2005
ANNUAL REPORT
CONTENTS
2
4
6
8
The Company
Financial and
Operational Overview
Chairman's Report
Chief Executive
Officer's Report
12 The Board of
Collection House
Limited
14 Financial Basics
Foundation
16 Corporate
Governance
Statement
23 Directors' Report
31 Independent Audit
Report
32 Financial Statements
300+
COLLECTION
OFFICERS
3.5 million
FILES UNDER
MANAGEMENT
10 million
CUSTOMER CONTACTS
PER YEAR
0.003%
COMPLAINT RATE p.a.
02
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 “the Entity”.
The Company
Collection House Limited is a group of companies
headquartered in Brisbane, operating globally and
delivering a broad range of financial services
including: debt purchasing; debt collection;
receivables management; insurance recovery and
claims management; credit reporting; and
corporate risk rating.
CONTINGENT
COLLECTION SERVICES
National Revenue Corporation
offers a service to the small and
medium business communities
through its Tandem program - an
alternative to conventional
collection approaches.
Midstate Credit Management
Services and Countrywide
Mercantile Services provide
specialised receivables
management and debt recovery
to the commercial and local
government sectors in Melbourne,
regional Victoria and southern
New South Wales.
Consumer Division collects debts
on a commission basis for banks
and building societies, finance
companies and other credit
providers.
Commercial Division collects
debts on a commission basis for
commercial clients such as retail
and wholesale suppliers, local
government, utilities, and schools.
Insurance Recovery Division
collects on a commission basis
motor vehicle claims as well as
property and public liability
insurance claims on behalf of
insurance companies and self-
insurers.
Workers’ Compensation Division
recovers employer premiums on
behalf of insurers through collection
and legal recovery processes.
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.
03
2005 ANNUAL REPORT
Collection House first opened in Brisbane
in 1992. It was listed on the Australian
Stock Exchange in 2000 and now employs
630 staff in 13 offices located in all
Australian mainland states and territories
and in New Zealand.
ACCOUNT ASSET
MANAGEMENT
CREDIT
REPORTING
OTHER
OPERATIONS
Lion Finance Pty Ltd is a wholly
owned subsidiary that buys debt
portfolios in Australia and New
Zealand.
Australian Business Research
Pty Ltd offers a range of business
searches, providing clients with
on-line access to a comprehensive
range of government and private
databases in Australasia.
Insurance Claims Solutions
Pty Ltd offers a web-based
management system called
ClaimsFasTrack which allows
insurers, self-insurers and
underwriters to manage insurance
claims.
National Tenancy Database
Pty Ltd is one of the largest
tenancy databases in Australia with
more than one million tenant files
and 4,000 subscribers.
Rapid Ratings Pty Ltd is a
quantitative-based agency that 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.
04
Financial and
Operational Overview
AUGUST 2005
> Announcement of 2004/05
full-year profit of $12.2m
(up 14.7% on previous year).
> Declaration of final dividend
of 4.0 cents unfranked
(8.0 cents unfranked for
full-year).
FEBRUARY 2005
> Announcement of first-half
profit of $6.5m (up 62% on
the previous corresponding
period).
> Declaration of interim
dividend of 4.0 cents
unfranked.
JULY 2005
> John Pearce was appointed
Deputy Chairman of the
Board effective 1 July, 2005.
> Colin Day was appointed
Chief Executive Officer and
Board member effective 1
July, 2005.
JUNE 2005
> Bo Göranson resigned as
independent director
effective 30 June, 2005.
> John Pearce stepped down
as Chief Executive Officer
(remains Managing Director)
effective 30 June, 2005.
> Chairman issued guidance
that revenue for the year
was expected to exceed
$124m (6% increase over
the previous year) delivering
a full-year after-tax result in
the range of $12-$13m
(up from $10.6m).
MAY 2005
> Tony Aveling resigned as
Deputy Chairman and as
an independent director
effective 30 June,
2005.
JANUARY 2005
> Announcement of the
purchase of $100m debt
portfolio.
DECEMBER 2004
> Announcement of renewed
forward debt purchase
contract with a major
Australian bank.
> Announcement of imminent
purchase of $90m debt
portfolio.
OCTOBER 2004
> Announcement of 2004/05
first-quarter profit in line with
company expectations of
$3.2m.
SEPTEMBER 2004
> Sale of Downie Insolvency.
AUGUST 2004
> Announcement of 2003/04
full-year profit of $10.6m
(up 30% on previous year).
> Declaration of final dividend
for 2003/04 of 4.0 cents
unfranked (7.0 cents
unfranked for full-year).
> Sale of National Revenue
Corporation (NZ).
05
2005 ANNUAL REPORT
REVENUE
NET PROFIT ATTRIBUTABLE
TO MEMBERS OF THE
COMPANY
RETURN ON
SHAREHOLDERS’ FUNDS
06
... These are the values, promises, challenges
and goals that distinguish our company as
we approach a new year.
07
2005 ANNUAL REPORT
Chairman’s Report
Fellow shareholders
On the cover of this Annual
Report three words precede
Collection House Limited –
ethical, dynamic and
professional. These are the
values, promises, challenges
and goals that distinguish our
company as we approach a
new year.
Once again this year, the
Board and Management of
Collection House Limited
delivered increased profit
through greater revenue,
contained expenses, and a
sharp focus on the exciting
growth area of purchased
debt. We follow a simple but
effective strategy, and we plan
more of the same in the years
ahead.
However, it is worth noting
that in meeting financial
expectations this past year,
your company also delivered
on another key promise - to
strategically position
Collection House Limited to
anticipate changing market
and stakeholder expectation.
I described it last October as
becoming tomorrow’s
company today.
In recent years we have seen
increasing emphasis by clients
and vendors on protection of
their reputation and brand in
the conduct of business
relationships. We have also
seen the consumer movement
and regulators giving special
attention to debt collection
practices. We concluded that
future success depended on
our ability to adapt effectively
to a rapidly changing
environment and commercial
imperatives.
As we began 2004/05
I forecast that we would
commit considerable
resources and effort to
making this company the
Australian benchmark in
ethical and compliant debt
collection. We have
succeeded.
Even though the cost has
been significant in terms of
foregone revenue, staff
training, database review,
as well as on-going
monitoring and auditing, the
benefits of our decision are
apparent and already being
acknowledged.
We now have policies,
practices and performance
that set us apart as a partner
of choice for clients and
vendors in financial services,
insurance and government.
During the year we were
acknowledged by regulators,
consumer groups and
governments for our
achievements and leadership
in the quest for consistent and
improved national standards
in debt collection.
Collection House Limited is
now better placed than ever
before to take advantage of
emerging commercial
opportunities, particularly in
the growing purchased debt
market where we are now the
largest buyer of impaired debt
in Australia.
We turned the page to a new
year not only with a stronger
brand, but with a new Chief
Executive Officer. Chief
Operations Officer, Colin Day
took over from John Pearce
as CEO from 1 July, 2005.
John remains Managing
Director, and also becomes
Deputy Chairman of the Board.
The Board is grateful to John
for having returned as CEO
for the past three years.
Having his wealth of
knowledge and experience
available to Colin in transition
offers us stability with
momentum.
Unfortunately, we also bid
farewell this year to two long-
serving directors – Tony
Aveling and Bo Göranson.
I expressed at the time of the
announcements the Board’s
gratitude for the outstanding
contribution of these two
talented and experienced
directors and wished them
well on your behalf.
We start a new year with
the prospect of exciting
opportunities and the
confidence that we are in
excellent shape to face the
challenges ahead.
Yours sincerely
Dennis Punches
CHAIRMAN
08
... If there was any doubt about where the future
success of our company lies, the answer is in the
results for 2004/05.
09
2005 ANNUAL REPORT
Chief Executive Officer’s Report
As the financial year
concluded, it was my great
pleasure to hand over the
reins to a new Chief
Executive Officer – a
pleasure because of what
Colin Day brings to the job,
and a pleasure because I
have handed over to him a
company that is beginning to
realise its significant potential.
If there was any doubt about
where the future success of
our company lies, the answer
is in the results for 2004/05.
Consolidated revenue for the
Group rose 7.6% and NPAT
was up 14.7%.
However, almost 80% of
our revenue came from the
combined collection segments,
and 43% from our purchased
debt division (Account Asset
Management) alone.
ACCOUNT ASSET
MANAGEMENT
For the past three years I
have pointed to the emerging
importance of Lion Finance
operations and our continuing
focus on debt collection as
core business. Now the
results prove my point.
Account Asset Management
(AAM) revenue was $54.4m
(up 27%) and its result was
up 43.9% (from $12.3m to
$17.7m). Our impressive
performance is consistent
with experience in more
mature purchased debt markets
in the USA and Europe.
Success is based not only
on the volume of debt
purchased, but also the
quality of the debt. During the
year we bought quality debt
ledgers with a face value of
$325.6m for an outlay of
$43.4m. This takes our
purchases since 2000 to
almost $1.7b (face value) and
confirms our position as the
largest buyer of impaired debt
in Australia and New Zealand.
Pleasingly, we continue to
purchase debt from operating
cash flow and existing facilities.
Once again this year, the price
expectations of some vendors
were raised unrealistically by
inexperienced new players
to the market. However, we
adhered to our pricing model
that continues to deliver
consistent profitability.
During the year the
amortisation rate on our
purchased debt portfolio
increased to 35% (29% in
2004).
AAM is not only showing
strong growth and impressive
profit, but it is also building a
healthy book of repayments-
under-arrangement to
guarantee long-term income.
The arrangements book
increased by $21m this year
to more than $135m.
CONTINGENT COLLECTION
SERVICES
Revenue was slightly down
in contingent collections as
a result of both a highly
competitive market and our
own fine tuning of portfolios
to ensure that we retain and
pursue only contracts with
sustainable margins.
We retain a strong banking
and finance client base giving
us opportunities for valuable
forward flow arrangements.
The International Division
recovered more than $4.4m
for Australian and international
clients during the year. The
volume of referrals from
offshore continued to increase
and we expect revenue
growth of around 10% in
2005/06.
Countrywide and Midstate
operations in Melbourne, rural
Victoria and southern New
South Wales have continued
to expand this year,
particularly in the local
government market in both
states; one of the major new
clients signed this year was
the City of Greater Geelong.
The Midstate office in Albury
is also developing well and we
are looking to expand further
in rural New South Wales.
National Revenue Corporation
operations were focussed on
the Australian market with the
sale of National Revenue
Corporation New Zealand.
CREDIT REPORTING
Australian Business Research
(ABR) again showed good
profitability on slightly lower
revenue giving a segment
result similar to the previous
year. As with our Contingent
Collection Division, ABR has
spent considerable time and
effort fine tuning its client
base. ABR also devoted
significant effort during the
year to upgrading information
technology.
As the year ended, a new
General Manager, Karen
Hansen, was appointed to
lead the company. During
2005/06 a decision will be
made on the best way for
Collection House Limited to
maximise the return on its
investment in ABR; this might
include a public float.
National Tenancy Database
(NTD) increased revenue by
5.9%. The growth was good
given a second quarter
downturn in the residential
rental sector.
10
of nine day fortnights and
changed rosters.
We have introduced
incentives that recognise this
balance, including holidays
and weekends away and,
more recently, supporting a
portal which allows staff
access to discounted
holidays.
We recognise leadership will
play a major role in the
success of the Company and
greater attention is being
given to developing strategies
and programs that harness
the development of our key
personnel.
All senior managers
participate in the Leadership
Profile Inventory which
embraces the development of
action plans to improve their
leadership.
Training and development of
staff has seen a
comprehensive compliance
regime incorporated into
orientation of all new
employees. Key
competencies are being
further developed and will
ultimately assist in succession
planning.
John Pearce
MANAGING DIRECTOR &
CHIEF EXECUTIVE OFFICER
OTHER OPERATIONS
Rapid Ratings continues to
make good progress in the
USA and particularly on the
Wall Street market. On this
basis, the Board decided in
June, 2005 to commit an
additional $3m over the next
two financial years to further
develop Rapid Ratings as a
global commercial ratings
agency.
A number of options are
being considered for Rapid
Ratings in the future including
a public float.
INFORMATION
TECHNOLOGY
An IT steering committee was
established during the year to
oversee and guide information
technology in Collection House.
‘Thin-client’ technology was
introduced across nine of the
Company’s 12 remote sites
allowing the Company to
more intelligently manage
hardware, software and
licences, as well as deliver
cost savings.
The HEAT task management
system has contributed to the
efficiency of support service
divisions. Similarly, there have
been gains through the office
equipment rationalisation
project and instigation of a
Business Intelligence Project
to provide better and more
manageable analytical tools
internally and for our clients.
Internal communications
have been improved by the
expansion of the staff intranet
which provides, among other
benefits, better document
management.
Telecommunication savings
flowed from the further
expansion of VOIP technology
and from the re-negotiation of
call costs with our provider.
Disaster recovery testing was
carried out as part of the
ongoing Business Continuity
Plan Development Program.
A key element of the program
was the installation of a
second SAN at our disaster
recovery site replicating core
business data.
COMPLIANCE
We invested heavily during the
year in compliance and ethical
conduct, reviewing and
revising policies, practices
and performance.
In the process we completely
restructured our compliance,
privacy and risk management.
This has allowed us to
improve processes e.g. by
expanding review and call
monitoring functions.
Mid year, we appointed an
internal auditor (CPA) to
regularly review our collection
policies, practices and
performance as well as
compliance and risk
management.
We became the first debt
collection agency outside the
USA to be accredited under
the Professional Practices
Management System (PPMS)
– the only industry-specific
quality assurance program –
developed by the American
Collectors Association.
PPMS overlays ISO 9000.
We also became the first debt
collection agency in Australia
to be admitted as a non-bank
member of the Australian
Banking and Financial
Services Ombudsman
Scheme. This provides
independent external dispute
resolution for our customers.
As part of our comprehensive
program of review and reform
we:
> implemented a future vision
package of initiatives that
included introduction of an
Important Customer Notice
on all Lion Finance debt
purchase correspondence
to inform customers of their
rights and obligations;
> extensively modified staff
training and recruitment;
and
> introduced transparent
reporting of dispute and
complaint statistics.
During 2004/05 we made
more than 10 million customer
contacts and recorded less
than 350 complaints about
our conduct. This is a
complaint rate of 0.003%.
Averaged across the working
days of the year, this is less
than one complaint per day.
During the year we worked
closely with consumer
organisations, welfare groups
and regulators to promote
consistent new national
standards for collection of
debt in Australia including the
conduct of collection agents
and creditors.
We promoted ongoing
dialogue among stakeholders
to achieve uniform laws and
legislation relating to the
collection of debt across all
Australian jurisdictions as well
as industry-wide Code of
Conduct and Standards,
providing effective and
enforceable self regulation.
HUMAN RESOURCES
Staff numbers have remained
constant with a total
workforce of 632 in 2004/05
compared with 692 the
previous year. Staff costs
decreased a further 5.1%
from $37.0m to $35.2m.
The proportion of women in
management positions has
again increased with an
additional three females
holding positions in the senior
management team. Females
make up 52% of the
Company’s workforce.
This year there has been a
concentrated effort toward
flexibility and work / life
balance with the introduction
11
2005 ANNUAL REPORT
Outlook
The results for the first
months of 2005/06
indicate that we remain
on track with our strategic
priorities.
We expect our purchased
debt operations to
continue growing in the
year ahead while
Contingent Collection
Services will remain
steady.
The Credit Reporting
segment should hold its
ground while we confirm
our future plans for both
ABR and Rapid Ratings.
We have several options
to look at, including
whether floating these two
companies will give the
best return on our
investment.
Colin Day
CHIEF EXECUTIVE OFFICER
STAFF EXPENSES
REVENUE BY SEGMENT
Contingent Collection Services
Account Asset Management
Credit Reporting
Other Operations
12
The Board of
Collection House Limited
DENNIS PUNCHES
JOHN PEARCE
BARRIE ADAMS
TONY AVELING
BARRY CONNELLY
DENNIS PUNCHES BSc
Chairman
Appointed to the Board in July
1998, and in 2000 as
Chairman. Chairman of the
Nominations Committee and a
member of the Remuneration
Committee. Current director
of Intrum Justitia AB, Call
Solutions Inc; Co-Chairman
of the International Collectors
Group and a Trustee for
Wisconsin’s Carroll College.
Former director of Attention
LLC Inc, Analysis and
Technology Inc, and co-
founder and former Chairman
of Payco American
Corporation. Resides Florida,
USA. Age 69.
JOHN PEARCE FAIM, FAICM
Managing Director &
Chief Executive Officer
Co-founder of Collection
House Limited and appointed
to the Board in April 1993. In
April 2003 returned to former
position of Managing Director
& Chief Executive Officer
which had been 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
Queensland, Australia. Age
60. (Stepped down as Chief
Executive Officer effective
30 June, 2005). Managing
Director and Deputy Chairman
effective 1 July, 2005.
BARRIE ADAMS PSM, FCPA
Lead Independent Director
Appointed to the Board
in November 2002 and
Chairman of the Audit & Risk
Management Committee in
January 2003. Member of
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. Resides Queensland,
Australia. Age 60.
TONY AVELING FAIM,
FAIBF, FAICD
Deputy Chairman
Independent Director
Board member since May
2000 and member of the
Audit & Risk Management
Committee, Nominations
Committee and Remuneration
Committee. Previously Chief
Executive of the Australian
Bankers’ Association;
Chairman of the Australian
Finance Conference; 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 of the
Science Foundation for
Physics, University of Sydney
and Chairman of Global
MoneyLine Limited. Resides
Queensland, Australia. Age 62.
(Resigned as Deputy Chairman
and Independent Director
effective 30 June, 2005).
BARRY CONNELLY BJ
Independent Director
Appointed to the Board in
June 2003. 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 65.
TONY COUTTS
Executive Director
General Manager of Collection
House in 1995. Appointed an
13
2005 ANNUAL REPORT
TONY COUTTS
BO GÖRANSON
BILL HILLER
BILL KAGEL
STEPHEN WALKER
RHONDA KING
COLIN DAY
Executive Director in
September 1998 with
executive responsibilities as
Director of Sales. Queensland
State President of the
Australian Collectors
Association. Twenty years’
experience in the finance and
insurance industry including
18 years with Australian
Guarantee Corporation Ltd.
Resides Queensland,
Australia. Age 46.
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
AB. Resides London,
England. Age 67. (Resigned
as Independent Director
effective 30 June, 2005).
BILL HILLER
Independent Director
Director since June 2003.
Member of Nominations
Committee and Audit &
Risk Management
Committee. Forty years’
experience in the automotive
finance industry including
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 Western Australia.
