers
national australia Bank
500 Bourke Street
Melbourne Vic 3000
Solicitors
clarendon Lawyers
level 19, 333 Collins Street
Melbourne VIC 3000
7
Funtastic Annual Report 2017
Corporate Governance Statement
the Corporate Governance principles that guide the operations of Funtastic limited (“Funtastic” or “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 2017 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.
Principle 1: Lay solid foundations for management and oversight
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:
y establishing, monitoring and modifying Funtastic’s corporate strategies;
y ensuring best practice corporate governance;
y appointing the Chief executive officer and approving succession plans;
y monitoring the performance of Funtastic’s management;
y ensuring that appropriate risk management systems, internal control and reporting systems and compliance frameworks are in place
and are operating effectively;
y monitoring financial results;
y ensuring that business is conducted ethically and transparently;
y approving decisions concerning Funtastic’s capital, including capital restructures and dividend policy; and
y 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 has a written agreement with each director and senior executive setting out the terms of their agreement.
the Company Secretary provides advice and support to the Board and is responsible for the Company’s day to day
governance framework.
the Chairman on behalf of the Board undertakes a review of the Managing Director’s performance at least on an annual basis.
objectives are set and aligned to the overall business goals and the Company’s requirement of the position.
the performance of senior management is evaluated by the Managing Director through formal performance reviews undertaken on an
annual basis. the individual performance of each Senior executive is reviewed against goals set in the previous year and new objectives
are established for the following financial year.
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 2017 the group’s mix of employees
was as follows (including 28 international staff in respect of the subsequently divested International operations):
General employees
Middle managers
Senior managers
Board
Total
8
Female
Male
Total
34
11
3
0
48
10
12
8
4
34
44
23
11
4
82
Principle 1: Lay solid foundations for management and oversight 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 restrictions on the company’s ability to operate effectively.
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.
new directors are provided with a letter of appointment setting out the Company’s expectations, 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.
Principle 2: Structure of the board to add value
Nomination Committee
the current members of the nomination Committee are Mr Shane tanner (Chairman), Ms linda norquay (resigned 3 March 2017) and
Mr Stephen Heath.
the role of the nomination Committee is to assist the Board in ensuring that the Board is comprised of individuals who are best able to
discharge the responsibilities of a Director, having regard to the law and the highest standards of governance, by:
y assessing the skills, knowledge, experience and diversity required on the Board and the extent to which they are represented;
y establishing processes for the identification of suitable candidates for appointment to the Board; and
y overseeing succession planning for the Board.
the principal purposes of the Committee are to:
y establish a formal and transparent procedure for the selection and appointment of new directors to the Board;
y 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;
y review the time commitment required from a non-executive director and whether non-executive directors are meeting this
requirement; and
y 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.
the committee seeks advice and guidance, as appropriate, from external experts.
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:
y the Board should comprise between 3 and 9 directors;
y the maximum age for directors is 72;
y the Board should comprise directors with a broad range of skills and experience; and
y the term of any appointment is subject to continuing shareholder approval.
the directors believe that limits on tenure may cause loss of experience and expertise that are 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
At the commencement of the financial year, the Board comprised of three non-executive directors (one non-executive director resigned
during the period without replacement) 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 pages 15 and 16 of the
Annual Report.
9
Funtastic Annual Report 2017 Corporate Governance Statement
continued
Principle 2: Structure of the board to add value continued
Board and Director Independence
the Board has assessed the criteria for independence as outlined in the ASX Corporate Governance Council’s best practice
recommendation 2.3. 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, two of the four directors are considered to be independent. It is the Board’s view that Mr Shane tanner, and Mr Stephen Heath
are independent directors.
Mr nir pizmony and Mr Grant Mackenzie are executive Directors and are deemed not to be independent directors.
Regardless of whether directors are defined as independent, all directors are expected to bring independent views and judgement to
Board deliberations.
the Board strongly believes that 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.
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.
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.
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 the business. 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 independent professional advice at the expense of Funtastic. 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.
Principle 3: Act ethically and responsibly
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 their duties and to sign an acknowledgement stating that
they have read and understood this document.
10
Principle 3: Act ethically and responsibly continued
Ethical Compliance
Funtastic uses its best endeavours through contract negotiations to ensure that all 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.
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”.
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 information obtained through employment with Funtastic.
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.
Principle 4: Safeguard integrity in corporate reporting
Audit, Risk and Compliance Committee
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 now comprised of two non-executive directors:
Ms linda norquay (Chairman) (resigned 3 March 2017), Mr Shane tanner and Mr Stephen Heath (appointed Chairman 3 March 2017).
Audit, Risk and Compliance Committee Charter and Responsibilities
the Committee’s key responsibilities and functions are to:
y 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;
y oversee the adequacy of internal control systems in relation to the preparation of financial statements and reports; and
y 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 invitation such members of management or others as it may
deem necessary to provide appropriate information or explanations.
the Audit, Risk and Compliance Committee meet at least twice per year and more frequently if required. the external Auditor attends
the 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 Committee reports matters regarding its role and responsibilities, including:
y the system of internal control, which management has established to safeguard the company’s assets;
y processes are in place such that accounting records are properly maintained in accordance with statutory requirements; and
y processes exist to reasonably guarantee that financial information provided to investors and the Board is reliable and free of
material misstatement.
11
Funtastic Annual Report 2017 Corporate Governance Statement
continued
Principle 4: Safeguard integrity in corporate reporting continued
the following are intended to form part of the normal procedures for the Committee’s audit responsibility:
y recommending to the Board the appointment and removal of the external auditors and reviewing the terms of engagement;
y approving the audit plan of the internal and external auditors;
y 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;
y providing recommendations to the Board as to the need for and the role of an internal audit function;
y reviewing and appraising the quality of audits conducted by the internal and external auditors and confirming their respective authority
and responsibilities;
y monitoring the relationship between management and the external auditors;
y determining the adequacy, effectiveness, reliability, and appropriateness of administrative, operating and internal control systems
and policies;
y evaluating compliance with approved policies, controls, and with applicable accounting standards and other requirements relating to
the preparation and presentation of financial results;
y overseeing financial reporting and disclosure practice and the resultant information;
y reviewing (in consultation with management and external auditors) the appropriateness of the accounting principles adopted by
management in the composition and presentation of financial reports and approving all significant accounting policy changes.
y evaluating the structure and adequacy of business continuity plans;
y determining the appropriateness of insurances on an annual basis;
y reviewing and making recommendations on the strategic direction, objectives and effectiveness of financial and operational risk
management policies;
y overseeing the establishment and maintenance of processes to ensure that there is:
– an adequate system of internal control, management of business risks and safeguard of assets; and
– a review of internal control systems and the operational effectiveness of the policies and procedures related to risk and control.
y evaluating exposure to fraud and monitoring investigations of allegations of fraud or malfeasance;
y reviewing corporate governance practices for completeness and accuracy;
y determining the adequacy and effectiveness of legal compliance systems; and
y providing recommendations as to the reporting of and propriety of related party transactions.
Management Certification Process
A management certification process operates across the business. the process serves the following purposes:
y provide assurance to the Board to support their approval of the annual financial reports;
y formalise the process by which the executive team sign-off on those areas of risk responsibility delegated to them by the Board; and
y ensure a true and fair view of Funtastic’s financial statements.
the key steps in the certification process are as follows:
y completion of a questionnaire by key management covering information that is critical to the financial statements, risk management and
internal controls; and
y 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:
y the financial statements provide a true and fair view, in all material respects of Funtastic’s financial condition and operating results;
y the financial statements provide a sound system of risk management and internal compliance and control;
y there is compliance with relevant laws and regulations;
y Funtastic’s risk management, internal compliance and control systems are operating efficiently and effectively in all material
respects; and
y all material business risks have been identified and communicated to the Board.
The external auditor attends the AGM and is available to answer questions from security holders relevant to the audit.
12
Principle 5: Make timely and balanced disclosure
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.
Principle 6: Respect the rights of security holders
the company maintains a corporate website which provides information freely and readily information to current and potential
security holders.
the company actively engages with security holders as well as meeting with security holders upon request and responds to enquiries from
time to time.
the company provides the option for security holders to receive communications from, and send communications to, the entity and its
security registry electronically.
Principle 7: Recognise and manage risk
Recognising and managing risk
the responsibility for risk management and oversight is coordinated through the Audit, Risk and Compliance Committee, in conjunction
with management. the committee’s specific function with respect to risk management is to review and report to the Board that:
y the company’s ongoing risk management program effectively identifies areas of potential risk;
y adequate policies and procedures are designed and implemented to manage identified risks; and
y 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:
y 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;
y determine the adequacy and effectiveness of financial and operational risk management systems by reviewing risk registers and reports
from management and external auditors;
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.
Principle 8: Remunerate fairly and responsibly
Remuneration and Evaluation Committee
the members of the Remuneration and evaluation Committee are Mr Stephen Heath (Chairman) and Shane tanner. Ms linda norquay
resigned 3 March 2017.
the Remuneration and evaluation Committee is appointed by the Board primarily to monitor, review, assess, recommend and approve:
y remuneration policies and practices which will serve to attract and retain executives and directors who will create value for
shareholders. these policies and practices should fairly and responsibly reward executives and directors, having regard to the
performance of the Company, the performance of the individual, and the general remuneration environment;
y succession planning for Senior executives who report directly to the Chief executive officer;
y the remuneration, superannuation and incentive policies for Senior executives who report directly to the Chief executive officer; and
y 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.
13
Funtastic Annual Report 2017 Corporate Governance Statement
continued
Principle 8: Remunerate fairly and responsibly continued
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:
y the company’s policy for determining executive and non-executive directors’ remuneration, superannuation, and incentives as well as
any retention or other compensation payments, and any proposed amendments to the policy;
y remuneration includes base pay, incentive payments, equity awards, retirement rights and service contracts;
y the implementation of the remuneration policy;
y 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 remuneration of individual non-executive directors will ultimately be determined by the Board and approved in
aggregate by the shareholders in accordance with the Corporations Act 2001 and the ASX listing Rules;
y the proposed specific remuneration and other benefits for the direct reports of the Chief executive officer and the design of all
incentive plans, including performance hurdles; and
y the total proposed payments from any executive incentive plan.
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.
14
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 2017.
the following persons were Directors of Funtastic limited during or since the end of the financial year:
shane tanner
FCPA, ACIS
Chairman and Independent
non-executive Director
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.
Mr tanner is also Chairman of BGD
Corporation and paragon Care ltd.
He is a former Ceo of Mayne nickless
Diagnostic Services and Director of
Sterihealth ltd. Mr tanner has vast
commercial and financial experience.
nir Pizmony
Managing Director and Chief
executive officer
(Resigned as Ceo 31 July 2017 and
Director on 28 September 2017)
Appointed to the Board in August 2009 as
an executive Director. He was appointed
as Managing Director & Chief executive
officer on 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.
stephen Heath
Independent non-executive Director
Appointed to the Board in october
2010 as an Independent non-executive
Director. Mr Heath is Chairman of the
Audit, Risk and Compliance Committee,
Chairman of the Remuneration and
evaluation Committee and a member of
the nomination committee.
Mr Heath has extensive retail experience
comprising 18 years across iconic Australian
retail brands including Harvey norman,
Rebel Sport, Godfreys, International
Cleaning Solutions Holdings and Fantastic
Holdings limited. Mr Heath was Ceo of
Rebel Sport during its public listing on the
ASX. He also spent 5 years with Sharp
Corporation managing the retail accounts
of major retailers such as Harvey norman,
Myer, David Jones and Kmart.
15
Funtastic Annual Report 2017 Directors’ Report
continued
Directors continued
Linda norquay
Grant mackenzie
B. Com, CA, GAICD
Independent non-executive Director
(Resigned 3 March 2017)
B. Acc, CA, MBA, GAICD
executive Director, Chief Financial officer
and Company Secretary
Appointed to the Board in September 2011
as an Independent non-executive Director.
Ms norquay was, until her resignation,
a member of the nomination Committee,
the Remuneration and evaluation
Committee and Chairman of the Audit,
Risk and Compliance Committee.
