inside Front cover
inside back cover
Table of Contents
1
3
5
6
7
10
12
The Company
Financial Overview
Operational Overview
Chairman’s Report
Managing Director & Chief Executive Officer’s Report
The Board of Collection House Limited
Financial Basics Foundation
13 Corporate Governance
22 Directors’ Report
30
Financial Statements
33 Notes to Financial Statements
65 Directors’ Declaration
66
59
Independent Audit Report
Shareholder Information
69 Corporate Directory
..
Note: Throughout this Annual Report, unless otherwise specified, Collection House Limited and its associated entities may also be referred to as "the Company", “the Group” and “the Entity”.
Cover photo of Leigh Matthews: courtesy of Nathan Richter, The Courier-Mail
The Company
Collection House Limited is a group of companies headquartered in Australia, operating
globally and delivering a broad range of financial services including receivables
management, debt collection, insurance recovery and claims management, debt
purchasing and recovery, credit reporting, and corporate risk rating.
Collection House first opened in Brisbane in 1992. It was listed on the Australian Stock
Exchange in 2000 and now employs 700 staff in 15 offices located in all mainland
Australian states and territories as well as New Zealand.
Contingent Collection Services
Account Asset Management
Credit Reporting
Contingent Collections
Other Services
page 1
The Company (continued)
Financial Overview
Contingent Collection Services
Account Asset Management
Consumer Division collects debts on a
commission basis for banks and building
societies, finance companies and other
institutions that provide credit.
Commercial Division collects debts on a
commission basis for commercial clients
including retail and wholesale suppliers, local
government, utilities, and schools.
Insurance Recovery Division collects on a
commission basis outstanding motor vehicle
claims as well as property and public liability
insurance claims on behalf of insurance
companies and self-insurers.
Workers’ Compensation Division recovers
on a commission basis outstanding employer
workers’ compensation premiums on behalf
of insurers.
Receivables Management Division
manages outsourced current receivables
portfolios. Collection is generally conducted
on a fee for service basis.
International Division collects on a
commission basis, debts owed overseas to
Australian or New Zealand clients, or debts
owed in Australia or New Zealand to clients
based in other countries. Collection House
International uses a global network of
specialist agents.
National Revenue Corporation (NRC)
offers a special service to the small / medium
business community through its unique
Tandem program. Designed to be an
alternative solution to conventional collection
approaches, the Tandem program focusses on
reducing the overall debt portfolio of small to
medium sized businesses and professionals,
accelerating cash flow, and reducing losses
associated with bad debt.
Midstate Credit Management Services and
Countrywide Mercantile Services provide
specialised receivables management and debt
recovery services to the commercial and local
government sectors in Melbourne, regional
Victoria and southern New South Wales.
Lion Finance Pty Ltd is a wholly owned
subsidiary that purchases debt portfolios in
Australia and New Zealand.
Credit Reporting
Australian Business Research Pty Ltd
(ABR) is a business information services
company offering an extensive range of live
business searches to clients, providing on-line
access to one of the most comprehensive
range of government and private databases
in Australasia.
National Tenancy Database Pty Ltd (NTD)
is one of the largest tenancy databases in
Australia with more than one million tenant
files, 4,000 subscribers and 10,000 rental
checks done per month. NTD supplies the real
estate industry with tenant histories and public
record information, and can verify details
provided on rental applications. NTD also
carries out commercial checks of companies,
directors, businesses and proprietors.
Other Services
Insurance Claims Solutions Pty Ltd (ICS)
offers a multi-faceted web-based claims
management system called ClaimsFasTrack.
It is a totally flexible and optioned solution
allowing insurers, self-insurers and
underwriters to manage insurance claims.
Insurers can outsource all or part of the
claims management process and reduce costs
in the claims process.
Rapid Ratings Pty Ltd (RR) is a quantitative-
based global rating agency based in Brisbane.
It was the first corporate credit rating agency
in Australia with an Australian Financial
Services licence from ASIC. RR rates more
than 15,000 companies (both listed and
unlisted) in Australia, Canada, New Zealand,
Singapore and the USA. Customers include
investment funds, brokers and financial
planners, accounting firms, banks and other
large creditors.
Revenue
EBITDA
Depreciation and amortisation
EBIT
Interest
Profit before tax
Income tax expense
Net profit
Net profit attributable to outside equity interest
Net profit attributable to the members of the Company
EPS (basic cents per share)
Net assets
2004
2003
2002
2001
117,876
119,854
118,419
60,439
35,774
17,527
18,247
2,966
15,281
(5,056)
10,225
416
10,641
11.0
33,065
19,441
13,624
2,323
11,301
(3,778)
7,523
674
8,197
8.6
45,505
17,169
28,336
1,054
27,282
(8,694)
18,588
67
18,655
19.6
18,687
3,900
14,787
727
14,060
(4,736)
9,324
(14)
9,310
10.6
90,398
82,152
80,866
71,603
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page 2
page 3
Financial Overview (continued)
Operational Overview
2004
August 2004
2004
June 2004
2004 full year financial results announced
Revenue of $117.9m [$119.9m]
NPAT of $10.6m [$8.2m]
Cash flow increased to $32.1m [$30.5m]
Staffing costs decreased to $36.6m [$43.7m]
Capital expenditure reduced to $2m [$5.7m]
Earning per share 11.0 cents [8.6 cents]
Final dividend of 4.0 cents unfranked
declared [1.0 cent fully franked]
Net assets increased to $90.4m [$82.2m]
Debt with a face value of $172m [$248.5m]
was purchased during the second half of the
year for $27.9m [$28.5m]
February 2004
Announced a half year after-tax profit of
$4.0m [$2.5m]
Debt with a face value of $56.7m [$75.0m]
was purchased during the first half of the year
for $8.7m [$12.9m]
Revenue of $57.8m [$60.8m] represented a
decrease of 5% on corresponding 2003 half.
Interim unfranked dividend declared of 3.0
cents [4.5 cents fully franked]
Increase in profitability resulted from savings
in payroll, associated employee expenses and
communication costs
December 2003
Parent Entity acquired a further 11% of issued
capital of CHIP No.1 Pty Ltd and Insurance
Claims Solutions Pty Ltd
Collection House Limited entered into a tax
consolidation regime resulting in a minor
decrease in deferred tax assets
July 2003
Parent Entity acquired a further 5.9% of issued
share capital of Collection House Business
Diagnostics Pty Ltd
Note: figures in square brackets [ ] represent the previous year.
2003
page 4
Tony Aveling, an Independent
Director, appointed as Deputy
Chairman of the Board
Adrian Ralston, General
Manager, Finance appointed
as Chief Financial Officer
March 2004
Collection House Limited
announces it will no longer
pursue collection of statute
barred debt
February 2004
Ross Oakley appointed as
Executive Director,
Rapid Ratings Pty Ltd
January 2004
Collection House Limited
announces renewal of a forward
debt purchase contract with
a major Australian bank for a
period of 12 months
October 2003
Adrian Ralston appointed as
General Manager, Finance
September 2003
Barry Connelly appointed as
Director and Chairman of the
Board of Australian Business
Research Pty Ltd (ABR)
Existing ABR Director Andrew
Woods appointed Deputy
Chairman of ABR
Mark Stanton announced he
would vacate position of
Chief Financial Officer on
31 December 2003
2003
page 5
Chairman’s Report
Managing Director &
Chief Executive Officer’s Report
Fellow shareholders
We began Financial Year 2003/04 with a clear and simple plan for continued cost
I said in my report last year that the Board was confident of our overall strategy and the
containment, corporate consolidation, and realisation of investment in assets.
management of the Company going into 2003/04 and beyond. I think the result for this
Our aim was to improve profitability while consolidating operations and building
year confirms that our confidence was well placed.
sustainable revenue growth across the Group.
Our aim is to be highly regarded for the way we do
business, not just the business we do.
The Company accepts that with 700 staff and
10 million customer contacts a year, often on
sensitive and complex financial issues, no amount
of training, systems or monitoring will completely
eliminate human error. However, we can always
do better, and that is our goal – continuous
improvement. As we improve the way we do
business, we expect to reduce future risk and more
quickly resolve identified problems.
None of our programs will negatively affect financial
performance in the coming year.
I look forward to reporting to you on future
progress of the program and eventual recognition
of the Company’s leadership in the industry.
In the meantime, I congratulate the management
and staff of Collection House on their achievement
this year and assure you that we are absolutely
focussed on an even better outcome in 2005.
Dennis G. Punches
Chairman
After a challenging 2002/03, we have been able
to more fully implement the strategy that we
outlined to you last year. We have focussed on cost
containment, strategic management, development
of new business and realisation of investment.
The result is solid revenue and increased profit as
well as significant forward momentum across the
Company going into the current year.
I am confident that we have met and dealt with the
challenges that confronted us two years ago and
we are now well and truly back on course.
Our plan for the coming years is simple – to
consolidate and improve our contingent collection
business, grow the purchased debt portfolio, and
pursue the best possible return on our investments
in all areas of operation. We will also capitalise on
the range of quality financial services that we offer
our markets.
However, the challenges will continue to come, and
so we are also looking to position the Company to
not only deal with those, but to turn them to our
commercial advantage.
By anticipating inevitable change, we become the
company of tomorrow, today.
One of the greatest challenges we foresee will come
from the environment in which we operate. The
nature of our business, growing consumer activism,
increasing regulatory intervention, the need to
guarantee protection of client brand and reputation,
and shifting economic conditions all demand that
we achieve and maintain the highest standards of
professional performance, legal compliance and
ethical conduct.
To that end, Collection House will increase its
investment in an extensive, continuous program of
development and improvement to ensure that we
are the industry benchmark in policies, practices
and conduct. It is in the Company’s commercial
interest to have the confidence of clients,
customers and regulators.
In the coming year, we will concentrate even more
on our staff training and development, strategic
management, monitoring and review of operations,
and relationship management.
Despite both our strategy and resolve being tested
in the first months of the year, we achieved our
goal, turning challenges of the first half into
opportunities in the second half.
We ended the year an even stronger and healthier
company than we started: profit up 30% on solid
revenue; staff costs and expenses down; cash flow
much improved and net assets increased by more
than 10%.
Revenue ($m)
2004
2003
2002
2001
$117.9m
$119.9m
$118.4m
$60.4m
0
20
40
60
80
100
120
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$10.6m
$8.2m
$18.7m
$9.3m
0
5
10
15
20
Account Asset Management
Competition was greater than ever before in the
purchased debt market with a number of new
and inexperienced buyers raising some vendor
expectations to unrealistic levels. And, with several
large-volume / poor-quality portfolios being offered
to the market, we proceeded cautiously in the first
half, holding to our pricing models and maintaining
a high quality debt portfolio.
Although that decision held down revenue,
particularly in the first half, we have delivered a
good segment result thanks to a strong second half
and improved profitability throughout.
As the year progressed, price expectation in the
debt market returned to some normalcy. We also
saw several new and significant vendors appear –
a trend we expect to continue in the years ahead
as Australia and New Zealand follow the pattern of
USA and European financial markets.
A strong indicator of the value of purchased debt
to this company is the accounts-under-repayment
plan, where we now have almost $114 million
on “arrangement” providing long-term revenue
streams from this asset. Our arrangement book has
not only been maintained this year, but grew by
3.3% during the second half.
Contingent Collection Services
The backbone of our debt collection business
remains the contingent collection services. We took
the decision at the start of the year to move away
from high-cost / low-yield work. Again this had an
effect on early revenue.
A major contract signed at the start of the year with
a leading bank always promised strong revenue and
profit. However, unexpected delays in bringing that
contract on-line meant we did not see it bear fruit
until the third quarter. Our second half figures, and
particularly final quarter revenue and profit, show
the significance of that contract.
The benefits will continue to flow from this and all
our quality, flow-through contracts in financial years
2004/05 and 2005/06.
The International Division recovered in excess of
$4 million for Australian, New Zealand and
international clients. As the Australian and
international economies cool (particularly those in
the South East Asian region) opportunities arise to
provide recovery services to financial institutions,
exporters and their insurers within Australia
and offshore.
The International Division is now co-located with the
rest of Collection House operations in Collins Street
Melbourne, finalising the integration of this business
unit following its purchase as TCMS in 2001.
National Revenue Corporation (NRC) performed well
in its eighth year of operation with increased revenue
from its wide customer base in the small to medium-
sized business (SME) market. With its specialised
collection program, NRC attracts early referral of
delinquent accounts. This early placement optimises
collection results and improves client satisfaction.
page 6
page 7
Managing Director & Chief Executive Officer’s Report (continued)
Credit Reporting
Australian Business Research (ABR) showed the
benefits of our cost containment program that
began in the second half of 2003. ABR group
delivered a 17.4% rise in revenue ($24.9m
compared with $21.2m) and a 266% increase in
profit ($3.1m, up from $0.9m).
In March, ABR underwent re-branding and re-
positioning in pursuit of greater market share and
new markets. The exercise included revising the
sales team to provide stronger links with clients, and
a marketing program for its re-structured product
range. The focus is now on risk management
and strategic management products, as well as a
continual development of ABR’s on-line domestic
and international reporting products.
National Tenancy Database (NTD) exceeded
projections with a 16% increase in revenue.
A 22% increase in customer usage suggests there
will be further growth in this specialist market
during 2004/05.
Challenges during the past year included:
adverse media coverage of activities by another
company in the industry; announcement of a
Federal Government review of the use of tenancy
databases; and introduction of tighter legislative
controls by the Queensland Government.
None of the developments is likely to adversely
affect NTD which is well regarded and respected for
its business practices.
Other Services
Rapid Ratings (RR) is well positioned to capture
growing demand for independent rating research in
Australia and around the globe.
RR was the first rating agency to obtain an
Australian Financial Services (AFS) licence from ASIC
and is now rating more than 15,000 companies in
Australia, Canada, New Zealand, Singapore and the
United States of America.
RR announced a number of significant developments
during the year and developed a number of new
products in response to client demand.
Human Resources
Staff numbers were further reduced from 753 in
2002/03 to 692 at the end of 2003/04. With staff
numbers now stabilised, the focus has moved
to improving efficiencies, streamlining operating
procedures and developing programs for managing
human resources issues.
Succession planning and employee development
has been a priority with the inclusion of a Future
Leaders team in a revised management structure.
This team will be involved in projects throughout
the Company, giving them a better understanding
of both operations and strategy across the Group.
Communication is an important aspect of human
resource management in a large and diverse
company. A staff intranet homepage was introduced
at the end of the year to improve the two-way flow
of information at all levels and in all divisions.
Collection House recruitment strategies were
revised during the year to attract more female
applicants. More than 55% of the Company
workforce is now female and there is an increasing
proportion of women in senior management
positions in our Australasian operations. There is
also a greater focus on work / life balance including
more flexible working hours.
The employee share scheme was re-introduced
along with other staff benefits including a corporate
health plan. Further benefits will be considered in
order to attract and retain high quality staff.
In-house training programs have been bolstered.
Initially, the emphasis has been on refining the on-
line training system and course packages to meet
departmental requirements. This on-line system
is integral to programs that require all staff to be
familiar and compliant with such requirements as
the Uniform Consumer Credit Code (UCCC) and the
Privacy Act. It delivers not only training modules,
but allows ongoing evaluation of standards.
We will continue to review training systems to
ensure that we are getting the best from our most
important and valuable asset – our people.
Compliance
Collection House continued during the year to
enhance compliance mechanisms and to promote a
culture of compliance in the organisation.
This was achieved by:
more closely integrating the training and
compliance functions and formalising the
refresher training program;
making compliance a regular topic of all
management meetings for collection staff;
continuing to build community and industry
relationships through the Key Stakeholder
Contact Program;
systems; upgrades to our client on-line access
products; and enhanced time-saving integration
between systems.
