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Strength in Diversification
Collection House’s pre-eminent position and future growth in the
receivables management industry is strengthened through our ability
to provide a range of solutions to meet industry needs.
Our prime aim is to cater to the
differing needs of the broad cross-
section of businesses that outsource
to Collection House. From small
businesses to large conglomerates,
Collection House and its associates
are valuable partners to have on their
team, delivering quality services across
the receivables management spectrum.
We’re proud of each of our
businesses and their brands. To assist
shareholders in recognising each
of our operating companies, we’ve
provided a simple summary.
Contingent Collection Service
Account Asset Management
Credit Reporting
Debt Purchasing
Debt Recovery
Receivables Management
Receivables Management
Outsourcing Call Centre
Debt Collection
Debt Recovery
Litigation
Process Serving
Insolvency Administration
Claims Management
Insurance Claims
Management Program
Commercial Tenant Check
Tenant Database
Company Searches
On-line Credit Information
Credit Risk Management
Risk Ratings
Corporate Risk Ratings
Financial Health
Assessments
Investment Quality Ratings
page .1
Operational overview
July 2003
March 2003
November 2002
Bo Göranson, a Director of
Collection House Limited,
becomes a major shareholder
June 2003
Collection House acquired the
Completed all outstanding
remaining 26% shareholding of
Australian Business Research Pty
Ltd, a subsidiary of Collection
House Limited
pre-July 2002 acquisitions’ non-
insurance collection database
conversions to proprietary
software, The Controller
Barry Connelly and Bill Hiller
appointed to the Board of
Collection House
Board appointment of Andrew
Woods to Australian Business
Research Pty Ltd
Appointment of Barrie Adams
to the Board of Collection
House Limited
April 2003
January 2003
October 2002
John Pearce, co-founder and
director of Collection House
Limited, reappointed to the
position of Managing Director
and Chief Executive Officer
Appointment of Rhonda King to
position of Company Secretary
Russell Templeton
vacated position of Chief
Executive Officer
Resignation of Don Nissen
from the Board of Collection
House Limited
December 2002
Russell Templeton formally
appointed to the position of
Chief Executive Officer
Australian Business Research
launches eCAPS (electronic
Commercial Application
Processing System)
July 2002
Acquired 100% shareholding of
Midstate Credit Management
Services Pty Ltd
Acquired 100% shareholding of
Countrywide Mercantile Credit
Services Pty Ltd
Financial overview
August 2003
June 2003
August 2002
Downgrade in profit forecast
range $8.0 - $9.0 million
Announced results for year end
30 June 2002.
2003 full year financial
results announced
Total revenue of $119.9
[118.4] million
Full year after-tax profit $8.2
[18.7] million
April 2003
Downgrade in profit forecast
range $12.0 - $14.0 million
Earnings per share 8.6
February 2003
[19.6] cents
Final fully franked dividend of 1.0
[8.0] cent declared
Net assets increased to $82.2
[80.9] million
Total face value of debts
purchased during year $248.5
[$636.1] million for $28.5
[$60] million
Announced a half year after-tax
profit of $2.5 [6.9] million.
Revenue of $60.8 [52.7] million
represented an increase of 15%
on corresponding 2002 half.
Interim dividend declared of 4.5
[4.5] cents.
Decrease in net profit attributed
to $5.5 million in redundancy
and litigation costs.
Revenue of $118.4 [60.4] million
near doubles previous year
After-tax profit doubled to $18.7
[9.3] million.
Final fully franked dividend
declared of 8.0 [3.5]
cents declared
page .2
page .3
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Financial Information Summary Table
2003
2002
2001
2000
Revenue
119,854
118,419
60,439
20,547
EBITDA
Depreciation and amortisation
EBIT
Interest
Profit before tax
Income tax expense
Net profit
Net (profit) loss attributable to
outside equity interest
Net profit attributable to the
members of the company
33,065
19,441
13,624
2,323
11,301
(3,778)
45,505
17,169
28,336
1,054
27,282
(8,694)
18,687
3,900
14,787
727
14,060
(4,736)
5,191
798
4,393
330
4,063
(1,566)
7,523
18,588
9,324
2,497
674
67
(14)
15
8,197
18,655
9,310
2,512
Note: Figures in square brackets [ ] represent the
corresponding prior half year or full year figures
where appropriate.
Eps (basic cents per share)
8.6
19.6
10.6
-
Net assets
82,152
80,866
71,603
4,711
page .2
page .3
Chairman’s Letter to Shareholders
The 2003 financial year was a challenging one that nevertheless
repositioned Collection House to achieve better results following
a year-long consolidation period. As a result, greater revenue and
profitability for each of its core business segments will be returned in
the new financial year. Throughout the year, despite reported results,
we have maintained our position as one of the leading players in
the Australasian receivables management industry. In terms of our
market capitalisation to revenue ratio, this company is one of the
best in its sector.
However, it would be remiss of me
not to express my disappointment as
well as to acknowledge shareholder
disappointment in the reduction
of the company’s 2003 full year
profitability, and indeed, in our
overall share price performance.
What would be even more remiss,
given these results, is for the Board
not to have reacted quickly to
address performance issues. I assure
you, we have.
Let me state quite unequivocally
that this disappointment, given
changes made, does not now extend
to our company’s current ability to
appropriately manage its business in
a growth sector. Allow me to set out
some of the key issues which have
led to the share price fall.
Collection House’s performance has
been, in part, a victim of its own
making. Ever since the majority of
the public receivables management
companies listed on the Australian
Stock Exchange just under four years
ago - Collection House in October
2000 - the industry redefined itself
dramatically with high levels of
business acquisition resulting in a
rationalisation of the industry at the
top end. The emergence of several
key players in the market place took
the industry to a new level.
This rationalisation not only
demanded a consolidatory period
for each of these companies, but it
also demanded an infrastructure that
would be able to respond to greater
demand for high level technology,
policy and practice in order to meet
all stakeholder expectations and
which would withstand greater
public scrutiny in a not-so glamorous
industry. We believe we have met
these demands well but that the
consolidation process came at a cost.
Throughout this last year, Collection
House also had to combat negative
market sentiment towards the
industry’s move from the more
traditional commission-based
collection services to the newer
account asset management
(purchased debt) segment1. In fact,
the account asset management
segment has continued to dominate
the reasons for analyst uncertainty in
relation to our stock and not without
some merit. Most agencies keen to
be a part of the segment created a
false competition and, accordingly,
those bidding too aggressively
for a piece of the purchased debt
market have priced some ledgers
unrealistically and escalated the
market’s precautionary concerns.
Collection House, since it began
purchasing debt ledgers in 2000,
has maintained a solid approach to
valuing debt parcels and has been
unmoved by the more competitive
environment which saw debt being
bought at unsustainable profit
margins. The huge advantage that
we have enjoyed is that we have
worked most of the ledgers we
have acquired prior to purchase.
We believe, given the number of
agencies which have now entered
the purchased debt market and
which do not have the capacity
to provide returns in a real time,
that a more rational purchasing
environment will result.
1Changes to segment names, Collection Services to Contingent Collection Services and Purchased Debt to Account Asset Management, have been made to better reflect each
of these segments’ operations. For a more detailed explanation, refer page 6.
page .4
page .5
1.
1.
Dennis G. Punches - Chairman of Collection House Limited
Collection House is now in a stronger
position that it has ever been. The
company has solid foundations in its
managed account assets, an excellent
and extensive contingent client
base, a comprehensive commercial
reporting facility, good support
subsidiaries and an experienced and
enthusiastic staff on which to build.
We are focused on what needs to
be achieved.
Pleasingly, 2004 year-to-date
figures indicate a renewed growth
momentum. The Board is confident
in the overall strategy, the general
management of the company
and Collection House’s long-term
viability. The final dividend payment
of 1.0 cent per share bringing the
total for the year to 5.5 cents, in line
with dividend policy, further attests
to this.
I assure you that we are determined
to deliver timely and excellent
operating results in 2004.
Dennis G. Punches
Chairman
Strategies implemented in the
latter part of the second half will
provide the reassurance and, more
importantly, secure evidence that
Collection House is set to realise
its true potential in 2004. Barring
unforeseen events, I am confident
of this.
In the year ahead, Collection House
will seek divisional contribution
to revenue and profit through a
definitive strategy endorsed at Board
level and welcomed by its staff. The
strategy is:
The full benefit of cost
containment exercises
implemented in the 2003
financial year will be felt in the
2004 year.
The solidifying of our
management team and the
welcome return of John Pearce
as Chief Executive Officer has
rejuvenated our 750 strong work
force to provide excellent results
throughout 2004.
Winning several major contracts
within the contingent collection
services segment will
increase revenue.
The investment in the account
asset management segment will
continue to realise sound returns
for the company over the next
few years.
Our investment in the credit
reporting industry is now ready
to contribute sound bottom
line returns.
In fact we continue to be adamant
that the account asset management
segment of our business need not be
viewed negatively. We are moving
to address the market’s uncertainty
regarding this and a more detailed
explanation of this segment is
contained within the operational
review. Account asset management
is a growth segment, one that
does not risk loss of the client nor
reductions in commission rates, and
which provides excellent revenue
potential for our company when
managed correctly.
Without wanting to shirk
responsibility for our company’s
contribution to the share price fall,
there is no doubt that this decline
is also due to a bear stockmarket
pushed to extremes by war and
a rising property market. Even
the delivery of growth figures for
Collection House at the end of
the 2002 financial year could not
challenge the momentum.
Continued downgrades in
profitability for the majority of
Australasian public companies across
the receivables management sector
have also been responsible for
endorsing further negative market
consensus. Collection House’s less
than expected performance this year
did little to avert this downward
trend nor provide any further
reassurance to its investors.
Additional downgrade
announcements by Collection
House in April and June of this year
did not give any reason to inspire
market confidence in the company
and warranted share price decline.
Revenue from several new clients in
the second half, whilst building, was
not enough to compensate for the
loss of consumer contingent business
over the year.
page .4
page .5
1.
Managing Director & Chief Executive Officer’s Report
New contracts and continued efficiencies in infrastructure and
management continue our progression as one of the two dominant
providers in the Australasian receivables management industry.
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Sales to External Customers - Primary Business Segments ($’000)
Contingent Collection Services
Account Asset Management
Credit Reporting
2003
2002
2001
50,895
47,479
20,962
53,346
46,756
17,305
42,375
10,254
3,627
Sales to External Customers – Geographical Segments ($’000)
2003
2002
2001
112,470
6,866
114,071
3,336
54,838
1,418
In an endeavour to provide
shareholders with a better
understanding of the range of
activities that provide our company
its revenue, our reporting this year
provides more detail of divisional
performance. Inherent in this
approach is our desire to provide a
greater transparency of operational
contribution. To further clarify our
operations we have renamed a
number of our business units to
better reflect operations undertaken.
New segment titles are included
alongside previously used ones for
ease of comparison.
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Australia
New Zealand
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New Zealand
Whilst 2003 was earmarked as
a period of consolidation at the
company’s October 2002 annual
general meeting, the costs of
consolidation and a purchased
debt litigation campaign impacted
on first half results as did some
further redundancies in the second
half. Further, expense reducing
initiatives undertaken in the first
half have not been fully reflected
in our results, and overall, bedding
down systems, infrastructure and
policy has had a short-term impact
on revenue generation this year.
Attention will now be focused on
increasing revenue whilst containing
an appropriate cost structure for that
revenue. 2004 will not suffer the
same fate.
With the departure of our Chief
Executive Officer in April 2003,
I have returned to the operational
role I held some 10 months prior.
I have a passion for the industry and
the company we have developed. I
understand well our revenue streams
and their inherent potential and will
work with our highly respected staff
to achieve improved results.
The Board is confident about our
company’s trading position and
outlook over the next two years.
I intend to deliver a strong and clear
message that our company has a
sound platform on which it can build
further revenue growth through its
diversified range of income streams
and new initiatives.
page .6
page .7
1.
2.
3.
5.
John Pearce - Managing Director and Chief Executive Officer of Collection House Limited returned to an operational role in April 2003.
The installation of an imaging document storage system has streamlined the insurance division’s ability to progress claims with
increased productivity.
Telecommunication clients benefit from Collection House utilising efficient delivery communication media like SMS messaging,
predictive dialer technology and plain old-fashioned customer service!
4. Major energy providers use Collection House’s services to help track defaulting customers.
5.
The workers’ compensation division benefits from automated processes as well as skilled personnel, facilitating compliance in a highly
regulated industry.
2.
3.
4.
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Consumer
Commercial
Insurance
�� $18m
$8m
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$6m
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$5m Workers’ Compensation
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$4m
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$4m
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$2m
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Collection House Legal Services
Countrywide & Midstate
Receivables Management
Downie & Associates
Insurance Claims Solutions
National Revenue Corporation
International
International: Revenue in
this division is generated
from those accounts that
require specialist international
collections either on behalf of
international clients who are
signed through established
partnership programs or for
domestic clients wishing to
collect customer accounts
where their customer has
relocated overseas. Note that
Australian and New Zealand
debts are considered domestic
accounts if submitted
by a domestic client and
would not be handled by the
international division.
Contingent Collection
Services
[Collection Services]
This segment covers a variety of
industry sectors still keen to do
business “traditionally”, that is,
where commission is paid by a client
to Collection House contingent on
Collection House collecting money on
a debt owing to that client. Divisional
contributions for this traditional
segment of our business will remain
strong and will continue to provide
significant levels of revenue for the
company in the future.
Indicative client bases and/or services
are provided for each of the divisions
below and their contributions to
revenue outlined in the graph titled
Divisional Contribution to Contingent
Collection Services’ Revenue.
Consumer: This division
includes banks and building
societies, finance companies
and other institutions that
provide credit card services or
other credit regulated debt, and
telecommunication carriers.
Commercial: The commercial
division includes (but is not limited
to) retail and wholesale suppliers,
city councils, power and water
suppliers; and schools. Due to
the localised collection nature
of commercial debt, commercial
operations are located in all
mainland states and territories of
Australia and in New Zealand.
Insurance: A specialist division
predominantly collecting
outstanding insurance companies’
and self-insurers’ motor vehicle
claims as well as property and
public liability insurance claims.
Workers’ Compensation:
Recoveries of outstanding
employer workers’ compensation
premiums, referred by insurers,
are pursued in this workflow
intensive division.
Receivables Management: This
division manages outsourced
receivables’ ledgers, more
commonly operating at 30 days
or less overdue, where collection
activity is generally conducted on
a fee for service basis.
page .6
page .7
Continued development of cost and
yield effective collection strategies
remain a goal for the ensuing
financial year.
National Revenue Corporation Pty
Ltd, a subsidiary primarily focused in
the commercial market, continued to
perform soundly. Significant revenue
increases and subsequent profit
performance are expected in the
new financial year by diversifying its
revenue base.
The subsidiary, Insurance Claims
Solutions Pty Ltd, an insurance
claims management system provider,
recently signed three major clients
and is making inroads into its target
market. Additional web-enabled
automated services planned for the
new year will provide a wider range
of services for clients including risk
management, policy administration
and purchasing.
Subsidiary operations providing
ancillary services to core business
operations include the law firm,
Collection House Legal Services
Pty Ltd, and insolvency specialists,
Downie & Associates. Both have
performed satisfactorily with
revenues generated from Collection
House and, in the case of Downie &
Associates, also from clients external
to Collection House.
It is important to understand that no
one client in any of these divisions
represents more than 2.5 percent of
the company’s total revenue.
The loss of one client from the
consumer division which ceased
outsourcing work and pursued
a purchased debt solution to its
collection strategy, contributed to the
decrease in this division’s revenue. A
decision by Collection House to not
continue collection activity for two
other clients requiring guarantees
also impacted on revenue. Signing
three new major insurance and
finance clients in the latter half of the
year, had little impact on this year’s
results however it is expected that
the full revenue potential of these
clients will be reflected in the new
financial year.
During the year, we:
finetuned data modelling
techniques to assist in the
analysis and management of
accounts as well as continued
“washing” data to confirm
accuracy of demographic
information. Both have increased
collection productivity;
better analysed data based on
debt characteristics enabling
a more sophisticated scoring
of accounts in order to extract
premium returns for clients;
reduced costs by making
significant changes to
operations including changes
to organisational structure,
particularly in the
consumer division;
enhanced predictive
dialer technology and
collection practices;
provided greater levels of
automation for the management
of new accounts and accounts
under arrangement in addition to
legal processes; and
introduced scripting which
has contributed to further
improving productivity and
compliance performance.
page .8
page .9
1.
collection effort.
1. Working for different local governments, Collection House has developed a range of products to assist their
2. Clients like Valvoline (Aust) Pty Ltd utilise our commercial services. As their oil is to this engine, so is Collection
House to numerous credit managers .. helping cash flows run a little more smoothly.
3. Credit card and other regulated credit debt are managed in both the contingent collection services and
account asset management segments.
2.
3.
Account Asset Management
[Purchased Debt]
This year we have changed the way
we view the purchased debt segment.
Succinctly we consider it our account
asset management segment which
reflects it being more than a debt
purchasing program but one that
when managed appropriately will
return excellent results.
The account asset management
segment is of paramount importance
to our business with revenue of
$47.5 million representing 40 percent
of total operating revenue. Lion
Finance Pty Ltd, the account asset
management subsidiary, consolidated
its position this year becoming the
primary profit producer within the
Collection House group of companies.
