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We help people smile!
Annual Report 2018
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
Funtastic
Annual
Report
2018
1
Chairman’s
Report
On behalf of the Board of Directors of Funtastic Limited,
I am pleased to present our 2018 Annual Report.
The Period in Review
Reconciliation of underlying to statutory results
The financial year ended 31 July 2018 was a year of significant
change and turnaround for Funtastic with the business
returning to profitability following several loss-making years.
The strategic plan outlined at the beginning of the year has
begun to deliver the sustainable revenue and profitability
improvement that it has been designed to do. The review
of the cost base has delivered significant savings and there
will remain an ongoing focus of minimising both fixed and
variable costs. The implementation of improved, disciplined
business processes combined with enhanced commercial
acumen has begun to streamline the product range and will
drive ongoing margin improvements. A focus on developing
long term supply partnerships and reducing dependence
on transactional opportunities has led to the business being
awarded a number of significant licensing opportunities.
Highlights for the year ended
31 July 2018 included:
y A return to profitability with operating FY18 EBITDA
of $2.5 million, $8.1 million higher than FY17 operating
EBITDA loss of ($5.6 million).
y The completion of the sale of a segment of the previously
loss-making international business for $2.1 million,
reducing fixed costs and significantly improving cashflows.
y Completion of a fixed cost review that has delivered
an ongoing reduction in fixed overheads by $2.0 million.
y Completion of the transition to a variable logistics model
that has delivered cost savings of $1.2 million per annum.
y Securing the Toy Story 4 licensing rights for Australia and
New Zealand, a major achievement that has positioned
the company within the top 150 licensing companies
globally, building on the foundation of other major licenses
such as JoJo Siwa, Paw Patrol, LOL and others.
y A restructuring of debt facilities was completed in the
first half of FY18, reducing debt by $36.0 million.
y A successful capital raising of $8.4 million was completed
in September 2017. Together with the debt reduction
noted above the Company’s balance sheet was
significantly strengthened.
Statutory EBITDA
of continuing operations
$’000
31,490
Bank Debt Forgiveness net of costs
(35,003)
Impairment of intangible assets
Redundancy and restructuring costs
Impairment of contingent assets
Non-recurring significant legal costs
Provision for inventory
to be returned to supplier
Operating EBITDA
1,951
1,941
1,312
596
225
2,512
Post balance date events:
Post FY18 year end, an $8.2 million capital raising via a
placement and entitlement offer was announced and this
was completed on 9 October 2018. The main reason for
raising capital was to facilitate a further restructuring of debt
facilities, eliminating all liabilities with National Australia Bank
subject to a debt payment of a $5.0 million which was
completed on 12 October 2018. The completion of the
capital raising and finalisation of the restructuring of Funtastic’s
debt arrangements have resulted in a more appropriate and
sustainable capital structure for the Company and will provide
it with the balance sheet strength and flexibility to pursue
new growth opportunities as well as enhance its position
with customers and suppliers.
The Board’s key strategies for FY19
performance include:
y Ongoing enhancement of the licensing portfolio,
building on key relationships.
y Development and growth of our own brands.
y Capitalising on emerging technologies and trends.
y Further improvement of cash management
disciplines, driving balance sheet strength.
y Continual investment in our people, culture
and leadership.
2
Funtastic
Annual
Report
2018
3
4
Chairman’s Report
Continued
Funtastic
Annual
Report
2018
The year ahead
y Funtastic sells, markets and distributes products within
the Toy, Apparel, Tech and Confectionery categories.
These categories remain relevant and valued by both
major and specialty retailers. All categories are profitable
with Toys, dominated by one off transactions, being our
largest strategic challenge.
y Funtastic has secured the licensing rights for Toy Story 4
and will continue to seek other licensing opportunities,
building on its foundation of the licenses for JoJo Siwa,
Paw Patrol, LOL and others.
y Funtastic has secured the Australia/New Zealand
distribution rights for Pai International and Learning
Resources as the company expands its consumer offering
into the learning and Science, Technology, Engineering,
Maths (STEM) categories.
y The Australian e-commerce and speciality channels are
poised for growth as consumer purchasing behaviour
evolves. Funtastic has resourced and positioned itself
to maximise growth from this opportunity.
y Opportunities to develop and grow own brands
(Pillow Pets, Chill factor and Floaties) both domestically
and internationally continue to be pursued. Improved
distribution and consumption opportunities exist in
brands such as Razor, Beacon, JoJo, LOL Accessories
and Orbeez.
y Divestment, refinancing and successful implementation
of a lower cost structure have positioned the business
to accelerate growth initiatives.
y Funtastic will continue to build on its strong customer
and supplier relationships and sourcing competency.
y The Company expects to build on its return to
profitability in FY18 and deliver further growth
and profitability in FY19.
The Directors would like to thank all our staff, shareholders,
bankers, suppliers, key agency partners and customers
for their ongoing loyalty and support. We look forward
to building on a profitable FY18 and making FY19 another
successful year.
Shane Tanner
Chairman of the Board
31 October 2018
5
Financial Report
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
19
31
32
36
37
38
39
40
41
41
50
51
52
53
54
54
55
58
59
60
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
60
61
61
62
63
63
63
64
64
65
66
66
67
67
68
71
72
77
82
82
83
83
84
84
85
6
Company Information
Funtastic
Annual
Report
2018
Principal Administrative Office
Level 2, 315 Ferntree Gully Road
Mount Waverley VIC 3149
Share Registry
Boardroom Limited
Grosvenor Place, Level 12
225 George Street
Sydney NSW 2000
Auditors
Grant Thornton
Collins Square, Tower 1
727 Collins Street
Docklands VIC 3008
Bankers
Commonwealth Bank of Australia
201 Sussex Street
Sydney NSW 2000
Solicitors
K&L Gates
Level 25, 525 Collins Street
Melbourne VIC 3000
Directors
Shane Tanner
Chairman and Independent Non-Executive Director
Stephen Heath
Independent Non-Executive Director
Steven Leighton
Managing Director and Chief Executive Officer
(appointed Chief Executive Officer 24 July 2017,
appointed Executive Director 31 May 2018)
John Tripodi
Independent Non-Executive Director
(appointed 25 October 2018)
Nicki Anderson
Independent Non-Executive Director
(appointed 25 October 2018)
Grant Mackenzie
Executive Director and Chief Operating & Financial Officer
(resigned 31 May 2018)
Nir Pizmony
Managing Director and Chief Executive Officer
(resigned 28 September 2017)
Company Secretary
Grant Mackenzie
(resigned 31 May 2018)
Howard Abbey
(appointed 31 May 2018)
Registered Office
Level 2, 315 Ferntree Gully Road
Mount Waverley VIC 3149
7
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 2018 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 2018 the group’s mix of employees
was as follows:
General employees
Middle managers
Senior managers
Board
Total
8
Female
Male
Total
23
6
5
–
34
2
8
7
3
20
25
14
12
3
54
Funtastic
Annual
Report
2018
Principle 1: Lay solid foundations for management and oversight (continued)
Diversity (continued)
Funtastic has elected not to establish targets with regard to gender mix within its workforce on the grounds that, as a small business,
such targets could place unreasonable 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) 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.
9
Corporate Governance Statement
continued
Principle 2: Structure of the Board to add value (continued)
Board Membership (continued)
At the commencement of the financial year, the Board comprised of two non-executive directors and two executive directors (the Chief
Executive Officer and the Chief Finance Officer/Chief Operating Officer). The details of each director’s qualifications, experience and skills
are set out on pages 15 to 16 of the Annual Report.
Board and Director Independence
The Board has assessed the criteria for independence as outlined in the ASX Corporate Governance Council’s best practice
recommendation 2.1. Independent directors of Funtastic are those not involved in the day to day management of the company
and are free from any real or reasonably perceived business or other relationship that could materially interfere with the exercise
of their unfettered and independent judgement.
Currently, four of the five directors are considered to be independent. It is the Board’s view that Mr Shane Tanner, Mr Stephen Heath,
Mr John Tripodi and Ms Nicki Anderson are independent directors.
Mr Steven Leighton is an Executive Director and therefore deemed not to be an independent director.
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.
10
Funtastic
Annual
Report
2018
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.
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)
b)
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);
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 comprised of two non-executive directors:
Mr Shane Tanner and Mr Stephen Heath.
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.
11
Corporate Governance Statement
continued
Principle 4: Safeguard integrity in corporate reporting (continued)
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.
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.
12
Funtastic
Annual
Report
2018
Principle 4: Safeguard integrity in corporate reporting (continued)
Management Certification Process (continued)
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.
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.
13
Corporate Governance Statement
continued
Principle 8: Remunerate fairly and responsibly
Remuneration and Evaluation Committee
The members of the Remuneration and Evaluation Committee are Mr Stephen Heath (Chairman) and Mr Shane Tanner.
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.
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
Funtastic
Annual
Report
2018
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 2018.