Ms norquay is 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.
Appointed to the Board as executive
Director and to the position of Chief
operating officer in August 2014.
Mr Mackenzie is also the Chief Financial
officer & Company Secretary of
the Company.
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 Finance Director for
Brown-Forman Australia. Grant brings with
him a successful record of international,
strategic and commercial management
such that he is considered a key asset
to the Group in executing its long term
geographical expansion of its own brands.
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
Company
Period
Vision eye Institute limited
2004 to october 2015
BDG Corporation limited
november 2014 to current
paragon Care limited
2005 to current
Stephen Heath
Fantastic Holdings limited
2013 to January 2016
temple and Webster Group limited
March 2016 to current
Company Secretary
Mr Mackenzie was appointed to the position of Company Secretary on 1 november 2013.
Principal activities
the Group’s principal continuing activity during the period was as a brand builder and distributor of toys, sporting, confectionery and
lifestyle products, operating globally.
16
Subsequent events
sale of international – the sale of a significant segment of the International business by way of a management buyout was made on
31 July 2017 with settlement effected on 7 September 2017.
Bank debt restructure – After significant and lengthy negotiations, the Group completed a major restructuring of its debt facility with
it bankers the national Australia Bank effective on 30 August 2017. the impact of this was a reduction of debt by $36 million by way of
a debt forgiveness.
capital raising –the company undertook a successful capital raising of $8.2 million which was completed on 19 September 2017.
the combination of the above and continued overhaul of the fixed cost base has significantly restructured and strengthened the Groups
balance sheet for the future.
Environmental regulations
the Group is not required to hold any environmental protection Authority licences.
Review operations
Key strategic achievements:
y Continued development of our own brands
y Continued development of our global distribution network
y Continued expansion into lifestyle and apparel
Key operating achievements:
y Debt restructure and capital raising for a ‘Match fit’ balance sheet
y Cost base reset – International fixed cost reduction, conversion to fully variable warehousing and headcount reduction.
y Strategic review completed
y Competency, recourse and structural review
y part sale of international business
y Management restructure
Key financial results from continuing operations:
y npAt loss of $29.7 million.
y eBItDA loss of $5.6 million (excluding impairment charge recognised in the period of $17.1 m).
y Finance costs reduced to $3.6 million due to lower interest cost offset by increased debt facility.
y net debt increased by $3.6 million.
17
Funtastic Annual Report 2017 Directors’ Report
continued
Key Financials (Continuing Activities)
AUD’m
Revenue
eBItDA
loss before tax
net loss after tax
Basic epS (cents)
Dividend per share (cents)
Roe(i)
net Debt ($m)
Gearing(ii)
(i) npAt/average issued capital;
(ii) net debt/shareholder equity;
FY17
FY16 (restated)
% Change
55.7
(22.8)
(28.0)
(29.7)
(4.10)
n/A
88.9
(11.8)
(19.1)
(20.6)
(3.04)
n/A
(15.98%)
(11.42%)
51.9
(1.02)
48.2
(2.82)
↓37%
↓93%
↓ 47%
↓ 44%
↓35%
n/A
↓40%
↓8%
↓64%
Outlook
Funtastic has developed a solid foundation that will enable it to continue to create, develop and market innovative brands that enrich
lifestyles around the world, whilst delivering improved returns to our shareholders. the company has broadened its categories we
operate in to include lifestyle and health food products whilst continuing in toys, sporting and confectionery categories.
the benefits of the initiatives that have been implemented in FY17 will have a positive impact in FY18. these include:
y the continued expansion of our own products.
y Increased product portfolio of agency brands.
y ongoing benefits derived from significant cost savings initiatives structural organisational and key people changes.
y Improved margins with a better mix of new products, reduced clearance sales and new channels of distribution.
through our own and key agency brands we continue to enhance our contract manufacturing and innovation capabilities, global
distribution networks, brand building capabilities and domestic distribution expertise that will enable us to strengthen a well-balanced
diversified portfolio of key brands.
Rounding of amounts to nearest thousand dollars
the company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the financial
statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
Dividends
In respect of the financial year ended 31 July 2017, no dividends have been declared or paid, and a dividend is unlikely until the company
returns to a profit and reduces its core debt levels. the declaration of dividends is subject to bank approval.
Subsequent Events
Bank
the company’s bank facilities with national Australia Bank have been restructured, enabling the business to operate in an efficient and
effective manner. In March, the facilities were extended through to november 2018 (overdraft facility February 2018). In accordance with
accounting standards, these facilities have been classified as current in the Company’s balance sheet as there is a review in november 2016.
In August 2017, the company finalised its new banking facilities through to 30 September 2018 (Corporate Market loan of $2 million with
an expiration date of 30 September 2020).
18
Capital Raising
post Balance date the company undertook a capital raising of $8.2 million comprising a pro-rata renounceable entitlement offer,
underwritten by a number of institutional and private investors. the proceeds are being used to reduce short term funding as part
of the debt restructure and the provision of additional working capital for the Company.
Share Options
Options granted to directors and executives of the Company
During or since the end of the financial year, no options were granted under the employee Share loan Scheme (eSlS) over unissued
ordinary shares in the Company to Directors or executives as part of their remuneration.
Unissued shares under option
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 29 of the
financial statements.
At the date of this report, unissued shares of the Company under option are:
(a) employee share loan scheme (esLs)
Tranche
tranche 1
Grant date
8 July 2013
tranche 2
27 January 2014
Number of
shares
400,000
500,000
Exercise price
Exercise date
Vesting date Expiry date
$0.1599
1 January 2016
1 January 2016
$0.1660
27 January 2017
27 January 2017
tranche 3
31 July 2015
–
$0.0244
31 July 2018
31 July 2018
tranche 4
19 october 2015
3,275,000
$0.0300
4 october 2018
4 october 2018
tranche 5
23 December 2015
3,300,000
$0.0290 23 December 2018 23 December 2018
7,475,000
n/A
n/A
n/A
n/A
n/A
of the 2,400,000 options granted on 8 July 2013, 2,000,000 had been forfeited due to resignations of employment. of the 2,200,000
options granted on 27 January 2014, 1,700,000 had been forfeited due to resignations of employment. of the 9,110,000 options
granted on 19 october 2015, 5,835,000 had been forfeited due to resignations of employment. of the 18,800,000 options granted
on 23 December 2015, 15,500,000 had been forfeited due to resignations of employment. none of these forfeited shares had been
exercised and they had a nil value at the forfeited dates.
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.
19
Funtastic Annual Report 2017 Directors’ Report
continued
Meetings of Directors
the number of meetings of the Company’s directors held during the year ended 31 July 2017 and the number of meetings attended by
each director were:
Remuneration and
Evaluation Committee
Board of Directors
Audit, Risk and
Compliance Committee
A
4
*
2
2
*
B
4
*
4
4
*
A
18
17
14
16
18
B
18
18
14
18
18
A
2
*
1
2
*
B
2
*
2
2
*
S tanner
n pizmony
(Resigned as Ceo
31 July 2017)
l norquay
(Resigned
3 March 2017)
S Heath
G Mackenzie
Note:
A number of meetings attended during the year the Director was a member of the Board and/or Committee(s).
B 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 nomination Committee meetings were held during 2017 (2016: nil) since no changes to
Board composition were contemplated.
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:
n pizmony (Resigned as Ceo 31 July 2017)
Funtastic limited
54,988,601
Director
S tanner
S Heath
l norquay (Resigned 3 March 2017)
G Mackenzie
Issuing entity Ordinary Shares
Share Options
Funtastic limited
1,000,000
Funtastic limited
4,952,802
n/A
–
Funtastic limited
11,896,976
3,600,000
–
–
–
–
Option holdings
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
there was no significant change in the state of affairs of the Group 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 32
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.
20
Non-audit services continued
the Directors are of the opinion that the services as disclosed in note 32 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:
y all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
y 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 31
of this annual report.
Remuneration Report (Audited)
Details of key management personnel
the directors and key management personnel of the Group during or since the end of the financial year were:
Name
Shane tanner
nir pizmony
Stephen Heath
linda norquay
Position
Period in position during the year
Chairman and Independent non-executive Director
executive Director
Full year
Full year
Managing Director and Chief executive officer
Resigned as Ceo 31 July 2017
Independent non-executive Director
Full year
Independent non-executive Director
Resigned 3 March 2017
Grant Mackenzie
executive Director
Full year
Chief operating officer, Chief Financial officer
and Company Secretary
pedro Sangil lopez
International Manager
Resigned 31 July 2017
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 employee Share
loan Scheme.
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.
21
Funtastic Annual Report 2017 Directors’ Report
continued
Remuneration Report (Audited) continued
Remuneration policy for directors and executives continued
compensation and company performance
Funtastic limited’s net profit before tax (npBt) has been the key performance measure for the Company’s incentive plans for executives,
linked to individual key performance objectives.
In 2017, no Short-term Incentive (“StI”) eligible payments were made (2016: $nil).
the table below shows the Group’s earnings in the reporting period and the previous four financial periods/years as well as an indication of
the Group’s value over the corresponding period:
npAt ($’000) (i)
epS Basic (Cents)(ii)
Diluted epS (Cents)(ii)
total Dividends ($’000)
Year end Share price ($)
Shares on Issue (no.) (iv)
Year ended
31 July 2017
Year ended
31 July 2016
Year ended
31 July 2015
Year ended(iii)
31 July 2014
Year ended(iii)
31 July 2013
(33,466)
(23,854)
(56,479)
(41,763)
13,962
(4.63)
(4.63)
nil
0.006
(3.52)
(3.52)
nil
0.022
(8.42)
(8.42)
nil
0.029
(6.30)
(6.30)
3,335
0.077
2.58
2.57
2,702
0.17
723,286,390
723,286,390
667,169,723
667,169,723
642,169,723
Market Capitalisation ($’000)
4,340
16,052
19,348
51,372
109,169
(i) npAt from group operations
(ii) Basic & Diluted epS from group operations
(iii) Includes Madman entertainment group of companies
(iv) Shares on Issue does not include shares held by the Group issued under the employee Share loan Scheme.
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
information and having regard to an individual’s responsibilities, performance, qualifications, experience and location. An executive’s
compensation is also reviewed on promotion.
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
y the StI plan is linked to specific targets (predominantly financial) with the opportunity to earn incentives based on a percentage of
fixed compensation.
y 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.
y As noted in the FY16 accounts, due to the company’s financial position, the executive leadership took a reduction in pay effective 1 June
2016. the reduction in pay was converted to a StI plan subject to the company delivering a net profit before tax for the FY17 financial
year. As the company did not meet the target for the FY17 year, no amounts were due or payable.
22
Remuneration Report (Audited) continued
Components of Compensation continued
at risk compensation continued
Annual Bonus continued
Directors
Shane tanner
Stephen Heath
linda norquay (resigned 3 March 2017)
Executive Officers
Grant Mackenzie
nir pizmony (resigned as Ceo 31 July 2017)
pedro Sangil lopez (resigned 31 July 2017)
Fixed remuneration
Remuneration linked
to performance
2017
2016
2017
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
Share Options/Share Performance Right Plans/Employee Share Loan Scheme
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. the Company’s executive Share option plan (eSop)
and Funtastic employee performance Share Rights (epSR) were replaced by the employee Share loan Scheme (eSlS) established during
the 2013 financial year. As at the 31 July 2017 all options relating to the eSop and epSR had expired.
During the 2013 financial year (as part of the Company’s ltI arrangements), 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, 27 January 2017 for tranche 2, 31 July 2018 for tranche 3, 19 october 2018 for
tranche 4 and 23 December 2018 for tranche 5. Although there are no performance conditions attached to the eSlS, eligible employees
only benefit from the scheme through improvements in the share price of the company, which results from improved performance. the
options become exercisable only when the vesting conditions are met. (See note 28)
23
Funtastic Annual Report 2017 Directors’ Report
continued
Remuneration Report (Audited) continued
Share Options/Share Performance Right Plans/Employee Share Loan Scheme continued
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 eSlS’s interest free limited recourse loan are set out in note 29 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.
the eSlS is treated in substance as an option for accounting purposes and is therefore disclosed as share options in the
Remuneration report.