To enhance productivity and efficiency within
Collection House’s support divisions, the HEAT task
management and service delivery utility has been
installed in Technology, Accounting, Compliance,
Legal and Sales with Human Resources soon
to follow.
Outlook
I am confident that we will see a stronger first half
this year thanks to the momentum we carry out of
2003/04.
We will maintain a tight rein on costs and continue
to look to improve the return on assets. With
improved profitability we should see consistently
solid results throughout the coming year.
I expect modest growth in the Contingent
Collection Services division on the back of sound
relationships with quality clients.
The purchased debt segment will enjoy strong
growth and margins should improve both here and
in contingent collections.
The credit reporting segment should improve
again in 2004/05 and there is good reason to be
optimistic about the potential of Rapid Ratings.
Generally, I look to 2004/05 as a year of even
greater opportunity for Collection House Limited
than was 2003/04.
John Pearce
Managing Director &
Chief Executive Officer
transferring dispute handling for the Account
Asset Management division to the Compliance
Department for closer integration with other
complaints handling processes;
continuing to provide feedback to managers
and staff from call monitoring;
further refining policies and procedures and
more closely aligning the training program
with them; and
resolving the certification requirements for
the Professional Practices Management
System (PPMS) to clear the way for Collection
House to undertake the industry-specific,
international quality certification process
in 2004/05.
Collection House was subject to numerous audits
by key clients during the year and passed all tests.
Feedback from the Key Stakeholder Contact
Program indicates that improvements in our
operational performance continue to be noted in
the market place.
Information Technology
The program of IT systems rationalisation continued
during the year with a significant number of servers
consolidated, cutting associated operating and
maintenance costs.
Data integrity and storage systems continue to be
upgraded with a large proportion of production
data now on our new Hitachi Systems 9570
SAN which provides highly available and secure
data storage in an enterprise-class centralised
solution. As part of our Business Continuity
Plan Development Program, Collection House is
investigating the viability of installing a second SAN
device at our disaster recovery site, to enable real
time synchronisation of all core business data.
This and projects such as a successful pilot
implementation of thin-client desktop technology,
position the Company well for the years ahead.
Retirement or redeployment of older IT assets is
expected to deliver further cost savings during
2004/05, as is the restructuring of our Wide Area
Network (under implementation) and renegotiation
of telephony carrier agreements in late 2004.
The in-house programming team implemented
several innovative productivity-driven enhancements
to our proprietary collection system such as:
enhanced data washing of customer information
to ensure accuracy; password unification between
page 8
page 9
The Board of Collection House Limited
1. Dennis Punches BSc
4. John Pearce FAIM, FAICM
Chairman
Managing Director & Chief Executive Officer
Appointed to the Board in July 1998, and in
2000 as its Chairman. Chairman of the Board’s
Nominations Committee and a member of the
Remuneration Committee. 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.
Former director of Attention LLC, Inc and Analysis
and Technology, Inc and co-founder and former
Chairman of Payco American Corporation. Resides
in Florida, USA. Age 68.
2. Tony Aveling FAIM, FAIBF, FAICD
Deputy Chairman
Independent Director
Board member since May 2000 and member of
the Audit & Risk Management Committee, the
Nominations Committee and the Remuneration
Committee. Prior positions 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. Honorary Governor for
the Science Foundation for Physics, University of
Sydney and past Chairman of the Australian Finance
Conference. Resides in Queensland and New South
Wales, Australia. Age 61.
3. Barrie Adams PSM, FCPA, PSM
Lead Independent Director
Appointed to the Board in November 2002 and
as Chairman of the Audit & Risk Management
Committee in January 2003. Member of both the
Nominations and the Remuneration Committees.
Chairman of CITEC Business Enterprise Board,
NuCashew Limited, Pro Super Holdings Limited and
Financial Basics Foundation. Director of Corporate
Influences Pty Ltd, Ingeus Limited and NuPlant
Limited. Chairman of the Risk and Audit Committee
of Ingeus Limited. Chairman of the Professional
Standards Committee for CPA Australia. Resides in
Queensland, Australia. Age 59.
Co-founder of Collection House and appointed to
the Board in April 1993. In April 2003 returned to
former position of Managing Director &
Chief Executive Officer which he held from
mid 1998 until December 2002. Director of all
Collection House subsidiaries and the Financial
Basics Foundation. Chairman of the Brisbane Lions
Foundation. Member of the International Fellowship
of Certified Collectors. Resides in Queensland,
Australia. Age 59.
5. Barry Connelly BJ
Independent Director
Appointed in June 2003 to the Board of Collection
House. Subsidiary board appointments to Australian
Business Research and Rapid Ratings in September
2003 and November 2003 respectively, the first
of which as Chairman. Charter member of the
board of NASDAQ listed company, First Advantage.
Retired President of the international Consumer
Data Industry Association and former member of
the Texas House of Representatives. Past board
member of the Merchants Research Council,
Charter Bank-Willowbrook. Resides in Texas and
Maine, USA. Age 64.
6. Tony Coutts
Executive Director
Subsequent to initial posting as General Manager
of Collection House in 1995, appointed as
an Executive Director to the Collection House
Board in September 1998 with current executive
responsibilities as Director of Sales. Queensland
State President of the Australian Collectors
Association. Twenty years’ experience in the finance
and insurance industries including 18 years with
Australian Guarantee Corporation Ltd. Resides in
Queensland, Australia. Age 45.
7. Bo Göranson
Independent Director
Director since May 2000. Non-executive director
of Intrum Justitia AB. Director of Travel Focus Ltd
(UK), Amfa Finans AB (Sweden), Market Maker AB
(Sweden) and Redab Fulcull Ltd (UK). Past Chief
Executive Officer and Chairman of Intrum Justitia.
Resides in London, England. Age 66.
8. Bill Hiller
Independent Director
Director since June 2003 and
member of the Nominations and
the Audit & Risk Management
Committees. Some 40 years’
experience in the automotive finance
industry including prior position as
General Manager – Automotive Finance
for St George Bank Limited. Former
directorships include St George Motor
Finance Limited, Autobytel.com.au Pty Ltd,
the Australian Finance Conference and Cycle
& Carriage Finance Limited. Resides in Perth,
Australia. Age 65.
5.
9. Bill Kagel
Independent Director
Joined the Board in February 2000 and appointed
Chairman of the Remuneration Committee in
June 2003. Over 40 years’ debt collection industry
experience as a former director of Outsourcing
Solutions Inc and co-founder and Senior Vice-President
- Production for Payco American Corporation. Resides
in Wisconsin, USA. Age 67.
10. Stephen Walker
Non-Executive Director
Co-founder of Collection House and member of the
Board since July 1992. Former Collection House
Managing Director until 1998. Past member of
the Audit & Risk Management Committee and
former director of National Revenue Corporation
Pty Ltd. Has owned and managed debt collection
agencies in both Australia and New Zealand.
Resides in Queensland, Australia. Age 53.
Committees
Audit & Risk Management:
Barrie Adams (Chairman),Tony Aveling,
Bill Hiller
Nominations:
Dennis Punches (Chairman),
Barrie Adams, Bill Hiller, Tony Aveling
Remuneration:
Bill Kagel (Chairman), Dennis Punches,
Barrie Adams, Tony Aveling
10.
6.
9.
7.
3.
2.
1.
4.
8.
page 10
page 11
Financial Basics Foundation
Corporate Governance
Foundation dream: to ensure that all Australians leaving the secondary education system
The members of the Board, its management and staff are committed to sound
have an understanding of the credit system and financial management practices, so that
corporate governance policies and practices in all aspects of the Company’s business
they can make informed decisions on their financial affairs.
activities to ensure that it is a professional, ethical company with the highest of
Collection House Foundation changed its name
during the first half of 2004 to Financial Basics
Foundation. Board members believe that the new
name more clearly communicates the Foundation’s
mission and will be more recognisable.
The growing awareness and recognition of financial
literacy as an important life skill was highlighted this
year with the establishment of a Federal Government
taskforce to develop a national strategy for provision
of consumer and financial literacy information and
education. There has been considerable discussion
about the importance of financial literacy, particularly
for young people, and how to best provide this type
of information. The Foundation has been actively
involved in these discussions and will continue to
advocate for the inclusion of financial literacy as part
of school curriculum.
In 2003, the Foundation funded programs in which
15 schools in four states developed and trialled
financial literacy courses. In 2004, information
gathered from the pilots was used to re-develop
curriculum material with the assistance of Business
Educators Australasia Inc. and Enterprise New
Zealand Trust. The result will be an integrated
package called “Operation Financial Literacy”.
The package will include a hardcopy student
portfolio and an electronic teacher’s manual
covering nine core modules with topics such as:
Income; Budgeting; Credit and Borrowing; Financial
Protection; Saving and Investing; Taxation; and
Planning for your Future.
Schools involved in the pilot program will receive a
copy of the revised Operation Financial Literacy by
October 2004 and other schools will have access to
it, free of charge, by January 2005.
The Bank of Queensland has recognised the
potential of the Foundation’s work and the key role
the finance industry can play in addressing issues
associated with financial literacy and has agreed
to become a Corporate Partner of the Foundation
from August 2004. Financial Basics Foundation and
the Bank of Queensland will work together on a
number of projects over the next three years.
During the year the Board appointed Ann McArdle
as Financial Administrator for the Foundation,
and Katrina Birch as the National Development
Manager. Ann’s accounting background and
Katrina’s extensive experience in not-for-profit
organisations made these appointees ideally suited
for their Foundation roles.
In June 2004 Mr Leigh Matthews, coach of the
Brisbane Lions Australian Football Club was appointed
Patron of the Foundation. Leigh will also continue to
serve as a director on the Foundation Board.
A Glance Back and a Look Forward
2004 was about creating a quality financial literacy
resource and establishing a three-year business
and strategic plan that will ensure the growth and
development of the Foundation well beyond the
delivery of a single program.
In 2005 the Foundation will deliver the Operation
Financial Literacy program and continue to review
and assess it with a view to developing modules
covering such topics as: Gambling; Youth Mobile
Phone Debt; Scam Awareness and Philanthropy.
The Foundation also plans to develop Operation
Financial Literacy to become an accredited pre-
vocational course and to work with financial
counsellors and community agencies in delivering
the program in a broader community context.
The Foundation was first registered in December
2001. Collection House has remained the major
donor of funding to the Foundation whose aim is
to provide financial education and awareness about
the industry in which Collection House operates.
Financial Basics Foundation is a registered charity
under Australian taxation legislation.
Foundation Board
Chairman
Barrie Adams
Directors
Julie Tealby, Rhonda King, John Pearce, Leigh Matthews
standards in compliance and conduct.
The Company has a strong culture of compliance
and is dedicated to the pursuit of excellence in its
stewardship across all levels of the organisation to
ensure the long-term sustainability of the Company
and indeed, for the express purpose of improving
returns on shareholders’ investments.
Integrating the philosophies behind the Australian
Stock Exchange (ASX) Corporate Governance
Guidelines and Principles into all work practices
throughout the organisation, not just at board level,
delivers an environment that strives for, and achieves,
transparency and honesty in business practice.
We encourage our shareholders to view supporting
statements and actual policies and procedures
relating to corporate governance processes on the
company website. A more succinct account of these
policies is outlined below.
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 Charter and its Board Functions and Protocols
annexure are posted on the company website. 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; and
monitor committees including the
Audit & Risk Management, Nominations and
Remuneration Committees.
The Board in turn delegates the day-to-day
management of the consolidated Entity’s operations
to the Managing Director & Chief Executive
Officer. To this end, the Managing Director & Chief
Executive Officer of the Company is also a member
of all subsidiary company boards.
While key executives report directly to either the
Managing Director & Chief Executive Officer, or
the Chief Operations Officer, they are required to
submit monthly management reports to the Audit
& Risk Management Committee and the Board so
that directors are apprised of operational issues on
an ongoing basis. A formal charter for delegated
functions to management has been approved by
the Board and a summary is included on the
company website.
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. Meeting attendance by
individual directors is tabled on page 24. Urgent
matters requiring discussion and / or a resolution of
the Board between board meetings are managed
procedurally by a circulating minute program and
conference call links.
An annual meeting by the Board, dedicated to the
review of the Company’s business plan, is to be
conducted over a full day during the period prior
to the Annual General Meeting (AGM), when all
directors of the Board are present in Brisbane.
The Strategic Planning Meeting, as it is known,
is to be based on a formal review of past years’
strategies incorporating changes to the current and
anticipated general economic environment and to
the particular needs of the receivables management
industry. An ongoing review of the strategy is
conducted informally at board meetings and on an
“as needs basis” in order to evaluate the continued
efficacy of that strategy for the coming years and to
make changes as appropriate.
page 12
page 13
Corporate Governance (continued)
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, six are
classified as independent.
While 75% of non-executive directors are
classified as independent directors, there are two
exceptions. Due only to their respective substantial
shareholdings in the Company, Dennis Punches 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
the Company.
Similarly, it affords the Company 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 the Company’s
corporate development. Directors’ experience and
shareholdings as at June 30, 2004 are provided in
greater detail on pages 10-11, and 25 respectively.
While our Chairman, Dennis Punches, is not classed
as 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 valuable and effective Chairman with a scope
well beyond that of other candidates, at either a
national or international level.
The appointment of Barrie Adams, in June 2003
as the lead independent director coupled with
the predominance of non-executive directors,
ensures the Board can operate independently of
executive management and provides for special
professional expertise.
In July 2004, Tony Aveling (an independent director)
was appointed as the Board’s Deputy Chairman,
further ensuring that the effectiveness and influence
of the Company’s independent directors remain at
the forefront of our board meetings.
The roles of Chairman and Chief Executive Officer
are clearly delineated. The office of Chief Executive
Officer is held by John Pearce.
The Nominations Committee determines the criteria
for board membership and reviews the composition
of the Board, nomination of directors and the terms
and conditions of appointment to the Board as it
does for senior executives. Its membership consists
of Dennis Punches (Chairman), Barrie Adams, Bill
Hiller and Tony Aveling (appointed July 2004).
The Chairman considers individual directors’
performances during the year via a performance
evaluation process. The evaluations also extend to
a review of the performance of the Board and each
committee assessing the overall performance of the
Board and each of the committees.
The Board will be evaluating senior executives of
the Company by a formal performance review
assessment each year.
Directors appointed to the Board during the year
and not at an AGM must seek re-election at the
first AGM following their appointment to allow for
shareholder consent.
The Board’s Charter detailing the responsibilities
and composition of the Nominations Committee
and outlining the framework for selection of future
candidates for appointment to the Board is available
for viewing on the company website.
Promoting Ethical and Responsible
Decision-making
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 to act in accordance
with the law are communicated to all employees
across a range of issues through the consolidated
Entity’s accessible on-line policy bulletin board.
Codes of Conduct have been established for
directors and senior executives as they have for
all employees. The Charter also outlines expected
conduct of board members. These documents are
included on the company website.
The Board has also approved a Security Policy
applicable to employees of the Company (including
the Board, board committees, senior executives,
managers and other employees). This policy
specifies the terms on which employees are required
to receive, hold, analyse and / or otherwise deal
with confidential and sensitive information of
the Company.
Since listing, directors and other officers of the
Company have been subject to restrictions under
the Corporations Act 2001 and Listing Rules of the
ASX relating to dealing in securities. In addition to
these obligations, the Company has in place, an
Insider Trading Policy that applies to all staff, with
specific reference to executive staff and directors.
Essentially, trading in the Company’s shares is not
permitted at any time by any person who has in
their possession price-sensitive information, not
available to the market.