The following persons were Directors of Funtastic Limited during or since the end of the financial year:
Shane Tanner
Stephen Heath
Steven Leighton
John Tripodi
Managing Director &
Chief Executive Officer
(Appointed Executive
Director 31 May 2018)
Mr Leighton has extensive
experience with major Fast
Moving Consumer Goods
companies including major
licensing entities working
internationally across
Australasia, Europe, Asia
Pacific, USA and Latin America.
He has held senior roles
including CEO and EVP with
companies including Twentieth
Century Fox, Dulux, Heinz
Wattie’s and Hawthorn
Football Club.
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 Zenitas Healthcare Limited,
Rhythm Biosciences Limited
and Paragon Care Limited.
He is a former CEO of Mayne
Nickless Diagnostic Services
and Chairman of Sterihealth
Limited. Mr Tanner has vast
commercial and financial
experience.
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.
B Com, B Bus (Hons)
Independent Non-Executive
Director (Appointed
25 October 2018)
Mr Tripodi is a business leader
with extensive multinational
FMCG experience in various
strategic and operational
roles with a track record
of championing innovative
brand strategies that deliver
successful commercial
outcomes.
Mr Tripodi is currently the
CEO of the diversified sport,
entertainment and consumer
lifestyle agency, Twenty3
Group. Prior to co-founding
the Twenty3 Group, Mr Tripodi
held senior sales and marketing
roles with Mars Inc. before
moving into general
management with the
L’Oreal Group.
Mr Tripodi is a graduate
of the University of Melbourne
in Commerce and holds an
honours degree in Marketing
from Monash University.
Mr Tripodi is also an Adjunct
Professor of Business at
RMIT University.
15
Directors’ Report
continued
Directors (continued)
Nir Pizmony
Managing Director and
Chief Executive Officer
(Resigned 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.
Nicki Anderson
B Bus, MBA, GAICD
Independent Non-Executive Director
(Appointed 25 October 2018)
Ms Anderson is an accomplished leader
and director with deep experience in
strategy, sales, marketing, licensing and
innovation within branded food, beverage
and consumer goods businesses both
in Australia and Internationally.
Ms Anderson has held senior positions
in marketing and innovation within world
class FMCG companies and was most
recently Managing Director within the
Blueprint Group concentrating on sales,
marketing and merchandising within the
retail and pharmacy sales channels.
Ms Anderson has an Executive MBA
from AGSM, a Bachelor of Business and
is a graduate of the Australian Institute
of Company Directors.
Grant Mackenzie
B. Acc, CA, MBA, GAICD
Executive Director, Chief Operating &
Financial Officer and Company Secretary
(Resigned 31 May 2018)
Appointed to the Board as Executive
Director and to the position of Chief
Operating Officer in August 2014.
Mr Mackenzie was 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
Paragon Care Limited
Zenitas Healthcare Limited
Rhythm Biosciences Limited
Period
2005 to current
2014 to current
2017 to current
Vision Eye Institute Limited
2004 to October 2015
Stephen Heath
Fantastic Holdings Limited
2013 to January 2016
Nicki Anderson
Select Harvests Limited
2016 to current
Temple and Webster Group Limited
2016 to current
16
Funtastic
Annual
Report
2018
Company Secretary
Mr Howard Abbey was appointed to the position of Company Secretary on 31 May 2018 following the resignation of Mr Grant Mackenzie.
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.
Key Financials AUD ’m
Revenue
EBITDA
Profit/(Loss) before Tax
Net profit/(loss) after tax
Basic EPS (cents) from continuing operations
Dividend per share (cents)
ROE 1
Net Debt ($m)
Gearing 2
1. NPAT/average shareholder equity.
2. Net debt/shareholder equity.
Dividends
FY18
41.7
31.5
28.0
28.2
32.5
N/A
FY17
55.7
(22.8)
(28.0)
(29.7)
(102.5)
N/A
13.24%
-15.98%
% Change
-25.0%
N/A
N/A
N/A
N/A
N/A
N/A
19.6
(1.37)
51.9
(1.02)
(62.3%)
34.5%
In respect of the financial year ended 31 July 2018, no dividends have been declared or paid.
Changes in state of affairs
The following events occurred during the financial year that positively impact on the state of affairs of the consolidated entity:
y The completion of the sale of a segment of the previously loss-making international business for $2.1 million, reducing fixed costs and
significantly improving cashflows.
y A restructuring of debt facilities was completed in the first half of FY18, reducing debt by $36.0 million.
y A successful capital raising of $8.4 million was completed in September 2017. Together with the debt reduction noted above the
Company’s balance sheet was significantly strengthened.
Subsequent events
Bank debt restructure – The Company entered into negotiations with its Bankers, the National Australia Bank (NAB) regarding the
future and structure of the bank debt. Thanks to the significant support of the NAB, who have been with the Company for many years,
it was agreed on 7 September 2018 for a full and final settlement of all liabilities owing to NAB subject to the payment of approximately
$5.0 million and satisfactory completion of several other obligations. The reduction in financial indebtedness totalled approximately
$21.1 million comprising a $5.0 million repayment and a $16.1 million debt forgiveness. The full impact of this was discussed in the recent
Capital Raising documents announced to the ASX and will be included in the January 2019 half year accounts. The debt restructure was
completed on 12 October 2018.
Capital raising – On 13 September 2018, the Company successfully completed a capital raising of $1.2 million by way of a share placement
to sophisticated and professional investors. Additionally, on 9 October 2018, the Company successfully completed a capital raising of
$7.0 million by way of a 1 for 1 non-renounceable rights issue.
The combination of the above events has significantly restructured and strengthened the Group’s balance sheet which will further support
the Group’s profitability improvement and strategic initiatives moving forward.
17
Directors’ Report
continued
Environmental regulations
The Group is not required to hold any Environmental Protection Authority Licences.
Meetings of Directors
The number of meetings of the Company’s directors held during the year ended 31 July 2018 and the number of meetings attended
by each director were:
Remuneration &
Evaluation Committee
Board of Directors
Audit, Risk and
Compliance Committee
A
2
2
–
–
–
B
2
2
–
–
–
A
10
10
3
9
1
B
10
10
3
9
1
A
2
2
–
–
–
B
2
2
–
–
–
S Tanner
S Heath
N Pizmony
(Resigned 28 September 2017)
G Mackenzie
(Resigned 31 May 2018)
S Leighton
(Appointed 31 May 2018)
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 Nomination Committee but no Nomination Committee meetings were held during 2018 (2017: nil).
Directors’ shareholdings
Securities in the Company or in a related body corporate in which directors have a relevant interest as at the date of this report were:
Director
S Tanner
S Heath
S Leighton
J Tripodi
N Anderson
N Pizmony
(resigned 28 September 2017)
G Mackenzie
(Resigned 31 May 2018)
Option holdings
Issuing entity
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Funtastic Limited
Ordinary
Shares
2,000,000
1,149,863
1,600,000
–
666,667
670,201
3,225,833
Share Options
–
–
–
–
–
–
–
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.
18
Directors’ Report
Remuneration Report (Audited)
Funtastic
Annual
Report
2018
The Directors are pleased to present the 2018 Remuneration Report, prepared in accordance with section 300A of the Corporations Act 2001,
for the period ended 31 July 2018. The information provided in the Remuneration Report has been audited by the company auditors as
required by section 308(3C) of the Corporations Act 2001. The Remuneration Report forms a part of the Directors report.
The Remuneration Report outlines the remuneration policies and arrangements for the Company’s Key Management Personnel (KMP)
who have authority and responsibility for planning, directing and controlling the activities of the Company.
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
Stephen Heath
Steven Leighton
Nir Pizmony
Position
Period in position during the year
Chairman and Independent Non-Executive
Director
Independent Non-Executive Director
Chief Executive Officer
Executive Director
Executive Director
Full year
Full year
Full Year
Appointed 31 May 2018
Resigned 28 September 2017
Managing Director and Chief Executive Officer
Resigned 31 July 2017
Grant Mackenzie
Executive Director
Chief Operating Officer, Chief Financial Officer
and Company Secretary
Howard Abbey
Chief Financial Officer
Company Secretary
Resigned 31 May 2018
Resigned 31 May 2018
Appointed 2 May 2018
Appointed 31 May 2018
Remuneration policy for directors and executives
The objective of the Funtastic remuneration policy is to attract, retain and motivate the people required to sustainably manage and grow
the business. Executive remuneration packages include a balance of fixed remuneration, short term cash incentives and long-term equity
incentives. The framework endeavours to align executive reward with market conditions and shareholders’ interests.
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 Incentive Plan.
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.
19
Directors’ Report
Remuneration Report (Audited)
continued
Remuneration policy for directors and executives (continued)
Compensation and company performance
Funtastic Limited’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) has been the key performance measure for
the Company’s incentive plan for executives, linked to individual key performance objectives.
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.