Age 66.
BILL KAGEL
Independent Director
Joined the Board in February
2000. Appointed Chairman of
the Remuneration Committee
in June 2003. Over 40 years’
debt collection industry
experience. Co-founder and
Senior Vice-President of
Payco American Corporation,
USA. Former director of
Payco American Corporation
and Outsourcing Solutions
Inc. Resides Wisconsin, USA.
Age 68.
STEPHEN WALKER
Non-Executive Director
Co-founder of Collection
House and Board member
since July 1992. Former
Collection House Managing
Director until 1998. Past
member of Audit & Risk
Management Committee
and former director of
National Revenue
Corporation. Has owned
and managed debt collection
agencies in Australia and
New Zealand. Resides
Queensland, Australia.
Age 54.
RHONDA KING BA, LLB
Company Secretary
Executive Director
A commercial lawyer since
1981, and partner or
consultant to legal practices
from 1984. Appointed
Company Secretary of
Collection House Limited and
its subsidiaries in April 2003.
Member of the Board and
Company Secretary for
Brisbane Lions Foundation.
Member of the Board and
joint Company Secretary for
Financial Basics Foundation
and Company Secretary for
Rutherglen Cemetery
Foundation. Resides
Queensland, Australia.
Age 48. (Appointed 24
August, 2005).
COLIN DAY
Chief Executive Officer
Appointed a director on
1 July, 2005. Has extensive
experience in the IT and debt
collection industries. In 1987,
co-founded the Remington
White Debt Collection Agency
which was bought out by
Collection House in July,
2000. Has performed a
number of roles in the
Collection House group since
2000, most recently as Chief
Operations Officer. Resides
Queensland, Australia.
Age 51. (Appointed CEO
and Board member effective
1 July, 2005).
COMMITTEES
Audit & Risk
Management:
Barrie Adams (Chairman);
Tony Aveling (resigned
30 June, 2005); Bill Hiller;
and Barry Connelly
(appointed 1 July, 2005).
Nominations:
Dennis Punches
(Chairman); Barrie Adams;
Bill Hiller; and Tony Aveling
(appointed 27 July, 2004,
resigned 30 June, 2005).
Remuneration:
Bill Kagel (Chairman);
Dennis Punches; Barrie
Adams; Tony Aveling
(appointed 27 July, 2004,
resigned 30 June, 2005);
and Bill Hiller (appointed
15 June, 2005).
14
Foundation Dream:
To ensure that all Australians leaving the
secondary education system have an
understanding of the credit system
and financial management practices,
so that they can make informed decisions
on their financial affairs.
15
2005 ANNUAL REPORT
Financial Basics Foundation
The Foundation Board
believes that by continuing to
develop and support a broad
range of financial literacy
initiatives we will achieve our
dream.
The Foundation is pleased
to welcome Tarryn McMullen,
who joined the Board as a
director, representing our
major support sponsor, Bank
of Queensland. The directors
and Patron of the Foundation
continue to give their time and
expertise voluntarily and
receive no remuneration for
their contributions.
THE FINANCIAL BASICS
FOUNDATION BOARD
Chairman Barrie Adams
Directors
Julie Tealby
Rhonda King
John Pearce
Tarryn McMullen
Patron
Leigh Matthews
This continued interest along
with some very positive
feedback from teachers has
been quite extraordinary and
the Foundation Board is
extremely pleased with this
outcome.
In August, 2004 the
Foundation Board was very
pleased to announce a
second major sponsor
partnership arrangement
between the Foundation and
the Bank of Queensland.
Bank of Queensland joins
Collection House Limited
as a major sponsor of the
Foundation for the next
three years.
The Foundation is currently
working with the Bank of
Queensland on a number of
financial literacy initiatives.
Work has also begun on the
development of an interactive
investment game. The game,
also targeted towards young
people, will be played over a
number of days and require
participants to make financial
investment choices, each with
a degree of risk. The game
will simulate the financial
implications and outcomes of
making these choices.
Operation Financial
Literacy, the first major
initiative of the Financial
Basics Foundation (FBF),
was developed with the
intention of being a ready-
to-use financial literacy
educational resource for
teachers in secondary
schools.
In 2003 the Foundation Board
initiated and funded a series
of pilot programs in 15
schools around Australia to
develop financial literacy
courses.
In 2004, the Foundation
worked with these schools
and education writers to
produce a complete financial
literacy program.
As a result, the Foundation
was able to launch and
distribute Operation Financial
Literacy in March, 2005 to a
very receptive audience.
Initial forecasts had set an
achievable target of 100
schools registering their
interest to receive the
program.
As of June, 2005 470 schools
across Australia have since
registered and received
copies of Operation Financial
Literacy and a second print
run has been ordered to keep
up with the ongoing demand.
16
Corporate Governance
Statement
Good corporate governance
is important to the
Company and the Board is
committed to maintaining
high standards of corporate
governance.
As detailed in this Corporate
Governance Statement, the
Company considers that its
governance practices comply
with all the Australian Stock
Exchange (ASX) Corporate
Governance Council’s best
practice recommendations,
other than recommendations
2.1. and 2.2. An explanation
for departure from these
recommendations is provided
on page 18.
A description of the
Company’s main corporate
governance practices is set
out in this Corporate
Governance Statement. All
practices were in place for the
entire year unless otherwise
stated. The Company has
posted copies of its
practices to its website at
www.collectionhouse.com.au
in accordance with the ASX
Corporate Governance
Council’s recommendations.
BOARD RESPONSIBILITIES
Laying solid foundations for
management and oversight
The Board is responsible for
the corporate governance of
the Company and its
controlled entities and
operates in accordance with
the principles set out in the
Board Committees Overview,
a summary of which is
available from the corporate
governance section of the
Company’s website at
www.collectionhouse.com.au.
The principal role of the Board
is to ensure the long term
prosperity of the Company
by setting broad corporate
governance policies and
ensuring that they are
effectively implemented by
management. The Board
carries out this role
principally by:
> overseeing the Company
and its operations;
> appointing and removing,
where appropriate,
senior executives of the
Company;
> setting the strategic
direction of the Company
and providing strategic
advice to management;
> providing input into and
approval of management’s
development of corporate
strategy and performance
objectives;
> reviewing and ratifying
systems of governance,
risk management, and
internal compliance and
control, codes of conduct
and legal compliance to
ensure appropriate
compliance frameworks and
controls are in place; and
> approval of budgets and
monitoring progress
against budget via the
establishment and reporting
of both financial and non
financial key performance
indicators.
The Board has delegated
to executive management
responsibility for a number
of matters including:
> managing the Company’s
day to day operations in
accordance with the Board
approved authorisations,
policies and procedures;
> developing the Company’s
annual budget and
recommending it to the
Board for approval and
managing the day to day
operations within the
budget; and
> implementing corporate
strategy and making
recommendations on
significant corporate
strategic initiatives.
While executive management
reports directly to either the
Managing Director or the
Chief Executive Officer,
executive management is
required to submit monthly
management reports to the
Audit & Risk Management
Committee (ARMC) and the
Board so that directors are
apprised of operational
issues on an ongoing basis.
A formal charter of delegated
functions and authorities to
17
2005 ANNUAL REPORT
management has been
approved by the Board and a
summary is included on the
Company website at
www.collectionhouse.com.au.
> discharge their duties and
responsibilities under the
law efficiently and
effectively;
> understand the business of
the Company and the
environment within which
the Company operates so
as to be able to provide
sound stewardship for
management and the
Company’s objectives,
goals and strategic direction
to maximise shareholder
value; and
> assess the performance of
management in meeting
those objectives.
STRUCTURING THE
BOARD TO ADD VALUE
The Company’s Constitution
provides that:
> the minimum number of
directors shall be three and
the maximum number of
directors shall be ten unless
amended by a resolution
passed at a general
meeting;
> at each AGM at least two
directors must retire from
office. Re-appointment is
not automatic. If retiring
directors wish to continue
to hold office they must
submit themselves to re-
election by shareholders;
and
> no director may be in
office for longer than
three years without facing
re-election.
MEMBERSHIP AND
EXPERTISE OF THE
BOARD
The Board considers that its
membership should comprise
directors with an appropriate
mix of skills, knowledge,
experience and personal
attributes that allow the
directors individually, and
the Board collectively, to:
BOARD COMPOSITION
The Board composition during 2004/05 is set out below with details
of the backgrounds of each director set out at page 12 and 13.
DIRECTOR
BOARD
MEMBERSHIP
Dennis Punches Chairman
Tony Aveling
Deputy Chairman
and Independent Director
(resigned 30 June, 2005)
DATE OF
APPOINTMENT
1 July, 1998
1 February, 2001
Barrie Adams
Lead Independent
Director
27 November, 2002
John Pearce
Deputy Chairman and
Managing Director
(and Chief Executive Officer
until 30 June, 2005)
5 April, 1993
Tony Coutts
Executive Director
17 September, 1998
Barry Connelly
Independent Director
5 June, 2003
Bo Göranson
Independent Director
(resigned 30 June, 2005)
25 May, 2000
Bill Hiller
Bill Kagel
Independent Director
5 June, 2003
Independent Director
16 February, 2000
Stephen Walker Non-Executive Director
31 August, 1990
There were some changes to the Board and the roles of certain
directors that took effect at 30 June, 2005, or thereafter:
> Tony Aveling, Deputy Chairman
and Independent Director
resigned on 30 June, 2005;
> Bo Göranson, Independent
Director, resigned on
30 June, 2005;
> John Pearce, though being
appointed Deputy Chairman
and remaining as Managing
Director, retired as Chief
Executive Officer on
30 June, 2005;
> Colin Day was appointed
an Executive Director on
1 July, 2005 and was also
appointed as Chief
Executive Officer on 1 July,
2005; and
> Rhonda King was
appointed an Executive
Director on 24 August,
2005, in addition to
continuing as Company
Secretary.
18
BOARD INDEPENDENCE
While the concept of director
independence is variously
defined, the Board has
considered each of the
directors in office as at the
date of this report and
determined that four of the
current directors are
independent.
The six directors who are not
considered independent as at
the date of this report are
Dennis Punches (Chairman),
John Pearce (Deputy
Chairman and Managing
Director), Tony Coutts
(Executive Director), Colin Day
(Chief Executive Officer),
Stephen Walker (Non-
Executive Director), and
Rhonda King (Company
Secretary and Executive
Director).
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 in the
collection industry are
invaluable to the Company.
Directors’ experience and
shareholdings as at 24
August, 2005 are provided
in greater detail on page 12,
13 and 26.
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
Lead Independent Director
coupled with the remaining
non-executive directors,
ensures that the Board can
operate independently of
executive management and
provides for special
professional expertise.
As noted, Colin Day is not
deemed to be independent
by virtue of his appointment
as Chief Executive Officer
(previously Chief Operations
Officer) of the Company.
Rhonda King is also not
deemed independent by
virtue of her role as Company
Secretary. John Pearce is not
deemed independent by
virtue of his appointment as
Chief Executive Officer during
the 2004/05 financial year.
Notwithstanding, the Board
does not consider there are
any matters that may
materially interfere with the
exercise by Colin Day and
Rhonda King of unfettered
and independent judgment.
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.
ASX CORPORATE
GOVERNANCE COUNCIL
RECOMMENDATIONS
2.1: A majority of the Board
should be Independent
Directors
The Board considers that a
majority of the Board is not
independent in accordance
with Recommendation 2.1.
However, the Board considers
that the individuals on the
Board can, and do make
quality, unfettered and
independent judgments in the
best interests of the Company
on all relevant issues. Directors
having a conflict of interest in
relation to a particular item of
business must and do absent
themselves from the Board
meeting before
commencement of discussion
on the topic.
2.2: The Chairperson should
be an Independent Director
The Company’s Chairman,
Dennis Punches is considered
by the Board not to be
independent in terms of the
ASX Corporate Governance
Council’s definition of
Independent Director.
However, the Board considers
that for the reasons set out
previously, the Chairman is
able to and does bring quality,
unfettered and independent
judgment to all relevant issues
falling within the scope of the
role of Chairman.
The Board does not consider
that a majority of directors
being independent is, on its
own, a sufficiently compelling
factor to justify additional
appointments to the Board at
this time.
In addition to ensuring that
the Board has a broad range
of necessary skills,
knowledge, and experience
to govern the Company and
understand the challenges
that the Company faces, the
Board considers that its
membership should represent
an appropriate balance
between directors with
experience and knowledge of
the Company and directors
with an external perspective.
The Board also considers that
its size should be conducive
to effective discussion and
efficient decision-making. The
Board believes that its current
composition meets these
requirements.
BOARD MEETINGS
The Board meets at least six
times a year, both as a Board
and in conjunction with
executive management, to
discuss the short and long-
term strategy of the Company.
The Board receives a monthly
report, which provides current
information concerning the
Company and each of its
controlled entities. The
monthly Board report includes
salient financial details
together with information
on the performance of
operations, major initiatives as
well as legal, governance and
compliance issues that may
arise.
The Board convenes by email
and by telephone conference
call to discuss matters of
urgency and importance with
management, make
recommendations to
management, discuss
strategy and make resolutions
as required by a circulating
minute program, ratified at its
next Board meeting for
expediency and efficiency.
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The Chairman is responsible
for leading the Board,
facilitating Board discussions
and managing the Board’s
relationship with the
Company’s executive
management.
The Chief Executive Officer is
responsible for implementing
the Company’s strategies and
policies. The roles of the
Chairman and Chief Executive
Officer are separate roles
which are undertaken by
separate people.
BOARD COMMITTEES
Three Board Committees
have been established to
assist the Board in
discharging its responsibilities.
Audit & Risk Management
Committee
The Audit & Risk Management
Committee operates in
accordance with its Board
approved charter, a copy of
which is available from the
corporate governance section
of the Company’s website
www.collectionhouse.com.au.
The principal functions of the
ARMC include reviewing and
19
2005 ANNUAL REPORT
making recommendations
to the Board and assisting
it in the discharge of its
responsibilities relating to
accounting policy, continuous
disclosure and risk
management. The
Committee’s responsibilities
also include:
> assessing the adequacy of
accounting, financial and
operating controls;
> reviewing the performance
of external auditors;
> reviewing and monitoring
the adequacy and
effectiveness of
management’s control of
risk, compliance and
internal controls across all
controlled entities in the
Company; and
> ensuring the Company
complies with all legislation
and regulations impacting
on its daily operations,
with particular attention
to the financial and
reporting needs of the
Company.
The ARMC is chaired by
Barrie Adams, Lead
Independent Director, and
during 2004/05 had two other
permanent members being
Tony Aveling (resigned
30 June, 2005), and Bill Hiller.
With Tony Aveling’s
resignation, the Board has
now appointed Barry Connelly
(appointed 1 July, 2005), as
a permanent member of the
Committee. The Board
considers that these members
have appropriate financial
expertise and understanding
of the industry in which the
Company operates.
The Managing Director,
Chief Executive Officer,
Chief Financial Officer,
General Counsel, Internal
Auditor, executive
management and the
Company’s external auditors
are invited to ARMC
meetings, at the discretion
of the Committee. The
Committee meets at least six
times each year and more
often as required.
Nominations Committee
The Nominations Committee
operates in accordance with
its Board approved charter, a
summary of which is available
from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
The main functions of the
Committee are to assess the
desirable competencies of
the Board members, review
Board succession plans,
provide a framework for the
evaluation process of the
performance of the Board,
individual directors, the Chief
Executive Officer and
executive management and to
make recommendations for
the appointment and removal
of directors.
The members of the
Committee during 2004/05
were Dennis Punches, Barrie
Adams, Bill Hiller, and Tony
Aveling (resigned on 30 June,
2005). It is chaired by the
Chairman of the Board. The
Nominations Committee
meets no less than once
per year.
The Committee’s policy for
the appointment of directors
is to select candidates whose
skills, expertise, qualifications,
networks, and knowledge of
the industry in which the
Company operates and other
potential markets into which
it may expand, complement
those of existing Board
members.
When selecting new directors
for recommendation to the
Board, the Committee reviews
prospective directors’ CVs,
meets with them and speaks
with their referees and others
who have previously worked
with them to assess their
suitability.
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
duties and responsibilities.
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.
Remuneration Committee
The Remuneration Committee
operates in accordance with
its Board approved charter,
a copy of which is available
from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
The principal function of the
Committee is to assist the
Board in ensuring that the
Company’s remuneration
levels are appropriate and
sufficient to attract and retain
the directors and key
executives needed to run the
Company.
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 executives
and other senior personnel;
> monitor organisational
structure and succession
planning strategies; and
> evaluate and review current
industry standards and
practices.
During 2004/05 the Committee
was chaired by Bill Kagel and
comprised Dennis Punches,
Barrie Adams, Bill Hiller
(appointed 15 June, 2005)
and Tony Aveling (resigned
30 June, 2005).
The Committee meets at
least annually with additional
meetings being convened as
required. The Committee
has access to executive
management of the Company
and may consult independent
experts where it considers
this necessary in order to
effectively discharge its
responsibilities.
For details of directors
attendances at Committee
meetings refer to the
Directors’ Report.
EQUITY PARTICIPATION
BY NON-EXECUTIVE
DIRECTORS
The Board encourages
non-executive directors to
own shares in the Company.
REMUNERATION
It is the Company’s objective
to provide maximum
stakeholder benefit from the
retention of a high quality
Board and executive
management team by
remunerating directors and
key executives fairly and
appropriately in accordance
with market conditions and
reflective of their contribution.
The expected outcomes of
this remuneration philosophy
are:
> retention and motivation
of key executives;
> attraction of quality
management to the
Company; and
> performance incentives
which allow executives to
share the rewards of the
success of the Company.
The Board is keen to
encourage equity holdings
by employees to align staff
interests with those of
shareholders. Many
employees have
participated in the Company’s
various share and option
plans and the directors
20
believe this has historically
been a significant contributing
factor to the Company’s
success.
The Company’s share plans
were in place prior to the
release of the ASX best
practice recommendations
and where included as part of
the documentation provided
to shareholders on listing of
the Company in October,
2000. The Board considers
that the composition of
executive remuneration and
equity related staff incentive
plans are the domain of the
Board subject to meeting the
Company’s statutory and
ASX Listing Rule disclosure
obligations.
No directors participate in
share plans. Non-executive
directors receive only cash
compensation and
reimbursement of expenses
for their services.
For additional information
relating to the Company’s
remuneration practices and
details relating to directors’
and executives’ remuneration
during the year, refer to the
Directors’ Report and Note 30
to the Financial Statements.