Executives need not seek the consent of the
Managing Director & Chief Executive Officer if
shares are being bought through the general
employee share scheme program.
The Managing Director & Chief Executive Officer
has established an executive structure consisting of
a number of strata of management. The Executive
Management Team and the Senior Management
Team comprise key executives who report directly
either to the Managing Director & Chief Executive
Officer or the Chief Operations Officer and who are
charged with providing improved company financial
performance. Each of these executives has signed
a confidentiality agreement and has been notified
of the Company’s Insider Trading Policy and the
dealing in shares restrictions under the Corporations
Act 2001. The further management teams comprise
the General Management Team and the Future
Leaders Team.
The Audit & Risk Management Committee has
established a Compliance Policy and a Risk
Management Policy that have been approved by
the Board and posted on the company website. This
again further assists the directors in ensuring they
and the employees of the Company actively seek to
comply with relevant 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.
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.
Safeguarding Integrity in
Financial Reporting
To safeguard the integrity of financial and
compliance reporting, the Managing Director &
Chief Executive Officer (based on declarations made
by the Chief Financial Officer and other divisional
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 & 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 24.
The Committee meets with the external auditor
of the Company, independently of company
management, at least twice a year. It met nine
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
consideration 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; 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.
page 14
page 15
Corporate Governance (continued)
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. While
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, the Company has maintained
an environment promoting continuous disclosure
to the market, satisfying enhanced disclosure
recommendations. The Board has approved a
Continuous Disclosure Policy that is listed on the
company website. That policy sets out the guiding
principles for company disclosure and those persons
charged with the responsibility and authority to
speak to the ASX, the media or otherwise externally
in relation to the Company’s affairs.
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
Company Secretary is also required to maintain a
material disclosures register that lists all key
market disclosures.
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;
a half yearly report which is available to all
shareholders;
disclosures to the ASX;
the company website
(www.collectionhouse.com.au)
which details corporate information along with
corporate governance disclosure documentation
including the Company’s constitution, board
and committee charters, remuneration policies
and corporate conduct guidelines;
the Board encourages full participation by
shareholders at the AGM 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
attends the AGM and is available to answer
shareholder questions at that meeting;
the Chief Financial Officer and the General
Manager, Corporate Communication &
Marketing being available to meet with and
answer shareholder and analysts queries on
request at any time; and
the Company Secretary is the key contact for
shareholder communication and is required to
answer promptly and factually any queries
from shareholders.
The Board has approved a Shareholder
Communication Guidelines Policy that is contained
on the company website.
Recognising and Managing Risk
The Audit & Risk Management Committee serves
a dual function. These functions comprise the
audit side of its role and also financial risk (risks
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.
The Audit & Risk Management Committee, as part
of its ongoing review, has put forward a proposal
for an internal audit team that will shortly be
considered by the Board.
As part of this strategy, the Managing Director
& Chief Executive Officer has been charged with
maintaining the commitment to risk management
at an operational level throughout the organisation.
To this end, a risk and compliance strategy has been
adopted by the Board and a monthly reporting
system requiring consideration of risks in all
areas of the Company’s operations by senior
management continues.
Formal advice to the Board, via a quarterly report,
is also delivered by the Managing Director & Chief
Executive Officer as part of his monitoring and
reporting responsibilities to the Board. In addition,
the Risk Manager has dual reporting lines: one
to the Audit & Risk Management Committee and
the other to the Chief Operations Officer. The Risk
Manager is responsible for the Company’s risk
management program and a compliance regime that
includes internal monitoring and auditing, complaints
management and best practice policy and procedure.
Major business risks identified and managed are:
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.
Encouraging Enhanced Performance
The Nominations Committee, comprising non-
executive directors Dennis Punches as Chairman,
Bill Hiller, Barrie Adams and Tony Aveling (appointed
July 2004) met three times during the year. The
Committee has adopted a formal charter setting out
its composition, function and responsibilities.
The principle roles of the Committee are to:
consider and make recommendations to
the Company on the composition of, and
criteria for appointment to, the Board and its
subsidiary boards;
make recommendations to the Board in
relation to expected board retirements, and
identify succession planning needs; and
evaluate and make recommendations to
the Board in relation to the performance of
board members and to evaluate the Board’s
performance as a whole.
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 their 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 through the director, the
Board and the Committee evaluation process.
The Company Secretary has the responsibility of
preparing board agendas and coordinating 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, Barrie Adams and Tony Aveling (appointed
July 2004), met twice 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.
The Managing Director & Chief Executive Officer
has elected to continue to not take a salary nor any
other remuneration unless corporate performance
warrants change.
Principles used to determine the nature and
amount of remuneration
The objective of the Company’s executive reward
and seniority framework is to ensure and promote
reward for performance, that is competitive and
appropriate for the results delivered. The framework
aligns executive reward with achievement of
strategic objectives, the creation of value for
shareholders, and conforms to market best practice
for delivery of reward. The Board ensures that
executive reward satisfies the following key criteria
for good governance practices:
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of
effective compensation;
transparency; and
capital management.
page 16
page 17
Corporate Governance (continued)
In consultation with key members of the Board
who have many years industry operational
experience and the Human Resources Manager,
the Company has structured an executive
remuneration framework that is market competitive
and complimentary to the reward strategy of the
organisation through:
Alignment to shareholder interests
- has economic profit as a core component
of plan design
-
focusses on sustained growth in share price
and delivering constant return on assets as
well as focussing the executive on key non-
financial drivers of value
- attracts and retains high calibre executives;
Alignment to program participants interests
-
-
rewards capability and experience
reflects competitive reward for contribution
to shareholder growth
- provides a clear structure for
earning rewards
- provides recognition for contribution.
The framework provides a mix of short and long-
term incentives. As executives gain seniority within
the Group, higher salary and incentives are offered.
Non-Executive Directors
Fees and payments to non-executive directors
reflect the demands that are made on, and the
responsibilities of, the directors. Payments are
allowed for additional responsibilities for board
chairmanship, deputy chairmanship, the lead
independent director role and for membership of
board committees and subsidiary boards.
The Chairman has voluntarily reduced his fee to
$50,000 per annum as from 1 April 2003. William
Kagel, a non-executive director and the chairperson
of the Remuneration Committee has also waived
the fee normally due to him for this role. Directors’
fees and payments are reviewed annually by the
Remuneration Committee. The Committee’s
recommendations are forwarded for approval by
the Board. Non-executive directors do not receive
share options.
Non-executive directors fees are determined within
an aggregate directors’ fee pool limit, which is
periodically recommended for shareholder approval.
The total maximum currently stands at $500,000 as
approved at the AGM held on 9 October 2002.
Executive Directors’ Payments
Remuneration for executive directors is reviewed on
an annual basis.
The current base remuneration of Tony Coutts was
reviewed in December 2003 when he reduced the
hours of his position. In 2000, an option agreement
was put in place for Tony providing the issue of
options for 500,000 shares at an exercise price of
$1 per share. The options are exercisable at the rate
of 100,000 per annum and may only be exercised
if he remains employed with the Company. The
terms of the option agreement were disclosed in
the Prospectus.
John Pearce, the Managing Director & Chief
Executive Officer elected to receive no remuneration
during the 2003/04 financial year and this situation
will continue in the coming financial year.
Retirement Allowances for Directors
There are no retirement allowances paid to non-
executive directors.
Executive Remuneration
Executive remuneration comprises:
a base salary;
incentives provided through the employee
share plan and the executive option plan; and
other remuneration such as superannuation.
The Board has recently approved a new
performance evaluation for senior executives. Each
senior executive’s performance is reviewed at least
annually against agreed key performance indicators.
Changes in seniority and executive reward are
based on the results of this evaluation.
Participation in the employee share plan is based on
a simple formula applying to seniority and length
of employment.
Participation in the option plan is via board
approval. The Managing Director & Chief Executive
Officer first prepares a list of executives and their
proposed level of participation in the plan. The
nominees and the level of options to be issued are
based on performance. That list is referred to the
Remuneration Committee for review. The final list
of nominees and their participation level in the plan
is recommended by the Remuneration Committee
to the Board for consideration prior to final
approval. Options in the past have been issued on
the basis of individual performance. The option plan
has been reviewed and future options will
B Doherty – Chief Collections Officer
agreement terminable by either party on three
months’ notice;
annual base salary of $175,000.
M Thomas – Chief Information Officer
agreement terminable by either party on three
months’ notice;
annual base salary of $175,000.
M Watkins – Corporate Counsel
agreement terminable by either party on three
months’ notice;
annual base salary of $235,000.
M Stanton – Consultant
Chief Financial Officer until 31 December 2003;
Salary while Chief Financial Officer was
$290,909 per annum;
Remained as a consultant to the Company
until 30 June 2004;
Payments as a consultant were $100 gross per
hour worked for the Company during the
six-month period of the consultancy.
be issued with not only individual performance
being considered but also with company
performance targets to be achieved before options
may be exercised.
The Remuneration Committee reviews the terms of
the option plan on an annual basis.
Service Agreements
Remuneration and other terms of employment for
the Managing Director & Chief Executive Officer,
Executive Director - Sales, Chief Financial Officer
and other executives are formalised in employment
agreements. Major provisions of these agreements
are set out below:
J M Pearce – Managing Director &
Chief Executive Officer
agreement terminable by either party on three
months’ notice;
entitlement to any salary has been waived.
A F Coutts – Executive Director – Sales
agreement terminable by either party on three
months’ notice;
base salary reviewed and agreed with the
Board in December 2003. Salary prior
to review was $353,250 per annum and
following review was agreed at $183,161 per
annum effective from 1 January 2004;
options provided by separate option
agreement entered into in 2000, the terms of
which were disclosed in the Prospectus.
A Ralston – Chief Financial Officer
agreement terminable by either party on three
months’ notice;
annual base salary of $190,000 (appointed
Chief Financial Officer on 8 June 2004).
C Day – Chief Operations Officer
agreement terminable by either party on three
months’ notice;
annual base salary of $190,000 from the date
of his appointment as Chief Operations Officer
(appointed on 8 June 2004).
C Stewart – General Manager, Corporate
Communication & Marketing
agreement terminable on 12 months’ notice
by the Company or one months’ notice by
the employee;
annual base salary of $160,000 (commenced
employment on 12 January 2004).
page 18
page 19
Corporate Governance (continued)
Director and Executive Payments
Details of the nature and amount of each element of emoluments of each director of the Company, the five
executives of the consolidated Entity receiving the highest emoluments, and the four executives over and above this
with the greatest authority for the strategic direction and management of the consolidated Entity, are set out below:
Base
salary
$
Options
issued1
$
Bonus
$
Superannuation
$
Non-cash
benefits
$
Total
$
Directors
Non-executive
D G Punches2
A R Aveling
B E Adams
D B Connelly
B S Göranson
W L Hiller
W W Kagel
S Walker
Executive
J M Pearce3
Managing Director &
Chief Executive Officer
A F Coutts4
Executive Director
50,000
50,000
96,519
44,038
40,000
50,000
40,000
40,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79
4,500
4,343
59
59
4,500
69
3,600
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
52,310
56,731
103,693
46,328
42,290
56,731
42,300
45,831
-
3,257
3,257
282,278
180,000
-
30,790
3,257 496,325
Executive officers of the consolidated Entity – highest remuneration (excluding directors)
M Watkins5
General Counsel
253,076
15,998
-
22,777
3,257 295,108
M Stanton5,6
-
220,931
Chief Financial Officer (to 31 December 2003 and consultant until 30 June 2004)
12,798
15,105
3,257
252,091
G Cameron5
M Easy5
M Thomas5
173,285
171,965
150,000
15,998
-
19,197
-
-
-
12,980
11,996
13,500
205,658
3,395
3,257 187,218
2,231
184,928
Executive officers of the consolidated Entity – responsible for strategic direction (excluding directors)
C Day5
Chief Operations Officer (commenced 8 June 2004)
126,307
12,798
B Doherty5
Chief Collections Officer
136,983
19,197
-
-
12,808
27,785 179,698
13,598
3,257 173,035
C Stewart
General Manager, Corporate Communication & Marketing (commenced 12 January 2004)
65,030
-
-
6,369
A Ralston
Chief Financial Officer (commenced 8 June 2004), General Manager, Finance (commenced 29 October 2003)
107,182
11,444
-
-
2,231 73,630
8,190 126,816
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. That reduction continued through the 2003/04
financial year.
3 Mr Pearce opted to receive no remuneration effective 8 April, 2003. That request continued through the 2003/04 financial year.
4 Mr Coutts exercised 100,000 options in October 2003 at an exercise price of $1 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 2002/03 calculation, the benefit to Mr Coutts on the exercise of his options
is included as the relevant value.
5 These executives were entitled to participate in the Company’s executive option plan and were issued options during the year. The details are disclosed below.
6 Salary for Mr Stanton includes salary of $175,787 to 31 December 2003 and consultancy fees of $45,144 to 30 June 2004.
page 20
Share Options Granted to Directors and Executives
Options over unissued ordinary shares of the Company granted during or since the end of the financial year to
any of the directors and the executives listed above as part of their remuneration are:
Issued to
M Watkins
M Stanton
G Cameron
M Easy
M Thomas
C Day
B Doherty
C Stewart
Issue date
Exercise price
per share
Number of
shares
Expiry
date
Exercised
1 September 2003
1 September 2003
1 September 2003
1 September 2003
1 September 2003
1 September 2003
1 September 2003
22 July 2004
$1.18
$1.18
$1.18
$1.18
$1.18
$1.18
$1.18
$1.18
25,000
20,000
25,000
20,000
30,000
20,000
30,000
20,000
30 June 2004
30 June 2004
30 June 2004
30 June 2004
30 June 2004
30 June 2004
30 June 2004
30 June 2005
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Shares Under Option
Unissued shares of the Company under option at the time of this report are:
Issued to
A F Coutts
A F Coutts
Executives1
Issue date
Exercise price
per share
Number of
shares
14 July 2000
14 July 2000
22 July 2004
$1.00
$1.00
$1.18
100,000
100,000
20,000
220,000
Expiry
date
3 November 2004
3 November 2005
30 June 2005
1 Options were issued under the Company 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 the Company were issued during the year ended 30 June 2004 on the exercise
of options. A further 20,000 shares have been issued since the end of the year. The amount unpaid under loans
to employees under the employee loan scheme to purchase company shares, as at 30 June 2004, was $120,235.
Issue date of options
14 July 2000
1 September 2003
Issue price of shares
Number of shares issued
$1.00
$1.18
100,000
555,000
Recognising the Legitimate Interest of Stakeholders
The Board has adopted a Code of Conduct for directors and senior executives that requires officers of the
Company to promote and encourage ethical behaviour. Officers of the Company must not engage in conduct
that is either illegal or would have an adverse affect on the reputation of the Company. The Board has also
adopted a charter that links corporate goals and compliance to community interests and requires the Company
to behave as a good corporate citizen.
Collection House contributes to the youth of Australia through its financial support for the Financial
Basics Foundation.
The Company not only recognises the interests of key stakeholders, but actively seeks their constructive
contribution to the development of the Company, including through its Stakeholder Contact Program.
page 21
Directors’ Report
for the year ended 30 June 2004
Directors’ Report
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 (the Entity) at the
end of, or during, the year ended 30 June 2004 and the auditor’s report thereon.
Directors
The following persons were directors of the Company during the financial year:
D G Punches
A R Aveling
B E Adams
J M Pearce
D B Connelly
A F Coutts
B S Göranson
W L Hiller
W W Kagel
S Walker
Additional information about each of the directors is included on pages 10 and 11.