20
Funtastic
Annual
Report
2018
Components of Compensation (continued)
At risk Compensation (continued)
Annual Bonus (continued)
The table below shows the Group’s earnings in the reporting period and the previous four financial periods/years as well as an indication
of the Group’s value over the corresponding period:
Post Share Consolidation
Year ended
31 July 2018
Year ended
31 July 2017
Year ended
31 July 2016
Year ended
31 July 2015
Year ended (iii)
31 July 2014
NPAT ($’000) (i)
EPS Basic (Cents) (ii)
Diluted EPS (Cents) (ii)
Total Dividends ($’000)
Year End Share Price ($)
Shares on Issue (No.) (iv)
28,258
32.60
31.64
Nil
0.08
(33,466)
(115.75)
(115.75)
Nil
0.150
(23,854)
(88.00)
(88.00)
Nil
0.550
(56,479)
(210.50)
(210.50)
Nil
0.725
(41,763)
(157.50)
(157.50)
3,335
1.925
96,025,827
28,931,456
28,931,456
26,686,789
26,686,789
Market Capitalisation ($’000)
7,682
4,557
16,052
19,348
51,372
Pre Share Consolidation
EPS Basic (Cents) (ii)
Diluted EPS (Cents) (ii)
Year End Share Price ($)
Shares on Issue (No.) (iv)
1.30
1.27
0.003
(4.63)
(4.63)
0.006
(3.52)
(3.52)
0.022
(8.42)
(8.42)
0.029
(6.30)
(6.30)
0.077
2,400,645,675
729,619,723
729,619,723
667,169,723
667,169,723
Market Capitalisation ($’000)
7,682
4,557
16,052
19,348
51,372
(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.
21
Directors’ Report
Remuneration Report (Audited)
continued
Remuneration of Key Management Personnel compensation
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Post-
employ-
ment
benefits
Other
long-term
employee
benefits
Salary
and fees
$
Non-
monetary
benefits
$
Cash
bonus
$
Superan-
nuation
$
Long
service
leave
$
Termi-
nation
benefits
$
Year ended 31
July 2018
Directors
Share-based
payments
Perfor-
mance
and
service
rights
$
Options
Under
Employee
Share loan
scheme (i)
Total
$
Shane Tanner
123,600
Stephen Heath
56,697
–
–
215,582
144,000
–
–
–
–
5,386
34,760
–
–
–
–
–
–
–
–
324,605
–
–
–
123,600
62,083
718,947
Steven Leighton
(Appointed CEO
24 July 2017,
appointed
managing
director
31 May 2018)
Grant Mackenzie
(Resigned as
CFO/COO
31 May 2018)
Sub-Totals
Executives
Howard Abbey
(Appointed CFO
2 May 2018)
357,605
–
–
22,395
(3,240)
168,763
–
(41,233)
504,290
753,484
144,000
65,593
–
–
Sub-Totals
65,593
Totals
819,077
144,000
–
–
–
–
62,541
(3,240)
168,763
324,605
(41,233) 1,408,920
5,281
5,281
–
–
–
–
–
–
–
–
70,874
70,874
67,822
(3,240)
168,763
324,605
(41,233) 1,479,794
(i) There is a negative expense for share-based payments as vesting criteria of options issued has not been met.
22
Funtastic
Annual
Report
2018
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
$
Superan-
nuation
$
Long
service
leave
$
Termi-
nation
benefits
$
Options
$
Options
Under
Employee
Share
loan
scheme (i)
Total
$
Year ended 31
July 2017
Directors
Shane Tanner
Stephen Heath
Linda Norquay
(Resigned
3 March 2017)
Nir Pizmony
(Resigned as CEO
31 July 2017)
98,880
56,697
36,050
290,448
Grant Mackenzie
328,767
Sub-Totals
Executives
Pedro Sangil
Lopez (Resigned
31 July 2017)
810,842
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
–
–
–
–
–
–
–
–
–
–
–
–
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
(i) There is a negative expense for share-based payments as vesting criteria of options issued has not been met.
23
Directors’ Report
Remuneration Report (Audited)
continued
Remuneration of Key Management Personnel compensation (continued)
Fixed remuneration
Remuneration linked
to performance
2018
2017
2018
2017
Directors
Shane Tanner
Stephen Heath
Steven Leighton
(appointed CEO 24 July 2017,
appointed managing director 31 May 2018)
100%
100%
35%
100%
100%
100%
Linda Norquay (resigned 3 March 2017)
N/A
100%
Executive Officers
Howard Abbey
(appointed CFO 2 May 2018)
Grant Mackenzie
(resigned as CFO/COO 31 May 2018)
Nir Pizmony
(resigned as CEO 31 July 2017)
Pedro Sangil Lopez
(resigned 31 July 2017)
Short term incentives
100%
100%
N/A
N/A
N/A
100%
100%
100%
–
–
65%
–
–
–
–
–
–
–
–
–
–
–
–
–
In 2018, Mr Steven Leighton was eligible for a Short-Term Incentive (“STI”) based on performance targets based on EBITDA and a service
condition. If Mr Leighton is still in employment with the company at 31 October 2018 the service condition will be met and he will receive
an STI payment of $144,000 based on performance achievements. In 2017 no STI payments were made.
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 Incentive Plan (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.
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.
24
Funtastic
Annual
Report
2018
Short term incentives (continued)
Service Agreements (continued)
Steven Leighton – Managing director and Chief Executive Officer
y Term of the agreement – full-time permanent and no specific term.
y Payment of a termination benefit on early termination by the employer, other than for gross misconduct equal to six months base salary.
y Notice period six months.
John Tripodi – 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.
Nicki Anderson – 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.
Howard Abbey – Chief Financial Officer and Company Secretary
y Term of the agreement – full-time permanent and no specific term.
y Payment of a termination benefit on early termination by the employer, other than for gross misconduct equal to three months base salary.
y Notice period three months.
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 and rights
The tables below include balances for both options granted under the Employee Share Loan Scheme, unlisted options, service rights and
performance rights.
Year ended
31 July 2018
Executive Directors
Balance
at the start
of the year
Granted
during
the year
Options/
Rights
expired
during
the year
Options/
Rights
forfeited
during
the year
Balance
at the end
of the year
Vested and
exercisable
at the end
of the year (ii)
Steven Leighton
–
3,443,836
Grant Mackenzie
3,600,000
–
Totals
3,600,000
3,443,836
–
–
–
–
3,443,836
(3,600,000)
–
(3,600,000)
3,443,836
–
–
–
25
Directors’ Report
Remuneration Report (Audited)
continued
Key management personnel equity holdings (continued)
Share options and rights (continued)
Balance
at the start
of the year
Granted
during
the year
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 (i)
Year ended
31 July 2017
Executive Directors
Nir Pizmony
15,500,000
Grant Mackenzie
3,600,000
Executives
Pedro Sangil Lopez
6,550,000
Totals
25,650,000
–
–
–
–
(i) No options or rights were vested, exercised or exercisable during FY17 or FY18.
–
–
–
–
(15,500,000)
–
–
–
3,600,000
300,000
(6,550,000)
–
–
(22,050,000)
3,600,000
300,000
Share based compensation
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 31 July 2018 and at the date of this report, there are no unissued shares of the Company under option.
Share Right Plans
Under the terms of his employment contract Mr Steven Leighton received a one-off grant on 26 October 2017 of 1,643,836 service rights
as a sacrifice of $205,479.45 of Mr Leighton’s cash salary (fair value at the grant date of $0.125 (12.5 cents) per share).
The service rights vest on 31 October 2018 provided Mr Leighton has been in continuous employment with Funtastic from the
commencement of his employment until the vesting date (the Service Condition). The service rights expire on 31 December 2021.
Mr Leighton has also been granted 1,800,000 performance rights with a total fair value at grant date of $225,000 (fair value at the grant date
of $0.125 (12.5 cents) per share on 26 October 2017), each of which can be exercised for one fully paid ordinary share for nil consideration.
The vesting date of the performance rights is 31 October 2018 and the performance rights expire on 31 December 2021.
The number of performance rights to vest will be determined by the earnings per share (EPS) of Funtastic for the financial year ended
31 July 2018 (excluding the effects of Funtastic’s debt restructure), as follows:
y EPS of at least $0.0059 – 80% of performance rights to vest.
y EPS of at least $0.0158 – 100% of performance rights to vest.
Vesting of the performance rights is also conditional on Mr Leighton meeting the Service Condition and approval of Funtastic’s FY2018 accounts.
26
Funtastic
Annual
Report
2018
Share based compensation (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.