Further acquisitions of debt ledgers
with a face value of $248.5 million
for $28.5 million occurred during the
year and as at 30 June 2003, accounts
remaining under management stood
at a face value of $970.0 million.
Contrary to some market opinion,
our Board highly values the account
asset management segment due to
the benefits it provides Collection
House, clients and customers alike
(refer table Benefits of the Account
Asset Management Segment to
Major Stakeholders).
Benefits of the Account Asset Management Segment to Major Stakeholders
Collection House
Client
(vendor or owner of the debt)
Customer
(the individual or business who
owes the money)
Cannot lose client (as opposed to contingent collection services)
Minimal client reporting or accounting programs required
Decreased expenses (eg. trust accounts, auditing, sales)
Self-managed with limited client imposed restrictions relating to
discounting or litigation programs
Immediate bottom line profit
No management and associated infrastructure required to manage
collection agency
Discounting or manageable arrangements may be offered by Collection
House due to Collection House’s lower cost of investment compared to
the debt outstanding
Enables consumers to rehabilitate their financial and credit position
Ongoing interest is ceased in most cases once debt is purchased.
Account Asset Management Performance by Price Banding ($AUD)
Price Band
(¢ in the $)
Average
Months since
Purchase
# Portfolios
Face Value
of Debts
Purchased $M
Total
Paid
$M
Total
Collected
$M
Amount Under
Management as at
30/06/2003 $M
0 – 05
06 – 10
11 – 15
16 – 20
21 – 25
25+
Total
29
21
30
25
20
12
53
51
23
59
10
5
644
405
84
100
88
9
201
1330
11
32
9
20
19
3
94
30
32
12
16
12
2
104
Note: Varied profiles of debt that range in age, size and style may be represented in each band.
505
287
57
59
57
5
970
page .8
page .9
There have been new entrants into
both the selling and purchasing sides
of the market and it is our observation
that some overpricing may have
occurred. As the debt purchasing
practices continue to evolve within
Australia and New Zealand, we
believe that there will be a more
rational approach to pricing.
We believe Collection House has
garnered a level of respect in this
market by being conservative in our
buying practices and collection activity
as well as adopting appropriate
amortisation policies that have been
consistent since we commenced
buying debt in April 2000.
Credit Reporting
A small profit was recorded this
year, the first since 74% of the
shareholding in Australian Business
Research Pty Ltd (ABR) was acquired
in May 2001. The March 2003
acquisition of the remaining 26%
of the shareholding has been the
impetus behind an in-depth analysis
of internal processes and financial
performance. Outcomes from this
review are expected to contribute
significantly to ABR achieving a
better trading position in 2004 than
evidenced this year. This is further
strengthened by the ABR Board
appointments of Andrew Woods,
former Chief Operating Officer of
Data Advantage and Managing
Director of Credit Advantage, and
Colin Day, who has assumed the role
of Acting Managing Director.
Over the last two years, ABR has
invested heavily in the development
of new products such as eCAPS (the
electronic Commercial Application
Processing System), data cleansing,
commercial risk monitoring and
access to property valuation and sales
databases. As a result, transaction
volumes have continued to grow
at a rate in excess of 20 percent
per annum. Having completed this
significant phase of development,
ABR will focus on marketing these
products to existing customers while
increasing market share in markets
previously not targeted.
By October, ABR will complete its
development of an inhouse litigation
database reducing dependence
on external sources for similar
information enhancing client access
to both Australian and New Zealand
court judgement and insolvency data.
The appropriate management
of this segment from a financial,
regulatory and social perspective
is of enormous importance to
Collection House. However,
pricing purchased debt correctly
remains key. Whilst pricing
information is of extreme
commercial sensitivity in a
competitive market place, we
have endeavoured to better
inform our shareholders and
other interested parties by
providing aggregated purchased
debt information in the table,
Account Asset Management
Performance by Price Banding, as
an insight into indicative rates of
return for all purchases as at 30
June 2003.
Throughout the year, a
conservative and realistic
approach to the assessment
of purchased debt tenders has
been maintained by Collection
House and historical performance
to date has confirmed our
original modelling. We also
have a considerable competitive
advantage in having previously
worked in excess of 95 percent of
the ledgers purchased.
page .10
page .11
1. We are conscious of the need for privacy in all our practices, right down to the
simple art of putting sensitive customer information into security bins for secure
destruction.
2.
Employing skilled staff and call centre technology provides a solid platform to
progress Collection House’s future.
3. Our dedicated management team consists of a pool of some 80 talented and
experienced staff from portfolio manager level through to Chief Executive Officer.
4.
Employing sophisticated technology to ensure a quality and secure mailing
process is imperative for Collection House’s operation and compliance programs.
4.
3.
Rapid Ratings Pty Ltd has spent
the last year developing business
partners to assist with its marketing
and sales approach in New Zealand,
Australia and overseas. These efforts
have led to new business in a number
of areas including risk assurance,
corporate health assessments and
counterparty trading risk.
Rapid Ratings is now recognised as
a major rating agency assessing the
non-bank finance companies in the
New Zealand market. In September
2003, Rapid Ratings launched two
major reports that rate and assess
the Top 50 listed companies in New
Zealand. Similar products will be
introduced in the Australian market
in the next six months.
It is anticipated that there will be a
greater demand for Rapid Ratings’
services and products due to its
independence for judging credit
and investment quality of companies
as well as its highly competitive
pricing structure.
2.
1.
It is our intention to promote and
expand ABR’s current product set of
information services. ABR’s significant
public record database used in the
consumer lending arena, such as land
title and property value data, motor
vehicle securities and bankruptcy
listings will be expanded to meet
the needs of the consumer lending
market. We will continue to monitor
further opportunities for pursuing
consumer credit bureau activities in
the Australasian market.
National Tenancy Database Pty Ltd,
despite seemingly adverse market
influences including record highs
registered in rental property vacancy
rates across all states, improved
revenue performance figures
including a 14 percent increase in
the number of enquiries being made
by agents compared to the same
period last year. The second half of
the financial year saw the tenancy
database perform to expectations,
with a ten percent increase in revenue
$.7 [.6] million for the full year.
Staffing
A redundancy programme carried
out in the financial year has resulted
in employee numbers being reduced
by approximately 200 people to a
current staff of 753.
Building a vibrant culture is of
paramount importance to Collection
House’s progress this next year.
Continuing to employ powerful
technology solutions to provide an
enhanced working environment for
our staff will increase revenue and
profitability through productivity
improvement. In addition, a year-
long and carefully managed program
designed to embrace employee
suggestions, provide incentives and to
involve staff in the company’s delivery
of profit will be rolled out in the
second quarter of this year. Increasing
employee shareholder ownership
through the employee share scheme
will be returned this financial year so
that staff may reap the benefits of their
own success in a very tangible manner.
It is important that stakeholders
recognise that we have developed
excellent mid to upper management
resources. Collection House has a
depth of management that draws
upon more than 80 staff who
are representative of a talented
pool of experienced and
enthusiastic personnel.
The importance of training was
afforded a high priority during the
year with compliance and training
personnel working closely to ensure
the development and delivery of a
range of on-line modules designed
to improve employee skill sets
and productivity.
page .10
page .11
Also under consideration
is the alignment of our in-
house training programs with
diploma equivalent education.
Such nationally recognised
qualifications will value-add
to the recruitment and career
development strategies of
the company. On-line testing
assisted greatly in monitoring
the effectiveness of training
as well as quickly identifying
further training needs. A focus
on management training will
also be a theme of 2004.
Compliance
Collection House’s compliance
objective is to continually enhance
our culture of compliance. We aim
to ensure that we comply not only
with the law, but also maintain
best practice as viewed by the
industry itself and by our major
clients, regulators and other key
stakeholders, and to provide our
company and our people with a
better understanding of a range
of industry and company-specific
compliance issues.
Analysis of all compliance
information for potential systemic
issues remains a key focus of the
compliance function. This progressive
attitude has seen a healthy reduction
in complaints since the introduction
of our compliance regime, despite
increased collection activity for
the company.
Integrating a compliance
awareness campaign into regular
corporate communications as well
as reinforcing the compliance
message through a variety of media
including compliance reminders
greeting staff as they log into the
collections’ database, training and
call monitoring programs, and
the provision of feedback from
complaints investigations was
critical to the program’s success.
This commitment together with an
on-line assessment regime and clear
policy and procedure systems, saw
Collection House fulfil client audit
expectations.
Collection House also received an
endorsement for “demonstrating a
strong culture of compliance” from
the Federal Privacy Commissioner
in its formal audit report detailing
findings in relation to a Credit
Information Audit of the company,
conducted during July, and as part
of its general industry survey to
assess the proper introduction of the
National Privacy Principles.
Establishing a Stakeholder
Contact Program in June 2003
has also provided a well-received
communication forum between
Collection House representatives
and its key clients, regulators, and
consumer advocate and counseling
organisations. It represents a
significant step in seeking greater
synergy between all stakeholders.
Whilst the Professional Practices
Management System, an industry-
specific ISO 9000 equivalent, has not
yet been certified, development of
the program has provided Collection
House with a superior platform for
ensuring that our management
systems are of world best practice
standard for our industry. Collection
House is ready to complete the
process once final certification
requirements have been approved by
industry bodies.
page .12
page .13
1. Credit card debt has increased since 2001 some 50% to current levels of $24.2 billion. Credit limits
now stand at $64.9 billion compared with 2001 levels of $47.6 billion. Source: RBA
3.
2. Australian Bureau of Statistics data confirm what we already know, debt levels are increasing with
consumer spending outstripping household income.
3.
Lower interest rates have meant greater investment in the property market. Any increase to housing
loan interest rates will contribute to higher levels of household debt.
2.
1.
The implementation of new
telecommunication carrier
agreements has delivered cost
savings to Collection House this year,
and further savings are anticipated
in the 2003/04 year though a similar
review of costs and methods of data
carriage.
Hosting and managing the majority
of websites internally, reducing
unauthorised internet traffic,
reducing mailing costs and utilising
imaging technology are further
examples of technology creating
greater efficiencies and productivity
for the consolidated company.
Currently under a pilot program is
the application of IP telephony in
order to enable Collection House
to have a single network, remove
reliance on PABX systems, scale
inexpensively, and deliver calls
without incurring voice call costs.
Outlook
The benefits of cost reduction will
be fully realised in the new financial
year. Modest growth is expected in
the contingent collection services
segment whilst the account asset
management segment will continue
its growth trend. Margin improvement
for both segments will continue with
pleasing results already evidenced.
The improvement of margins is
progressing within the credit reporting
segment and its profit and revenue
performance will be advanced in the
new financial year.
If I can compare Collection House
with the company it was at the
peak of its share value, I know that
today we are a better company than
we have ever been. We have good
people, we have a clear strategy, and
we have the competence to produce
a consistent delivery of results.
Collection House will reward its
employees for their dedicated focus
on improved profitability and in turn,
our shareholders will be rewarded.
John Pearce
Managing Director &
Chief Executive Officer
Technology
Enhancements to The Controller, our
proprietary receivables management
software, have been ongoing.
Significant workflow changes were
introduced to The Controller and
several administrative functions have
been automated. Scripting and
dialer technology enhancements
have also proved valuable in terms
of improving productivity and
compliance ratios. Client utilisation
of online facilities has grown
significantly with 952 client users
allocated access since February 2002.
The increased visibility and ready
access to performance data has been
enthusiastically received.
The standardisation of collection
systems is complete, except for one
system associated with businesses
acquired in July 2003. During the year
the Workers’ Compensation1, Canberra
(previously Wards Mercantile) and the
Total Credit Management Services
collections’ databases were converted
to The Controller.
The rationalisation of network,
server and desktop environments
to improve redundancy and deliver
both short and long term cost
efficiencies has been a focus for the
company. Extensive work has been
undertaken to improve Collection
House’s capacity to recover from
business interruptions, on a policy
and procedural level, as well as at
the network architecture level. This
year also saw infrastructure upgraded
at Newcastle, Sydney, Melbourne,
Perth, Canberra and Adelaide.
page .12
page .13
1The workers’ compensation collection system was converted to our proprietary system post 30 June 2003.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The Board of Collection House Limited
Changes to the Board
At the October 2002 Annual General
Meeting, the constitution of the
Board was amended to allow for an
increase in the number of directors
from a maximum of eight to ten.
In November, Barrie Adams was
appointed to the Board and following
Don Nissen’s resignation from both
the Board and as Chairman of its Audit
and Risk Managment Committee
in January 2003, Barrie was also
appointed as Chairman of the Audit
and Risk Management Committee.
John Pearce returned to the position
of Chief Executive Officer and
Managing Director replacing outgoing
Chief Executive Officer, Russell
Templeton in April 2003. At the same
time, John relinquished the December
2002 board posting as Deputy
Chairman and Alternate Chairman.
In June 2003, the Board increased
its membership with non-executive
appointments of Barry Connelly and
Bill Hiller. Existing non-executive
director, Barrie Adams, was charged
with the role of lead independent
director. A Nomination Committee
was also established in June.
Committees
Audit & Risk Management:
Barrie Adams (Chairman),
Tony Aveling, Bill Hiller
Nomination:
Dennis Punches (Chairman),
Barrie Adams, Bill Hiller
Remuneration:
Bill Kagel (Chairman),
Dennis Punches, Barrie Adams
Lead Independent Director:
Barrie Adams
page .14
1. Dennis Punches BSc
Chairman
Appointed to the Board in July
1998, and in 2000 to the position of
Chairman, Dennis is internationally
recognised for his substantial
involvement in the receivables
management industry over the last
five decades. He is also the Chairman
of the Board’s Nomination Committee
and a member of the Remuneration
Committee. He is a current director of
Intrum Justitia, AB and Call Solutions,
Inc; Co-Chairman of the International
Collectors’ Group and a Trustee for
Wisconsin’s Carroll College. He has
held directorships with Attention LLC,
Inc and Analysis and Technology, Inc
and was co-founder and Chairman
of Payco American Corporation, a
USA debt collection company which
was sold to the Outsourcing Solutions
Inc conglomerate in 1996. He is a
resident of Florida, USA. Age 67 years.
2. John Pearce FAIM, FAICM
Managing Director & Chief
Executive Officer
A founding member of Collection
House and appointed to the Board
in April 1993. John returned in April
2003 to his former executive director
position of Managing Director
and Chief Executive Officer which
he had held from mid 1998 until
December 2002. He is a director of
all subsidiaries of Collection House
Limited, Collection House Foundation
and The Brisbane Lions Foundation,
the latter of which he is Chairman.
Prior to Collection House, John’s
involvement with the receivables
management industry began with
the George Laurens organisation,
a relationship that lasted nearly 20
years as both an employee and an
independent owner of its Queensland
operation. He is the number 1
ticketholder for the Brisbane Lions
Australian Football Club and is
a member of the International
Fellowship of Certified Collectors.
He resides in Queensland, Australia.
Age 58 years.
3. Barrie Adams FCPA, PSM
Lead Independent Director
In November 2002, Barrie was
appointed to the Board of Collection
House in a non-executive capacity
and in January 2003 as Chairman
of its Audit and Risk Management
Committee. In June 2003, he was
made lead independent director
of the Collection House Board and
became a member of both the
Nomination and the Remuneration
Committees. He holds various
board positions, several of which as
Chairman including CITEC Business
Enterprise Board, NuCashew Limited,
Pro Super Holdings Limited and
Collection House Foundation.
He is also a director of Corporate
Influences Pty Ltd, Ingeus Limited
and NuPlant Limited. He is Chairman
of the Professional Standards
Committee for CPA Australia.
Barrie is a resident of Queensland,
Australia. Age 58 years.
page .15
4. Tony Aveling FAIM, FAIBF,
FAICD
Independent Director
Tony has been a member of the
Audit and Risk Management
Committee since joining the Board
as a non-executive director in May
2000. He has substantial experience,
domestically and internationally, in
the banking and financial services
industry. Past positions held include
Chief Executive of the Australian
Bankers’ Association; Chief Executive
Business and Private Banking,
Westpac Banking Corporation; Chief
Executive Officer, The Mortgage
Company Ltd and Managing Director
and Chief Executive Officer of
Australian Guarantee Corporation
Ltd. He is Honorary Governor
for the Science Foundation for
Physics, University of Sydney and
past Chairman of the Australian
Finance Conference. He resides in
Queensland, Australia. Age 60 years.
5. Barry Connelly BJ
Independent Director
Appointed to the Board of Collection
House in June 2003 and as Chairman
of subsidiary, Australian Business
Research Pty Ltd, in September 2003
for Barry’s extensive knowledge of
and experience in the international
consumer credit reporting industry.
He is a charter member of the board
of First Advantage; a director of The
Credit Network and serves on the
advisory board of idAnalytics. As a
former President of the international
Consumer Data Industry Association
and a former member of the Texas
House of Representatives, he has
been instrumental in progressing
legislative changes for the US
credit reporting and debt collection
industry. He is a past board member
of the US credit industry’s Merchant’s
Research Council and Charter Bank-
Willowbrook, a Texas commercial
bank. He is a resident of Texas and
Maine, USA. Age 63 years.
6. Tony Coutts
Executive Director
Initially employed as General Manager
of Collection House in 1995, Tony
was appointed as an executive
director in September 1998. He
currently leads the national sales
staff as Director of Sales and is
Queensland State President of the
Australian Collectors’ Association.