REVIEW OF BOARD
AND EXECUTIVE
PERFORMANCE
In order to ensure that the
Board continues to discharge
its duties effectively, the
performance of all directors
was reviewed during the
reporting period by the
Chairman.
The performance of the
Chairman was reviewed
during the reporting period
by his fellow directors. A
review of the Board has also
taken place in accordance
with the Company’s
performance evaluation
process for directors and
executives.
The Board also annually
reviews the performance of
the executive management
team.
IDENTIFYING AND
MANAGING BUSINESS
RISKS
There are a variety of risks
that exist in the collection
industry in which the
Company operates and there
are a range of factors, some
of which are beyond the
control of the Company and
which may impact on the
Company’s performance.
The Board, in conjunction
with the ARMC, reviews and
approves the parameters
under which such risks are
managed including the
responsibility for internal
control systems, the
procedure for identifying
business risks and the
methods to control their
financial impact on the
Company. The Board has
approved a Risk Management
Policy, a summary of which
is available on the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
The policy is designed to
ensure that strategic,
operational, legal, brand
reputation and financial risks
are identified, evaluated,
effectively and efficiently
monitored to enable the
achievement of the Company’s
business objectives.
The Chief Executive Officer
and the executive
management team are
instructed and empowered by
the Board to implement risk
management strategies in
cooperation with it and the
ARMC, report to the Board
and the ARMC on
developments related to risk,
and suggest to the Board
new and revised strategies for
mitigating and resolving risk.
During the year, a new role
was created within the
Company to further
strengthen the Company’s risk
management framework. The
role of Internal Auditor was
created to oversee and
support risk management
efforts from a Company
perspective ensuring that these
efforts were in accordance
with the direction provided by
the Board and executive
management, and to ensure
the adequacy of the risk
management information
framework throughout the
Company.
Internal audit carries out
regular systematic monitoring
of control activities and
reports to both relevant
business unit management
and the ARMC. Typically, the
audit methodology includes
performing risk assessments
of the areas under review;
performing audit tests,
including selecting and testing
audit samples; reviewing
progress made on previously
reported audit findings and
discussing internal control or
compliance issues with line
management and agreeing on
actions to be taken.
An information technology
steering committee was also
established to support
management on technology
risk matters across all
operational areas in Australia
and New Zealand with the
focus including technology
risk reviews and policy
development.
As at the half-year ended
31 December, 2004 and full-
year ended 30 June, 2005 the
Chief Executive Officer and
Chief Financial Officer certified
to the Board that the
Company’s financial reports
were complete and presented
a true and fair view, in all
material respects, of the
financial conditions and
operational results of the
Company and the controlled
entities at that date and were
in accordance with relevant
accounting standards. Also,
the Board received half-year
and full-year declarations from
executive management that
the Company’s risk
management and internal
compliance and control
systems were at that date
operating efficiently and
effectively in all material
respects.
Although no system of risk
management can provide
total assurance that the risks
that the Company faces will
be fully diminished, the
Company’s approach to risk
management seeks to meet
the Company’s specific needs
and minimise the risks to
which it is exposed.
CORPORATE REPORTING
The CEO and CFO have
made the following
certifications to the Board:
> that the Company’s financial
reports are complete and
present, a true and fair view,
in all material respects, of
the financial conditions and
operational results of the
Company and the
controlled Entities and are
in accordance with relevant
accounting standards;
> that the above statement is
founded on a sound system
of risk management and
internal compliance and
control which implements
the policies adopted by the
Board; and
> the Company’s risk
management and internal
compliance and control
system is operating
efficiently and effectively in
all material respects.
The Company adopted this
certification structure for the
year ended 30 June, 2005.
CONFLICT OF
INTEREST
If a director has a potential
conflict of interest in a matter
under consideration by the
Board or a board committee,
that director must abstain
from deliberations on those
matters. In that instance, the
director is not permitted to
exercise any influence over
21
2005 ANNUAL REPORT
other Board members or
board committee members on
that issue nor receive relevant
Board or board committee
papers or reports.
INDEPENDENT ADVICE
The Company permits any
director or board committee
to obtain advice about
transactions or matters of
concern, at the Company’s
cost. Approval for directors
seeking independent advice is
subject to the approval of the
Chairman acting reasonably.
Where appropriate, directors
share such independent
advice with other directors.
ETHICAL STANDARDS
The Company recognises
the need for our directors,
executives and employees to
observe the highest standards
of behaviour and business
ethics when engaging in
corporate activity.
The Board has adopted a
Code of Conduct that sets
out the principles and
standards with which all
officers and employees are
expected to comply in the
performance of their
respective functions. A key
element of that code is the
requirement that directors,
officers and employees act in
accordance with the law and
with the highest standards of
propriety. The code and the
methods of its implementation
are reviewed annually.
A summary of the Company’s
Code of Conduct for directors
and senior executives is
available from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
COMPANY POLICY AND
PRACTICE FOR DEALING
IN SECURITIES
The freedom of directors and
executives to deal in the
Company’s securities is
restricted in a number of
ways: by statute; by common
law; and by the requirements
of the ASX Listing Rules.
In addition to these
restrictions, the Company has
adopted an Insider Trading
Policy for dealing in company
securities.
The Insider Trading Policy
provides that directors and
executives may only deal in
company securities, provided
they are not in possession of
material non-public
information, in the 30 days
following the Company’s half-
year and full-year financial
results announcements and,
if relevant, any shareholders’
meeting.
Directors and executives may
only deal in the Company
securities outside of these
times with the express prior
approval of the Chairman or
Managing Director.
A summary of the Insider
Trading Policy is available
from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
SHAREHOLDER
COMMUNICATIONS
The Board aims to ensure that
shareholders are informed of
all information necessary to
assess the performance of
the Company. Information is
communicated to the
shareholders through:
> the Annual Report which is
distributed to all
shareholders (other than
those who elect not to
receive it);
> the AGM and other
shareholder meetings
called to obtain approval for
Board action as
appropriate;
> making available all
> ensuring all press releases
issued by the Company are
posted on the Company’s
website;
> encouraging active
participation by
shareholders at shareholder
meetings;
> actively encouraging
shareholders to provide
their email address to
facilitate more timely and
effective communication
with shareholders at all
times;
> contacting shareholders
who have provided their
email addresses directly to
provide details of upcoming
events of interest; and
> encouraging all
shareholders who are
unable to attend general
meetings to communicate
issues or ask questions by
writing to the Company.
A copy of the Board
approved Shareholder
Communications Guidelines is
available from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
COMPANY
COMMITMENT TO
CONTINUOUS
DISCLOSURE
The Board has approved a
Continuous Disclosure Policy
to ensure the fair and timely
disclosure of price sensitive
information to the investment
community as required by
applicable law.
The Company Secretary has
been appointed the
Disclosure Officer of the
Company and is required to
keep abreast of all material
information and where
appropriate ensure disclosure
of share price sensitive
information.
information released to the
Australian Stock Exchange
on the Company’s website
immediately following
confirmation of receipt by
the ASX;
A copy of the Continuous
Disclosure Policy is available
from the corporate
governance section of the
Company’s website
www.collectionhouse.com.au.
EXTERNAL AUDIT
INDEPENDENCE
The Company’s policy is to
appoint external auditors who
demonstrate quality and
independence. The
performance of the auditor is
reviewed annually and
applications for tender of
external audit services are
requested as deemed
appropriate, taking into
account an assessment of
performance, existing value
and tender costs. Hacketts
Chartered Accountants were
appointed as the external
auditors in 2000.
It is the policy of Hacketts to
provide an annual Declaration
of Independence to the
ARMC.
In addition, the Company has
put in place a policy which
lists the types of services that
Hacketts will not be able to
undertake in order to maintain
the independence and
integrity of its services to the
Company.
The ARMC meets with the
external auditor of the
Company, independently of
executive 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
ARMC reports to the Board at
least at each Board meeting.
A formal program has been
established for the ARMC at
each of its meetings in order
to ensure, among other
things, 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; and
> make recommendations to
the Board on the
22
appointment, removal and
terms of engagement of
external auditors.
The External Auditor is
requested to attend the AGM
and be available to answer
shareholder questions about
the conduct of the audit and
the preparation of the content
of the audit report.
An analysis of fees paid to
external auditors, including a
breakdown of fees for non-
audit services, is provided in
the Directors’ Report and in
Note 31 to the Financial
Statements.
WHISTLEBLOWER
PROTECTION
The Board has approved a
Whistleblower Protection
Policy that specifically outlines
procedures for dealing with
allegations of improper
conduct. Concerns can be
raised in a number of ways,
including in writing,
anonymously through the
Company’s online
whistleblower reporting
system, or by telephone.
Any concerns that are
reported are assessed and
handled by disclosure
coordinators in conjunction
with the Company’s General
Counsel.
The Company does not
tolerate known or
suspected incidents of
fraud, corrupt conduct,
adverse behaviour, legal or
regulatory non-compliance,
or questionable accounting
and auditing matters by its
employees.
Nor does the Company
tolerate taking reprisals
against those who come
forward to disclose such
conduct. The Company
will take all reasonable steps
to protect employees who
make such disclosures from
any reprisal or detrimental
action following the
disclosure.
HEALTH AND SAFETY
The Company aims to provide
and maintain a safe and
healthy work environment
within all operations. The
Company acts to meet this
commitment by implementing
work practices and
procedures throughout the
Company that comply with
the relevant regulations
governing the workplace.
Employees are expected to
take all practical measures to
ensure a safe and healthy
working environment in
keeping with their defined
responsibilities and
regulations.
and seeks to support the
effectiveness of the Board by
monitoring Board policy and
procedures and coordinating
the completion and despatch
of the Board meeting agendas
and papers. The Company
Secretary must also ensure
that each director receives
any requested information
in a timely manner.
Rhonda King was in practice
as a commercial lawyer from
1981, and as a partner or
consultant from 1984, until
accepting the appointment as
Company Secretary of the
Company and its subsidiaries
in April, 2003.
INTERNATIONAL
FINANCIAL REPORTING
STANDARDS (IFRS)
All directors have access to
the advice and services of the
Company Secretary.
The Australian Accounting
Standards Board (AASB) is
adopting International
Financial Reporting Standards
(IFRS) for application to
reporting periods beginning
on or after 1 January, 2005.
The AASB will issue Australian
equivalents to IFRS, and the
Urgent Issues Group will issue
abstracts corresponding to
International Accounting
Standards Board (IASB)
interpretations originated by
the International Financial
Reporting Interpretations
Committee or the former
Standing Interpretations
Committee. The adoption of
Australian equivalents to IFRS
will be first reflected in the
consolidated Entity’s financial
statements for the half-year
ending 31 December, 2005
and the year ending 30 June,
2006.
COMPANY SECRETARY
The Company Secretary is
Rhonda King. Under the
Company’s Constitution, the
appointment and removal of
the Company Secretary is a
matter for the Board. Among
other matters, the Company
Secretary advises the Board
on governance procedures
23
2005 ANNUAL REPORT
Directors’ Report
PRINCIPAL ACTIVITIES
The principal activities of the
consolidated Entity during the
year were the provision of
debt collection services
throughout Australasia.
There were no significant
changes in the nature of the
activities of the consolidated
Entity during the year.
Your directors present their
report on the consolidated
Entity comprising Collection
House Limited (the
Company) and its controlled
Entities for the financial
year ended 30 June,
2005.
DIRECTORS
The following persons were
directors of the Company
during the whole of the
financial period and up to the
date of this report, unless
stated otherwise:
D G Punches
Chairman
A R Aveling
Deputy Chairman
(resigned effective 30 June, 2005)
B E Adams
Lead Independent Director
A F Coutts
Executive Director
C K Day
Chief Executive Officer
(effective 1 July, 2005).
Additional information about
each of the directors is
included in the Board of
Collection House Limited and
Corporate Governance
sections of this report.
COMPANY SECRETARY
The Company Secretary at
the end of the financial year
was R G King.
D B Connelly
Independent Director
B S Göranson
Independent Director
(resigned effective 30 June, 2005)
W L Hiller
Independent Director
W W Kagel
Independent Director
S Walker
Non-Executive Director
J M Pearce
Managing Director & Chief
Executive Officer
(Managing Director and Deputy
Chairman effective 1 July, 2005)
Dividends
Details of dividends in respect of the reporting period are outlined below:
TYPE
CENTS
PER
SHARE
TOTAL
AMOUNT
$’000
FRANKED /
UNFRANKED
DATE OF
PAYMENT
Declared and paid during the year
> Final 2004 ordinary
> Interim 2005 ordinary
Declared after end of year
> Final 2005 ordinary
Dealt with in the financial report as:
> Dividends
> Noted as a subsequent event
4.0
4.0
4.0
NOTE
22
34
3,888
3,888
Unfranked
Unfranked
26 November, 2004
16 March, 2005
3,889
Unfranked
25 November, 2005
7,776
3,889
24
REVIEW OF OPERATIONS
CONTINGENT
COLLECTION
SERVICES
ACCOUNT
ASSET
MANAGEMENT
CREDIT
REPORTING
OTHER
OPERATIONS
INTER-SEGMENT
ELIMINATIONS /
UNALLOCATED
CONSOLIDATED
2004
2005
$'000 $'000
2004
2005
$'000 $'000
2004
2005
$'000 $'000
2004
2005
$'000 $'000
2004
2005
$'000 $'000
2005
$'000
2004
$'000
Sales to external customers
Inter-segmental sales
Total sales revenue
Other revenue
Total segmental revenue
43,084 46,353
2,489 6,009
45,573 52,362
160
46,893 52,522
1,320
54,301 42,666
-
-
54,301 42,666
67
54,404 42,733
103
248
21,686 23,790
272
21,934 24,062
847
21,995 24,909
61
6,046
-
3,719
-
6,046 3,719
9
6,096 3,728
50
-
-
(2,737) (6,281)
(2,737) (6,281)
265
(2,565) (6,016)
172
125,117 116,528
-
-
125,117 116,528
1,348
126,823 117,876
1,706
Segment result
Less: unallocated expenses
Profit from ordinary activities
before income tax expense
Less: income tax expense
Profit from ordinary activities
after income tax expense
Less: outside equity interest
Net profit attributable to
members of the Company
OPERATING AND
FINANCIAL REVIEW
A summary of the
consolidated sales and results
for the reporting period by
significant industry segment is
set out above.
Company Overview
The consolidated Statement
of Financial Performance
shows a consolidated net
profit of $12.2m, compared
to $10.6m in 2004. This
represents an increase of
14.7%.
A strong performance was
recorded by the contingent
collection services and
account asset management
segments with a combined
segment result of $23.7m,
($19.3m in 2004). This
represents an increase of
22.8%. During the year the
amortisation rate on
purchased debt increased to
35% from 29% in 2004. The
result from the account asset
management segment was
$17.7m, ($12.3m in 2004).
This represents an increase of
43.9%.
The consolidated Entity’s net
assets increased by 4.8%.
5,958 6,956
17,695 12,334
3,073 3,134
(2,221) (2,243)
(156) 1,637
24,349 21,818
(6,537)
(6,710)
17,639 15,281
5,056
5,825
11,814 10,225
(416)
(396)
12,210 10,641
The consolidated revenue for
the period increased by 7.6%
to $126.8m. Revenue
continues to confirm
Collection House as one of
Australasia’s dominant
receivables management
companies.
Staffing levels continue to be
contained. At the end of the
financial year there were 632
staff compared with 692 the
previous year. Staffing costs
decreased from $37.0m to
$35.2m. A decrease of 5.1%.
During the year savings were
realised in telecommunication,
postage, printing, and
advertising. The program of
cost containment and
reduction will continue in the
coming year and further
savings are expected.
Capital expenditure in 2005 was
$2.2m compared with $2.0m in
2004. The Company has
provided an additional $0.15m
for bad and doubtful debts.
The Entity acquired debt
ledgers with a total cost of
$43.4m ($27.9m in 2004).
The purchases were made
from operating cash flow and
the use of existing facilities.
During the year the Entity
increased its borrowings by
$10.1m compared with a
decrease in 2004 of $1.4m.
Cash flow from operations
increased to $43.4m, ($32.1m
in 2004). This represents an
increase of 35.2% over 2004.
During the year, current
assets decreased by $7.6m,
current liabilities decreased by
$2.4m and current receivables
decreased by $4.2m to
$12.9m.
The Entity has enjoyed the
benefits of a period of
consolidation in 2005
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 25
November, 2005. With the
unfranked interim dividend of
4.0 cents paid in March 2005,
the total dividend for 2004/05
is 8.0 cents (unfranked) per
share, consistent with the
Company dividend policy.
State of affairs
Significant changes in the
state of affairs of the
consolidated Entity during the
financial year were as
follows:
1. The consolidated Entity
purchased $325.6m face
value of debt for $43.6m.
2. The consolidated Entity
acquired a further 5.9% of
Collection House Business
Diagnostics Pty Ltd.
3. The consolidated Entity
sold the business of
Downie Insolvency.
4. The consolidated Entity
sold the business of
National Revenue
Corporation (NZ).
Events subsequent to
reporting date
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
25
2005 ANNUAL REPORT
operations, or the state of
affairs of the consolidated
Entity, in future financial
years.
Directors’ meetings
The number of meetings of
the Company’s Board and
of each board committee
held during the year ended
30 June, 2005 and the
numbers of meetings
attended by each director
of the Company during the
financial year were:
Likely developments
The benefits of cost reduction
will be further realised in the
new financial year. The
account asset management
segment will continue its
growth trend. The
improvement of margins in
the credit reporting segment
should continue. Rapid
Ratings and Insurance Claims
Solutions are expected to
make an improved
contribution.
The Board is considering
future strategic direction for
Rapid Ratings and ABR and
consideration is being given
to future public listing for both
subsidiaries. Consideration is
at a very preliminary stage
and no specific timeline has
been set.
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.
Environmental regulations
The Company’s operations
are not regulated by any
significant environmental
regulation under a law of the
Commonwealth or of a state
or territory.
NUMBER OF BOARD MEETINGS ATTENDED BY DIRECTORS
DIRECTOR NAME
MEETINGS HELD
TO 30 JUNE, 2005 (excluding
AGM and circulating minutes)
MEETINGS
ATTENDED
CIRCULATING
MINUTES
Dennis Punches
John Pearce
Barrie Adams
Tony Coutts
Stephen Walker
Tony Aveling
Bo Göranson
Bill Kagel
Barry Connelly
Bill Hiller
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
4
7
7
6
5
5
5
5
5
5
5
5
5
5
NUMBER OF ARMC MEETINGS ATTENDED BY COMMITTEE MEMBERS
COMMITTEE MEMBER
Barrie Adams
Tony Aveling
Bill Hiller
MEETINGS
HELD
MEETINGS
ATTENDED
9
9
9
9
9
9
Tony Aveling ceased to be a member of the ARMC on 30 June, 2005 and Barry Connelly
was appointed to the ARMC from 1 July, 2005.