Share Options 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
Total
Series
Tranche Grant date Expiry date
Grant date
average
fair value
Number
of shares
at 31 July
2017
Vesting
date
Exercise
date
eSlS(i), (ii)
eSlS(i), (ii)
eSlS(i), (ii)
eSlS(i), (ii)
eSlS(i), (ii)
tranche 1 08/07/2013
tranche 2 27/01/2014
tranche 3 31/07/2015
tranche 4 19/10/2015
tranche 5 23/12/2015
n/A
n/A
n/A
n/A
n/A
$0.0502
400,000 01/01/2016 01/01/2016
$0.0634
500,000 27/01/2017 27/01/2017
$0.0154
– 31/07/2018 31/07/2018
$0.0199
3,275,000 04/10/2018 04/10/2018
$0.0144
3,300,000 23/12/2018 23/12/2018
7,475,000
(i) there are no performance conditions attached to this share. the only vesting condition is for participants to remain in employment until 1 January 2016 for tranche 1,
27 January 2017 for tranche 2, 31 July 2018 for tranche 3, 4 october 2018 for tranche 4 and 23 December 2018 for tranche 5. 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.
there have been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date.
Shares provided on exercise of remuneration options
no eSop or eSlS options were exercised during the current financial year or preceding financial year.
24
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-
employ-
ment
benefits
Other
long-term
employee
benefits
Share-based
payments
Salary
and fees
$
Non-
monetary
benefits
$
Cash
Bonus
$
Super-
annu ation
$
Long
service
leave
$
Termi-
nation
Benefits
$
Options
$
Year ended
31 July 2017
Directors
Shane tanner
Stephen Heath
linda norquay
(Resigned
3 March 2017)
98,880
56,697
36,050
nir pizmony
(resigned as Ceo
31 July 2017)
290,448
Grant Mackenzie
328,767
Sub-Totals
810,842
Executives
pedro Sangil
lopez (resigned
31 July 2017)
249,582
Sub-Totals
249,582
TOTALS
1,060,424
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,386
–
–
–
–
–
–
–
46,204
69,717
495,892
31,233
6,084
–
82,823
75,801
495,892
192,202
3,367
192,202
3,367
–
–
–
–
192,202
86,190
75,801
495,892
–
–
–
–
–
–
–
–
–
(i) there is a negative expense for share-based payments as vesting criteria of options issued had not been met.
Options
Under
Employee
Share
loan
scheme (i)
–
–
–
Total
$
98,880
62,083
36,050
(43,492)
858,769
15,873
381,957
(27,619) 1,437,739
(81,140)
364,011
(81,140)
364,011
(108,759) 1,801,750
25
Funtastic Annual Report 2017 Directors’ Report
continued
Remuneration Report (Audited) continued
Remuneration of Key Management Personnel compensation continued
Short-term employee benefits
Post-
employ-
ment
benefits
Other
long-term
employee
benefits
Share-based
payments
Salary
and fees
$
Non-
monetary
benefits
$
Cash
Bonus
$
Super-
annu ation
$
Long
service
leave
$
Termi-
nation
Benefits
$
Options
$
Options
Under
Employee
Share
loan
scheme
Total
$
Year ended
31 July 2016
Directors
Shane tanner
123,600
Stephen Heath
linda norquay
61,186
61,800
nir pizmony
448,676
Grant Mackenzie
359,209
Sub-Totals
1,054,471
Executives
pedro Sangil
lopez
298,476
Sub-Totals
298,476
TOTALS
1,352,947
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
898
–
–
–
–
37,216
11,830
34,125
1,028
72,239
12,858
193,382
3,712
193,382
3,712
–
–
193,382
75,951
12,858
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
123,600
62,084
61,800
43,492
541,214
15,589
409,951
59,081 1,198,649
50,939
546,509
50,939
546,509
110,020 1,745,158
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
the tables below include balances for both options granted under the employee Share loan Scheme and unlisted options.
Year ended 31 July 2017
Executive Directors
nir pizmony
Grant Mackenzie
Executives
pedro Sangil lopez
Totals
Balance at
the start of
the year
Granted
during the
year as
remuneration
Options
expired
during the
year
Options
forfeited
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year(ii)
15,500,000
3,600,000
6,550,000
25,650,000
–
–
–
–
–
–
–
–
(15,500,000)
–
–
–
3,600,000
300,000
(6,550,000)
–
–
(22,050,000)
3,600,000
300,000
(i) the eSlS options were granted the ltI component of management compensation.
(ii) no options were vested, and exercised or exercisable during FY17.
26
Remuneration Report (Audited) continued
Key management personnel equity holdings continued
share options continued
Year ended 31 July 2016
Executive Directors
nir pizmony
Grant Mackenzie
Executives
–
15,500,000(i)
300,000
3,300,000(i)
pedro Sangil lopez
4,800,000
1,750,000
Totals
5,100,000
20,550,000
(i) the eSlS options were granted the ltI component of management compensation.
(ii) no options were vested, and exercised or exercisable during FY16.
no options granted during the year ended 31 July 2017.
the following options were granted during the year ended 30 June 2016.
Balance at
the start of
the year
Granted
during the
year as
remuneration
Options
expired
during
the year
Options
forfeited
during
the year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year(ii)
–
–
–
–
–
–
–
–
15,500,000
3,600,000
6,550,000
25,650,000
–
–
–
–
Year ended 31 July 2016
Executive Directors
nir pizmony
Grant Mackenzie
Executives
pedro Sangil lopez
Totals
No. of
options
granted at
the grant
date
Value of
options
granted at
the grant
date(i)
Value of
options
exercised at
the exercise
date(ii)
No. of
options
exercised
15,500,000
223,671
3,300,000
47,620
1,750,000
34,854
20,550,000
306,145
–
–
–
–
–
–
–
–
(i) the value of the eSlS options granted during the financial year is calculated as at grant date using the Black Scholes model. this grant date value is allocated to
remuneration of key management personnel on a straight-line basis over the period from grant date to vesting/exercise date
(ii) not applicable as there were no options exercised during the year.
27
Funtastic Annual Report 2017 Directors’ Report
continued
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.
Balance at
the start of
the year
Shares
purchased
during the
year
Received on
exercise of
options
Other
changes
Balance at
the end of
the period(i)
Balance held
nominally
Year ended 31 July 2017
Directors
Shane tanner
nir pizmony
Steven Heath
linda norquay
(Resigned 3 March 2017)
1,000,000
54,988,601
4,952,802
–
Grant Mackenzie
11,896,976
Executives
pedro Sangil lopez
Totals
7,522,095
80,360,474
(i) excludes share options issued under the eSlS.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,000,000
1,000,000
54,988,601
46,254,918
4,952,802
4,952,802
–
–
11,896,976
1,292,856
7,522,095
–
80,360,474
53,500,576
Year ended 31 July 2016
Balance at
the start of
the year
Shares
purchased
during the
year
Received on
exercise of
options
Other
changes
Balance at
the end of
the period(i)
Balance held
nominally
Directors
Shane tanner
nir pizmony
Steven Heath
linda norquay
Grant Mackenzie
Executives
500,000
500,000
30,238,601
24,750,000
4,452,802
500,000
–
–
7,146,976
4,750,000
pedro Sangil lopez
7,522,095
–
Totals
49,860,474
30,500,000
(i) excludes share options issued under the eSlS.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,000,000
1,000,000
54,988,601
46,254,918
4,952,802
4,952,802
–
–
11,896,976
1,292,856
7,522,095
–
80,360,474
53,500,576
28
Remuneration Report (Audited) continued
Loans to and other transactions with Key Management Personnel
(a) transactions with Key management Personnel
Key management personnel compensation
Details of key management personnel compensation are disclosed in note 30 to the financial statements and within this
Remuneration Report.
Loans from key management personnel
there are no outstanding loans from key management personnel.
(b) transactions with key management personnel of the Group
loss 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 profit includes the following amounts arising from transactions with key
management personnel of the Group or their related parties:
other expenses
Year ended
31 July 2017
Year ended
31 July 2016
$
$
2,724
2,724
6,237
6,237
the above transactions were performed at arm’s length.
During the financial year, the Group recognised the following transactions with key management personnel:
y purchases of $1,768 (2016: $5,553) to Annabel Mackenzie a party related to Mr Grant Mackenzie for external consulting; and
y purchases of $956 (2016: $684) for provision of employment services from Ms. Sherelle pizmony a party related to Mr nir pizmony.
(c) transactions with other related parties
transactions between Funtastic limited and other entities in the wholly-owned Group during the financial years ended 31 July 2016 and
31 July 2017, which were eliminated on consolidation, consist of:
y Sales made by Funtastic limited;
y loans advanced and interest charged by Funtastic limited;
y Management services provided to Funtastic limited; and
y payment to/from Funtastic limited for the above services.
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. In the case of the Chief executive officer and other
executives, these allow for the provision of performance-related cash bonuses, and where eligible, participation in the Funtastic limited
employee Share loan Scheme (excludes Chairman, Managing Director and non-executive Directors). Additionally, other benefits
including car allowances can be provided to all Key Management personnel.
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
y term of the agreement – Full-time permanent and no specific term.
y payment of a termination benefit on early termination by the employer is not applicable.
nir Pizmony – managing director and chief executive Officer (Resigned as CEO 31 July 2017)
y term of the agreement – full-time permanent and no specific term.
y payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6 months’ base salary.
y notice period 6 months.
29
Funtastic Annual Report 2017 Directors’ Report
continued
Remuneration Report (Audited) continued
Service Agreements continued
Grant mackenzie – executive director, chief Financial Officer & chief Operating Officer
y term of the agreement – full-time permanent and no specific term.
y payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 12 weeks base salary.
y notice period 12 weeks.
stephen Heath – non‑executive director
y term of the agreement – full-time permanent and no specific term.
y payment of a termination benefit on early termination by the employer is not applicable.
Pedro sangil Lopez – international manager (resigned 31 July 2017)
y term of the agreement – full-time permanent and no specified term.
y payment of termination benefit on early termination by the employer, other than for gross misconduct, equal to 6 months base salary.
y notice period 6 months
End of Remuneration Report (Audited)
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
27 october 2017
30
Auditor’s Independence Declaration
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
to the Directors of Funtastic Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
the audit of Funtastic Limited for the year ended 31 July 2017, I declare that, to the best of my
knowledge and belief, there have been:
a
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b
no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
B L Taylor
Partner - Audit & Assurance
Melbourne, 27 October 2017
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context
requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal
entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s
acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities.
GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
31
Funtastic Annual Report 2017
Independent Auditor’s Report
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
to the Members of Funtastic Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Funtastic Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 31 July 2017, the
consolidated statement of profit or loss and other comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
consolidated financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
a Giving a true and fair view of the Group’s financial position as at 31 July 2017 and of its
performance for the year ended on that date; and
b Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that
are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context
requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal
entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s
acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities.
GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
32
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of
$33,466,000 for the year ended 31 July 2017 and, as of that date, the Group’s current liabilities
exceeded its current assets by $55,359,000 with a net asset deficiency of $50,714,000. These
conditions along with other matters set forth in Note 1, indicate the existence of a material uncertainty
which may cast significant doubt about the Group’s ability to continue as a going concern. Therefore, the
Group may be unable to realise its assets and discharge its liabilities in the normal course of business,
and at amounts stated in the financial report. Our opinion is not modified in relation to this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter
Asset impairment testing – refer to Note 3, 14 and 15
How our audit addressed the key audit matter
At 31 July 2017 the Group has $Nil (2016:
$14,163,000) of goodwill and $4,287,000 in
other intangible assets contained within
separate cash generating units (CGUs).
Management is required to perform an
impairment test on goodwill and other finite life
intangibles at least annually, and is also
required to perform an impairment test on other
intangible assets with finite useful lives if
indicators of impairment are identified.
The Group generated an operating loss in the
current financial year which is an indication that
goodwill and other intangible assets may be
impaired.
