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Brisbane, QLD, 4000
{
Collection House Limited
Street Address:
Postal Address:
Tel:
Level 3, 488 Queen St,
GPO Box 2584,
Brisbane, QLD, 4001
+61 7 3832 0222
Fax:
www.collectionhouse.com.au
+61 7 3292 1000
Website:
{
Annual Report
}
2005 ~ 2006
Company:Collection House Limited
//
Contents
1. The Company ....................................................
pg # 2
2. Financial and Operational Overview ..............
3. Chairman’s Address ..........................................
4. Chief Executive Officer’s Report ....................
5. Financial Basics Foundation ............................
6. Corporate Governance Statement....................
7. Directors’ Report ..............................................
pg # 3
pg # 4
pg # 5
pg # 11
pg # 12
pg # 22
pg # 37
8. Auditor’s Independence Declaration ..............
Financial Statements Table of Contents ........
pg # 39
1
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. }
Collection House first opened in Brisbane in 1992. It was listed on the
Australian Stock Exchange in 2000 and now employs 630 staff in 11 offices
in Australia and New Zealand.
{
CONTINGENT
COLLECTION SERVICES
ACCOUNT ASSET
MANAGEMENT
CREDIT
REPORTING
OTHER
OPERATIONS
National Revenue
Corporation offers a
service to the small and
medium business
communities through its
Tandem program - an
alternative to conventional
collection approaches.
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.
Midstate Credit
Management Services
and Countrywide
Mercantile Services
provide specialised
receivables management
and debt recovery services
to the commercial and local
government sectors in
Victoria and New South
Wales.
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
corporate credit rating
agency that provides
unique insight into the
financial health of more
than 15,000 companies
(both listed and unlisted) in
Australia, Canada, New
Zealand, Singapore, Europe
and the USA. Customers
include hedge funds,
investment managers,
brokers, financial planners,
accounting firms, banks and
other large creditors.
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
selfinsurers.
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, debts owed
overseas to Australian or
New Zealand clients and
debts owed in Australia or
New Zealand to clients
based in other countries
on a commission basis.
Note: Throughout this Annual Report, unless otherwise specified, Collection House Limited and its
associated entities may also be referred to as “Collection House”, “CHL”, “the Company”, “the Group”,
“Parent Entity” and the “the Entity”.
{
Annual Report
}
2005 ~ 2006
2
Financial and Operational Overview
26 April 2006
// Purchased large tranche of debt from a new
vendor, a major international financial institution.
7 February 2006
// Suspension of trading requested due to
material variation from corresponding period.
29 March 2006
// Signed two-year contract with major Australian
8 November 2005
// Signed new, twelve-month contract with major
Bank.
international financial institution.
9 March 2006
// Purchased debt with a face value of $22m from
major Australian telecommunications provider.
1 September 2005
// Action by former CEO settled on confidential
terms satisfactory to all parties.
2 March 2006
// Renewal of arrangement with major Australian
bank for debt collection services and debt
purchase on forward flow arrangement.
24 February 2006
// Half-Year results show net profit after tax of
$3.05m, first half EBITDA in excess of $22m
and increased revenue of 4.6% on same period
for the previous year.
24 August 2005
// Full-Year results show net profit after tax of
$12.95m, up 14.7% on previous year.
27 June 2005
// Disclosure of contract terms for newly
appointed Chief Executive Officer, Colin Day.
Figure No:
(Revenue)*
01
02
Figure No:
(Net profit attributable
to members of the Company)*
03
Figure No:
(Return on
shareholders’ Funds)*
)
m
(
$
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120
100
80
60
40
20
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Year
%
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02 03 04 05 06
Year
* 2005 results have been restated on adoption of International Accounting Standards.
Collection House Limited // Page No: 003
3
Chairman's Address
Your Board will continue to examine company cost structures to ensure they remain aligned with our cost
containment strategy and will continue to work in accordance with our operational and strategic strengths.
}
Company’s shares. This was a strategic decision,
made to ensure our shareholders were provided
with the most accurate information available, and
to comply with the requirements of the Australian
Stock Exchange. Changes to the Australian
equivalents to International Financial Reporting
Standards (AIFRS) required the implementation
of a more complex calculation process for
determining the company’s financial position.
The effort made to conform to these changes has
resulted in an accounting system that provides
you, as shareholders, with greater transparency
and increased clarity about your company’s future
endeavours.
While these changes were followed by a cancellation
of the half-year dividend, the Collection House
Board and management has worked hard to identify
future opportunities for growth and are dedicated to
ensuring the best possible outcomes for our
shareholders.
‘‘
Your management intends to build upon the
experience gained through this financial year,
and progress your company further towards
its overall goal of improving performance
through a more efficient use of technology and
improved collection practices.
‘‘
I thank you for your continued support and look
forward to the coming year, and any future
challenges, as an opportunity to continue
positioning Collection House as a leader in
Australian debt collection.
Yours sincerely
advantage of emerging
Fellow shareholders
This year has seen Collection House Limited
commercial
take
opportunities and position itself strongly within
the Australian debt collection industry. We have
achieved a growth in revenue flow, supported by a
stable and clear accounting format. Collection
House remains Australia’s largest debt collector
by gross revenue, retaining at least a 20% market
share advantage by sector revenue.
We have continued our strong commitment to
ethical and compliant debt collection practices
and remain committed to ensuring our corporate
standards
governance
throughout the entire company and its service
network partners.
follows
same
the
Your Board will continue to examine company
cost structures to ensure they remain aligned with
our cost containment strategy and will continue to
work in accordance with our operational and
strategic strengths.
This cost containment strategy is highlighted by
your management’s activities during the year.
Processes were implemented to reduce collection
costs and ensure our purchased debt portfolios
maintain their long term value. These processes
include identifying and implementing savings
opportunities and developing and maintaining
economies of scale. This will remain a primary
focus of the Board.
In February this year the Collection House Board
decided to enter into a trading halt on the
Dennis Punches
CHAIRMAN
{
Annual Report
}
2005 ~ 2006
4
Chief Executive Officer’s Report
2006/07 will be a year when we consolidate many of our new work practices, see many of the initiatives taken
during the past year bear fruit and continue to drill into processes that extract maximum value from our
operations. We have come through a difficult period with a much greater strength of purpose and direction.
}
The 2005/06 financial year has been a year of
transition and refocusing. We have reviewed our
work practices,
team,
underperforming divisions and corporate culture.
We have made the transition to new accounting
standards and we are refocusing on what we do best
– collect money.
senior management
While our gross revenue may have grown, I am a
great advocate of Quality rather than Quantity
Revenue. To this end we are focusing on all
revenue and the source, maintainability and cost
of delivery of that revenue. Throughout the year
we have worked to improve our cost structure.
This included significant changes to the senior
management team. We have analysed each
revenue area of the business and ensured that
both direct costs and overhead allocations reflect
the real profitability or otherwise of each area thus
providing a true analysis of that division. We will
continue to monitor all costs associated with
running the business in order to assist us reaching
what I consider to be an acceptable and
sustainable level of revenue and profit.
Another key area of focus was the rebuilding of
our technology
infrastructure to provide a
platform for the next three to five years and
beyond.
After ensuring that we could continue to provide
our Territory clients with an appropriate level of
service, we closed our Darwin and Canberra
offices and integrated collection activities for
those areas within existing offices. This allowed
us to cut the costs of two unprofitable offices,
while retaining the clients that were beneficial to
our bottom line.
Each division of the company has worked and will
continue to work on identifying and developing
those basic business practices at which we excel and
eliminate those that represent a drag on our profit.
In the first half, we focussed significant effort on
processes to value the debt held by Lion Finance
according to the new, international accounting
standards. This involved establishing a “fair
value” for our many tranches of debt. This new
approach placed a different value on our financial
assets. However, aside from substantial purchases
of new, quality debt, the adjustment in accounting
standards showed only a different way of looking
at the same company.
Under the new accounting standards, we elected
to take a most transparent and conservative
approach to valuing our financial assets allowing a
greater level of transparency and accountability
and also providing us with more certainty and
precision as we purchase further tranches of debt.
In the last half, the establishment of a rigid pricing
methodology for new purchases has been a central
focus. In addition, we have undertaken a review
of all continuous purchasing agreements. Some of
these were not as profitable as originally
expected. Action has been taken to correct this.
At the operational level, we have concentrated on
structural and procedural reform and this will be a
continued priority in the coming months. In
particular, we have targeted underperforming
tranches of debt, improved propensity to pay
modelling and have increased our efficient and
effective use of predictive dialling technology.
Account Asset Management
This year saw operational and structural reviews
undertaken for Lion Finance.
Further, we have made a concerted effort to
increase the size and liquidation rate of our
arrangement bank and we have made a significant
Collection House Limited // Page No: 005
change in policy relating to reduced settlements.
We have
reduced discounted settlements
substantially which has lead to a corresponding
growth in the revenue from full payments. This in
turn provides us a greater quality of revenue and
retains the value in our portfolios over a longer
period of time.
In addition to this, our use of due Legal process in
the collection and enforcement of debts has been
significantly improved. This has been done while
remaining conscious of our social and moral
obligations to those in genuine hardship.
These improvements have been critical to setting
a strong platform for sustainable profit growth in
2006/07.
In the next period, the advent of new reporting
tools will increase the effectiveness of account
actioning and will increase our ability to manage
our workforce capacity and concentrate on those
areas that net us real profit.
We expect the total size of the potential recovery
outstanding (PRO) to continue to grow along with
our monthly rate of liquidation. Purchased debt
represents the largest portion of Collection House
revenue and will remain our most important profit
centre in the coming years.
Contingent Collection Services
As Collection House continues to shift its focus
more and more on to debt purchase, contingent
collections revenue was, as forecast, down on last
financial year.
This decrease represents a conscious effort to
move away from the less profitable contingent
clients and focus on those with sustainable profit
margins, compatibility of collections ideals and
prospects of later debt purchase .
This is best highlighted by the achievements of
the Commercial Division which, previously
recorded a drop in revenue of 6%, while
improving profitability by some 450% during the
same period.
Other Contingent divisions will see significant
savings over the coming year in terms of basic
{
Annual Report
}
2005 ~ 2006
processes such as mail runs (Consumer Division),
litigation costs
(Insurance Division) and
international skip tracing (International Division).
We have secured new relationships with three
major financial institutions and reduced, by
choice, our dependence on one key client, thus
spreading our risk over a broader base of major
clients. We believe that this will lead to profitable
forward flow arrangements resulting in quality
debt purchase in the future. We remain the
exclusive agent for the outsourcing of a major
bank’s motor finance receivables division and
have completed structural reviews that will allow
us to realise valuable growth in the Receivables
Management division.
Credit Reporting
Australian Business Research (ABR) achieved a
strong financial result for the reporting period.
Revenue increased by 6% overall, but profits rose
by a total of 27%. A continuing focus on upgrading
technologies
and
the
refinement of the product offering have been the
driving forces behind ABR’s recent success.
consolidation
and
ABR are positioned to continue sustainable
growth over the current financial year through
business growth, supported by targeted sales
initiatives. ABR has enjoyed an improved market
profile and a strengthening of its market position
in the last twelve months.
National Tenancy Database (NTD) remains a
highly profitable business unit having generated
$0.9m in revenue during this financial year. We
expect to exceed this return in the coming twelve
months as a result of streamlined business changes
scheduled for the first and second quarters, as well
as an increase in marketing activity to boost rental
industry awareness of the product.
NTD continues to provide shareholders with a
very high profit on turnover. Also, its use of
business units such as ABR (for business related
reporting) and Commercial Collections (for the
collection of rental debts) distributes much of
NTD’s outgoings across the Collection House
Group. The revenue NTD generates is not
limited to its own financial results.
Other Operations
To coincide with the appointment of Ed
Gallagher, a twenty-five-year Wall Street veteran,
as President and CEO of Rapid Ratings (RR) in
February, Head Office was moved to New York.
Our commitment to RR’ growth as a commercial
ratings agency was well rewarded in December
2005 when ASIC granted RR the same status as
Moody’s Investors Service Pty Ltd, Standard &
Poor’s (Australia) Pty Ltd. and Fitch Australia Pty
Ltd. RR’ products are now also available to the
global institutional investment market through
affiliations with Reuters, Bloomberg, and
Thomson Financial.
Insurance Claims Solutions (ICS) has turned a
$0.4m loss last year into a profit in excess of $1m
this year. In addition to this ICS has signed a 3
year contract with their major client that will
provide continuity for the foreseeable future.
Information Technology
Collection House Technologies has continued to
contribute significantly
the Group by
supporting and enhancing the value of service it
provides while continuing to contain, and in some
areas reduce, operating costs.
to
form
This year has seen the successful implementation
of key infrastructure and applications strategies
that will
future
development. The three major projects have
been
terminal-based
workstations, a consolidation of servers and a
move to voice over IP (VoIP) technology.
the deployment of
the platform
for
Terminal-based workstations, which rely on a
central server to store applications and supply
processing power, have cheaper initial set up costs
and maintenance costs. At the same time, current
technological capabilities mean no
loss of
functionality of personal computers and, in areas
such as speed and security, this “thin client
technology” is a vast improvement.
the server side, by moving
On
towards
‘redundant clusters’ we have consolidated storage
space while increasing access speeds. This
approach enables us
to ensure optimum
utilisation of IT assets, high uptime, system
scalability and centralised management and
security administration.
telephony and
and Perth offices have
Our Auckland
implemented VoIP
further
expansion to Sydney, Newcastle and Melbourne
is planned in the first half of 06/07. We expect to
see the greatest benefits of VoIP from our
expanded ability to integrate our communications
with applications such as the predictive dialler,
and improvements to our remote access capability.
The maturity of our infrastructure has allowed us
to extend our web development capabilities and
we have completed a number of application
projects that will lead to direct staff savings,
particularly in administrative functions where
significant improvements have already been made.
Further development of web interfaces and other
system integration with The Controller (our
proprietary Collections application) will provide
added confidence that this visionary system will
continue to underscore the market leadership of
Collection House. Controller will continue to
strengthen our competitive edge
through
capability and compliance.
The business intelligence project instigated late
last year is nearing completion and promises to
greatly improve management reporting and data
analysis. We have completed final testing on a
data warehouse and a number of related data
modelling projects are at various stages of
development. We expect these reporting systems
to go live before the end of 2006.
Compliance
Collection House retains total commitment to
professional and ethical conduct across all its
business areas. We are continually reviewing and
revising policies and procedures, critically
examining practices and staff performance and
developing and improving our compliance and
quality assurance standards.
We have recently entered our third year of
accreditation under the Professional Practices
Management System (PPMS), a collection industry
specific quality assurance program, developed by
the American Collector’s Association. PPMS
overlays international standard series ISO 9000.
We continue to be a non-bank member of the
Australian Banking and Financial Services
Ombudsman Scheme.
Collection House Limited // Page No: 007
As further evidence of our belief in the strength of
compliant collections, we have adopted the
ACCC and ASIC Guideline for Debt Collection
in its entirety into the Collection House Code of
Conduct, where it forms part of the employment
contract for each and every staff member.
Collection House employs a dedicated Internal
Auditor to evaluate the adequacy and application
of the Company’s operational, administrative and
financial control environment.
We value the independence of the Internal
Auditor. Most recently under this function we
have released a complete Whistleblower package
aimed at developing and fostering a culture of
corporate compliance, ethical behaviour and good
corporate governance.
As part of our comprehensive and ongoing program
of review and reform we:
// further refined our Statute Barred Accounts
identification program;
// increased the size of our Compliance
department;
// launched several new policy and procedural
documents including an updated Company
Philosophy and Code of Conduct, and new
manuals covering the Uniform Consumer
Credit Code (UCCC), Privacy and Credit
Reporting, and
// initiated an in-depth review of our Call
improve our
to
Quality Monitoring
processes and reporting.
During 2005/06 we made six million customer
contacts and recorded 249 complaints about our
conduct. This is less than one per day and
represents a complaint rate of less than 0.004%, an
amazing figure for a call centre selling a popular
product, much less a debt collector.
We continue to work closely with consumer
organisations, community-based welfare groups
in the resolution of both
and regulators
individual customer concerns and shared
problems. We also continue to promote ongoing
communication among stakeholders to achieve
uniform laws and legislation relating to the
collection of debt across all Australian
jurisdictions, as well as industry-wide standards,
to provide effective and enforceable self-
regulation.
{
Annual Report
}
2005 ~ 2006
Human Resources
Staff numbers have remained fairly consistent with
last year. There were 633 employees compared
with 632 reported last period. While employment
costs have increased, this has been a necessary by-
product of retaining the right people. In addition,
the strong economy and low unemployment rate
have driven the costs of staff retention higher.
Collection House has always prided itself on the
standard of staff orientation training we provide.
With this in mind, we plan to implement
strategies to provide development opportunities
for senior staff and middle management.
We predict the Training Department will grow over
the next year, with projects already commenced to:
// become a registered training organisation
and deliver Certificate 3 in Financial Services
(Mercantile Agent);
// deliver Certificate 4 in Business (Frontline
Management) for targeted staff;
// centralise the “Call Quality Assurance”
function, providing Call Quality reporting
and trend analysis to managers;
// resource new Training Officers in each
location, and
// review management structures, with more
attention being given to professional
development, particularly for the core
development team.
are
justifiably excited
We
these
developments and believe the increase in training
will further develop quality staff, forming a solid
core for our future operations and management.
about
In other areas, our Human Resources division
continues to work towards providing staff at all
ranks with high levels of job satisfaction and
skills. This contributes to our back to basics
approach in a number of key areas.
// Improvement of operational processes by
utilising simple and powerful automated
forms to provide effective and efficient HR
services staff in all divisions across the Group.
// An
of
our
overhaul
performance
management review process will result in
some fundamental refinements to the way
we monitor KPIs next financial year.
This in turn will lead to significant
improvements in the way we measure and
reward staff performance.
// Undertaking a review of recruitment and
retention practices.
the current
competitive marketplace, this is imperative
and will involve conducting a climate
survey in the later part of the current
financial year.