Pre-Consolidation
Year ended
31 July 2018
Directors
Shane Tanner
Nir Pizmony
Balance
at the start
of the year
Shares
purchased
during
the year
1,000,000
49,000,000
54,988,601
–
Stephen Heath
4,952,802
23,793,773
Steven Leighton
(Appointed CEO
24 July 2017,
appointed
managing director
31 May 2018)
Nicki Anderson
(Appointed
25 October 2018)
Grant Mackenzie
(Resigned
31 May 2018)
–
40,000,000
–
16,666,675
11,896,976
68,748,849
Totals
72,838,379
198,209,297
Received
on exercise
of options
Shares
sold during
the year
Balance at
the end of
the period
Balance held
nominally (i)
–
–
–
–
–
–
–
–
50,000,000
50,000,000
(38,233,576)
16,755,025
16,755,025
–
–
–
–
28,746,575
28,746,575
40,000,000
40,000,000
16,666,675
16,666,675
80,645,825
80,645,825
(38,233,576)
232,814,100
232,814,100
27
Directors’ Report
Remuneration Report (Audited)
continued
Share based compensation (continued)
Ordinary shares (continued)
Post-Consolidation
Year ended
31 July 2018
Directors
Shane Tanner
Nir Pizmony
Balance
at the start
of the year
Shares
purchased
during the
year
40,000
1,960,000
2,199,544
–
Stephen Heath
198,112
951,751
Steven Leighton
(Appointed CEO
24 July 2017,
appointed
managing director
31 May 2018)
Nicki Anderson
(Appointed
25 October 2018)
Grant Mackenzie
(Resigned
31 May 2018)
–
1,600,000
–
666,667
475,879
2,749,954
Totals
2,913,535
7,928,372
(i) Excludes share options issued under the ESLS.
Received
on exercise
of options
Shares
sold during
the year
Balance at
the end of
the period
Balance held
nominally (i)
–
–
–
–
–
–
–
–
2,000,000
2,000,000
(1,529,343)
670,201
670,201
–
–
–
–
1,149,863
1,149,863
1,600,000
1,600,000
666,667
666,667
3,225,833
3,225,833
(1,529,343)
9,312,564
9,312,564
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
Balance held
nominally (i)
Year ended
31 July 2017
Directors
Shane Tanner
Nir Pizmony
Stephen 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
7,522,095
Totals
80,360,474
(i) Excludes share options issues under the ESLS.
28
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
Funtastic
Annual
Report
2018
Share based compensation (continued)
Ordinary shares (continued)
a) Equity interests in related parties
Equity interests in subsidiaries.
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
During the financial year, the Group recognised the following transactions with key management personnel:
y Interest payment of $69,500 to Stephen Heath for a loan made to the Company.
There are no outstanding loans from key management personnel as at 31 July 2018.
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 2018
$
Year ended
31 July 2017
$
3,339
3,339
2,724
2,724
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 $0 (2017: $1,768) to Annabel Mackenzie a party related to Mr Grant Mackenzie for external consulting; and
y Purchases of $3,339 (2017: $956) for provision of employment services from Sherelle Pizmony a party related to Mr Nir Pizmony.
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 2017 and
31 July 2018, which were eliminated on consolidation, consist of:
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.
End of Remuneration Report (audited)
29
Directors’ Report
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.
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.
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.
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.
Auditor’s independence declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 31
of this annual report.
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
31 October 2018
30
Auditor’s Independence Declaration
Funtastic
Annual
Report
2018
Collins Square, Tower 1
727 Collins Street
Melbourne VIC 3000
Correspondence to:
GPO Box 4736
Melbourne VIC 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 2018, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner - Audit & Assurance
Melbourne, 31 October 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘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
Independent Auditor’s Report
Collins Square, Tower 1
727 Collins Street
Docklands VIC 3008
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 2018, 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 2018 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 auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘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
Funtastic
Annual
Report
2018
33
Material uncertainty related to going concern
We draw attention to Note 1 in the financial statements, which indicates that the Group generated a net profit from continuing
operations of $28,167,000 during the year ended 31 July 2018, and as of that date, the Group’s liabilities exceeded its total
assets by $14,266,000. We note the following, as detailed in Note 1:
Subsequent to year end the Company has agreed on a full and final settlement of its external debt with its external
financier for a debt repayment of $5,000,000; and
the Company completed a capital raising of $8,200,000 on 9th October 2018 with funds used to complete the final
settlement of the external debt facility along with general working capital and costs of the raising.
These events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may
cast doubt on 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 respect of 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.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
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.
Our procedures included, amongst others:
Documenting our understanding of internal processes and
controls associated with the determination of the provision
for obsolescence;
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.
Documenting and understanding the underlying
methodology upon which management's provision is based
and considering 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.
Independent Auditor’s Report
continued
Key audit matter
How our audit addressed the key audit matter
Asset impairment testing – refer to Note 3 and 15
At 31 July 2018 the Group has $976,000 (2017: $4,287,000)
in other intangible assets contained within separate cash
generating units (CGUs).
Management is required to perform an impairment test on
infinite 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 operating performance of particular brands is an
indication that the 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 other intangible assets. Measuring recoverable amount
involves judgments about the future results of the underlying
products and businesses as well as the discount and royalty
rates applied.
The Group recognised an impairment against other intangible
assets totalling $1,951,000 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 ‘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;
Performing sensitivity analysis on the model in relation to
the cash flow projections and discount rate assumptions;
and
Assessing the adequacy of the Group’s disclosures within
the financial statements.
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 2018, 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.
34
Funtastic
Annual
Report
2018
35
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.
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_responsibilities/ar1.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 19 to 29 of the Directors’ report for the year ended 31 July
2018.
In our opinion, the Remuneration Report of Funtastic Limited, for the year ended 31 July 2018 complies with section
300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
B L Taylor
Partner – Audit & Assurance
Melbourne, 31 October 2018
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 26 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
31 October 2018
36
Consolidated Statement of Profit or Loss
and other Comprehensive Income
For the year ended 31 July 2018
Funtastic
Annual
Report
2018
Note
31 July 2018
$’000
31 July 2017
$’000
6
7
7
7
8
5
Revenue
Cost of Goods Sold
Gross profit
Investment Income
Warehouse and Distribution Expenses
Marketing and Selling Expenses
Administration Expenses
Loan Forgiveness
Profit on sale of subsidiary
Impairment of Goodwill and Intangible Assets
Earnings before interest, taxation, amortisation
and depreciation (EBITDA)
Finance Costs
Depreciation and Amortisation Expenses
Profit/(Loss) before income tax
Income tax (expense)/benefit
Profit/(Loss) for the period from continuing operations
Discontinued operations
Profit/(Loss) from Discontinued Operations
Profit/(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 taken to equity
Other comprehensive income/(loss) for the year (net of tax)
Total comprehensive income/(loss) for the year attributable
to the members of Funtastic
Earnings per share
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Earnings per share – continuing operations
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
41,748
(26,717)
15,031
2
(3,272)
(1,150)
(12,299)
35,003
126
(1,951)
31,490
(1,917)
(1,571)
28,002
165
28,167
91
28,258
(122)
88
(34)
55,707
(38,797)
16,910
439
(3,964)
(6,345)
(12,689)
-
-
(17,144)
(22,793)
(3,559)
(1,645)
(27,997)
(1,690)
(29,687)
(3,779)
(33,466)
212
131
343
28,224
(33,123)
32.60
31.64
32.49
31.54
(115.75)
(115.75)
(102.50)
(102.50)
37
Consolidated Statement of Financial Position
As at 31 July 2018
Current Assets
Cash
Receivables
Inventories
Tax Receivable
Other Assets
Assets classified as held for sale
Total Current Assets
Non-Current Assets
Property, Plant and Equipment
Other Intangibles
Other Assets
Total Non-Current Assets
Total Assets
Current Liabilities
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
Provision for Deferred Tax Liabilities
Other Liabilities
Total Non-Current Liabilities
Total Liabilities
Net Liabilities
Equity
Issued capital
Accumulated Losses
Reserves
Total Deficiency
The above statement of financial position should be read in conjunction with the accompanying notes.
38
Note
31 July 2018
$’000
31 July 2017
$’000
27
9
10
8
11
12
13
15
11
17
17
18
8
19
12
18
19
21
718
2,956
5,305
133
1,414
10,526
–
10,526
156
976
241
1,373
11,899
3,774
18,189
2,000
457
–
–
1,649
26,069
–
26,069
21
–
75
96
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
26,165
70,090
(14,266)
(50,714)
217,400
(231,369)
(297)
(14,266)
209,483
(259,727)
(470)
(50,714)
Consolidated Statement of Changes in Equity
For the year ended 31 July 2018
Issued
Capital
$’000
Accumulat-
ed Losses
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity
settled
Employee
Benefits
Reserve
$’000
Cash Flow
Hedging
Reserve
$’000
Balance at 31 July 2016
209,483
(227,904)
(711)
2,253
Loss for the year
Other comprehensive income
Total comprehensive (loss)
Recognition of
sharebased payments
Transfer of sharebased
payments
–
–
–
–
–
(33,466)
–
(33,466)
–
1,643
Balance at 31 July 2017
209,483
(259,727)
Profit for the year
Other comprehensive income
Total comprehensive profit
–
–
–
Issue of ordinary shares
7,917
Recognition of
sharebased payments
Transfer of
sharebased payments
–
–
28,258
–
28,258
–
–
100
–
212
212
–
–
(499)
–
(122)
(122)
–
–
–
–
–
–
(493)
(1,643)
–
–
–
–
307
(100)
Balance at 31 July 2018
217,400
(231,369)
(621)
324
The above statement of changes in equity should be read in conjunction with the accompanying notes.