This area is a key audit matter due to the
inherent subjectivity and judgment required in
measuring the recoverable amount of goodwill
and other intangible assets. Measuring
recoverable amount involves judgments about
the future results of the underlying products
and business as well as the discount and
royalty rates applied.
The Group recognised an impairment against
goodwill totalling $14,163,000 and other
intangible assets totalling $2,981,000 during
the year.
Our procedures included, amongst others:
• Reviewing management’s valuation models for
compliance with AASB 136 Impairment of Assets;
• Assessing management’s determination of
CGU’s based on our understanding of how
management monitors the entity’s operations and
makes decisions about groups of assets that
generate independent cash flows;
• Understanding and documenting management’s
process for the preparation and review of the
value-in-use and ‘relief from royalty’ models;
• Checking the mathematical accuracy of the
underlying model calculations;
• Assessing the appropriateness of the key inputs
used in the calculations and evaluating the
reasonableness of the cash flow projections by
considering the historical accuracy of the
budgeting process;
• Assessing the key growth rate assumptions by
comparing them to historical results and forecasts
and the discount rate by reference to the cost of
capital for the Group;
• Utilising valuation specialists to review the
appropriateness of the models and compliance
with the requirements of AASB 136, royalty rates
used as well as the discount rate applied;
• Performing sensitivity analysis on the models in
relation to the projections, discount and growth
rate assumptions; and
• Assessing the adequacy of the Group’s
disclosures within the financial statements.
33
Funtastic Annual Report 2017
Independent Auditor’s Report
continued
Provision for inventory obsolescence – refer to Note 3 and 10
Inventory is a material item within the statement
of financial position and is valued using the
weighted average cost methodology and is
stated at the lower of cost and net realisable
value in accordance with AASB 102
Inventories.
Inventory primarily comprises discretionary
consumer products, including toys and
confectionary, which are susceptible to
obsolescence. The determination of the
recoverable value and the related provision for
obsolescence involves a high level of
management judgement.
This area is a key audit matter due to the
management judgment required in determining
the provision.
Our procedures included, amongst others:
• Documenting our understanding of internal
processes and controls associated with the
determination of the provision for obsolescence;
• Documenting and understanding the underlying
methodology upon which management's
provision is based and considered for any
changes from the previous year;
• Testing the provision calculation for mathematical
accuracy;
• Analysing and challenging management's
assessment of the provision required for
particular products identified which are deemed
to be of higher risk of obsolescence including
consideration of sales and aged inventory reports
prepared by management; and
• Considering the adequacy of the provision
through selecting a sample of inventory items and
tracing to the most recent sales invoice to
determine whether items are sold less than cost
and thus indicative of requiring a provision for
stock obsolescence.
Information Other than the Financial Report and Auditor’s Report Thereon
The Directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 31 July 2017, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ 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.
34
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion 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 2017.
In our opinion, the Remuneration Report of Funtastic Limited, for the year ended 31 July 2017, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
B L Taylor
Partner - Audit & Assurance
Melbourne, 27 October 2017
35
Funtastic Annual Report 2017
Directors’ Declaration
the directors declare that:
(a)
(b)
(c)
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;
in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as
stated in note 1 to the financial statements;
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 legislative Instrument 2016/785 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 25 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
27 october 2017
36
Consolidated Statement of Profit or Loss
and other Comprehensive Income
for the year ended 31 July 2017
Revenue
Cost of Goods Sold
Gross profit
Investment Income
Warehouse and Distribution expenses
Marketing and Selling expenses
Administration expenses
Impairment of Goodwill and Intangible Assets
Earnings before interest, taxation, amortisation
and depreciation (EBITDA)
Finance Costs
Depreciation and Amortisation expenses
Loss before income tax
Income tax expense
Loss for the period from continuing operations
Discontinued operations
loss from Discontinued operations
Loss for the year
Other comprehensive income (net of tax)
Items that may be reclassified subsequently to profit or loss
exchange differences on translating foreign operations
Gain on cash flow hedges
other comprehensive income for the year (net of tax)
Total comprehensive loss for the year
attributable to the members of Funtastic
Loss per share
Basic loss per share (cents per share)
Diluted earnings per share (cents per share)
Loss per share – continuing operations
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Note
6
7
7
7
8
5
31 July 2017
31 July 2016
$’000
55,707
(38,797)
16,910
439
(3,964)
(6,345)
(12,689)
(17,144)
$’000
88,888
(63,754)
25,134
651
(4,685)
(10,782)
(15,667)
(6,424)
(22,793)
(11,773)
(3,559)
(1,645)
(27,997)
(1,690)
(3,794)
(3,497)
(19,064)
(1,533)
(29,687)
(20,597)
(3,779)
(3,257)
(33,466)
(23,854)
212
131
343
318
58
376
(33,123)
(23,478)
(4.63)
(4.63)
(4.10)
(4.10)
(3.52)
(3.52)
(3.04)
(3.04)
the above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
37
Funtastic Annual Report 2017 Consolidated Statement of Financial Position
as at 31 July 2017
Current Assets
Cash
Receivables
Inventories
other Assets
Assets classified as held for sale
Total Current Assets
Non-Current Assets
property, plant and equipment
Goodwill
other Intangibles
Deferred tax Asset
other Assets
Total Non-Current Assets
Total Assets
Current Liabilities
trade payables
Interest Bearing liabilities (excluding Bill Finance)
Bill Finance
provisions
tax liabilities
other Financial liabilities
other liabilities
liabilities classified as held for sale
Total Current Liabilities
Non-Current Liabilities
provisions
Deferred tax liabilities
other liabilities
Total Non-Current Liabilities
Total Liabilities
Net Deficiency
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
31 July 2017
31 July 2016
Note
$’000
$’000
27
9
10
11
12
13
14
15
8
11
17
17
18
8
19
12
18
8
19
21
21
664
2,532
7,010
2,744
12,950
1,653
14,603
457
–
4,287
–
29
4,773
19,376
9,213
24,597
27,965
671
117
87
5,417
68,067
1,895
69,962
27
–
101
128
764
8,684
10,340
2,187
21,975
–
21,975
1,455
14,163
7,524
1,821
194
25,157
47,132
9,805
20,950
27,965
947
236
313
3,752
63,968
–
63,968
60
37
165
262
70,090
(50,714)
209,483
(259,727)
(470)
(50,714)
64,230
(17,098)
209,483
(227,904)
1,323
(17,098)
38
the above statement of financial position should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
for the year ended 31 July 2017
Issued
Capital
Accumulated
Losses
$’000
$’000
Balance at 1 August 2015
208,372
(204,050)
Foreign
Currency
Translation
Reserve
$’000
(1,029)
Equity-
settled
Employee
Benefits
Reserve
$’000
2,099
Cash Flow
Hedging
Reserve
$’000
(277)
loss for the year
other comprehensive income
total comprehensive income
(loss)
Issue of ordinary shares
Recognition of share based
payments
–
–
–
1,111
–
(23,854)
–
(23,854)
–
–
–
318
318
–
–
–
–
–
–
154
–
58
58
–
–
Total
$’000
5,115
(23,854)
376
(23,478)
1,111
154
Balance at 31 July 2016
209,483
(227,904)
(711)
2,253
(219)
(17,098)
loss for the year
other comprehensive income
total comprehensive income
(loss)
Recognition of share-based
payments
transfer of share-based
payments
–
–
–
–
–
(33,466)
–
(33,466)
–
1,643
–
212
212
–
–
–
–
–
(493)
(1,643)
–
131
131
–
–
(33,466)
343
(33,123)
(493)
–
Balance at 31 July 2017
209,483
(259,727)
(499)
117
(88)
(50,714)
the above statement of changes in equity should be read in conjunction with the accompanying notes.
39
Funtastic Annual Report 2017 Consolidated Statement of Cash Flows
for the year ended 31 July 2017
31 July 2017
31 July 2016
Note
$’000
$’000
Cash Flows from Operating Activities
Receipts from customers
payments to suppliers and employees
Cash (utilised) generated from operations
Income taxes paid
Interest and other costs of finance paid
Net cash outflow from operating activities
27(c)
Cash Flows from Investing Activities
Interest and other investment income received
payments for plant and equipment
payments for other intangible assets
Net cash outflow from investing activities
Cash Flows from Financing Activities
proceeds from borrowings
Repayment of commercial bills
proceeds from share issue
Net cash inflow from financing activities
Net decrease 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
27(a)
the above statement of cash flows should be read in conjunction with the accompanying notes.
61,731
(60,897)
834
(25)
(3,559)
(2,750)
439
(888)
(540)
(989)
3,647
–
–
3,647
(92)
764
(8)
664
94,773
(98,145)
(3,372)
(163)
(3,794)
(7,329)
651
(884)
(325)
(558)
7,457
(1,000)
1,111
7,568
(319)
904
179
764
40
Notes to the Financial Statements
31 July 2017
Note 1: Significant accounting policies
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 law. the financial statements comprise the
consolidated financial statements of the Group.
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 26 october 2017.
the company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the financial
statements 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
the financial report has been prepared on the going concern basis which contemplates the continuity of business activities and the
realisation of assets and the payment of liabilities in the normal course of business.
Whilst the eBItDA loss excluding impairment charges was $5.6 million, a net loss for the year of $33.5 million was reported and there
is a net asset deficiency of $50.7 million and net current deficiency of $55.4 million, management have made significant changes to the
business which is expected to result in improved results going forward. these include:
y An improved debt structure through the permanent reduction of $36 million in bank debt by way of a debt forgiveness subsequent
to year end
y Raising further capital of $8.2 million subsequent to year end
y Changes in the management structure
y Continued focus on cost management
y Sale of the international business which was completed subsequent to year end
the ability for the Group to continue as a going concern is dependent upon the following factors:
y Achievement of improved financial results through normal trading and the achievement of budgeted results.
y Continued support of creditors and customers through appropriate trading terms as well as the nAB (national Australia bank).
there is therefore material uncertainty that may cast significant doubt as to whether the Group will continue as a going concern and,
therefore, whether it will realise its assets and settle its liabilities in the normal course of business and at the amounts stated in the
financial report.
notwithstanding this uncertainty, the Directors believe that the Group will be able to achieve the required results and are satisfied the
Group will continue as a going concern. Accordingly, the financial report has been prepared on a going concern basis.
(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:
y Has the power over the investee;
y is exposed, or has rights, to variable returns from its involvement with the investee; and
y 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.
41
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 1: Significant accounting policies continued
(a) Basis of consolidation continued
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 income from the date the Company gains control until the date the Company ceases
to control the subsidiary.
profit or loss and each 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 members of the Group
are eliminated in full on consolidation.
(b) income tax
(i) Current tax
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 if they arose 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.
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.
(iv) Tax Losses
A deferred tax asset in respect to tax losses is only recognised where there is a reasonable certainty that future taxable profits will be
guaranteed. Management assesses continuity of ownership test and same business test hurdles bi-annually.
(v) 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 in the tax-consolidated Group. 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.
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.
42
Note 1: Significant accounting policies continued
(c) Foreign currency translation
(i) Functional and presentation currency
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 dollars, which is Funtastic limited’s functional
and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
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.
(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 the presentation currency, are translated into the presentation currency as follows:
y assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
y income and expenses for each profit or loss presented are translated at the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions); and
y 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 a foreign operation is sold or borrowings
repaid a 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.
(d) cash and cash equivalents
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.
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 to the specified location, the 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.
Commission revenue is recorded when the consideration is receivable based on when the goods have been dispatched to a customer by
the third party.
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.
43
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 1: Significant accounting policies continued
(g) Plant and equipment continued
Depreciation is calculated on a straight-line 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 estimated useful life of the improvement to the Group. the
expected useful lives are as follows:
plant and equipment:
2.5 – 10 years
leasehold improvements:
3 – 5 Years
(h) Loans and receivables
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 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 the carrying value of inventory and costs necessary to make
the sale.
Stock write downs occur where the estimated selling price of stock, in the ordinary course of business, is less than the estimated costs of
completion and costs necessary to make the sale. excess stock levels are reviewed on a regular basis, where discussions with the sales
teams are undertaken.