In
// Deploying staff effectively to make best
use of their skills and capabilities.
While the focus on reducing operating costs will
always remain a high priority so to is building a
culture of integrity, excellence, understanding
and
to
introducing initiatives that help to support this
philosophy and throughout the year continued to
promote work/life balance initiatives.
remain committed
teamwork. We
Outlook
2006/07 will be a year when we consolidate many
of our new work practices, see many of the
initiatives taken during the past year bear fruit
and continue to drill into processes that extract
maximum value from our operations. We have
come through a difficult period with a much
greater strength of purpose and direction.
to build
successful,
Collection House will grow its business by
continuing
strategic
relationships with blue chip commercial partners
who value our commitment to not only deliver
excellent financial results, but also to protect their
reputation and brand. We are the Australian
benchmark in ethical debt collection and we will
continue to improve our policies, practices and
standards to maintain that leadership.
Our plan for the coming years is to consolidate
and improve our contingent collection business
and grow the purchased debt portfolio. In many
cases, this will be one and the same process as we
investigate further forward flow arrangements
based on our ability to supply a competitive
package for the two divisions.
We will also move to establish further Receivables
Management agreements with banks and financiers.
In 2006/07, we will concentrate on those things
that we know we are the best at. We will look at
all opportunities and assets to ensure that we have
the best business mix and we will find and train
the best staff to implement these processes and
take us towards high revenue,
low costs,
sustainable growth and a more profitable future.
Delivery of critical information to all managers
and staff is vital to managing our company and the
implementation of our new reporting system will
be a major step forward for this company.
We’ve made some great improvements this year
and now it’s time to REALLY get to work and
return value to our shareholders.
Yours sincerely
Colin Day
CHIEF EXECUTIVE
OFFICER
Figure No:
(Staff Expenses)*
04
Figure No:
05
(Revenue by segment)*
Other Operations
Credit Reporting
Account Asset Management
Collection Services
)
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02 03 04 05 06
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* 2005 results have been restated on adoption of International Accounting Standards.
Collection House Limited // Page No: 009
Focuses and Achievements
Achievements
Focuses
Account Asset
Management
// New accounting standards offer more
certainty in debt purchase and greater
transparency in reporting.
// Improved pricing methodology.
// Reduction in settlements leads to larger
revenue from paid in full debt.
// Improve reporting tools to identify
profitable areas.
// Increase action in profitable areas.
// Stop action in non-profitable areas or
procedures.
Contingent
Collection
Services
// Concentrated on quality clients.
// Three new relationships with major
international and local financial institutions.
// Improved Receivables Management
structure.
// Reduce costs of basic processes.
// Seek economies of scale.
// Further maintain and develop quality
clients.
Credit
Reporting
// ABR profits increased 27%.
// NTD moved into New Zealand.
// Improved market position and market share
across the board.
// Improve market awareness of product.
// Seek sustainable growth through
economies in business processes.
Other
Operations
// Rapid Ratings moved to New York to
be closer to larger USA and UK markets.
// Expansion of client base.
// Best recorded profits for ICS.
Information
Technology
// Thin-client technology reduces initial and
on-going hardware costs.
// VoIP telephony introduced in satellite
offices.
// Server consolidation into redundant
clusters.
Compliance
// New Code of Conduct to align with
industry guidelines.
// Assistance for staff in dealing with Privacy
and the Credit Code.
Human
Resources
// Streamlined administrative procedures,
reducing associated time and costs.
// Automation of forms.
// Improve web interfaces to streamline
processes and cut times and costs of
administration and other procedures.
// Creation and implementation of powerful
business intelligence tools.
// Work with consumer groups to develop and
maintain mutually acceptable industry
standards.
// Develop operational manuals to assist staff
in understanding and complying with
legislation, industry standards and company
policy.
// Improve the wording, standard and
currency of automated letters.
// Payroll upgrade and online system.
// Improve training for key development
staff.
// Certificate 4 in Frontline management.
Financial
Basics
// Launched mobile phone education module
as part of Operation Financial Literacy.
// Develop and release on-line e-learning
campaign for schools.
// Endorsement of educational value by
Financial Literacy Foundation and
Curriculum Corporation.
// Secure more alliances with finance and
education partners.
// Now in over 700 High Schools in Australia.
{
Annual Report
}
2005 ~ 2006
5
Financial Basics Foundation
The Foundation dream is 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.
}
The Financial Basics Foundation has established
itself as the leader in the provision of financial
literacy programs for young Australians. Our
reputation within the education and finance
sectors is growing as is the demand for the
resources we provide.
In keeping with our dream, the Foundation
launched a mobile phone module to educate
students about the dangers of mobile phone debt.
This is the tenth in a series of complimentary
modules that educators may take advantage of
separately or together to assist in developing
financial literacy for young Australians. The
launch of the module coincided with the
introduction of a new industry code to protect
vulnerable Australians, particularly young people,
from getting into financial difficulties with mobile
phone and internet services.
With around 45% of 13 to 15 year olds and 50,000
children aged between five and nine owning a
mobile phone (Australian Bureau of Statistics,
2004), the incidence of mobile phone debt owed
by students is on the rise. The Foundation
believes that this is a “hot topic” for young
people, their parents and teachers and it is
important to be able to provide such relevant and
up to date material on this topic.
Corporate Partner and Bank of Queensland
Managing Director, David Liddy suggested that
‘‘
mobile phones really can be a debt trap for our kids.
Rather than trying to get them to stop using phones all
together, we need to ensure our children are educated
and know how to be smart about their phones.
‘‘
The success of Operation Financial Literacy has
been extraordinary with over 780 secondary
schools across every state and territory in Australia
currently registered with the program. This is a
significant increase from the same period last year.
Feedback continues to be extremely positive with
most teachers very grateful for what they describe
as a valuable and useful resource.
Not only has Operation Financial Literacy grown
from nine to ten modules in the last twelve
months, it has also been mapped to all state and
territory curriculum documents and to the
National Consumer and Financial Literacy
The Foundation
Learning Dimensions.
continues to provide these resources free of
charge.
to
In June 2006, the Foundation submitted an
the Federal Government’s
application
Financial Literacy Foundation for listing on the
Understanding Money website. Our successful
endorsement by
the Financial Literacy
Foundation and the Curriculum Corporation
about the quality and educational content of
Operation Financial Literacy
is a further
testament to the value of this resource.
The development of an online e-learning game
has commenced and is expected to be completed
by the latter half of 2006 for roll-out into schools
early in 2007. Once again, the Foundation
expects to make the game available free of charge
to secondary schools around Australia. It will be a
unique
tool
designed to teach a broad range of financial skills
to young people.
‘first-of-its-kind’
educational
In 2006, the Foundation was invited to submit an
application from a significant and well respected
national financial services association who were
seeking a not-for-profit organisation to align with.
The details of the partnership are being finalised.
There is no doubt that the lack of sound financial
knowledge among young people continues to be a
major concern for government and educators. The
Financial Basics Foundation is addressing this
issue proactively by continuing to develop and
provide high quality financial literacy materials for
secondary schools. 2007 will see the Foundation
continue to review and update our existing
materials while also developing new ideas.
In the year ahead we will move to securing
finance and education sector alliances that will
support the Foundation’s initiatives and ensure
materials are available well in to the future.
Collection House Limited // Page No: 011
6
Corporate Governance Statement
Collection House Limited (the Company) and the Board are committed to
achieving and demonstrating the highest 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 pages 13 - 14.
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 the
Company's website at www.collectionhouse.com.au
in accordance with the ASX Corporate Governance
Council's recommendations.
Board of Directors
The Board of Directors operates in accordance
with the principles set out in the Directors' charter
Board Composition
which is available from the corporate governance
information section of the Company website at
www.collectionhouse.com.au. The charter details
the Board's composition and responsibilities.
Board Structure
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.
The Board composition during 2005/06 is set out below with details of the backgrounds of each
director set out at pages 25 - 26.
Director
Board Membership
Date of Appointment
Dennis Punches
Chairman
Barrie Adams
Lead Independent Director
John Pearce
Deputy Chairman and Managing Director
Colin Day
Executive Director
1 July, 1998
27 November, 2002
5 April, 1993
1 July, 2005
Rhonda King
Executive Director and Company Secretary
24 August, 2005
Tony Coutts
Executive Director
Barry Connelly
Independent Director
Bill Kagel
Independent Director
Stephen Walker
Non-Executive Director
Bill Hiller
Independent Director
17 September, 1998
5 June, 2003
16 February, 2000
31 August, 1990
5 June, 2003
There were some changes to the Board that took effect at 30 June, 2006 or thereafter:
// Rhonda King, Executive Director and Company Secretary, though remaining as a Non-Executive
Director, resigned as the Company Secretary on 30 June, 2006; and
// Kylie Lynam was appointed the Company Secretary from 1 July, 2006.
{
Annual Report
}
2005 ~ 2006
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:
// 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.
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),
Colin Day (Chief Executive Officer), Tony Coutts
(Non-Executive Director), Stephen Walker (Non-
Executive Director), and Rhonda King (Company
Secretary and Non-Executive Director).
to
their
respective
Due only
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 30 August, 2006
are provided in greater detail on pages 25 - 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 role as Chief
Executive Officer of the Company. Rhonda King
is also not deemed independent by virtue of her
role as Executive Director and Company Secretary
during the 2005-2006 financial year. John Pearce is
not deemed independent by virtue of his being a
substantial shareholder of the Company.
Notwithstanding, the Board does not consider there
are any matters that may materially interfere with
the exercise by John Pearce, Colin Day and Rhonda
King of unfettered and independent judgment.
ASX Corporate Governance
Council Recommendations
2.1: A majority of the Board should
be Independent Directors:
accordance
independent
The Board considers that a majority of the Board is
not
with
in
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
Collection House Limited // Page No: 013
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 Responsibilities
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
the corporate governance section of
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:
// setting the strategic direction of the
Company and providing strategic guidance
to management;
// providing input into and approval of
management's development of corporate
strategy and performance objectives;
// reviewing and approving business plans for
the Company and its Controlled Entities;
// approval of annual budget and financial
plans including available resources and
major capital expenditure and initiatives;
// overseeing and monitoring progress against
budget via the establishment and reporting
of both financial and non financial key
performance indicators;
// overseeing and monitoring:
• organisational performance and
the
achievement of strategic goals and
objectives;
• compliance with the Company's Code of
Conduct (see page 19);
// appointing, assessing performance and
(where appropriate), senior
removing
executives of the Company;
// monitoring financial performance including
approval of the half year and annual
financial reports and liaison with the
Company's auditors;
// overseeing, reviewing and ratifying systems
of governance, management processes, risk
management, internal compliance and
controls, codes of conduct and legal and
regulatory
ensure
compliance
appropriate compliance frameworks and
controls are in place; and
to
// enhancing and protecting the brand and
reputation of the organisation.
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 also
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 management has been
approved by the Board and a summary is
included on the Company's website at
www.collectionhouse.com.au.
{
Annual Report
}
2005 ~ 2006
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, risk management 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, ensuring directors are properly briefed in
all matters
roles and
responsibilities, facilitating Board discussions and
managing the Board's relationship with the
Company's executive management.
relevant
their
to
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.
Each Committee is comprised mainly of Non-
Executive Directors. The Committee structure
and membership is reviewed on an annual basis.
Each Committee has its own written charter setting
out its role and responsibilities, composition,
structure, membership requirements and the
manner in which the Committee is to operate. All of
these charters are reviewed on an annual basis and
are available on the Company website. All matters
determined by Committees are submitted to the full
Board as recommendations for Board decisions.
Minutes of Committee meetings are tabled at the
subsequent Board meeting. Additional requirements
for specific reporting by the Committees to the
Board are addressed in the charter of the
individual committees.
Audit and Risk
Management Committee
The Audit & Risk Management Committee
(ARMC) operates in accordance with its Board
approved charter, a copy of which is available from
the corporate governance section of the Company's
website at www.collectionhouse.com.au.
The ARMC consists of the following Non-
Executive Directors:
// Barrie Adams - Chairman and Lead
Independent Director
// Bill Hiller - Independent Director
// Barry Connelly - Independent Director
(Resigned 30 June, 2006)
// Rhonda King (Appointed 1 July, 2006)
The principal functions of the ARMC include
reviewing and making recommendations to the
Board and assisting the Board in the discharge of
its responsibilities relating to accounting policy,
continuous disclosure and risk management. The
Committee's responsibilities also include:
// to review, assess and approve the annual full
and concise reports, the half-year financial
report and all other financial information
published by the Company or released to the
market;
// assisting the Board in reviewing the
effectiveness of the Company's internal
management
environment
control
covering:
• effectiveness and efficiency of operations;
• reliability of financial reporting; and
• compliance with applicable laws and
regulations;
// to determine the scope of the internal audit
function and ensure that its resources are
adequate and used effectively, assess its
performance, including to independently
Collection House Limited // Page No: 015
ratify the appointment and/or removal and
contribute to the performance assessment
of the Internal Auditor;
// oversee the effective operation of the risk
management framework;
// recommend to the Board the appointment,
removal and remuneration of the external
auditors and review the terms of their
engagement, the scope and quality of the
audit and assess performance;
the
and
competence of the external auditor on an
ongoing basis;
independence
// consider
// review and approve the level of non-audit
services provided by the external auditors
and ensure it does not adversely impact on
auditor independence;
// review
and monitor
related party
transactions and assess their propriety;
// oversee the Company's transition to
Australian equivalents to International
Financial Reporting Standards (AIFRS) -
see note 42 to the financial statements; and
// report to the Board on matters relevant to
the Committee's role and responsibilities.
In fulfilling its responsibilities, the ARMC:
// receives regular reports from management,
the internal and external auditors and the
AIFRS transition project team;
// meets with the internal and external
auditors at least twice a year or more
frequently if necessary;
// reviews the processes the CEO and CFO
have in place to support their certifications
to the Board;
// reviews any
significant disagreements
between the auditors and management,
irrespective of whether they have been
resolved;
// meets separately with the external auditors
and the Internal Auditor at least twice a
year without the presence of management;
// provides the internal and external auditors
with a clear line of direct communication at
any time to either the Chairman of the
ARMC or the Chairman of the Board.
The ARMC has authority, within the scope of its
responsibilities, to seek any information it
requires from any employee or external party.
The ARMC is chaired by Barrie Adams, Lead
Independent Director, and during 2005/06 had
two other permanent members being Barry
Connelly (resigned 30 June, 2006), and Bill Hiller.
With Barry Connelly's resignation, the Board has
{
Annual Report
}
2005 ~ 2006
now appointed Rhonda King (appointed 1 July,
2006) as a permanent member of the Committee.
The Board considers that these members have
appropriate financial and legal 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 in
previous financial years. During the last six
months of the 2005-2006 financial year and
continuing into the current financial year, the
ARMC now meets in on a monthly basis.
Nominations Committee
in
The Nominations Committee operates
accordance with its Board approved charter, a
summary of which is available from the corporate
governance section of the Company's website at
www.collectionhouse.com.au.
The Nominations Committee consists of the
following Non-Executive Directors:
// Dennis Punches - Chairman
// Barrie Adams - Lead Independent Director
// Bill Hiller - Independent Director
The principal 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 Committees responsibilities also include:
// conduct an annual
the
membership of the Board having regard to
present and future needs of the Company
and to make recommendations on Board
composition and appointments;
review of
// conduct an annual review of and conclude
on the independence of each director;
// propose candidates for Board vacancies;
// oversee the annual performance assessment
program;
// oversee Board succession including the
succession of the Chairman; and
// assess the effectiveness of the induction process.
The members of the Committee during 2005/06
were Dennis Punches, Barrie Adams and Bill
Hiller. 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.
new
directors
selecting
When
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 and ensuring directors clearly
understand
and
responsibilities.
corporate
duties
their
to
In addition
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 nonfiduciary responsibilities, terms
and conditions of the directorship including
expectations of performance, policy relating to the
availability of independent advice and counsel,
and corporate governance.
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 and
for
incentive policies and practices
executives and other senior personnel;
// monitor organisational
structure and
succession planning strategies; and
// evaluate and review current industry
standards and practices.
During 2005/06 the Committee was chaired by
Bill Kagel and comprised Dennis Punches, Barrie
Adams and Bill Hiller.
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 Committee
in
The Remuneration Committee operates
accordance with its Board approved charter, a
copy of which is available from the corporate
governance section of the Company's website at
www.collectionhouse.com.au.
The Remuneration Committee consists of the
following Non-Executive Directors:
// Bill Kagel - Chairman and Independent
// Dennis Punches
- Non-Independent
Director
// Barrie Adams - Lead Independent Director
// Bill Hiller - Independent Director
Remuneration
is the Company's objective to provide
It
maximum stakeholder benefit from the retention
of a high quality Board and executive
management team by remunerating directors and
in
key executives fairly and appropriately
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
Collection House Limited // Page No: 017
// 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 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 were 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-
cash
Executive Directors
compensation and reimbursement of expenses for
their services.
receive
only
information relating to the
For additional
Company's remuneration practices and details
relating to directors' and executives' remuneration
during the year, refer to the Directors' Report and
Note 31 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. The Board undertakes an annual
assessment of its collective performance and the
performance Board committees in accordance
with the Company's performance evaluation
process for directors and executives. This
assessment was undertaken during September
2006.
The Board also annually reviews the performance
of the Executive Management Team.
{
Annual Report
}
2005 ~ 2006
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
the Company's
performance.
impact on
are managed
The Board, in conjunction with the ARMC,
reviews and approves the parameters under which
such
the
risks
responsibility for
internal control systems;
compliance and the procedure for identifying
business risks and the methods to control their
financial impact on the Company.
including:
The Board has approved a Risk Management
Policy, a summary of which is available on the
corporate governance section of the Company's
website at 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 managed and 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.
In 2004, 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,
includes:
the audit methodology
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 established in 2004 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, 2005 and
full year ended 30 June, 2006 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
internal
compliance and control systems were, at that date
operating efficiently and effectively in all material
respects.
risk management and
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.