117
(88)
(50,714)
Funtastic
Annual
Report
2018
Total
$’000
(17,098)
(33,466)
343
(33,123)
(493)
–
(219)
–
131
131
–
–
–
88
88
–
–
–
–
28,258
(34)
28,224
7,917
307
–
(14,266)
39
Consolidated Statement of Cash Flows
For the year ended 31 July 2018
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
Note
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Cash (utilised)/generated from operations
Income taxes refunded/(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
Proceeds from sale of International subsidiary –
Funtastic International Limited (HK)
Net cash outflow from investing activities
Cash Flows from Financing Activities
Proceeds from borrowings
Proceeds from share issue
Costs from share issue
46,463
(54,777)
(8,314)
49
(1,917)
(10,182)
2
(145)
(281)
126
(298)
2,630
8,355
(438)
61,731
(60,897)
834
(25)
(3,559)
(2,750)
439
(888)
(540)
–
(989)
3,647
–
–
Net cash inflow from financing activities
10,547
3,647
Net increase/(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.
67
664
(13)
718
(92)
764
(8)
664
40
Notes to the Financial Statements
31 July 2018
Funtastic
Annual
Report
2018
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 31 October 2018.
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.
The profit for the period from continuing operations is $28,167,000.
The net asset deficiency as at 31 July 2018 of $14,266,000 has been addressed post balance sheet date with the completion on
12 October 2018 of a full and final settlement of the NAB bank debt, including a debt repayment of $5,000,000 and the satisfactory
completion of other obligations. The reduction in financial indebtedness is approximately $21,100,000. The debt repayment was funded
by a successful capital raising of $8,200,000 that was completed on 9 October 2018. The balance of funds from the capital raising were
used for general working capital and to pay the costs of the raising.
Funtastic is now well positioned to deliver improved results in future years.
The ability for the Group to continue as a going concern is dependent upon the following factors:
y Sustaining the improved financial results through normal trading and achieving budgeted results
y Continued support of creditors and customers through appropriate trading terms
The directors believe that the Group will be able to achieve the improved results and are satisfied that 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
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) 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.
42
Funtastic
Annual
Report
2018
Note 1: Significant accounting policies (continued)
(b) Income tax (continued)
(v) Tax Consolidation (continued)
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated Group, amounts are recognised as payable
to or receivable by the company and each member of the Group in relation to the tax contribution amounts paid or payable between the
parent entity and the other members of the tax-consolidated Group in accordance with the arrangement. Further information about the
tax funding arrangement is detailed in Note 8 to the financial statements.
(c) Foreign currency translation
(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.
43
Notes to the Financial Statements
continued
Note 1: Significant accounting policies (continued)
(f) Rental Income
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred
in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis
over the lease term.
(g) Plant and Equipment
Plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable
to the acquisition of the item.
Depreciation is calculated on a straight-line 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.
44
Funtastic
Annual
Report
2018
Note 1: Significant accounting policies (continued)
(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.
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 and service 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 and service 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 and service 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.
45
Notes to the Financial Statements
continued
Note 1: Significant accounting policies (continued)
(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.
(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.
3 years
Intangible assets are amortised, based on the useful live assessed by management, as follows:
y Software
y Patents
y Trademarks
10–20 years
y Licensed distribution agreements 1–20 years
y Brand names
3–5 years
20 years
46
Funtastic
Annual
Report
2018
Note 1: Significant accounting policies (continued)
(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).
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.
47
Notes to the Financial Statements
continued
Note 1: Significant accounting policies (continued)
(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.
(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.
48
Funtastic
Annual
Report
2018
Note 1: Significant accounting policies (continued)
(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.
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.
49
Notes to the Financial Statements
continued
Note 1: Significant accounting policies (continued)
(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 2017.
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.
50
Funtastic
Annual
Report
2018
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’
Effective for annual
reporting periods
beginning on
or after
Expected to
be initially applied
in the financial
year ending
1 January 2018
1 January 2018
31 July 2019
31 July 2019
AASB 16 ‘Leases’
1 January 2019
AASB 2016-3 ‘Amendments to Australian Accounting Standards – Clarifications to AASB 15’
1 January 2018
AASB 2016-5 ‘Amendments to Australian Accounting Standards – Classification and
Measurement of Share-based Payment Transactions
1 January 2018
31 July 2020
31 July 2019
31 July 2019
AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9
(December 2014)
Interpretation 22 Foreign Currency Transactions and Advance Consideration
Interpretation 23 Uncertainty Over Income Tax Treatments
1 January 2018
31 July 2019
1 January 2018
1 January 2019
31 July 2019
31 July 2020
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.
51
Notes to the Financial Statements
continued
Note 3: Critical accounting judgments and key sources of estimation uncertainty (continued)
Key sources of estimation uncertainty (continued)
i) Useful life and impairment 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.
The Group tests annually for intangible assets with indefinite useful lives or when impairment indicators are identified, whether intangible
assets have suffered any impairment, in accordance with the accounting policy. The recoverable amounts of the other intangible assets have
been determined on a relief from royalty basis. These calculations require the use of assumptions. A significant change to the assumptions
affects the recoverable amount of the other intangible assets.
ii) 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.
iii) 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.
iv) 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 FY2019, the Group has continued to not recognise 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 two principal geographical areas – Australia/NZ and Hong Kong and USA. The Group’s revenue from external
customers and information by geographical location is as follows:
Revenue from
External Customers
Non-Current Assets
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
41,748
–
–
41,748
45,059
10,648
1,046
56,753
1,373
–
–
4,698
75
–
1,373
4,773
Australia/NZ
Hong Kong
USA
52
Funtastic
Annual
Report
2018
Note 4: Segment information (continued)
Information about major customers
Included in revenues of Australia of $41,748,000 are revenues of approximately $25,816,079 (2017: $28,079,230), which arose from sales
to that region’s three largest customers (2017: 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.
Results of discontinued operation
Revenue
Expenses
Profit/(Loss) before tax
Attributable income tax expense
Result from operating activities, net of tax
Comprising:
Discontinued operation – USA
Discontinued operation – Madman & Wellington Rd
Profit/(Loss) for the year from discontinued operations
Basic Profit/(Loss) per share (cents per share)
Diluted Profit/(Loss) per share (cents per share)
Cashflow used in discontinued operations
Net cash produced/(used) in operating activities
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
279
(188)
91
–
91
(80)
171
91
0.11
0.10
1,046
(4,825)
(3,779)
–
(3,779)
(1,959)
(1,820)
(3,779)
(0.53)
(0.53)
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
(228)
(1,894)
53
Notes to the Financial Statements
continued
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
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
45,689
(3,941)
41,748
–
41,748
60,234
(4,986)
55,248
459
55,707
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
Note
2
–
2
1
438
439
Impairment of Goodwill and Intangible assets
14/15
1,951
17,144
Depreciation and amortisation expense
Depreciation of property, plant & equipment
Depreciation of leasehold improvements
Amortisation of other intangible assets
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
54
13
13
15
213
2
1,356
1,571
225
498
307
439
5,838
7,082
825
148
672
1,645
75
572
(493)
478
9,604
10,161
Note 8: Income tax
(a) Income tax expense/(benefit) relating to continuing operations
Tax expense comprises:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax expense of prior years
Deferred tax expense comprises:
Deferred tax (benefit) expense relating to the origination and reversal of temporary differences
Total tax expense/(benefit) 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:
Profit/(Loss) from continuing operations
Tax expense/(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 Deferred Tax balances
Effect of different tax rates of subsidiaries operating in other jurisdictions
Non-Assessable Commercial Debt Forgiveness
Income tax expense recognised in profit or loss
(c) Income tax recognised directly in equity
Deferred Tax:
Relating to share issue expenses deductible over 5 years
Funtastic
Annual
Report
2018
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
(187)
(165)
(352)
187
(165)
117
–
117
1,573
1,690
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
28,002
8,401
1,633
187
–
404
(10,790)
(165)
(27,997)
(8,399)
5,205
3,614
1,459
(189)
–
1,690
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
–
–
–
–
55
Notes to the Financial Statements
continued
Note 8: Income tax (continued)
(d) Current tax balances
Current tax liabilities and assets
Income tax (payable)/receivable
Other – overseas subsidiaries
(e) Deferred tax balances
2017 Temporary differences
2017 Gross Deferred
Tax Liabilities
Prepaid royalties
FX on foreign operations
2017 Gross Deferred
Tax Assets
Provisions
Accruals
Inventory
Cash flow hedges
Capital Raising
Other
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
133
(117)
Opening
Balance
Recognised
in Profit
& Loss
Recognised
in Other
Compre-
hensive
income
Recognised
directly in
equity
De-recogni-
tion of DTA
Closing
Balance
(35)
(2)
(37)
236
754
617
94
77
43
1,821
(24)
–
(24)
(7)
33
(158)
–
(52)
(13)
(197)
–
(36)
(36)
–
–
–
(68)
–
–
(68)
–
–
–
–
–
–
–
–
–
–
59
38
97
(229)
(787)
(459)
(26)
(25)
(30)
(1,556)
–
–
–
–
–
–
–
–
–
–
No movement in deferred tax balances were recognised in the financial year 2018.