NUMBER OF NOMINATIONS COMMITTEE MEETINGS ATTENDED BY COMMITTEE MEMBERS
COMMITTEE MEMBER
Dennis Punches
Barrie Adams
Bill Hiller
Tony Aveling
(from 27 July, 2004)
MEETINGS
HELD
MEETINGS
ATTENDED
3
3
3
3
2
2
3
3
Tony Aveling ceased to be a member of the Nominations Committee on 30 June, 2005.
NUMBER OF REMUNERATION COMMITTEE MEETINGS ATTENDED BY COMMITTEE MEMBERS
COMMITTEE MEMBER
MEETINGS HELD
(excluding circulating minutes)
MEETINGS
ATTENDED
CIRCULATING
MINUTES
Bill Kagel
Dennis Punches
Barrie Adams
Tony Aveling
(from 27 July, 2004)
Bill Hiller
(from 15 June, 2005)
3
3
3
3
3
3
3
2
3
-
2
2
2
2
-
Tony Aveling ceased to be a member of the Remuneration Committee on 30 June, 2005.
26
DIRECTORS’ SHAREHOLDING REGISTER
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
C K Day
Ordinary Shares
14,054,835
250,000
-
14,189,900
20,000
4,034,000
4,772,427
5,200
500,000
6,750,000
325,000
Options
-
-
-
-
-
100,000
-
-
-
-
100,000
Directors’ Shareholding
Register
complimentary to the reward
strategy of the organisation.
The relevant interest of each
director and their associates
in the shares or options
over issued shares by the
Company at 24 August, 2005
is as listed above.
Alignment to shareholders
interests:
> has economic profit as a
core component of plan
design;
> focuses on sustained
Remuneration Report
The objective of the
Company’s executive reward
and seniority framework is to
ensure promotion and reward
for performance is competitive
and appropriate for the results
delivered. The framework
aligns executive reward with
achievement of strategic
objectives and 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.
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
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.
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,
the higher the salary and
incentives offered.
Non-executive directors
Fees and payments to non-
executive directors reflect the
demands which 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. 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
Chair 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.
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 Tony reduced the
hours of his position. An
option agreement was put in
place for Tony Coutts
providing the issue of options
for 500,000 shares at $1 per
share to him. The options are
exercisable at the rate of
100,000 per annum and may
only be exercised if Tony
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
2004/05 financial year. John
has waived any fee payable
during 2005/06 for his roles
as Managing Director and
Deputy Chairman.
Retirement allowances for
directors
There are no retirement
allowances paid to non-
executive directors.
Executive pay
Executive pay comprises:
> a base salary;
> incentives provided through
the employee share plan
and the executive option
plan; and
> other remuneration such
as superannuation and a
car park.
Each senior executive’s
performance is reviewed at least
annually in accordance with
the terms of the Company’s
approved 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
27
2005 ANNUAL REPORT
DIRECTOR AND EXECUTIVE PAYMENTS
OPTIONS BONUS/ SUPER-
CAR
ISSUED1
ALLOWANCE
$
$
$
NON-CASH
ANNUATION BENEFITS
$
$
TOTAL
BASE
SALARY
$
DIRECTORS
Non-executive:
D G Punches2
B E Adams
A R Aveling
B Connelly
B S Göranson
W L Hiller
W W Kagel
S Walker
Executive:
50,000
120,000
70,000
50,000
40,000
60,000
40,000
40,000
J Pearce3
Managing Director & Chief Executive Officer
A Coutts4
Executive Director
182,623
-
174,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,800
6,300
-
-
5,400
-
3,600
2,576
2,576
2,576
2,576
2,576
2,576
2,576
2,576
52,576
133,376
78,876
52,576
42,576
67,976
42,576
46,176
-
6,404
6,404
7,777
22,521
6,404
393,325
Executive officers of the consolidated Entity – highest remuneration (excluding directors)
M Watkins5
General Counsel
A Ralston
Chief Financial Officer
D McAlpine5
Subsidiary Director
B Doherty5
Chief Collections Officer
M Thomas5
Chief Information Officer
253,077
190,000
130,000
174,265
176,234
8,700
-
-
-
22,777
6,404
290,958
17,100
6,404
213,504
6,525
58,878
15,953
6,404
217,760
17,400
17,400
-
-
15,684
6,536
213,885
13,747
2,576
209,957
Executive officers of the consolidated Entity – responsible for strategic direction (excluding directors)
17,400
17,400
164,432
174,265
C Day5
Chief Operations Officer
B Doherty5
Chief Collections Officer
C Stewart5
160,000
General Manager, Corporate Communication & Marketing
190,000
A Ralston5
Chief Financial Officer
M Watkins5
General Counsel
M Thomas5
Chief Information Officer
176,234
253,077
17,400
25,540
8,700
-
-
-
-
-
-
-
14,799
6,404
203,035
15,684
6,536
213,885
14,400
17,100
22,777
13,747
6,404
6,404
6,404
2,576
206,344
213,504
290,958
209,957
1 Other than the options for Tony 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
on page 29.
2 Dennis Punches requested that the annual salary of $80,000 be reduced to $50,000 effective
1 April, 2003.That reduction continued through the 2004/05 financial year.
3 John Pearce opted to receive no remuneration effective 8 April, 2003. That request continued
through the 2004/05 financial year.
4 Tony Coutts exercised 100,000 options in October, 2004 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 2001/02 calculation, the benefit to
Tony 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 on page 29.
simple formula involving
seniority and length of
employment.
Participation in the option
plan is via Board approval.
The Chief Executive Officer
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.
The final list of nominees
and their participation level
in the plan is
recommended by the
Remuneration Committee
to the Board for approval.
Options in the past have
been issued on the basis
of individual performance.
The option plan was
reviewed and options in
the 2004/05 financial year
were issued on the basis
of not only individual
performance but also
company performance
hurdles. The performance
hurdle for the 2004/05
financial year was an
increase in the share price
of 10%.
The Remuneration
Committee reviews the
terms of the option plan
on an annual basis.
Director and executive
payments
Details of the nature and
amount of each element
of emoluments of each
director of the Company,
of the five executives of
the consolidated Entity
receiving the highest
emoluments and of the
six executives with the
greatest authority for the
strategic direction and
management of the
consolidated Entity are
set out above.
28
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:
JM Pearce – Managing
Director & Chief Executive
Officer
> agreement terminable by
either party on three
months’ notice;
> entitlement to any salary
has been waived;
> retired as Chief Executive
Officer on 30 June, 2005;
and
> remains as Managing
Director and has been
appointed as Deputy
Chairman effective from
1 July, 2005.
AF 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; and
> 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; and
> annual base salary of
$190,000.
CK Day – Chief Operations
Officer (to 30 June, 2005)
> agreement terminable by
either party on three
months’ notice; and
> annual base salary of
$190,000.
CK Day – Chief Executive
Officer (from 1 July, 2005)
> term of one year with the
option of two renewals,
each for two years;
> annual base salary of
$330,000;
> annual bonus of $200,000
payable at the discretion of
the Board;
> also granted 100,000
options per annum for three
years, exercisable at a price
being the average market
price for CLH shares for the
five days prior to and
including 30 June, 2005.
The options may only be
exercised if certain
performance targets are
met: the target for the first
year is to increase return on
equity for CLH shares to
14.4%; in the second year
the target is a 16.8% return;
and in the third year it is
19.2%; and
> agreement terminable in the
first year on a six months’
notice period, and in each
of the following periods it is
12 months.
C Stewart – General
Manager, Corporate
Communication & Marketing
> agreement terminable by
C Stewart on one month’s
notice and by Collection
House on 12 months’
notice; and
> annual base salary of
$160,000.
B Doherty – Chief Collections
Officer
> agreement terminable by
either party on three
months’ notice; and
> annual base salary of
$174,265.
M Thomas – Chief
Information Officer
> agreement terminable by
either party on three
months’ notice; and
> annual base salary of
$175,000.
> annual base salary of
$235,000.
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 opposite
in Table 1.
Options were issued under
the Company executive
option plan to eligible
employees.
Options issued on
30 September, 2004 were
subject to a performance
hurdle that the Company
share price increase by 10%
by 30 June, 2005. The hurdle
was not reached and as a
consequence, the options
lapsed.
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 under option
Unissued shares of the
Company under option at the
time of this report are
opposite in Table 2.
Shares issued on the
exercise of options
The ordinary shares of the
Company issued during the
year ended 30 June, 2005
on the exercise of options
are shown opposite in
Table 3.
The amount unpaid under
loans to employees under the
employee loan scheme to
purchase Company shares,
as at 30 June, 2005 was
$132,860.
M Watkins – General Counsel
> agreement terminable by
either party on three
months’ notice; and
Relationship between
remuneration policy and
company performance
The Company considers that
its remuneration policy fairly
recompenses employees
without being overly generous
to the detriment of profit
available for distribution to
shareholders (see Table 4
opposite).
Company remuneration policy
also ensures options over
shares in the Company are
issued on the basis of
individual performance. In the
2004/05 financial year, issued
options could not be
exercised until a performance
hurdle was satisfied. That
hurdle, being an
improvement in share price
of 10% by 30 June, 2005
was not achieved and the
options lapsed.
During the last five years
the Company’s financial
performance has been solid
with a profit being declared in
each half year, an improving
net asset position, and a
return to shareholders by way
of dividend each half year.
Indemnification and
insurance of officers
During the financial year,
Collection House Limited paid
premiums of $74,707 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
in prohibited under the terms
of the contract.
29
2005 ANNUAL REPORT
TABLE 1: SHARE OPTIONS GRANTED TO DIRECTORS AND EXECUTIVES
ISSUED TO
ISSUE DATE
EXERCISE
PRICE PER
SHARE
NUMBER
OF
SHARES
EXPIRY
DATE
EXER-
CISED
Michael Watkins
Don McAlpine
Matthew Thomas
Colin Day
Brendan Doherty
Chris Stewart
30 September, 2004
30 September, 2004
30 September, 2004
30 September, 2004
30 September, 2004
22 July, 2004
30 September, 2004
$1.36
$1.36
$1.36
$1.36
$1.36
$1.18
$1.36
20,000
15,000
40,000
40,000
40,000
20,000
40,000
30 June, 2005
30 June, 2005
30 June, 2005
30 June, 2005
30 June, 2005
30 June, 2005
30 June, 2005
No
No
No
No
No
Yes
No
TABLE 2: SHARES UNDER OPTION
ISSUED TO
ISSUE
DATE
EXERCISE PRICE
PER SHARE
NUMBER OF
SHARES
EXPIRY
DATE
A Coutts
14 July, 2000
$1.00
100,000
3 November, 2005
C Day
1 July, 2005
$1.42 100,000 30 June, 2007
200,000
TABLE 3: SHARES ISSUED ON THE EXERCISE OF OPTIONS
ISSUE DATE OF OPTIONS
14 July, 2000
22 July, 2004
ISSUE PRICE
OF SHARES
NUMBER OF
SHARES ISSUED
$1.00
$1.18
100,000
20,000
TABLE 4: RELATIONSHIP BETWEEN REMUNERATION POLICY
AND COMPANY PERFORMANCE
FINANCIAL
YEAR
NUMBER OF
EMPLOYEES
AT YEAR END
NPAT
NET
ASSETS
DIVIDENDS
DECLARED
CHANGE IN
SHARE PRICE
649
$9,324,000
$71,603,000
2000-2001
(noting that the
Company listed on
4 October, 2000)
2001-2002
957
$18,655,000
$80,866,000
2002-2003
753
$8,197,000
$82,152,000
2003-2004
692
$10,641,000
$90,398,000
2004-2005
632
$12,210,000
$94,773,000
6.5 cents
fully franked
12.5 cents
fully franked
5.5 cents
fully franked
7.0 cents
unfranked
8.0 cents
unfranked
Listed at
$1.00
Ended: $5.28
Commenced:
$5.13
Ended: $3.10
Commenced:
$3.02
Ended: $1.19
Commenced:
$1.16
Ended: $1.43
Commenced:
$1.54
Ended: $1.40
BASIC
EARNINGS
PER SHARE
10.55 cents
19.60 cents
8.59 cents
11.00 cents
12.57 cents
Independence Declaration as
required under Section 307C
of the Corporations Act is
included in the Directors’
Report. Details of the
amounts paid to the auditors
of the Company, Hacketts,
are set out below.
AUDITORS’ REMUNERATION
Audit services:
Amounts received or due and receivable by the
auditors, Hacketts, for:
> audit of the financial statements
Other services:
Amounts received or due and receivable by the
auditors for:
> other assurance services
> other non-assurance services
2005
2004
$170,000
$160,000
$70,000
-
$65,000
$26,500
Auditors’ Independence
Declaration
Our auditors have provided
the Board of Directors with
a signed Independence
Declaration in accordance
with section 307C of the
Corporations Act 2001. This
declaration is attached in the
Directors’ Report.
This report is made in
accordance with a resolution
of the directors.
COLLECTION HOUSE LIMITED
John Pearce
MANAGING DIRECTOR
Brisbane, 24 August, 2005
30
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 or on
behalf of the Company with
leave of the court under
section 237 of the
Corporations Act 2001.
Rounding
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 and financial
report have been rounded off
in accordance with that class
order to the nearest thousand
dollars, or in certain cases,
to the nearest dollar.
Non-audit services
The Board of Directors in
accordance with advice from
the Audit & Risk Management
Committee is satisfied that the
provision of the non-audit
services during the year is
compatible with the general
standard of independence for
auditors imposed by the
Corporations Act 2001. The
directors are satisfied that the
services disclosed below did
not compromise the external
auditors’ independence for
the following reasons.
> During the year the
Company’s auditors have
performed no other services
in addition to their statutory
duties. All non-audit services
are subject to the corporate
governance procedures
adopted by the Company.
A copy of the auditors’
HACKETTS CHARTERED ACCOUNTANTS
ABN 14 071 939 497
Financial Statements
For the year ended 30 June, 2005
CONTENTS
34 Statements of
Financial
Performance
35 Statements of
Financial Position
36 Statements of Cash
Flows
37 Notes to Financial
Statements
71 Directors’
Declaration
72 Independent Audit
Report
73 Shareholder
Information
75 Corporate Directory
33
2005 ANNUAL REPORT
34
Statements of Financial Performance
Collection House Limited and its controlled entities
For the year ended 30 June, 2005
Revenue from rendering of services
Other revenues from ordinary activities
Total revenue from ordinary activities
Expenses from ordinary activities,
excluding borrowing costs expense
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
4
4
4
125,117
116,528
1,706
1,348
126,823
117,876
2005
$’000
46,368
12,399
58,767
2004
$’000
47,917
9,815
57,732
5(a)
(105,460)
(99,229)
(47,807)
(46,994)
Borrowing costs
5(b)
Profit from ordinary activities before related income tax expense
Income tax (expense) / benefit relating to ordinary activities
6(a)
Profit from ordinary activities after related
income tax (expense) / benefit
(3,724)
17,639
(5,825)
11,814
(3,366)
15,281
(5,056)
10,225
(3,704)
(3,267)
7,256
1,699
8,955
7,471
301
7,772
Profit from extraordinary item after related income tax expense
-
-
-
-
Net profit
Net (profit) / loss attributable to outside equity interests
Net profit attributable to members of the Company
Non-owner transaction changes in equity:
11,814
10,225
8,955
7,772
396
416
-
-
12,210
10,641
8,955
7,772
23
21
Net exchange difference relating to self-sustaining foreign operations 20
Total revenues, expenses and valuation adjustments attributable
to members of the Company recognised directly in equity
Total changes in equity from non-owner related transactions
attributable to the members of the Company
(144)
(144)
268
268
-
-
-
-
24
12,066
10,909
8,955
7,772
Basic earnings per share
Diluted earnings per share
cents
12.57
12.56
cents
11.00
10.97
7
7
The above statements of financial performance are to be read in conjunction with the accompanying notes to the financial statements.
35
2005 ANNUAL REPORT
Statements of Financial Position
Collection House Limited and its controlled entities
For the year ended 30 June, 2005
Current assets
Cash assets
Receivables
Current tax assets
Other
Total current assets
Non current assets
Receivables
Purchased debt
Other financial assets
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other
Total non current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non current liabilities
Payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total Company interest
Outside equity interests
Total equity
CONSOLIDATED
THE COMPANY
2005
$’000
2,399
12,937
763
1,437
17,536
1,013
112,339
-
10,356
10,414
25,884
5,927
46
165,979
2004
$’000
4,697
17,114
2,211
1,113
25,135
79
86,872
-
11,782
10,241
28,071
4,982
51
142,078
2005
$’000
558
19,459
763
1,011
21,791
101,381
-
21,947
7,148
-
11,211
4,461
28
146,176
2004
$’000
150
17,919
1,918
683
20,670
78,219
-
21,844
8,826
-
11,974
3,739
29
124,631
183,515
167,213
167,967
145,301
6,391
216
1,309
2,123
10,039
-
54,290
24,052
361
78,703
88,742
94,773
67,156
380
28,060
95,596
(823)
94,773
7,364
2,919
206
1,900
12,389
-
44,129
19,991
306
64,426
76,815
90,398
66,757
524
23,626
90,907
(509)
90,398
3,319
2,429
-
1,779
7,527
9,761
54,290
22,506
343
86,900
94,427
73,540
67,156
-
6,384
73,540
-
73,540
2,497
2,825
-
1,562
6,884
3,507
44,108
18,581
259
66,455
73,339
71,962
66,757
-
5,205
71,962
-
71,962
Note
8
9(a)
10(a)
9(b)
11
12
13
14
15
6(c)
10(b)
16(a)
17(a)
18(a)
16(b)
17(b)
6(b)
18(b)
19(a)
20
21
23
24
The above statements of financial position are to be read in conjunction with the accompanying notes to the financial statements.