As in previous years, the Company adopted this
certification structure for the year ended 30 June,
2006.
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 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.
Code of Conduct and Ethical
Standards
The Company recognises the need for our
directors, senior 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 directors, senior executives and employees are
expected to comply in the performance of their
respective functions. A key element of that code
is
that directors, senior
executives 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.
requirement
the
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 at www.collectionhouse.com.au.
Company Policy and Practice
for Dealing in Securities
The freedom of directors and senior 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.
Collection House Limited // Page No: 019
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 senior executives may deal in company
securities provided that, at all times, 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 senior executives may only deal in
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 at 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 information released to
the Australian Stock Exchange on the
Company's website immediately following
confirmation of receipt by the ASX;
// ensuring all press releases issued by the
Company are posted on the Company's
website as soon they are disclosed to the ASX;
active participation by
// encouraging
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.
{
Annual Report
}
2005 ~ 2006
A copy of the Board approved Shareholder
Communications Guidelines is available from the
corporate governance section of the Company's
website at 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.
copy of
is
the Continuous Disclosure
A
Policy
corporate
governance section of the Company's website at
www.collectionhouse.com.au.
available
from
the
External Audit
Independence
The Company's policy is to appoint external
auditors who
and
demonstrate
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.
quality
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 twelve
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.
The ARMC meets with the external auditor of
the Company,
independently of executive
management, at least twice a year. It met 12 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.
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 32 to the Financial Statements.
Whistleblower Protection
The Board introduced 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,
the Company's online
anonymously
whistleblower reporting system, or by telephone.
through
Any concerns that are reported are assessed and
handled by
in
conjunction with the Company's General Counsel.
the disclosure coordinator,
The Company does not tolerate known or
suspected incidents of fraud, corrupt conduct,
adverse behaviour, illegal activities 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 workplace health and safety.
Employees are expected to take all practical
measures to ensure a safe and healthy working
environment in keeping with their defined
responsibilities and regulations.
International Financial
Reporting Standards (IFRS)
The Australian Accounting Standards Board
(AASB) has adopted 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.
The Company adopted the Australian equivalents
to IFRS in its consolidated Entity's financial
statements for the half-year ending 31 December,
2005 and the full year ending 30 June, 2006.
Company Secretary
The Company Secretary to 30 June, 2006 was
Rhonda King.
the Company's Constitution,
the
Under
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 and
seeks to support the effectiveness of the Board by
monitoring Board policy and procedures and
coordinating the completion and dispatch 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.
The Board confirmed the appointment of Kylie
Lynam as Company Secretary on 30 June, 2006,
with effect as and from 1 July, 2006. Rhonda King
resigned as Company Secretary with effect on 30
June, 2006, while remaining as a director. The Board
has now appointed Rhonda King as a permanent
member of the ARMC effective from 1 July, 2006.
Ms Lynam has a Bachelor of Business qualification
- majoring in Human Resources and Marketing and
is currently completing a Graduate Diploma in
Corporate Governance. Ms Lynam has been the
Human Resources Manager for the Company since
5 July, 2004 and will continue in this role, in
addition to her duties as Company Secretary.
All directors have access to the advice and services
of the Company Secretary.
Collection House Limited // Page No: 021
7
Directors' Report
Your directors present their report on the Consolidated Entity (referred to hereafter as the Group)
consisting of Collection House Limited and the entities it controlled at the end of, or during, the year
ended 30 June, 2006.
}
Principal activities
During the year the principal continuing activities
of the Group were the provision of debt collection
services throughout Australasia. There were no
significant changes in the nature of the activities
of the Group during the year.
Directors
following persons were directors of
The
Collection House Limited during the whole of
the financial period and up to the date of this
report, unless stated otherwise:
// Barrie Adams
// Barry Connelly
// Tony Coutts
// Colin Day
// Bill Hiller
// Bill Kagel
// Rhonda King (appointed 24 August, 2005)
// John Pearce
// Dennis Punches
// Stephen Walker
Dividends - Collection House Limited
Dividends paid to members during the financial year were as follows:
Final unfranked ordinary dividend for the year ended 30 June, 2005
of 4 cents (2004 - 4 cents) per fully paid share paid on 25 November, 2005
Interim ordinary dividend for the year ended 30 June, 2006 of nil
(2005 - 4 cents) per fully paid share
30 June 2006
$'000
30 June 2005
$'000
3,894
-
3,894
3,888
3,888
7,776
In addition to the above dividends, since the end of the financial year the directors have
recommended the payment of a final ordinary dividend of $1.9 million (2.0 cents per fully paid share)
to be paid on 24 November, 2006 out of retained profits at 30 June, 2006 (refer to note 30).
The directors did not recommended the payment of an interim dividend during the year ending 30
June, 2006.
{
Annual Report
}
2005 ~ 2006
Review of Operations
A summary of consolidated revenues and results by significant industry segments is set out below:
Revenue
Results
30 June 2006 30 June 2005 30 June 2006
$'000
$'000
$'000
Collection Services
Account Asset Management
Credit Reporting
Other
Intersegment eliminations
42,444
51,599
23,250
19,630
(1,920)
135,003
47,266
53,903
21,938
6,135
(2,725)
126,517
Unallocated revenue less unallocated expenses
Profit before income tax expense
Income tax expense
Profit for the period
(Profit) / Loss attributable to minority interest
Profit attributable to members of Collection House Limited
5,043
12,158
3,398
(2,211)
277
18,665
(8,752)
9,913
(4,088)
5,825
252
6,077
30 June 2005
$'000
7,872
20,110
2,526
(3,317)
12
27,203
(9,381)
17,822
(5,494)
12,328
618
12,946
Comments on the operations and the results of those operations are set out below:
Basis of Accounting
The financial report for the year ended 30 June,
2006 and the results set out in this report are
prepared in accordance with Australian equivalents
to International Financial Reporting Standards
("AIFRS"), in line with the provisions of AASB 1:
First-time Adoption of Australian Equivalents to
International Financial Reporting Standards.
Financial reports of the Group until 30 June, 2005
had been prepared in accordance with previous
Australian Generally Accepted Accounting
Principles ("previous AGAAP"). Previous AGAAP
differs in certain respects from AIFRS. When
preparing the Group's financial report for the year
ended 30 June, 2006, management has amended
certain accounting and valuation methods,
applied
in the previous AGAAP financial
statements, to comply with AIFRS.
With the exception of financial instruments, the
comparative figures have been restated to reflect
these adjustments. The Group has taken the
exemption available under AASB 1 to apply AASB
132: Financial Instruments: Disclosure and
Presentation ("AASB 132") and AASB 139:
Financial
and
Measurement ("AASB 139") only from 1 July, 2005.
Instruments: Recognition
Results
For the year ended 30 June, 2006, the Group
achieved a consolidated profit attributable to
ordinary equity holders of $6.1 million. The result
was down 53% on the prior corresponding period.
// Total income from ordinary activities was
$134.7 million, which is an increase of 7.4% on
the prior
corresponding period. Total
employment and administration expenses from
ordinary activities were $52.3 million, which
was 1.02% up on the prior corresponding
period.
// EBITDA for the year (including fair value
adjustments and impairment) was $42.1 million
(2005 $45.2 million).
// Basic earnings per share ("EPS") were 6.2 cents
(2005: 13.3 cents).
Collection House Limited // Page No: 023
// The consolidated cash flow was $40.0 million
for the year compared to $43.4 million for the
previous year.
The decreased profit attributable to members
resulted primarily from the effect of an increased
fair value adjustment
to purchased debt
(previously shown as amortisation) from $18.6
million in 2004-2005 to $21.6 million in the current
reporting period and impairment of goodwill and
other assets of $2.0 million ($1.4 million in 2004-5).
During the reporting period, A$32.8 million and
NZ$0.8 million was paid for new debt portfolios
in the Australian and New Zealand markets
respectively, all of which was funded from
operating cash flow.
and AASB
Consolidated net assets have decreased from $93.7
million to $75.1 million predominantly due to an
adjustment to consolidated retained earnings of
$20.5 million arising from the transition to AASB
132 "Financial Instruments: Disclosure and
Presentation"
"Financial
Instruments: Recognition and Measurement" at 1
July, 2005. $19.2 million of this adjustment was
required as the method used to value the purchased
debt portfolios was changed from amortised cost
(under AGAAP) to "fair value through the profit and
loss" (under AIFRS). The remainder is a result of
the impairment of receivables.
139
The value of Rapid Ratings was written down by
$1.1 million, Downie & Associates by $0.95
million and subsidiary NRC by $1.2 million.
The Group continued to focus on improving
processes. All segments other than Rapid Ratings
returned a profit in 2006. The strategic direction of
Rapid Ratings Pty Ltd has been reviewed and as a
result, the headquarters of the company have been
moved to New York and an experienced Wall Street
professional has been appointed as the CEO.
Significant changes in the
state of affairs
Significant changes in the state of affairs of the
Group during the financial year were as follows:
(a) In Australia the Group purchased debt with a
face value of A$316.0 million for A$32.8 million;
In New Zealand, the Group purchased debt
with a face value of NZ$4.2 million for NZ$0.8
million.
(b) The Group acquired a
further 5.9%
of Collection House Business Diagnostics
Pty Ltd.
Matters subsequent to the
end of the financial year
An unfranked final dividend has been declared of
2.0 cents for a total of $1.9 million, payable on 24
November, 2006. No provision has been raised in
these accounts.
Other than the matters discussed above, no
matter or circumstance has arisen since 30 June,
2006 that has significantly affected, or may
significantly affect:
(a) the Group's operations in future financial
years; or
(b) the results of those operations in future
financial years; or
(c) the Group's state of affairs in future financial
years.
Likely developments and
expected results of operations
There were no likely developments in the
operations of the Group constituted by Collection
House Limited and the entities it controls from
time to time that were not finalised at the date of
this report.
A provision has been made in the accounts for a
total of $660,000 over the next two financial years
to cover ex-gratia payments to former customers
in New South Wales under the terms of a
voluntary undertaking given to the ACCC
announced on 3 February, 2006.
Further information on likely developments in
the operations of the Group and the expected
results of operations have not been included in
this report because the directors believe it would
be likely to result in unreasonable prejudice to the
Group.
The Company acquired a further 5.9% of the
issued share capital of Collection House Business
Diagnostics Pty Ltd on 1 July, 2005.
The Board has confirmed its confidence in the
company's current and future trading position and
has declared an unfranked dividend as noted below.
Environmental regulation
The Company's operations are not regulated by
any significant environmental regulation under a
law of the Commonwealth or of a State or
Territory.
{
Annual Report
}
2005 ~ 2006
Information on directors as at 30 June, 2006
Dennis Punches
John Pearce
Barrie Adams
Barry Connelly
Tony Coutts
Dennis Punches Bsc Chairman. Age 70.
Experience and expertise: Appointed to the Board in
July 1998, and in 2000 as Chairman. Resides Florida, USA.
Other current directorships
(other than personal corporate entities)
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 directorships in last 3 years
(other than personal corporate entities)
Former director of Attention LLC Inc, Analysis and
Technology Inc, and co-founder and former Chairman of
Payco American Corporation
Special responsibilities
Chairman of the Board.
Chairman of Nomination Committee.
Member of Remuneration Committee.
Interests in shares and options
(direct and indirect holdings)
14,054,835 ordinary shares in Collection House Limited.
John Pearce FAIM, FAICM
Deputy Chairman / Managing Director. Age 61.
Experience and expertise: 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. Member of the International
Fellowship of Certified Collectors. Resides Queensland,
Australia. (Stepped down as Chief Executive Officer effective
30 June, 2005). Managing Director and Deputy Chairman
effective 1 July, 2005. Resides Queensland, Australia.
Other current directorships
(other than personal corporate entities)
Director of all Collection House subsidiaries with the
exception of Insurance Claims Solutions Ltd,
Director of Financial Basics Foundation and
Chairman of the Brisbane Lions Foundation.
Former directorships in last 3 years
(other than personal corporate entities): None.
Special responsibilities
Managing Director, Deputy Chairman
Interests in shares and options
(direct and indirect holdings)
14,189,900 ordinary shares in Collection House Limited.
Barrie Adams PSM, FCPA.
Lead Independent Director. Age 61.
Experience and expertise: 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. Resides
Queensland, Australia.
Other current directorships (other than personal
corporate entities)
Chairman of NuCashew Limited and Financial Basics
Foundation. Director of Ingeus Limited, NuPlant Limited and
Steel Foundation Limited. Chairman of the Risk and Audit
Committee of Ingeus Limited and Steel Foundation Limited.
Former directorships in last 3 years
(other than personal corporate entities)
Chairman - CITEC Business Enterprise Board
Chairman - Pro Super Holdings Limited
Special responsibilities
Lead Independent Director
Chairman - Audit & Risk Management Committee
Member - Nominations Committee
Member - Remuneration Committee
Interests in shares and options
(direct and indirect holdings): None
Barry Connelly BJ.
Independent Director. Age 66.
Experience and expertise: 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 Texas, USA.
Other current directorships
(other than personal corporate entities)
Chairman of Australian Business Research Pty Ltd and
Rapid Ratings Pty Ltd
Former directorships in last 3 years (other than
personal corporate entities): None
Special responsibilities
Member - Audit & Risk Management Committee
(resigned effective 30 June 2006).
Interests in shares and options
(direct and indirect holdings)
20,000 ordinary shares in Collection House Limited.
Tony Coutts Executive Director. Age 47.
Experience and expertise: General Manager of
Collection House in 1995. Appointed an 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.
Other current directorships
(other than personal corporate entities)
Collection House (NZ) Ltd, Lion Finance Ltd,
Collection House ALR Pty Ltd, Australian Corporate
Reporting Pty Ltd, ABR NZ Ltd, Colpro Pty Ltd, The
Creditfax (Aust) Pty Ltd, Australian Legal Recoveries Pty
Ltd, Rent Check Australia Pty Ltd, Australian Stockdata
Pty Ltd, Creditnet Pty Ltd, National Tenancy Database
Ltd, Insurance Claims Solutions Ltd.
Collection House Limited // Page No: 025
Bill Hiller
Bill Kagel
Stephen Walker
Rhonda King
Colin Day
Former directorships in last 3 years
(other than personal corporate entities): None
Special responsibilities: None
Interests in shares and options
(direct and indirect holdings)
4,134,000 ordinary shares in Collection House Limited.
Bill Hiller Independent Director. Age 67.
Experience and expertise: Director since June 2003.
Forty years' experience in the automotive finance industry
including as General Manager - Automotive Finance for St
George Bank Limited. Resides New South Wales, Australia.
Other current directorships (other than personal
corporate entities): None
Former directorships in last 3 years
(other than personal corporate entities)
Former directorships include St George Motor Finance
Limited, Autobytel.com.au Pty Ltd, the Australian Finance
Conference and Cycle & Carriage Finance Limited.
Special responsibilities
Member - Audit & Risk Management Committee
Member - Nominations Committee
Member - Remuneration Committee
Interests in shares and options
(direct and indirect holdings)
5,200 ordinary shares in Collection House Limited.
Bill Kagel Independent Director. Age 69.
Experience and expertise: 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. Resides Wisconsin, USA.
Other current directorships
(other than personal corporate entities): None
Former directorships in last 3 years
(other than personal corporate entities)
Former director of Payco American Corporation and
Outsourcing Solutions Inc.
Special responsibilities: None
Interests in shares and options
(direct and indirect holdings)
500,000 ordinary shares in Collection House Limited.
Stephen Walker
Non-Executive Director. Age 55.
Experience and expertise: 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. Has
owned and managed debt collection agencies in Australia
and New Zealand. Resides Queensland, Australia.
Other current directorships
(other than personal corporate entities)
Director of Collection House Technologies Pty Ltd
Former directorships in last 3 years
(other than personal corporate entities)
National Revenue Corporation Pty Ltd
Special responsibilities: None
Interests in shares and options
(direct and indirect holdings)
6,750,000 ordinary shares in Collection House Limited.
Rhonda King BA, LLB.
Executive Director, Company Secretary. Age 49.
Experience and expertise: 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. Appointed to the Collection House
Board on 24 August, 2005. Resides Queensland, Australia.
Other current directorships
(other than personal corporate entities)
Member of the Board and Company Secretary for
Brisbane Lions Foundation and member of the Board and
joint Company Secretary for Financial Basics Foundation.
Former directorships in last 3 years
(other than personal corporate entities)
Member of the Board of Hockey Queensland and the
Dental Technicians Board.
Special responsibilities
Member of the Audit and Risk Management Committee
from 1 July, 2006.
Interests in shares and options
(direct and indirect holdings)
35,000 ordinary shares in Collection House Limited.
Colin Day Chief Executive Officer. Age 52.
Experience and expertise: 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, including Chief Operations Officer.
Appointed as a director of Collection House and as CEO
on 1 July, 2005. Resides Queensland, Australia.
Other current directorships
(other than personal corporate entities)
Director of all Collection House subsidiaries.
Former directorships in last 3 years
(other than personal corporate entities): None.
Special responsibilities
Chief Executive Officer
Interests in shares and options
(direct and indirect holdings)
325,000 shares in Collection House Limited
{
Annual Report
}
2005 ~ 2006
Company Secretary
The Company Secretary to 30 June, 2006 was Rhonda
King BA, LLB. Ms King was appointed to the position
of Company Secretary on 8 April, 2003. Before joining
Collection House she worked as a solicitor in legal
practice. Ms King has resigned as Company Secretary
from 30 June, 2006, but will continue to consult to the
company on an as needs basis.
The Company Secretary from 1 July, 2006 is Kylie
Lynam. Ms Lynam has a Bachelor of Business
qualification majoring in Human Resources and
Marketing and is currently completing a Graduate
Diploma in Corporate Governance. Ms Lynam has
been the Human Resources Manager for the Group
since 5 July, 2004 and will continue in this role in
addition to her duties as Company Secretary.