The following deferred tax assets relating to tax losses have not been
brought to account as assets:
Tax losses – Revenue
Tax losses – Capital
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
61,301
53,267
114,568
97,527
53,267
150,794
56
Funtastic
Annual
Report
2018
Note 8: Income tax (continued)
(e) Deferred tax balances (continued)
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.
(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 2018 the Australian Group has carried forward revenue tax losses of approximately $61,300,989 (2017: 97,527,433).
As at 31 July 2018 a deferred tax asset of $nil (2017: $nil) has been booked relating to revenue tax losses and deferred assets relating
to temporary differences of $nil (2017: $nil). The Company made losses in the 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 2018 of $61,300,989 and net deferred
tax assets relating to temporary differences of $2,178,631 have not been booked as a deferred tax asset in these financial statements.
57
Notes to the Financial Statements
continued
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 past due
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
4,893
(1,898)
(543)
2,452
504
2,956
3,470
(23)
(1,265)
2,182
350
2,532
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
146
–
–
146
7
62
102
3
167
54
The Group does not hold any collateral over these balances.
The Group reviews trade debtors on an ongoing basis and makes a provision against specific debtors based on management’s assessment
of the debtors’ ability to settle the debt.
The Group reviews the provision for credit notes, rebates and settlement discounts on an ongoing basis and makes allowances for
individual customers based on historical sales, trading terms and expected returns, settlement discounts and rebates.
58
Note 9: Current Assets – Trade and Other Receivables (continued)
Movement in Allowances/Provisions
12 months ended 31 July 2018
Balance at beginning of period
Provisions raised
Utilised
Balance at end of the period
12 months ended 31 July 2017
Balance at beginning of period
Provisions raised
Utilised
Balance at end of the period
Rebates, credit
notes &
settlement
discount
$’000
Doubtful debts
$’000
(23)
(1,898)
23
(1,898)
(30)
–
7
(23)
(1,265)
(3,240)
3,962
(543)
(1,852)
(4,992)
5,579
(1,265)
Funtastic
Annual
Report
2018
Total
$’000
(1,288)
(5,138)
3,985
(2,441)
(1,882)
(4,992)
5,586
(1,288)
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
Stock at cost
Obsolescence provision
Stock at NRV
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
6,327
(1,022)
5,305
8,916
(1,906)
7,010
59
Notes to the Financial Statements
continued
Note 11: Other Assets
Current other assets
Prepaid royalties
Prepayments
Prepaid inventory
Other non-current assets
Product development costs
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
665
169
580
1,414
241
241
197
550
1,997
2,744
29
29
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. There are no assets held for
sale on the 31 July 2018.
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
–
–
–
–
–
–
–
–
–
–
67
86
591
661
124
124
1,653
1,816
79
1,895
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
60
Funtastic
Annual
Report
2018
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
1,252
(1,110)
142
16
(2)
14
156
4,332
(3,875)
457
1,141
(1,141)
–
457
Note 13: Non-current assets – Plant and equipment
Plant and equipment – at cost
Less: accumulated depreciation
Leasehold improvements – at cost
Less: accumulated amortisation
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:
12 months ended
Cost
Opening Balance
Additions
Disposals
Depreciation/Amortisation
Transfers – Held for resale
Forex
Closing Balance
P&E
$’000
Leasehold
$’000
457
129
(231)
(213)
–
–
142
–
16
–
(2)
–
–
14
2018
Total
$’000
457
145
(231)
(215)
–
–
156
P&E
$’000
Leasehold
$’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
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
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
–
–
–
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.
As a result of the assessment of the carrying amount and the significant restructuring of the business in 2017, the Directors determined
that full impairment of goodwill is appropriate.
61
Notes to the Financial Statements
continued
Note 15: Non-current Assets – Other Intangibles
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
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
1,015
(1,015)
–
3,320
(3,042)
278
10,423
(10,249)
174
10,924
(10,400)
524
976
1,015
(334)
681
6,214
(5,695)
519
10,423
(9,666)
757
10,924
(8,594)
2,330
4,287
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
$’000
Software
$’000
Chill Factor
Trademarks
and Patents
$’000
Other
Licences and
Trademarks
$’000
681
–
–
–
(681)
–
519
180
(150)
(177)
(94)
278
757
101
–
–
(684)
174
2,330
–
(135)
(1,179)
(492)
524
Opening Balance
Additions
Disposals
Depreciation/Amortisation
Impairment
Closing Balance
2018
Total
$’000
4,287
281
(285)
(1,356)
(1,951)
976
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 the approved FY2019 budget and management’s view of longer term performance expectations.
The estimated product life cycle was included in the calculation.
Outcome of assessment
A re-assessment of future performance expectations resulted in an impairment charge of $1,951,000 to the intangibles. (FY17 $2,981,000).
62
Funtastic
Annual
Report
2018
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 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
Trade finance
Overdraft
Finance Lease
Interest bearing liabilities (excluding Bill finance)
Bill finance
Total Current
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
7,617
10,512
60
18,189
2,000
20,189
6,294
18,303
–
24,597
27,965
52,562
After significant and lengthy negotiations, the Group completed a major restructuring of its debt facility with the National Australia Bank
effective 30 August 2017. The impact of this was a reduction of debt by $35 million by way of of a loan forgiveness. The new facilities
have been re-established through to 30 September 2018 in respect of the short-term facilities and 30 September 2020 in respect of the
Corporate Markets Loan Facility.
Note 18: Provisions
Secured – at amortised cost
Current
Employee benefits
Total Current
Non-current
Employee benefits
Total Non-Current
Total
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
457
457
21
21
478
671
671
27
27
698
63
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
Finance lease liabilities
Not later than one year
Later than one year and not later than five years
Less: Future finance charges
Present value of minimum lease payments
Included in the consolidated financial statements:
Current borrowings
64
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
244
–
26
51
60
1,268
–
1,649
75
75
1,652
21
26
77
49
3,018
574
5,417
101
101
25
25
Minimum lease payments
Present value of
minimum lease payments
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
63
–
63
(3)
60
–
–
–
–
–
63
–
63
(3)
60
–
–
–
–
–
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
60
60
–
–
Funtastic
Annual
Report
2018
Note 21: Equity
Share Capital
96,025,827 fully paid ordinary shares (2017: 729,619,723)
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
217,400
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 a poll is called, otherwise each shareholder
has one vote on a show of hands
31/07/2018
Pre Consolidation
31/07/2018
Post Consolidation
Number
of Shares
Share
Capital
$’000
Number
of Shares
Share
Capital
$’000
Number
of Shares
31 July 2017
Share
Capital
$’000
Movements in Ordinary
Share Capital
Opening balance
737,094,723
209,483
29,484,124
209,483
762,234,723
209,483
ESLS 1 cancellations
ESLS 2 cancellations
ESLS 3 cancellations
ESLS 4 cancellations
ESLS 5 cancellations
–
–
–
(400,000)
(7,075,000)
–
–
–
–
–
–
–
–
(16,000)
(283,000)
–
–
–
–
–
(200,000)
(1,000,000)
(3,600,000)
(4,840,000)
(15,500,000)
Capital Raise 19 Sep 17
1,670,998,391
7,917
66,840,703
7,917
–
–
–
–
–
–
–
Closing balance
2,400,618,114
217,400
96,025,827
217,400
737,094,723
209,483
Treasury Shares (ESLS)
–
–
(7,475,000)
2,400,618,114
217,400
96,025,827
217,400
729,619,723
209,483
Note: ESLS refers to the Employee Share Loan Scheme
Prior year shares and shares issued during the period have been adjusted for the 25:1 share consolidation that occurred in December 2017.