Tony has gained extensive financial
industry and sales experience from
various positions held across two
decades with Australian Guarantee
Corporation Ltd and has been directly
involved in the debt collection
industry at senior management level
since 1993. He resides in Queensland,
Australia. Age 44 years.
7. Bo Göranson
Non-Executive Director
A non-executive director since May
2000 and a significant shareholder
since late July 2003. He is currently
a non-executive director of the
European debt collection giant,
Intrum Justitia AB which he founded
in 1971. He holds directorships with
Travel Focus Ltd (UK), Amfa Finans
AB (Sweden), Market Maker AB
(Sweden) and Redab Fulcull Ltd (UK).
He has been Chief Executive Officer
and Chairman of Intrum Justitia. He
is a resident of London, England.
Age 65 years.
8. Bill Hiller
Independent Director
The Board’s recent non-executive
appointments in June 2003 include
Bill Hiller, who enjoys a career
spanning some 40 years in the
automotive finance industry. Bill
was also appointed to both the
Nomination and the Audit and
Risk Management Committees.
He is currently General Manager
– Automotive Finance for St
George Bank Limited, a position
he retires from in November
2003. He is a former director of St
George Motor Finance Limited and
Autobytel.com.au Pty Ltd, a former
director and past Chairman of the
Australian Finance Conference and
was a founding director of Cycle &
Carriage Finance Limited. He resides
in Perth, Australia. Age 64 years
9. Bill Kagel
Independent Director
Joined the Board in February 2000 in a
non-executive capacity and appointed
as Chairman of the Remuneration
Committee in June 2003. He is the
former Executive Vice-President -
Production for Outsourcing Solutions
Inc, following its purchase of the
national Payco American Corporation,
a USA-based debt collection company
he co-founded. His debt collection
industry experience spans some 45
years. He resides in Wisconsin, USA.
Age 66 years.
10. Stephen Walker
Non-Executive Director
As a co-founder of the company,
Stephen has been a member of
the Collection House Board since
July1992. Stephen was Managing
Director until 1998 and has been a
non-executive director since. He is a
past member of the company’s Audit
and Risk Management Committee
and a former director of National
Revenue Corporation Pty Ltd. He
has owned and managed debt
collection agencies in both Australia
and New Zealand. He is a resident of
Queensland, Australia. Age 52 years.
Donald Nissen
Former Independent Director
Appointed to the Board in 2000, Don Nissen also
chaired the company’s Audit and Risk Management
Committee. He resigned his directorship in January
2003. We thank him for his contribution during a
significant growth period: pre- and post-Collection
House’s debut on the Australian Stock Exchange.
page .14
page .15
Operation Financial Literacy: Scholars & Dollars
the dream: to ensure that all young Australians leaving the secondary
education system have an understanding of the credit system and
financial management practices, so that they can make informed
decisions on their financial affairs.
Since its incorporation in December
2001, the Collection House Foundation
has achieved amazing progress.
Ongoing contributions by Collection
House Limited to the Foundation,
which will equate to $1.0 million over
a five-year period, have paved the way
for several development initiatives to
date in this year’s Operation Financial
Literacy pilot program.
However, it is the visionary principals
and dedicated teaching staff of
the15 schools participating in the
program across Queensland, New
South Wales, Victoria and Tasmania,
as well as their keen student bodies,
who have provided the real incentive
to drive the Foundation’s progress.
Conscious of the need to provide
a range of subject matter that
caters for differing school and
community environments throughout
Australia, the Foundation funded
the development of programs
empowering
schools to
create tailored
programs for
their students.
The results: 15 unique approaches
to teaching financial literacy utilising
a range of delivery platforms from
on-line simulation games, classroom
interaction to the involvement of local
financial institutions in programs.
Whilst the ultimate goal for the
Foundation is to have financial
literacy education included as part
of the national secondary school
curriculum, it is hoped that this
strategy of creating and providing
financial literacy resources at the
school level will contribute to the
growing awareness and recognition
of the importance of financial
understanding as a life skill in the
education environment.
With the first of these programs
now developed, the second phase
of Operation Financial Literacy, an
evaluative process, begins. It is
anticipated that existing programs
will be combined into a number of
generic financial literacy curricula so
that they can be offered, ready for
implementation, to as many Australian
secondary schools as possible in 2004
and in ensuing years to come.
Collection House is proud of the
success of the Foundation to date
and the real benefits it is delivering
for young Australians.
Board Members
Chairman
Barrie Adams (refer page 14 for
detailed experience)
Secretary and Financial Controller
Julie Tealby (former Financial
Controller and Company Secretary,
Collection House)
Directors
John Pearce (refer page 14 for
detailed experience)
Leigh Matthews
(Senior Coach, Brisbane Lions
Australian Football Club)
Interested parties can direct enquiries to
Promotions and Development
Collection House Foundation
GPO Box 2386, Brisbane, 4001
+61 7 3017 3160 (tel)
+61 7 3292 0491 (fax)
info@chfoundation.org.au
www.chfoundation.org.au
Collection House Foundation is a
registered charity under Australian
Taxation Office legislation.
Participating Schools
Queensland - Caboolture State High School, John Paul College, Mackay State High School, Morayfield
State High School, Tullawong State High School
Victoria - Kealba College, Lowanna College, Luther College, North Geelong Secondary College, Scoresby
Secondary College, Sebastopol College, Shelford Girls’ Grammar
New South Wales - Mercy Catholic College, Moriah College
Tasmania - The Hutchins School
page .16
page .17
1. Harnessing student enthusiasm has been greatly enhanced by identities like Brisbane Lions Australian Rules player,
Jonathan Brown, through their invaluable contribution during school visitation programs.
2.
3.
This project cover designed by a year 10 student from Scoresby Secondary College, one of the pilot program’s
participating schools, encapsulates the meaning of debt as seen through the eyes of a 15 year old.
Leigh Matthews’ involvement as both a director and earnest promoter of the Foundation’s vision has contributed to
the success of Operation Financial Literacy.
2.
3.
1.
Corporate Governance
The release of the ASX Corporate Governance Council’s
recommendations, intended to promote good corporate governance
and best practice for Australian companies, has ensured that the
issue of corporate governance remains high on the corporate agenda
for Australian business. In light of ongoing corporate collapses, this
move to address appropriate standards for the business community is
welcomed by the board members of Collection House.
The principles encourage a
comparative medium for shareholder
decisioning through the adoption of
a standardised reporting framework.
Whilst the principles afford
shareholders the opportunity to make
informed decisions, so too do they
allow investors to assess the relevance
of “compliance” for the operating
environment of the individual
organisation within the industry in
which they conduct their business.
This year’s governance statement
adopts a format that is consistent
with the ASX recommendations by
responding to each principle. The
majority of these recommendations
have been, in principle, applied
to Collection House practices
throughout the full financial year.
Formalising or enhancing policies to
support these practices is a focus for
the company in the ensuing months.
Greater policy detail is available via
the corporate website
www.collectionhouse.com.au
Laying solid foundations
for management and
oversight
Clearly defining the role of the Board
and its management is instrumental
to laying solid foundations for the
company’s success. The Board has
adopted a Board Charter outlining
the role and responsibilities of the
directors. The Charter also details
Board functions, protocols, meeting
procedures and decision making
processes. The Board’s primary role
is to guide and monitor the business
and affairs of the company to ensure
that the interests of shareholders
are protected. The Board’s key
responsibilities are to:
Determine and review
operational and strategic
direction and policy
Establish goals for management
and monitor the achievement of
those goals
Ensure regulatory compliance
Appoint, monitor and reward
senior managers
Report to shareholders and
the market
Monitor committees including
the Audit and Risk Management,
Nomination and Remuneration
committees.
The Board in turn delegates the
day-to-day management of the
consolidated entity’s operations to
the Managing Director and Chief
Executive Officer. To this end,
the Managing Director and Chief
Executive Officer of Collection House
is also a member of all subsidiary
company boards.
Whilst key executives report directly
to the Managing Director and Chief
Executive Officer, they are required to
submit monthly management reports
to the Board so that Directors are
apprised of operational issues on an
ongoing basis. A formal charter for
delegated functions to management
is currently under
Board consideration.
The Board has also adopted a
Director’s Letter of Appointment
covering the matters referred to in
Principle 1 of the ASX Corporate
Governance Guidelines ensuring
directors clearly understand their
corporate responsibilities.
The Board must meet at least six
times a year with the Company
Secretary and other senior
management as required. Part of
each meeting is allocated to consider
formal strategic planning. Meeting
attendance by individual directors
is tabled on page 25. Urgent
matters requiring discussion and/or
page .16
page .17
a resolution of the Board between
Board meetings are managed
procedurally by a circulating minute
program and conference call links.
Structuring the Board
to add value
The composition of the Board is
determined in accordance with the
company’s constitution (available for
viewing on the company website)
which states that the Board consists
of a minimum of three and a
maximum of ten directors. Currently
it is comprised of eight non-executive
and two executive directors and of
the ten members, five are classified
as independent, that is, they comply
with the ASX Corporate Governance
Guidelines’ guide to assessing the
independence of directors.
Whilst the majority of non-
executive directors are classified as
independent directors, there are
three exceptions. Due only to their
respective substantial shareholdings
in the company, Dennis Punches, Bo
Göranson and Stephen Walker are
not classed as independent directors.
The Board maintains however that
their combined industry experience
and knowledge of international
and domestic trends is invaluable
to Collection House. Similarly it
affords Collection House a level of
introduction and understanding
offered by very few within the
receivables management industry,
a standing deemed important to
current operations and at this stage
in Collection House’s corporate
development. Directors’ experience
and shareholdings as at June 30,
2003 are provided in greater detail
on pages 14 and 25 respectively.
It is confirmed that our Chairman,
Dennis Punches, is not an
independent director. His experience
and knowledge of the industry
coupled with his ability to lead has
enabled him to be and continue to
be a very effective chairman with
a scope well beyond that of other
candidates, at either a national or
international level. Further, a lead
independent director, Barrie Adams,
was appointed effective June 2003
and a statement of responsibilities
for that position was adopted. This
appointment coupled with the
predominance of non-executive
directors ensures the Board can
operate independently of executive
management and provides for special
professional expertise to the Board.
The roles of Chairman and Chief
Executive Officer are clearly
delineated. The office of
Chief Executive Officer is held by
John Pearce.
Commencing in June 2003, a
Nomination Committee was
established to determine the criteria
for Board membership and to review
the composition of the Board,
nomination of directors and the
terms and conditions of appointment
to the Board. Its membership consists
of Dennis Punches (Chairman), Barrie
Adams and Bill Hiller.
The nomination committee considers
individual directors’ performances
during their term, prior to endorsing
their re-election at an annual general
meeting. Those directors appointed
to the Board during the year and not
at an Annual General Meeting must
also seek “re-election” at the first
Annual General Meeting following
their appointment to allow for
shareholder consent.
On establishment of the Nomination
Committee, a charter was adopted
detailing the responsibilities and
composition of the Committee and
also outlining the framework for
selection of future candidates for
appointment to the Board.
Promoting ethical
and responsible
decision-making
Conduct guidelines have been
established for directors and senior
executives as they have for all
employees. The Board Charter also
outlines expected conduct of Board
members. In addition, the company’s
Corporate Governance Program
Guide for Directors is currently
under review by the Audit and Risk
Management Committee and will be
made available for viewing on the
company website when finalised.
Since listing, directors and other
officers of the company have been
subject to restrictions under the
Corporations Act 2001 and Listing
Rules of the Australian Stock
Exchange relating to dealing in
securities. In addition to this the
company has in place, a director’s
share trading policy. Essentially,
trading Collection House shares is
not permitted at any time by any
person who possesses price-sensitive
information not available to the
market. Executives need not seek the
consent of the Managing Director
and Chief Executive Officer if shares
are being bought through the general
employee share scheme program.
The Managing Director and Chief
Executive Officer has established
an Operation Financial Delivery
team consisting of a number of
key executives who are charged
with providing improved company
financial performance. Each of
these executives has signed a
confidentiality agreement and has
been notified of the “insider trading”
rules of the Corporations Act 2001.
page .18
page .19
The Audit and Risk Management
Committee has established a
Compliance Policy and a Risk
Management Policy that have been
approved by the Board. This again
further assists the directors in ensuring
they, the company employees and the
company itself actively seek to comply
with laws and regulations.
In accordance with the Corporations
Act 2001 and the company’s
constitution, directors must keep
the Board advised, on an ongoing
basis, of any interest that could
potentially conflict with those of the
company. The Board has developed
procedures to assist directors to
disclose potential conflicts of interest,
including the disclosure of any
conflict of interest at each meeting of
the Board.
Ethical behaviour is also considered
under the section titled Recognising
the legitimate interests of
stakeholders.
For the purpose of the proper
performance of their duties, and
subject to the approval of the
Chairman, directors are entitled to seek
independent professional advice at the
company’s expense. Any advice sought
shall be made available to all other
Board members. Directors are also
entitled to be paid expenses incurred in
connection with their duties.
Safe guarding integrity
in financial reporting
To safeguard the integrity of
financial and compliance reporting,
the Managing Director and
Chief Executive Officer (based
on declarations made by the
Chief Financial Officer and other
department managers) provides the
Board with a quarterly declaration
stating that the financial and other
operations reports presented to the
Board represent a fair view of the
company’s position. The statement
also sets out any compliance
exceptions and resulting action taken.
The Audit and Risk Management
Committee is currently comprised
of its Chairman, Barrie Adams
(lead independent director) and
independent directors, Tony Aveling
and Bill Hiller. Full attendance details
of past and present members of this
Committee are detailed on page [x].
The Committee meets with the
external auditor of the Company,
independently of company
management at least twice a year.
This Committee met ten times during
the reporting period with senior
executives and external consultants
and auditors as required. The
Committee reports to the Board at
least at each Board meeting. The
Committee has a formal charter
setting out its functions, composition
and responsibilities. Further, a formal
program has been established for the
Committee at each of its meetings
in order to ensure that appropriate
considerations is given to the
Committee’s overall responsibility to:
Oversee and appraise the
scope and quality of audits
conducted by the company’s
external auditors;
Monitor the relationship
with and independence of
external auditors;
Make recommendations to the
Board on the appointment,
removal and terms of
engagement of external auditors;
Review and monitor the
adequacy and effectiveness of
management’s control of risk,
compliance and internal controls
across all entities in the group of
companies; and
Ensure the company complies
with all legislation and
regulations impacting on its
daily operations, with particular
attention to the financial and
reporting needs of the company.
The company recognises the
need for its external auditors to
understand the operations of the
company, but at the same time, for
the external auditors to maintain
their independence. Whilst ongoing
quarterly assessments and a formal
annual assessment of the company’s
external auditors have indicated
that they provide professional and
competent auditing services to the
company, the rotation of audit
personnel every five years is being
considered by the Board.
Making timely and
balanced disclosure
Throughout the year, Collection
House has maintained an
environment promoting continuous
disclosure to the market, satisfying
the ASX enhanced disclosure
recommendations released in July
2002. Notification of all disclosure
documents are provided to the
ASX electronically and it is the
responsibility of the Company
Secretary to ensure all disclosed
information is factually correct. The
Collection House Board is currently
considering redrafted policy on media
releases and continuous disclosure.
Respecting the rights of
shareholders
The Board aims to ensure that
shareholders are informed of all
major developments affecting
the company’s state of affairs.
Information is communicated to
shareholders by:
An annual report which is
available to all shareholders. The
principles of the ASX Corporate
Governance Guidelines have
been adopted for the 2003
annual report, although not a
requirement until 2004;
page .18
page .19
A half yearly report which is
available to all shareholders;
Disclosures to the Australian
Stock Exchange;
The Collection House website
(www.collectionhouse.com.au)
which details corporate
information. A newly created
corporate governance section
has been established for all
shareholders to access relevant
information including the
company’s constitution, Board
and Committee charters,
remuneration policies and
corporate conduct guidelines;
The annual general meeting.
The Board encourages full
participation by shareholders at
the annual general meeting to
ensure there is a high level of
accountability and identification
with the company’s strategy and
goals. For those unable to attend
the meeting, audio tapings are
made available on the company
website. The company’s auditor
always attend the company’s
Annual General Meeting and is
available to answer shareholder
questions at that meeting; and
The Company Secretary, who
has been appointed as the
key contact for shareholder
communication and is required
to answer promptly and
factually any e-mailed, mailed or
telephoned queries
of shareholders.
page .20
Major business risks identified and
managed are:
Management of the rapidly
changing needs and
requirements of a public
company;
Compliance with the expansive
regulatory environment in
Australasia;
Competition and potential loss of
clients;
Effectiveness of information
technology and communication
networks; and
Integration of personnel
processes across the total
operation.
The performance of companies in the
receivables management sector as
well as the negative sentiment to the
account asset management segment
have also been identified as risks to
shareholder investment, but not to
the company’s operations per se.
Encouraging enhanced
performance
By forming a Nomination Committee
in June 2003, the Collection House
Board has commenced a formalised
review process for individual
directors’ appointments and their
ongoing contributions (in order to
structure the Board to add value)
as well as the performance of the
Board as a whole. The membership
and processes of subsidiary boards
are also kept under review by the
Nomination Committee. Members
of this non-executive committee are
Dennis Punches (Chairman), Barrie
Adams and Bill Hiller.