Meetings of Directors
The number of meetings (inclusive of meetings held by circulating minute) of the Company’s Board of Directors
and of each Board Committee held during the year ended 30 June, 2006, and the numbers of meetings attended
by each director were:
Dennis Punches
John Pearce
Barrie Adams
Barry Connelly
Tony Coutts
Bill Hiller
Bill Kagel
Stephen Walker
Rhonda King
Colin Day
Full meetings of directors
B
A
ARMC
B
A
15
16
16
16
15
16
16
14
16
16
16
16
16
16
16
16
16
16
16
16
**
**
12
12
**
12
**
**
**
**
**
**
12
12
**
12
**
**
**
**
Meetings of committees
Nomination Remuneration
A
2
**
2
**
**
2
**
**
**
**
B
2
**
2
**
**
2
**
**
**
**
A
2
**
3
**
**
3
3
**
**
**
B
3
**
3
**
**
3
3
**
**
**
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee
during the year
** = Not a member of the relevant committee
Collection House Limited // Page No: 027
Remuneration Report
The Remuneration Report is set out under the following main headings:
(a) Principles used to determine the nature and amount of remuneration
(b) Details of remuneration
(c) Service agreements
(d) Share-based compensation
(e) Additional information.
The information provided under headings A-D includes remuneration disclosures that are required
under Accounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred
from the financial report and have been audited. The disclosures in Section E are additional disclosures
required by the Corporations Act 2001 and the Corporations Regulations 2001 which have not been audited.
(a) Principles used to determine
the nature and amount of
remuneration (audited)
The objective of the Group’s executive reward
framework is to ensure 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 with market best practice for delivery of
reward. The Board ensures that executive reward
satisfies the following key criteria for good reward
governance practices:
// competitiveness and reasonableness;
// acceptability to shareholders;
// performance
/ alignment of
linkage
executive 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 Group has
structured an executive
is market
remuneration
competitive and complimentary to the reward
strategy of the organisation.
framework
that
Alignment to shareholders’ interests:
// has economic profit as a core component of
plan design;
// focuses on sustained growth in shareholder
wealth, consisting of dividends and growth
in share price, and delivering constant
return on assets, as well as focusing the
executive on key non-financial drivers of
value; and
{
Annual Report
}
2005 ~ 2006
// attracts and retains high calibre executives.
Alignment to program participants’ interests:
// rewards capability and experience;
// reflects competitive reward for contribution
to growth in shareholder wealth;
// provides a clear structure for earning
rewards; and
// provides recognition for contribution.
The framework provides a mix of fixed and
variable pay and a blend of short and long-term
incentives. As executives gain seniority with the
Group, the balance of this mix shifts to a higher
proportion of “at risk” rewards.
Non-Executive Directors
Fees and payments to non-executive directors
reflect the demands which are made on and the
responsibilities of the 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 and the Deputy Chairman has
requested that no fee be paid to him. William
Kagel, as Chair of the Remuneration Committee,
has 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.
Executive Directors
Remuneration for executive directors is reviewed
on an annual basis.
Tony Coutts became a Non-Executive Director of
the Company on 1 July, 2006. Tony's valued
knowledge of the industry and expertise in
marketing remains available to the Company on
consultancy request. The final tranche of shares
available to Tony under his option agreement
were exercised in November 2005. That option
agreement has now expired.
John Pearce, the Managing Director & Deputy
Chairman elected to receive no remuneration
during the 2005/06 financial year. John has also
waived any fee payable during 2006/07.
Colin Day, the Chief Executive Officer, was paid
in accordance with the terms of his contract for
the 2005/06 financial year, receiving $330,000 in
base salary and a bonus of $200,000. The
100,000 options available to Colin for the
2005/06 financial year were cancelled as the
condition precedent required for their exercise
was not achieved.
Rhonda King became a Non-Executive Director
from 1 July, 2006, resigning her role as Company
Secretary on 30 June, 2006. During the 2005/06
financial year, Rhonda received recompense
based on a consultancy contract whereby payment
was received based on hours worked.
remuneration was
Directors’ fees
The current base
last
reviewed with effect from 1 July, 2006. No
change was made to current fee levels. The
Chairman's
inclusive of
committee fees while Non-Executive Directors
who participate as members of the Audit & Risk
Management Committee receive additional
yearly fees. Additional fees are also payable to
directors for their membership on subsidiary
boards.
remuneration
is
Non-Executive Directors' fees are determined
within an aggregate directors' fee pool limit,
which is periodically recommended for approval
by shareholders. The maximum currently stands
at $550,000.
Retirement allowances for directors
There are no retirement allowances paid to
Non-Executive directors, in line with recent
guidance on non executive directors' remuneration.
Executive pay
The executive pay and reward framework has
three components:
// base pay and benefits;
// long-term incentives through participation
in the Employee Share Plan and Executive
Option Plan; and
// other remuneration such as superannuation.
The combination of these comprises the
executive’s total remuneration.
Base pay
Structured as a total employment cost package
which may be delivered as a combination of cash
and prescribed non financial benefits at the
executives' discretion.
Executives are offered a competitive base pay
that comprises the fixed component of pay and
rewards. External remuneration consultants
provide analysis and advice to ensure base pay is
set to reflect the market for a comparable role.
Base pay for senior executives is reviewed
annually to ensure the executive's pay is
competitive with the market. An executive's pay
is also reviewed on promotion.
Benefits
The major benefit provided to executives is the
ability to participate in the Employee Share Plan
and Executive Option Plan.
Retirement benefits
There are no retirement benefits made available to
Executives, other than as are required by Statute.
Short-term incentives
Short-term incentives, such as bonuses, are
allocated to executives on a case by case basis
following consultation between the CEO and the
Human Resources Manager.
Collection House Employee Option
Plan
Information on the Collection House Executive
Option Plan is set out on pages 32 - 34.
Collection House Limited // Page No: 029
(b) Details of remuneration
(audited)
Amounts of remuneration
Details of the remuneration of the directors, the key
management personnel (as defined in AASB 124
Related Party Disclosures) and the highest paid
executives of Collection House are set out below.
The key management personnel of the Group
includes the directors as set out above (including
Colin Day as an Executive Director and Chief
Executive Officer) and the following executive
officers:
// A. Ralston - Chief Financial Officer
// M. Thomas - Chief Information Officer
// K. Lynam - Manager, Human Resources
(and Company Secretary from 1 July, 2006)
// B. Doherty - Chief Collections Officer - to
17 November, 2005
// B. Savage - Consultant - appointed during
March 2006.
The executive officers who received the highest
remuneration for the year ended 30 June, 2006 are:
// C. Day - Chief Executive Officer
(and Executive Director)
// A. Ralston - Chief Financial Officer
// P. Carroll - Managing Director Subsidiary
// D. McAlpine - Director Subsidiary
// C. Stewart - General Manager Corporate
Communications - to 30 March, 2006
// B. Doherty - Chief Collections Officer -
to 17 November, 2005.
Table: Key management and highest paid personnel of Collection House
2006
Name
Short-term benefits
Post-employment
benefits
Share-based
payment
Cash
salary and
fees $
Cash
bonus
$
Non-
monetary annuation
benefits $
Super- Retirement Options
benefits
$
$
$
Non-Executive Directors
D.G. Punches
B. E. Adams
B. Connelly
W.L Hiller
W.W. Kagel
S. Walker
Sub-Total
Non-Executive Directors 420,000
50,000
120,000
80,000
70,000
50,000
50,000
Executive Directors
J.M. Pearce
A.F. Coutts
R.G. King (payment for full
financial year included)
C.K. Day
Sub-Total
Executive Directors
-
192,433
116,150
300,000
-
-
-
-
-
-
-
-
-
-
200,000
2,338
2,338
2,338
2,338
2,338
2,338
-
10,800
-
6,300
-
4,500
14,028
21,600
6,166
6,166
6,166
6,166
-
17,319
-
30,000
608,583
200,000
24,664
47,319
199,231
175,057
100,000
Other key management personnel
A. Ralston
M. Thomas
K. Lynam
B. Savage (commenced
March 2006)
*B. Doherty
Sub-Total
Key management personnel 866,055
132,570
259,197
-
-
-
-
-
-
6,166
2,338
6,404
24,320
6,166
18,658
16,271
9,000
-
6,603
45,394
50,532
{
Annual Report
}
2005 ~ 2006
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
52,338
133,138
82,338
78,638
52,338
56,838
455,628
6,166
215,918
-
-
-
-
-
-
-
-
-
-
39,185
122,316
575,351
39,185
919,751
-
-
-
-
-
-
224,055
193,666
115,404
156,890
271,966
961,981
Table: Key management and highest paid personnel of Collection House (continued)
2006
Name
Short-term benefits
Post-employment
benefits
Share-based
payment
Cash
salary and
fees $
Cash
bonus
$
Non-
monetary annuation
benefits $
Super- Retirement Options
benefits
$
$
$
Highest paid Executives
A. Ralston
*C. Stewart
*B. Doherty
P. Carroll
M. Watkins
199,231
318,938
259,197
300,000
235,000
Sub-Total
Highest paid Executives
1,312,366
* Includes redundancy payment
-
-
-
-
-
-
6,166
6,166
6,166
6,166
6,166
18,658
11,220
6,603
27,000
21,963
30,830
85,444
-
-
-
-
-
-
2005
Name
Short-term benefits
Post-employment
benefits
Share-based
payment
Cash
Cash
Non-
salary and bonus/Car monetary annuation
allowance $ benefits $
fees $
$
Super- Retirement Options
benefits
$
$
Non-Executive Directors
D.G. Punches
B.E. Adams
A.R. Aveling
B. Connelly
B. S. Goranson
W.L. Hiller
W.W. Kagel
S. Walker
Sub-Total
Non-Executive Directors 470,000
50,000
120,000
70,000
50,000
40,000
60,000
40,000
40,000
:
-
-
-
-
-
-
-
-
-
2,576
2,576
2,576
2,576
2,576
2,576
2,576
2,576
-
10,800
6,300
-
-
5,400
-
3,600
20,608
26,100
Executive Directors
J. Pearce
A. Coutts
Sub-Total
Executive Directors
-
182,623
-
7,777
6,404
6,404
-
22,521
182,623
7,777
12,808
22,521
Other key management personnel
164,432
C. Day
174,265
B. Doherty
160,000
C. Stewart
130,000
D. McAlpine
190,000
A. Ralston
253,077
M. Watkins
176,235
M. Thomas
Sub-Total Other key
management personnel 1,248,009
-
-
-
58,878
-
-
-
6,404
6,536
6,404
6,404
6,404
6,404
2,576
14,799
15,684
14,400
15,953
17,100
22,777
13,747
58,878
41,132
114,460
Totals
for each component
1,900,632
66,655
74,548
163,081
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
224,055
336,324
271,966
333,166
263,129
-
-
-
-
-
- 1,428,640
Total
$
52,576
133,376
78,876
52,576
42,576
67,976
42,576
46,176
516,708
-
-
-
-
-
-
-
-
-
-
174,000
6,404
393,325
174,000
399,729
17,400
17,400
25,540
6,525
-
8,700
17,400
203,035
213,885
206,344
217,760
213,504
290,958
209,958
92,965
1,555,444
266,965 2,471,881
Collection House Limited // Page No: 031
(c) Service agreements
(audited)
Remuneration and other terms of employment for
the Managing Director, Chief Executive Officer,
Executive Director Sales, Chief Financial Officer
and the other key management personnel are
formalised
service agreements. Major
provisions of the agreements are set out below.
in
Except as otherwise stated, all contracts with
executives may be terminated early by either
party with three months notice.
J. M. Pearce Managing Director
// Entitlement to any salary was waived for
the 2005-2006 financial year and has been
waived for the 2006-2007 financial year.
// Appointed as Deputy Chairman effective
from 1 July, 2005.
A.F. Coutts Executive Director - Sales
// Base salary, inclusive of superannuation, for
the year ending 30 June, 2006 is detailed
above. Tony Coutts became a Non-Executive
Director of the Company on 1 July, 2006.
Tony's valued knowledge of the industry and
expertise in marketing remains available to
the Company on consultancy request
// Options provided by a separate option
agreement entered into in 2000, the terms
of which were disclosed in the prospectus.
The final tranche of shares available to
Tony under his option agreement were
exercised in November 2005. That option
agreement has now expired.
C.K. Day Chief Executive Officer
// Term of agreement 1 year with option of 2
renewals commencing 1 July, 2005.
// Annual Base salary $330,000 for the 2005-
2006 financial year. Annual base salary for
the 2006-2007 financial year is $465,000.
// Annual Bonus of $200,000, paid for the
2005-2006 financial year. No bonus will be
payable for the 2006-2007 financial year.
// Granted 100,000 options per annum for 3
years, exercisable at a price being the average
market prices for Collection House shares in
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 was to increase return
on equity for Collection House shares to
14.4%; in the second year the target is a
16.8% return, and in the third year it is 19.2%.
The 100,000 options available to Colin for
the 2005/06 financial year were cancelled as
the condition precedent required for their
exercise was not achieved.
// Agreement is terminable in the first year on
six months notice, and in each of the
following periods it is 12 months.
A. Ralston Chief Financial Officer
// Annual Base salary for the year ended 30
June, 2006 of $199,231
M. Thomas Chief Information Officer
// Annual Base salary for the year ended 30
June, 2006 of $175,057
R. King Company Secretary/Director
// Rhonda King became a Non-Executive
Director from 1 July, 2006, resigning her role
as Company Secretary on 30 June, 2006.
During the 2005/06 financial year Rhonda
received recompense of $116,150 based on a
consultancy contract whereby payment was
received based on hours worked.
K. Lynam Manager, Human Resources, and from
1 July, 2006, Company Secretary
// Annual Base salary for the year ended 30
June, 2006 of $100,000
(d) Sharebased
compensation (audited)
Options
Options are granted under the Collection House
Executive Option Plan details of which were
made available in the prospectus for the Initial
Public Offering of shares in the Company.
Senior personnel, whose performance warrants
inclusion, are considered annually for nomination
initial
under the Plan. The CEO makes
nominations, which are
the
Remuneration Committee and then finally
forwarded to the Board for approval.
received by
Options are granted under the plan for no
consideration. The Company makes finance
available to those executives who wish to exercise
their options.
{
Annual Report
}
2005 ~ 2006
The terms and conditions of each grant of options affecting remuneration in the previous, current or
future reporting periods are as follows:
Grant date
Expiry date Exercise Value per option
Date exercisable
price
at grant date
30th September,
2004
30 June, 2005
$1.36
$0.44
Condition precedent to vesting and
exercise: 10% increase in the
Company share price over the year
expiring 30 June, 2005. The condition
precedent was not achieved
Options granted under the plan carry no dividend
or voting rights.
When exercised, each option is convertible into
one ordinary share.
Historically, the exercise price of options is based
on the weighted average price at which the
Company's shares are traded on the Australian
Stock Exchange during the five trading days
immediately before 30 June.
Name
Details of options over ordinary shares in the
Company provided as remuneration to each
director of Collection House Limited and each of
the key management personnel of the Group are
set out below. When exercisable, each option is
convertible into one ordinary share of Collection
House. Further information on the options is set
out in note 39 to the financial statements.
Number of options
granted during the year
Number of options
vested during the year
2006
2005
2006
2005
Directors of Collection House Limited
C. Day
* C. Day
T. Coutts
Other key management personnel of the Group
*M. Watkins
*D. McAlpine
*M. Thomas
*B. Doherty
*C. Stewart
C. Stewart
*K. Lynam
300,000
-
-
-
-
-
-
-
-
-
-
40,000
-
20,000
15,000
40,000
40,000
40,000
20,000
20,000
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
-
-
-
20,000
-
* = These options were made available on the basis that there was a condition precedent to vesting and exercise,
being that there was to be a 10% increase in the Company share price over the year expiring 30 June, 2005
before options could be exercised. The condition precedent was not achieved.
The assessed fair value at grant date of options
granted to the individuals is allocated equally over
the period from grant date to vesting date, and the
amount is included in the remuneration tables
above. Fair values at grant date are independently
determined using a Black Scholes option pricing
model that takes into account the exercise price,
the term of the option, the impact of dilution, the
share price at grant date and expected price
volatility of the underlying share, the expected
dividend yield and the risk free interest rate for
the term of the option.
Shares provided on exercise of
remuneration options
Details of ordinary shares in the Company
provided as a result of the exercise of remuneration
options to each director of Collection House
Limited and other key management personnel of
the Group are set out below.
Collection House Limited // Page No: 033
Name
Date of exercise
of options
Number of ordinary shares issued on
exercise of options during the year
2006
2005
Directors of Collection House Limited
T. Coutts
1 November, 2005
100,000
100,000
Other key management
personnel of the Group
Nil
-
-
The amounts paid per ordinary share by each director and other key management personnel on the
exercise of options at the date of exercise were as follows:
Exercise date
T Coutts - 1 November, 2005
Amount paid per share
$1.00
(e) Additional information - unaudited
Principles used to determine the nature and amount of remuneration: relationship between
remuneration and company performance
The overall level of executive reward takes into account the performance of the Group over a number
of years, with greater emphasis given to the current and prior year. Details of the relationship between
the Company remuneration policy and company performance over the last 6 years is detailed below.