Principle activities
The principle 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:
2004
In respect of the current financial year:
Paid and declared during the year:
Final 2003 dividend of 1.0 cent per share fully franked
[Final 2002 dividend of 8.0 cents fully franked] paid on 28 November 2003
Interim 2004 dividend of 3.0 cents per share unfranked
[Interim 2003 dividend of 4.5 cents fully franked] paid on 18 March 2004
Paid or declared after end of year:
Final 2004 dividend of 4.0 cents per share unfranked payable on 26 November 2004
$‘000
966
2,902
3,868
3,875
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
Credit
collection services management reporting
Inter-segment
Other eliminations /
services
unallocated Consolidated
2004
$’000
$’000
$’000
$’000
Sales to external customers 46,353
6,009
Inter-segment sales
42,666
-
23,790
272
3,719
-
$’000
-
(6,281)
$’000
116,528
-
Total sales revenue
52,362
42,666
24,062
3,719
(6,281)
116,528
Company overview
The consolidated Statement of Financial Performance, shows a consolidated net profit of $10.6m, compared to
$8.2m in 2003. This represents an increase of 30%.
A strong performance was recorded by the credit reporting segment with a segment result of $3.1m
($0.9m in 2003).
The consolidated Entity’s net assets increased by 10% to $90.4m.
The consolidated revenue for the period decreased by 1.7% to $117.9m. Revenue continues to confirm
Collection House as one of Australasia’s two dominant receivables management companies.
As foreshadowed in the 2003 Annual Report, staffing levels have been contained. At the end of the financial
year there were 692 staff compared with 753 the previous year. Staffing costs decreased to $36.6m
($43.7m in 2003).
During the year savings were realised in telecommunication, postage, printing, advertising, occupancy and
travel. The program of cost containment and reduction will continue in the coming year and further savings
are expected.
Capital expenditure was significantly reduced in 2004 from $5.7m to $2m. The consolidated Entity also
undertook a reassessment of the useful life of its plant and equipment resulting in an extension to the useful life
of some of these assets by 12 months.
The consolidated Entity has provided an additional $0.6m for bad and doubtful debts.
The consolidated Entity acquired debt ledgers for a total cost of $27.9m, ($28.5m in 2003). The purchases were
made from operating cash flow. During the year the Entity reduced its borrowings by $1.4m compared with an
increase in 2003 of $22.4m. Cash flow from operations increased to $32.1m ($30.5m in 2003).
During the year, current assets decreased by $2.7m, current liabilities decreased by $2m and current receivables
decreased by $3.3m to $17.1m.
The consolidated Entity has enjoyed the benefits of a period of consolidation in 2004 following two years of
heavy acquisition activity. The Board has confirmed its confidence in Collection House’s current and future
trading position. In line with dividend policy, the Board has declared an unfranked final dividend of 4.0 cents,
payable on 26 November 2004. With the unfranked interim dividend of 3.0 cents paid in March 2004, the total
dividend for 2003/04 is 7.0 cents per share.
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 2003, the parent Entity acquired a further 5.9% of the issued share capital of Collection House
Business Diagnostics Pty Ltd.
2. On 1 December 2003, the parent Entity acquired a further 11% of the issued capital of CHIP No.1 Pty Ltd
and Insurance Claims Solutions Pty Ltd.
3.
The Entity entered into the tax consolidation regime effective from 1 July 2003. This resulted in a minor
decrease in deferred tax assets due to the reset of balances on entering tax consolidation.
Other revenue
160
67
847
9
265
1,348
4.
The consolidated Entity purchased $172m face value of debt for $27.9m.
Total segmental revenue
52,522
42,733
24,909
3,728
(6,016)
117,876
Events subsequent to reporting date
Segment result
6,956
12,334
3,134
(2,243)
1,637
21,818
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
(6,537)
15,281
(5,056)
10,225
(416)
10,641
A final unfranked dividend has been declared of 4.0 cents for a total of $3.9m. 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.
page 22
page 23
Directors’ Report
for the year ended 30 June 2004
Likely Developments
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 2004, is as follows:
D G Punches
A R Aveling
B E Adams
J M Pearce
D B Connelly
A F Coutts
B S Göranson
W L Hiller
W W Kagel
S Walker
Collection House Limited
Ordinary shares
14,011,665
250,000
-
14,146,730
20,000
3,934,000
4,772,427
5,200
500,000
6,750,000
Options
-
-
-
-
-
200,000
-
-
-
-
The benefits of cost reduction will be fully realised in the new financial year. Modest growth is expected in the
contingent collection services division while the account asset management segment will continue its growth
trend. Margins should improve in both segments. The improvement of margins in the credit reporting segment
should continue with profit and revenue performance expected to be even better in the new financial year.
Rapid Ratings and Insurance Claims Solutions are expected to make an improved contribution in the year ahead.
It is the Company’s intention to further promote Australian Business Research’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.
During the next financial year, the Company and all of its controlled entities will continue planning and
preparation for the adoption of international financial reporting standards required effective from 1 July 2005.
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.
Directors’ Meetings
The number of meetings of the Company’s board and of each board committee held during the year ended 30 June
2004, and the numbers of meetings attended by each director of the Company during the financial year were:
Board Meetings
Circulating Minutes
Number held
Number distributed
while a member
Number attended
while a member
Number voted on
by director
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
6
D G Punches
A R Aveling
B E Adams
J M Pearce
D B Connelly
A F Coutts
B S Göranson
W L Hiller
W W Kagel
S Walker
6
6
6
6
6
6
6
6
6
6
Audit & Risk Management Committee Meetings
B E Adams
A R Aveling
W L Hiller
9
9
9
Nominations Committee Meetings
D G Punches
B E Adams
W L Hiller
3
3
3
Remuneration Committee Meetings
W W Kagel
B E Adams
D G Punches
2
2
2
5
6
6
6
6
6
5
5
6
5
9
9
8
3
3
3
2
2
2
page 24
page 25
Directors’ Report
for the year ended 30 June 2004
Directors’ and Executives’ Disclosures
Principles used to determine the nature and amount of remuneration
The objectives of the Company’s executive reward and seniority framework is set out in detail in the
Remunerating Fairly and Responsibly section of the Corporate Governance Statement of this Report on page 17.
Director and executive payments
Details of the nature and amount of each element of emoluments of each director of Collection House Limited
and the five executives of the consolidated Entity receiving the highest emoluments are set out below:
Bonus
Superannuation
Base
salary
$
Options
issued1
$
50,000
50,000
96,519
44,038
40,000
50,000
40,000
40,000
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
Non-cash
benefits
$
Total
$
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
52,310
56,731
103,693
46,328
42,290
56,731
42,300
45,831
$
79
4,500
4,343
59
59
4,500
69
3,600
-
3,257
3,257
Directors
Non-executive
D G Punches2
A R Aveling
B E Adams
D B Connelly
B S Göranson
W L Hiller
W W Kagel
S Walker
Executive
J M Pearce3
Managing Director &
Chief Executive Officer
A F Coutts4
Executive Director
Executive officers of the consolidated Entity – highest remuneration (excluding directors)
M Watkins5
General Counsel
253,076
15,998
-
22,777
3,257 295,108
M Stanton5,6
-
220,931
Chief Financial Officer (to 31 December 2003 and consultant until 30 June 2004)
12,798
15,105
3,257
252,091
G Cameron5
M Easy5
M Thomas5
173,285
171,965
150,000
15,998
-
19,197
-
-
-
12,980
11,996
13,500
205,658
3,395
3,257
187,218
2,231 184,928
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. That reduction continued through the 2003/04
financial year.
3 Mr Pearce opted to receive no remuneration effective 8 April, 2003. That request continued through the 2003/04 financial year.
4 Mr Coutts exercised 100,000 options in October 2003 at an exercise price of $1 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 2002/03 calculation, the benefit to Mr Coutts on the exercise of his options
is included as the relevant value.
5 These executives were entitled to participate in the Company’s executive option plan and were issued options during the year. The details of these options
are disclosed below.
6 Salary for Mr Stanton includes salary of $175,787 to 31 December 2003 and consultancy fees of $45,144 to 30 June 2004.
Share Options Granted to Directors and Executives
Options over unissued ordinary shares of the Company 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
M Watkins
M Stanton
G Cameron
M Easy
M Thomas
Issue date
Exercise price
per share
Number of
shares
Expiry
date
Exercised
1 September 2003
1 September 2003
1 September 2003
1 September 2003
1 September 2003
$1.18
$1.18
$1.18
$1.18
$1.18
25,000
20,000
25,000
20,000
30,000
30 June 2004
30 June 2004
30 June 2004
30 June 2004
30 June 2004
Yes
Yes
Yes
No
Yes
Shares Under Option
Unissued shares of the Company under option at the time of this report are:
Issued to
A F Coutts
A F Coutts
Executives1
Issue date
Exercise price
per share
Number of
shares
14 July 2000
14 July 2000
22 July 2004
$1.00
$1.00
$1.18
100,000
100,000
20,000
220,000
Expiry
date
3 November 2004
3 November 2005
30 June 2005
1 Options were issued under the Company 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.
The following ordinary shares of the Company were issued during the year ended 30 June 2004 on the exercise
of options. A further 20,000 shares have been issued since the end of the year. The amount unpaid under loans
to employees under the employee loan scheme to purchase company shares, as at 30 June 2004, was $120,235.
Issue date of options
14 July 2000
1 September 2003
Issue price of shares
Number of shares issued
$1.00
$1.18
100,000
555,000
Indemnification and Insurance of Officers
During the financial year, Collection House Limited paid premiums of $75,855 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.
282,278
180,000
-
30,790
3,257 496,325
Shares Issued on the Exercise of Options
page 26
page 27
Directors’ Report
for the year ended 30 June 2004
Proceedings on Behalf of the Company
No person has applied to the Courts under section 237 of the Corporations Act 2001 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 and
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 Marshall Pearce
Managing Director & Chief Executive Officer
Brisbane, 25 August 2004
Financial Statements
for the year ended 30 June 2004
..
Table of Contents
Statements of Financial Performance
Statements of Financial Position
Statements of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report to the Members of Collection House Limited
30
31
32
33
70
71
page 28
page 29
Financial Statements
for the year ended 30 June 2004
Statements of Financial Performance
Statements of Financial Position
Revenue from rendering of services
Other revenues from ordinary activities
Total revenue from ordinary activities
Expenses from ordinary activities, excluding
borrowing costs expense
Borrowing costs
Profit from ordinary activities before
related income tax expense
Income tax (expense) / benefit
relating to ordinary activities
Note
4
4
4
5(a)
5(b)
Consolidated
The Company
2004
$’000
2003
$’000
116,528
1,348
119,336
518
2004
$’000
47,917
9,815
2003
$’000
54,334
11,593
117,876
119,854
57,732
65,927
(99,229)
(106,059)
(46,994)
(60,773)
(3,366)
(2,494)
(3,267)
(2,484)
15,281
11,301
7,471
2,671
6(a)
(5,056)
(3,778)
301
2,244
Profit from ordinary activities after related
income tax expense / (benefit)
Profit from extraordinary item after
related income tax expense
10,225
7,523
7,772
4,915
-
-
-
-
Net profit
10,225
7,523
7,772
4,915
Net (profit) / loss attributable to
outside equity interests
Net profit attributable to members
of the Company
Non-owner transaction changes in equity:
Net exchange difference relating to
self-sustaining foreign operations
23
416
674
-
-
21
10,641
8,197
7,772
4,915
20
268
43
-
-
Total revenues, expenses and valuation adjustments
attributable to members of the Company
recognised directly in equity
268
43
-
-
Total changes in equity from non-owner
related transactions attributable to
members of the Company
24
10,909
8,240
7,772
4,915
Basic earnings per share
Diluted earnings per share
cents
11.01
10.98
cents
8.51
8.49
7
7
The above statements of financial performance are to be read in conjunction with the accompanying notes to the financial statements.
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
Consolidated
The Company
2004
$’000
4,697
17,114
2,211
1,113
2003
$’000
4,430
20,371
2,236
766
2004
$’000
150
17,919
1,918
683
2003
$’000
53
21,288
1,760
453
25,135
27,803
20,670
23,554
79
86,872
-
11,782
10,241
28,071
4,982
51
-
70,680
99
14,877
9,215
29,573
5,009
438
78,219
-
21,844
8,826
-
11,974
3,739
29
50,270
-
21,717
11,197
-
12,846
1,063
438
Note
8
9(a)
10(a)
9(b)
11
12
13
14
15
6(c)
10(b)
Total non current assets
142,078
129,891
124,631
97,531
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
167,213
157,694
145,301
121,085
16(a)
17(a)
18(a)
16(b)
17(b)
6(b)
18(b)
7,364
2,919
206
1,900
9,801
1,945
487
2,123
12,389
14,356
-
44,129
19,991
306
-
45,456
15,220
510
2,497
2,825
-
1,562
6,884
3,507
44,108
18,581
259
4,173
697
-
1,773
6,643
1,751
45,262
428
487
Total non current liabilities
64,426
61,186
66,455
47,928
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total Company interest
Outside equity interests
Total equity
76,815
75,542
73,339
54,571
90,398
82,152
71,962
66,514
19(a)
20
21
23
24
66,757
524
23,626
65,213
256
16,853
66,757
-
5,205
65,213
-
1,301
90,907
82,322
71,962
66,514
(509)
(170)
-
-
90,398
82,152
71,962
66,514
The above statements of financial position are to be read in conjunction with the accompanying notes to the financial statements.
page 30
page 31
Financial Statements
for the year ended 30 June 2004
Statements of Cash Flows
Notes to the Financial Statements
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Note
Cash flows from operating activities
Cash receipts in the course of operations
118,078
126,273
48,333
80,691
Cash payments in the course of operations
(82,485)
(90,606)
(44,287)
(58,313)
Dividends received
Interest received
Borrowing costs paid
Income taxes paid
Net cash provided by / (used in)
operating activities
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 intangible assets
Payments for purchased debt
35,593
35,667
4,046
22,378
2
400
(3,366)
(548)
-
268
(2,494)
(2,913)
-
492
-
183
(3,267)
(2,483)
714
(89)
33(b)
32,081
30,528
1,985
19,989
799
50
(127)
(1,991)
(50)
41
-
(7,297)
(5,689)
(88)
(27,888)
(28,492)
8
50
(127)
(384)
(5)
-
(79)
7
-
(7,297)
(3,586)
(88)
6,248
82
Other cash flows from investing activities
(71)
271
Net cash used in investing activities
(29,278)
(41,254)
(537)
(4,634)
Cash flows from financing activities
Proceeds from issue of shares
1,544
100
1,544
100
Proceeds from borrowings
Repayment of borrowings
Loans advanced to related parties
Repayment of loans to related parties
Dividends paid
-
26,424
-
26,365
(1,398)
-
-
(63)
-
(3,973)
(1,218)
(64)
-
-
(27,225)
(3,973)
(3,868)
(11,928)
(3,868)
(11,928)
Net cash provided by financing activities
(3,722)
10,560
(3,542)
(16,725)
Net increase / (decrease) in cash held
Cash at the beginning of the financial period
Effects of exchange rate fluctuations on the
balances of cash held in foreign currencies
(919)
2,879
(166)
3,002
(2,094)
(352)
(1,370)
1,018
141
43
-
-
Cash at the end of the financial period 33(a)
2,101
2,879
(2,446)
(352)
The above statements of cash flows are to be read in conjunction with the accompanying notes to the financial statements.
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
The financial report is a general purpose financial report which has been prepared in accordance with
Accounting Standards, Urgent Issues Group Consensus Views, and other authoritative pronouncements of
the Australian Accounting Standards Board and the Corporations Act 2001.
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,
unless otherwise stated, 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.