(j) trade payables
these amounts represent liabilities for goods and services provided to the Group prior to the end of the financial 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 to 90 days of recognition. the average credit period on purchases of certain goods
from international supplier’s 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.
(k) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GSt), except:
y where the amount of GSt incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an
asset or as part of an item of expense; or
y 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 from investing and financing
activities which are recoverable from, or payable to, the tax authority are classified as operating cash flows.
(l) Leased non‑current assets
A distinction is made between finance leases which effectively transfer from the lessor to 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.
Finance leases are capitalised (note 20). 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.
44
Note 1: Significant accounting policies continued
(l) Leased non‑current assets continued
operating lease payments are charged to the profit or loss account on a straight-line basis over the period of the lease. 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 within equity.
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 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.
(o) Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:
y interest on bank overdrafts and short-term and long-term borrowings;
y finance lease charges; and
y 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.
45
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 1: Significant accounting policies continued
(p) employee benefits continued
(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) intangible assets
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 amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.
Amortisation of the Group’s intangible assets 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, based on the useful live assessed by management, as follows:
y Software
y patents
y trademarks
y licensed distribution agreements
y Brand names
10-20 years-indefinite
10-20 years
1-20 years
20 years
3 years
(r) 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 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.
(s) 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 28 to the financial statements.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured
to their fair value at each reporting date. the resulting gain or loss is recognised in profit or loss immediately unless the derivative 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).
46
Note 1: Significant accounting policies continued
(s) derivative financial instruments continued
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 liability if the remaining maturity of the hedge relationship is more than
12 months.
(i) Cash flow hedges
the Group designates certain hedging instruments, derivatives in respect of foreign currency, as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging 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 28 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in
equity are also detailed in the statement of changes in equity.
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 loss relating to the ineffective portion is recognised immediately in other comprehensive income.
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. When a hedging
instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the 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
(t) 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:
y it has been acquired principally for the purpose of selling it in the near term; or
y on initial recognition, it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual
pattern of short-term profit-taking; or
y it is a derivative that is not designated and effective as a hedging instrument.
(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 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.
47
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 1: Significant accounting policies continued
(u) 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) 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.
(v) 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.
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.
(w) Onerous contracts
the Group enters into royalty contracts. 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.
(x) 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.
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.
(y) 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:
y represents a separate major line of business or geographical area of operations;
y is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
y is a subsidiary acquired exclusively with a view to re-sell.
48
Note 1: Significant accounting policies continued
(y) discontinued operations continued
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.
(z) 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 in an orderly
transaction between market participants at measurement date.
the Group 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 Group has adopted the fair value
hierarchy established in AASB 13 ‘Fair Value Measurement’ that categorises fair value measurement into three levels:
y level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
y 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 (i.e. as prices) or indirectly (i.e. derived from prices).
y 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
(e.g. 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.
(aa) assets and Liabilities classified as held for sale.
When the group intends to sell a non-current asset or group of assets (a disposal group), and if sale within 12 months is highly probable, the
asset or disposal group is classified as “held for sale” and presented separately in the statement of financial position. liabilities are classified
as “held for sale” and presented in the statement of financial position if they are directly associated with a disposal group.
Assets classified as “held for sale” are measured at the lower of their carrying amounts immediately prior to their classification as held for
sale and their fair value less costs to sell. However, some “held for sale assets” such as financial assets or deferred tax assets, continue to be
measured in accordance with the Group’s accounting policy for those assets. once classified as “held for sale’, the assets are not subject to
deprecation or amortisation.
Note 2: Application of new and revised Accounting Standards
2.1 Amendments to AASBs and the new Interpretation that are mandatorily effective for the current year
In the current year, the Group has applied all amendments to AASBs issued by the Australian Accounting Standards Board (AASB) that are
mandatorily effective for an accounting period that begins on or after 1 July 2016.
the application of these amendments does not have any material impact on the disclosures or the amounts recognised in the Group’s
consolidated financial statements.
49
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 2: Application of new and revised Accounting Standards continued
2.2 Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations that were issued which are deemed applicable
but not yet effective are listed below, which are deemed applicable to the Group.
Standard/Interpretation
AASB 9 ‘Financial Instruments’, and the relevant amending
standards(i)
AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5
‘Amendments to Australian Accounting Standards arising from AASB
15’, AASB 2015-8 ‘Amendments to Australian Accounting Standards
– Effective date of AASB 15’
AASB 16 ‘Leases’
AASB 2016-1 ‘Amendments to Australian Accounting Standards –
Recognition of Deferred Tax Assets for Unrealised Losses’
AASB 2016-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107’
AASB 2016-3 ‘Amendments to Australian Accounting Standards –
Clarifications to AASB 15’
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
1 January 2018
31 July 2019
1 January 2018
31 July 2019
1 January 2019
1 January 2017
31 July 2020
31 July 2018
1 January 2017
31 July 2018
1 January 2018
31 July 2019
AASB 2016-5 ‘Amendments to Australian Accounting Standards –
Classification and Measurement of Share-based Payment Transactions
1 January 2018
31 July 2019
the potential impacts of the above Standards on the reported results or financial position have not yet been fully assessed. However,
our initial assessments indicate that no material change is expected to result from the applicable of these standards with the exception
of AASB 16 Leases.
AASB 16 introduces a single comprehensive on-balance sheet accounting model for lease arrangements that apply to lessors and lessees.
this effectively removes the distinction between operating leases (off-balance sheet) and finance leases (on-balance sheet) with the
exception for short term leases and leases of low value assets. lessees will now have to bring operating leases on to the balance sheet and
recognise a right-of-use asset (Rou) being the asset that is leased and a corresponding lease liability for the amount used to finance the
Rou. Committed payments that are now recognised as rental expense will be replaced by the depreciation of the Rou and the interest
expense from the lease liability. the Group is currently assessing the potential impact on the consolidated financial statements when the
new standard is mandatorily adopted.
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 1, 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
In addition to the key sources of estimation uncertainty on the going concern basis as disclosed in note 1, 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.
50
Note 3: Critical accounting judgments and key sources of estimation uncertainty continued
Key sources of estimation uncertainty continued
(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 amounts of the cash-generating units have been determined on a value in use basis. these
calculations require the use of assumptions. A significant change to these assumptions may affect the recoverable amount of the cash
generating units (refer to note 14).
(ii) useful life of intangible assets
Management has assessed the useful life of intangibles on the following basis:
y Software – based on the licence or expected
y patents and trademarks – based on the contractual life of the patent
y licensed distribution agreements – based on the term of the agreement or the expected Brand product life cycle
y Brand names – up to indefinite useful life based on the nature of the brand
Whilst the current useful lives are management’s best estimate, a periodic review is undertaken to ensure that these remain appropriate.
(iii) Recoverability of inventory
the Group periodically assesses whether the net realisable value (nRV) of its inventories is reasonable in light of changing market
conditions within the retail sector and the Group’s reassessment of brand portfolio. 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.
(iv) Recoverability of debtors
the Group periodically assesses the recoverable amount of its trade debtors in light of ageing and other market indicators of impairment.
Whilst the Group has provided against impaired debts based on its best estimate of the recoverable amount, final amounts recovered may
differ to that provided against.
(v) taxation timing differences recognised as asset and deferral of tax liability
the amount of deferred tax asset in respect of revenue tax losses is determined based upon expected future taxable income, and
judgement as to the losses availability under the “continuity of ownership test”, and where applicable the “same business test”. Based on the
current assessment, determined using budget forecasts for FY2018, the Group has de-recognised previously capitalised timing differences
composing the deferred tax asset as at 31 July 2017 and no longer recognises an amount within the deferred tax asset or provision for
deferred tax liability for timing differences. Refer to note 8 for details.
Note 4: Segment information
Based on the reports reviewed by the Chief executive officer to make strategic and operating decisions, management has determined
that the Group has one operating segment.
Geographical Information
the Group operates in three principal geographical areas – Australia, Hong Kong and uSA. the Group’s revenue from external
customers and information by geographical location is as follows:
Australia
Hong Kong
uSA
Revenue from External Customers
Non-Current Assets
Year ended
31-Jul-17
Year ended
31-Jul-16
Year ended
31-Jul-17
Year ended
31-Jul-16
$’000
45,059
10,648
1,046
56,753
$’000
68,457
20,431
1,976
90,864
$’000
4,698
75
–
4,773
$’000
22,046
1,270
21
23,337
51
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 4: Segment information continued
Information about major customers
Included in revenues of Australia of $45,059,000 are revenues of approximately $28,079,230 (2016: $47,151,600), which arose from sales
to that region’s three largest customers.
Information about products and services
the group generates all their revenue from the sale of consumer products (toys, sporting confectionery, lifestyle and apparel products).
Note 5: Discontinued operations
USA Operation
After an extensive review, slower than anticipated sales growth and with regards to the costs incurred with servicing the uSA market it
was decided to close the uSA operation in September 2016 and service the existing customer base from the Head office in Australia.
Madman and Wellington Rd
the losses resulting from Madman arose from the write-off of the amount receivable and legal costs arising out of the dispute around
working capital and warranty claims that were settled in January 2017. the losses from Wellington Rd are the result of make good claims
from the landlord at the expiration of the lease agreement. the Wellington Rd property was a property previously used by Madman and
sub-let in 2010. the Company has provided the full amount claimed by the landlord, and is currently assessing its legal position around
this claim.