2000-2001
(noting that the Company listed on 4 October 2000)
No. of Employees at year end: 649
Net Profit after tax: $9,310,000
Net Assets: $71,603,000
Dividends Declared: 6.5 cents fully franked
Change in share price:
Listed at $1.00 Ended: $5.28
Basic earnings per share: 10.55 cents
2001-2002
No. of Employees at year end: 957
Net Profit after tax: $18,665,000
Net Assets: $80,866,000
Dividends Declared: 12.5 cents fully franked
Change in share price:
Commenced: $5.13 Ended: $3.10
Basic earnings per share: 19.60 cents
2002-2003
No.of Employees at year end: 753
Net Profit after tax: $8,197,000
Net Assets: $82,152,000
Dividends Declared: 5.5 cents fully franked
Change in share price:
Commenced: $3.02 Ended $1.19
Basic earnings per share: 8.95 cents
2003-2004
No. of Employees at year end: 692
Net profit after tax: $10,641,000
Net Assets: $90,398,000
Dividends Declared: 7 cents unfranked
Change in share price:
Commenced: $1.16 Ended $1.43
Basic earnings per share: 11.01 cents
2004-2005
No. of Employees at year end: 632
Net profit after tax: $12,946,000
Net Assets: $93,670,000
Dividends Declared: 8.0 cents unfranked
Change in share price:
Commenced: $1.54 Ended: $1.40
Basic earnings per share: 13.3 cents
2005-2006
No. of Employees at year end: 633
Net profit after tax: $6,077,000
Net Assets: $75,091,000
Dividends Declared: 2.0 cents unfranked
Change in share price:
Commenced: $1.41 Ended: $0.975
Basic earnings per share: 6.2 cents
{
Annual Report
}
2005 ~ 2006
Details of remuneration: cash bonuses
and options
For each cash bonus and grant of options included
in the tables on pages 30 - 31, the percentage of
the available bonus or grant that was paid, or that
vested, in the financial year, and the percentage
that was forfeited because the person did not meet
the service and performance criteria is set out
below. No part of the bonuses is payable in future
years. The options vest according to their grant
terms, provided the vesting conditions are met (see
page 33). No options will vest if the conditions are
not satisfied.
Cash bonus
Options
Name Paid Forfeited Year Vested Forfeited Financial years Minimum total Maximum total
value of grant
yet to vest $
in which options
may vest
value of grant
yet to vest $
granted
%
%
%
%
C Day
100
-
2005
-
-
-
-
-
2007
2008
0.11
0.17
0.30
0.40
Sharebased compensation: Options
Further details relating to options are set out below.
Loans to directors and executives
Information on loans to directors and executives,
including amounts, interest rates and repayment terms
are set out in notes 31 and 35 to the financial statements.
Share options granted to
directors and the most highly
remunerated officers
Options over unissued ordinary shares of
Collection House Limited granted during or since
the end of the financial year to the five most highly
remunerated officers of the Company as part of
their remuneration were as follows:
Directors
C.K. Day - Chief Executive Officer
Other executives of
Collection House Limited
Nil
Other executives of the Group
Nil
300,000
300,000
~
~
~
~
The options made available to the CEO were
granted under the terms of his employment
contract with the Company.
Details of options granted to the directors and the
five most highly remunerated officers of the Group
can be found in section D of the remuneration
report on page 33. No options have been granted
since the end of the year.
Shares issued on the exercise of
options
The following ordinary shares of Collection House
were issued during the year ended 30 June, 2006
on the exercise of options. No further shares have
been issued since that date. No amounts are
unpaid on any of the shares.
Date options
granted
Issue price Number of
shares issued
of shares
01 November 2005
$1.00
100,000
Insurance of officers
During the financial year, Collection House Limited
paid a premium of $63,119.75 to insure the director
and secretaries of the Company and its Australian
based Controlled Entities and the general managers
of each of the divisions of the Group.
The liabilities insured are legal costs that may be
incurred in defending civil or criminal proceedings
that may be brought against the officers in their
capacity as officers of entities in the Group and any
other payments arising from liabilities incurred by
the officers in connection with such proceedings.
This does not include such liabilities that arise from
conduct involving a wilful breach of duty by the
officers or the improper use by the officers of their
position or of information to gain advantage for
themselves or someone else or to cause detriment to
the Company. It is not possible to apportion the
premium between amounts relating to the
insurance against legal costs and those relating to
other liabilities.
Collection House Limited // Page No: 035
Proceedings on behalf of the
Company
No person has applied to the Court under section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to
intervene in any proceedings to which the
Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or
part of those proceedings.
No proceedings have been brought or
intervened in on behalf of the Company with
leave of the Court under section 237 of the
Corporations Act 2001.
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.
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 independence declaration as required under section 307C of the
Corporations Act is included in the Director's Report. Details of the amounts paid to the auditors of the
Company, Hacketts, are set out below.
1. Audit services
Hacketts - Audit and review of financial reports and other audit work
under the Corporations Act 2001
Total remuneration for audit services
2. Other assurance services
Hacketts - Audit of regulatory returns
Total remuneration for other assurance services
Total remuneration for assurance services
Consolidated
30 June 2006
$
30 June 2005
$
190,000
190,000
70,000
70,000
260,000
170,000
170,000
70,000
70,000
240,000
Auditors’ independence
declaration
A copy of the auditors’ independence declaration,
as required under section 307C of the Corporations
Act 2001, is set out on page 37.
Rounding of amounts
The Company is of a kind referred to in Class
Order 98/100, issued by the Australian Securities
and Investments Commission, relating to the
“rounding off” of amounts in the Directors'
Report. Amounts in the Directors' Report have
been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
Auditor
Hacketts Chartered Accountants continues in
office in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution
of directors.
John Pearce
COLLECTION HOUSE LIMITED, DIRECTOR
Brisbane. 30 August 2006
{
Annual Report
}
2005 ~ 2006
8
Auditor’s Independence Declaration
Level 3
549 Queen Street
BRISBANE QLD 4000
Telephone: +617 3839 9733
Facsimile: +617 3832 1407
Email: advice@hacketts.com.au
Website: www.hacketts.com.au
30 August, 2006
Collection House Limited
488 Queen Street
BRISBANE Q 4000
Auditors' Independence Declaration
As lead auditor for the audit of Collection House Limited for the year ended Friday,
30 June, 2006, I declare that, to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the
Corporations Act 2001 in relation to the audit; and
(a) no contraventions of any applicable code of professional conduct in relation
to the audit.
This declaration is in respect of Collection House Limited and the entities it
controlled during the period.
Liam Murphy
PARTNER
Hacketts Chartered Accountants
Collection House Limited // Page No: 037
{
Annual Report
}
2005 ~ 2006
//
Contents ~ Financial Statements
For the year ended 30 June, 2006
10. Income Statement..........................................
11. Balance Sheet ................................................
12. Statement of Changes in Equity ..................
13. Cash Flow Statement ....................................
14. Notes to Financial Statements ....................
15. Director’s Declaration....................................
16. Independent Audit Report ..........................
17. Shareholder Information ..............................
18. Corporate Directory ......................................
pg # 40
pg # 41
pg # 42
pg # 43
pg # 44
pg # 96
pg # 97
pg # 98
pg # 100
10
Income statement
Collection House Limited ~ For the year ended 30 June 2006
}
Revenue from continuing operations
Other income
Depreciation and amortisation expense
Impairment of goodwill
Foreign exchange losses (net)
Other expenses
Employee expenses
Search fees
Direct collection costs
Insurance claims costs
Bad and doubtful debts
Operating lease rental expense
Consultancy fees
Legal expenses
Other expenses - related parties
Impairment of other assets
Fair value losses on other financial assets
Net gain/(loss) on disposal of property
Finance costs
Profit before income tax
Income tax expense
Profit from continuing operations
Profit attributable to minority interest
Profit attributable to members of
Collection House Limited
Consolidated
Company
30 June
2006
30 June
2005
30 June 30 June
2005
2006
Note
$’000
$’000
$’000
$’000
5
6
7
16
7
134,864
125,572
55,097
58,731
139
-
-
-
(4,843)
(22,593)
(2,546)
(2,695)
(348)
(17)
(301)
5
(208)
(988)
-
-
(7,080)
(7,227)
(4,261)
(4,245)
(36,273)
(35,223)
(22,638)
(22,892)
(12,226)
(12,826)
(440)
(418)
(14,517)
(16,106)
(12,081)
(13,863)
(16,069)
(4,029)
-
-
59
(137)
(666)
-
-
-
-
(833)
(3,359)
(1,867)
(168)
-
(27)
(890)
(3,551)
(2,130)
(2,163)
(619)
(757)
68
(685)
(110)
-
(1,639)
(1,103)
(5,229)
(21,661)
(36)
(4,154)
9,913
(4,088)
5,825
7
8
-
263
(3,724)
17,822
(5,494)
12,328
-
-
(3,989)
(3,704)
(110)
7,019
1,988
1,878
1,699
8,718
252
618
-
-
6,077
cents
12,946
cents
1,878
8,718
6.2
6.2
13.3
13.3
Earnings per share for profit attributable to
the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Note
38(a)
38(b)
The above income statement should be read in conjunction with the accompanying notes.
{
Annual Report
}
2005 ~ 2006
11
Balance sheet
Collection House Limited ~ As at 30 June 2006
}
Assets
Current assets
Cash and cash equivalents
Receivables
Other financial assets at fair value through profit or loss
Current tax receivables
Other current assets
Total current assets
Non-current assets
Receivables
Purchased debt
Other financial assets at fair value through profit or loss
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Minority interest
Total equity
Consolidated
Company
Note
2006
$’000
2005
$’000
2006
$’000
2005
$’000
9
10
11
12
13
11
11
14
18
16
15
17
19
20
21
22
23
25
24
27
28
28
29
3,038
11,621
28,615
2,436
1,032
46,742
-
-
66,891
5,069
11,321
27,837
1,214
283
112,615
4,775
12,929
-
763
1,437
19,904
1,013
112,339
-
6,566
10,414
28,692
891
46
159,961
641
15,402
-
2,436
677
19,156
78,290
-
20,461
4,537
-
13,483
1,826
27
118,624
558
19,459
-
763
1,011
21,791
79,214
-
20,959
5,558
-
13,552
4,122
28
123,433
159,357
179,865
137,780
145,224
7,038
2,956
1,686
2,450
14,130
-
53,793
424
15,919
70,136
84,266
6,391
2,592
1,309
2,123
12,415
-
54,290
361
19,129
73,780
86,195
7,519
2,918
212
1,689
12,338
-
53,793
223
-
54,016
66,354
3,319
2,429
-
1,779
7,527
9,761
54,290
343
-
64,394
71,921
75,091
93,670
71,426
73,303
67,256
(523)
9,410
76,143
(1,052)
75,091
67,156
(144)
27,703
94,715
(1,045)
93,670
67,256
39
4,131
71,426
-
71,426
67,156
-
6,147
73,303
-
73,303
The above balance sheet should be read in conjunction with the accompanying notes.
Collection House Limited // Page No: 041
12
Statement of changes in equity
Collection House Limited ~ For the year ended 30 June 2006
}
Total equity at the beginning of the financial year
93,670
88,782
73,303
71,963
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June 30 June
2005
$’000
2006
$’000
Note
Adjustment on adoption of AASB 132 and
AASB 139, net of tax, to:
Retained profits
Restated total equity at the beginning of the
financial year
(Profit)/Loss attributable to Minority Interest
Net (income) / loss recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of transaction costs
Dividends provided for or paid
Movement in Share-based payments reserve
Movement in Foreign Currency translation reserve
Total changes in minority interest
28
(20,476)
-
-
-
73,194
88,782
73,303
71,963
252
252
618
618
5,825
12,328
6,077
12,946
-
-
1,878
1,878
-
-
8,718
8,718
27
30
28
28
100
398
100
398
(3,894)
(7,776)
(3,894)
(7,776)
39
(418)
(7)
-
(144)
(536)
39
-
-
-
-
-
(4,180)
(8,058)
(3,755)
(7,378)
Total equity at the end of the financial year
75,091
93,670
71,426
73,303
Total recognised income and expense for the
year is attributable to:
Members of Collection House Limited
Minority interest
5,825
252
6,077
12,328
618
12,946
1,878
8,718
-
-
1,878
8,718
The above statement of changes in equity should be read in conjunction with the accompanying notes.
{
Annual Report
}
2005 ~ 2006
13
Cash flow statement
Collection House Limited ~ For the year ended 30 June 2006
}
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June 30 June
2005
$’000
2006
$’000
Note
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
150,289
128,663
50,477
54,875
Payments to suppliers and employees
(inclusive of goods and services tax)
Interest received
Other sundry income
Interest paid
Income tax refund/(paid)
Net cash (outflow) inflow from operating activities
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Proceeds from sale of property, plant & equipment
Payments for property, plant and equipment
41
36
(106,466)
(81,708)
(45,007)
(48,226)
43,823
46,955
5,470
6,649
483
171
307
-
336
22
340
-
(4,154)
(3,725)
(3,989)
(3,704)
(324)
39,999
(158)
43,379
961
2,800
(98)
3,187
(100)
31
(103)
264
(101)
(103)
31
-
(1,429)
(2,229)
(1,140)
(1,106)
Payments for purchased debt
Payments for intangible assets
Payment for databases
Other
(32,969)
(43,414)
(2,018)
(907)
-
(86)
(173)
275
-
(826)
-
-
Net cash (outflow) inflow from investing activities
(37,392)
(45,466)
(2,036)
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of loans from related parties
Repayment of borrowings
Dividends paid to company’s shareholders
Net cash inflow (outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning
of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
100
6,571
-
(7,246)
(3,894)
(4,469)
(1,862)
2,399
(417)
120
30
9
244
10,377
-
(323)
(7,776)
2,522
100
6,526
3,122
(7,123)
(3,894)
(1,269)
435
(505)
674
2,101
(137)
2,399
(1,772)
(2,446)
-
-
(2,277)
(1,772)
-
(6)
-
281
(934)
244
10,182
-
(4,229)
(7,776)
(1,579)
The above cash flow statements should be read in conjunction with the accompanying notes.
Collection House Limited // Page No: 043
14
Notes to the financial statements
}
01
Note No:
Summary of significant
accounting policies
The principal accounting policies adopted in the
preparation of the financial report are set out
below. These policies have been consistently
applied to all the years presented, unless
otherwise stated. The financial report includes
separate financial statements for Collection
House Limited as an individual entity and the
Consolidated Entity consisting of Collection
House Limited and its subsidiaries.
in
(a) Basis of preparation
This general purpose financial report has been
prepared
accordance with Australian
equivalents to International Financial Reporting
Standards
authoritative
pronouncements of the Australian Accounting
Standards Board, Urgent
Issues Group
Interpretations and the Corporations Act 2001.
(AIFRSs),
other
Statement of Compliance
Australian Accounting Standards include Australian
equivalents to International Financial Reporting
Standards. Compliance with AIFRSs ensures that
the consolidated financial statements and notes of
Collection House Limited
comply with
International Financial Reporting Standards
(IFRSs). The Parent Entity (Company) financial
statements and notes also comply with IFRSs
except that it has elected to apply the relief
provided to parent entities in respect of certain
disclosure requirements contained in AASB 132
Financial Instruments: Presentation and Disclosure and
AASB 124 Related Party Disclosures.
Application of AASB 1
First-time Adoption of Australian
Equivalents to International
Financial Reporting Standards
These financial statements are the first Collection
House Limited financial statements to be prepared
in accordance with AIFRSs. AASB 1 First-time
Adoption of Australian Equivalents to International
{
Annual Report
}
2005 ~ 2006
Financial Reporting Standards has been applied in
preparing these financial statements.
Financial statements of Collection House Limited
until 30 June 2005 had been prepared in
accordance with previous Australian Generally
(AGAAP).
Accepted Accounting Principles
AGAAP differs in certain respects from AIFRS.
When preparing Collection House Limited 2006
financial statements, management has amended
certain accounting, valuation and consolidation
methods applied
financial
statements to comply with AIFRS. With the
exception of financial instruments, the comparative
figures in respect of 2005 were restated to reflect
these adjustments. The Group has taken the
exemption available under AASB 1 to only apply
AASB 132 and AASB 139 from 1 July 2005.
the AGAAP
in
Reconciliations and descriptions of the effect of
transition from previous AGAAP to AIFRS on the
Group's equity and its net income are given in
note 42.
Historical cost convention
These financial statements have been prepared
under the historical cost convention, as modified
by the revaluation of financial assets and liabilities
at fair value through profit or loss and certain
classes of non-current assets.
Critical accounting estimates
The preparation of financial statements in
conformity with AIFRS requires the use of certain
critical accounting estimates. It also requires
management to exercise its judgement in the
process of applying the Group’s accounting
policies. The areas involving a higher degree of
judgement or complexity, or areas where
assumptions and estimates are significant to the
financial statements, are disclosed in note 3.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of
Collection House Limited (“Company” or
“Parent Entity”) as at 30 June 2006 and the
results of all subsidiaries for the year then ended.
Collection House Limited and its subsidiaries
together are referred to in this financial report as
“the Group” or “the Consolidated Entity”.
Subsidiaries are all those entities (including
special purpose entities) over which the Group
has the power to govern the financial and
operating policies, generally accompanying a
shareholding of more than one-half of the voting
rights. The existence and effect of potential
voting rights that are currently exercisable or
convertible are considered when assessing
whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The purchase method of accounting is used to
account for the acquisition of subsidiaries by the
Group (refer to note 1(h)).
The Group applies a policy of treating transactions
with minority interests as transactions with parties
external to the Group. Disposals of minority
interests result in gains or losses to the Group that
are recorded in the income statement. Purchases
of minority interests result in goodwill, being the
difference between any consideration paid and the
relevant share acquired of the carrying value of the
identifiable net assets of the subsidiary.
Intercompany transactions, balances and unrealised
gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the
impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies
adopted by the Group.
Minority interests in the results and equity of
subsidiaries are shown separately
the
consolidated income statement and balance sheet
respectively.
in
Investments in subsidiaries are accounted for at
cost in the individual financial statements of
Collection House Limited.
(c) Segment reporting
A business segment is a group of assets and
operations engaged in providing products or
services that are subject to risks and returns that
are different to those of other business segments.
A geographical segment is engaged in providing
products or services within a particular economic
environment and is subject to risks and returns
that are different from those of segments
operating in other economic environments.
(d) Foreign currency
translation
(i) Functional and presentation currency
Items included in the financial statements of each of
the Group’s entities are measured using the currency
of the primary economic environment in which the
Entity operates (“the functional currency”). The
consolidated financial statements are presented in
Australian dollars, which is Collection House
Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into
the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the
settlement of such transactions and from the
translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign
currencies are recognised in the income statement,
except when deferred in equity as qualifying cash
flow hedges and qualifying net investment hedges.