Interest
Interest received is recognised as it accrues, taking into account the effective yield on the financial asset.
page 32
page 33
Notes to the Financial Statements
for the year ended 30 June 2004
Note 1
Statement of significant accounting policies (continued)
Note 1
Statement of significant accounting policies (continued)
(d) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of 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, except where:
-
relating to amounts payable or receivable in foreign currency forming part of a net investment in a self-
sustaining foreign operation. In this case, the exchange difference, together with any related income
tax expense / benefit, is transferred to the foreign currency translation reserve on consolidation; and
-
relating to acquisition of qualifying assets (see Note 1(f)).
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,
until the disposal or partial disposal, of the operations.
The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of,
or partially disposed of, is transferred to retained profits in the year of disposal.
(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.
Tax consolidation legislation
Collection House Limited and its wholly owned Australian controlled entities have decided to implement
the tax consolidation legislation as of 1 July 2003. The ATO has not yet been notified of this decision.
As a consequence, the Company as head Entity in the tax-consolidated Group, recognises all of the
current and deferred tax assets and liabilities of the tax-consolidated Group (after elimination of
intra-Group transactions).
The tax-consolidated Group has entered into a tax funding agreement that requires wholly owned
subsidiaries to make contributions to the head Entity for:
-
-
deferred tax balances recognised by the head Entity on implementation date, including the impact of
any relevant reset tax cost bases; and
current tax assets and liabilities and deferred tax balances arising from external transactions occurring
after the implementation of tax consolidation.
Under the tax funding agreement, the contributions are calculated on a “stand-alone basis” so that the
contributions are equivalent to the tax balances generated by external transactions entered into by wholly
owned subsidiaries. The contributions are payable as set out in the agreement and reflect the timing of
the head Entity’s obligations to make payments for tax liabilities to the relevant tax authorities. The assets
and liabilities arising under the tax funding agreement are recognised separately as tax-related amounts
receivable or payable with a consequential adjustment to income tax expense / revenue.
(h) Acquisition 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.
page 34
page 35
Notes to the Financial Statements
for the year ended 30 June 2004
Note 1
Statement of significant accounting policies (continued)
Note 1
Statement of significant accounting policies (continued)
(j) Receivables
(p) Other intangibles
The collectibility 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.
(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 amortised 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.
Licences and intellectual property are recorded at cost and are not amortised where they will not lose value
from use, be consumed or depreciate.
All costs associated with the maintenance and protection of these assets are expensed in the period incurred.
(q) 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.
(r) Depreciation and amortisation
Property, plant and equipment is depreciated / amortised using the straight line method over their
estimated useful lives taking into account estimated residual values.
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
Term of Lease
4 to 8 years
3 to 5 years
4 to 10 years
Term of Lease
4 to 8 years
3 to 4 years
4 to 10 years
2004
2003
(s) Employee benefits
Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries and 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 employee 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.
page 36
page 37
Notes to the Financial Statements
for the year ended 30 June 2004
Note 1
Statement of significant accounting policies (continued)
Note 2
Changes in accounting policies (continued)
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 defined contribution superannuation
plans. Contributions are expensed in the period to which they relate.
(t) Trade and other creditors
These amounts represent liabilities for goods and services provided to the Company and controlled entities
prior to balance date and which are unpaid. The amounts are unsecured and are usually paid within 60
days of recognition.
(u)
Interest bearing liabilities
All borrowings are recognised at their principal amounts which represent the present value of future cash
flows associated with servicing the debt. Interest expense is accrued over the period it becomes due, is
recorded at the contracted rate and included as part of “Other creditors and accruals”.
(v) 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. The unwinding of the discount is treated as part of the expense related to the particular provision.
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.
(w) 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
Changes in accounting policies
(a) Managing the transition to Australian equivalents to International Financial Reporting
Standards (AIFRS)
The transition to AIFRS is under the control of the Chief Financial Officer, including training of staff and
systems and internal control changes necessary to gather the required information. Those involved in
the preparation of the Company’s financial statements have familiarised themselves with the AIFRS and
assessed the potential impact of adopting AIFRS on the accounting policies used in the preparation of the
Company’s financial statements.
The following actions will be taken to manage the transition to AIFRS and to address the key differences in
accounting policies that are expected to arise from the adoption of AIFRS.
2004/05
(i) During 2004/05 the Company will restate its assets and liabilities as at 1 July 2004 to comply
with AIFRS.
(ii) During the 2005/06 Budget process, budget financial statements for the Company will be prepared in
accordance with AIFRS.
2005/06
(i)
(ii)
The Company will implement AIFRS on 1 July 2005 by adjusting the opening 1 July 2005 Statement
of Financial Position system accounts to reflect the recast AIFRS figures and commence accounting
treatments using AIFRS.
The Company will report under AIFRS requirements for the half year ended 31 December 2005,
and the year ended 30 June 2006, meaning that the financial reports for those periods and all
comparatives will be prepared using AIFRS.
(b) Key differences in accounting policies expected to arise from the adoption of AIFRS
Based on its assessment, the Company expects the following key differences in accounting policies to arise
in the following areas from the adoption of AIFRS:
-
-
-
-
asset carrying values (including intangibles);
income tax;
financial instruments; and
equity based compensation benefits.
The above should not be regarded as a complete list of changes in accounting policies that will result from
the transition to AIFRS as some decisions have not yet been made where choices of accounting policies
are available. For these reasons it is not possible to quantify the impact of the transition to AIFRS on the
Group’s financial position and reported results.
Note 3
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, Credit Reporting, and Other Services.
Business Segments
The consolidated Entity comprises the following main business segments, based on the consolidated Entity’s
management reporting system:
-
-
-
-
Contingent Collection Services (the earning of commissions on the collection of debts for clients);
Account Asset Management (the collection of debts from client ledgers acquired by the Company);
Credit Reporting (the provision of consumer credit enquiry information on a fee-for-service basis); and
Other Services (includes insurance claims services and corporate risk rating. None of these activities
consititutes a separately reportable segment).
An additional segment called “Other Services” has been added to reflect the growing significance of the
insurance claims services and corporate risk rating businesses. These segments have previously been included in
the Contingent Collection Services and Credit Reporting segments respectively. Both of these businesses were in
a startup phase in previous years, and not significant enough to warrant separate disclosure. These businesses
have grown to a point where the Contingent Collection Services segment and the Credit Reporting segment
would be distorted by their inclusion.
The prior year comparatives have been restated to reflect this change.
page 38
page 39
Notes to the Financial Statements
for the year ended 30 June 2004
Note 3
Segment information (continued)
Note 3
Segment information (continued)
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The Company operates primarily in two geographical areas: Australia and New Zealand.
Accounting policies
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 provisions. While 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 costs 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.
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.
page 40
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page 41
s
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S
Notes to the Financial Statements
for the year ended 30 June 2004
Note 4
Revenue from ordinary activities
Note 5
Profit from ordinary activities before related income tax expense (continued)
Rendering of services revenue from operating activities 116,528
119,336
47,917
54,334
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Other revenues:
From operating activities
Interest:
Other parties
Related parties
From outside operating activities
Gross proceeds from sale of non current assets
Dividends
Rent received
Other
Total other revenues
358
42
400
849
2
3
94
1,348
243
25
268
41
1
-
208
518
340
152
492
58
9,200
2
63
9,815
119
64
183
7
11,366
-
37
11,593
Total revenue from ordinary activities
117,876
119,854
57,732
65,927
Note 5
Profit from ordinary activities before related income tax expense
(a) Expenses from ordinary activities, excluding borrowing costs expense, included in the statement
of financial performance classified by nature:
Employee expenses
(36,560)
(43,720)
(20,402)
(27,253)
Depreciation and amortisation expenses
(17,527)
(19,441)
(3,631)
Search fees
Direct collection costs
Insurance claims costs
Net bad and doubtful debts expense including
movements in provision for doubtful debts
Operating lease rental expense representing
minimum lease payments
Other expenses from ordinary activities
(4,599)
(420)
(14,476)
(12,822)
(464)
(14,648)
(13,155)
(15,064)
(16,821)
(2,771)
(825)
-
-
(1,186)
(1,334)
(943)
(1,167)
(3,470)
(8,591)
(3,472)
(11,291)
(2,329)
(4,161)
(2,626)
(7,887)
(99,229)
(106,060)
(46,994)
(60,773)
(b) Profit from ordinary activities before income tax expense has been arrived at after charging /
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
(crediting) the following items:
Depreciation of:
Leasehold improvements, plant and equipment
Purchased debt
Amortisation of:
Goodwill
Other intangibles
Leased plant and equipment
3,885
11,861
4,655
13,025
15,746
17,680
1,619
142
20
1,781
1,535
123
103
1,761
2,722
-
2,722
751
142
16
909
3,411
200
3,611
763
123
102
988
Total depreciation and amortisation
17,527
19,441
3,631
4,599
Borrowing costs:
Related parties
Other parties:
-
-
-
Bank loans and overdraft
Other borrowings
Finance charges on capitalised leases
Net (gain) / loss on disposal:
Property, plant and equipment
Write down of other non current assets
to recoverable amount
(c) Revision of accounting estimates
Plant and equipment
63
226
-
226
3,286
17
-
3,366
2,230
13
25
2,494
3,267
-
-
3,267
(599)
(9)
10
213
-
213
2,235
13
10
2,484
(7)
-
During the year, the estimated total useful lives to the Company and its controlled entities of certain items
of computer equipment and software were revised. The net effect of the changes in the current financial
year was a decrease in the depreciation expense of the consolidated Entity of $817,461 and the Company
of $735,569.
Assuming the assets are held until the end of their estimated useful lives, depreciation of the consolidated
Entity and of the Company in future years in relation to these assets will be (increased) / decreased by the
following amounts:
Consolidated
The Company
Year ending 30 June
2005
2006
2007
2008
2009
Deferred tax balances
$’000
312
(477)
(608)
(337)
(8)
$’000
287
(458)
(541)
(327)
(4)
As a consequence of the enactment of the Tax Consolidation legislation, the Company, as the head Entity
in a tax-consolidated group implementing tax consolidation from 1 July 2003, has applied UIG 52 Income
Tax Accounting under the Tax Consolidation System.
page 42
page 43
Notes to the Financial Statements
for the year ended 30 June 2004
Note 5
Profit from ordinary activities before related income tax expense (continued)
Note 6
Taxation (continued)
Where assets have had their tax value reset under tax consolidation, the subsidiary-related deferred tax balances
recognised in the Company and the consolidated Entity have been determined based on the tax-consolidated
Group carrying amount for the subsidiaries less the reset tax bases. For other assets and liabilities, the subsidiary-
related deferred tax balances recognised in the Company and the consolidated Entity have been determined
based on the previous timing differences at the level of the tax-consolidated Group. The consolidated Entity has
reflected all adjustments in income tax expenses as it has elected not to open past acquisition accounting. Future
acquisition accounting will take deferred tax balances into account.
The effect of implementing tax consolidation and of applying UIG 52 at 1 July 2003 was:
-
-
an increase in deferred tax assets transferred
from wholly owned subsidiaries in the tax-consolidated Group
an increase in deferred tax liabilities transferred from wholly
owned subsidiaries in the tax-consolidated Group
-
a corresponding increase in inter-company receivables
The effect for the year ended 30 June 2004 has been:
-
-
-
-
-
a decrease in deferred tax assets
an increase / (decrease) in current tax liabilities
an increase / (decrease) in current inter-company receivables
an increase in non current inter-company receivables
an increase in deferred tax liabilities
Note 6
Taxation
The Company
$’000
2,576
(13,176)
10,600
54
(507)
507
4,812
(4,866)
(a)
Income tax expense / (benefit)
Prima facie income tax expense / (benefit) calculated
at 30% (2003:30%) on the profit / (loss) from
ordinary activities
Increase in income tax expense due to:
Non-deductible depreciation and amortisation
Sundry items
Effect of higher rates of tax on overseas income
Income tax expense related to current and deferred
tax transactions of the wholly owned subsidiaries
in the tax-consolidated Group
Decrease in income tax expense due to:
Recovery of income tax expense under a
tax funding agreement
Non-assessable inter-company dividends from
members of the tax-consolidated Group
Rebateable dividend
Sundry items
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
4,585
3,390
2,242
801
460
246
10
429
112
65
-
-
-
-
-
-
-
-
-
(218)
332
30
-
5,742
(5,742)
(2,760)
297
67
-
-
-
-
-
-
(3,409)
-
Income tax expense on the profit from ordinary activities
before individually significant income tax items
5,301
3,778
(156)
(2,244)
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
-
-
-
-
5,301
(245)
3,778
-
10,600
(10,600)
(156)
(145)
-
-
(2,244)
-
5,056
3,778
(301)
(2,244)
Individually significant income tax items:
Net deferred tax balances recognised by the head
Entity in relation to wholly owned subsidiaries
within the tax-consolidated Group upon
implementation of tax consolidation
Recovery of income tax expense under a tax funding
agreement at transition
Income tax under / (over) provided in prior year
Income tax expense / (benefit) attributable to
profit from ordinary activities
Income tax expense / (benefit) attributable to
profit from ordinary activities is made up of:
Current income tax provision
Deferred income tax provision
Future income tax benefit
408
5,192
(299)
Tax related receivables from wholly owned subsidiaries
-
Under / (over) provision in prior year
(245)
2,144
5,660
(4,026)
-
-
5,056
3,778
359
5,012
216
(5,743)
(145)
(301)
-
(1,764)
(480)
-
-
(2,244)
(b) Deferred tax liabilities
Provision for deferred income tax
Provision for deferred income tax comprises the
estimated expense at the applicable rate of
30% (2003:30%) for Australian entities and the
relevant rates for foreign entities
(c) Deferred tax assets
Future income tax benefit
Future income tax benefit comprises the estimated
future benefit at the applicable rate of 30%
(2003:30%) for Australian entities and the relevant
rates for foreign entities
Tax losses
The part of the future income tax benefit shown
above that relates to income tax losses is
19,991
15,220
18,581
428
4,982
5,009
3,739
1,063
4,225
4,221
153
157
The future income tax benefit of tax losses recognised in the deferred tax asset balance at 30 June 2004
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 affect the relevant company and / or the consolidated entity in
realising the benefit.
page 44
page 45
Notes to the Financial Statements
for the year ended 30 June 2004
Note 7
Earnings per share
Note 8
Cash assets
Basic earnings per share
Diluted earnings 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 director and executive share options on issue
Weighted average number of diluted shares
Consolidated
2004
cents
11.01
10.98
2003
cents
8.51
8.49
Consolidated
2004
$’000
10,225
416
10,641
2003
$’000
7,523
674
8,197
Consolidated
2004
2003
number
number
96,627,658
95,415,639
276,745
200,612
96,904,403
95,616,251
On 1 September 2003, 970,000 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 250,693.
On 24 October 2003, 100,000 options issued to an executive director were converted to ordinary shares. Details
relating to the options are set out in Note 29. 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 28,519.
At various dates during the financial year 555,000 executive share options were converted to ordinary shares.
Details relating to the options are set out in Note 29. 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 70,343.
Consolidated
The Company
Note
33(a)
2004
$’000
4,697
4,697
2003
$’000
4,430
4,430
Cash at bank and on hand
Note 9
Receivables
(a) Current
Trade debtors
Less: provision for doubtful trade debtors
Other debtors
Loans to controlled entities
Other loans1
(b) Non current
Loans to controlled entities
Other loans1
17,909
(1,753)
17,967
(1,187)
16,156
16,780
786
-
172
3,449
-
142
2004
$’000
150
150
8,878
(1,163)
7,715
1,033
8,999
172
2003
$’000
53
53
7,668
(838)
6,830
932
13,384
142
17,114
20,371
17,919
21,288
-
79
79
-
-
-
78,140
79
50,270
-
78,219
50,270
1Other 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.