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
Notes to the Financial Statements
continued
Note 22: Earnings per share
Basic profit/(loss) per share
From continuing operations
From discontinued operations
Total Earnings per share
Diluted profit/(loss) per share
From continuing operations
From discontinued operations
Total profit/(loss) per share
Basic earnings per share calculation:
Net profit/(loss) after tax for the year – continuing operations
Net profit/(loss) after tax for the year – discontinued operations
Profit/(Loss) used in the calculation of total basic EPS
Weighted average number of ordinary shares outstanding during the year used
in the calculation of basic profit/(loss) per share
Diluted earnings per share calculation:
Weighted average number of ordinary shares outstanding during the year used
in the calculation of basic profit/(loss) per share
Add: Shares deemed to be issued for no consideration in respect of:
Performance and service rights
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings per share
31 July 2018
Cents
per share
31 July 2017
Cents
per share
32.49
0.11
32.60
31.54
0.10
31.64
$’000
28,167
91
28,258
(102.50)
(13.25)
(115.75)
(102.50)
(13.25)
(115.75)
$’000
(29,687)
(3,779)
(33,466)
No. ’000
No. ’000
86,686
723,286
86,686
723,286
2,623
89,309
–
723,286
Note 23: Dividends on equity instruments
There were no dividends declared or paid during the financial year (2017: nil). The franking account balance at 31 July 2018 is $19,302
(2017: $19,302).
66
Funtastic
Annual
Report
2018
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 2018
$’000
Year ended
31 July 2017
$’000
2,308
2,288
4,596
839
380
1,219
Note 25: Operating Leases
The operating leases are non-cancellable leases with respect to office premises with lease terms of 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:
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
Liabilities recognised in respect of non-cancellable
operating leases
Lease incentives:
Current
Non-current
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
182
–
182
182
796
978
1,694
(472)
1,222
267
918
1,185
Note
19
19
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
26
75
101
26
101
127
67
Notes to the Financial Statements
continued
Note 26: Subsidiaries
Name of Entity
Company
Funtastic Limited (i),(iii)
Subsidiaries
JNH Australia Pty Limited (ii),(iii),(v)
Fun International Limited
Funtastic International Limited
Funtastic (NZ) Pty Limited (ii),(iii),(v)
Dorcy Irwin Pacific Pty Limited (iii),(v)
Funtastic Employee Share Loan Scheme Trust (iv)
Dorcy Investments Pty Limited (iii),(v)
Irwin Pacific Pty Limited (ii),(v)
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)
Chill Factor Global Pty Limited (ii),(iii)
Hydro-Turbine Developments Pty Limited (ii),(iii),(v)
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.
Equity Holding
Country of
Incorporation
Year ended
31 July 2018
%
Year ended
31 July 2017
%
Australia
Australia
Hong Kong
Hong Kong
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
USA
Hong Kong
Australia
Australia
Australia
China
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
(iii) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Funtastic Limited pursuant to ASIC Class Order 98/1418 and are relieved from
the requirement to prepare and lodge an audited financial report. The subsidiaries became a party to the deed of cross guarantee on 23 July 2008.
(iv) During 2013 the Board established the Funtastic Employee Share Loan Scheme Trust for the purpose of purchasing and holding shares on behalf of participants
in accordance with ESLS Rules. The assets of the scheme are held separately from those of the Company and are administered by trustees appointed by the
Company. The Trust is consolidated into the Group financial statements at each reporting date.
(v) Companies are in the process of a voluntary deregistration.
68
Funtastic
Annual
Report
2018
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:
Revenue
Cost of Goods Sold
Gross profit
Investment Income
Warehouse and Distribution Expenses
Marketing and Selling Expenses
Administration Expenses
Bank Forgiveness
Profit on sale of subsidiary
Impairment of Goodwill and Intangible Assets
Impairment of related party loans
Earnings before interest, taxation, amortisation and depreciation (EBITDA)
Finance Costs
Depreciation and Amortisation Expenses
Profit/(Loss) before income tax
Income tax (expense)/benefit
Profit/(Loss) for the period from continuing operations
Discontinued operations
Profit/(Loss) from Discontinued Operations
Profit/(Loss) for the year
Other comprehensive income (net of tax)
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
41,748
(26,677)
15,071
2
(3,272)
(1,150)
(11,909)
35,003
126
(1,951)
–
31,920
(1,910)
(1,561)
28,449
0
28,449
171
28,620
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)
Items that may be reclassified subsequently to profit or loss
Gain on cash flow hedges taken to equity
Other comprehensive income/(loss) for the year (net of tax)
Total comprehensive income/(loss) for the year attributable to the members
of Funtastic
88
88
131
131
28,708
(52,559)
69
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:
Current Assets
Cash
Receivables
Inventories
Tax Receivable
Other Assets
Total Current Assets
Non-Current Assets
Property, Plant and Equipment
Goodwill
Other Intangibles
Other Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Interest Bearing Liabilities (excluding Bill Finance)
Provisions
Other Financial Liabilities
Other Liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Provision for Deferred Tax Liabilities
Other Liabilities
Total Non-Current Liabilities
Total Liabilities
Net Liabilities
Equity
Issued capital
Accumulated Losses
Reserves
Total Deficiency
70
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
606
2,972
5,305
–
1,414
10,297
157
–
976
241
1,374
11,671
3,685
20,189
451
–
1,575
25,900
21
–
75
96
354
4,396
7,011
–
1,098
12,859
469
–
3,546
–
4,015
16,874
8,897
52,561
631
88
5,007
67,184
26
–
101
127
25,996
67,311
(14,325)
(50,437)
217,359
(231,399)
(285)
(14,325)
209,443
(259,909)
29
(50,437)
Funtastic
Annual
Report
2018
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
Bank Guarantees
Other facilities
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
1
717
718
8
656
664
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
9,880
8,135
2,646
1,200
250
22,111
9,873
7,617
2,646
610
–
20,746
7
518
590
250
1,365
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
71
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 Profit/(Loss) after income tax
Income tax expense/(benefit) 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
Bank Forgiveness
Changes in net assets and liabilities, net of effects from acquisition and disposal
of businesses:
(Increase)/Decrease in trade and other receivables
Decrease in inventories
(Increase)/Decrease in prepayments and other assets
(Increase)/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 received/(paid)
Net cash outflow from operating activities
Note 28: Financial Instruments
Capital risk management
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
28,258
(33,466)
(165)
1,951
1,356
215
–
307
–
–
(35,003)
(424)
1,705
1,330
1,653
(6,999)
(214)
(2,306)
(1,895)
(10,231)
49
(10,182)
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)
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.
72
Funtastic
Annual
Report
2018
Note 28: Financial Instruments (continued)
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.
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
Financial risk management objectives
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
718
3,089
–
20,189
664
3,887
87
69,125
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 2018, 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
2018
$’000
1,386
–
–
Liabilities
2017
$’000
5,810
97
42
2018
$’000
1,765
–
–
Assets
2017
$’000
863
–
–
73
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)
USD Impact
2018
$’000
2017
$’000
(19)
19
(295)
295
(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 or foreign exchange contracts outstanding (2017: asset of $nil).
During the year ended 31 July 2018 a gain on hedging instruments for the Group of $88,000 (31 July 2017: loss $25,000) 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.
25-basis point increase in Interest rates
Profit or Loss (i)
25-basis point decrease in Interest rates
Profit or Loss (i)
(i) This is mainly due to the Group’s exposure to interest rates on its variable rate borrowings.
74
Interest Impact
2018
$’000
2017
$’000
(50)
50
(131)
131
Funtastic
Annual
Report
2018
Note 28: Financial Instruments (continued)
Interest Rate Swap Contracts
Bank loans of the Group currently bear an average variable interest rate of 7.45% (2017: 5.61%). It is the Group’s policy to protect part of the
loans from exposure to increasing interest rates. However due to the loan restructure, the Group has not currently purchased any Swaps.
The floating rate on the interest rate swap is the Australian bank bill swap rate (BBSW).
The swap currently in place covers 0% (2017: 29%) of the total debt outstanding with its senior lender. The fixed interest rate is not
applicable (2017: 3.09%) and the variable rate is the bank bill rate of the term of the underlying bill which at balance date is not applicable
(2017: 1.65%).
As at 31 July 2018, the notional principal amounts and the periods of expiry of the interest rate swap contracts for the Group were as follows:
Average contracted
fixed interest rate
Notional principal amount
Fair value
2018
%
–
2017
%
3.09
2018
$’000
–
2017
$’000
15,000
2018
$’000
–
2017
$’000
(87)
Less than 1 year
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
Notes to the Financial Statements
continued
Note 28: Financial Instruments (continued)
Liquidity and interest tables – financial liabilities
The following table details 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.
Weighted
average
effective
interest
rate %
Less than
1 month
$’000
1–3
months
$’000
3 months
to 1 year
$’000
1–5 years
$’000
5+ years
$’000
Total
$’000
–
7.45%
1,849
5,085
1,925
15,104
6,934
17,030
–
5.61%
3,042
2,381
6,425
6,913
–
–
–
–
43,268
5,423
13,338
43,268
–
–
–
–
–
–
–
–
–
–
–
–
3,774
20,189
23,964
9,467
52,562
62,029
2018
Non-interest bearing
Variable interest rate
instruments
2017
Non-interest bearing
Variable interest rate
instruments
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 %
0.25%
–
0.25%
–
2018
Cash
Non-interest bearing
2017
Cash
Non-interest bearing
Less than
1 month
$’000
1–3
months
$’000
3 months
to 1 year
$’000
1–5 years
$’000
5+ years
$’000
Total
$’000
718
1,282
2,000
664
670
1,334
1,674
1,674
1,862
1,862
–
–
–
–
–
–
–
–
718
2,956
3,674
664
2,532
3,196
–
–
–
–
76
Funtastic
Annual
Report
2018
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 2018, 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.