Recognising and
managing risk
The Audit and Risk Management
Committee serves a dual function.
As with the audit side of its role
so does it assess, at its meetings,
financial risk, risk to the business and
the management of those risks. The
members of the Committee, Barrie
Adams (Chairman), Tony Aveling and
Bill Hiller, all independent directors,
focus on reviewing the effectiveness
of the risk management strategies and
processes operating across the entity.
As part of this strategy, the
Managing Director and Chief
Executive Officer has been charged
with maintaining the commitment to
risk management at an operational
level throughout the organisation.
To this end, as previously stated,
risk and compliance policies have
been adopted by the Board and
a reporting system has been
implemented at senior management
level requiring monthly consideration
of risks in all areas of the company’s
operations. Board members now
receive this monthly rather than
quarterly, as was the practice in the
previous reporting period.
Formal advice to the Board, via a
quarterly report, is also delivered
by the Managing Director and
Chief Executive Officer as part
of his monitoring and reporting
responsibilities to the Board.
In addition, a Risk Manager was
appointed in March 2003 with dual
reporting lines to the Audit and
Risk Management Committee and
the Managing Director and Chief
Executive Officer. This position
is responsible for the management
of the company’s risk management
program and a compliance regime
that includes internal monitoring
and auditing, complaints
management and best practice
policy and procedure.
The unprecedented step this year
for the Managing Director and
Chief Executive Officer to not take
a salary nor any other remuneration
unless performance warrants was
announced in April 2003. Further,
in lieu of the Managing Director and
Chief Executive Officer receiving
a bonus, that is if the company
achieves or exceeds targeted profit
figures as set out in the 2004
annual budget, an amount to be
determined by the Board but not
exceeding $200,000, will be payable
to the Collection House Foundation.
Remuneration for key executives
is market and sector driven and
any bonuses are linked to the
achievement by the company of its
performance targets.
The company continues to offer
incentives to employees via its
employee share plan and
executive option plan.
Shares are offered to employees
in accordance with an allocation
schedule adopted by the Board.
Options are offered to executives
based on performance assessment
by the Managing Director and Chief
Executive Officer.
Upgrading disclosure policy in
relation to termination payments for
new executives is currently under
consideration. For existing executives
not under term contracts, up to a
maximum of three months notice has
been prescribed in contracts.
The company does not recompense
directors other than fees paid to
directors for acting in that role and
for any appointment to company
committees. The company does not
provide retirement benefits for non-
executive directors.
In addition to the Director’s Letter
of Appointment and the Board
Charter, an induction process
has been introduced for all new
Board members designed to
inform directors of fiduciary and
non-fiduciary responsibilities,
terms and conditions of the
directorship including expectations
of performance, policy relating
to the availability of independent
advice and counsel and corporate
governance (refer Promoting ethical
and responsible decision-making).
Agreed key performance indicators
are assessed accordingly.
The Company Secretary has the
responsibility of preparing Board
agendas and co-ordinating the receipt
of the monthly reports to ensure the
Board is fully informed. The Company
Secretary must also ensure that
each director receives any requested
information in a timely manner.
Remunerating fairly
and responsibly
The Remuneration Committee,
comprising non-executive directors
Bill Kagel as Chairman, Dennis
Punches and Barrie Adams, met
two times during the year. The
Committee has adopted a formal
charter setting out its composition,
function and responsibilities. The role
of the Committee is to:
Make recommendations to
the Board on director’s fees,
remuneration and policies;
Approve and monitor salary
packages for senior executives
and other senior personnel;
Monitor organisational structure
and succession planning
strategies; and
Evaluate and review current
industry standards and practices.
Recognising the legitimate
interest of stakeholders
The company recognises the
need for directors, executives
and employees to observe high
standards of behaviour and business
ethics when engaging in corporate
activity in order to strive at all times
to enhance the reputation and
performance of the consolidated
entity. The requirement to comply
with these ethical standards and
act in accordance with the law are
communicated to all employees
across a range of issues through
the consolidated entity’s Standards
and Conduct Handbook and more
expansive policy and procedure
documents. The Board has adopted
a Corporate Stewardship Policy
which includes a code of conduct
and specifies that corporate goals
and compliance should be linked
to contributing to the community,
protecting the environment,
promoting health and safety and
behaving as a good corporate citizen.
Ethical standards and best practice
policy and procedure coupled with
other programmes including the
company’s contribution to the youth
of Australia through its Collection
House Foundation, the establishment
of a client care department and a
compliance regime (including the
Stakeholder Contact Programme)
which considers customers and
advocacy groups are amongst
the initiatives designed to not
only recognise the interest of key
stakeholders but genuinely seek their
constructive feedback.
The move to provide supporting
corporate governance documentation
on the website within the first half of
the year as well as the rejuvenation
of current employee programs
are among initiatives for the new
financial year.
page .21
Directors’ Report
Collection House Limited Financial Statements for the year ended 30 June 2003
Your directors present their report together with the financial report of Collection House Limited (the company) and the
consolidated entity comprising Collection House Limited and the entities it controlled at the end of, or during, the year
ended 30 June 2003 and the auditor’s report thereon.
Directors
The following persons were directors of Collection House Limited during the financial year:
D G Punches
J M Pearce
A F Coutts
B E Adams
A R Aveling
D B Connelly
B S Göranson
W L Hiller
W W Kagel
D I Nissen
S Walker
Additional information about each of the directors is included on pages 14 and 15.
Principal activities
The principal activities of the consolidated entity during the year were the provision of receivables management services
throughout Australasia. There were no significant changes in the nature of the activities of the consolidated entity during
the year.
Dividends
Details of dividends paid or declared by the Company to members since the end of the previous financial year are as
follows:
2003
As proposed and provided for in last year’s report:
Final dividend of 8.0 cents per share paid on 4 November 2002
In respect of the current financial year:
Paid or declared during the year:
Interim dividend of 4.5 cents (2002, 4.5 cents) per share paid on 20 March 2003
Paid or declared after end of year:
Final dividend of 1.0 cents (2002, 8.0 cents) per share payable on 28 November 2003
Total dividends paid or declared since the end of the previous financial year
Disclosed in the financial report as:
Dividends Paid
Adjusted against opening retained earnings on adoption of AASB 1044
“Provision, Contingent Liabilities and Contingent Assets”
Noted as a subsequent event
$‘000
7,626
4,302
954
5,256
11,928
(7,626)
4,302
954
5,256
All the dividends paid or declared by the company since the end of the previous financial year were franked at 30%.
page .22
page .23
Review of operations
A summary of the consolidated sales and results for the year by significant industry segment is set out below:
Contingent
Account asset
collection services management
Credit
reporting
Inter-segment
eliminations /
unallocated
Consolidated
$’000
50,895
7,295
58,190
297
58,487
7,440
$’000
47,479
-
47,479
34
47,513
13,967
$’000
20,962
357
21,319
47
21,366
(655)
$’000
-
(7,652)
(7,652)
140
(7,512)
(660)
2003
Sales to external customers
Inter-segment sales
Total sales revenue
Other revenue
Total segmental revenue
Segment result
Less: unallocated expenses
Profit from ordinary activities before
Income tax expense
Less: Income tax expense
Profit from extraordinary item after
income tax expense
Less: outside equity interest
Net profit attributable to members of the Company
$’000
119,336
-
119,336
518
119,854
20,091
8,790
11,301
3,778
7,523
(674)
8,197
Revenue increased by 1.2 percent to $119.9 million confirming Collection House’s position as one of Australasia’s two
dominant receivables management companies. Growth was attributed to organic growth and revenue from additional
acquisitions of businesses and purchased debt parcels, specifically:
The consolidated entity acquired 100 percent shareholdings in two regional Victorian commercial debt collection agencies.
The acquisition of the remaining 26 percent of the issued share capital of Australian Business Research Pty Ltd.
The acquisition of debt ledgers with a face value of $248.5 million for $28.5 million during the year.
An after-tax profit of $8.2 million was recorded. Disappointing profit levels were attributed to a 22% increase in employee
expenses from $35.9 million to $43.7 million which included a significant redundancy program. At the end of the financial
year, payroll costs have been reduced reflecting more appropriate manpower levels. Staff now number 753 compared to
957 at the beginning of the financial year. Other operating expenses including a litigation campaign in late 2003, increases
in insurance premiums, increases in borrowing costs and the realisation of bad and doubtful debts were also associated
with increases in expenses. Further, anticipated expense reducing initiatives have not been fully reflected in results, most
significantly savings associated with payroll expenses and telecommunication charges.
Total assets within the group increased from $132.2 million to $157.7 million, up 19% at 30 June 2003. Cash assets
increased by $1.4 million from $3.0 million however this was more than offset by an increase in total interest bearing
debt from $22.7million, to $47.4 million. This net movement in cash position was more than offset by the acquisitions of
purchased debt of $28.5 million.
Current receivables have increased by $0.2 million to $20.4 million.
Total liabilities increased to $75.5 million, primarily as a result of borrowings to fund the company’s debt purchasing
program, as discussed earlier. This increase however does not incorporate the provision for the final 2003 dividend of 1.0
cent as this was not declared by the directors at balance date.
page .22
page .23
Directors’ Report (cont’d)
Collection House Limited Financial Statements for the year ended 30 June 2003
Having completed the consolidation period following two years of heavy acquisition activity, the Board has confirmed its
confidence in Collection House’s current and future trading position. The Board has declared a fully franked final dividend
of 1.0 cent, payable on 28 November 2003, and including the fully franked interim dividend of 4.5 cents that was paid
in March 2003, this represents a total dividend of 5.5 cents per share, consistent with the company dividend policy which
aims to pay 65% of the company NPAT as dividends.
State of affairs
Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:
1. On 1 July 2002, Collection House Limited acquired 100 percent of the issued share capital in two commercial
collection agencies, Countrywide Mercantile Credit Services Pty Ltd and Midstate Credit Management Services Pty
Ltd for cash consideration. Details of acquisitions are included in note 27 to the financial statements.
2. On 12 March 2003, the parent entity acquired the remaining 26 percent of the issued share capital of Australian
Business Research Pty Ltd.
3. The consolidated entity purchased $248.5 million face value of debt for $28.5 million.
Events subsequent to reporting date:
A final dividend has been declared of 1.0 cent for a total of $954,000. No provision has been raised in these accounts.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the
date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of
the company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state
of affairs of the consolidated entity, in future financial years.
Likely developments
The benefits of cost reduction will be fully realised in the new financial year. Modest growth is expected in the contingent
collection services division whilst the account asset management segment will continue its growth trend. Margin
improvement for both segments will continue with pleasing results already evidenced. The improvement of margins is
progressing within the credit reporting segment and its profit and revenue performance will be advanced in the new
financial year.
Whilst the Board has not yet made a decision on establishing a full-scale consumer credit bureau, detailed market
research and data analyses have indicated support for a second bureau in the Australasian marketplace. The purchase of
the remaining shareholding in Australian Business Research Pty Ltd (“ABR”) has enhanced progress in accessing ABR’s
significant public record database used in the consumer lending arena, such as land title and property value data, motor
vehicle securities and bankruptcy listings. It is our intention to promote ABR’s current product set of information services
as well as to gradually expand this range of services to meet the needs of the consumer lending market. We will continue
to monitor opportunities for full-scale credit bureau activities in the Australasian market.
At the date of this report, there have been several developments in the operations of the consolidated entity that are
likely to be finalised during 2003 and 2004. These include:
Implementation of the tax consolidation regime from 1 July 2003 for the Company and its Australian wholly-owned
controlled entities.
The adoption of international financial reporting standards from 1 July 2005, requiring significant preparation and
planning prior to implementation.
Further information about likely developments in the operations of the consolidated entity and the expected results of
those operations in future financial years has not been included in this report because disclosure of the information would
be likely to result in unreasonable prejudice to the consolidated entity.
page .24
page .25
Directors’ meetings
The number of meetings of the company’s Board and of each Board committee held during the year ended 30 June 2003,
and the numbers of meetings attended by each of director of the company during the financial year were:
Board meetings Audit & Risk Management
Committee meetings
Remuneration
Committee meetings
Number
held whilst
a member
Number
Number
Number held whilst
a member
attended
Number
Number
Number held whilst
a member
attended
Number
Number
attended
D G Punches
J M Pearce
A F Coutts
B E Adams1
A R Aveling
D B Connelly2
B S Göranson
W L Hiller3
W W Kagel
D I Nissen4
S Walker5
2
2
2
2
7
7
7
4
7
1
7
1
7
4
7
7
7
7
4
7
1
7
1
7
2
7
8
10
-
3
2
8
10
-
-
2
1 Appointed to Board and Audit and Risk Management Committee on 27 November 2002
2 Appointed to Board on 5 June 2003
3 Appointed to Board on 5 June 2003 and to Audit and Risk Management Committee on 29 June 2003
4 Resigned from Board on 9 January 2003
5 Resigned from Audit and Risk Management Committee on 27 November 2002 due to issue of independence
Directors’ interests
The relevant interest of each director and their associates in the shares or options over issued shares by the company, at
15 August 2003, is as follows:
Collection House Limited
Ordinary Shares
Options
D G Punches
J M Pearce
A F Coutts
B E Adams
A R Aveling
D B Connelly
W L Hiller
B S Göranson
W W Kagel
S Walker
300,000
14,011,665
14,146,730
3,832,000
-
250,000
20,000
5,200
4,772,427
500,000
6,750,000
page .24
page .25
Directors’ Report (cont’d)
Collection House Limited Financial Statements for the year ended 30 June 2003
Directors’ and executives’ emoluments
The remuneration committee considered and continues to consider policy in relation to the ASX Corporate Governance
Council recommendations, in particular Principle 8, “Encourage enhanced performance” and Principle 9, “Remunerate
fairly and responsibly”. The committee also considered the recommendations of independent advice in relation to
improving the employee share and executive option plans and recommended that the advice be adopted.
Executive remuneration and other terms of employment are reviewed by the committee having regard to performance
against previously defined goals and independent expert advice. As well as a base salary, remuneration packages include
superannuation, fringe benefits and performance-related bonuses. Executives are entitled to participate in the Collection
House Employee Share Plan and the Collection House Executive Option Plan.
Remuneration packages are set at levels designed to attract and retain executives capable of managing the consolidated
entity’s operations and are reviewed as appropriate and in line with market bandings. Remuneration and other terms of
employment for executive directors and employees are formalised in employment contracts.
Performance-related bonuses are available to executives, calculated on base salary and other measurable indicators.
Bonuses are not payable to directors.
Details of the nature and amount of each element of emoluments of each director of Collection House Limited and the
five executives of the Company receiving the highest emoluments are set out as follows:
page .26
page .27
Executive directors and other executives of Collection House
Base
salary
$
Options
issued 1
$
Bonus
$
Super-
annuation
$
Non-cash
benefits
$
Director
Non-executive:
D G Punches2
B E Adams
A R Aveling
B Connelly
B S Göranson
W L Hiller
W W Kagel
D I Nissen
S Walker
Executive:
J Pearce3
Managing Director &
Chief Executive Officer
A Coutts
Executive Director
72,500
25,000
50,000
3,333
40,000
4,167
40,000
25,000
40,000
3,375
2,250
3,150
Total
$
72,500
25,000
53,375
3,333
40,000
4,167
40,000
27,250
43,150
81,240
1,778
4,862
87,880
353,091
220,0004
33,128
4,597
610,816
Executive officers (excluding directors)
R Templeton5, 6
Chief Executive Officer
M Stanton6
Chief Financial Officer &
Company Secretary
M Watkins6
General Counsel
R Levison6
Manager Communications &
Marketing
R Anderson6
National Manager –
Commercial Collections
530,040
72,590
41,553
4,052
648,235
316,783
72,590
28,510
4,597
422,480
235,000
54,443
24,042
4,597
318,082
200,000
36,295
18,000
4,862
259,157
177,235
36,295
14,677
14,635
242,842
1 Other than the options for Mr Coutts, the value disclosed above is calculated at the date of grant using a Black-Scholes model. Further details of options granted
during the year are set out below.
2 Mr Punches requested that the annual salary of $80,000 be reduced to $50,000 effective 1 April, 2003.
3 Mr Pearce opted to receive no remuneration effective 8 April, 2003.
4 Mr Coutts exercised 100,000 options in November 2002 at an exercise price of $1.00 per share. It was considered impractical to estimate the value of the options
exercised as at the date of grant on 14 July 2000. Therefore, consistent with the 2001/02 calculation, the benefit to Mr Coutts on the exercise of his options is included
as the relevant value.