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled entities.
Note 10
Other assets
(a) Current
Other deposits
Prepayments
(b) Non current
Other
Note 11
Purchased debt
Purchased debt - at cost
Accumulated depreciation
332
781
1,113
51
51
250
516
766
438
438
126,187
(39,315)
98,053
(27,373)
86,872
70,680
241
442
683
29
29
-
-
-
210
243
453
438
438
-
-
-
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled entities.
Note 12
Other financial assets
Non current
Non-traded investments
Shares in controlled entities - at cost
Interests in other entities - at cost
27(a)
-
-
-
-
99
99
21,844
-
21,717
-
21,844
21,717
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled entities.
page 46
page 47
Notes to the Financial Statements
for the year ended 30 June 2004
Note 13
Property, plant and equipment
Note 13
Property, plant and equipment (continued)
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
The Company
2004
$’000
426
(87)
339
2003
$’000
2004
$’000
2003
$’000
383
(60)
323
335
(71)
264
296
(56)
240
17,715
(9,814)
17,618
(7,359)
14,913
(8,243)
14,745
(6,132)
7,901
10,259
6,670
8,613
35
(4)
31
508
(440)
68
6,546
(3,035)
6,544
(2,317)
3,511
4,227
-
-
-
3,900
(2,008)
1,892
8,826
484
(387)
97
3,690
(1,443)
2,247
11,197
Total property, plant and equipment net book value 11,782
14,877
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled entities.
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
Disposals
Depreciation
Carrying amount at end of year
Plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Transfers
Depreciation
Acquisition through entities acquired
323
51
(8)
(27)
339
10,259
212
(17)
17
(2,570)
-
101
235
-
(13)
323
10,122
3,308
(156)
-
(3,164)
149
240
40
-
(16)
264
8,613
134
(18)
81
(2,140)
-
101
148
-
(9)
240
8,617
2,630
-
-
(2,634)
-
Carrying amount at end of year
7,901
10,259
6,670
8,613
Leased plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Transfers
Amortisation
Carrying amount at end of year
68
-
-
(17)
(20)
31
222
56
-
(107)
(103)
68
97
-
-
(81)
(16)
-
189
10
-
-
(102)
97
Consolidated
The Company
Computer software
Carrying amount at beginning of year
Additions
Depreciation
Disposals
2004
$’000
2003
$’000
4,227
710
(1,287)
(139)
4,081
1,624
(1,478)
-
Carrying amount at end of year
3,511
4,227
Total property, plant and equipment net book value 11,782
14,877
Note 14
Databases
Databases
10,241
10,241
9,215
9,215
2004
$’000
2,247
211
(566)
-
1,892
8,826
-
-
2003
$’000
2,141
873
(767)
-
2,247
11,197
-
-
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 arms length transaction, having regard to the highest and best
use of the asset for which other parties would be willing to pay.
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled Entities.
Note 15
Intangible assets
Goodwill – at cost
Other intangibles
Accumulated amortisation
32,008
2,063
34,071
(6,000)
31,805
2,040
33,845
(4,272)
14,911
444
15,355
(3,381)
14,910
444
15,354
(2,508)
28,071
29,573
11,974
12,846
Refer to Note 17 for information on non current assets pledged as security by the Company or its controlled Entities.
Note 16
Payables
(a) Current
Trade creditors
Other creditors and accruals
(b) Non current
2,840
4,524
7,364
3,695
6,106
9,801
744
1,753
2,497
1,354
2,819
4,173
Loans from controlled entities
-
-
3,507
1,751
page 48
page 49
Notes to the Financial Statements
for the year ended 30 June 2004
Note 17
Interest bearing liabilities
Note 18
Provisions
(a) Current
Bank overdraft (secured)
Other loans (secured)
Hire purchase liabilities
Lease liabilities
(b) Non current
Bank loans (secured)
Other loans (secured)
Hire purchase liabilities
Note
25
25
25
Consolidated
The Company
2004
$’000
2,596
229
94
2003
$’000
1,551
275
102
-
17
2004
$’000
2,596
229
-
-
2,919
1,945
2,825
2003
$’000
405
275
-
17
697
44,016
92
21
44,940
321
195
44,016
92
-
44,941
321
-
44,129
45,456
44,108
45,262
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 offset facility (secured)
Bank loan (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Total facilities utilised at balance date
Bank overdraft (secured)
Bank offset facility (secured)
Bank loan (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Total facilities not utilised at balance date
Bank overdraft (secured)
Bank offset facility (secured)
Bank loan (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
-
5,000
-
60,000
872
265
5,000
-
45,000
-
630
814
-
5,000
-
60,000
500
150
5 ,000
-
45,000
-
630
517
66,137
51,444
65,650
51,147
-
2,596
-
44,016
711
115
1,551
-
44,940
-
239
314
-
2,596
-
44,016
314
-
405
-
44,940
-
239
17
47,438
47,044
46,926
45,601
-
2,404
-
15,984
161
150
3,449
-
60
-
391
500
-
2,404
-
15,984
186
150
4,595
-
60
-
391
500
18,699
4,400
18,724
5,546
(a) Current
Employee benefits
Other
(b) Non current
Employee benefits
Note
29
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
1,737
163
1,919
204
1,509
53
1,900
2,123
1,562
2003
$’000
1,693
80
1,773
29
306
510
259
487
Consolidated
2004
$’000
The Company
2004
$’000
Reconciliations
Reconciliations of the carrying amounts of each class of provision, except for employee benefits are set out below:
Other
Carrying amount at beginning of year
Provisions made during the year
Payments made during the period
Carrying amount at end of year
Note 19
Contributed equity
204
278
(319)
163
80
261
(288)
53
Consolidated
The Company
Note
2004
$’000
2003
$’000
2004
$’000
2003
$’000
(a) Share capital
96,876,381 (2003: 95,423,503)
ordinary shares, fully paid
(b) Movements in ordinary share capital
66,757
65,213
66,757
65,213
Details
Number of shares
Issue price
$’000
Balance at the beginning of year
Shares issued under the employee share ownership plan
Exercise of options pursuant to the
Executive Director share option plan
Exercise of options pursuant to the Executive share option plan 555,000
-
Transaction costs from issue of shares
95,423,503
100,000
797,878
Balance at end of year
96,876,381
(c) Ordinary shares - terms and conditions
-
$1.06
$1.00
$1.18
-
65,213
846
100
655
(57)
66,757
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.
Refer to Note 29 for details of shares issued on exercise of options.
page 50
page 51
Notes to the Financial Statements
for the year ended 30 June 2004
Note 20
Reserves
Note 22
Dividends (continued)
Consolidated
The Company
Note
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Foreign currency translation reserve
524
256
-
Movements during the year
Foreign currency translation reserve
Balance at beginning of year
Net exchange difference relating to self-sustaining
foreign operations
Balance at end of year
Nature and purpose of reserves
256
213
268
524
43
256
-
-
-
-
-
-
-
Foreign currency translation 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(e).
Note 21
Retained profits
Retained profits at beginning of year
Net profit attributable to members of the Company
Net effect on dividends from:
16,853
10,641
12,958
8,197
1,301
7,772
688
4,915
Initial adoption of AASB 1044
“Provisions, Contingent Liabilities and
Contingent Assets”
Dividends recognised during the year
-
22
(3,868)
7,626
(11,928)
-
(3,868)
7,626
(11,928)
Total dividends
(3,868)
(4,302)
(3,868)
(4,302)
Retained profits at end of year
23,626
16,853
5,205
1,301
Note 22
Dividends
Dividends recognised in the current year by the Company are:
Cents Total amount
$’000
per share
Date of
payment franking credit
Tax rate for Percentage
franked
2004
Interim 2004 – ordinary
Final 2003 – ordinary
Total amount
2003
Interim 2003 – ordinary
Final 2002 – ordinary
3.0
1.0
2,902
966
18 March 2004
28 November 2003
30%
30%
NIL
100%
3,868
4.5
8.0
4,306
7,622
20 March 2003
24 November 2002
30%
30%
100%
100%
Total amount
11,928
Subsequent events
Since the end of the financial year, the directors have declared the following dividends:
Final 2004 – ordinary
4.0
3,875
30%
NIL
The financial effect of this dividend has not been brought to account in the financial statements for the year
ended 30 June 2004 and will be recognised in subsequent financial reports.
The Company
2004
$’000
2003
$’000
Dividend franking account
Franking credits available to shareholders of Collection House Limited for subsequent
financial years based on a tax rate of 30% (2003:30%)
-
-
The above available amounts are based on the balance of the dividend franking account at year end adjusted for:
(a)
(b)
(c)
(d)
franking credits that will arise from the payment of the amount of the current provision for income tax;
franking debits that will arise from the payment of dividends recognised as a liability at year end;
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date;
and
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.
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
2004
$’000
2003
$’000
(443)
(416)
(859)
350
-
(509)
45
(674)
(629)
459
-
(170)
Total equity at beginning of year
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
Consolidated
The Company
Note
2004
$’000
2003
$’000
2004
$’000
2003
$’000
82,152
80,866
66,514
65,801
10,909
8,240
7,772
4,915
22
1,544
(3,868)
(339)
100
1,544
(4,302)
(2,752)
(3,868)
-
100
(4,302)
-
Total equity at end of year
90,398
82,152
71,962
66,514
page 52
page 53
Notes to the Financial Statements
for the year ended 30 June 2004
Note 25
Commitments
Note 26
Contingent liabilities and contingent assets
Consolidated
The Company
Note
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
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
129
-
-
129
-
-
-
-
-
-
-
-
Investments
During the year the Company entered into an agreement to purchase a further 17.4% of the share capital of
a controlled entity over a specified period of time. The future obligations under this agreement have not been
provided for in the financial report and are payable:
Within one year
One year or later and no later than five years
100
200
100
200
-
-
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
Hire purchase provided for in the financial statements:
Current
Non current
17(a)
17(b)
Total hire purchase commitments
300
-
300
99
22
-
121
6
115
94
21
115
125
199
-
324
27
297
102
195
297
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Details of contingent liabilities and contingent assets
where the probability of future payments or 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.
(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 (secured) exist in respect of
satisfactory contract performance in the normal
course of business for a controlled entity.
(c)
The Company is having on going discussions with
the ACCC regarding some accounts handled by
Collection House as long as four years ago.
Collection House has fully cooperated and complied
with the ACCC’s requests for the provision of
information and documents over the past two years.
This issue remains unresolved. No specific provision
has been raised in the accounts to cover any of
the above matters.
711
239
314
239
In the directors’ opinion disclosure of any further information about the above matter would be prejudicial to the
interest of the Company. These events have been notified to our insurers under the professional indemnity policy.
The directors are not aware of any other matters.
Non-cancellable operating lease payment commitments
Future operating lease commitments are payable:
Within one year
One year or later and no later than five years
Later than five years
3,180
4,440
-
2,470
4,570
-
2,575
3,183
-
1,902
3,634
-
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)
Total lease commitments
7,620
7,040
5,758
5,536
-
-
-
-
-
-
-
-
-
17
-
-
17
-
17
17
-
17
-
-
-
-
-
-
-
-
-
17
-
-
17
-
17
17
-
17
page 54
page 55
Notes to the Financial Statements
for the year ended 30 June 2004
Note 27
Controlled entities (continued)
Note 28
Additional financial instruments disclosure
Ordinary shares, consolidated equity interest
2003
%
2004
%
(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
CHIP No.1 Pty Ltd 1
Collection House ALR Pty Ltd 1
Collection House Business Diagnostics Pty Ltd 1
Jones King Lawyers Pty Ltd (formerly Collection House Legal Services Pty Ltd)
Collection House Technologies Pty Ltd
Colpro Pty Ltd
Countrywide Mercantile Services Pty Ltd
Downie Insolvency Unit Trust (formerly Downie & Associates Unit Trust)
Insurance Claims Solutions Pty Ltd
Lion Finance Pty Ltd
Midstate Credit Management Services Pty Ltd
National Revenue Corporation Pty Ltd
National Tenancy Database Pty Ltd
R W Receivables Pty Ltd
Rapid Ratings Pty Ltd
Rent Check Australia Pty Ltd 1
The Creditfax (Aust) Pty Ltd 1
Controlled entities - incorporated in New Zealand
abr.nz Limited (formerly New Zealand Business Research Limited)
Collection House (NZ) Limited
Lion Finance Limited
National Revenue Corporation Limited 1
New Zealand Creditors Association Limited 1
1 These controlled entities have not traded during the financial year.
100
100
100
100
100
100
71
100
73
100
100
100
100
100
71
100
100
100
100
100
73
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
67
100
100
100
100
100
60
100
100
100
100
100
67
100
100
100
100
100
100
100
(b) Acquisition of controlled entities
On 1 July 2003 the Company accquired a further 5.9% of the issued share capital of Collection House
Business Diagnostics Pty Ltd.
On 1 December 2003 the Company accquired a further 11% of the issued share capital of CHIP No. 1 Pty
Ltd and Insurance Claims Solutions Pty Ltd.
Collection House
Business Diagnostics Pty Ltd
$’000
CHIP No.1 Pty Ltd
$’000
Insurance Claims
Solutions Pty Ltd
$’000
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 / (discount) on consolidation
Consideration
101
-
101
182
1,980
(130)
(2,572)
(540)
(508)
(32)
133
101
21
-
21
-
500
-
-
500
445
55
(34)
21
5
-
5
561
542
(243)
(1,769)
(909)
(809)
(100)
105
5
(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:
2004
Fixed interest maturing in:
Weighted
average
interest rate
%
Notes
Floating
interest
1 year 1 to 5
years
$’000
rate or less
$’000
$’000
Financial assets
Cash assets
Receivables
Other current assets
Purchased debt
8
9(a), 9(b)
10(a)
11
4.17%
6.00%
3.47%
-
4,690
-
-
-
-
172
332
-
4,690
504
16
Financial liabilities
Payables
Hire purchase liabilities 17(a), 17(b)
Bank overdraft
Other loans
Bank loans
Employee benefits
17(a), 17(b)
18(a), 18(b)
17(b)
17(a)
-
7.80%
8.25%
5.55%
6.08%
-
-
-
2,596
-
44,016
-
-
94
-
229
-
-
-
79
-
-
79
-
21
-
92
-
-
Net financial assets (liabilities)
(41,922)
181
(34)
46,612
323
113
More than
Non-
interest
5 years bearing
$’000
$’000
Total
$’000
-
4,697
7
- 16,942 17,193
781 1,113
-
- 86,872 86,872
- 104,602 109,875
-
-
-
-
-
-
-
-
7,364
7,364
-
115
- 2,596
321
-
- 44,016
2,043
2,043
9,407 56,455
95,195 53,420
2003
Fixed interest maturing in:
Weighted
average
interest rate
%
Notes
Floating
interest
1 year 1 to 5
years
$’000
rate or less
$’000
$’000
Financial assets
Cash assets
Receivables
Other current assets
Purchased debt
Other financial assets
8
9(a), 9(b)
10(a)
11
12
3.58%
6.00%
4.45%
-
-
4,376
-
-
-
-
-
142
250
-
-
4,376
392
-
-
-
-
-
-
Financial liabilities
Payables
16
Hire purchase liabilities 17(a), 17(b)
Lease liabilities
Bank overdraft
Other loans
Bank loans
Employee benefits
17(a)
17(a), 17(b)
17(b)
18(a), 18(b)
17(a), 17(b)
-
7.95%
7.61%
8.00%
4.80%
5.39%
-
-
-
-
1,551
-
44,941
-
-
102
17
-
275
-
-
-
195
-
-
321
-
-
More than
Non-
interest
5 years bearing
$’000
$’000
Total
$’000
4,430
54
-
- 20,229 20,371
-
766
516
- 70,680 70,680
99
99
-
-
91,578 96,346
-
-
-
-
-
-
-
9,801
9,801
297
-
17
-
1,551
-
-
596
- 44,941
2,429 2,429
Net financial assets (liabilities)
(42,116)
(2)
(516)
- 79,348 36,714
46,492
394
516
- 12,230 59,632
page 56
page 57
Notes to the Financial Statements
for the year ended 30 June 2004
Note 28
Additional financial instruments disclosure (continued)
Note 29
Employee benefits (continued)
(b) Credit risk exposures
Details of options over unissued shares as at the begining and ending date of the financial date and
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
movements during the year are as follows:
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 basis:
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
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Note
Aggregate liability for employee benefits, including on-costs:
Current
Other creditors and accruals
Employee benefit provisions
16(a)
18(a)
375
1,737
-
1,919
203
1,509
Non current
Employee benefit provisions
18(b)
306
510
259
2,418
2,429
1,971
-
1,693
487
2,180
Number of employees
Number of employees at year end
(a) Executive share option plan
692
753
580
496
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 in accordance with terms and conditions specified in
the Company’s Prospectus issued in 2000.