Year ended
31 July 2017
Year ended
31 July 2016
$’000
1,046
(4,825)
(3,779)
–
(3,779)
(1,959)
(1,820)
(3,779)
(0.53)
(0.53)
$’000
1,976
(5,233)
(3,257)
–
(3,257)
(2,836)
(421)
(3,257)
(0.48)
(0.48)
Year ended
31 July 2017
Year ended
31 July 2016
$’000
(1,894)
$’000
(2,679)
Results of discontinued operation
Revenue
expenses
loss before tax
Attributable income tax expense
Result from operating activities, net of tax
Comprising:
Discontinued operation – uSA
Discontinued operation – Madman & Wellington Rd
Loss for the year from discontinued operations
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Cashflow used in discontinued operations
net cash used in operating activities
52
Note 6: Revenue
Revenue from the sale of goods
Gross revenue
less settlement discounts and rebates
other
Note 7: Profit/(Loss) for the year
Investment income
Interest from bank deposits
Rental income received
Total investment income
Impairment of Goodwill and Intangible assets
14/15
Reversal of impairment loss recognised on trade receivables
13
13
15
Depreciation and amortisation expense
Depreciation of property, plant & equipment
Depreciation of leasehold improvements
Amortisation of other intangible assets
Amortisation of product development costs
Total depreciation and amortisation expense
Research expensed as incurred
Employee benefits expense
post-employment benefits:
Defined contribution plans (Super)
Share-based payments:
equity-settled share-based payments expense/(credit)
termination benefits
other employee benefits
Total employee benefits expense
Year ended
31 July 2017
Year ended
31 July 2016
Restated
$’000
60,234
(4,986)
55,248
459
55,707
$’000
96,231
(7,899)
88,332
556
88,888
Year ended
31 July 2017
Year ended
31 July 2016
Note
$’000
$’000
1
438
439
17,144
–
825
148
672
–
1,645
75
572
(493)
478
9,604
10,161
1
650
651
6,424
(188)
772
611
1,966
148
3,497
108
707
154
337
10,895
12,093
53
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 8: Income tax
(a) Income tax expense relating to continuing operations
tax expense comprises:
Current tax expense in respect of the current year
Deferred tax expense comprises:
effect of reversal of previously recognised and unused tax losses
Write-off previously recognised DtA
Deferred tax reclassified from equity to profit or loss
Total tax expense relating to continuing operations
(b) Income tax recognised in profit or loss
the expense for the year can be reconciled to the accounting profit as follows:
loss from continuing operations
tax benefit 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 reversal of previously recognised and unused tax losses
effect of reversal of Deferred tax balances
effect of different tax rates of subsidiaries operating in other jurisdictions
other
Income tax expense recognised in profit or loss
(c) Income tax recognised directly in equity
Deferred tax:
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
117
117
–
1,573
–
1,690
99
99
2,177
(768)
25
1,533
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
(27,997)
(8,399)
(21,900)
(6,570)
5,205
3,614
–
1,459
(189)
–
1,690
2,542
3,506
2,177
–
(81)
(41)
1,533
Relating to share issue expenses deductible over 5 years
–
77
54
Note 8: Income tax continued
(d) Current tax balances
Current tax liabilities and assets
Income tax payable
other – overseas subsidiaries
(e) Deferred tax balances
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
$’000
$’000
(117)
(236)
2017 Temporary
differences
Opening
Balance
Recognised in
Profit & Loss
2017 Gross Deferred Tax Liabilities
prepaid royalties
FX on foreign operations
2017 Gross Deferred Tax Assets
provisions
Accruals
Inventory
Cash flow hedges
Capital Raising
(S40-880)
other
(35)
(2)
(37)
236
754
617
94
77
43
1,821
(24)
–
(24)
(7)
33
(158)
–
(52)
(13)
(197)
Recognised
in Other
Comprehensive
income
Recognised
directly in
equity
De-recognition
of DTA Closing Balance
–
(36)
(36)
–
–
–
(68)
–
–
(68)
–
–
–
–
–
–
–
–
–
–
59
38
97
(229)
(787)
(459)
(26)
(25)
(30)
(1,556)
–
–
–
–
–
–
–
–
–
–
55
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 8: Income tax continued
(e) Deferred tax balances continued
2016 Temporary
differences
Opening
Balance
Recognised in
Profit & Loss
2017 Gross Deferred Tax Liabilities
Recognised
in Other
Comprehensive
income
Recognised
directly in
equity
De-recognition
of DTA Closing Balance
prepaid royalties
FX on foreign operations
2016 Gross Deferred Tax Assets
provisions
Accruals
Inventory
Cash flow hedges
Capital Raising
(S40-880)
tax losses
other
(190)
(64)
(254)
745
117
–
119
180
2,177
29
3,367
155
–
155
(509)
637
617
–
–
(2,177)
14
(1,418)
–
62
62
–
–
–
(25)
–
–
–
–
–
–
–
–
–
–
(103)
–
–
(25)
(103)
the following deferred tax assets have not been brought to account as assets:
–
–
(37)
–
–
–
–
–
–
–
–
(35)
(2)
236
754
617
94
77
–
43
1,821
tax losses – Revenue
tax losses – Capital
unused tax credits
Year ended
31 July 2017
Year ended
31 July 2016
$’000
97,527
53,267
–
$’000
86,363
53,267
–
150,794
139,630
unrecognised taxable temporary differences associated with investments and interests in subsidiaries
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 leaves 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-consolidated 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 26.
56
Note 8: Income tax continued
(e) Deferred tax balances continued
tax consolidation continued
(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 tax payable by the tax consolidated
Group is limited to the amount payable to the head entity under the tax funding arrangement.
tax Losses and temporary differences
As at 31 July 2017 the Australian Group has carried forward revenue tax losses of approximately $97,527,433 (2016: $86,363,306).
As at 31 July 2017 a deferred tax asset of $nil (2016: $nil) has been booked relating to revenue tax losses and deferred assets relating
to temporary differences of $nil (2016: $nil). the Company made losses in the current and previous reporting period. Following the
assessment of the probability of recovery, having considered forecast future taxable income and current tax legislation with respect to
carrying forward revenue tax losses and temporary differences, the full balance of tax losses available at 31 July 2017 of $97,527,433 and
net deferred tax asset of $1,556,000 have not been booked as a deferred tax asset in these financial statements.
Furthermore, we note that as a result of the debt restructure subsequent to year end, we anticipate that the tax losses will still be available
for utilisation subject to continuing to meet the continuity of ownership or same business test.
Note 9: Current Assets – Trade and Other Receivables
trade receivables
Allowance for doubtful debts
Allowance for credit notes, rebates & settlement discounts
other receivables
Total Current Receivables
Age of receivables that are past due but not impaired
0-60 days
61-90 days
91-120 days
Total
Average days
Year ended
31 July 2017
Year ended
31 July 2016
$’000
3,470
(23)
(1,265)
2,182
350
2,532
$’000
9,989
(30)
(1,852)
8,107
577
8,684
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
62
102
3
167
54
$’000
$’000
56
15
158
229
39
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.
57
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 9: Current Assets – Trade and Other Receivables continued
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 Allowances/Provisions
12 months ended 31 July 2017
Balance at beginning of period
provisions raised
utilised
Reversed
Balance at end of the period
12 months ended 31 July 2016
Balance at beginning of period
provisions raised
utilised
Reversed
Balance at end of the period
Rebates,
credit notes
& settlement
discount
Doubtful debts
$’000
$’000
(30)
–
7
–
(1,852)
(4,992)
5,579
–
Total
$’000
(1,882)
(4,992)
5,586
–
(23)
(1,265)
(1,288)
(260)
–
197
33
(30)
(2,891)
(8,163)
9,029
173
(1,852)
(3,151)
(8,163)
9,226
206
(1,882)
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.
Note 10: Current assets – Inventories
Year ended
31 July 2017
Year ended
31 July 2016
$’000
8,916
(1,906)
7,010
$’000
12,561
(2,221)
10,340
Stock at cost
obsolescence provision
Stock at NRV
58
Note 11: Other Assets
Current other assets
prepaid royalties
prepayments
prepaid inventory
other
Other non-current assets
product development costs
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
197
550
1,997
0
2,744
29
29
118
601
1,393
75
2,187
194
194
Note 12: Assets held for sale
on 31 July 2017, an agreement was entered to sell a segment of the International business for $2.1 million AuD by way of a management
buy-out to key personnel based in Hong Kong. this transaction subsequently settled on 7 September 2017.
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
Current assets
Receivables
Inventories
other Assets
Non-current assets
property, plant & equipment
trademarks & Registrations
other
Assets classified as held for sale
Current Liabilities
payables
provisions
Liabilities classified as held for sale
67
86
591
661
124
124
1,653
1,816
79
1,895
–
–
–
–
–
–
–
–
–
–
59
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 13: Non-current assets – Plant and equipment
plant and equipment – at cost
less: accumulated depreciation
leasehold improvements – at cost
less: accumulated amortisation
Year ended
31 July 2017
Year ended
31 July 2016
$’000
4,332
(3,875)
457
1,141
(1,141)
–
457
$’000
4,673
(3,345)
1,328
1,485
(1,358)
127
1,455
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:
P&E
Leasehold
$’000
$’000
1,328
823
(47)
(825)
(617)
(205)
457
127
65
(7)
(148)
(44)
7
–
2017
Total
$’000
1,455
888
(54)
(973)
(661)
(198)
457
P&E
Leasehold
$’000
$’000
1,083
866
(34)
667
18
–
2016
Total
$’000
1,750
884
(34)
(780)
(611)
(1,391)
–
193
1,328
–
53
127
–
246
1,455
12 months ended
Cost
opening Balance
Additions
Disposals
Depreciation/
Amortisation
transfers –
Held for resale
Forex
Closing Balance
Note 14: Non-current assets – Goodwill
Carrying Amount
Balance at the beginning of financial year
Impairment losses for the year
Balance at the end of financial year
31 July 2017
31 July 2016
$’000
$’000
14,163
(14,163)
–
14,163
–
14,163
the CGu is required to perform an impairment test annually on goodwill and other indefinite life intangible assets as required by
AASB 136. More frequent reviews are performed for indications of impairment of the CGu, and where an indication of impairment
is identified a formal impairment assessment is performed.
60
Note 14: Non-current assets – Goodwill continued
In addition to the requirement to perform the annual test, the Group has identified the following Indicators of impairment at 31 July 2017:
y the financial year result was below budget expectations. this was due to a number of adverse events that have impacted the result
significantly. these events included:
–
International customers significantly reducing purchases as a result of poor season sales and business uncertainty.
– Key discount department store customers reducing purchases as a result of organisational restructuring and
inventory consolidation.
As a result, the Group assessed the recoverable amount of the CGu and related goodwill and intangibles at 31 July 2017 having regard to
the value-in-use approach.
Impairment testing – Value-in-use
In calculating value-in-use, the cash flows include projections of cash inflows and outflows from continuing use of the group of assets making
up the CGu. the cash flows are estimated for the assets of the CGu in their current condition and discounted to their present value using
a pre-tax discount rate that reflects the current market assessments of the risks specific to the CGu. the group uses a 5-year discounted
cash flow model with a terminal growth rate for years beyond the 5-year forecast period.
Outcome of assessment
In determining the value-in-use, the cash flow forecasts for the CGu were based on forecast sales and gross margins for FY2018. Margins
used in the forecast are based upon a bottom up forecast approach, historical and anticipated product margins and assumptions on
projected sales mix and rebate arrangements. Reduced overheads based on actions already implemented at the commencement of the
FY2018 financial year have been used in the assessment. However, the cash flow was risk adjusted based on the current year results and
uncertainty of future cash flows, resulting in management taking the view to impair the full carrying value of the goodwill.
Assessment of carrying amount
As a result of the assessment of the carrying amount and the significant restructuring of the business, the Directors determined that full
impairment of goodwill is appropriate.
Note 15: Non-current Assets – Other Intangibles
Year ended
31 July 2017
Year ended
31 July 2016
Brand names
Accumulated amortisation and impairment
Software costs
Accumulated amortisation and impairment
Chill Factor – trademarks and patents
Accumulated amortisation and impairment
licenses, trademarks, distribution agreements & supplier relationships
Accumulated amortisation and impairment
$’000
1,015
(334)
681
6,214
(5,695)
519
10,423
(9,666)
757
10,945
(8,615)
2,330
4,287
$’000
1,015
(290)
725
5,846
(5,579)
267
10,423
(6,681)
3,742
10,924
(8,134)
2,790
7,524
61
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 15: Non-current Assets – Other Intangibles continued
Reconciliations
Reconciliations of the carrying amounts of each class of intangibles at the beginning and end of the current financial year are set out below
Brand Names
Software
Chill Factor
Trademarks
and Patents
Other Licences
and Trademarks
$’000
725
–
–
(44)
(2,759)
–
681
$’000
267
368
–
(116)
(222)
–
519
$’000
3,742
–
–
(226)
(2,981)
–
757
$’000
2,790
172
–
(286)
(124)
2,330
opening Balance
Additions
Disposals
Depreciation/Amortisation
Impairment
transfers – Held for resale
Closing Balance
2017
Total
$’000
7,524
540
–
(672)
(124)
4,287
As impairment indicators were present for intangible assets, AASB136 required performance of an impairment assessment of the various
other intangibles. this has been performed, based on the royalty relief method by applying a market related royalty rate to the expected
future sales and terminal growth rate, which is a level three valuation in the fair value hierarchy.
projected sales were calculated based on approved FY2018 budget and management’s view of longer term performance expectations.
the estimated product life cycle was included in the calculation.
Outcome of assessment
Failure to meet budgeted performance expectations in FY17 and a re-assessment of future performance expectations resulted in an
impairment charge of $2,981,000 to the intangibles. (FY16 $6,424,000).
Note 16: Assets pledged as security
In accordance with the security arrangements of liabilities as disclosed in note 17 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 17: Borrowings
Secured – at amortised cost
Current
Finance lease liabilities
trade finance
overdraft
Interest bearing liabilities (excluding Bill finance) (i)
Bill finance (i)
Total Current
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
–
6,294
18,303
24,597
27,965
52,562
23
17,233
3,694
20,950
27,965
48,915
Subsequent to the end of the financial year a significant restructuring of the bank debt was completed resulting in the overall debt being
reduced by $36 million by way of a debt forgiveness.
(i) Although the Company’s facilities with national Australia Bank (excluding the overdraft facility which expires in June 2018) do not expire until november 2018, they have
been classified as current in accordance with accounting standards as there is a review in november 2017.