5 Includes termination pay of $101,385.
6 These executives were entitled to participate in the Collection House Executive Option Plan and were issued options during the year. The details of these options
are disclosed below. These options will only be of value to the Executives if the company’s share price exceeds $2.51 by 31 December 2003. The closing price of the
company’s share price on 30 June 2003 was $1.19.
page .26
page .27
Directors’ Report (cont’d)
Collection House Limited Financial Statements for the year ended 30 June 2003
Share options granted to directors and executives
Options over unissued ordinary shares of Collection House Limited granted during or since the end of the financial year to
any of the directors or the five most highly remunerated officers of the Company and consolidated entity as part of their
remuneration are:
Issued to
R Templeton
M Stanton
M Watkins
R Levison
R Anderson
Issue date
Exercise price per share
Number of shares
Expiry date
1 January2003
1 January2003
1 January2003
1 January2003
1 January2003
2.51
2.51
2.51
2.51
2.51
100,000
100,000
75,000
50,000
50,000
31 December 2003
31 December 2003
31 December 2003
31 December 2003
31 December 2003
Shares under option
Unissued shares of Collection House Limited under option at the time of this report are:
Issued to
A Coutts
A Coutts
A Coutts
Executives1
Issue date
Exercise price per share
Number of shares
Expiry date
14 July 2000
14 July 2000
14 July 2000
1 January 2003
$1.00
$1.00
$1.00
$2.51
100,000
100,000
100,000
1,125,000
1,425,000
3 November 2003
3 November 2004
3 November 2005
31 December 2003
1 Options were issued under the Collection House Executive Option Plan to eligible employees.
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
Shares issued on the exercise of options
The following ordinary shares of Collection House Limited were issued during the year ended 30 June 2003 on the
exercise of options. No further shares have been issued since the end of the year. No amounts are unpaid on any of these
shares.
Issue date of options
Issue price of shares
Number of shares issued
14 July 2000
$1.00
100,000
Indemnification and insurance of officers
During the financial year, Collection House Limited paid premiums to insure the directors and officers of the company and
its controlled entities.
The insurance policies indemnify the insured directors and officers for any payment they shall become legally liable to
make arising from any claim made against them in their capacity as directors and officers of the organisation, to the
extent allowed by law.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in
respect of the directors and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under
the terms of the contract.
page .28
page .29
Proceedings on behalf of the company
No person has applied to the Courts under section 237 of the Corporations Act 2002 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
Rounding off
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments
Commission, relating to the rounding off of amounts in the directors’ report. Amounts in the directors’ report have been
rounded off in accordance with that class order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the directors.
John Pearce
Managing Director
Brisbane 27 August 2003
page .28
page .29
Statements of Financial Performance
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Consolidated
The Company
Revenue from rendering of services
Other revenues from ordinary activities
Total revenue from ordinary activities
Employee expenses
Depreciation and amortisation expenses
Borrowing costs
Other expenses from ordinary activities
Profit from ordinary activities before
related income tax expense
Income tax (expense)/benefit relating to
ordinary activities
Profit from ordinary activities after related
income tax expense/(benefit)
Profit from extraordinary item after related
income tax expense
Net profit
Net (profit)/loss attributable to outside equity interests
23
3
3
3
4
4
Note
2003
$’000
2002
$’000
119,336
518
117,407
1,012
2003
$’000
54,334
11,593
2002
$’000
53,233
5,822
119,854
118,419
65,927
59,055
(43,720)
(19,441)
(2,494)
(42,898)
(35,918)
(17,169)
(1,054)
(36,996)
(27,253)
(4,599)
(2,484)
(28,920)
(30,451)
(4,602)
(1,029)
(16,223)
11,301
27,282
2,671
6,750
6(a)
(3,778)
(8,694)
2,244
(618)
7,523
18,588
4,915
6,132
-
7,523
674
-
-
-
18,588
4,915
6,132
67
-
-
Net profit attributable to members of the Company 21
8,197
18,655
4,915
6,132
Non-owner transaction changes in equity:
Net exchange difference relating to
self-sustaining foreign operations
Total revenues, expenses and valuation adjustments
attributable to members of the Company
recognised directly in equity
Total changes in equity from non-owner related
transactions attributable to the members
of the Company
20
43
219
43
219
-
-
-
-
24
8,240
18,874
4,915
6,132
Basic earnings per share
Diluted earnings per share
cents
8.59
8.57
cents
19.60
19.53
7
7
The above statements of financial performance are to be read in conjunction with the accompanying notes to the financial statements
page .30
page .31
Statements of Financial Position
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Current assets
Cash assets
Receivables
Current tax assets
Other
Total current assets
Non-current assets
Receivables
Purchased debt
Other financial assets
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Consolidated
The Company
2003
$’000
4,430
20,371
2,236
766
2002
$’000
3,002
20,202
1,741
554
2003
$’000
53
21,288
1,760
453
2002
$’000
1,018
17,819
1,673
170
27,803
25,499
23,554
20,680
-
70,680
99
14,877
9,215
29,573
5,009
438
201
55,200
281
14,526
8,750
26,767
982
-
50,270
-
21,717
11,197
-
12,846
1,063
438
35,764
6,248
14,728
11,048
-
13,731
582
-
129,891
106,707
97,531
82,101
157,694
132,206
121,085
102,781
9,801
1,945
487
2,123
8,425
250
768
9,526
14,356
18,969
-
45,456
15,220
510
-
22,423
9,555
393
4,173
697
-
1,773
6,643
1,751
45,262
428
487
2,100
181
-
9,176
11,457
691
22,255
2,193
384
Note
8
9(a)
10(a)
9(b)
11
12
13
14
15
6(c)
10(b)
16(a)
17(a)
18(a)
16(b)
17(b)
6(b)
18(b)
Total non-current liabilities
61,186
32,371
47,928
25,523
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total Company interest
Outside equity interests
Total equity
75,542
51,340
54,571
36,980
82,152
80,866
66,514
65,801
19(a)
20
21
23
24
65,213
256
16,853
82,322
(170)
65,113
213
12,958
78,284
2,582
65,213
-
1,301
66,514
-
65,113
-
688
65,801
-
82,152
80,866
66,514
65,801
The above statements of financial position are to be read in conjunction with the accompanying notes to the financial statements
page .30
page .31
Statement of Cash Flows
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Cash flows from operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Dividends received
Interest received
Borrowing costs paid
Income taxes paid
Consolidated
The Company
2003
$’000
2002
$’000
2003
$’000
2002
$’000
Note
126,273
(90,606)
109,611
(72,046)
69,325
(58,313)
41,850
(45,569)
35,667
-
268
(2,494)
(2,913)
37,565
-
454
(1,054)
(4,175)
11,012
11,366
183
(2,483)
(89)
(3,719)
5,000
316
(1,029)
(3,660)
Net cash provided by/(used in) operating activities 33(b)
30,528
32,790
19,989
(3,092)
Cash flows from investing activities
Proceeds on disposal of non-current assets
Proceeds on sale of investments
Payment for controlled entities (net of cash acquired)
Payments for property, plant and equipment
Payments for investments
Payments for intangible assets
Payments for purchased debt
Other cash flows from investing activities
41
-
(7,297)
(5,689)
-
(88)
(28,492)
271
11
800
-
(9,078)
(219)
(5,378)
(60,006)
40
7
-
(7,297)
(3,586)
-
(88)
6,248
82
4
987
-
(6,595)
(688)
(486)
(857)
53
Net cash used in investing activities
(41,254)
(73,830)
(4,634)
(7,582)
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Loans advanced to related parties
Repayment of loans to related parties
Dividends paid
100
27,975
(63)
-
(3,973)
(11,928)
1,573
18,594
(498)
(100)
-
(7,620)
100
26,770
(64)
(27,225)
(3,973)
(11,928)
1,573
18,468
(271)
(33,276)
2,069
(7,620)
Net cash provided by financing activities
12,111
11,949
(16,320)
(19,057)
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
Effects of exchange rate fluctuations on the balances of
cash held in foreign currencies
1,385
3,002
(29,091)
31,874
(965)
1,018
(29,731)
30,749
43
219
-
53
-
1,018
Cash at the end of the financial year
33(a)
4,430
3,002
The above statements of cash flows are to be read in conjunction with the accompanying notes to the financial statements
page .32
page .33
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 1
Statement of significant accounting policies
The significant policies which have been adopted in the preparation of this financial report are:
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Accounting Standards, Urgent Issues
Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the
Corporations Act 2002.
It has been prepared on the basis of historical costs, and except where stated, does not take into account changing
money values or fair values of non-current assets.
These accounting policies have been consistently applied by each entity in the consolidated entity and, except where
there is a change in accounting policy as set out in note(s), are consistent with those of the previous year.
(b) Principles of consolidation
Controlled entities
The financial statements of controlled entities are included in the consolidated financial statements from the date
control commences until the date control ceases.
Outside interests in the equity and results of the entities that are controlled by the Company are shown as a separate
item in the consolidated financial statements.
Transactions eliminated on consolidation
Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities
are eliminated in full on consolidation.
(c) Revenue recognition
Revenues are recognised at the fair value of the consideration received net of the amount of goods and services tax
(GST) payable to the taxation authority. Exchanges of goods or services of the same nature and value without any
cash consideration are not recognised as revenues.
Rendering of services
Revenue from rendering services is recognised to the extent that it is probable that the revenue benefits will flow to
the entity and the revenue can be reliably measured.
Specific revenues are recognised as follows:
Sale of non-current assets
The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the
buyer, usually when an unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of
disposal and the net proceeds on disposal.
Any related balance in the asset revaluation reserve is transferred to the capital profits reserve on disposal.
Dividends
Revenue from dividends and distributions from controlled entities is recognised by the parent entity when they are
declared by the controlled entities.
Revenue from dividends from other investments is recognised when received.
page .32
page .33
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 1
Statement of significant accounting policies (cont’d)
(d) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the
statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising
from investing and financing activities which are recoverable from, or payable to, the ATO are classified as
operating cash flows.
(e) Foreign currency
Transactions
Foreign currency transactions are translated to Australian currency at the rate of exchange at the date of the
transaction. Amounts receivable and payable in foreign currencies at balance date are translated at the rate of
exchange on that date.
Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as
exchange gains or losses in the statement of financial performance in the financial year in which the exchange rates
change.
Translation of controlled foreign operations
The assets and liabilities of foreign operations, including associates and joint venturers, that are self-sustaining are
translated at the rate of exchange at balance date. Equity items are translated at historical rates. The statements
of financial performance are translated at a weighted average rate for the year. Exchange differences arising on
translation are taken directly to the foreign currency translation reserve.
(f) Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation of
ancillary costs incurred in connection with arrangement of borrowings, foreign exchange losses net of any hedged
amounts on borrowings, including trade creditors and lease finance charges.
Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life
of the borrowings.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets that
take more than 12 months to get ready for their intended use or sale. In these circumstances borrowing costs are
capitalised to the cost of the asset.
(g) Taxation
The consolidated entity adopts the income statement liability method of tax effect accounting.
Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and
accounting income. The tax effect of timing differences, which arise from items being brought to account in different
periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future
income tax benefit or a provision for deferred income tax.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable
doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually
certain. The tax effects of capital losses are not recorded unless realisation is virtually certain.
page .34
page .35
Note 1
Statement of significant accounting policies (cont’d)
(h) Acquisitions of assets
All assets acquired including property, plant and equipment and intangibles other than goodwill are initially recorded
at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental
costs directly attributable to the acquisition. When equity instruments are issued as consideration, their market
price at the date of acquisition is used as fair value. Transaction costs arising on the issue of equity instruments are
recognised directly in equity subject to the extent of proceeds received, otherwise these costs are expensed.
Where settlement of any part of cash consideration is deferred, the amounts payable are recorded at their present
value, discounted at the rate applicable to the company if similar borrowings were obtained from an independent
financier under comparable terms and conditions.
The costs of assets constructed or internally generated by the consolidated entity, other than goodwill, include the
cost of materials and direct labour. Directly attributable overheads and other incidental costs are also capitalised to
the asset. Borrowing costs are capitalised to qualifying assets as set out in Note 1(g).
Expenditure, including that on internally generated assets, is only recognised as an asset when the entity controls
future economic benefits as a result of the costs incurred, it is probable that those future economic benefits
will eventuate, and the costs can be measured reliably. Costs attributable to feasibility and alternative approach
assessments are expensed as incurred.
Subsequent additional costs
Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable that future economic
benefits in excess of the originally assessed performance of the asset will flow to the consolidated entity in future
years. Costs that do not meet the criteria for capitalisation are expensed as incurred.
(i) Revisions of accounting estimates
Revisions to accounting estimates are recognised prospectively in current and future periods only.
(j) Receivables
The collectability of debts is assessed at reporting date and specific provision is made for any doubtful accounts.
Trade and other receivables are recognised and carried at original invoice amount less any provision for doubtful
debts. Bad debts are written off as incurred.
(k) Investments
Controlled entities
Investments in controlled entities are carried in the Company’s financial statements at the lower of cost and
recoverable amount.
Other entities
Investments in other listed entities are measured at fair value, being the quoted market prices at reporting date.
Investments in other unlisted entities are carried at the lower of cost and recoverable amount.
(l) Leased assets
Leases under which the Company or its controlled entities assume substantially all the risks and benefits of ownership
are classified as finance leases. Other leases are classified as operating leases.
Finance leases
Finance leases are capitalised. A lease asset and a lease liability equal to the present value of the minimum lease
payments are recorded at the inception of the lease.
Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are expensed.
Operating leases
Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where
an alternative basis is more representative of the pattern of benefits to be derived from the leased property.
page .34
page .35
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 1
Statement of significant accounting policies (cont’d)
(m) Purchased debt
Purchased debt is recorded at cost.
Purchased debt is depreciated on a basis that is representative of the pattern of benefits to be derived from the asset.
Depreciation is calculated based on total projected collections.
(n) Databases
The databases are considered an identifiable intangible asset and are recorded at cost or fair value. Fair value is
supported by a directors’ valuation.
Databases are not depreciated as they are regularly maintained and as a consequence will not depreciate, be
consumed or lose value from use. The cost of all maintenance is expensed in the period incurred.
(o) Goodwill
On acquisition of the assets of another entity, or equity in a controlled entity, the identifiable net assets acquired are
measured at fair value. The excess of the cost of acquisition plus incidental costs over the fair value of the identifiable
net assets acquired, including any liability for restructuring costs, is brought to account as goodwill.
Goodwill is amortised on a straight-line basis over periods not greater than 20 years.
(p) Recoverable amount of non-current assets
The carrying amounts of non-current assets valued on a cost basis are reviewed annually to determine whether they
are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds its
recoverable amount, the asset is written down to the lower amount. The write-down is recognised as an expense in
the reporting period in which it occurs.
In assessing recoverable amounts of non-current assets the relevant cash flows have been discounted to their
present value.
(q) Depreciation and amortisation
All assets, including intangibles, have limited useful lives and are depreciated/amortised using the straight line
method over their estimated useful lives taking into account estimated residual values with the exception of
Purchased debt which is depreciated on a basis that is representative of the pattern of benefits to be derived from
the asset refer Note 1(m).
Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from
the time an asset is completed and held ready for use.
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are
made, adjustments are reflected prospectively in current and future periods only.
The depreciation/amortisation rates used for each class of asset are as follows:
The estimated useful lives for each class of depreciable asset are:
Leasehold improvements
Plant and equipment
Computer equipment
Software
Goodwill
2003
2002
Term of Lease
4 to 8 years
3 to 4 years
4 to 10 years
max 20 years
Term of Lease
4 to 8 years
3 to 4 years
4 to 10 years
max 20 years
page .36
page .37
Note 1
Statement of significant accounting policies (cont’d)
(r) Employee benefits
Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave expected to be settled within 12 months of the
year-end represent present obligations resulting from employee’ services provided to reporting date, calculated at
undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as
at reporting date including related on-costs.
Long service leave
The provision for employee entitlements to long service leave represents the present value of the estimated future
cash outflows to be made resulting from employees’ services provided up to balance date.
The provision is calculated using estimated future increases in wage and salary rates including related on-costs
and expected settlement dates based on turnover history and is discounted using the rates attaching to national
government bonds at balance date which most closely match the terms of maturity of the related liabilities.
Employee share and option plans
Where shares or options are issued to employees, including directors, as remuneration for past services, the shares or
options issued are recorded in contributed equity at the fair value of consideration received, if any.
Transaction costs associated with issuing shares and options are recognised in equity subject to the extent of the
proceeds received, otherwise expensed. Other administrative costs are expensed.
Superannuation plans
The company and other controlled entities contribute to several superannuation plans. Contributions are expensed in
the period to which they relate.
Change in accounting policy for employee benefits
The above policy was adopted with effect from 1 July 2002 to comply with AASB 1028 Employee Benefits released in
June 2001. There was no material impact on the financial statements as a result of the change in accounting policy.
(s) Dividends
Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on
or before the end of the financial year but not distributed at balance date.
Change in accounting policy for providing for dividends
The above policy was adopted with effect from 1 July 2002 to comply with AASB 1044 Provisions, Contingent
Liabilities and Contingent Assets released in October 2001.
In previous years, in addition to providing for the amount of any dividends declared, determined or publicly
recommended by the directors on or before the end of the financial year but not distributed at balance date,
provision was made for dividends to be paid out of retained profits at the end of the financial year where the
dividend was proposed, recommended or declared between the end of the financial year and the completion of the
financial report.
An adjustment of $7,626,000 was made against the consolidated and parent entity retained profits at the beginning
of the financial year to reverse the amount that was provided at 30 June 2002 for the proposed final dividend for
that year that was recommended by the directors between the end of the financial year and the completion of the
financial report. This reduced the consolidated and parent entity current liabilities – provisions and total liabilities at
the beginning of the financial year by $7,626,000 with corresponding increases in their net assets, retained profits,
total equity and the total dividends provided for or paid during the current financial year.