Options are granted under the plan for no consideration. Options are granted for a period not exceeding
12 months, vest immediately and are exercisable one day after the date of the grant. Options granted
under the plan carry no dividend or voting rights.
Each option is convertible to one ordinary share. The directors determine the exercise price. The exercise
price of the options issued in 2003 is based on the average volume weighted share price of the Company’s
shares for the five days trading prior to 30 June 2003.
The exercise price may be payable by the employee either in full on the exercise date or the Company may,
at it’s discretion, lend the employee such monies as is required to complete the share purchase. The terms
of loan funding is as detailed for the Employee Share Ownership Plan following.
The only exception to the above are options issued to one of the executive directors of the Company,
Tony Coutts. Full details of his option agreement were disclosed in the Prospectus issued in 2000 and are
summarised in Note 30 following.
Exercise date
Exercise
start of year
granted
exercised
lapsed
at end of year
at end of year
Grant date
on or after
Expiry date
price
Number
Number
Number
Number
Number
Number
Options at
Options
Options
Options Options on issue Options vested
Consolidated and company 2004
14 Jul 2000
4 Oct 2003
3 Nov 2003
$1.00
100,000
-
(100,000)
14 Jul 2000
4 Oct 2004
3 Nov 2004
$1.00
100,000
14 Jul 2000
4 Oct 2005
3 Nov 2005
$1.00
100,000
31 Dec 2002
1 Jan 2003
31 Dec 2003
$2.51
1,125,000
-
-
-
1 Sep 2003
2 Sep 2003 30 June 2004
$1.18
-
970,000
(555,000)
(415,000)
-
-
-
-
-
-
(1,125,000)
-
100,000
100,000
-
-
-
100,000
100,000
-
-
1,425,000
970,000
(655,000)
(1,540,000)
200,000
200,000
Consolidated and company 2003
14 Jul 2000
4 Oct 2002
3 Nov 2002
$1.00
100,000
14 Jul 2000
4 Oct 2003
3 Nov 2003
$1.00
100,000
14 Jul 2000
4 Oct 2004
3 Nov 2004
$1.00
100,000
14 Jul 2000
4 Oct 2005
3 Nov 2005
$1.00
100,000
31 Dec 2001
1 Jan 2002
31 Dec 2002
$4.17
975,000
-
-
-
-
-
31 Dec 2002
1 Jan 2003
31 Dec 2003
$2.51
-
1,125,000
(100,000)
-
-
-
-
-
-
-
-
-
(975,000)
-
100,000
100,000
100,000
-
-
100,000
100,000
100,000
-
-
1,125,000
1,125,000
1,375,000
1,125,000
(100,000)
(975,000)
1,425,000
1,425,000
Options exercised during the financial year and number of shares issued to employees are as follows:
Exercise date
1 - 31 October 2002
1 - 31 October 2003
1 - 30 November 2003
1 - 31 January 2004
1 - 29 February 2004
1 - 31 March 2004
1 - 30 April 2004
1 - 30 June 2004
Fair value of shares
at issue date
Consolidated
The Company
2004
Number
2003
Number
2004
Number
2003
Number
$177,000
$221,000
$298,500
$267,750
$206,600
$23,225
$11,400
$169,850
-
100,000
-
100,000
125,000
170,000
130,000
90,000
12,500
7,500
120,000
-
-
-
-
-
-
-
125,000
170,000
130,000
90,000
12,500
7,500
120,000
-
-
-
-
-
-
-
655,000
100,000
655,000
100,000
The fair value of shares issued on the exercise of options at their issue date is the market price of shares of the
Company on the Australian Stock Exchange as at close of trading.
The amount disclosed above represents the accumulated fair value of all issues during the represented month.
The amounts recognised in the financial statements of the consolidated Entity and the Company in relation to
share options exercised during the year were:
Employee loans
Bank
Issued capital
Consolidated
The Company
2004
$’000
630
125
755
2003
$’000
-
100
100
2004
$’000
630
125
755
2003
$’000
-
100
100
page 58
page 59
Notes to the Financial Statements
for the year ended 30 June 2004
Note 29
Employee benefits (continued)
(b) Employee share ownership plan
An employee of the Company or its subsidiaries with at least three months’ service is eligible to participate
in the employee share plan in accordance with terms and conditions disclosed in the Prospectus issued
in 2000.
The plan provides for eligible employees to acquire ordinary shares in the Company at a price determined
by the directors. For shares issued under the plan in the current year, the price is a 10% discount to
market price. Market price was determined by reference to the average volume weighted share price of
the Company’s shares for the five business days prior to and including 30 June 2003.
On application, employees must pay application monies of at least 10% of the value of the share offer.
The Company may, at it’s discretion, lend the employee such monies as is required to complete the share
purchase. Interest is charged monthly on outstanding loan balances at a rate determined by the directors,
which is currently 6% per annum. Repayment of the loan balance is required within two years or the
employee’s right to the shares will be forfeited with the current net market price less the outstanding loan
balance refunded to the employee.
The shares vest immediately upon acquisition but are not able to be traded until the later of 90 days from
the acquisition date or the date on which the outstanding loan balance has been fully repaid.
The details of the number of shares issued under this plan and the issue price is set out in Note 19.
The amount recognised in the financial statements of the consolidated Entity and the Company in relation
to employee shares issued during the year were:
Employee loans
Bank
Issued capital
Superannuation plans
Consolidated
The Company
2004
$’000
425
421
846
2003
$’000
-
-
-
2004
$’000
425
421
846
2003
$’000
-
-
-
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.
Note 30
Directors’ and executives’ disclosures
(a) Directors
The following persons were directors of the Company during the financial year:
Non-executive directors
Dennis George Punches (Chairman)
Anthony Robin Aveling (Deputy Chairman)
Barrie Edward Adams (Lead Independent Director)
David Barry Connelly
Executive directors
John Marshall Pearce (Managing Director & Chief Executive Officer)
Anthony Francis Coutts
Bo Sven Göranson
William Leslie Hiller
William Walter Kagel
Stephen Walker
(b) Executives (other than directors) with the greatest authority for strategic direction
and management
The following persons with the greatest authority for the strategic direction and management of the
consolidated Entity (“specified executives”) during the financial year were:
Name
Position
Employer
Adrian Ralston
(from 8 June 2004)
(from 29 October 2003)
Chief Financial Officer
General Manager, Finance
Collection House Limited
Brendan Doherty
Chief Collections Officer
Collection House Limited
Christopher Stewart
(from 12 January 2004)
General Manager
Corporate Communication & Marketing
Collection House Limited
Colin Day
(from 8 June 2004)
Chief Operations Officer
Collection House Limited
Matthew Thomas
Chief Information Officer
Collection House Limited
Michael Watkins
General Counsel
Collection House Limited
Mark Stanton
(resigned 31 December 2003)
Chief Financial Officer
Collection House Limited
(c) Remuneration of directors and executives
Principles used to determine the nature and amount of remuneration
The objective of the Company’s executive reward and seniority framework is to ensure promotion and
reward for performance is competitive and appropriate for results delivered. The framework aligns
executive rewards with achievement of strategic objectives and creation of wealth for shareholders, and
conforms to market best practice for delivery of rewards. The Board ensures that executive reward satisfies
the following key criteria for good governance practices:
-
-
-
-
-
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of effective compensation;
transparency; and
capital management.
In consultation with key members of the Board who have had many years industry operational experience
and the Human Resources Manager, the Company has structured an executive remuneration framework
that is market competitive and complementary to the reward strategy of the organisation.
Alignment to shareholders interests:
-
-
-
has economic profit as a core component of plan design;
focusses on sustained growth in share price and delivering constant return on assets as well as
focussing the executive on key non-financial drivers of value; and
attracts and retains high calibre executives.
page 60
page 61
Notes to the Financial Statements
for the year ended 30 June 2004
Note 30
Directors’ and executives’ disclosures (continued)
Note 30
Directors’ and executives’ disclosures (continued)
Alignment to program participants interests:
rewards capability and experience;
-
reflects competitive reward for contribution to shareholder growth;
-
provides a clear structure for earning rewards; and
-
provides recognition for contribution.
-
The framework provides a mix of short and long-term incentives. As executives gain seniority within the
group, higher salary and incentives are offered.
Non-executive directors
Fees and payments to non-executive directors reflect the demands that are made on, and the
responsibilities of, the directors. Payments are allowed for additional responsibilities for Board
chairmanship, deputy chairmanship, the lead independent director’s role and for membership of Board
committees and subsidiary boards. It should be noted that the Chairman has voluntarily reduced his fee to
$50,000 per annum as from 1 April 2003. William Kagel, a non-executive director and the chairperson of
the Remuneration Committee has also waived the fee normally due to him for this role. Directors’ fees and
payments are reviewed annually by the Remuneration Committee. The Committee’s recommendations are
forwarded for approval by the Board. Non-executive directors do not receive share options.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit which is
periodically recommended for shareholder approval. The total maximum currently stands at $500,000 as
agreed at the Annual General Meeting of the Company held on 9 October 2002.
Executive directors’ payments
Remuneration for executive directors is reviewed on an annual basis.
The current base remuneration of Tony Coutts was reviewed in December 2003 when he reduced the
hours of his position. On 14 July 2000 an option agreement was put in place for Tony providing the issue
of options for 500,000 shares at an exercise price of $1 per share. The options are exercisable at a rate of
100,000 per annum and may only be exercised while he remains employed by the Company. The terms of
the option agreement were disclosed in the Prospectus.
John Pearce, the Managing Director & Chief Executive Officer, elected to receive no remuneration during
the 2003/04 financial year and this situation will continue in the coming financial year.
Retirement allowances for directors
There are no retirement allowances paid to non executive directors.
Executive pay
Executive pay comprises:
-
-
-
base salary;
incentives provided through the employee share plan and the executive share option plan; and
other remuneration such as superannuation.
The Board has recently approved a new performance evaluation for senior executives. Each senior
executive’s performance is reviewed at least annually in accordance with the terms of that evaluation form
together with agreed key performance indicators. Changes in seniority and executive reward are based
on the results of this evaluation. Participation in the employee share plan is based on a simple formula
applying to seniority and length of the employee’s employment.
Participation in the executive share option plan is through Board approval. The Managing Director & Chief
Executive Officer initially prepares a list of executives and their proposed level of participation in the plan.
The nominees and the level of options to be issued are based on performance. This list is referred to the
Remuneration Committee for review. The final list of nominees and their participation level in the plan is
recommended by the Remuneration Committee to the Board for consideration prior to final approval. In
past years, options have been issued solely on the basis of individual performance. The executive share
option plan has been reviewed and future options will be issued with not only individual performance
being considered but also company performance hurdles to be achieved before options may be exercised.
The Remuneration Committee reviews the terms of the executive share option plan on an annual basis.
Details of remuneration
The following tables provide details of remuneration to all directors of the Company and specified executives of
the consolidated Entity, including their personally-related entities, for the year ended 30 June 2004.
Primary
post-employment
Equity
Other
Name
Cash salary
& fees
$
Cash Non-monetary
benefits
$
bonus
$
Superannuation Consultancy
fees
$
benefits
$
Value of
options2
$
insurance
premiums
$
Total
$
Directors of Collection House Limited 2004
D G Punches 50,000
50,000
A R Aveling
B E Adams
96,519
J M Pearce1
D B Connelly 44,038
A F Coutts2,3 282,278
B S Göranson 40,000
50,000
W L Hiller
40,000
W W Kagel
40,000
S Walker
-
-
-
1,026
-
1,026
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79
4,500
4,343
-
59
30,790
59
4,500
69
3,600
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
180,000
-
-
-
-
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
52,310
56,731
103,093
3,257
46,328
496,325
42,290
56,731
42,300
45,831
Total 2004 692,835
-
2,052
47,999
- 180,000
22,310
945,196
Total remuneration of directors of Collection House Limited for the year ended 30 June 2003 is set out below.
Information for individual directors is not shown as this is the first financial report prepared since the issue of
AASB 1046 Director and Executive Disclosures by Disclosing Entities.
Directors of Collection House Limited 2003
9,459
Total 2003
734,331
-
43,681
-
220,000
- 1,007,471
Specified executives of the consolidated Entity 2004
C Day
(Chief Operations Officer from 8 June 2004)
126,307
-
25,554
12,808
- 12,798
2,231 179,698
B Doherty
136,983
-
A Ralston
(commenced on 29 October 2003)
107,182
-
1,026
5,959
13,598
11,444
-
-
19,197
2,231 173,035
-
2,231
126,816
M Stanton
(departed on 30 June 2004)
175,787
-
1,026
15,105
45,144
12,798
2,231
252,091
C Stewart
(commenced on 12 January 2004)
65,030
-
M Thomas
150,000
M Watkins
253,076
Total 2004 1,014,365
-
-
-
-
-
1,026
6,369
-
-
2,231
73,630
13,500
22,777
-
-
19,197
2,231
184,928
15,998
2,231
295,108
34,591
95,601
45,144
79,988
15,617 1,285,306
Total remuneration of specified executives of Collection House Limited for the year ended 30 June 2003 is
set out below. Information for individual executives is not shown as this is the first financial report prepared
since the issue of AASB 1046 Director and Executive Disclosures by Disclosing Entities. In some cases, different
individuals are included than those specified in the year ended 30 June 2004.
Specified executives of the consolidated Entity 2003
Total 20034 1,459,058
-
32,743
126,782
-
272,213
- 1,890,796
1 Mr Pearce elected to receive no remuneration effective 8 April, 2003.
2 Mr Coutts exercised 100,000 options in November 2003 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 2002/03 calculation, the benefit to Mr Coutts on the exercise is
included as the relevant value.
3 Other than the options for Mr Coutts, the fair value of options is calculated at the date of the grant using a Black-Scholes model.
4 Included in cash salary and fees are termination benefits totalling $101,385.
page 62
page 63
Notes to the Financial Statements
for the year ended 30 June 2004
Note 30
Directors’ and executives’ disclosures (continued)
Note 30
Directors’ and executives’ disclosures (continued)
(d) Equity Instruments
Options provided as remuneration
Details of options over ordinary shares in the Company provided as remuneration to each director of
Collection House Limited and each of the specified executives of the consolidated Entity are set out below.
When exercisable each option is convertible into one ordinary share of Collection House Limited. Further
information is set out in Note 29.