36
Statements of Cash Flows
Collection House Limited and its controlled entities
For the year ended 30 June, 2005
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Cash flows from operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Dividends received
Interest received
Borrowing costs paid
Income taxes paid
Net cash provided by / (used in) operating activities
33 (b)
Cash flows from investing activities
Proceeds on disposal of businesses and related 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 databases
Payments for purchased debt
Other cash flows from investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Repayment of loans to related parties
Dividends paid
Net cash provided by financing activities
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
129,621
(82,666)
46,955
-
307
(3,725)
(158)
43,379
264
-
(103)
(2,229)
(86)
(173)
(43,414)
275
118,078
(82,485)
35,593
2
400
(3,366)
(548)
32,081
780
50
(127)
(1,991)
-
(50)
(27,888)
(52)
(45,466)
(29,278)
244
10,377
(323)
-
(7,776)
2,522
435
2,101
(137)
1,544
-
(1,398)
-
(3,868)
(3,722)
(919)
2,879
141
49,002
(54,353)
(5,351)
12,000
340
(3,704)
(98)
3,187
-
-
(103)
(1,106)
(6)
-
-
281
(934)
244
10,182
(130)
(4,099)
(7,776)
(1,579)
674
(2,446)
-
48,333
(44,287)
4,046
-
492
(3,267)
714
1,985
-
50
(127)
(384)
(5)
-
-
(71)
(537)
1,544
-
(1,218)
-
(3,868)
(3,542)
(2,094)
(352)
-
Cash at the end of the financial period
33(a)
2,399
2,101
(1,772)
(2,446)
The above statements of cash flows are to be read in conjunction with the accompanying notes to the financial statements.
37
2005 ANNUAL REPORT
Notes to Financial Statements
Collection House Limited and its controlled entities
For the year ended 30 June, 2005
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, 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 an 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.
38
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.
(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 Note1(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
The Company is the head Entity in the tax consolidated Group comprising all of the Australian wholly owned subsidiaries set out in
39
2005 ANNUAL REPORT
Note 27. The head Entity recognises all of the current and deferred tax assets and liabilities of the tax-consolidated Group
(after elimination of intragroup 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 current tax assets and liabilities and deferred tax balances arising from external transactions
during the year.
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(f).
Expenditure, including that on internally generated assets, is only recognised as an asset when the Entity controls future economic
benefits as a result of the costs incurred, it is probable that those future economic benefits will eventuate, and the costs can be
measured reliably. Costs attributable to feasibility and alternative approach assessments are expensed as incurred.
Subsequent additional costs
Costs incurred on assets subsequent to initial acquisition are capitalised when it is probable that future economic benefits in
excess of the originally assessed performance of the asset will flow to the consolidated Entity in future years. Costs that do not
meet the criteria for capitalisation are expensed as incurred.
(i) Revisions of accounting estimates
Revisions to accounting estimates are recognised prospectively in current and future periods only.
(j) Receivables
The 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.
40
(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.
Change in accounting policy for the measurement of purchased debt
Significant legal and court costs associated with purchased debt and incurred subsequent to acquisition have been capitalised in
recognition that it is expected beyond reasonable doubt future economic benefits will flow to the consolidated Entity as a result of
the expenditure being incurred.
These costs are amortised on a straight line basis over the period of their expected benefit, which is not expected to exceed two
years.
The policy of capitalising legal and court costs was adopted with effect from 1 July, 2004. The previous policy was to expense
such costs as incurred. The new policy was adopted in recognition that the costs represent future economic benefits and as such
should be brought to account in the same period as those benefits.
The change in accounting policy resulted in a decrease in the consolidated expenses from ordinary activities excluding borrowing
costs of $665,000 in the Statement of Financial Performance for the year ended 30 June, 2005 with a corresponding increase in
the consolidated carrying value of purchased debt in the Statement of Financial Position as at 30 June, 2005. The decrease in
consolidated expenses has been reflected as a decrease in direct collection costs of $1,075,000 and an increase in amortisation
of $410,000 as disclosed in Note 5(a). The change in accounting policy has no effect on the expenses or carrying value of assets
of the Company.
The restatements of the consolidated profit from ordinary activities before income tax, income tax expense, retained earnings and
purchased debt above show the information that would have been disclosed had the new accounting policy always been applied.
Profit from ordinary activities before related income tax expense
Previously reported amount
Adjustment for change in accounting policy for measurement of purchased debt
Restated amount
Income tax (expense) / benefit relating to ordinary activities
Previously reported amount
Adjustment for change in accounting policy for measurement of purchased debt
Restated amount
Retained profits
Previously reported amount
Adjustment for change in accounting policy for measurement of purchased debt
Restated amount
Purchased debt (net)
Previously reported carrying amount at the end of the previous financial year
Adjustment for change in accounting policy for measurement of purchased debt
Restated carrying amount at the end of the previous financial year
(n) Databases
2005
HALF-YEAR
2005
2004
$’000
(Restated)
$’000
(Restated)
$’000
(Restated)
16,974
665
17,639
(5,625)
(200)
(5,825)
27,595
465
28,060
111,674
665
112,339
15,281
657
15,938
(5,056)
(198)
(5,254)
23,626
459
24,085
86,872
657
87,529
9,837
620
10,457
(3,598)
(186)
(3,784)
26,244
434
26,678
92,769
620
93,389
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 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.
41
2005 ANNUAL REPORT
(p) Other intangibles
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 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
All assets, including intangibles, have limited useful lives and are depreciated / amortised using the straight-line method over their
estimated useful lives taking into account estimated residual values with the exception of purchased debt which is depreciated on
a basis that is representative of the pattern of benefits to be derived from the asset refer Note 1(m).
Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an
asset is completed and held ready for use.
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made,
adjustments are reflected prospectively in current and future periods only.
2005
2004
The estimated useful
lives for each class of
depreciable asset are:
Leasehold improvements
Plant and equipment
Computer equipment
Software
Goodwill
Term of Lease
4 to 8 years
3 to 5 years
2 to 12 years
max 20 years
Term of Lease
4 to 8 years
3 to 4 years
4 to 10 years
max 20 years
(s) Employee benefits
Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave expected to be settled within 12 months of the year end
represent present obligations resulting from employee services provided to reporting date, calculated at undiscounted amounts
based on remuneration wage and salary rates that the consolidated Entity expects to pay as at reporting date including related
on-costs.
Long service leave
The provision for employee entitlements to long service leave represents the present value of the estimated future cash outflows
to be made resulting from employees services provided up to balance date.
The provision is calculated using estimated future increases in wage and salary rates including related on-costs and expected
settlement dates based on turnover history and is discounted using the rates attaching to national government bonds at balance
date which most closely match the terms of maturity of the related liabilities.
Employee share and option plans
Where shares or options are issued to employees, including directors, as remuneration for past services, the shares or options
issued are recorded in contributed equity at the fair value of consideration received, if any.
Transaction costs associated with issuing shares and options are recognised in equity subject to the extent of the proceeds
received, otherwise expensed. Other administrative costs are expensed.
Superannuation plans
The Company and other controlled entities contribute to several 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 ecognition.
42
(u) Interest bearing liabilities
All borrowings are recognised at their principal amounts subject to set off arrangements which represent the present value of
future cash flows associated with servicing the debt. Where interest is payable in arrears the interest expense is accrued over the
period it becomes due, is recorded at the contracted rate as part of “Other creditors and accruals”.
Where interest is paid in advance, the interest expense is recorded as a part of “Prepayments” and released over the period to
maturity.
(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 Company 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
Managing the transition to Australian equivalents to International Financial Reporting Standards (AIFRS)
The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards (IFRS) for application
to reporting periods beginning on or after 1 January, 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent
Issues Group has issued interpretations corresponding to IASB interpretations originated by the International Financial Reporting
Interpretations Committee or the former Standing Interpretations Committee. These Australian equivalents to IFRS are referred to
hereafter as AIFRS. The adoption of AIFRS will be first reflected in the consolidated Entity's financial statements for the half year
ending 31 December, 2005 and the year ending 30 June, 2006.
Entities complying with AIFRS for the first time will be required to restate their comparative financial statements to amounts
reflecting the application of AIFRS to that comparative period. Most adjustments required on transition to AIFRS will be made,
retrospectively, against opening retained earnings as at 1 July, 2004.
The consolidated Entity has established a project team to manage the transition to AIFRS, including training of staff and system
and internal control changes necessary to gather all the required financial information. The project team is chaired by the Chief
Financial Officer and reports to the Audit & Risk Management Committee. The project team has prepared a detailed timetable for
managing the transition and is currently on schedule.
The project team has analysed all of the AIFRS and has identified the accounting policy changes that will be required. In some
cases choices of accounting policies are available, including elective exemptions under Accounting Standard AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards. These choices have been analysed to determine
the most appropriate accounting policy for the consolidated Entity.
A detailed analysis of the impacts of adopting the AIFRS is set out in Note 35.
43
2005 ANNUAL REPORT
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 Operations.
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 Operations
Includes insurance claims services and corporate risk rating. None of these activities constitutes a separately reportable segment.
Geographic Segments
The Company operates 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.
44
NOTE 3 SEGMENT INFORMATION (CONTINUED)
PRIMARY REPORTING - BUSINESS SEGMENTS
as at 30 June, 2005
Sales to external customers
Inter-segmental sales
Total sales revenue
Other revenue
Total segmental revenue
Segment result
Less: unallocated expenses
Profit from ordinary activities before
income tax expense
Less: Income Tax Expense
Profit from ordinary activities after
income tax expense
Less: outside equity interest
Net profit attributable to members
of the Company
Margin on sales revenue
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Ratio Assets: Liabilities
Acquisitions of property, plant and equipment,
intangibles and other non-current segment assets
Depreciation and amortisation expense
Other non-cash expenses
SECONDARY REPORTING - GEOGRAPHICAL SEGMENTS
as at 30 June, 2005
Australia
New Zealand
COLLECTION
SERVICES
2005
$’000
43,084
2,489
45,573
1,320
46,893
2004
$’000
46,353
6,009
52,362
160
52,522
5,958
6,956
13%
13%
121,289
110,832
32,545
37,195
3.7
3.0
1,266
640
1,257
1,491
189
904
ACCOUNT ASSET
MANAGEMENT
CREDIT
REPORTING
OTHER
OPERATIONS
2005
$’000
54,301
-
54,301
103
54,404
2004
$’000
42,666
-
42,666
67
42,733
2005
$’000
21,686
248
21,934
61
21,995
2004
$’000
23,790
272
24,062
847
24,909
2005
$’000
6,046
-
6,046
50
6,096
2004
$’000
3,719
-
3,719
9
3,728
INTER-SEGMENT
ELIMINATIONS /
UNALLOCATED
2005
2004
$’000
-
(2,737)
(2,737)
172
(2,565)
$’000
-
(6,281)
(6,281)
265
(6,016)
17,695
12,334
3,073
3,134
(2,221)
(2,243)
(156)
1,637
45
2005 ANNUAL REPORT
CONSOLIDATED
2005
$’000
125,117
-
125,117
1,706
126,823
24,349
(6,710)
17,639
5,825
11,814
(396)
2004
$’000
116,528
-
116,528
1,348
117,876
21,818
(6,537)
15,281
5,056
10,225
(416)
12,210
10,641
33%
29%
14%
13%
(37%)
(60%)
(6%)
26%
19%
19%
115,493
88,409
23,180
22,033
4,058
3,958
(87,112)
(65,216)
99,066
71,955
4,277
5,324
14,688
9,699
(87,112)
(65,344)
176,908
6,607
183,515
160,016
7,197
167,213
63,464
25,278
88,742
58,829
17,986
76,815
1.2
1.2
5.4
4.1
0.3
0.4
1.0
1.0
2.1
2.2
43,414
28,133
19,032
11,861
44
29
722
911
(95)
1,409
1,186
(239)
695
110
94
539
205
(6)
-
-
46,097
30,721
2,871
2,784
24,181
17,527
14
80
246
768
SEGMENT REVENUES
FROM SALES TO
EXTERNAL
CUSTOMERS
2005
$’000
2004
$’000
116,201
8,916
125,117
110,461
6,067
116,528
SEGMENT
ASSETS
2005
$’000
2004
$’000
175,192
8,323
183,515
159,621
7,592
167,213
ACQUISITION OF
PROPERTY, PLANT AND
EQUIPMENT, INTANGIBLES
AND OTHER NONCURRENT
SEGMENT ASSETS
2005
$’000
43,194
2,903
46,097
2004
$’000
28,831
1,890
30,721
46
NOTE 4 REVENUE FROM ORDINARY ACTIVITIES
Rendering of services revenue from operating activities
125,117
116,528
46,368
47,917
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
Other revenues:
From operating activities
Interest:
Other parties
Related parties
From outside operating activities
Gross proceeds from sale of businesses and related assets
Dividends
Rent received
Other
Total other revenues
306
-
306
1,234
-
10
156
1,400
1,706
358
42
400
780
2
3
163
947
1,348
Total revenue from ordinary activities
126,823
117,876
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
Depreciation and amortisation expenses
Search fees
Direct collection costs
Insurance claims costs
Net bad and doubtful debts (expense) / write-back including
movements in provision for doubtful debts
Operating lease rental expense representing minimum lease payments
Consultancy fees
Legal expenses
Other expenses from ordinary activities
(b) Profit from ordinary activities before income tax expense has been arrived
at after charging /(crediting) the following items:
Depreciation of:
Leasehold improvements, plant and equipment
Purchased debt
Amortisation of:
Goodwill
Other intangibles
Legal and court cost capitalised
Leased plant and equipment
Total depreciation and amortisation
Borrowing costs:
Related parties
Other parties:
– Bank loans and overdraft
– Other borrowings
Net (gain) / loss on disposal:
Property, plant and equipment
Businesses and related assets
Write down of other non current assets to recoverable amount
35,223
24,181
12,826
16,106
4,029
27
3,551
619
757
8,141
105,460
3,548
18,622
22,170
1,589
8
410
4
2,011
24,181
37,042
17,527
14,476
14,648
2,771
1,186
3,470
549
245
7,315
99,229
3,885
11,861
15,746
1,619
142
-
20
1,781
17,527
340
-
340
-
12,000
4
55
12,059
12,399
58,767
22,892
3,446
418
13,863
-
(59)
2,163
138
666
4,280
47,807
2,687
-
2,687
751
8
-
-
759
3,446
340
152
492
-
9,200
2
121
9,323
9,815
57,732
20,621
3,631
464
15,064
-
943
2,329
102
222
3,618
46,994
2,722
-
2,722
751
142
-
16
909
3,631
11
63
-
-
3,651
62
3,724
21
(284)
-
3,286
17
3,366
-
(599)
213
3,643
61
3,704
14
-
-
3,267
-
3,267
10
-
213
47
2005 ANNUAL REPORT
NOTE 5 PROFIT FROM ORDINARY ACTIVITIES BEFORE RELATED INCOME TAX EXPENSE (CONTINUED)
(c) Revision of accounting estimates
Plant and equipment
During the year, the estimated total useful lives to a controlled entity of certain items of computer 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 $72,799.
Assuming the assets are held until the end of their estimated useful lives, depreciation of the consolidated Entity in future years in
relation to these assets will be (increased) / decreased by the following amounts:
Year ending 30 June
CONSOLIDATED
$’000
THE COMPANY
$’000
2006
2007
2008
2009
2010
2011
2012
2013
2014
NOTE 6 TAXATION
(a) Income tax expense / (benefit)
Prima facie income tax expense / (benefit) calculated at 30%
(2004: 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
Income tax expense on the profit from ordinary activities before individually
significant income tax items
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
Research & development allowance
Other
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
Tax related receivables from wholly owned subsidiaries
Under / (over) provision in prior year
56
82
56
28
(59)
(59)
(59)
(59)
(59)
-
-
-
-
-
-
-
-
-
CONSOLIDATED
2004
2005
$’000
$’000
THE COMPANY
2005
$’000
2004
$’000
5,292
4,585
2,177
2,242
547
510
83
460
246
10
227
5
-
332
30
-
-
-
-
-
-
-
-
-
-
-
6,155
5,742
(6,155)
(3,600)
-
-
(5,742)
(2,760)
-
-
6,432
5,301
(1,191)
(156)
-
-
6,432
(379)
(228)
5,825
3,123
3,671
(362)
-
(607)
5,825
-
-
5,301
-
(245)
5,056
408
5,192
(299)
-
(245)
5,056
-
-
(1,191)
10,600
(10,600)
(156)
(280)
(228)
(1,699)
1,589
3,551
(176)
(6,155)
(508)
(1,699)
-
(145)
(301)
359
5,012
216
(5,743)
(145)
(301)
(b) Deferred tax liabilities
Provision for deferred income tax
Provision for deferred income tax comprises the estimated expense at the applicable
rate of 30% (2004: 30%) for Australian entities and the relevant rates for foreign entities. 24,052
19,991
22,506
18,581
48
NOTE 6 TAXATION (CONTINUED)
(c) Deferred tax assets
Future income tax benefit
Future income tax benefit comprises the estimated future benefit at the applicable rate
of 30% (2004: 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
the future income tax benefit of tax losses recognised in the deferred tax asset
balance at 30 June, 2005 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.
Future income tax benefits not taken into account
The potential future income tax benefit of a controlled entity, which is a company,
arising from tax losses has not been recognised as an asset because recovery of
tax losses is not virtually certain or assured beyond any reasonable doubt. If the
company should start to derive profits in a future year, the future income tax
benefit relating to the prior year losses will be recognised when it is determined
that the profits are sustainable.
Tax losses carried forward
NOTE 7 EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Earnings reconciliation
Net profit
Net (profit) / loss attributable to outside equity interests
Basic (and diluted) earnings
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
5,927
4,982
4,461
3,739
4,553
4,225
3,168
153
676
-
-
-
CONSOLIDATED
2005
cents
12.57
12.56
2004
cents
11.00
10.97
CONSOLIDATED
2005
$’000
2004
$’000
11,814
396
12,210
10,225
416
10,641
CONSOLIDATED
2005
Number
2004
Number
97,135,427
53,166
97,188,593
96,627,658
276,745
96,904,403
Weighted average number of ordinary shares used in the calculation of basic earnings per share.
Effect of directors and executive share options on issue.
Weighted average number of potential ordinary shares used in the calculation of diluted earnings
per share.
On 23 July, 2004 20,000 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 4,697.
On 29 October, 2004 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 24,343.
On 30 June, 2005 20,000 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 nil.
49
2005 ANNUAL REPORT
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
2005
$’000
2004
$’000
33(a)
2,399
2,399
4,697
4,697
558
558
150
150
NOTE 8 CASH ASSETS
Cash at bank and on hand
Bank overdraft right of set-off
With effect from 1 July, 2004 the Company holds a contractual right of
set-off between the current overdraft balance and the cash-at-bank balances.