The restatements of consolidated and parent entity retained profits, provisions and total dividends paid or provided
for during the year as set out below show the information that would have been disclosed had the new accounting
policy always been applied.
page .36
page .37
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 1
Statement of significant accounting policies (cont’d)
2003
$’000
Restated
Consolidated
2002
$’000
Restated
2003
$’000
Restated
The Company
2002
$’000
Restated
12,958
6,235
688
6,488
7,626
3,314
7,626
3,314
20,584
9,549
8,314
9,802
8,197
28,781
(11,928)
18,655
28,204
(7,620)
4,915
13,229
(11,928)
6,132
15,934
(7,620)
16,853
20,584
1,301
8,314
2,123
-
9,526
(7,626)
1,773
-
9,176
(7,626)
2,123
1,900
1,773
1,550
11,928
-
15,246
(7,626)
11,928
-
15,246
(7,626)
11,928
7,620
11,928
7,620
Restatement of retained profits
Previously reported retained profits at the
end of the financial year (note 21)
Change in accounting policy for
providing for dividends
Restated retained profits at the beginning
of the financial year
Net profit attributable to members
of the Company
Total available for appropriation
Dividends paid or provided (see below)
Restated retained profits at the end
of the financial year
Restatement of current liabilities – provisions
Previously reported carrying amount at the end
of the financial year (note 18)
Adjustment for change in accounting policy
Restated carrying amount at the
end of the financial year
Restatement of dividends provided or paid
Previously reported total dividends provided for
or paid during the financial year (note 22)
Adjustment for change in accounting policy
Restated total dividends provided for or
paid during the financial year
(t) Payables and borrowings
Liabilities for trade creditors and other payables are carried at cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the company.
All borrowings are recognised at the principal amount. Interest expense is accrued at the contracted rate and
included in “Other creditors and accruals”.
page .38
page .39
Note 1
Statement of significant accounting policies (cont’d)
(u) Provisions
A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is
probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of
which is uncertain.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability.
Dividends
A provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the
entire undistributed amount, regardless of the extent to which they will be paid in cash.
(v) Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net profit attributable to members of the parent entity
for the reporting period, after excluding any costs of servicing equity (other than ordinary shares and converting
preference shares classified as ordinary shares for EPS calculation purposes), by the weighted average number of
ordinary shares of the Company, adjusted for any bonus issue.
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of financing costs
associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary
shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and
dilutive potential ordinary shares adjusted for any bonus issue.
Note 2
Segment information
Individual business segments have been identified on the basis of grouping individual products or services subject to
similar risks and returns. The business segments reported are: contingent collection services, account asset management
and credit reporting.
The Company operates in two geographical areas: Australia and New Zealand.
Primary reporting - business segments
Contingent
Account asset
collection services management
Credit
reporting
Inter-segment
eliminations /
unallocated
Consolidated
2003
Sales to external customers
Inter-segment sales
Total sales revenue
Other revenue
Total segmental revenue
Segment result
$’000
50,895
7,295
58,190
297
58,487
7,440
$’000
47,479
-
47,479
34
47,513
13,967
$’000
20,962
357
21,319
47
21,366
(655)
$’000
-
(7,652)
(7,652)
140
(7,512)
(661)
Less: unallocated expenses
Profit from ordinary activities before
Income tax expense
Less: Income tax expense
Profit from extraordinary item after
income tax expense
Less: outside equity interest
Net profit attributable to members of the Company
$’000
119,336
-
119,336
518
119,854
20,091
8,790
11,301
3,778
7,523
(674)
8,197
page .39
page .38
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 2
Segment information (cont’d)
Primary reporting - business segments (cont’d)
Contingent
Account asset
collection services management
$’000
98,409
$’000
76,046
Credit
reporting
$’000
23,954
Inter-segment
eliminations /
unallocated
$’000
(59,157)
2003
Segment assets
Unallocated assets
Consolidated total assets
Segment liabilities
45,322
63,577
10,093
(59,157)
Unallocated liabilities
Consolidated total liabilities
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets
3,095
Depreciation and amortisation expense 1,441
Other non-cash expenses
870
2002
Sales to external customers
Inter-segment sales
Total sales revenue
Other revenue
Total segmental revenue
Segment result
Less: unallocated expenses
53,346
2,147
55,493
395
55,888
16,332
Profit from ordinary activities before income tax expense
Less: Income tax expense
Profit from ordinary activities after income tax expense
Less: outside equity interest
Net profit attributable to members of the Company
28,489
13,026
(4)
46,756
-
46,756
16
46,772
18,974
3,615
1,270
117
17,305
197
17,502
93
17,595
444
3,660
3,704
-
-
(2,344)
(2,344)
508
(1,836)
(957)
Segment assets
Unallocated assets
Consolidated total assets
84,758
58,198
21,795
(44,727)
Segment liabilities
47,002
30,731
8,013
(44,727)
Unallocated liabilities
Consolidated total liabilities
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets
6052
Depreciation and amortisation expense 1,172
Other non-cash expenses
665
60,006
12,786
-
2,155
614
131
7,361
2,597
(15)
Consolidated
$’000
139,252
18,442
157,694
59,835
15,707
75,542
38,859
19,441
983
117,407
-
117,407
1,012
118,419
34,793
7,511
27,282
8,694
18,588
(67)
18,655
120,024
12,182
132,206
41,019
10,321
51,340
75,574
17,169
781
page .40
page .41
Note 2
Segment information (cont’d)
Secondary reporting - geographical segments
Segment revenues from sales
to external customers
Segment assets
2003
$’000
Australia
112,470
New Zealand
6,866
119,336
(a) Accounting policies
2002
$’000
114,071
3,336
117,407
2003
$’000
131,512
7,740
139,252
2002
$’000
112,309
7,715
120,024
Acquisition of property,
plant and equipment,
intangibles and other
non-current segment assets
2003
$’000
36,156
2,703
38,859
2002
$’000
71,304
4,270
75,574
Segment results, assets and liabilities are those that are directly attributable to a segment and the relevant portion
that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment
and consist primarily of operating cash, receivables, property, plant and equipment, databases and goodwill and
other intangible assets, net of related provision. Whilst most of these assets can be directly attributable to individual
segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable
estimates of usage. Segment liabilities consist primarily of trade and other creditors, interest bearing liabilities and
employee entitlements. Segment assets and liabilities do not include income taxes.
Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest bearing loans, borrowing
and expenses and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected
to be used for more than one period.
(b) Inter-segment transfers
Segment revenues and expenses and results include transfers between segments. Such transfers are priced on an
“arms length” basis and are eliminated on consolidation.
Note 3
Revenue from ordinary activities
2003
$’000
Consolidated
2002
$’000
Rendering of services revenue from operating activities 119,336
117,407
Other revenues:
From operating activities
Interest:
Other parties
Related parties
From outside operating activities
Gross proceeds from sale of non current assets
Dividends
Other
Total other revenues
243
25
268
41
1
208
518
454
-
454
11
-
547
1,012
Total revenue from ordinary activities
119,854
118,419
2003
$’000
54,334
The Company
2002
$’000
53,233
119
64
183
7
11,366
37
11,593
65,927
316
0
316
4
5,000
502
5,822
59,055
page .41
page .40
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 4
Profit from ordinary activities before related income tax expense
2003
$’000
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
Profit from ordinary activities before income tax expense has
been arrived at after charging/(crediting) the following items:
Depreciation of:
Leasehold improvements, plant and equipment
Purchased debt
Amortisation of:
Goodwill
Other intangibles
Leased plant and equipment
Total depreciation and amortisation
Borrowing costs:
Related parties
Other parties:
- Bank loans and overdraft
- Other borrowings
-
Finance charges on capitalised leases
Net bad and doubtful debts expense including
movements in provision for doubtful debts
Search costs
Direct collection costs
Net expense from movements in provision for
employee benefits
Operating lease rental expense representing
minimum lease payments
Net (gain)/loss on disposal of property,
plant and equipment
4,655
13,025
17,680
1,535
123
103
1,761
19,441
226
2,230
13
25
2,494
1,334
12,822
13,979
2,847
12,786
15,633
958
450
128
1,536
17,169
209
797
2
46
1,054
76
10,877
14,487
3,411
200
3,611
763
123
102
988
4,599
226
2,235
13
10
2,484
1,167
420
16,821
339
691
30
2,340
1,216
3,556
512
411
123
1,046
4,602
209
790
2
28
1,029
(2)
399
7,130
440
3,472
3,032
2,626
2,478
(9)
(7)
(7)
(2)
page .42
page .43
Note 5
Auditor’s remuneration
2003
$
Consolidated
2002
$
The Company
2002
$
2003
$
Audit services:
Amounts received or due and receivable by the auditors for:
- Audit of the financial statements
- Other regulatory audit services
155,000
70,000
105,000
53,500
155,000
70,000
105,000
53,500
Other services:
Amounts received or due and receivable by the auditors for:
- Other assurance services
- Other non-assurance services
-
-
20,000
70,000
-
-
20,000
70,000
Note 6
Taxation
2003
$’000
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
(a) Income tax expense/(benefit)
Prima facie income tax expense/(benefit)
calculated at 30% (2002: 30%) on the profit/
(loss) from ordinary activities
3,390
8,185
Increase in income tax expense due to:
Non-deductible depreciation and amortisation
Sundry items
Effect of higher rates of tax on overseas income
Decrease in income tax expense due to:
Non-assessable profit on disposal of property,
plant and equipment
Rebateable dividend
Sundry items
Tax benefit on losses transferred from a
controlled entity
Income tax expense attributable to profit from
ordinary activities
429
112
65
-
-
(218)
-
531
69
38
(3)
-
(126)
-
801
297
67
-
-
(3,409)
-
-
3,778
8,694
(2,244)
Income tax expense attributable from ordinary activities is made up of:
Current income tax provision
Deferred income tax provision
Future income tax benefit
2,144
5,660
(4,026)
3,778
1,643
7,520
(469)
8,694
-
(1,764)
(480)
(2,244)
page .42
2,025
313
44
-
(3)
(1,500)
(81)
(180)
618
703
347
(432)
618
page .43
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 6
Taxation (cont’d)
(b) Deferred tax liabilities
Provision for deferred income tax
Provision for deferred income tax comprises the
estimated expense at the applicable
rate of 30% (2002: 30%)
(c) Deferred tax assets
Future income tax benefit
Future income tax benefit comprises the estimated
future benefit at the applicable
rate of 30% (2002: 30%)
Tax losses
2003
$’000
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
15,220
9,555
428
2,193
5,009
982
1,063
582
The future income tax benefit of tax losses recognised in the deferred tax asset balance
at 30 June 2003 will only be obtained if:
(i) the relevant company derives future assessable income of a nature and an amount sufficient to enable the benefit
to be realised, or the benefit can be utilised by another company in the consolidated entity in accordance with
Division 170 of the Income Tax Assessment Act 1997
(ii) the relevant company and/or the consolidated entity continues to comply with the conditions for deductibility
imposed by the law, and
(iii) no changes in tax legislation adversely affected the relevant company and/or the consolidated entity in realising
the benefit.
Tax consolidation legislation
As a consequence of the substantive enactment of the Tax Consolidation legislation and since the consolidated tax
group within the consolidated entity has not notified the Australian Taxation Office at the date of signing this report
of the implementation date for tax consolidation, the consolidated entity has applied UIG 39 “Effect of Proposed Tax
Consolidation Legislation on Deferred Tax Balances”.
There has been no impact on the Company’s future income tax benefits, as at 30 June 2003, as a result of
this application.
page .44
page .45
Note 7
Earnings per share
Basic earnings per share (cents per share):
Diluted earnings per share (cents per share):
Earnings reconciliation
Net profit
Net (profit)/loss attributable to outside equity interests
Basic (and diluted) earnings
Weighted average number of ordinary shares used in the
calculation of basic earnings per share
Effect of directors and executive share options on issue
Weighted average number of diluted shares
2003
Cents
8.59
8.57
2003
$’000
7,523
674
8,197
Consolidated
2002
Cents
19.60
19.53
Consolidated
2002
$’000
18,588
67
18,655
2003
Number
Consolidated
2002
Number
95,415,639
95,141,797
200,612
324,279
95,616,251
95,466,076
On 4 October 2002, 100,000 options were converted to ordinary shares. The diluted EPS calculation includes that
portion of these options assumed to be issued for nil consideration, weighted with reference to the date of conversion.
The weighted average number included is 45,039.
On 31 December 2002, 1,125,000 executive share options were issued. The diluted EPS calculation includes that portion
of these options assumed to be issued for nil consideration, weighted with reference to the date of conversion.
The weighted average number included is 3,899.
Effect of change in accounting policies on comparatives
Basic and diluted earnings per share for the comparative financial year ended 30 June 2002 have been adjusted to the
amounts that would have been determined had the changes in accounting policies noted in Note 1 been applied in 2002.
Note 8
Cash assets
Cash at bank and on hand
Consolidated
2002
$’000
2003
$’000
4,430
4,430
3,002
3,002
The Company
2002
$’000
2003
$’000
53
53
1,018
1,018
Note
33(a)
page .44
page .45
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 9
Receivables
(a) Current
Trade debtors
Less: Provision for doubtful trade debtors
Other debtors
Loans to controlled entities
Other loans(1)
(b) Non-current
Loans to controlled entities
Other loans(1)
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
17,967
(1,187)
16,780
3,449
-
142
16,379
(365)
16,014
3,850
-
338
7,668
(838)
6,830
932
13,384
142
9,666
(88)
9,578
1,490
6,413
338
20,371
20,202
21,288
17,819
-
-
-
-
201
201
50,270
-
35,563
201
50,270
35,764
(1) Other loans include share loans to employees and represent amounts receivable from
employees under all employee share plans. The loan balance is fully recoverable over the
period of the employee share scheme.
Note 10
Other assets
(a) Current
Other deposits
Prepayments
Advances
(b) Non-current
Other
Note 11
Purchased debt
At cost
Accumulated depreciation
During the year all of the purchased debt held by the Company
was assigned to a controlled entity, Lion Finance Pty Ltd, at the
written down value applicable at the date of the assignment and
in accordance with the terms of the Deed of Assignment.
250
516
-
766
438
438
180
371
3
554
-
-
98,053
(27,373)
69,561
(14,361)
70,680
55,200
210
243
-
453
438
438
-
-
-
-
170
-
170
-
-
8,928
(2,680)
6,248
Note 12
Other financial assets
Non-traded investments
Shares in controlled entities - at cost
Interests in other entities - at cost
27(a)
-
99
99
-
281
281
21,717
-
14,546
182
21,717
14,728
page .46
page .47
Note 13
Property, plant and equipment
Leasehold improvements
At cost
Accumulated depreciation
Plant and equipment
At cost
Accumulated depreciation
Leased plant and equipment
At capitalised cost
Accumulated amortisation
Computer software
At cost
Accumulated depreciation
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
383
(60)
323
148
(47)
101
296
(56)
240
17,618
(7,359)
14,317
(4,195)
14,745
(6,132)
10,259
10,122
8,613
508
(440)
68
6,544
(2,317)
4,227
565
(343)
222
5,035
(954)
4,081
484
(387)
97
3,690
(1,443)
2,247
148
(47)
101
12,124
(3,507)
8,617
474
(285)
189
2,818
(677)
2,141
Total property, plant and equipment net book value
14,877
14,526
11,197
11,048
Refer Note 17 for details of security over property, plant & equipment.
Reconciliations
Reconciliations of the carrying amounts for each class of property,
plant and equipment are set out below:
Leasehold improvements
Carrying amount at beginning of year
Additions
Depreciation
Carrying amount at end of year
Plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Depreciation
Acquisition through entities acquired
101
235
(13)
323
10,122
3,308
(156)
(3,164)
149
5
98
(2)
101
5,810
6,362
(2)
(2,163)
115
101
148
(9)
240
8,617
2,630
-
(2,634)
-
Carrying amount at end of year
10,259
10,122
8,613
Leased plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Amortisation
Acquisition through entities acquired
Carrying amount at end of year
222
56
(107)
(103)
-
68
381
3
(34)
(128)
-
222
189
10
-
(102)
-
97
5
98
(2)
101
4,999
5,406
-
(1,815)
27
8,617
309
3
-
(123)
-
189
page .47
page .46
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 13
Property, plant and equipment (cont’d)
Computer software
Carrying amount at beginning of year
Additions
Depreciation
Acquisition through entities acquired
Carrying amount at end of year
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
4,081
1,624
(1,478)
-
4,227
1,798
2,965
(682)
-
4,081
2,141
873
(767)
-
2,247
1,156
1,508
(523)
-
2,141
Total property, plant and equipment net book value
14,877
14,526
11,197
11,048
Note 14
Databases
Databases - at cost
Databases - at directors’ valuation
Valuation of Databases
Databases are measured on a fair value basis, being the amount for
which the assets could be exchanged between knowledgeable
and willing parties in an arm’s-length transaction, having regard to
the highest and best use of the asset for which other parties would
be willing to pay.
The current year’s valuation was determined by the directors
after taking into account the original acquisition price and
subsequent additions.