Translation differences on non-monetary items, such
as equities held at fair value through profit or loss, are
reported as part of the fair value gain or loss.
Translation differences on non-monetary items, such
as equities classified as available-for-sale financial
assets, are included in the fair value reserve in equity.
(iii)Group companies
The results and financial position of all the Group
entities (none of which has the currency of a
hyperinflationary economy) that have a functional
currency different from the presentation currency are
translated into the presentation currency as follows:
Collection House Limited // Page No: 045
// assets and liabilities for each balance sheet
presented are translated at the closing rate
at the date of that balance sheet;
// income and expenses for each income
statement are
translated at average
exchange rates (unless this is not a
reasonable approximation of the cumulative
effect of the rates prevailing on the
transaction dates, in which case income and
expenses are translated at the dates of the
transactions); and
// all
resulting exchange differences are
recognised as a separate component of equity.
On consolidation, exchange differences arising
from the translation of any net investment in
foreign entities, and of borrowings and other
currency instruments designated as hedges of such
investments, are taken to shareholders’ equity.
When a foreign operation is sold or borrowings
repaid, a proportionate share of such exchange
differences are
income
recognised
statement as part of the gain or loss on sale.
the
in
Goodwill and fair value adjustments arising on the
acquisition of a foreign entities are treated as
assets and liabilities of the foreign entities and
translated at the closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the
consideration received or receivable net of the
amount of Goods and Services Tax (GST) payable
to the taxation authority. Exchanges of goods and
services of the same nature and value without any
cash consideration are not recognised as revenue.
(i) 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.
(ii) 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.
{
Annual Report
}
2005 ~ 2006
Any related balance in the asset revaluation
reserve is transferred to the capital profits reserve
on disposal.
(iii)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.
For fixed price contracts, the stage of completion
is measured by reference to labour hours incurred
to date as a percentage of estimated total labour
hours for each contract. Revenue from cost plus
contracts is recognised by reference to the
recoverable costs incurred during the reporting
period plus the percentage of fees earned. The
percentage of fees earned is measured by the
proportion that costs incurred to date bear to the
estimated total costs of the contract.
(iv) Interest
Interest received is recognised as it accrues,
taking into account the effective yield on the
financial asset.
(f) Income tax
The income tax expense or revenue for the period
is the tax payable on the current period’s taxable
income based on the national income tax rate for
each jurisdiction adjusted by changes in deferred
tax assets and liabilities attributable to temporary
differences between the tax bases of assets and
liabilities and their carrying amounts in the
financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised
for temporary differences at the tax rates expected
to apply when the assets are recovered or
liabilities are settled, based on those tax rates
which are enacted or substantively enacted for
each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible
and taxable temporary differences to measure the
deferred tax asset or liability. An exception is
made for certain temporary differences arising
from the initial recognition of an asset or a
liability. No deferred tax asset or liability is
recognised
in relation to these temporary
differences if they arose in a transaction, other
than a business combination, that at the time of
the transaction did not affect either accounting
profit or taxable profit or loss.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
if it is probable that future taxable amounts will
be available to utilise those temporary differences
and losses.
Deferred tax liabilities and assets are not
recognised for temporary differences between the
carrying amount and tax bases of investments in
controlled entities where the Parent entity is able
to control the timing of the reversal of the
temporary differences and it is probable that the
differences will not reverse in the foreseeable
future.
Current and deferred tax balances attributable to
amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation legislation
Collection House Limited and its wholly-owned
Australian controlled entities have implemented
the tax consolidation legislation as of 1 July 2003.
The Head Entity, Collection House Limited, and
the controlled entities in the tax consolidated
group continue to account for their own current
and deferred tax amounts. These tax amounts are
measured as if each entity in the tax consolidated
group continues to be a stand alone taxpayer in its
own right.
In addition to its own current and deferred tax
amounts, Collection House Limited also
recognises the current tax liabilities (or assets) and
the deferred tax assets arising from unused tax
losses and unused tax credits assumed from
controlled entities in the tax Consolidated Group.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as amounts receivable from or payable
to other entities in the Group.
Any difference between the amounts assumed
and amounts receivable or payable under the tax
funding agreement are
recognised as a
contribution to (or distribution from) wholly-
owned tax consolidated entities.
(g) Leases
Leases of property, plant and equipment where
the Group has, substantially, all the risks and
rewards of ownership are classified as finance
leases (note 14). Finance leases are capitalised at
the lease’s inception at the lower of the fair value
of the leased property and the present value of the
minimum lease payments. The corresponding
rental obligations, net of finance charges, are
included in other long term payables. Each lease
payment is allocated between the liability and
finance charges so as to achieve a constant rate on
the finance balance outstanding. The interest
element of the finance cost is charged to the
income statement over the lease period so as to
produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
The property, plant and equipment acquired
under finance leases is depreciated over the
shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks
and rewards of ownership are retained by the
lessor are classified as operating leases (note 34).
Payments made under operating leases (net of any
incentives received from the lessor) are charged to
the income statement on a straight-line basis over
the period of the lease.
(h) Business combinations
The purchase method of accounting is used to
account for all business combinations, including
business combinations involving entities or
businesses under common control, regardless of
whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the
assets given, shares issued or liabilities incurred or
assumed at the date of exchange plus costs
directly attributable to the acquisition. Where
equity instruments are issued in an acquisition,
the fair value of the instruments is their published
market price as at the date of exchange unless, in
rare circumstances, it can be demonstrated that
the published price at the date of exchange is an
unreliable indicator of fair value and that other
evidence and valuation methods provide a more
reliable measure of fair value. Transaction costs
arising on the issue of equity instruments are
recognised directly in equity.
Identifiable assets acquired and liabilities and
in a business
contingent
liabilities assumed
Collection House Limited // Page No: 047
combination are measured initially at their fair
values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the
cost of acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is
recorded as goodwill (refer to note 1(p)). If the cost
of acquisition is less than the Group's share of the
fair value of the identifiable net assets of the
subsidiary acquired, the difference is recognised
directly in the income statement, but only after a
reassessment of the identification and measurement
of the net assets acquired.
Where
settlement of any part of cash
consideration is deferred, the amounts payable in
the future are discounted to their present value as
at the date of exchange. The discount rate used is
the entity’s incremental borrowing rate, being the
rate at which a similar borrowing could be
obtained from an independent financier under
comparable terms and conditions.
(i) Impairment of assets
Assets that have an indefinite useful life are not
subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment
loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash
generating units).
(j) Cash and cash equivalents
Cash and cash equivalents includes: cash on hand;
deposits held at call with financial institutions,
other short-term, highly liquid investments with
original maturities of three months or less that are
readily convertible to known amounts of cash and
which are subject to an insignificant risk of
changes in value, and bank overdrafts.
(k) Trade receivables
Trade receivables are recognised initially at fair
value less provision for doubtful debts. Trade
receivables are due for settlement no more than
30 days from the date of recognition.
{
Annual Report
}
2005 ~ 2006
Collectability of trade receivables is reviewed on
an ongoing basis. Debts which are known to be
uncollectable are written off. A provision for
doubtful receivables is established when there is
objective evidence that the Group will not be able
to collect all amounts due according to the original
terms of receivables. The amount of the
provision is recognised in the income statement.
(l) Non-current assets (or
disposal groups) held for sale
Non-current assets (or disposal groups) are
classified as held for sale and stated at the lower of
their carrying amount and fair value less costs to
sell if their carrying amount will be recovered
principally through a sale transaction rather than
through continuing use.
Non-current assets classified as held for sale and the
assets of a disposal group classified as held for sale
are presented separately from the other assets in the
balance sheet. The liabilities of a disposal group
classified as held for sale are presented separately
from other liabilities in the balance sheet.
(m) Financial assets
From 1 July 2004 to 30 June 2005
The Group has taken the exemption available
under AASB 1 to apply AASB 132 and AASB 139
only from 1 July 2005. The Group has applied
previous AGAAP to the comparative information
on financial instruments within the scope of
AASB 132 and AASB 139.
Adjustments on transition date: 1 July 2005
The nature of the main adjustments to ensure this
information complies with AASB 132 and AASB
139 are that, with the exception of held-to-
maturity investments and loans and receivables
which are measured at amortised cost (refer
below), fair value is the measurement basis. Fair
value is inclusive of transaction costs. Changes in
fair value are either taken to the income statement
or an equity reserve (refer below). At the date of
transition (1 July 2005) changes to carrying
amounts are taken to retained earnings or reserves.
further
concerning
information
the
For
adjustments on transition date reference should
be made to the following notes:
// Explanation of transition to AIFRSs - note
42: section 5 of this note discloses the
adjustment to each line item in the financial
statements on transition date.
From 1 July 2005
The Company classifies its financial assets in the
following categories: (i) financial assets at fair
value through profit or loss, and (ii) loans and
receivables. The classification depends on the
purpose for which the assets were acquired.
Management determines the classification of
these assets at initial recognition and re-evaluates
this designation at each reporting date.
(i) Financial assets at fair value through profit
or loss - Purchased debt ledgers (PDL's)
PDL’s have been included in this category of
financial assets as they are managed and their
performance is evaluated on a fair value basis.
PDL’s are initially recorded at cost (including
incidental costs of acquisition) and thereafter at
fair value in the balance sheet. In the absence of
an active market, the fair value of a particular
ledger is determined based on a valuation
technique. The valuation is based on the present
value of expected future cash flows.
When a ledger is impaired, the carrying amount is
reduced to its recoverable amount (fair value),
being
flows
discounted to present value.
the anticipated
future cash
Realised and unrealised gains and losses arising
from changes in the fair value of these ledgers are
included in the income statement in the period in
which they arise.
PDL’s are included as non-current assets, except
for the amount of the ledger that is expected to be
realised within 12 months of the balance sheet
date, which is classified as a current asset.
(ii) Loans and receivables (notes 10 and 13).
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. They arise
when the Company provides money, goods or
services directly to a debtor with no intention of
selling the receivable. They are initially measured
at cost and included in current assets, except for
those with maturities greater than 12 months after
the balance sheet date which are classified as non-
current assets. The nominal value less credit
adjustments of trade receivables are assumed to
approximate their fair values.
The Company assesses at each balance date
whether there is objective evidence that loans and
receivables are impaired.
(n) Fair value estimation of
financial assets and liabilities
The fair value of financial assets and financial
liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The fair value of financial instruments that are not
traded in an active market is determined using
valuation techniques. The Company uses estimated
discounted cash flows to determine fair value.
(o) Property, plant and
equipment
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.
settlement of any part of cash
Where
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(s).
that on
including
Expenditure,
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.
Collection House Limited // Page No: 049
All assets, including intangibles other than
goodwill, have limited useful lives and are
depreciated / amortised using the straight-line
method over their estimated useful lives, taking
into account estimated residual values and 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.
Assets are depreciated or amortised from the date
internally
of acquisition or,
constructed assets, from the time an asset is
completed and held ready for use.
in respect of
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.
Table: The estimated useful lives for each
class of depreciable asset are:
Leasehold Improvements
Term of Lease
Plant and equipment
Computer equipment
Software
4-8 years
3-5 years
2-12 years
The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each
balance sheet date.
An asset’s carrying amount is written down
immediately to its recoverable amount if the
asset’s carrying amount is greater than its
estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by
comparing proceeds with carrying amount. These
are included in the income statement. When
revalued assets are sold, it is Group policy to
transfer the amounts included in other reserves in
respect of those assets to retained earnings.
(p) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group’s share
of the net identifiable assets of the acquired
subsidiary/associate at the date of acquisition.
Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill on
{
Annual Report
}
2005 ~ 2006
is
included
acquisitions of associates
in
investments in associates. Goodwill acquired in
business combinations is not amortised. Instead,
goodwill is tested for impairment annually, or
more frequently
in
circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an
entity include the carrying amount of goodwill
relating to the entity sold.
if events or changes
Goodwill is allocated to cash-generating units for
the purpose of impairment testing. Each of those
cash-generating units represents the Company’s
investment in each primary reporting segment.
(note 4).
(ii) Computer software
Costs incurred in developing products or systems
and costs incurred in acquiring software and
licence fees that will contribute to future period
financial benefits through revenue generation and
/or cost reduction are capitalised. Costs capitalised
include external direct costs of materials and
services, direct payroll and payroll-related costs of
employees'
the project.
Amortisation is applied on a straight line basis
over periods generally ranging from 2 to 12 years.
spent on
time
(iii)Databases
The databases are considered purchased
intangible assets recorded at cost or fair value.
Purchased data files are used in our product and
services. Fair value is supported at each reporting
period by an impairment test as the database
forms part of an identified CGU. Impairment
testing is carried out in accordance with the
accounting policy stated at 1(i). The calculation
of impairment requires the use of assumptions.
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.
(iv) Other intangible assets
Licences and intellectual property are considered
to have an infinite useful life and are carried at
cost less impairment losses. All costs associated
with the maintenance and protection of these
assets are expensed in the period consumed.
(q) Trade and other payables
These amounts represent liabilities for goods and
services provided to the Group prior to the end of
financial year which are unpaid. The amounts are
unsecured and are usually paid within 60 days of
recognition.
(r) Borrowings
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 and 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.
Borrowings are classified as current liabilities,
unless the Group has an unconditional right to
defer settlement of the liability for at least 12
months after the balance sheet date.
(s) Borrowing costs
Borrowing costs incurred for the construction of
any qualifying asset are capitalised during the
period of time that is required to complete and
prepare the asset for its intended use or sale.
Other borrowing costs are expensed.
Borrowing costs include interest, amortisation of
discounts or premiums relating to borrowings,
amortisation of ancilliary 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.
(t) Provisions
Provisions for legal claims and service warranties
are recognised when the Group has a present
legal or constructive obligation as a result of past
events and it is more likely than not that an
outflow of resources will be required to settle the
obligation and the amount has been reliably
estimated. Provisions are not recognised for
future operating losses.
rate
that
If the effect is material, provisions are determined
by discounting the expected future cash flows at a
pre-tax
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.
(u) Employee benefits
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and accumulating
sick leave expected to be settled within 12
months of the reporting date are recognised in
other payables in respect of employees' services
up to the reporting date and are measured at the
amounts expected to be paid when the liabilities
are settled. Liabilities for non-accumulating sick
leave are recognised when the leave is taken and
measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in
the provision for employee benefits and measured
as the present value of expected future payments
to be made in respect of services provided by
employees up to the reporting date using the
projected unit credit method. Consideration is
given to expected future wage and salary levels,
experience of employee departures and periods of
service. Expected future payments are discounted
using market yields at the reporting date on
national government bonds with terms to maturity
and currency that match, as closely as possible,
the estimated future cash outflows.
(iii)Superannuation Plans
The Company and other Controlled Entities
make
several
superannuation funds in accordance with the
directions of its employees. Contributions are
expensed in the period to which they relate.
contributions
statutory
to
(iv) Share-based payments
Share-based compensation benefits are provided
to employees via the Collection House Limited
Executive Share Option Plan. Information
relating to these schemes is set out in note 39.
Collection House Limited // Page No: 051
Shares options granted before 7 November
2002 and/or vested before 1 January 2005
No expense is recognised in respect of these
options. The shares are recognised when the
options are exercised and the proceeds received
allocated to share capital.
Shares options granted after 7 November
2002 and vested after 1 January 2005
The fair value of options granted under the
Executive Share Option Plan is recognised as an
employee benefit expense with a corresponding
increase in equity. The fair value is measured at
grant date and recognised over the period during
which the employees become unconditionally
entitled to the options.
The fair value at grant date is independently
determined using a Black-Scholes option pricing
model that takes into account: the exercise price,
the term of the option, the vesting and
performance criteria, the impact of dilution, the
non-tradeable nature of the option, the share
price at grant date and expected price volatility of
the underlying share, the expected dividend
yield, and the risk-free interest rate for the term
of the option.
The fair value of the options granted excludes the
impact of any non-market vesting conditions (for
example, profitability and sales growth targets).
Non-market vesting conditions are included in
assumptions about the number of options that are
expected to become exercisable. At each balance
sheet date, the Entity revises its estimate of the
number of options that are expected to become
exercisable. The employee benefit expense
recognised each period takes into account the
most recent estimate.
Upon the exercise of options, the balance of the
share-based payments reserve relating to those
options is transferred to share capital.
(v) Termination benefits
are payable when
Termination benefits
employment is terminated before the normal
retirement date or when an employee accepts
voluntary redundancy in exchange for these
benefits. The Group recognises termination
benefits when it is demonstrably committed to
either terminating the employment of current
employees according to a detailed formal plan
without possibility of withdrawal or providing
{
Annual Report
}
2005 ~ 2006
termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling
due more than 12 months after balance sheet date
are discounted to present value.
(v) Dividends
Provision is made for the amount of any dividend
declared on or before the end of the financial year,
but not distributed at balance date.
(w) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing
the profit attributable to equity holders of the
Company, excluding any costs of servicing
equity other than ordinary shares, by the
weighted average number of ordinary shares
outstanding during the financial year, adjusted
for bonus elements in ordinary shares issued
during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures
used in the determination of basic earnings per
share to take into account the after income tax
effect of interest and other financing costs
associated with dilutive potential ordinary shares
and the weighted average number of shares
assumed
for no
consideration in relation to dilutive potential
ordinary shares.
to have been
issued
(x) Goods and Services Tax
(GST)
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless the
GST incurred is not recoverable from the
taxation authority. In this case it is recognised as
part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The
net amount of GST recoverable from, or payable
to, the taxation authority is included with other
receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The
GST components of cash flows arising from
investing or financing activities which are
recoverable from, or payable to the taxation
authority, are presented as operating cash flow.
(y) Rounding of amounts
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 financial report.
Amounts in the financial report have been
rounded off in accordance with that Class Order to
the nearest thousand dollars or, in certain cases,
the nearest dollar.