The details are as follows:
Cash at bank and on hand
Bank overdraft set-off under terms of facility effective 1 July, 2004
Disclosed as:
Cash at bank and on hand
Bank overdraft
NOTE 9 RECEIVABLES
(a) Current
Trade debtors
Less: provision for doubtful trade debtors
Other debtors
Loans to controlled entities
Other loans(1)
(b) Non current
Loans to controlled entities
Other debtors
Other loans (1)
(1) Other loans include share loans to employees and represent amounts receivable from employees under all
employee share plans. The loan balance is fully recoverable over the period of the employee share scheme.
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
Legal and court costs capitalised (net)
1(m)
Refer to Note 17 for information on non current assets pledged as
security by the Company or its controlled entities.
604
(2,376)
(1,772)
558
(2,330)
6,717
(1,057)
5,660
613
13,098
88
19,459
4,775
(2,376)
2,399
4,697
-
4,697
2,399
-
4,697
(2,596)
17,909
(1,753)
16,156
786
-
172
17,114
12,950
(1,497)
11,453
1,396
-
88
12,937
-
970
43
1,013
-
-
79
79
101,338
-
43
101,381
150
-
150
150
(2,596)
8,878
(1,163)
7,715
1,033
8,999
172
17,919
78,140
-
79
78,219
338
1,099
1,437
46
46
332
781
1,113
51
51
169,601
(57,927)
111,674
126,187
(39,315)
86,872
254
757
1,011
28
28
-
-
-
241
442
683
29
29
-
-
-
665
-
-
-
112,339 86,872 - -
-
-
-
-
NOTE 12 OTHER FINANCIAL ASSETS
Non current
Non-traded investments
Shares in controlled entities - at cost
Interests in other entities - at cost
Refer to Note 17 for information on non current assets pledged as
security by the Company or its controlled entities.
27(a)
-
-
-
-
-
-
21,947
-
21,947
21,844
-
21,844
50
NOTE 13 PROPERTY, PLANT AND EQUIPMENT
Leasehold improvements
At cost
Accumulated depreciation
Plant and equipment
At cost
Accumulated depreciation
Leased plant and equipment
At capitalised cost
Accumulated amortisation
Computer software
At cost
Accumulated depreciation
Work-in-progress
At cost
Total property, plant and equipment net book value
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
Transfers
Depreciation
Carrying amount at end of year
Plant and equipment
Carrying amount at beginning of year
Additions
Disposals
Transfers
Depreciation
Carrying amount at end of year
Leased plant and equipment
Carrying amount at beginning of year
Disposals
Transfers
Amortisation
Carrying amount at end of year
Computer software
Carrying amount at beginning of year
Additions
Disposals
Transfers
Depreciation
Carrying amount at end of year
Work in progress
Carrying amount at beginning of year
Additions
Disposals
Transfers
Carrying amount at end of year
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
453
(117)
336
426
(87)
339
364
(94)
270
335
(71)
264
17,469
(11,905)
5,564
17,715
(9,814)
7,901
14,898
(10,235)
4,663
14,913
(8,243)
6,670
375
(321)
54
7,732
(4,088)
3,644
758
758
10,356
35
(4)
31
6,535
(3,035)
3,500
11
11
11,782
339
38
(9)
-
(32)
336
7,901
203
(61)
(17)
(2,462)
5,564
31
(28)
55
(4)
54
3,500
1,209
(11)
-
(1,054)
3,644
11
785
-
(38)
758
323
51
(8)
-
(27)
339
10,259
212
(17)
17
(2,570)
7,901
68
-
(17)
(20)
31
4,227
699
(139)
-
(1,287)
3,500
-
11
-
-
11
-
-
-
4,232
(2,642)
1,590
625
625
7,148
264
29
-
-
(23)
270
6,670
40
(20)
-
(2,027)
4,663
-
-
-
-
-
1,892
335
-
-
(637)
1,590
-
625
-
-
625
-
-
-
3,900
(2,008)
1,892
-
-
8,826
240
40
-
-
(16)
264
8,613
134
(18)
81
(2,140)
6,670
97
-
(81)
(16)
-
2,247
211
-
-
(566)
1,892
-
-
-
-
-
Total property, plant and equipment net book value
10,356
11,782
7,148
8,826
51
2005 ANNUAL REPORT
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
2005
$’000
2004
$’000
10,414
10,414
10,241
10,241
-
-
-
-
NOTE 14 DATABASES
Databases
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
Refer to Note 17 for information on non current assets pledged as security by the
Company or its controlled entities.
31,275
2,076
33,351
(7,467)
25,884
32,008
2,063
34,071
(6,000)
28,071
14,911
450
15,361
(4,150)
11,211
14,911
444
15,355
(3,381)
11,974
NOTE 16 PAYABLES
(a) Current
Trade creditors
Other creditors and accruals
(b) Non current
Loans from controlled entities
NOTE 17 INTEREST BEARING LIABILITIES
(a) Current
Bank overdraft (secured)
Other loans (secured)
Other loans (unsecured)
Hire purchase liabilities
(b) Non current
Bank loans (secured)
Other loans (secured)
Hire purchase liabilities
3,069
3,322
6,391
2,840
4,524
7,364
1,130
2,189
3,319
744
1,753
2,497
-
-
9,761
3,507
8
25
25
-
92
103
21
216
54,290
-
-
54,290
2,596
229
-
94
2,919
44,016
92
21
44,129
2,330
92
7
-
2,429
54,290
-
-
54,290
2,596
229
-
-
2,825
44,016
92
-
44,108
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 offset facility (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Total facilities utilised at balance date
Bank offset facility (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
5,000
60,000
872
265
66,137
-
54,290
852
21
55,163
5,000
60,000
872
265
66,137
2,596
44,016
711
115
47,438
5,000
60,000
500
150
65,650
2,330
54,290
480
-
57,100
5,000
60,000
500
150
65,650
2,596
44,016
314
-
46,926
52
NOTE 17 INTEREST BEARING LIABILITIES (CONTINUED)
Total facilities not utilised at balance date
Bank offset facility (secured)
Bank bills
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
NOTE 18 PROVISIONS
(a) Current
Employee benefits
Other
(b) Non current
Employee benefits
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
5,000
5,710
20
244
10,974
2,404
15,984
161
150
18,699
2,670
5,710
20
150
8,550
2,404
15,984
186
150
18,724
29
1,752
371
2,123
1,737
163
1,900
1,529
250
1,779
1,509
53
1,562
29
361
306
343
259
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
(a) Share capital
97,221,881 (2004: 96,876,381) ordinary shares, fully paid
(b) Movements in ordinary share capital
Details
Balance at the beginning of the 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
Balance at end of year
(c) Ordinary shares - terms and conditions
163
696
(488)
371
53
528
(331)
250
67,156
66,757
67,156
66,757
NUMBER
OF SHARES
ISSUE
PRICE
96,876,381
225,500
100,000
20,000
97,221,881
$ 1.22
$ 1.00
$ 1.18
$’000
66,757
275
100
24
67,156
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.
NOTE 20 RESERVES
Foreign currency translation reserve
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
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
380
524
524
(144)
380
256
268
524
-
-
-
-
-
-
-
-
53
2005 ANNUAL REPORT
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
2005
$’000
2004
$’000
NOTE 20 RESERVES (CONTINUED)
Nature and purpose of reserves
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
Dividends recognised during the year
Retained profits at the end of the year
NOTE 22 DIVIDENDS
Dividends recognised in the current year by the Company are:
22
23,626
12,210
(7,776)
28,060
16,853
10,641
(3,868)
23,626
5,205
8,955
(7,776)
6,384
1,301
7,772
(3,868)
5,205
CENTS
TOTAL
DATE OF TAX RATE FOR
%
PER SHARE AMOUNT PAYMENT FRANKING FRANKED
$’000
3,888
3,888
7,776
2,902
966
3,868
3,889
CREDIT
30%
30%
NIL
NIL
30%
NIL
30%
100%
16 March
2005
26 November
2004
18 March
2004
28 November
2003
30%
NIL
THE COMPANY
2005
$’000
2004
$’000
-
-
2005
Interim 2005 – ordinary
Final 2004 – ordinary
Total amount
2004
Interim 2004 – ordinary
Final 2003 – ordinary
Total amount
4.0
4.0
3.0
1.0
Subsequent events
Since the end of the financial year, the directors have declared the following dividends:
Final 2005 – ordinary
4.0
The financial effect of this dividend has not been brought to account in the
financial statements for the year ended 30 June, 2005 and will be recognised in
subsequent financial reports.
Dividend franking account
Franking credits available to shareholders of Collection House Limited for
subsequent financial years based on a tax rate of 30% (2004: 30%)
The above available amounts are based on the balance of the dividend
franking account at year end adjusted for:
(a) franking credits that will arise from the payment of the amount of the current
current provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised
as a liability at year end;
(c) franking credits that will arise from the receipt of dividends recognised
as receivables at the reporting date; and
(d) franking credits that may be prevented from being distributed in
subsequent financial years.
The ability to utilise the franking credits is dependent upon there being
sufficient available profits to declare dividends.
54
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
CONSOLIDATED
2005
$’000
2004
$’000
(746)
(396)
(1,142)
319
-
(823)
(443)
(416)
(859)
350
-
(509)
NOTE 24 TOTAL EQUITY RECONCILIATION
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
Total equity at end of year
NOTE 25 COMMITMENTS
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
One year or later and no later than five years
Later than five years
Investments
In 2003 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
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
Total hire purchase commitments
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
Commitments not recognised in the financial statements
17(a)
17(b)
CONSOLIDATED
THE COMPANY
Note
2005
$’000
2004
$’000
2005
$’000
2004
$’000
90,398
82,152
71,962
66,514
12,066
10,909
8,955
7,772
22
23
399
(7,776)
1,544
(3,868)
399
(7,776)
(314)
(339)
-
1,544
(3,868)
-
94,773
90,398
73,540
71,962
327
-
-
327
100
100
200
22
-
-
22
1
21
21
-
21
129
-
-
129
100
200
300
99
22
-
121
6
115
94
21
115
304
-
-
304
-
-
-
-
100
100
200
100
200
300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,630
2,169
-
4,799
3,180
4,440
-
7,620
2,227
1,775
-
4,002
2,575
3,183
-
5,758
55
2005 ANNUAL REPORT
CONSOLIDATED
THE COMPANY
2005
$’000
2004
$’000
2005
$’000
2004
$’000
852
711
480
314
ORDINARY SHARES
Consolidated equity interest
2004
2005
%
%
100
100
100
100
100
100
71
100
79
100
100
100
100
100
71
100
100
100
100
100
100
79
100
100
100
100
100
100
100
100
100
100
100
100
100
100
71
100
73
100
100
100
100
100
71
100
100
100
100
100
100
73
100
100
100
100
100
100
100
100
NOTE 26 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
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 co-operated and complied with the ACCC's requests for the
provision of information and documents over the past two years. This issue
remains unresolved and does not appear to be material at this time.
(d) The Company has received a claim of $684,140 for wrongful dismissal from
its former CEO, Mr Russell Templeton. The Company is defending the action.
No specific provision has been raised in the accounts to cover any of the above matters.
In the directors' opinion disclosure of any further information about the above
matters 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.
NOTE 27 CONTROLLED ENTITIES
(a) Particulars in relation to controlled entities
The Company
Collection House Limited
Controlled entities - incorporated in Australia
ABR Publications Pty Ltd
Australian Business Research Pty Ltd
Australian Corporate Reporting Pty Ltd
Australian Creditors Association Pty Ltd (1)
Australian Legal Recoveries Pty Ltd (1)
Australian Stockdata Pty Ltd (1)
CHIP No.1 Pty Ltd (1)
Collection House ALR Pty Ltd (1)
Collection House Business Diagnostics Pty Ltd (1)
Collection House Technologies Pty Ltd
Colpro Pty Ltd
Countrywide Mercantile Services Pty Ltd
Creditnet Pty Ltd (1)
Downie Insolvency Unit Trust
Insurance Claims Solutions Pty Ltd
Jones King Lawyers 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
Collection House (NZ) Limited
Insurance Claims Solutions Limited (formerly New Zealand Creditors Association Limited) (1)
Lion Finance Limited
National Tenancy Database Limited (formerly National Revenue Corporation Limited) (1)
Rapid Ratings (NZ) Limited
(1) These controlled entities have not traded during the financial year.
56
NOTE 27 CONTROLLED ENTITIES (CONTINUED)
(b) Acquisition of controlled entities
On 1 July, 2004 the Company acquired a further 5.9% of the issued share capital of Collection House Business Diagnostics Pty Ltd.
COLLECTION HOUSE BUSINESS DIAGNOSTICS PTY LTD
$’000
103
-
103
Details of the acquisition is as follows:
Cash consideration
Less cash balances acquired
Fair value of net assets of entity acquired:
Current assets
Non current assets
Current liabilities
Non current liabilities
Less: outside equity interests
Goodwill / (discount) on consolidation
Consideration
(c) Disposal of business and related assets
On 17 September, 2004 the consolidated entity disposed of the business and assets of Downie Insolvency.
Vendor finance was provided for this transaction, and the outstanding balance is shown at Note 9(b).
On 20 August, 2004 the consolidated Entity disposed of the business and assets of National Revenue
Corporation (NZ branch). Details of the disposals are as follows:
Downie Insolvency
National Revenue Corporation (NZ branch)
$’000
1,000
234
1,234
TOTAL
CONSIDERATION
CARRYING VALUE
OF ASSETS SOLD
$’000
922
28
950
179
2,266
(149)
(3,720)
(1,424)
(1,340)
(84)
187
103
PROFIT ON
DISPOSAL
$’000
78
206
284
NOTE 28 ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE
(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:
NOTES WEIGHTED
AVERAGE
INTEREST RATE
%
FLOATING
INTEREST
RATE
$'000
FIXED INTEREST MATURING IN:
1 YEAR
1 TO 5
MORE THAN
YEARS
OR LESS
5 YEARS
$'000
$'000
$'000
NON-
INTEREST
BEARING
$'000
2005
Financial assets
Cash assets
Receivables
Other current assets
Purchased debt
Financial liabilities
Payables
Hire purchase liabilities
Bank overdraft
Other loans
Bank loans
Employee benefits
8
9(a), 9(b)
10(a)
11
4.65%
6.00%
4.77%
16
17(a),17(b)
17(a)
17(a),17(b)
17(b)
18(a),18(b)
7.80%
8.23%
6.36%
6.41%
2,393
-
-
-
2,393
-
-
-
-
54,290
-
54,290
-
88
338
-
426
-
21
-
92
-
-
113
-
43
-
-
43
-
-
-
-
-
-
-
TOTAL
$'000
2,399
13,950
1,437
112,339
130,125
6,391
21
-
195
54,290
2,113
63,010
6
13,819
1,099
112,339
127,263
6,391
-
-
103
-
2,113
8,607
-
-
-
-
-
-
-
-
-
-
-
-
-
Net financial assets (liabilities)
(51,897)
313
43
118,656
67,115
57
2005 ANNUAL REPORT
NOTE 28 ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (CONTINUED)
2004
NOTES
WEIGHTED
AVERAGE
INTEREST RATE
%
FLOATING
INTEREST
RATE
$'000
FIXED INTEREST MATURING IN:
1 YEAR
1 TO 5
MORE THAN
OR LESS
YEARS
5 YEARS
$'000
$'000
$'000
NON-
INTEREST
BEARING
$'000
TOTAL
$'000
Financial assets
Cash assets
Receivables
Other current assets
Purchased debt
Financial liabilities
Payables
Hire purchase liabilities
Bank overdraft
Other loans
Bank loans
Employee benefits
8
9(a), 9(b)
10(a)
11
4.17%
6.00%
3.47%
4,690
-
-
-
7
16,942
781
86,872
4,690 504 79 - 104,602
-
172
332
-
-
79
-
-
-
-
-
-
16
17(a),17(b)
17(a)
17(a),17(b)
17(b)
18(a),18(b)
7.80%
8.25%
5.55%
6.08%
-
-
2,596
-
44,016
-
46,612
-
94
-
229
-
-
323
-
21
-
92
-
-
113
4,697
17,193
1,113
86,872
109,875
7,364
115
2,596
321
44,016
2,043
56,455
7,364
-
-
-
-
2,043
9,407
-
-
-
-
-
-
-
-
Net financial assets (liabilities)
(41,922)
181
(34)
95,195
53,420
(b) Credit risk exposures
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
Recognised financial instruments
The credit risk on financial assets of the consolidated Entity which have been recognised in the Statement of Financial Position is
the carrying value net of any provision.
The consolidated Entity minimises concentrations of credit risks by undertaking transactions with a large number of customers
and does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered
into by the Company or any of its controlled entities.
(c) Net fair value of financial assets and liabilities
Net fair values of financial assets and liabilities are determined by the consolidated Entity on the following 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
Aggregate liability for employee benefits, including on-costs:
Current
Other creditors and accruals
Employee benefit provisions
Non current
Employee benefit provisions
Number of employees
Number of employees at year end
Note
16(a)
18(a)
18(b)
CONSOLIDATED
2005
$’000
2004
$’000
THE COMPANY
2005
$’000
2004
$’000
337
1,752
361
2,450
375
1,737
306
2,418
288
1,529
343
2,160
203
1,509
259
1,971
632
692
499
580
58
NOTE 29 EMPLOYEE BENEFITS (CONTINUED)
(a) Executive share option plan
Participation in the executive share option plan is through Board approval. The Managing Director and Chief Executive Officer
prepare 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 performance hurdle for the 2004/05 financial year was
an increase in the share price of 10%. Options are exercisable at market price. Market price is 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.
The Remuneration Committee reviews the terms of the executive share option plan on an annual basis.