Note 15
Intangible assets
Goodwill – at cost
Other intangibles
Accumulated amortisation
Note 16
Payables
(a) Current
Trade creditors
Other creditors and accruals
(b) Non-current
Loans from controlled entities
-
9,215
9,215
222
8,528
8,750
-
-
-
-
-
-
31,805
2,040
33,845
(4,272)
27,271
2,129
29,400
(2,633)
14,910
444
15,354
(2,508)
14,831
532
15,363
(1,632)
29,573
26,767
12,846
13,731
3,695
6,106
9,801
3,631
4,794
8,425
1,354
2,819
4,173
781
1,319
2,100
-
-
1,751
691
page .48
page .49
Note 17
Interest bearing liabilities
(a) Current
Bank overdraft (secured)
Other loans (secured)
Hire purchase liabilities
Lease liabilities
(b) Non-current
Bank loans (secured)
Other loans (unsecured)
Other loans (secured)
Hire purchase liabilities
Lease liabilities
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
25
25
25
25
1,551
275
102
17
1,945
44,940
-
321
195
-
-
-
184
66
250
18,461
3,780
-
168
14
405
275
-
17
697
44,941
-
321
-
-
-
-
115
66
181
18,461
3,780
-
-
14
45,456
22,423
45,262
22,255
All bank loans and overdraft are denominated in Australian dollars and are secured by a fixed and floating charge over all
of the assets and uncalled capital of the company and certain of its controlled entities.
Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
Other loans are secured by a fixed and floating charge over the assets of a controlled entity.
Financing arrangements
The consolidated entity has access to the following lines of credit:
Total facilities available at balance date
Bank overdraft (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank guarantee facilities (unsecured)
Bank leasing and hire purchase facilities
Total facilities utilised at balance date
Bank overdraft (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank guarantee facilities (unsecured)
Bank leasing and hire purchase facilities
Total facilities not utilised at balance date
Bank overdraft (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank guarantee facilities (unsecured)
Bank leasing and hire purchase facilities
5,000
45,000
630
-
814
10
30,000
250
372
433
5,000
45,000
630
-
517
10
30,000
250
-
195
51,444
31,065
51,147
30,455
1,551
44,940
239
-
314
-
18,461
-
372
433
405
44,940
239
-
17
-
18,461
-
-
195
47,044
19,266
45,601
18,656
3,449
60
391
-
500
4,400
10
11,539
250
-
-
11,799
4,595
60
391
-
500
5,546
10
11,539
250
-
-
11,799
page .49
page .48
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 18
Provisions
(a) Current
Dividends
Employee benefits
Other
(b) Non-current
Employee benefits
Note
22
29
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
-
1,919
204
2,123
7,626
1,632
268
9,526
-
1,693
80
1,773
7,626
1,470
80
9,176
29
510
393
487
384
Consolidated
2003
$’000
The Company
2003
$’000
Reconciliations
Reconciliations of the carrying amounts of each class of provision, except for employee benefits are set out below
Dividends
Carrying amount at beginning of year
Adjustment on adoption of AASB 1044
“Provisions, Contingent Liabilities and Contingent Assets”
Provisions made during the year:
Final dividend 2002
Interim dividend 2003
Payments made during the period
Carrying amount at end of year
Other
Carrying amount at beginning of year
Provisions made during the year:
Payments made during the period
Carrying amount at end of year
7626
7626
(7,626)
(7,626)
-
7634
4294
(11,928)
-
7634
4294
(11,928)
-
-
268
489
(553)
204
80
235
(235)
80
page .50
page .51
Note 19
Contributed equity
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
(a) Share capital
95,423,503 (2002: 95,323,503) ordinary shares, fully paid
65,213
65,113
65,213
65,113
(b) Movements in ordinary share capital
Date
Details
1 July 2002
4 October 2002
Opening balance
Exercise of options issued pursuant to
the share option agreement
Number
of shares
95,323,503
Issue
price
$’000
65,113
100,000
$1.00
100
30 June 2003
Balance at end of year
95,423,503
65,213
(c) Ordinary shares - Terms and Conditions
Ordinary shares entitle the holder to participate in dividends as declared from time to time and are entitled to one vote
per share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to the
proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.
Note 20
Reserves
Foreign currency translation
2003
$’000
256
Movements during the year
Foreign currency translation
Balance at beginning of year
Net exchange difference relating to self-sustaining foreign operations
Balance at end of year
213
43
256
Consolidated
2002
$’000
The Company
2002
$’000
2003
$’000
213
(6)
219
213
-
-
-
-
-
-
-
-
Nature and purpose of reserves
Foreign currency reserve
The foreign currency translation reserve records the foreign currency differences arising from the translation of self-
sustaining foreign operations, any translation of transactions that hedge the Company’s net investment in a foreign
operation or the translation of foreign currency monetary items forming part of the net investment in a self-sustaining
operation. Refer to accounting policy Note 1(f).
page .50
page .51
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 21
Retained profits
Retained profits at beginning of year
Net profit attributable to members of the Company
Net effect on dividends from:
Initial adoption of AASB 1044 “Provisions,
Contingent Liabilities and Contingent Assets”
Note
Consolidated
2002
$’000
2003
$’000
12,958
8,197
6,235
18,655
The Company
2002
$’000
2003
$’000
688
4,915
6,488
6,132
Dividends recognised during the year
22
(11,928)
(11,932)
(11,928)
Total dividends
(4,302)
(11,932)
(4,302)
7,626
-
7,626
-
(11,932)
(11,932)
Retained profits at the end of the year
16,853
12,958
1,301
688
Note 22
Dividends
Dividends recognised in the current year by the Company are:
2003
Interim – ordinary
2002 Final - ordinary
Cents
per share
Total
amount
$’000
Date of
payment
Tax rate for
franking
credit
Percentage
franked
4.5
8.0
4,306
7,622
20 Mar 2003
4 Nov 2002
30%
30%
100%
100%
2002 final dividend recognised when declared during the year.
Total amount
2002
Interim – ordinary
Final – ordinary
11,928
4.5
8.0
4,306
7,626
20 Mar 2002
4 Nov 2002
30%
30%
100%
100%
Total franked amount
11,932
Subsequent events
Since the end of the financial year, the directors declared the following dividends:
2003 Final – ordinary
1.0
954
30%
100%
The financial effect of this dividend has not been brought to account in the financial statements for the year ended
30 June 2003 and will be recognised in subsequent financial reports.
Dividend franking account
Franking credits available to shareholders of Collection House Limited for
subsequent financial years based on a tax rate of 30% (2002: 30%)
The Company
2002
$’000
2003
$’000
-
-
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits that will arise from the payment of the amount of the current provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at year-end;
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(d) franking credits that may be prevented from being distributed in subsequent financial years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
page .52
page .53
Note 23
Outside equity interests
Outside equity interests in controlled entities comprise:
Interest in retained profits(losses) at the beginning of the financial year after adjusting
for equity interests in entities acquired during the financial year
Interest in operating profit (loss) after income tax
Interest in retained profits (losses) at the end of the financial year
Interest in share capital
Interest in reserves
Total outside equity interest
Note 24
Total equity reconciliation
Consolidated
2002
$’000
2003
$’000
45
(674)
(629)
459
-
(170)
(320)
(67)
(387)
1,498
1,471
2,582
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
Total equity at beginning of year
80,866
71,603
65,801
69,498
Total changes in the company interest in equity
recognised in statement of financial performance
Transactions with owners as owners:
Contributions of equity
Dividends
Total changes in outside equity interest
8,240
18,874
4,915
6,132
21
100
(4,302)
(2,752)
2,103
(11,932)
218
100
(4,302)
-
2,103
(11,932)
-
Total equity at end of year
82,152
80,866
66,514
65,801
Note 25
Commitments
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
One year or later and no later than five years
Later than five years
Hire purchase commitments
Hire purchase commitments are payable:
Within one year
One year or later and no later than five years
Later than five years
Less: Hire purchase charges
-
-
-
125
199
-
324
27
297
402
-
-
402
213
182
-
395
43
352
-
-
-
-
-
-
-
-
-
-
364
-
-
364
121
-
-
121
6
115
page .53
page .52
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 25
Total equity reconciliation (cont’d)
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
Hire purchase provided for in the financial statements:
Current
Non-current
17(a)
17(b)
Total hire purchase commitments
Operating lease payment commitments
Operating lease commitments are payable:
Within one year
One year or later and no later than five years
Later than five years
Commitments not recognised in the financial statements
Finance lease payment commitments
Finance lease commitments are payable:
Within one year
One year or later and no later than five years
Later than five years
Less: Future lease finance charges
Lease liabilities provided for in the financial statements:
Current
Non-current
17(a)
17(b)
Total lease commitments
102
195
297
2,470
4,570
-
7,040
17
-
-
17
-
17
17
-
17
184
168
352
2,655
3,184
-
5,839
68
18
-
86
6
80
66
14
80
-
-
-
-
17
-
17
17
-
-
17
-
17
17
-
17
115
-
115
2,204
1,957
-
4,161
68
18
-
86
6
80
66
14
80
Note 26
Contingent liabilities and contingent assets
Details of contingent liabilities and contingent assets where the probability of future payments/receipts is not considered
remote are set out below as well as details of contingent liabilities and contingent assets, which although considered
remote, the directors consider should be disclosed.
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a
future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
(a) On 29 October 2002 the company and certain of its
controlled entities entered into an Interlocking Debt and Interest
Guarantee which is supported by a Fixed and Floating charge
over all of the assets and uncalled capital of those entities.
-
-
- -
(b) Bank guarantees (unsecured) exist in respect of satisfactory
contract performance in the normal course of business for a
controlled entity.
(c) Bank guarantees (secured) exist in respect of satisfactory
contract performance in the normal course of business for
a controlled entity.
-
372
-
239
-
239
-
-
page .54
page .55
Note 27
Controlled entities
(a) Particulars in relation to controlled entities
The Company
Collection House Limited
Controlled entities - incorporated in Australia
ABR Publications Pty Ltd
Australian Business Research Pty Ltd
Australian Corporate Reporting Pty Ltd
Australian Creditors Association Pty Ltd (1)
Australian Stockdata Pty Ltd (1)
Australian Legal Recoveries Pty Ltd (1) (2)
CHIP No.1 Pty Ltd (1)
Collection House ALR Pty Ltd (1)
Collection House Business Diagnostics Pty Ltd (1)
Collection House Legal Services Pty Ltd
Collection House Technologies Pty Ltd
Colpro Pty Ltd
Downie & Associates Unit Trust
Insurance Claims Solutions Pty Ltd
Lion Finance Pty Ltd
National Revenue Corporation Pty Ltd
National Tenancy Database Pty Ltd
R W Receivables Pty Ltd (1)
Rapid Ratings Pty Ltd
Rent Check Australia Pty Ltd (1)
The Creditfax (Aust) Pty Ltd (1)
Controlled entities - incorporated in New Zealand
Collection House (NZ) Limited
Lion Finance Limited
National Revenue Corporation Limited (1)
New Zealand Business Research Limited
New Zealand Creditors Association Limited (1)
Ordinary shares
Consolidated equity interest
2002
%
2003
%
100
100
100
100
100
100
60
100
67
100
100
100
100
60
100
100
100
100
67
100
100
100
100
100
100
100
74
74
74
100
74
-
60
100
67
100
100
100
100
60
100
100
100
100
67
100
74
100
100
100
74
100
(1) These controlled entities have not traded during the financial year
(2) This entity was acquired during the financial year with a share capital of less than $100
(b) Acquisition of controlled entities
On 1 July 2002, the parent entity acquired 100 percent of the issued share capital of Countrywide Mercantile
Credit Services Pty Ltd and of Midstate Credit Management Services Pty Ltd. Both entities specialise in commercial
debt collections.
On 12 March 2003, the parent entity acquired the remaining 26 percent of the issued share capital of Australian
Business Research Pty Ltd.
The operating results of these controlled entities have been included in the consolidated statement of financial
performance since the date of acquisition.
page .54
page .55
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 27
Controlled entities (cont’d)
Details of the acquisition is as follows:
Cash Consideration
Less cash balances acquired
Fair value of net assets of entity acquired:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Less: Outside equity interests
Goodwill on consolidation
Consideration
Countrywide
Mercantile
Credit Services
Pty Ltd
$’000
Midstate Credit
Management
Services
Pty Ltd
$’000
Australian
Business
Research
Pty Ltd
$’000
1,268
23
1,245
335
85
(37)
(7)
376
-
376
869
1,245
2,428
1
2,427
784
64
(261)
(25)
562
-
562
1,865
2,427
3,799
174
3,625
392
3,024
(1,297)
-
2,119
-
2,119
1,506
3,625
page .56
page .57
Note 28
Additional financial instruments disclosure
Weighted
average
interest rate
%
Floating
interest
rate
$’000
Fixed interest maturing in:
1 year
or less
$’000
1 to 5 More than
5 years
$’000
years
$’000
Non-
interest
bearing
$’000
Total
$’000
(a) Interest rate risk exposures.
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class
of financial assets and liabilities is set out below.
2003
Financial assets
Cash assets
Receivables (current)
Other current assets
Purchased debt
Receivables (non-current)
Other financial assets (non-current)
3.58%
6.00%
4.45%
4,376
-
-
-
-
-
142
250
-
-
4,376
392
Financial liabilities
Payables -
Hire purchase liabilities
Lease liabilities
Bank overdraft
Other loans
Bank loans (non-current)
Employee benefits
7.95%
7.61%
8.00%
4.80%
5.39%
-
-
-
1,551
-
44,941
-
-
102
17
275
-
-
-
-
-
-
-
-
-
195
-
321
-
-
Net financial assets (liabilities)
(42,116)
(2)
(516)
46,492
394
516
2002
Financial assets
Cash assets
Receivables (current)
Other current assets
Purchased debt
Receivables (non-current)
Other financial assets (non-current)
3.40%
6.00%
4.33%
6.00%
2,992
-
179
-
-
-
337
-
-
-
-
-
-
-
201
3,171
337
201
page .56
Financial liabilities
Payables
Hire purchase liabilities
Lease liabilities
Other loans (non-current)
Bank loans (non-current)
Employee benefits
7.59%
8.20%
5.30%
5.59%
-
-
3,780
18,461
-
184
66
-
-
-
168
14
-
-
Net financial assets (liabilities)
(19,070)
87
19
22,241
250
182
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
20,229
516
70,680
-
99
4,430
20,371
766
70,680
-
99
91,578
96,346
9,801
-
-
-
-
9,801
297
17
1,551
596
44,941
2,429
2,429
12,230
59,632
79,348
36,714
10
19,865
375
55,200
-
281
3,002
20,202
554
55,200
201
281
75,731
79,440
8,425
-
-
-
-
8,425
352
80
3,780
18,461
2,025
2,025
10,450
33,123
65,281
46,317
page .57
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 28
Additional financial instruments disclosure (cont’d)
(b) Credit risk exposures
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
Recognised financial instruments
The credit risk on financial assets of the consolidated entity which have been recognised in the Statement of Financial
Position, is the carrying value, net of any provision.
The consolidated entity minimises concentrations of credit risks by undertaking transactions with a large number
of customers and does not have any material credit risk exposure to any single debtor or group of debtors under
financial instruments entered into by the company or any of its controlled entities.
(c) Net fair value of financial assets and liabilities
Net fair values of financial assets and liabilities are determined by the consolidated entity on the following bases:
Recognised financial instruments
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial
liabilities is not materially different from their carrying values.
The net fair value of other monetary financial assets and financial liabilities is based upon market prices where a
market exists or by discounting the expected future cash flows by the current interest rate for assets and liabilities
with similar risk profiles.
For unlisted equity investments, the net fair value is an assessment by the directors based on the underlying net
assets, future maintainable earnings and any special circumstances pertaining to a particular investment.
Note 29
Employee benefits
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
Aggregate liability for employee benefits, including on-costs:
Current
Non-current
Number of employees
18(a)
18(b)
1,919
510
2,429
1,632
393
2,025
1,693
487
2,180
1,470
384
1,854
Number of employees at year end
753
957
496
804
page .58
page .59
Note 29
Employee benefits (cont’d)
Executive share option plan
The directors may, at their discretion, grant options to purchase fully paid ordinary shares in the Company to employees
of the Company or related companies, as per terms and conditions previously approved by the shareholders.
Unissued ordinary shares of the Company under option are:
Grant date Exercise date
Expiry date
14 Jul 2000
14 Jul 2000
14 Jul 2000
14 Jul 2000
31 Dec 2001
31 Dec 2002
4 Oct 2002
4 Oct 2003
4 Oct 2004
4 Oct 2005
1 Jan 2002
1 Jan 2003
3 Nov 2002
3 Nov 2003
3 Nov 2004
3 Nov 2005
31 Dec 2002
31 Dec 2003
Exercise
price
Total options exercised
and shares issued
2002
2003
Unissued shares and
options available
2002
2003
$1.00
$1.00
$1.00
$1.00
$4.17
$2.51
100,000
-
-
-
-
-
100,000
-
-
-
-
-
-
100,000
100,000
100,000
-
1,125,000
100,000
100,000
100,000
100,000
975,000
-
100,000
100,000
1,425,000
1,375,000
975,000 options expired during the year ended 30 June 2003.
Employee share ownership plan
An employee of the Company or its subsidiaries with at least 3 months service is eligible to participate in the Employee
Share Plan, as per terms and conditions previously approved by the shareholders.