62
Note 18: Provisions
Current
employee benefits(i)
onerous lease contract(ii)
licensor audits(iii)
Total Current
Non-current
employee benefits(i)
total non-current
Total
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
671
–
–
671
27
27
698
753
47
147
947
60
60
1,007
2016
2017
opening balance
Additional provisions recognised
Reductions resulting from re-measurement or
settlement without cost
Reductions arising from payments/other sacrifices
of future economic benefits
Closing balance
Onerous Lease
Contract(ii)
Licensor
Audits(iii)
Onerous Lease
Contract(ii)
Licensor
Audits(iii)
$’000
$’000
47
–
–
(47)
–
147
–
(147)
–
–
$’000
332
42
–
(285)
47
$’000
105
–
–
147
(i) the provision for employee benefits represents annual leave and long service leave entitlements accrued.
(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 25).
(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.
63
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 19: Other Liabilities
Current
Accrued royalties
GSt payable
lease incentives
payroll accruals
other creditors
other accrued expenses
Accrued revenue/Sales Deposits
Total Current
Non-current
lease incentives
Total Non-current
Note 20: Leasing arrangements
the Group at the Balance date did not have any finance leases.
Finance lease liabilities
Year ended
31 July 2017
Year ended
31 July 2016
Note
$’000
$’000
25
25
1,652
21
26
77
49
3,018
574
5,417
101
101
1,310
123
91
70
238
1,441
479
3,752
165
165
Minimum Lease payments
Present value of minimum
lease payments
Year ended
31 July 2017
Year ended
31 July 2016
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
$’000
$’000
–
–
–
(3)
–
26
–
26
(3)
23
–
–
–
–
26
–
26
23
Year ended
31 July 2017
Year ended
31 July 2016
Note
$’000
$’000
17
–
–
23
23
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
64
Note 21: Equity
Issued Capital
Group
Share Capital
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
723,286,390 fully paid ordinary shares (2016: 723,286,390)
209,483
209,483
Changes to the then Corporations law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998.
therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.
ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of members’
shares held. At members’ meetings, each fully paid ordinary share is entitled to vote when ta poll is called, otherwise each shareholder has
one vote on a show of hands
Details
Movements in Ordinary Share Capital
opening balance
eSlS 1 cancellations
eSlS 2 cancellations
eSlS 3 cancellations
eSlS 4 cancellations
eSlS 5 cancellations
unlisted options
Shares issued under eSlS 4 19 october 2015
Shares issued under eSlS 5 23 December2015
Shares issued as part of the Institutional placement
(net of share issue costs)
Closing balance
treasury Shares (eSlS)
note: eSlS refers to the employee Share loan Scheme
31 July 2017
Share Capital
$’000
Number of
Shares
31 July 2016
Share Capital
$’000
Number of
Shares
762,234,723
209,483
686,369,723
208,402
(200,000)
(1,000,000)
(3,600,000)
(4,840,000)
(15,500,000)
(6,333,333)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13,500,000)
(995,000)
–
9,110,000
18,800,000
62,450,000
–
–
–
(30)
–
–
–
1,111
730,761,390
209,483
762,234,723
209,483
(7,475,000)
–
(38,948,333)
–
723,286,390
209,483
723,286,390
209,483
Foreign currency translation reserve
the foreign translation reserve account accumulates exchange differences arising on translation of foreign controlled entities which are
recognised in other comprehensive income. the carrying amount is reclassified to profit or loss when the net investment is disposed of.
Equity settled employee benefits reserve
Movements in the reserve are detailed in the statement of changes in equity. the reserve records amount for the fair value of options
granted and recognised as an employee benefits expense but not exercised.
Cash flow hedging reserve
the hedging reserve is used to record gains and losses on interest rate swaps that are designed and qualify as cash flow hedges and that are
recognised in other comprehensive income
65
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 22: Earnings per share
Basic loss per share
From continuing operations
From discontinued operations
Total loss per share
Diluted loss per share
From continuing operations
From discontinued operations
Total loss per share
Basic earnings per share calculation:
net loss after tax for the year – continuing operations
net loss after tax for the year – discontinued operations
31 July 2017
31 July 2016
Cents per share Cents per share
(4.10)
(0.53)
(4.63)
(4.10)
(0.53)
(4.63)
(3.04)
(0.48)
(3.52)
(3.04)
(0.48)
(3.52)
31 July 2017
31 July 2016
Restated
$’000
(29,687)
(3,779)
$’000
(20,597)
(3,257)
Loss used in the calculation of total basic EPS
(33,466)
(23,854)
Weighted average number of ordinary shares outstanding during
the year used in the calculation of basic loss per share
Diluted earnings per share calculation:
Weighted average number of ordinary shares outstanding during
the year used in the calculation of basic loss per share
Add: Shares deemed to be issued for no consideration in respect of:
employee Share loan Scheme
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
2017
2016 Restated
No. ’000
No. ’000
723,286
676,988
723,286
676,988
–
–
723,286
676,988
(i) the potential shares relating to the employee Share loan Scheme are anti-dilutive and therefore excluded from the weighted average number of potential ordinary shares.
Note 23: Dividends on equity instruments
there were no dividends declared or paid during the financial year (2016: nil). the franking account balance at 31 July 2017 is $19,302
(2016: $19,302).
66
Note 24: 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 not already recognised is as follows:
not later than one year
later than one year but not later than two years
Year ended
31 July 2017
Year ended
31 July 2016
$’000
839
380
1,219
$’000
1,424
524
1,948
Note 25: Operating Leases
the operating leases are non-cancellable leases with respect to office and warehouse premises with lease terms of between six months
and five years, some with options to extend. All operating leases with options to extend contain market review clauses in the event that
the company group exercises its option to renew. the group and the company do not have an option to purchase the leased asset at the
expiry of the leased period.
Minimum lease payments recognised as an expense:
Year ended
31 July 2017
Year ended
31 July 2016
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
$’000
1,694
(472)
1,222
267
918
–
1,185
–
–
–
267
918
1,185
$’000
2,178
(566)
1,612
2,101
899
–
3,000
(566)
–
(566)
1,535
899
2,434
67
Funtastic Annual Report 2017
Notes to the Financial Statements
continued
Note 25: Operating Leases continued
Liabilities recognised in respect of non-cancellable operating leases
Onerous lease contracts:
Current
non-current
Lease incentives:
Current
non-current
Note 26: 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(iii)
Funtastic employee Share loan Scheme trust(iv)
Dorcy Investments pty limited(iii)
Irwin pacific pty limited(ii)
Dorcy nZ pty limited(v)
Funtastic uSA pty limited (formerly Judius pty limited) (ii), (iii)
Funtastic America Inc. (formerly My paint Box Inc.)
nSR (HK) limited(iii)
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
(i) Funtastic limited is the head entity within the tax consolidated Group
(ii) these companies are members of the tax consolidated Group
Year ended
31 July 2017
Year ended
31 July 2016
Note
$’000
$’000
18
18
19
19
–
–
–
26
101
127
47
–
47
91
165
303
Equity Holding
Year ended
31 July 2017
Year ended
31 July 2016
%
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
%
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
Country of
Incorporation
Australia
Australia
Hong Kong
Hong Kong
Australia
Australia
Australia
Australia
Australia
new Zealand
Australia
uSA
Hong Kong
Australia
Australia
Australia
China
(iii) these wholly-owned subsidiaries have entered into a deed of cross guarantee with Funtastic limited pursuant to ASIC legislative Instrument 96/785 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.
68
(v) the value attributed to the minority interest is $nil (2016: $nil).
Note 26: 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
$’000
$’000
Year ended
31 July 2017
Year ended
31 July 2016
Continuing operations
Revenue
Cost of goods sold
Gross profit
Investment income
Warehouse and distribution expenses
Marketing and selling expenses
Administration expenses
Impairment of Goodwill and other intangible assets
Impairment of related party loans
Earnings before interest, taxation, amortisation and depreciation (EBITDA)
Finance costs
Depreciation and amortisation expenses
Loss before income tax
Income tax (expense)
Loss for the period from continuing operations
Discontinued operations
loss from discontinued operations
Loss for the year
Other comprehensive income
Items that subsequently may be reclassified to profit or loss:
loss on cash flow hedges taken to equity
other comprehensive income (loss) for the year (net of tax)
Total comprehensive loss for the year
55,803
(43,625)
12,178
438
(3,963)
(6,085)
(8,672)
(17,144)
(21,370)
(44,618)
(3,112)
(1,450)
(49,180)
(1,690)
(50,870)
(1,820)
(52,690)
90,867
(65,413)
25,454
651
(5,272)
(7,097)
(16,306)
(6,424)
–
(8,994)
(3,329)
(3,254)
(15,577)
(1,305)
(16,882)
(421)
(17,303)
131
131
58
58
(52,559)
(17,245)
69
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 26: 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
Total Current Assets
Non-current Assets
property, plant and equipment
Goodwill
other intangibles
Deferred tax assets
other assets
Total Non-Current Assets
Total Assets
Current Liabilities
trade and other payables
Borrowings
provisions
other liabilities
other financial liabilities
Total Current Liabilities
Non-Current Liabilities
provisions
Deferred tax liabilities
other liabilities
Total Non-Current Liabilities
Total Liabilities
Net (Deficiency)/Assets
Equity
Issued capital
Accumulated losses
Reserves
Total Equity
70
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
354
4,396
7,011
1,098
12,859
469
–
3,546
–
–
4,015
16,874
8,897
52,561
631
5,007
88
67,184
26
–
101
127
67,311
(50,437)
209,443
(259,909)
29
(50,437)
597
8,038
10,340
22,472
41,447
1,380
14,163
6,144
1,821
244
23,752
65,199
9,737
48,914
802
3,023
313
62,789
107
37
144
288
63,077
2,122
209,443
(209,422)
2,101
2,122
Note 27: 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:
Cash
Cash equivalents
(b) Financing facilities
Total Financing Facilities
overdraft
Combined trade Refinance & letter of Credit
Commercial Bill Facility
Bank Guarantees
other facilities
Reconciliation of Finance facilities
Used at Balance Date
overdraft
Combined trade Refinance & letter of Credit
Commercial Bill Facility
Bank Guarantees
other facilities
Unused at Balance Date
overdraft
Combined trade Refinance & letter of Credit
Commercial Bill Facility
Bank Guarantees
other facilities
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
8
656
664
8
756
764
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
18,634
7,000
27,965
3,300
1,250
58,149
18,303
6,294
27,965
2,165
–
54,727
331
706
–
1,135
1,250
3,422
3,700
18,000
28,000
3,300
1,250
54,250
3,694
17,233
27,965
2,199
19
51,110
6
767
36
1,101
1,231
3,141
71
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 27: Notes to the cash flow statements continued
(c) Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities
operating loss after income tax
Income tax expense recognised in profit or loss
Impairment
Amortisation
Depreciation
loss on assets disposed
Share options (benefit)/expense
other revenue
unrealised FX loss on revaluation of plant and equipment
Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses:
Decrease in trade and other receivables
Decrease in inventories
Decrease in prepayments and other assets
Decrease in assets held for sale
Decrease in trade creditors
Decrease in provisions
(Decrease)/increase in other liabilities
(Increase) in liabilities held for sale
Cash (utilised) generated from operations
Income tax paid
Net cash outflow from operating activities
Year ended
31 July 2017
Year ended
31 July 2016
$’000
(33,466)
1,690
17,144
672
973
55
(493)
(439)
198
6,151
3,331
(392)
(744)
(593)
(309)
1,602
1,895
(2,725)
(25)
(2,750)
$’000
(23,854)
1,533
6,424
1,165
2,341
–
154
(651)
–
1,931
6,223
986
–
(1,810)
(1,658)
50
–
(7,166)
(163)
(7,329)
Note 28: 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 17, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, accumulated losses and reserves as disclosed in the
Statement of Changes in equity.
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.
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 1 to the financial statements. these policies were consistent throughout the current year and the previous year.