77
Notes to the Financial Statements
continued
Note 29: Share-based payments (continued)
Employee Share Loan Scheme (continued)
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.
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.
Performance rights and service rights
Performance rights
On 22 March 2018, Mr Leighton was granted 1,800,000 performance rights each of which can be exercised for one fully paid ordinary
share in the Company. Subject to the vesting conditions being achieved, each performance right is exercisable for nil cash consideration.
The vesting date and the expiry date of the 1,800,000 performance rights is 31 October 2018 and 31 December 2021, respectively.
Vesting of the performance rights is conditional on Mr Leighton meeting the Service Condition (which requires him to have been
in continuous employment with the Company from the commencement of his employment until the vesting date) and the approval
of the financial statements at the Annual General Meeting.
Furthermore, the number of performance rights that will actually vest on the vesting date will be determined by Funtastic’s reported
earnings per share (adjusted to exclude the effect of Funtastic’s debt restructure) for the year ended 31 July 2018, with 80% of the rights
vesting if Funtastic’s EPS is at least $0.0059 and 100% if Funtastic’s EPS is $0.0158.
Service rights
Mr Leighton was granted 1,643,836 service rights on 22 March 2018. The 1,643,836 service rights were granted to Mr Leighton in lieu
of $205,479.45 of Mr Leighton’s cash salary which he agreed to sacrifice. In this light, each service right has a deemed price of $0.125.
Each service right is exercisable into one fully paid ordinary share in the Company for no cash consideration subject to the Service
Condition (which requires him to have been in continuous employment with the Company from the commencement of his employment
until the vesting date) being satisfied.
ESLS shares outstanding at the end of the financial year
Tranche
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Vesting Date
Grant date
Exercise date
1/01/2016
8/07/2013
1/01/2016
27/01/2017
27/01/2014
27/01/2017
31/07/2018
31/07/2015
31/07/2018
4/10/2018
19/10/2015
4/10/2018
23/12/2018
23/12/2015
23/12/2018
Exercise
price (ii)
Fair value at
grant date
$0.1599
$0.1660
$0.0244
$0.0300
$0.0290
$0.0502
$0.0634
$0.0154
$0.0199
$0.0144
2018
Balance
at end of
Financial year
–
–
–
–
–
–
78
Funtastic
Annual
Report
2018
Note 29: Share-based payments (continued)
ESLS shares outstanding at the end of the financial year (continued)
Tranche
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Vesting Date
Grant date
Exercise date
1/01/2016
8/07/2013
1/01/2016
27/01/2017
27/01/2014
27/01/2017
31/07/2018
31/07/2015
31/07/2018
4/10/2018
19/10/2015
4/10/2018
23/12/2018
23/12/2015
23/12/2018
Exercise
price (ii)
Fair value at
grant date
$0.1599
$0.1660
$0.0244
$0.0300
$0.0290
$0.0502
$0.0634
$0.0154
$0.0199
$0.0144
2017
Balance
at end of
Financial year
400,000
500,000
–
3,275,000
3,300,000
7,475,000
(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
79
Notes to the Financial Statements
continued
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:
2018
Weighted
average
exercise price
$
2017
Weighted
average
exercise price
$
Number
of options
Number
of options
Balance at the beginning of the financial year
7,475,000
$0.1633
32,615,000
$0.0374
Granted during the financial year
–
–
–
–
Forfeited/cancelled during the financial year
(7,475,000)
$0.1633
(25,140,000)
$0.0350
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
–
–
$0.0450
$0.1633
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.
Rights outstanding at the end of the financial year
Tranche
Vesting Date
Grant date
Exercise date
Exercise
price
Fair value at
grant date
2018
Balance
at end of
Financial year
Service Rights
31/10/2018
26/10/2017
31/10/2018
Performance Rights
31/10/2018
26/10/2017
31/10/2018
$0.0000
$0.0000
$0.1250
$0.1250
1,643,836
1,800,000
80
Note 29: Share-based payments (continued)
Fair value of the rights granted
Option Number
Grant date
Vesting date
Expiry date
Exercise price
Stock price at issue
Expected life (years)
Volatility
Risk free rate
Dividend yield
Vesting period (years)
Average fair value at Grant date
Reconciliation of the outstanding performance and service rights:
Balance at the beginning of the financial year
2018
Weighted
average
exercise price
$
–
Number
of rights
–
Granted during the financial year
3,443,836
$0.1250
Forfeited/cancelled during the financial year
Exercised during the financial year
Expired during the financial year
–
–
–
–
–
–
Balance at the end of the financial year
3,443,836
$0.1250
Exercisable at the end of the financial year
–
–
Funtastic
Annual
Report
2018
Service Rights
Performance
Rights
26/10/2017
26/10/2017
31/10/2018
31/10/2018
N/A
$0.0000
$0.0500
N/A
N/A
$0.0000
$0.0500
N/A
150.00%
150.00%
1.75%
N/A
1.0
1.75%
N/A
1.0
$0.1250
$0.1250
2017
Weighted
average
exercise price
$
Number
of rights
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81
Notes to the Financial Statements
continued
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
Year ended
31 July 2018
$
Year ended
31 July 2017
$
963,077
1,252,626
67,822
(3,240)
168,763
283,372
86,190
75,801
495,892
(108,759)
1,479,794
1,801,750
Note 31: Related party transactions
a) Equity interests in related parties
Equity interests in subsidiaries.
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
During the financial year, the Group recognised the following transactions with key management personnel:
y Interest payment of $69,500 to Stephen Heath for a loan made to the Company.
There are no outstanding loans from key management personnel.
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 2018
$
Year ended
31 July 2017
$
3,339
3,339
2,724
2,724
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 $0 (2017: $1,768) to Annabel Mackenzie a party related to Mr Grant Mackenzie for external consulting; and
y Purchases of $3,339 (2017: $956) for provision of employment services from Sherelle Pizmony a party related to Mr Nir Pizmony.
82
Funtastic
Annual
Report
2018
Note 31: Related party transactions (continued)
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 2017
and 31 July 2018, which were eliminated on consolidation, consist of:
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
(i) Related practice of parent entity auditor.
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
Total Equity
Year ended
31 July 2018
$
Year ended
31 July 2017
$
165,000
28,000
33,500
226,500
165,000
20,000
30,000
215,000
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
7,145
1,328
8,473
(24,237)
(96)
(24,333)
(15,860)
217,400
12,859
4,015
16,874
(67,184)
(127)
(67,311)
(50,437)
209,443
(233,584)
(259,909)
324
–
117
(88)
(15,860)
(50,437)
83
Notes to the Financial Statements
continued
Note 33: Parent entity disclosures (continued)
Financial Performance
Profit/(Loss) for the year – continuing operations
Loss for the year – discontinued operations
Other comprehensive income
Total comprehensive loss
Note 34: Subsequent Events
Subsequent events
Bank debt restructure
Year ended
31 July 2018
$’000
Year ended
31 July 2017
$’000
25,699
–
–
(50,870)
(1,820)
131
25,699
(52,559)
The Company entered into negotiations with its Bankers, the National Australia Bank (NAB) regarding the future and structure of the bank
debt. Thanks to the significant support of the NAB, who have been with the Company for many years, it was agreed on 7 September 2018
for a full and final settlement of all liabilities owing to NAB subject to the payment of approximately $5.0 million and satisfactory completion
of several other obligations. The reduction in financial indebtedness totalled approximately $21.1 million comprising a $5.0 million repayment
and a $16.1 million debt forgiveness. The full impact of this was discussed in the recent Capital Raising documents announced to the ASX
and will be included in the January 2019 half year accounts. The debt restructure was completed on 12 October 2018.
Capital raising
On 13 September 2018, the Company successfully completed a capital raising of $1.2 million by way of a share placement to sophisticated
and professional investors. Additionally, on 9 October 2018, the Company successfully completed a capital raising of $7.0 million by way
of a 1 for 1 non-renounceable rights issue.
The combination of the above events has significantly restructured and strengthened the Group’s balance sheet which will further support
the Group’s profitability improvement and strategic initiatives moving forwards.
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.
84
Additional stock exchange information
As at 18 October 2018
Funtastic
Annual
Report
2018
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
100,001–9,999,999,999
Totals
Holders
Options
Ordinary Shares
Performance
share rights
2609
400
142
256
171
3,578
–
–
–
–
–
–
–
–
–
–
–
–
The number of shareholders holding less than a marketable parcel of shares was 3,088 holding 1,911,225 shares (based on the closing
market price on 18 October 2018).
Substantial shareholders Report
Substantial shareholders Report
Shares
%
1
2
3
4
JASZAC INVESTMENTS PTY LTD
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