Details of options over unissued shares as at the beginning and ending date of the financial report and movements during the
year are as follows:
GRANT
DATE
EXERCISE
DATE
ON OR AFTER
EXPIRY
DATE
EXERCISE
PRICE
OPTIONS
AT START
OF YEAR
Number
OPTIONS
GRANTED
OPTIONS
EXERCISED
OPTIONS
LAPSED
Number
Number
Number
OPTIONS ON
ISSUE AT
END OF YEAR
Number
OPTIONS
VESTED AT
END OF YEAR
Number
Consolidated and Company 2005
14 July, 2000
14 July, 2000
1 July, 2004
1 Sept, 2004
$1.00
4 Oct, 2004
$1.00
4 Oct, 2005
23 July, 2004 30 June, 2005 $1.18
$1.36
1 July, 2005 30 Sept, 2005
3 Nov, 2004
3 Nov, 2005
100,000
100,000
-
-
- 20,000
- 736,000
(100,000)
-
(20,000)
-
200,000 756,000 (120,000)
-
-
-
(736,000)
(736,000)
-
100,000
-
-
100,000
Consolidated and Company 2004
100,000
14 July, 2000
100,000
14 July, 2000
14 July, 2000
100,000
31 Dec, 2002 1 Jan, 2003 31 Dec, 2003 $2.51 1,125,000
1 Sept, 2003 2 Sept, 2003 30 June, 2004 $1.18
3 Nov, 2003
3 Nov, 2004
3 Nov, 2005
4 Oct, 2003
4 Oct, 2004
4 Oct, 2005
$1.00
$1.00
$1.00
-
(100,000)
-
-
-
-
-
-
-
- - (1,125,000)
(415,000)
1,425,000 970,000 (655,000) (1,540,000)
- 970,000
(555,000)
-
100,000
100,000
-
-
200,000
-
100,000
-
-
100,000
-
100,000
100,000
-
-
200,000
Options exercised during the financial year and number of shares issued to employees are as follows:
Exercise date
Fair value of shares at issue date
CONSOLIDATED
2005
Number
2004
Number
THE COMPANY
2005
Number
2004
Number
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
1 - 31 October, 2004
1 - 30 June, 2005
$221,000
$298,500
$267,750
$206,600
$23,225
$11,400
$169,850
$174,000
$28,000
-
-
-
-
-
-
-
100,000
20,000
125,000
170,000
130,000
90,000
12,500
7,500
120,000
-
-
-
-
-
-
-
-
-
100,000
20,000
125,000
170,000
130,000
90,000
12,500
7,500
120,000
-
-
120,000
655,000
120,000
655,000
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
2005
$’000
2004
$’000
THE COMPANY
2005
$’000
2004
$’000
-
124
124
630
125
755
-
124
124
630
125
755
59
2005 ANNUAL REPORT
(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 Company's 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, 2004.
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 ninety 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
2005
$’000
2004
$’000
THE COMPANY
2005
$’000
2004
$’000
155
120
275
425
421
846
155
120
275
425
421
846
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
Bo Sven Göranson
William Leslie Hiller
William Walter Kagel
Stephen Walker
EXECUTIVE DIRECTORS
John Marshall Pearce (Managing Director & Chief Executive Officer)
Anthony Francis Coutts
(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
Brendan Doherty
Christopher Stewart
Colin Day
Matthew Thomas
Michael Watkins
Chief Financial Officer
Chief Collections Officer
General Manager,
Corporate Communication
and Marketing
Chief Operations Officer
(Chief Executive Officer
from 1 July, 2005)
Chief Information Officer
General Counsel
Collection House Limited
Collection House Limited
Collection House Limited
Collection House Limited
Collection House Limited
Collection House Limited
60
NOTE 30 DIRECTORS’ AND EXECUTIVES DISCLOSURES (CONTINUED)
(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 the results delivered. The framework aligns executive reward with achievement of strategic
objectives and creation of wealth 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.
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;
> focuses on sustained growth in share price and delivering constant return on assets as well as focusing the executive on key
non-financial drivers of value; and
> 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; 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.
Executive directors' payments
Remuneration for executive directors is reviewed on an annual basis. The current base remuneration of Anthony Coutts was
reviewed in December, 2003 when he reduced the hours of his position. In 2000 an option agreement was put in place for
Anthony Coutts 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 whilst Anthony remains employed by the Company. The
terms of the option agreement were disclosed in the Company's Prospectus.
John Pearce, the Managing Director & Chief Executive Officer, elected to receive no remuneration during the 2004/05 financial
year and has waived any fee payable during 2005/06 for his roles as Managing Director and Deputy Chairman.
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 and a car park.
Each senior executive's performance is reviewed at least annually in accordance with the terms of the Company approved
evaluation form together with agreed key performance indicators. Changes in seniority and executive reward are based on the
results of this evaluation.
61
2005 ANNUAL REPORT
Participation in the employee share plan is based on a simple formula applying to seniority and length of the employee’s period of
employment.
Participation in the option plan is via Board approval. The 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 was reviewed and options in 2004/05 financial year were issued on
the basis of not only individual performance being considered but also company performance hurdles to be achieved before
options may be exercised. The performance hurdle for the 2004/05 financial year was an increase in the share price of 10%.
The Remuneration Committee reviews the terms of the option plan on an annual basis.
Details of remuneration
The following tables provide details of the remuneration of all directors of the Company and each of the specified executives of
the consolidated Entity, including their personally-related entities, for the year.
PRIMARY
POST-EMPLOYMENT
NAME
CASH
SALARY
& FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPERANNUATION
BENEFITS
CONSULTANCY
FEES
$
$
EQUITY
VALUE OF
OPTIONS (2)
$
OTHER
INSURANCE
PREMIUMS
$
Directors of Collection House Limited 2005
D G Punches
A R Aveling
B E Adams
J M Pearce (1)
D B Connelly
A F Coutts (2) (3)
B S Göranson
W L Hiller
W W Kagel
S Walker
Total 2005
50,000
70,000
120,000
-
50,000
183,400
40,000
60,000
40,000
40,000
660,400
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,828
-
3,828
-
-
-
-
7,656
-
6,300
10,800
-
-
22,521
-
5,400
-
3,600
48,621
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
174,000
-
-
-
-
174,000
2,576
2,576
2,576
2,576
2,576
2,576
2,576
2,576
2,576
2,576
25,761
TOTAL
$
52,576
78,876
133,376
6,404
52,576
393,325
42,576
67,976
42,576
46,176
916,438
(1) Mr Pearce elected to receive no remuneration effective 8 April, 2003.
(2) Mr Coutts exercised 100,000 options in October, 2004 at an exercise 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 2003/04 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.
PRIMARY
POST-EMPLOYMENT
NAME
CASH
SALARY
& FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPERANNUATION
BENEFITS
CONSULTANCY
FEES
$
$
EQUITY
VALUE OF
OPTIONS (3)
$
OTHER
INSURANCE
PREMIUMS
$
Directors of Collection House Limited 2004
D G Punches
A R Aveling
B E Adams
J M Pearce (1)
D B Connelly
A F Coutts (2)(3)
B S Göranson
W L Hiller
W W Kagel
S Walker
Total 2004
50,000
50,000
96,519
-
44,038
282,278
40,000
50,000
40,000
40,000
692,835
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,026
-
1,026
-
-
-
-
2,052
79
4,500
4,343
-
59
30,790
59
4,500
69
3,600
47,999
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
180,000
-
-
-
-
180,000
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
2,231
22,310
TOTAL
$
52,310
56,731
103,093
3,257
46,328
496,325
42,290
56,731
42,300
45,831
945,196
(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 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.
62
NOTE 30 DIRECTORS’ AND EXECUTIVES DISCLOSURES (CONTINUED)
PRIMARY
POST-EMPLOYMENT
NAME
CASH
SALARY
& FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPERANNUATION
BENEFITS
CONSULTANCY
FEES
$
$
EQUITY
VALUE OF
OPTIONS (1)
$
OTHER
INSURANCE
PREMIUMS
$
TOTAL
$
Specified executives of the consolidated Entity 2005
164,432
C Day
174,264
B Doherty
190,000
A Ralston
160,000
C Stewart
176,234
M Thomas
253,077
M Watkins
1,118,007
Total 2005
3,828
3,960
3,828
3,828
-
3,828
19,272
-
-
-
-
-
-
-
14,799
15,684
17,100
14,400
13,747
22,777
98,507
-
-
-
-
-
-
-
17,400
17,400
-
25,540
17,400
8,700
86,440
2,576
2,576
2,576
2,576
2,576
2,576
15,456
203,035
213,884
213,504
206,344
209,957
290,958
1,337,682
(1) The fair value of options is calculated at the date of the grant using a Black-Scholes model.
PRIMARY
POST-EMPLOYMENT
NAME
CASH
SALARY
& FEES
$
CASH
BONUS
$
NON-
MONETARY
BENEFITS
$
SUPERANNUATION
BENEFITS
CONSULTANCY
FEES
$
$
EQUITY
VALUE OF
OPTIONS (1)
$
OTHER
INSURANCE
PREMIUMS
$
TOTAL
$
-
-
-
25,554
1,026
5,959
136,983
107,182
Specified executives of the consolidated Entity 2004
126,307
C Day
(Chief Operations Officer
from 8 June, 2004)
B Doherty
A Ralston
(commenced on
29 October, 2003)
M Stanton
(departed on 30 June, 2004)
C Stewart
(commenced on
12 January, 2004)
M Thomas
M Watkins
Total 2004
150,000
253,076
1,014,365
-
1,026
34,591
175,787
65,030
1,026
-
-
-
-
-
-
12,808
13,598
11,444
-
-
-
12,798
2,231
179,698
19,197
-
2,231
2,231
173,035
126,816
15,105
45,144
12,798
2,231
252,091
6,369
-
-
2,231
73,630
13,500
22,777
95,601
-
-
45,144
19,197
15,998
79,988
2,231
2,231
15,617
184,928
295,108
1,285,306
(1) The fair value of options is calculated at the date of the grant using a Black-Scholes model.
(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.
Directors of Collection House Limited
Nil
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 Thomas
M Watkins
OPTIONS GRANTED
DURING THE YEAR
Number
OPTIONS VESTED
DURING THE YEAR
Number
-
-
40,000
40,000
-
60,000
40,000
20,000
-
-
-
20,000
-
-
All options granted to specified executives expire on the earlier of their expiry date or termination of the individuals employment.
20,000 options were issued to C Stewart on 1 September, 2004 at an exercise price of $1.18 per share and an expiry date of 30 June, 2005. Other options granted to specified executives were
granted on 30 September, 2004; had an expiry date of 30 June, 2005; an exercise price of $1.36 per share; and were only exerciseable if the share price of the Company increased 10% by the end of
the financial year. The performance hurdle was not met and these options lapsed. All options were provided at no cost to the recipients.
63
2005 ANNUAL REPORT
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:
NAME
Directors of Collection House Limited
A F Coutts
Specified executives of the consolidated Entity
C Stewart
NUMBER OF SHARES
ISSUED ON EXERCISE
OF OPTIONS DURING
THE YEAR
AMOUNT PAID
$ PER SHARE
100,000
20,000
$1.00
$1.18
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
EXERCISED
Number
LAPSED
Number
BALANCE
AT END OF
YEAR
Number
VESTED AND
EXERCISABLE AT
END OF YEAR
Number
Directors of Collection House Limited
A Coutts
200,000
-
(100,000)
-
100,000
Specified executives of the
consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Thomas
M Watkins
-
-
-
-
-
-
40,000
40,000
-
60,000
40,000
20,000
-
-
-
(20,000)
-
-
(40,000)
(40,000)
-
(40,000)
(40,000)
(20,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
Options held by Mr Coutts are vested but not exercisable until 4 October, 2005.
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
YEAR
Number
RECEIVED ON
EXERCISE OF
OPTIONS
Number
OTHER
CHANGES
DURING THE
YEAR
Number Number
BALANCE AT
END OF YEAR
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
Specified executives of the consolidated Entity
C Day
B Doherty
A Ralston
C Stewart
M Thomas
M Watkins
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
-
-
10,000
27,000
-
-
-
-
-
100,000
-
-
-
-
-
-
-
20,000
-
-
43,170
-
-
43,170
-
-
-
-
-
-
52,000
(5,500)
-
-
(8,000)
(3,000)
14,054,835
250,000
-
14,189,900
20,000
4,034,000
4,772,427
5,200
500,000
6,750,000
325,000
2,000
-
20,000
2,000
24,000
64
NOTE 30 DIRECTORS’ AND EXECUTIVES DISCLOSURES (CONTINUED)
(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:
BALANCE AT
START OF
YEAR
$
INTEREST PAID
AND PAYABLE
FOR YEAR
$
BALANCE AT
END OF
YEAR
$
NUMBER IN
GROUP
AT END OF YEAR
Aggregates for directors and specified executives
Group
Directors of Collection House Limited
2005
2004
Specified executives of the consolidated Entity
2005
2004
-
-
23,895
-
-
-
-
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.
CONSOLIDATED
2004
2005
$
$
THE COMPANY
2005
$
2004
$
170,000
70,000
160,000
65,000
170,000
70,000
160,000
65,000
-
26,500
-
24,000
NOTE 31 AUDITOR'S REMUNERATION
Audit services:
Amounts received or due and receivable by the auditors for:
- Audit of the financial statements
- Other regulatory audit services
Other services:
Amounts received or due and receivable by the auditors for:
- Other non-assurance services
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 Coutts converted 100,000 options @ $1.00 per share on 29 October, 2004.
Mr D Punches transferred 14,000,000 shares from Dennis Punches to Dennis Punches as trustee for the DG Punches Revocable
Trust on 22 December, 2004.
Mr D Punches acquired 21,500 shares @ $1.48 per share on 1 September, 2004.
Mr D Punches acquired 21,670 shares @ $1.49 per share on 2 September, 2004.
Mr J Pearce and Mrs SA Pearce as trustees for the Collection House Superannuation Fund acquired 21,500 shares @ $1.48 per
share on 1 September, 2004. Mr J Pearce and Mrs SA Pearce as trustees for the Collection House Superannuation Fund
acquired 21,670 shares @ $1.49 per share on 2 September, 2004.
65
2005 ANNUAL REPORT
NOTE 32 RELATED PARTIES (CONTINUED)
(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.
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
Non current receivables from non-director related entities
wholly owned controlled entities (loans)
partly owned controlled entities (loans)
Non current payables from non director-related entities
wholly owned controlled entities (loans)
Percentage of equity interest
Details of equity interests held in classes of related parties are set out in Note 27.
THE COMPANY
2005
$’000
2004
$’000
17,889
15,440
-
-
-
209
-
2,489
-
2,881
248
272
26,683
614
21,072
2,413
6,254
1,756
12,000
9,200
-
110
13,098
8,999
95,759
5,579
73,175
4,965
9,761
3,507
66
NOTE 33 NOTES TO THE STATEMENTS OF CASH FLOWS
(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
(b) Reconciliation of profit from ordinary activities after income
tax to net cash provided by operating activities
Profit from ordinary activities after income tax
Add / (less) items classified as investing / financing activities:
Net (profit) / loss on sale of non current assets
Add / (less) non-cash items:
Amortisation
Amounts set aside to provisions
Amounts capitalised to purchased debt
Unrealised exchange loss / (gain)
Depreciation
Write-down of non-current assets
(Decrease) / increase in income taxes payable
(Decrease) / increase in deferred taxes payable
(Increase) / decrease in deferred tax asset
(Increase) / decrease in trade debtors
(Increase) / decrease in other debtors
(Increase) / decrease in other assets
Increase / (decrease) in trade creditors
Increase / (decrease) in sundry creditors and accruals
Increase / (decrease) in provision for doubtful debts
Increase / (decrease) in employee provisions
Increase / (decrease) in other tax provisions
Net cash provided by / (used in) operating activities
NOTE 34 EVENTS SUBSEQUENT TO BALANCE DATE
Dividends declared
For dividends declared after 30 June, 2005 see Note 22.
Note
CONSOLIDATED
2005
$’000
2004
$’000
THE COMPANY
2005
$’000
2004
$’000
8
17(a)
2,399
-
2,399
4,697
(2,596)
2,101
558
(2,330)
(1,772)
150
(2,596)
(2,446)
11,814
10,225
8,955
7,772
(290)
(467)
(6)
142
1,589
211
(1,075)
(7)
22,572
36
2,551
4,061
(945)
4,955
(612)
(319)
229
(1,202)
(256)
70
(3)
43,379
1,781
50
-
1
15,746
213
(256)
4,721
43
58
2,661
(348)
(855)
(1,582)
565
(384)
(91)
32,081
759
200
-
-
2,687
21
1,155
3,925
(722)
2,161
(16,553)
(328)
386
436
(106)
220
(3)
909
-
-
-
2,722
213
(160)
18,153
(2,675)
(1,210)
(21,862)
(229)
(611)
(1,066)
325
(412)
(26)
3,187
1,985
Other Events
The directors are not aware of any other material events which have occurred after balance date.
NOTE 35 IMPACTS OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS
The known or reliably estimable impacts on the financial report for the year ended 30 June, 2005 had it been prepared using
AIFRS are set out below. The expected financial effects of adopting AIFRS are shown for each line item in the statements of
financial performance and statements of financial position, with descriptions of the differences. No material impacts are expected
in relation to the statements of cash flows.
Although the adjustments disclosed in this note are based on management's best knowledge of expected standards and
interpretations, and current facts and circumstances, these may change. For example, amended or additional standards or
interpretations may be issued by the AASB and the IASB. Therefore, until the company prepares its first full AIFRS financial
statements, the possibility cannot be excluded that the accompanying disclosures may have to be adjusted.