72
Note 28: Financial Instruments continued
Categories of financial instruments
Financial assets
Cash and cash equivalents
loans and receivables
Financial liabilities
Derivative instruments in designated hedge accounting relationships
non-derivative financial liability
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
664
3,887
87
69,125
764
9,931
313
62,617
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, who 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:
y Foreign exchange forward contracts to hedge the exchange rate risk arising on the import of goods denominated in uS dollars; and
y 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 2017, while there has been a recent stabilisation of low 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.
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
euro
Hong Kong Dollars
2017
$’000
5,810
97
42
Liabilities
2016
$’000
7,962
–
229
2017
$’000
863
–
–
Assets
2016
$’000
6,229
8
159
73
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 28: Financial Instruments continued
Foreign currency sensitivity
the Group is mainly exposed to the uS dollar, euro and the HK dollar. the following table details the Group’s sensitivity to a 5% increase
and 5% decrease in the Australian dollar against the relevant foreign currencies. 5% 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 5% 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.
5% increase in AUD against foreign currency
profit or loss(i)
5% decrease in AUD against foreign currency
profit or loss(i)
(i) this is mainly attributable to the exposure outstanding in uSD receivables and payables at year end.
Forward foreign exchange contracts
At balance date, there were no purchase contracts (2016: asset of $nil).
USD Impact
2016
$’000
2017
$’000
(295)
(306)
295
306
During the year ended 31 July 2017 a loss on hedging instruments for the Group of $25,000 (31 July 2016: loss $38,000) has been brought
to account.
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 25-basis point increase or a 25-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 25-basis points higher or 25-basis points lower and all other variables were held constant,
the Group’s:
y net profit after taxation would increase/(decrease) by $131,000/($131,000) (post debt restructure and capital raise the sensitivity
changes to $37,500/($37,500) respectively (2016: $122,000/($122,000)). this is mainly due to the Group’s exposure to interest rates
on its variable rate borrowings.
Interest Rate Swap Contracts
Bank loans of the Group currently bear an average variable interest rate of 5.61% (2016: 6.74%). 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).
74
Note 28: Financial Instruments continued
Interest Rate Swap Contracts continued
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 29% (2016: 40%) of the total debt outstanding with its senior lender and is timed to expire on
1 December 2017. the fixed interest rate is 3.09% (2016: 3.09%) and the variable rate is the bank bill rate of the term of the underlying bill
which at balance date was 1.65% (2016: 1.9%).
As at 31 July 2017, 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
Average contracted
fixed interest rate
Notional principal amount
Fair value
2017
%
3.09
–
3.09
2016
%
–
3.09
3.09
2017
$’000
15,000
–
15,000
2016
$’000
–
20,000
20,000
2017
$’000
(87)
–
(87)
2016
$’000
–
(313)
(313)
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.
75
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 28: 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 only principal cash flows.
Weighted
average
effective
interest
rate
%
–
5.61
2017
non-interest bearing
Variable interest rate
instruments
2016
Less than
1 month
1 – 3
months
3 months
to 1 year
1 – 5 years
5+ years
$’000
$’000
$’000
$’000
$’000
3,042
2,381
6,425
6,913
–
43,268
5,423
13,338
43,268
non-interest bearing
–
2,031
7,844
3,348
Variable interest rate
instruments
Fixed interest rate
instruments
6.8
6.87
2,985
4,047
4,840
8,360
18,867
21,001
9,063
21,044
43,216
Total
$’000
9,467
52,562
62,029
13,223
26,692
33,408
73,323
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
1 – 3
months
3 months
to 1 year
1 – 5 years
5+ years
%
$’000
$’000
$’000
$’000
$’000
–
–
2.10
1,334
1,334
1,641
764
1,862
1,862
6,564
–
–
–
1,747
–
2,405
6,564
1,747
–
–
–
–
–
–
–
–
–
–
Total
$’000
3,196
3,196
9,952
764
10,716
2017
non-interest bearing
2016
non-interest bearing
Variable interest rate
instruments
76
Note 28: Financial Instruments continued
Fair value of financial instruments
the fair values of financial assets and financial liabilities are determined as follows:
y 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
y 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 1 and in the notes specific to that asset or liability.
Note 29: Share-based payments
Executive Share Option Plan (ESOP)
no options were granted under the eSop plan during the current financial year or preceding financial year. the executive Share option
plan (eSop) was replaced by the employee Share loan Scheme (eSlS) established during the 2013 financial year.
Unlisted Share Options
As at 31 July 2017, there were no unlisted share option balances outstanding. no options were granted under the plan during the current
financial year or preceding financial year.
Employee Share Loan Scheme
During the 2013 financial year (as part of the Company’s ltI arrangements), 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, 27 January 2017 for tranche 2, 31 July 2018 for tranche 3, 19 october 2018 for
tranche 4 and 23 December 2018 for tranche 5. Although there are no performance conditions attached to the eSlS, eligible employees
benefit from the scheme through improvements in the share price of the company, which results from improved performance. the options
become exercisable only when the vesting conditions are met. the expiry date of the eSlS options is on the date the employee ceases
employment with Funtastic.
77
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 29: Share-based payments continued
Employee Share Loan Scheme continued
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.
the eSlS is treated in substance as an option for accounting purposes and is therefore disclosed as share options in the Remuneration Report.
ESLS shares outstanding at the end of the financial year
Tranche
2017
tranche 1
tranche 2
tranche 3
tranche 4
tranche 5
2016
tranche 1
tranche 2
tranche 3
tranche 4
tranche 5
Vesting Date
Grant date
Exercise date
01/01/2016
08/07/2013
01/01/2016
27/01/2017
27/01/2014
27/01/2017
31/07/2018
31/07/2015
31/07/2018
04/10/2018
19/10/2015
04/10/2018
23/12/2018
23/12/2015
23/12/2018
01/01/2016
08/07/2013
01/01/2016
27/01/2017
27/01/2014
27/01/2017
31/07/2018
31/07/2015
31/07/2018
04/10/2018
19/10/2015
04/10/2018
23/12/2018
23/12/2015
23/12/2018
Exercise
price(ii)
Fair value at
grant date
Balance at end
of Financial
year
$0.1599
$0.1660
$0.0244
$0.0300
$0.0290
$0.1599
$0.1660
$0.0244
$0.0300
$0.0290
$0.0502
$0.0634
$0.0154
$0.0199
$0.0144
$0.0502
$0.0634
$0.0154
$0.0199
$0.0144
400,000
500,000
–
3,275,000
3,300,000
7,475,000
600,000
1,500,000
3,600,000
8,115,000
18,800,000
32,615,000
(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 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. eSlS options are valued using a Black
Scholes option pricing model. the model inputs for options granted include:
Option Number
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
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)
8/07/2013
27/01/2014
31/07/2015
4/10/2015
23/12/2015
01/01/2016
27/01/2017
31/07/2018
4/10/2018
23/12/2018
n/A
$0.1599
$0.1599
n/A
55.55%
3.00%
n/A
0.4
n/A
$0.1660
$0.1660
n/A
55.55%
3.00%
n/A
2.5
n/A
$0.0244
$0.0290
n/A
72.60%
1.90%
n/A
3.0
n/A
$0.0300
$0.0360
n/A
77.30%
1.84%
n/A
3.0
n/A
$0.0290
$0.0284
n/A
77.50%
2.05%
n/A
3.0
Average fair value at Grant date
$0.0502
$0.0634
$0.0154
$0.0199
$0.0144
78
Note 29: 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:
2017
Weighted
average
exercise price
$
Number of
options
Number of
options
Balance at the beginning of the financial year
32,615,000
$0.0374
19,200,000
Granted during the financial year
–
–
27,910,000
Forfeited/cancelled during the financial year
(25,140,000)
$0.0350
(14,495,000)
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
–
–
7,475,000
900,000
–
–
–
–
$0.045
$0.1633
32,615,000
600,000
2016
Weighted
average
exercise price
$
$0.0397
$0.0293
$0.0248
–
–
$0.0374
$0.1599
During the year, no eSlS options were granted to employees.
Aggregate proceeds received from employees on the exercise of options and recognised as issued capital in the financial period was $nil.
Note 30: 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 31: Related party transactions
(a) Equity interests in related parties
equity interests in subsidiaries
Year ended
31 July 2017
Year ended
31 July 2016
$
$
1,252,626
1,546,329
86,190
75,801
495,892
(108,759)
75,951
12,858
–
110,020
1,801,750
1,745,158
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 26 to the financial statements.
(b) Transactions with Key Management Personnel
Key management personnel compensation
Details of key management personnel compensation are disclosed in note 30 to the financial statements.
Loans from key management personnel
there are no outstanding loans from key management personnel.
79
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 31: Related party transactions continued
(c) Transactions with key management personnel of the Group
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 profit includes the following amounts arising from transactions with key
management personnel of the Group or their related parties:
other expenses
Year ended
31 July 2017
Year ended
31 July 2016
$
$
2,724
2,724
6,237
6,237
the above transactions were performed at arm’s length.
During the financial year, the Group recognised the following transactions with key management personnel:
y purchases of $1,768 (2016: $5,553) to Annabel Mackenzie a party related to Mr Grant Mackenzie for external consulting; and
y purchases of $956 (2016: $684) for provision of employment services from Sherelle pizmony a party related to Mr nir pizmony.
In prior years, Funtastic held a combined media purchasing arrangement with the three of us, which resulted in advantageous marketing
costs. this agreement terminated mid FY16. the media purchasing arrangement positioned Funtastic to facilitate payment of marketing
costs for both Funtastic and the three of us, following which the three of us reimburses Funtastic for their portion of advertising. A total
amount of $nil (2016: $343,697) was passed through to Funtastic in respect to their arrangements.
(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 2016 and
31 July 2017, which were eliminated on consolidation, consist of:
y sales made by Funtastic limited;
y loans advanced and interest charged by Funtastic limited;
y management services provided by Funtastic limited;
y management services provided to Funtastic limited; and
y payment to/from Funtastic limited for the above services.
Note 32: 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 and general taxation services
Year ended
31 July 2017
Year ended
31 July 2016
$
$
165,000
20,000
30,000
215,000
190,000
20,000
47,000
257,000
the auditor of Funtastic limited is Grant thornton Audit pty ltd. the auditor for 2016 was Deloitte touche tohmatsu.
(i) Related practice of parent entity auditor.
80
Note 33: Parent entity disclosures
Financial Position
Assets
Current assets
non-current assets
Liabilities
Current liabilities
non-current liabilities
net (Deficiency)/assets
Issued capital
Accumulated losses
Reserves:
equity-settled benefits
Cash flow hedging
Financial Performance
(loss) for the year – continuing operations
loss for the year – discontinued operations
other comprehensive income
Total comprehensive loss
Commitments for expenditure
there were no commitments to acquire property, plant and equipment at 31 July 2017.
Year ended
31 July 2017
Year ended
31 July 2016
$’000
$’000
12,859
4,015
16,874
(67,184)
(127)
(67,311)
(50,437)
209,443
41,447
23,752
65,199
(62,789)
(288)
(63,077)
2,122
209,443
(259,909)
(209,422)
117
(88)
(50,437)
2,320
(219)
2,122
Year ended
31 July 2017
Year ended
31 July 2016
Restated
$’000
(50,870)
(1,820)
131
$’000
(16,882)
(421)
58
(52,559)
(17,245)
81
Funtastic Annual Report 2017 Notes to the Financial Statements
continued
Note 34: Subsequent Events
sale of international – the sale of a significant segment of the International business by way of a management buyout was made on
31 July 2017 with settlement effected on 7 September 2017.
Bank debt restructure – After significant and lengthy negotiations, the Group completed a major restructuring of its debt facility with
it bankers the national Australia Bank effective on 30 August 2017. the impact of this was a reduction of debt by $36 million by way of
a debt forgiveness.
capital raising –the company undertook a successful capital raising of $8.2 million which was completed on 20 September 2017.
the combination of the above and continued overhaul of the fixed cost base has significantly restructured and strengthened the Group’s
balance sheet for the future.
Note 35: 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.
82
Additional stock exchange information
as at 26 September 2017
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
Substantial Shareholders
Substantial Shareholders in the Company are set out below:
1
2
3
4
5
Merrill lynch (Australia) nominees pty limited
G Harvey nominees pty ltd
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