The amount recognised in the financial statements of the consolidated entity and the Company in relation to employee
shares during the year were:
Employee loans
Bank
Issued capital
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
-
-
-
452
1,573
2,025
-
-
-
452
1,573
2,025
Superannuation plans
All employees are entitled to varying levels of benefits on retirement, disability or death. The superannuation plans
provide accumulated benefits. Employees contribute to the plans at various percentages of their wages and salaries.
Where there is a legal requirement the company contributes the appropriate statutory percentage of employees’
salaries and wages.
page .58
page .59
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 30
Directors’ remuneration
Directors’ income
The number of directors of the Company whose income from the Company
or any related party falls within the following bands:
$1 - $9,999
$20,000 - $29,999
$40,000 - $49,999
$50,000 - $59,999
$70,000 - $79,999
$80,000 - $89,999
$220,000 - $229,999
$610,000 - $619,999
$690,000 - $699,999
The Company
2002
$’000
2003
$’000
2
2
3
1
1
1
-
1
-
-
-
5
-
-
1
1
-
1
The remuneration bands may not be consistent with the emoluments disclosed in the Directors’ Report as the basis of
calculation differs due to the differing requirements of the Corporations Act 2002 and the Accounting Standards.
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Total income paid or payable, or otherwise made available,
to all directors of the Company and controlled entities from
the Company or any related party.
1,007,471
1,212,362
1,007,471
1,212,362
Directors’ income includes amounts paid by the Company during the year to indemnify directors, and an allocation of
insurance premiums paid by the Company or related parties in respect of directors’ and officers’ liabilities and legal
expenses insurance contracts in accordance with common commercial practice.
Note 31
Executives’ remuneration
The number of Australian based executive officers of the Company and of controlled entities, whose remuneration from
the Company or related parties, and from entities in the consolidated entity, falls within the following bands:
Consolidated
2002
2003
The Company
2002
2003
$100,000 - $109,999
$110,000 - $119,999
$120,000 - $129,999
$130,000 - $139,999
$140,000 - $149,999
$150,000 - $159,999
$160,000 - $169,999
$170,000 - $179,999
$180,000 - $189,999
$190,000 - $199,999
$200,000 - $209,999
$210,000 - $219,999
$220,000 - $229,999
$230,000 - $239,999
$260,000 - $269,999
$350,000 - $359,999
$570,000 - $579,999
page .60
-
2
1
4
1
1
3
2
-
1
1
-
1
-
1
1
1
8
7
4
1
1
2
-
-
3
-
-
1
-
2
-
-
-
-
1
1
4
1
-
1
2
-
1
1
-
1
-
1
1
1
8
7
3
1
-
2
-
-
3
-
-
1
-
2
-
-
-
20
29
16
27
page .61
Note 31
Executives’ remuneration (cont’d)
Consolidated
2002
2003
The Company
2002
2003
Total income in respect of the financial year received, or due and
receivable, from the Company, entities in the consolidated entity or
related parties by executive officers of the Company and of
controlled entities whose income is $100,000 or more.
3,883,779
3,970,196
3,273,647
3,696,042
Executive officers are those officers involved in the strategic direction, general management or control of business at a
company or operating division level. Executive remuneration does not include executive directors whose remuneration is
disclosed at note 30.
Executives’ remuneration includes amounts paid by the Company during the year to indemnify executives, and an
allocation of insurance premiums paid by the Company or related parties in respect of directors’ and officers’ liabilities
and legal expenses insurance contracts, in accordance with common commercial practice.
The remuneration bands may not be consistent with the emoluments disclosed in the Directors’ Report as the basis of
calculation differs due to the differing requirements of the Corporations Act 2002 and the Accounting Standards.
Note 32
Related parties
Directors
The names of each person who have held the position of director of Collection House Limited during the financial
year ended 30 June 2003 are:
Dennis George Punches
Anthony Robin Aveling
William Walter Kagel
John Marshall Pearce
Anthony Francis Coutts
Barrie Adams
David Barry Connelly
Bo Sven Göranson
William Leslie Hiller
Details of directors’ remuneration is set out in Note 30.
Donald Ian Nissen
Stephen Walker
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the
consolidated entity since the end of the previous financial year and there were no material contracts involving directors’
interests existing at year end.
Directors’ holdings of shares and share options
The interests of directors of the Company and their director-related entities in shares and share options of entities within
the consolidated entity at year-end are set out below:
Collection House Limited:
Ordinary shares
Options over ordinary shares
The Company
2002
2003
43,871
300
40,584
400
page .60
page .61
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 32
Related parties (cont’d)
Directors’ transactions in shares and share options
Parkerhouse Investments BV, a company acting as trustee of a trust associated with Mr B Göranson acquired:
604,108 shares @ $1.86 per share on 7 March 2003
243,958 shares @ $1.93 per share on 14 March 2003
55,872 shares @ $1.98 per share on 21 March 2003
245,089 shares @ $1.76 per share on 11 April 2003
1,673,000 shares @ $1.56 per share on 14 April 2003
119,943 shares @$1.54 per share on 15 April 2003
475,000 shares @ $1.53 per share on 16 April 2003
178,581 shares @ $1.52 per share on 17 April 2003
76,918 shares @ $1.49 per share on 22 April 2003
199,938 shares @ $1.54 per share on 23 April 2003
100,000 shares @ $1.55 per share on 29 April 2003
Mr A Coutts converted 100,000 options at $1.00 on 4 October 2002.
Mr S Walker sold 1,000,000 shares @ $3.20 on 19 September 2002
Directors’ transactions with the Company or its controlled entities
A number of directors of the Company, or their director-related entities, hold positions in other entities that result in them
having control or significant influence over the financial or operating policies of these entities. The terms and conditions of
the transactions with directors and their director-related entities were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions to non-related entities on an “arms length” basis.
The aggregate amounts recognised during the year relating to directors and their director-related entities were as follows:
Director
Transaction
Consolidated
2002
$
2003
$
The Company
2002
$
2003
$
D G Punches
Repayment of advances to the Company
3,755,697
-
3,755,697
-
D G Punches
Interest received/receivable
193,242
208,518
193,242
208,518
Amounts receivable or payable to directors and their
director-related entities arising from these transactions
were as follows:
Non-current interest bearing liabilities
Loans
-
3,780,087
-
3,780,087
Non-director related parties
The classes of non-director related parties are wholly owned controlled entities, partly owned controlled entities and
directors of related parties and their director-related entities.
Transactions
Transaction between non director related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
Wholly-owned group
The company provided collection services to and received collection services from Collection House (NZ) Limited, Lion
Finance Pty Ltd and Lion Finance Limited.
The company provided administrative services to all operating subsidiaries.
A wholly controlled entity, Collection House Technologies Pty Ltd, provided IT support to the company.
A wholly controlled entity, Collection House Legal Services Pty Ltd, provided legal services to the company.
A wholly controlled entity, Australian Business Research Pty Ltd provided credit reporting services to the company.
Loans were advanced by Collection House Limited to and were received from wholly controlled entities.
Loans were advanced by Collection House Limited to partly controlled entities
page .62
page .63
Note 32
Related parties (cont’d)
Dividends were paid to the company by Lion Finance Pty Ltd, Collection House Legal Services Pty Ltd, National Tenancy
Database Pty Ltd, National Revenue Corporation Pty Ltd, Countrywide Mercantile Services Pty Ltd and Midstate Credit
Management Services Pty Ltd.
Transactions with non-director related parties
Revenue from sale of services to:
Wholly-owned controlled entities
Provision of IT Services to:
Controlling entity
Provision of legal services to:
Controlling entity
Provision of credit reporting services to:
Wholly-owned controlled entities
Loan advances to:
Wholly-owned controlled entities
Partly-owned controlled entities
Loan advances from:
Wholly-owned controlled entities
Dividends received from:
Wholly-owned controlled entities
Interest received from:
Partly-owned controlled entities
Current receivables from non-director related entities
Wholly-owned controlled entities (dividends)
Partly-owned controlled entities (loans)
Non-current receivables from non-director related entities
Wholly-owned controlled entities (loans)
Partly-owned controlled entities (loans)
Non current-payables from non-director related entities
Wholly-owned controlled entities (loans)
Percentage of equity interest
Details of equity interests held in classes of related parties are set out in Note 27.
Note 33
Notes to the statements of cash flows
The Company
2002
$’000
2003
$’000
15,857
7,151
1,800
1,080
3,167
-
264
197
19,907
1,771
36,849
2,072
1,060
560
11,366
5,000
64
-
13,384
-
5,000
1,413
47,719
2,551
34,409
1,154
1,751
691
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
Note
(a) Reconciliation of cash
For the purposes of the statements of cash flows, cash includes cash on hand and at bank and short term deposits at
call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statements of cash
flows is reconciled to the related items in the statements of financial position as follows:
Cash assets
8
4,430
3,002
53
1,018
page .62
page .63
Notes to the Financial Statements
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Note 33
Notes to the statements of cash flows (cont’d)
Consolidated
2002
$’000
2003
$’000
The Company
2002
$’000
2003
$’000
(b) Reconciliation of profit from ordinary activities after income tax to net cash provided by operating activities
Profit from ordinary activities after income tax
7,523
18,588
4,915
6,132
Add/(less) items classified as investing/financing activities:
Net (profit)/loss on sale of non-current assets
(9)
(5)
(7)
(2)
Add/(less) non-cash items:
Amortisation
Amounts set aside to provisions
Unrealised exchange loss/(gain)
Depreciation
(Decrease)/increase in income taxes payable
(Decrease)/increase in deferred taxes payable
(Increase)/decrease in deferred tax asset
Net cash provided by operating activities before change
in assets and liabilities
Change in assets and liabilities adjusted for effects of purchase
and disposal of controlled entities during the financial year:
1,761
674
1
17,680
(773)
5,664
(4,026)
1,536
76
10
15,633
(2,532)
7,520
(469)
988
592
-
3,611
(89)
(1,764)
(480)
1,046
(3)
-
3,556
(2,956)
347
(432)
28,495
40,357
7,766
7,688
(Increase)/decrease in trade debtors
(Increase)/decrease in other debtors
(Increase)/decrease in other assets
Increase/(decrease) in trade creditors
Increase/(decrease) in sundry creditors and accruals
Increase/(decrease) in provision for doubtful debts
Increase/(decrease) in employee provisions
Increase/(decrease) in other tax provisions
(3,708)
2,628
(145)
64
1,930
822
404
38
(6,090)
(2,417)
(153)
679
(688)
(25)
771
356
1,999
7,654
(73)
574
1,065
750
326
(72)
Net cash provided by/(used in) operating activities
30,528
32,790
19,989
(4,513)
(7,384)
(72)
(183)
3
19
994
356
(3,092)
Note 34
Events subsequent to balance date
Implementation of tax consolidation legislation
The company and its wholly-owned Australian subsidiaries have decided to implement the tax consolidation legislation
as of 1 July 2003 although the Australian Tax Office has not yet been advised of this decision. The entities also intend to
enter into a tax sharing agreement, but details of this agreement are yet to be finalised.
As a consequence, Collection House Limited, as the head entity in the tax consolidated group, will recognise current and
deferred tax amounts relating to transactions, events and balances of the wholly-owned Australian entities in this group
in future financial statements as if those transactions, events and balances were its own. Amounts receivable or payable
under the tax sharing agreement will be recognised separately by the company as tax-related amounts receivable or
payable. The impact on the income tax expense and results of the company is unlikely to be material because of the tax
sharing agreement. It is also not expected to have a material impact on the consolidated assets, liabilities and results.
The expected financial consequence for the consolidated financial statements has already been brought to account at
30 June 2003. Refer Note 6(c).
Dividends declared
For dividends declared after 30 June 2003 see Note 22.
Other Events
The directors are not aware of any other material events which have occurred after balance date.
page .64
page .65
Directors’ Declaration
Collection House Limited and its controlled entities. For the year ended 30 June 2003
In the opinion of the directors of Collection House Limited (“the Company”):
(a) the financial statements and notes, set out on pages 30 to 64 are in accordance with the
Corporations Act 2001 including:
(i) giving a true and fair view of the financial position of the Company and consolidated entity as at 30 June
2003 and of their performance, as represented by the results of their operations and their cash flows, for the
year ended on that date; and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
This declaration is signed in accordance with a resolution of the directors.
John Pearce
Managing Director & Chief Executive Officer
Dated at Brisbane, 27 August 2003
page .64
page .65
Independent Audit Report
To The Members Of Collection House Limited
Scope
We have audited the financial report of Collection House Limited (“the Company”) for the financial year ended 30 June
2003 consisting of the statements of financial performance, statements of financial position, statements of cash flows,
accompanying notes 1 to 34 and the directors’ declaration. The financial report includes the consolidated financial
statements of the consolidated entity, comprising the Company and the entities it controlled at the end of, or during, the
financial year. The Company’s directors are responsible for the financial report. We have conducted an independent audit
of this financial report in order to express an opinion on it to the members of the Company.
Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to
whether the financial report is free of material misstatement. Our procedures included examination, on a test basis,
of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting
policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether,
in all material respects, the financial report is presented fairly in accordance with the Accounting Standards and other
mandatory professional reporting requirements in Australia and statutory requirements so as to present a view which is
consistent with our understanding of the Company’s and the consolidated entity’s financial position, and performance as
represented by the results of their operations and their cash flows.
The audit opinion expressed in the report has been formed on the above basis.
Audit Opinion
In our opinion, the financial report of the Company is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30
June 2003 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
(b) other mandatory professional reporting requirements in Australia.
Hacketts Chartered Accountants
Brisbane
27 August 2003
Liam Murphy
Partner
page .66
page .67
Shareholder Information
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Distribution of equity security holders
The shareholder information set out below was applicable as at 15 August 2003.
Analysis of numbers of security holders by size of holding:
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 and over
Ordinary shares
Options
1,373
3,378
817
435
42
40
6,085
_
–
_
19
6
_
25
There were 155 holders of less than a marketable parcel of shares.
On market buy-back
There is no current on market buy-back.
Twenty largest shareholders
The twenty largest holders of quoted securities are:
Number held
Percentage of issued shares
Ordinary shares
14,011,665
Dennis George Punches
14,000,000
George Laurens (Qld) Pty Ltd (Pearce Family Account)
Stephen Walker
6,750,000
RBC Global Services Australia Nominees Pty Limited (BKCUST A/C) 5,555,577
4,572,427
Parkerhouse Investments BV
4,153,107
Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/C)
3,600,000
Anthony Coutts & Jennifer Coutts (The Coutts Family Account)
2,292,825
Citicorp Nominees Pty Limited (CFS Developing Companies A/C)
1,670,039
National Nominees Limited
1,208,260
JP Morgan Nominees Australia Limited
1,201,101
Commonwealth Custodial Services Limited
1,000,000
Sandhurst Trustees Limited (SISF A/C)
559,570
AMP Life Limited
500,000
William Kagel
475,000
Seawise Pty Ltd (The Stanton Investment A/C)
457,807
Citicorp Nominees Pty Limited
400,000
Raymond Larkin
375,832
Westpac Custodian Nominees Limited
342,726
ANZ Nominees Limited
330,050
Merrill Lynch (Australia) Nominees Pty Ltd
14.67
14.67
7.07
5.82
4.79
4.35
3.77
2.40
1.75
1.27
1.26
1.05
0.59
0.52
0.50
0.48
0.42
0.39
0.36
0.35
63,455,986
66.48%
page .66
page .67
Shareholder Information (cont’d)
Collection House Limited and its controlled entities. For the year ended 30 June 2003
Restricted securities
All issued shares in Collection House Limited are quoted on ASX and there are no shares subject to escrow or other
regulated restrictions other than as set out below.
Voluntary restrictions on securities
Employees who participate in the Collection House Employee Share Plan are required to enter into voluntary escrow
arrangements with the Company, undertaking not to dispose of any of these shares for three months from the date of
issue of the relevant shares.
Employees who participate in the Collection House Executive Option Plan are required to enter into voluntary escrow
arrangements with the Company, undertaking not to dispose of any of these shares for twelve months from the date of
issue of the relevant shares.
Under the Collection House Employee Share Plan and Collection House Executive Option Plan, employees may be entitled
to acquire shares under an employee loan facility. Employee shares that are subject to an employee loan at the time that
the voluntary escrow period expires remain restricted until the relevant employee loan is discharged. As at 15 August
2003, there are 244,445 ordinary shares (.26% of issued capital) that are restricted on this basis. The date that these
shares cease to be restricted will depend upon the date that the employee loans are repaid in full.
Shares restricted under voluntary arrangements rank pari passu with all fully paid ordinary shares in all other respects.
Options to take up ordinary shares in Collection House Limited
1,425,000
25
Number on issue
Numberof holders
Issued unexercised options
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Number held
Percentage of issued shares
Ordinary Shares
George Laurens (Qld) Pty Ltd
D G Punches
S Walker
RBC Global Services Australia Nominees Pty Limited
Parkerhouse Investments BV
Options
Anthony Coutts
Voting rights
14,146,730
14,011,665
6,750,000
5,555,577
4,772,427
300,000
14.8
14.7
7.1
5.8
5.0
21.1
The voting rights attaching to each class of equity securities are:
1. Ordinary shares
On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
2. Options
There are no voting rights attached to the options. Voting rights will be attached to options once they are exercised.
Stock exchange
Collection House is listed on the Australian Stock Exchange under the code CLH. The home exchange is Brisbane.
Other information
Collection House Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
page .68
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