67
2005 ANNUAL REPORT
NOTE 35 IMPACTS OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS (CONTINUED)
IMPACTS ON THE STATEMENT OF FINANCIAL POSITION
CONSOLIDATED
THE COMPANY
Notes
Revenue from rendering of services
Other revenues from ordinary activities
(g)
Total revenue from ordinary activities
Expenses from ordinary activities, excluding
borrowing costs expense
Borrowing costs
Profit from ordinary activities before related
Income tax (expense) / benefit relating to (a)
ordinary activities
Profit from ordinary activities after related
income tax expense / (benefit)
Profit from extraordinary item after related
income tax expense
Net profit
Net (profit) / loss attributable to outside
equity interests
Net profit attributable to members
of the Company
Non-owner transaction changes in equity:
Net exchange difference relating to self-
sustaining foreign operations
Total revenues, expenses and valuation
adjustments attributable to members of the
Company recognised directly in equity
2005
$’000
AGAAP
125,117
1,706
126,823
Effect of
change
-
(980)
(980)
2005
$’000
AIFRS
125,117
726
2005
$’000
AGAAP
46,368
12,399
125,843
58,767
(105,460)
1,301
(104,159)
(47,807)
(3,724)
17,639
(5,825)
-
321
210
(3,724)
(3,704)
17,960
(5,615)
7,256
1,699
Effect of
change
(36)
(36)
787
-
751
-
2005
$’000
AIFRS
46,368
12,363
58,731
(47,020)
(3,704)
8,007
1,699
11,814
531
12,345
8,955
751
9,706
-
-
-
-
-
-
11,814
531
12,345
8,955
396
-
396
-
751
-
9,706
-
12,210
531
12,741
8,955
751
9,706
(144)
(144)
-
-
(144)
(144)
-
-
-
-
-
-
Total changes in equity from non-owner 12,066
related transactions attributable to the
members of the Company
531
12,597
8,955
751
9,706
Basic earnings per share (cents)
Diluted earnings per share (cents)
(a) Expenses from ordinary activities,
excluding borrowing costs expense,
included in the statement of financial
performance classified by nature:
12.57
12.56
12.72
12.72
35,223
-
Employee expenses
Depreciation and amortisation expenses (b) 24,181 (1,589)
Impairment charges (c) - 1,268
-
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
619
Consultancy fees
Legal expenses
757
Other expenses from ordinary activities (g) 8,141
12,826
16,106
4,029
27
-
-
(980)
3,551
-
35,223
22,592
1,268
12,826
16,106
4,029
27
22,892
-
3,446 (751)
-
-
-
-
-
-
418
13,863
-
(59)
3,551
2,163
619
757
7,161
138
666
4,280
-
-
-
(36)
22,892
2,695
-
418
13,863
-
(59)
2,163
138
666
4,244
105,460 (1,301)
104,159
47,807 (787)
47,020
68
NOTE 35 IMPACTS OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS (CONTINUED)
IMPACTS ON THE STATEMENT OF FINANCIAL POSITION
CONSOLIDATED
THE COMPANY
Notes
2005
$’000
AGAAP
Effect of
change
2005
$’000
AIFRS
2005
$’000
AGAAP
Effect of
change
Current assets
Cash assets
Receivables
Current tax assets
Other
Total current assets
Non current assets
Receivables
Purchased debt
Other financial assets
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other
Total non current assets
Total assets
Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non current liabilities
Payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total Company interest
Outside equity interests
Total equity
Opening Retained Profits
Plus current year profits
less dividends paid
plus tfrs into Retained Profits
Closing retained profits
(a)
(a)
(e)
(c)
(c)
(b,c)
(a)
(a)
(a)
(f)
(a,b,c,f,g)
(e)
2,399
12,937
763
1,437
17,536
1,013
112,339
-
10,356
10,414
25,884
5,927
46
165,979
183,515
6,391
216
1,309
2,123
10,039
-
54,290
24,052
361
78,703
88,742
94,773
67,156
380
28,060
95,596
(823)
94,773
23,626
12,210
(7,776)
-
28,060
-
-
-
-
-
-
-
-
(699)
-
1,029
210
(9)
531
2,399
12,937
763
1,437
17,536
1,013
112,339
-
9,657
10,414
26,913
6,137
37
166,510
558
19,459
763
1,011
21,791
101,381
-
21,947
7,148
-
11,211
4,461
28
146,176
2005
$’000
AIFRS
558
19,459
763
1,011
21,791
-
-
-
-
-
(22,167)
-
-
-
-
751
(179)
-
79,214
-
21,947
7,148
-
11,962
4,282
28
(21,595) 124,581
531
184,046
167,967
(21,595) 146,372
-
-
-
-
-
-
-
458
-
458
458
73
-
(380)
453
73
-
73
-
531
-
(78)
453
6,391
216
1,309
2,123
10,039
-
54,290
24,510
361
79,161
3,319
2,429
-
1,779
7,527
9,761
54,290
22,506
343
86,900
-
-
-
-
-
-
-
(22,346)
-
(22,346)
3,319
2,429
-
1,779
7,527
9,761
54,290
160
343
64,554
89,200
94,427
(22,346)
72,081
94,846
73,540
751
74,291
67,156
-
28,513
95,669
(823)
94,846
23,626
12,741
(7,776)
(78)
28,513
67,156
-
6,384
73,540
-
73,540
5,205
8,955
(7,776)
-
6,384
-
-
751
751
-
751
-
751
-
-
751
67,156
-
7,135
74,291
-
74,291
5,205
9,706
(7,776)
-
7,135
Notes to the IFRS-adjusted Statement of Financial Performance and Statement of Financial Position
(a) Income tax
Under AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet method which calculates
temporary differences based on the carrying amounts of an entity's assets and liabilities in the statement of financial position and
their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly in equity are also
recognised directly in equity.
This will result in a change to the current accounting policy, under which deferred tax balances are determined using the income
statement method, items are only tax-effected if they are included in the determination of pre-tax accounting profit or loss and / or
taxable income or loss and current and deferred taxes cannot be recognised directly in equity.
69
2005 ANNUAL REPORT
NOTE 35 IMPACTS OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS (CONTINUED)
If the policy required by AASB 112 had been applied during the year ended 30 June, 2005 the following would have resulted:
An increase in total consolidated deferred tax assets of $210,000 at 30 June, 2005 together with a corresponding decrease in
consolidated income tax expense, would have been recognised comprising the tax effect of the reduction in the carrying amount
of property, plant and equipment as a result of the impairment charge.
An increase in total consolidated deferred tax liabilities of $458,000 at 30 June, 2005 would have been recognised comprising the
recognition of an additional deferred tax liability in relation to databases.
The UIG have determined the recognition of tax amounts under the tax consolidation regime in the AIFRS framework. Wholly
owned subsidiaries in the tax consolidated group will be required to recognise their own tax balances directly, and the current tax
liability or asset will be assumed by the head entity via an equity contribution or distribution.
A decrease in total Company deferred tax liabilities of $22,346,000 at 30 June, 2005 would have been recognised comprising the
derecognition by the Company of deferred tax liabilities of relating to subsidiaries in the Company’s tax consolidated group in
accordance with UIG 1052. There is no effect on the consolidated Entity.
A decrease in total Company deferred tax assets of $179,000 at 30 June, 2005 would have been recognised comprising the
derecognition of deferred tax balances (excluding those related to tax losses) relating to subsidiaries in the Company’s tax
consolidated group in accordance with UIG 1052. There is no effect on the consolidated Entity.
As a result the intercompany balances in the Company’s financial statements will be reduced by $22,167,000. There is no effect
on the consolidated Entity.
(b) Intangible assets — goodwill
Under AASB 3 Business Combinations, amortisation of goodwill will be prohibited, and will be replaced by annual impairment
testing focusing on the cash flows of the related cash generating unit.
This will result in a change to the current accounting policy, under which goodwill is amortised on a straight line basis over the
period during which the benefits are expected to arise and not exceeding 20 years.
If the policy required by AASB 3 had been applied during the year ended 30 June, 2005 consolidated goodwill at 30 June, 2005
would have been $1,589,000 higher and consolidated amortisation expense for the year ended 30 June, 2005 would have been
$1,589,000 lower.
The impact on the Company's financial statements would have resulted in goodwill being $751,000 higher and amortisation
$751,000 lower.
(c) Impairment of Assets
Under AASB136 Impairment of Assets, the Company is required to test certain assets for impairment. Goodwill is required to be
impairment tested annually, and other relevant assets are tested whenever there is evidence that there may be an impairment.
Individual assets in the balance sheet have not been tested for impairment as they cannot reasonably be associated with individual
cashflows. As a result all of the assets of the group subject to AASB136 have been allocated to a cash generating unit, each of
which can be associated with an independent cashflow and impairment testing carried out at this level. Impairment losses
recognised in respect of a cash generating unit will be allocated first to reduce the amount of any goodwill allocated to the unit
and then to reduce the carrying amount of other assets in the unit, pro rata based on their carrying amounts.
If the policy required by AASB136 had been applied during the year ended 30 June, 2005 the carrying amount of consolidated
intangibles would have been $560,000 lower, the carrying amount of consolidated other non current assets would have been
$9,000 lower and the carrying amount of consolidated property, plant and equipment would have been $699,000 lower. A
consolidated impairment charge of $1,268,000 would have been passed through the Statement of Financial Performance.
There would have been no effect on the financial statements of the Company.
(d) Equity-based compensation benefits
Under AASB 2 Share-based Payment the group is required to recognise an expense equivalent to the fair value of options issued
with a corresponding increase in equity, for those options issued under the executive share option plan after 7 November, 2002
and which vest after 1 January, 2005. This will result in a change to the current accounting policy under which no expense is
recognised for equity based compensation.
If the policy required by AASB 2 had been applied during the year ended 30 June, 2005 there would have been no effect on the
consolidated and Company retained profits at 30 June, 2005 as all options had vested by 1 January, 2005.
70
NOTE 35 IMPACTS OF ADOPTING AUSTRALIAN EQUIVALENTS TO IFRS (CONTINUED)
(e) Financial instruments
AASB 139 requires all financial assets to be classified as either, at fair value through profit or loss, loans and receivables, held to
maturity or as available for sale financial assets. This classification determines how the financial asset will be measured subsequent
to initial recognition (at fair value or at amortised cost) and how any movements in its carrying amount will be recognised (directly
in the profit and loss or deferred in equity). Financial assets are not subject to impairment testing under AASB136.
The Company will be utilising the exception within AASB 1 First Time Adoption of Australian equivalents to International Financial
Reporting Standards in relation to financial instruments, and as such, the comparative year of its first AIFRS financial statements
will not be presented in accordance with AASB 132 and AASB 139. The transition date for these two accounting standards will
therefore be 1 July, 2005.
The purchased debt portfolio will be classified as an available for sale financial asset. Available for sale financial assets are initially
recognised and subsequently measured at fair value.
The Company is revising its financial model to estimate the value of a debt portfolio in accordance with the requirement of AASB
139. The model is expected to provide the ability to forecast cash flows for existing and new portfolios, to provide estimates of the
remaining value of existing portfolios, and to support the valuation and impairment-testing requirements of the standard. The
model will assess a number of key characteristics of a debt portfolio in arriving at the estimated annual recovery. This will include
reading files of the characteristics of past debtors and the details of past collection activities and results, and from that information
build a model file which describes how the characteristics of a debt are linked to its collection outcomes.
(f) Foreign currency translation reserve: cumulative translation differences
On the initial application of AIFRS, the Group will elect to apply the exemption in AASB 1 First-time Adoption of Australian
Equivalents to International Financial Reporting Standards relating to the balance of the foreign currency translation reserve. The
cumulative translation differences for all foreign operations represented in the foreign currency translation reserve will be deemed to
be zero at the date of transition to AIFRSs.
As a result of this exemption, the balance of the foreign currency translation reserve of the group at 30 June, 2005 would have
been $382,000 lower and retained earnings would be higher by this amount.
There would have been no effect on the financial statements of the Company.
(g) Revenue disclosures in relation to the sale of non current assets
Under AIFRS, the revenue recognised in relation to the sale of non current assets is the net gain on the sale. This is in contrast to
the current Australian GAAP treatment under which the gross proceeds from the sale are recognised as revenue and the carrying
amount of the assets sold is recognised as an expense. The net impact on the profit or loss of this difference is nil.
If the policy required under AIFRS had been applied during the year ended 30 June, 2005 the consolidated revenue from ordinary
activities would have been $1,243,000 lower, the consolidated carrying amount of non current assets sold disclosed as an
expense in the statement of financial performance would have been $980,000 lower, and consolidated other income would have
been $263,000 higher.
The impact on the Company's statement of financial performance would result in revenue from ordinary activities being $9,000
lower, the consolidated carrying amount of non current assets sold disclosed as an expense being $36,000 lower, and the
consolidated other income would have been $27,000 lower.
71
2005 ANNUAL REPORT
Directors’ Declaration
Collection House Limited and its controlled entities
For the year ended 30 June, 2005
In the opinion of the directors of Collection House Limited (“the Company”):
(a) the financial statements and notes, (set out on pages 34 to 70) 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, 2005 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.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer for the financial year ended 30 June, 2005.
This declaration is signed in accordance with a resolution of the directors.
DIRECTOR
John Marshall Pearce
Dated at Brisbane, 24 August 2005
72
Independent Audit Report
To the members of Collection House Limited
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, 2005. 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
We are independent of the Company, and have met the independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001. We have given the Directors of the Company a written Auditor’s Independence
Declaration, a copy of which is attached to the Directors’ Report.
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, 2005 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 24 August, 2005
Liam Murphy
PARTNER
73
2005 ANNUAL REPORT
Shareholder Information
Distribution of Equity Security Holders
The shareholder information set out below was applicable as at 15 August, 2005.
Analysis of numbers of security holders by size of holding:
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Total
There were 128 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:
George Laurens (Qld) Pty Ltd
Mr Dennis George Punches
Mr Stephen Walker
ANZ Nominees Limited
City Plaza Inc.
A Coutts & J Coutts
Citicorp Nominees Pty Limited
National Nominees Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Equitas Nominees Pty Limited
Westpac Custodian Nominees Limited
ANZ Nominees Limited
Custodial Services Limited
Mr William Kagel
Mr Anthony Coutts
Mr Raymond Larkin
Ankla Pty Ltd
Mr Neil Francis Michael Day
Mr Krisno David Mumby
Restricted Securities
NUMBER OF EQUITY SECURITY HOLDERS
Options
-
-
-
2
-
Ordinary shares
1,019
2,820
885
671
41
5,436
Number
held
14,000,000
14,000,000
6,750,000
6,276,969
4,772,427
3,600,000
2,879,584
1,732,303
1,705,508
1,653,685
1,000,000
831,441
782,137
533,100
500,000
434,000
400,000
320,000
273,500
250,000
62,694,654
ORDINARY SHARES
Percentage of
issued shares
14.40
14.40
6.94
6.46
4.91
3.70
2.96
1.78
1.75
1.70
1.03
0.86
0.80
0.55
0.51
0.45
0.41
0.33
0.28
0.26
64.48
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 follows:
74
Voluntary Restrictions on Securities
Employees who participate in the Collection House employee share plan are required to enter into voluntary escrow arrangements
with the Company, undertaking not to dispose of any of these shares for three months from the date of issue of the relevant
shares. 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 15 August, 2005 there are
270,115 ordinary shares (0.27% of issued capital) that are restricted on this basis. The date that these shares cease to be
restricted will depend upon the date that the employee loans are repaid in full.
Shares restricted under voluntary arrangements rank pari passu with all fully paid ordinary shares in all other respects.
Options to take up ordinary shares in Collection House Limited
200,000
2
Substantial Shareholders
The number of shares held by substantial shareholders and their associates are set out below:
ISSUED UNEXERCISED OPTIONS
Number on issue
Number of holders
Ordinary shares
George Laurens (Qld) Pty Ltd
Mr Dennis George Punches
Mr Stephen Walker
ANZ Nominees Limited
Options
A Coutts
C Day
Voting Rights
Number held
Percentage
14,189,900
14,054,835
6,750,000
6,276,969
100,000
100,000
14.59
14.45
6.94
6.46
0.1
0.1
The voting rights attaching to each class of equity securities are:
1. Ordinary shares
On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
2. Options
There are no voting rights attached to the options. Voting rights will be attached to options once they are exercised.
Stock Exchange
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.
75
2005 ANNUAL REPORT
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
Facsimile: +61 7 3237 2152
Website:
www.computershare.com
AUDITORS
Hacketts Chartered Accountants
Level 3, 549 Queen Street
Brisbane Qld 4000
FINANCIAL BASICS FOUNDATION
National Development Manager
GPO Box 2386
Brisbane Qld 4001
Email:
Website:
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: +61 7 3292 1000
Facsimile: +61 7 3832 0333
Email:
Website: www.collectionhouse.com.au
shares@collectionhouse.com.au
REGISTERED OFFICE
Level 3, 549 Queen Street
Brisbane Qld 4000
LOCATIONS
Australia
Sydney Melbourne
Brisbane Adelaide
Perth
Canberra
Darwin Newcastle
Bendigo
Ballarat
Shepparton
Albury
New Zealand
Auckland
Company Secretary
Rhonda King
This report is printed on
paper prepared using
environmentally
responsible practices
which are certified to
ISO14001 standards.
DESIGN AND PRINT
www.mitara.com.au
QUEENSLAND
Level 3, 488 Queen Street
Brisbane QLD 4000
GPO Box 2584
Brisbane QLD 4001
bne.office@collectionhouse.com.au
Ph
Fax
61 7 3292 1000
61 7 3832 0222
WESTERN AUSTRALIA
Level 12, 16 St Georges Terrace
Perth WA 6000
PO Box Y3186
East St Georges Terrace Perth WA 6832
per.office@collectionhouse.com.au
Ph
Fax
61 8 9260 6000
61 8 9225 7142
NEW ZEALAND
Ground Floor, Tower House
67-73 Hurstmere Road
Takapuna Auckland New Zealand
PO Box 331049
Takapuna New Zealand
akl.office@collectionhouse.com.au
Ph
Fax
64 9 976 9500
64 9 976 9501
www.collectionhouse.com.au
AUSTRALIAN CAPITAL
TERRITORY
Level 4, 39 London Circuit
Canberra ACT 2601
GPO Box 2957
Canberra ACT 2601
cbr.office@collectionhouse.com.au
Ph
Fax
61 2 6245 2000
61 2 6230 7293
NEW SOUTH WALES
Level 15, 9 Hunter Street
Sydney NSW 2000
GPO Box 3119
Sydney NSW 2001
syd.office@collectionhouse.com.au
Ph
Fax
61 2 8226 4200
61 2 9221 9842
Suite 203/526 Swift Street
Albury NSW 2640
PO Box 1038
Albury NSW 2640
Ph
Fax
61 2 6041 1222
61 2 6041 3733
Unit 17/235 Darby Street
Newcastle NSW 2300
PO Box 1778
Newcastle NSW 2300
ntl.office@collectionhouse.com.au
Ph
Fax
61 2 4908 7200
61 2 4927 8772
NORTHERN TERRITORY
Level 2, Paspalis Centrepoint
48-50 The Mall, Smith Street
Darwin NT 0800
PO Box 1651
Darwin NT 0801
drw.office@collectionhouse.com.au
Ph
Fax
61 8 8982 8900
61 8 8981 9916
SOUTH AUSTRALIA
Level 6, 50 Pirie Street
Adelaide SA 5000
GPO Box 2984
Adelaide SA 5001
adl.office@collectionhouse.com.au
Ph
Fax
61 8 8217 0250
61 8 8212 6894
VICTORIA
Level 7, 477 Collins Street
Melbourne VIC 3000
GPO Box 1290K
Melbourne VIC 3001
mel.office@collectionhouse.com.au
Ph
Fax
61 3 9610 4960
61 3 9629 8382
Level 1, 17 Lydiard Street North
Ballarat VIC 3350
PO Box 123
Ballarat VIC 3353
cwm@countrywidemercantile.com.au
Ph
Fax
61 3 5333 4397
61 3 5333 5665
111 Wills Street
Bendigo VIC 3550
PO Box 1043
Bendigo VIC 3552
mcmsbendigo@bigpond.com.au
Ph
Fax
61 3 54414096
61 3 54414017
34 Sobraon Street
Shepparton VIC 3632
PO Box 6520
Shepparton VIC 3632
sheppoff@midstatecms.com.au
61 3 5820 9222
Ph
61 3 5831 2490
Fax