Name
Directors of Collection House Limited
Nil
Options granted
during the year
Number
Options vested
during the year
Number
-
-
The options issued to a director of Collection House Limited were granted and vested on 14 July 2000.
The options are exercisable at specified exercise dates. Details of exercise dates are set out in Note 29.
Specified executives of the consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Stanton
M Thomas
M Watkins
20,000
30,000
-
-
20,000
30,000
25,000
20,000
30,000
-
-
20,000
30,000
25,000
All options granted to specified executives were granted on 1 September 2003, had an expiry date of 30 June
2004 and an exercise price of $1.18 per share. 20,000 options have been issued since the end of the financial
year at an exercise price of $1.18 per share and an expiry date of 30 June 2005. The options were provided at
no cost to the recipients.
All options granted to specified executives expire on the earlier of their expiry date or termination of the
individual’s employment. The options are exercisable at any date from the grant date.
Exercise of options granted as remuneration
Details of ordinary shares in the Company provided as a result of the exercise of options to each director of
Collection House Limited and each of the specified executives of the consolidated Entity are set out below:
Number of shares issued on exercise
of options during
the year
Amount paid
$ per share
Name
Directors of Collection House Limited
A F Coutts
Specified executives of the consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Stanton
M Thomas
M Watkins
100,000
20,000
30,000
-
-
20,000
30,000
25,000
$1.00
$1.18
$1.18
-
-
$1.18
$1.18
$1.18
The amount of $23,895 remains to be paid under a loan agreement as at 30 June 2004 on shares issued on the
exercise of options.
page 64
Option holdings
The number of options over ordinary shares in the Company held during the financial year by each director of
Collection House Limited and each of the specified executives of the consolidated Entity, including their
personally-related entities, are set out below:
Name
Balance at
start of year
Number
Granted as
remuneration
Number
Balance at
Exercised Other changes end of year
Number
Number
Number
Directors of Collection House Limited
A F Coutts
300,000
-
(100,000)
-
200,000
Specified executives of the consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Stanton
M Thomas
M Watkins
20,000
30,000
-
-
20,000
30,000
25,000
-
-
-
-
-
-
-
(20,000)
(30,000)
-
-
(20,000)
(30,000)
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vested and
exercisable at
end of year
Number
-
-
-
-
-
-
-
-
Options held by Mr Coutts are vested but not exercisable until 4 October 2004 (100,000) and
4 October 2005 (100,000).
Share holdings
The number of shares in the Company held during the financial year by each director of Collection House
Limited and each of the specified executives of the consolidated Entity, including their personally-related
entities, are set out below:
Name
Balance at
start of the year
Number
Received on
exercise of options
Number
Other changes
during the year
Number
Balance at
end of year
Number
Directors of Collection House Limited
D G Punches
A R Aveling
B E Adams
J M Pearce
D B Connelly
A F Coutts
B S Göranson
W L Hiller
W W Kagel
S Walker
14,000,000
235,000
-
14,146,730
20,000
3,832,000
4,740,427
5,200
500,000
6,750,000
Specified executives of the consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Stanton
M Thomas
M Watkins
201,000
-
-
-
475,000
-
225,000
-
-
-
-
-
100,000
-
-
-
-
20,000
30,000
-
-
20,000
30,000
25,000
11,665
15,000
-
-
-
2,000
32,000
-
-
-
52,000
(22,500)
-
-
2,000
(20,000)
(223,000)
14,011,665
250,000
-
14,146,730
20,000
3,934,000
4,772,427
5,200
500,000
6,750,000
273,000
7,500
-
-
497,000
10,000
27,000
page 65
Notes to the Financial Statements
for the year ended 30 June 2004
Note 30
Directors’ and executives’ disclosures (continued)
Note 31
Auditor’s remuneration
(e) Loans and other transactions with specified directors and executives
Loans
Details of loans made to directors of Collection House Limited and specified executives of the consolidated
Entity, including their personally-related entities are set out below:
Aggregates for directors and specified executives
Group
Balance at
start of the year
$
Interest paid and
payable for year
$
Balance at Number in Group
at end of year
end of year
$
Directors of Collection House Limited
2004
2003
-
-
Specified executives of the consolidated Entity
2004
2003
-
-
-
-
266
-
-
-
23,895
-
-
-
1
-
All loans specified above have been extended in accordance with the terms of the employee share
ownership plan.
Terms and conditions of loans are set out in Note 29. No amounts have been written down or recorded as
allowances, as the balances are considered fully collectable.
Individuals with loans in excess of $100,000 during the financial year
No individual’s aggregate loan balance exceeded $100,000 at any time during the financial year.
Other transactions with the Company or its controlled entities
A number of the directors of the Company and specified executives hold positions in other associated
entities that result in them having control or significant influence over the financial or operating policies of
those entities. The terms and conditions of any transactions with directors or specified executives 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.
No payments were made to directors or to director-related entities other than as appropriate payments for
performance of their duties as directors.
Audit services:
Consolidated
The Company
2004
$’000
2003
$’000
2004
$’000
2003
$’000
Amounts received or due and receivable by the auditors for:
-
-
Audit of the financial statements
Other regulatory audit services
160,000
65,000
155,000
70,000
160,000
65,000
155,000
70,000
Other services:
Amounts received or due and receivable by the auditors for:
-
-
26,500
-
Other assurance services
Other non-assurance services
-
-
-
24,000
-
-
Note 32
Related parties
(a) Directors and specified executives
Disclosures relating to directors and specified executives are set out in Note 30.
Directors’ transactions in shares and share options
Mr A F Coutts converted 100,000 options @ $1.00 per share on 24 October 2003.
Mr A F Coutts acquired 2000 shares @ $1.06 per share on 23 October 2003.
Parkerhouse Investments NV and Parkerhouse Investments BV, a company acting as trustee of a trust
associated with Mr B S Göranson transferred all shares held in the names of B S Göranson, Parkerhouse
Investments NV and Parkerhouse Investments BV to City Plaza Inc. @ $1.53 per share on 1 August 2003.
Parkerhouse Investments BV, a company acting as trustee of a trust associated with Mr B S Göranson
acquired 32,000 shares @ $1.36 per share on 15 July 2003.
Mr D G Punches acquired 11,665 shares @ $1.30 per share on 10 July 2003.
Mr A R Aveling acquired 15,000 shares @ $1.28 per share on 10 July 2003.
(b) 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.
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 owned controlled entity, Collection House Technologies Pty Ltd, provided IT support to the
Company and other wholly owned controlled entities.
A wholly owned controlled entity, Collection House Legal Services Pty Ltd, provided legal services to the
Company and other wholly owned controlled entities.
A wholly owned 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 owned
controlled entities.
Loans were advanced by Collection House Limited to partly controlled entities.
Dividends were paid to the Company by Lion Finance Pty Ltd.
page 66
page 67
Notes to the Financial Statements
for the year ended 30 June 2004
Note 32
Related parties (continued)
Note 33
Notes to the statements of cash flows
Transactions with non director-related parties
Revenue from sale of services to:
wholly owned controlled entities
Provision of IT Services to:
controlling Entity
wholly owned controlled entities
Provision of legal services to:
controlling Entity
wholly owned controlled entities
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)
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
The Company
2004
$’000
2003
$’000
15,440
15,857
-
209
-
2,881
1,800
-
3,167
-
272
264
21,072
2,413
19,907
1,771
1,756
1,060
9,200
11,366
110
64
8,999
13,384
73,175
4,965
47,719
2,551
wholly owned controlled entities (loans)
3,507
1,751
Percentage of equity interest
Details of equity interests held in classes of related parties are set out in Note 27.
Consolidated
The Company
Note
2004
$’000
2003
$’000
2004
$’000
2003
$’000
(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
Bank overdraft
8
17(a)
4,697
(2,596)
4,430
(1,551)
150
(2,596)
2,101
2,879
(2,446)
53
(405)
(352)
(b) Reconciliation of profit from ordinary activities after income tax to net cash provided by
operating activities
Profit from ordinary activities after income tax
10,225
7,523
7,772
4,915
1,781
50
1
Add / (less) items classified as investing / financing activities:
Net (profit) / loss on sale of non current assets
(467)
Add / (less) non cash items:
Amortisation
Amounts set aside to provisions
Unrealised exchange loss / (gain)
15,746
Depreciation
213
Write down of non current assets
(256)
(Decrease) / increase in income taxes payable
4,721
(Decrease) / increase in deferred taxes payable
43
(Increase) / decrease in deferred tax asset
58
(Increase) / decrease in trade debtors
2,661
(Increase) / decrease in other debtors
(348)
(Increase) / decrease in other assets
Increase / (decrease) in trade creditors
(855)
Increase / (decrease) in sundry creditors and accruals (1,582)
565
Increase / (decrease) in provision for doubtful debts
(384)
Increase / (decrease) in employee provisions
(91)
Increase / (decrease) in other tax provisions
(9)
142
(7)
1,761
674
1
17,680
-
(773)
5,664
(4,026)
(3,708)
2,628
(145)
64
1,930
822
404
38
909
-
-
2,722
213
(160)
18,153
(2,675)
(1,210)
(21,862)
(229)
(611)
(1,066)
325
(412)
(26)
988
592
-
3,611
-
(89)
(1,764)
(480)
1,999
7,654
(73)
574
1,065
750
326
(72)
Net cash provided by / (used in) operating activities 32,081
30,528
1,985
19,989
Note 34
Events subsequent to balance date
Dividends declared
For dividends declared after 30 June 2004, see Note 22.
Other Events
The directors are not aware of any other material events which have occurred after balance date.
page 68
page 69
Financial Statements
for the year ended 30 June 2004
Directors’ Declaration
In the opinion of the directors of Collection House Limited (“the Company”):
(a)
the financial statements and notes, set out on pages 30 to 69 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 2004 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 Marshall Pearce
Managing Director & Chief Executive Officer
Brisbane, 25 August 2004
page 70
Independent Audit Report
Scope
The financial report and directors’ responsibility
The financial report comprises the statement of financial position, statement of financial performance,
statement of cash flows, accompanying notes to the financial statements, and the directors’ declaration for
Collection House Limited (“the Company”) and controlled entities, for the year ended 30 June 2004. The
consolidated Entity comprises both the Company and the entities it controlled during that year.
The directors of the Company are responsible for the preparation and true and fair presentation of the financial
report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of
adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and
for the accounting policies and accounting estimates inherent in the financial report.
Audit Approach
We conducted an independent audit in order to express an opinion to the members of the Company. Our audit
was conducted in accordance with the Australian Auditing Standards, in order to provide reasonable assurance
as to whether the financial report is free of material misstatement. The nature of an audit is influenced by
factors such as the use of professional judgement, selective testing, the inherent limitations of internal control,
and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all
material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly, in
accordance with the Corporations Act 2001, including compliance with Accounting Standards and other
mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of
the Company’s and the consolidated Entity’s financial position, and of their performance as represented by the
results of their operations and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
-
-
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the
financial report; and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of
significant accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial reporting when
determining the nature and extent of our procedures, our audit was not designed to provide assurance on
internal controls.
Independence
In conducting our audit, we followed applicable requirements of Australian professional ethical pronouncements
and the Corporations Act 2001.
Audit Opinion
In our opinion, the financial report of Collection House Limited 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 2004 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
25 August 2004
Liam Murphy
Partner
page 71
Financial Statements
for the year ended 30 June 2004
Shareholder Information
Distribution of Equity Security Holders
Restricted Securities
The shareholder information set out below was applicable as at 16 August 2004. Analysis of numbers of
security holders by size of holding:
All issued shares in Collection House Limited are quoted on the ASX and there are no shares subject to escrow
or other regulated restrictions other than as set out below.
Number of Equity Security Holders
Ordinary Shares
Options
Voluntary Restrictions on Securities
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
1,263
3,561
854
521
36
6,235
-
-
-
1
1
2
There were 332 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:
Ordinary shares
Number held
Percentage of
issued shares
14,011,665
14,000,000
6,750,000
5,700,631
4,772,427
D G Punches
George Laurens (Qld) Pty Ltd
S Walker
RBC Global Services Australia Nominees Pty Limited (IM A/C)
City Plaza Inc.
Citicorp Nominees Pty Limited (CFS Developing Companies A/C) 4,139,800
A Coutts & J Coutts
ANZ Nominees Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Sandhurst Trustees Ltd
Cogent Nominees Pty Limited
W Kagel
Citicorp Nominees Pty Limited
Seawise Pty Ltd (The Stanton Investment A/C)
Mr Raymond Larkin
Westpac Custodian Nominees Limited
Merrill Lynch (Australia) Nominees Pty Ltd
Custodial Services Limited
Mr Anthony Coutts
3,600,000
2,004,704
1,547,258
1,532,705
1,000,000
873,631
500,000
464,500
420,000
400,000
360,520
358,532
338,092
334,000
63,108,465
14.53
14.52
7.00
5.91
4.95
4.29
3.73
2.08
1.60
1.59
1.04
0.91
0.52
0.48
0.44
0.41
0.37
0.37
0.35
0.35
65.45
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. There are no such restricted shares at the date of this Report.
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 12 months from
the date of issue of the relevant shares. There are no such restricted shares at the date of this Report.
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 16 August 2004, there are 470,870 ordinary shares (0.5% 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.
Issued Unexercised Options
Number on issue
Number of holders
Options to take up ordinary shares in Collection House Limited
220,000
2
Substantial Shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Number held
Percentage
Ordinary shares
George Laurens (Qld) Pty Ltd
D G Punches
S Walker
RBC Global Services Australia Nominees Pty Limited
Options
A Coutts
Voting Rights
14,146,730
14,011,665
6,750,000
5,700,631
200,000
14.67
14.53
7.00
5.91
0.21
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
The Company 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 72
page 73
Corporate Directory
Corporate Office
Share Registry
Computershare Investor Services Pty Ltd
Central Plaza One
Level 27, 345 Queen Street
Brisbane Qld 4000
GPO Box 523
Brisbane Qld 4001
Telephone:
1300 552 270
+61 3 9615 5970
+61 7 3229 9860
www.computershare.com
Facsimile:
Website:
Auditors
Hacketts Chartered Accountants
Level 3, 549 Queen Street
Brisbane Qld 4000
Financial Basics Foundation
National Development Manager
GPO Box 2386
Brisbane Qld 4001
Telephone:
Facsimile:
Email:
Website:
+61 7 3017 3160
+61 7 3831 6655
info@financialbasics.org.au
www.financialbasics.org.au
Collection House Limited
ABN 74 010 230 716
488 Queen Street
Brisbane Qld 4000
GPO Box 2584
Brisbane Qld 4001
Telephone:
Facsimile:
Email:
Website:
+61 7 3292 1000
+61 7 3832 0333
shares@collectionhouse.com.au
www.collectionhouse.com.au
Registered Office
Level 3, 549 Queen Street
Brisbane Qld 4000
Locations
Australia:
Sydney
Perth
Shepparton
New Zealand:
Auckland
Melbourne
Canberra
Bendigo
Brisbane Adelaide
Darwin
Ballarat
Newcastle
Albury
Board of Directors
Dennis George Punches
(Chairman)
Anthony Robin Aveling
(Deputy Chairman)
Barrie Edward Adams
(Lead Independent Director)
John Marshall Pearce
(Managing Director
& Chief Executive Officer)
David Barry Connelly
(Non-Executive Director)
Anthony Francis Coutts
(Executive Director)
Bo Sven Göranson
(Non-Executive Director)
William Leslie Hiller
(Non-Executive Director)
William Walter Kagel
(Non-Executive Director)
Stephen Walker
(Non-Executive Director)
Company Secretary
Rhonda King
page 74
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