(z) Revisions to accounting
estimates
Revisions to accounting estimates are recognised
prospectively in current and future periods only.
Note No:
Financial risk management
02
The Group's activities expose it to a variety of
financial risks: market risk (including currency
risk, fair value interest rate risk and price risk),
credit risk, liquidity risk and cash flow interest
rate risk. The Group's overall risk management
program focuses on the unpredictability of
financial markets and seeks to minimise potential
adverse effects on the financial performance of
the Group.
Financial risk management is carried out by the
finance department under policies approved by
the Board of Directors. Finance identifies,
evaluates and manages financial risks in close co-
operation with the Group’s operating units.The
Board provides written principles for overall risk
management, as well as written policies, covering
specific areas such as mitigating
foreign
exchange, interest rate and credit risks, use of
derivative financial instruments and investing
excess liquidity.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future
commercial transactions and recognised assets
and liabilities are denominated in a currency that
is not the Entity’s functional currency.
(ii) Fair value interest rate risk
Refer to (d) opposite.
(b) Credit risk
The Group has no significant concentrations of
credit risk. The Group has policies in place to
ensure that sales of products and services are
made to customers with an appropriate credit
history. The Group has policies that limit the
amount of credit exposure to any one financial
institution.
(c) Liquidity risk
Prudent liquidity risk management implies
maintaining sufficient cash, the availability of
funding
through an adequate amount of
committed credit facilities and the ability to close-
out market positions. Due to the dynamic nature
of the underlying businesses, the Group aims at
maintaining flexibility in funding by keeping
committed credit lines available.
(d) Cash flow and fair value
interest rate risk
As the Group has no significant interest-bearing
assets, the Group’s income and operating cash
flows are not materially exposed to changes in
market interest rates.
The Group's interest-rate risk arises from long-
term borrowings. Borrowings issued at variable
rates expose the Group to cash flow interest-rate
risk. Group finance facilities are a combination of
overdraft and short term commercial bill facilities,
all of which are on a variable interest rate basis. In
the current stable interest rate environment, this
approach maximises available cash with minimal
exposure to interest rate movements. All aspects
of the financing arrangements, including interest
rate structuring, can be reviewed as required
during the life of the facility.
03
Note No:
Critical accounting estimates
and judgements
Estimates and
judgements are continually
evaluated and are based on historical experience
and other factors, including expectations of future
events that may have a financial impact on the
Entity and that are believed to be reasonable
under the circumstances.
Collection House Limited // Page No: 053
(a) Critical accounting
estimates and assumptions
The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by definition, seldom equal the
related actual results. The estimates and
assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year
are discussed below.
(i) Estimated impairment of goodwill
The Group tests annually whether goodwill has
suffered any impairment, in accordance with the
accounting policy stated in note 1(p). The
recoverable amounts of cash-generating units
have been determined based on value-in-use
calculations. These calculations require the use
of assumptions.
(ii) Estimated impairment of non-financial assets
and intangible assets other than goodwill
The Group tests annually whether the non-
financial assets or intangible assets of the Group
(other
suffered any
impairment, in accordance with the accounting
policy stated in note 1(i). The recoverable
amounts of cash-generating units have been
determined based on value-in-use calculations.
These calculations require the use of assumptions.
than goodwill) have
(iii)Estimated fair value of purchased debt
At each reporting date the Group determines the
fair value of purchased debt in accordance with
the accounting policy stated at note 1(m).The
calculation of fair value requires the use of
assumptions.
(iv) Estimated fair value of other financial assets
At each reporting date the Company determines
the fair value of financial assets in accordance
with the accounting policy stated at note 1(m).
The calculation of impairment requires the use of
assumptions.
Note No:
04
Segment information
(a) Description of segments
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: 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:
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 reporting
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.
Geographical segments
Although the Consolidated Entity’s divisions are
managed on a global basis they operate in two
main geographical areas:
// Australia and New Zealand.
{
Annual Report
}
2005 ~ 2006
(b) Primary reporting format - business segments
2006
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue/income
Collection Account
Credit
Other
services
asset
management
reporting operations
Consolidated
Inter-
segment
eliminations/
unallocated
$’000
40,273
2,282
42,555
(111)
$’000
$’000
$’000
$’000
$’000
50,360
22,966
19,454
-
133,053
-
285
-
50,360
23,251
19,454
(2,567)
(2,567)
-
133,053
1,239
(1)
176
647
1,950
Total segment revenue/income
42,444
51,599
23,250
19,630
(1,920)
135,003
Segment result (notes (ii))
5,043
12,158
3,398
(2,211)
277
18,665
Unallocated revenue less
unallocated expenses
Profit before income tax
Income tax expense
Minority interest
Net profit for the period
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets
Depreciation and amortisation
expense
Impairment of goodwill
Impairment of other assets
Other non-cash expenses
120,157
97,173
18,615
2,021
(82,976)
17,414
72,892
6,079
10,025
(95,015)
2,066
1,091
-
26
965
36,555
2,009
355
2,374
-
-
21,726
629
-
2
79
11
-
1,217
54
-
738
348
394
239
(8,752)
9,913
(4,088)
252
6,077
154,990
4,367
159,357
11,395
72,871
84,266
40,985
4,843
348
1,639
23,063
Collection House Limited // Page No: 055
(b) Primary reporting format - business segments continued
2005
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue/income
Collection Account
Credit
Other
services
asset
management
reporting operations
Consolidated
Inter-
segment
eliminations/
unallocated
$’000
43,475
2,489
45,964
1,302
$’000
$’000
$’000
$’000
$’000
52,331
21,686
6,067
-
123,559
-
248
-
52,331
21,934
6,067
(2,737)
(2,737)
-
123,559
1,572
4
68
12
2,958
Total segment revenue/income
47,266
53,903
21,938
6,135
(2,725)
126,517
Segment result (notes (ii))
7,872
20,110
2,526
(3,317)
12
27,203
Unallocated revenue less
unallocated expenses
Profit before income tax
Income tax expense
Minority interest
Net profit for the period
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
121,039
115,493
23,340
2,741
(86,687)
10,178
73,013
4,277
8,817
(87,112)
Acquisitions of property, plant and
equipment, intangibles and other
non-current segment assets
Depreciation and amortisation
expense
Impairment of goodwill (note 16)
Impairment of other assets
Other non-cash expenses
1,266
1,446
-
-
189
43,414
19,921
-
-
44
722
551
-
-
(95)
695
-
301
1,013
94
-
675
-
-
14
(9,381)
17,822
(5,494)
618
12,946
175,926
3,939
179,865
9,173
77,022
86,195
46,097
22,593
301
1,013
246
{
Annual Report
}
2005 ~ 2006
(c) Secondary reporting format - geographical segments
Segment revenues from Segment assets
from sales to
external customers
Acquisitions of property,
plant and equipment,
intangibles and other
non-current segment assets
30 June 06
30 June 05 30 June 06 30 June 05 30 June 06
30 June 05
$’000
$’000
$’000
$’000
$’000
$’000
126,245
6,808
133,053
114,643
150,786
171,542
8,916
8,571
8,323
123,559
159,357
179,865
37,062
3,923
40,985
43,194
2,903
46,097
Australia
New Zealand
Total
Segment revenues are allocated based on the country in which the customer is located.
Segment assets and capital expenditure are allocated based on where the assets are located.
(i) Accounting policies
Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1 and
accounting standard AASB 114 Segment Reporting.
Segment revenues, expenses, 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, inventories, property, plant and equipment 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,
employee benefits and interest bearing liabilities. 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.
(ii) Segment margins
Collection
Services
Account Asset
Management
Credit Reporting
Other Operations
30 June 06 30 June 05 30 June 06 30 June 05 30 June 06 30 June 05 30 June 06
30 June 05
%
12
%
13
%
24
%
33
%
15
%
14
%
(11)
%
(37)
Margin
on sales
revenue
Collection House Limited // Page No: 057
Note No:
05
Revenue
Sales revenue
Revenue from rendering of services
Other revenue
Rent received
Interest
Dividends
Other
Profit from sale of businesses and related assets
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
134,349
134,349
125,117
125,117
43,492
43,492
46,332
46,332
4
483
-
28
-
515
10
306
-
139
-
455
4
557
4
340
11,000
12,000
15
29
49
6
11,605
12,399
Total revenue from continuing operations
134,864
125,572
55,097
58,731
Note No:
06
Other income
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
Export development grant (note 8)
139
-
-
-
Note No:
07
Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements, plant and equipment
Purchased debt
Total depreciation
Amortisation
Leased plant and equipment
Other intangibles
Legal and court cost capitalised
Total amortisation
{
Annual Report
}
2005 ~ 2006
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
3,334
-
3,334
14
1
1,494
1,509
3,549
18,620
22,169
2,545
2,687
-
-
2,545
2,687
5
8
411
424
-
1
-
1
-
8
-
8
Note No:
07
Expenses continued
Finance costs
Interest and finance charges paid/payable
Interest and finance charges - related parties
Total finance costs
Fair Value losses on other financial assets
Net foreign exchange losses recognised in profit before
income tax for the year (as either other income or expense)
Note No:
08
Income tax expense
(a) Income tax expense
Current income tax provision
Deferred income tax provision
Under (over) provided in prior years
Deferred income tax (revenue) expense included in income
tax expense comprises:
Decrease (increase) in deferred tax assets (note 15)
(Decrease) increase in deferred tax liabilities (note 24)
(b) Numerical reconciliation of income tax
expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2005 - 30%)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
Non-deductible depreciation
Non-deductible amortisation
Non-deductible impairment
Non-assessable inter-company dividends from
members of the tax-consolidated Group
Non-deductible writedown of investments in subsidiaries
Tax losses not recognised
Sundry items
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
4,096
58
4,154
21,661
17
3,724
3,989
3,704
-
-
-
3,724
3,989
3,704
-
-
-
(5)
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
1,243
4,824
(1,979)
4,088
3,123
2,785
(414)
5,494
(2,866)
2,294
(1,416)
(598)
(906)
(195)
(1,988)
(1,699)
2,836
1,988
4,824
(1,276)
4,061
2,785
2,429
(135)
2,294
(528)
(378)
(906)
9,913
2,974
17,822
5,347
(110)
(33)
7,019
2,106
263
104
-
-
-
611
72
-
151
-
-
-
519
1
-
-
922
-
298
-
(3,300)
592
-
57
(3,600)
-
-
5
4,024
6,018
(1,762)
(1,191)
Collection House Limited // Page No: 059
Note No:
08
Income tax expense continued
Difference in overseas tax rates
Sundry Items
Income tax expense
(c) Tax losses
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
78
(14)
64
83
(607)
(524)
-
(226)
(266)
-
(508)
(508)
4,088
5,494
(1,988)
(1,699)
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
All unused tax losses were incurred by Australian entities.
4,343
1,303
2,253
676
-
-
-
-
Note No:
09
Current assets - Cash and cash equivalents
Cash at bank and in hand
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the financial
year as shown in the statement of cash flows as follows:
Bank overdraft right of set-off
Balances as above
Bank overdrafts (note 20)
Balances per statement of cash flows
Consolidated
Company
2006
$’000
3,038
2005
$’000
4,775
2006
2005
$’000
$’000
641
558
3,038
4,775
641
558
(2,918)
(2,376)
(2,918)
(2,330)
120
2,399
(2,277)
(1,772)
(b) Cash at bank and on hand
Information concerning the effective interest rates is set out in the non-current receivables note (note 13).
(c) Fair value
The carrying amount for cash and cash equivalents equals the fair value.
(d) 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.
{
Annual Report
}
2005 ~ 2006
Note No:
10
Current assets - Receivables
Net trade receivables
Trade debtors
Provision for doubtful trade debtors
Loans to Controlled Entities
Other loans
Other debtors
Accrued revenue - intercompany interest
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
11,154
(2,206)
8,948
-
-
12,950
(1,497)
11,453
-
88
2,673
1,388
-
-
4,909
6,722
(1,880)
(1,057)
3,029
5,665
11,000
13,098
-
1,152
221
87
609
-
2,673
1,476
12,373
13,794
11,621
12,929
15,402
19,459
(a) Bad and doubtful trade receivables
The Group has recognised a loss of $833,000 (2005: $27,388) in respect of bad and doubtful trade receivables
during the year ended 30 June 2006.
(b) Effective interest rates and credit risk
Information concerning the effective interest rate and credit risk of both current and non-current receivables is
set out in the non-current receivables note (note 13).
Note No:
11
Other financial assets at fair value through profit or loss
Current and Non-Current
At beginning of the period
Reclassification of capitalised costs
Adjustment on adoption of AASB 132 and AASB 139
Additions
Fair value gain / (loss)
At end of year
Purchased debt
Purchased debt - at cost
Purchased debt - accumulated depreciation
Legal and court costs capitalised - net
Other financial assets - shares in Controlled Entities at fair price
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
112,339
(665)
(27,476)
32,969
(21,661)
95,506
-
-
-
-
-
-
-
-
-
-
-
169,601
(57,927)
665
112,339
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,461
20,959
Collection House Limited // Page No: 061
The amount of the above financial assets are classified as follows:
Current
Non-current
Consolidated
Company
2006
$’000
28,615
66,891
2005
$’000
-
112,339
95,506
112,339
2006
2005
$’000
$’000
-
20,461
20,461
-
20,959
20,959
Gains / (losses) in fair values of other financial assets at fair value through profit or loss are recorded in the
income statement.
(a) Transition to AASB 132 and AASB 139
The Group has taken the exemption available under AASB 1 to apply AASB 132 Financial Instruments: Disclosure
and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. At the date of
transition to these standards at 1 July 2005, both for the Group and the Parent Entity:
// Purchased debt with a carrying value of $111,674,000 that were classified in the balance sheet under previous
AGAAP as purchased debt were designated and re-classified as other financial assets at fair value through
profit and loss; and
// an adjustment of $27,476,000 ($19,234,000 net of tax) was recognised. This represented an initial loss on
remeasurement to fair value of assets that under previous AGAAP had been measured at amortised cost.
// the residual balance of $665,000 that was classified in the balance sheet under previous AGAAP as purchased
debt and which represented capitalised court and legal costs (net) were re-classified as other non-current
assets. There was no change to the measurement of this balance at 1 July 2005.
For further information refer to note 1(m) and section 5 of note 42.
(b) Classification
The carrying amounts of the above financial assets are classified as follows:
Designated at fair value on initial recognition
Consolidated
Company
2006
$’000
95,506
2005
$’000
-
2006
2005
$’000
$’000
-
-
Note No:
12
Current assets - Other current assets
Consolidated
Company
2006
$’000
420
612
1,032
2005
$’000
338
1,099
1,437
2006
2005
$’000
$’000
242
435
677
254
757
1,011
Other deposits
Prepayments
{
Annual Report
}
2005 ~ 2006
Note No:
13
Non-current assets - Receivables
Loans to Controlled Entities
Other debtors
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
-
-
-
78,290
79,214
1,013
-
-
Further information relating to loans to related parties and key management personnel is set out in notes 35 and 31 respectively.
(a) Fair values
The fair values and carrying values of non-current receivables of the Group are as follows:
Other receivables
Consolidated
Company
2006
2005
$’000
$’000
$’000
$’000
-
1,013
78,290
79,214
(b) Interest rate risks
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is
set out in the following tables.
2006
Current
Cash & cash equivalents
Trade receivables
Other receivables
Other deposits
Purchased debt
Weighted average interest rate (%)
2005
Current
Cash and cash equivalents
Trade receivables
Other current assets
Other receivables
Purchased debt
Weighted average interest rate (%)
Fixed interest maturing in:
Floating
interest rate
$’000
1 year Non-interest
or less
$’000
bearing
$’000
Total
$’000
3,032
-
-
-
-
3,032
4.93%
1 year
or less
$’000
-
-
338
88
-
426
5.02%
-
-
-
237
-
237
5.75%
6
8,948
2,673
183
95,506
3,038
8,948
2,673
420
95,506
107,316 110,585
-
Fixed interest maturing in:
Over 1 to Non-interest
Total
2 years
$’000
-
-
-
43
-
43
6.00%
bearing
$’000
$’000
2,399
6
11,453
11,453
1,437
1,099
2,489
2,358
112,339
112,339
127,255 130,117
-
Floating
interest rate
$’000
2,393
-
-
-
-
2,393
4.65%
(c) Credit risk
There is no concentration of credit risk with respect to current and non-current receivables, as the Group has a large number of
customers, internationally dispersed. Refer to note 2 for more information on the risk management policy of the Group.
Collection House Limited // Page No: 063
Note No:
14
Non-current assets - Property, plant and equipment
Plant and Leasehold Leased plant Work-in-
equipment improvements & equipment progress
$’000
$’000
$’000
$’000
Total
$’000
18,187
(9,905)
8,282
8,282
1,026
(98)
(146)
(2,498)
-
6,566
11
-
11
11
785
-
-
-
(38)
758
758
19,055
-
(12,489)
758
6,566
758
-
-
6,566
1,425
(1,017)
(92)
(288)
-
(1,798)
181
847
181
5,069
847
19,233
-
(14,164)
847
5,069
17,715
(9,814)
7,901
7,901
203
(61)
(146)
(2,462)
(17)
5,418
17,469
(12,051)
5,418
5,418
1,081
(981)
(196)
(1,726)
-
3,596
17,569
(13,973)
3,596
426
(87)
339
339
38
(9)
-
(32)
-
336
453
(117)
336
336
344
-
-
(58)
-
622
797
(175)
622
35
(4)
31
31
-
(28)
-
(4)
55
54
375
(321)
54
54
-
(36)
-
(14)
-
4
20
(16)
4
Consolidated
At 1 July 2004
- Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2005
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Transfers
Closing net book amount
At 30 June 2005
- Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2006
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Transfers
Closing net book amount
At 30 June 2006
- Cost
Accumulated depreciation
Net book amount
{
Annual Report
}
2005 ~ 2006
Company
At 1 July 2004
- Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2005
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2005
- Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2006
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Closing net book amount
At 30 June 2006
- Cost
Accumulated depreciation
Net book amount
Plant and Leasehold Work-in-
equipment improvements progress
$’000
$’000
$’000
Total
$’000
15,248
(8,314)
6,934
6,934
694
(20)
(2,050)
-
-
-
-
625
-
-
625
5,558
625
15,887
-
(10,329)
625
5,558
625
280
-
-
-
5,558
1,148
(553)
(598)
(1,018)
905
4,537
14,913
(8,243)
6,670
6,670
40
(20)
(2,027)
4,663
14,898
(10,235)
4,663
4,663
524
(553)
(598)
(971)
3,065
335
(71)
264
264
29
-
(23)
270
364
(94)
270
270
344
-
-
(47)
567
14,867
(11,802)
3,065
708
(141)
567
905
16,480
-
(11,943)
905
4,537
(a) Non-current assets pledged as security
Refer to note 23b for information on non-current assets pledged as security by the Parent Entity and its
Controlled Entities.
Collection House Limited // Page No: 065
Note No:
15
Non-current assets - Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Doubtful debts
Provisions and employee benefits
Receivables impairment
Fixed assets
Tax losses
Sundry
Set-off of deferred tax liabilities of Parent Entity pursuant
to set-off provisions (note 24)
Net deferred tax assets
Movements:
Opening balance at 1 July
Change on adoption of AASB 132 and AASB 139
Credited/(charged) to the income statement (note 8)
Closing balance at 30 June
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
664
952
116
661
1,063
95
3,551
-
1,155
-
461
4,553
104
6,273
(2,337)
(5,382)
1,214
891
564
846
-
245
135
62
1,852
(26)
1,826
-
1,015
-
-
3,168
100
4,283
(161)
4,122
6,273
114
(2,836)
3,551
4,996
4,281
3,753
-
1,277
6,273
-
(2,429)
1,852
-
530
4,283
Note No:
16
Non-current assets - Intangible assets
Consolidated
At 1 July 2004
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2005
Opening net book amount
Additions
Impairment charge
Disposals
Depreciation
Closing net book amount
At 30 June 2005
Cost
Accumulated amortisation and impairment
Net book amount
{
Annual Report
}
2005 ~ 2006
Goodwill Computer Other
Total
software intangible
assets
$’000
$’000
$’000
$’000
32,008
(5,884)
26,124
26,124
-
(301)
-
(1,270)
24,553
31,275
(6,722)
24,553
6,535
(3,035)
3,500
3,500
1,316
(846)
-
(1,054)
2,916
7,732
(4,816)
2,916
2,063
40,606
-
(8,919)
2,063
31,687
2,063
31,687
13
1,329
-
-
(1,147)
-
(853)
(3,177)
1,223
28,692
2,076
41,083
(853)
(12,391)
1,223
28,692
Note No:
16
Non-current assets - Intangible assets continued
Consolidated
Year ended 30 June 2006
Opening net book amount
Additions
Depreciation & impairment charges
Disposals
Closing net book amount
At 30 June 2006
Cost
Accumulated amortisation and impairment
Net book amount
Company
At 1 July 2004
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2005
Opening net book amount
Additions
Amortisation charge
Disposals
Goodwill Computer Other
Total
software intangible
assets
$’000
$’000
$’000
$’000
24,553
276
(297)
-
2,916
1,760
1,223
28,692
33
2,069
(2,290)
(315)
(2,902)
24,532
2,386
-
(22)
919
(22)
27,837
31,551
(7,019)
24,532
9,492
(7,106)
2,386
2,087
43,130
(1,168)
(15,293)
919
27,837
Goodwill Computer Other
Total
software intangible
assets
$’000
$’000
$’000
$’000
14,894
(3,382)
11,512
11,512
11
-
-
3,900
(2,008)
1,892
1,892
335
(637)
-
444
19,238
-
(5,390)
444
13,848
444
13,848
-
-
(5)
346
(637)
(5)
Closing net book amount
11,523
1,590
439
13,552
At 30 June 2005
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2006
Opening net book amount
Additions
Impairment charge
Depreciation charge
Disposals
14,911
(3,388)
11,523
4,232
(2,642)
1,590
439
19,582
-
(6,030)
439
13,552
11,523
-
55
-
(224)
1,590
814
-
(725)
-
439
11
-
-
-
13,552
825
55
(725)
(224)
Closing net book amount
11,354
1,679
450
13,483
At 30 June 2006
Cost
Accumulated amortisation and impairment
Net book amount
14,687
(3,333)
11,354
5,046
(3,367)
1,679
450
20,183
-
(6,700)
450
13,483
Collection House Limited // Page No: 067
Note No:
17
Non-current assets - Other non-current assets
Deferred expenditure - at cost
Deferred expenditure - accumulated amortisation
Legal and court costs capitalised
Consolidated
Company
2006
$’000
343
(266)
206
283
2005
$’000
314
(268)
-
46
2006
2005
$’000
$’000
291
(264)
-
27
291
(263)
-
28
Note No:
18
Non-current assets - Databases
Databases
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
11,321
10,414
-
-
Valuation of databases
The databases are considered purchased intangible assets and are recorded at cost or fair value. Fair value is supported at
each reporting period by an impairment test as the database forms part on an identified CGU. Impairment testing is carried
out in accordance with the accounting policy stated at 1(p). The calculation of impairment requires the use of assumptions.
Note No:
19
Current liabilities - Payables
Trade creditors
Other creditors and accruals
Intercompany loans
Consolidated
Company
2006
$’000
2,808
4,230
-
2005
$’000
3,069
3,322
-
7,038
6,391
2006
2005
$’000
$’000
1,374
1,628
4,517
7,519
1,130
2,189
-
3,319
Note No:
20
Current liabilities - Interest bearing liabilities
Secured
Bank overdraft
Hire purchase liabilities (note 34)
Other loans
Total secured current borrowings
{
Annual Report
}
2005 ~ 2006
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
2,918
2,376
2,918
2,330
-
-
21
92
-
-
-
92
2,918
2,489
2,918
2,422
Note No:
20
Current liabilities - Interest bearing liabilities continued
Unsecured
Other loans
Total unsecured current borrowings
Total current borrowings
Consolidated
Company
2006
$’000
38
38
2005
$’000
103
103
2006
2005
$’000
$’000
-
-
7
7
2,956
2,592
2,918
2,429
(a) Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 23.
Note No:
21
Current liabilities - Provisions
Employee benefits
Other
(a) Movements in provisions
Movements in each class of provision during the financial year,
other than employee benefits, are set out below:
Consolidated - 2006
Current
Carrying amount at start of year
Additional provisions recognised
Payments/other sacrifices of economic benefits
Unused amounts reversed
Carrying amount at end of year
Parent - 2006
Current
Carrying amount at start of year
Additional provisions recognised
Payments/other sacrifices of economic benefits
Unused amounts reversed
Carrying amount at end of year
Consolidated
Company
2006
$’000
1,908
542
2,450
2005
$’000
1,752
371
2,123
2006
2005
$’000
$’000
1,121
568
1,689
1,529
250
1,779
Other
Total
$’000
$’000
371
542
(171)
(200)
542
250
568
(50)
(200)
568
371
542
(171)
(200)
542
250
568
(50)
(200)
568
Note No:
22
Non-current liabilities - Payables
Loans from Controlled Entities
Consolidated
Company
2006
$’000
-
2005
$’000
-
2006
2005
$’000
-
$’000
9,761
Collection House Limited // Page No: 069
Note No:
23
Non-Current liabilities- Interest bearing liabilities
Bank loans
(a) Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank overdrafts and bank loans
Lease liabilities
Other loans
Total secured liabilities
(b) Assets pledged as security
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 recognised in the financial statements 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.
(c) Financing arrangements
Unrestricted access was available at balance date to the
following lines of credit:
Credit standby arrangements
Total facilities
Bank offset facility (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Used at balance date
Bank offset facility (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Unused at balance date
Bank offset facility (secured)
Bank loan (secured)
Bank guarantee facilities (secured)
Bank leasing and hire purchase facilities
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
53,793
54,290
53,793
54,290
56,711
56,666
56,711
56,620
-
-
21
92
-
-
-
92
56,711
56,779
56,711
56,712
5,000
60,000
1,009
-
5,000
60,000
872
265
5,000
5,000
60,000
60,000
500
-
500
150
66,009
66,137
65,500
65,650
2,918
53,793
989
-
-
-
2,330
54,290
53,793
54,290
852
21
480
-
480
-
57,700
55,163
54,273
57,100
2,182
6,207
-
265
8,654
5,000
5,710
20
244
5,000
6,207
-
150
2,670
5,710
20
150
10,974
11,357
8,550
The current interest rates are 6.24% on the bank loan, 8.08% on the overdraft (2005 - 6.41% and 8.23% respectively).
{
Annual Report
}
2005 ~ 2006
Note No:
23
Non-Current liabilities- Interest bearing liabilities continued
(d) Interest rate risk exposures
The following table sets out the Group’s exposure to interest rate risk, including the contractual repricing dates and the
effective weighted average interest rate by maturity periods.
2006
Fixed interest maturing in:
Floating
interest rate or less
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5 Total
4 years
2 years 3 years
5 years years
Bank overdrafts and loans
(notes 20 and 23)
Other loans (notes 20 and 23)
Lease liabilities (notes 20, 23 and 34)
56,711
-
-
56,711
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,711
-
-
- 56,711
Weighted average interest rate
6.24%
- %
- %
- %
- %
- %
- %
2005
Fixed interest maturing in:
Floating
interest rate or less
$’000
$’000
1 year Over 1 to Over 2 to Over 3 to Over 4 to Over 5 Total
4 years
$’000
2 years 3 years
$’000
$’000
5 years years
$’000
$’000
$’000
Bank overdrafts and loans
(notes 20 and 23)
Other loans (notes 20 and 23)
Lease liabilities (notes 20, 23 and 34)
56,666
-
-
-
92
21
56,666
113
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,666
92
21
- 56,779
Weighted average interest rate
6.41% 6.63%
- %
- %
- %
- %
- %
Collection House Limited // Page No: 071
Note No:
23
Non-Current liabilities- Interest bearing liabilities continued
(e) Fair values
The carrying amounts and fair values of borrowings at balance date are:
On-balance sheet
Non-traded financial liabilities
Bank overdrafts
Bank loans
Other loans
Lease liabilities
2006
2005
Carrying Fair value
amount
Carrying Fair value
amount
$’000
$’000
$’000
$’000
2,918
53,793
-
-
56,711
-
-
-
-
-
2,376
54,290
92
21
56,779
-
-
-
-
-
Other than those classes of borrowings denoted as “traded”, none of the classes are readily traded on organised
markets in standardised form.
Fair value is inclusive of costs which would be incurred on settlement of a liability.
Note No:
24
Non-current liabilities - Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Prepayments
Purchased debt
Intangibles
Fixed assets
Sundry
Set-off of deferred tax liabilities of Parent Entity pursuant to
set-off provisions (note 15)
Net deferred tax liabilities
Movements:
Opening balance at 1 July
Change on adoption of AASB 132 and AASB 139
Charged/(credited) to the income statement (note 8)
Closing balance at 30 June
Consolidated
Company
2006
$’000
2005
$’000
2006
$’000
2005
$’000
4
37
17,660
23,879
413
92
87
459
53
83
18,256
24,511
2
-
-
-
24
26
2
-
-
159
-
161
(2,337)
15,919
(5,382)
19,129
(26)
(161)
-
-
24,511
(8,243)
1,988
18,256
20,450
-
4,061
24,511
161
-
(135)
26
539
-
(378)
161
{
Annual Report
}
2005 ~ 2006
Note No:
25
Non-current liabilities - Provisions
Employee benefits
Consolidated
Company
2006
$’000
424
2005
$’000
361
2006
2005
$’000
$’000
223
343
Note No:
26
Employee benefits
(a) Superannuation plans
All employees are entitled to varying levels of benefits on retirement, disability or death. The
superannuation plans provide accumulated benefits. Employees contribute to the plans at various
percentages of their wages and salaries. Where there is a legal requirement the Company contributes
the appropriate statutory percentage of employees salaries and wages.
Note No:
27
Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Total contributed equity
Company
Company
2006
2005
2006
2005
Shares
Shares
$’000
$’000
97,321,881 97,221,881
67,256
67,256
67,156
67,156
Collection House Limited // Page No: 073
Note No:
27
Contributed equity continued
(b) Movements in ordinary share capital:
Issues of ordinary shares during the year
Date
Details
2005
01 July 2004
Opening balance
Employee share scheme issues
Exercise of options pursuant to the executive
director share option plan
Exercise of options pursuant to the executive share
option plan
30 June 2005
Balance
2006
01 July 2005
2 November 2005
Opening balance
Exercise of options pursuant to the Executive Director
share option plan
30 June 2006
Balance
Number
of shares
Issue
price $
$'000
96,876,381
225,500
66,757
275
$1.22
100,000
$1.00
20,000
$1.18
100
24
97,221,881
67,156
97,221,881
67,156
100,000
1.00
100
97,321,881
67,256
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held (refer to note 30).
On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy is entitled to one
vote and, upon a poll each share is entitled to one vote.
(d) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out
in note 39.
(e) Options
Information relating to the Collection House Employee Option Plan, including details of options issued,
exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out
in note 39.
{
Annual Report
}
2005 ~ 2006
Note No:
28
Reserves and retained profits
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Movements:
Share-based payments reserve
Balance at beginning of period
Option expense
Transfer to share capital (options exercised)
Balance at end of period
Movements:
Foreign currency translation reserve
Balance at beginning of period
Currency translation differences arising during the year :
Group
Associates
Balance at end of period
(b) Retained profits
Movements in retained profits were as follows:
Balance 1 July
Profit for the year
Dividends
Adjustment on adoption of accounting standard (net of tax) (note 11)
Balance at end of period
(c) Nature and purpose of reserves
(i) Share-based payments reserve
Consolidated
Company
2006
$’000
39
(562)
(523)
-
39
-
39
2005
$’000
-
(144)
(144)
-
-
-
-
(144)
380
(418)
-
(562)
(524)
-
(144)
2006
$’000
2005
$’000
39
-
39
-
39
-
39
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,703
6,077
(3,894)
(20,476)
9,410
22,533
12,946
(7,776)
-
27,703
6,147
1,878
(3,894)
-
4,131
5,205
8,718
(7,776)
-
6,147
The share-based payments reserve is used to recognise the fair value of options issued but not exercised.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign Controlled Entity are taken to the foreign currency translation
reserve, as described in note 1(d). The reserve is recognised in profit and loss when the net investment is disposed of.
Collection House Limited // Page No: 075
Note No:
29
Minority interest
Interest in:
Share capital
Interest in retained profits / (losses) at the beginning of the financial year
Note No:
30
Dividends
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
289
(1,341)
(1,052)
319
(1,364)
(1,045)
-
-
-
-
-
-
Company
30 June
2006
$’000
30 June
2005
$’000
(a) Ordinary shares
Unfranked final dividend for the year ended 30 June 2005 - 4.0 cents per share
3,894
3,888
Unfranked interim dividend for the year ended 30 June 2006 - 0.0 cents per share
(2005 - 4.0 cents per share)
Total dividends provided for or paid
Paid in cash
(b) Dividends not recognised at year end
In addition to the above dividends, since year end the directors have recommended the payment
of a final unfranked dividend of 2.0 cents per fully paid ordinary share (2005 - 4.0 cents). The
aggregate amount of the proposed dividend expected to be paid on 24 November 2006 out of
retained profits at 30 June 2006, but not recognised as a liability at year end, is
-
3,894
3,888
7,776
3,894
7,776
1,946
3,888
The financial effect of this dividend has not been brought to account in the financial statements for the year
ended 30 June 2006 and will be recognised in subsequent financial reports.
Consolidated
Company
30 June
2006
$’000
30 June
2005
$’000
30 June
2006
$’000
30 June
2005
$’000
Franking credits available for subsequent financial years based on
a tax rate of 30% (2005 - 30%)
-
-
-
-
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) Franking credits that will arise from the payment of the amount of the provision for income tax.
(b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date.
(c) Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
(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.
{
Annual Report
}
2005 ~ 2006
Note No:
31
Key management personnel disclosures
(a) Directors
The following persons were Directors of Collection House Limited during the financial year:
(i) Chairman - Non-Executive
D. G. Punches
(ii) Executive Directors
J. M. Pearce, Deputy Chairman and Managing Director
C. K. Day, Chief Executive Officer
R. G. King, Company Secretary (Director from 24 August 2005)
A. F. Coutts, Director, Sales
(iii) Non-Executive Directors
B. E. Adams (Lead Independent Director)
D. B. Connelly
W. L. Hiller
W. W. Kagel
S. Walker
(b) Other key management personnel
The following persons had authority and responsibility for planning, directing and controlling the activities of the
Group directly or indirectly, during the financial year:
Name
Adrian Ralston
Brendan Doherty
Brian Savage
Kylie Lynam
Matthew Thomas
Position
Chief Financial Officer
Chief Collections Officer
(to 17 November 2005)
Consultant
Manager, Human Resources
Chief Information Officer
Employer
Collection House Limited
Collection House Limited
Collection House Limited
Collection House Limited
Collection House Limited
All of the above persons were also key management persons during the year ended 30 June 2005.
(c) Key management personnel compensation
The Company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the
detailed remuneration disclosures to the Directors’ Report. The relevant information can be found in sections
A-C of the remuneration report on pages 28 to 32.
Collection House Limited // Page No: 077
Note No:
31
Key management personnel disclosures continued
(d) Equity instrument disclosures relating to key management personnel
(i) 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 five specified executives of the Group are set out below. When exercisable, each
option is convertible into one ordinary share of Collection House Limited. Further information on the options is
set out in note 39.
(ii) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms
and conditions of the options, can be found in section D of the remuneration report on pages 32 - 34.
(iii) Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of
Collection House Limited and other key management personnel of the Group, including their personally related
parties, are set out below.
2006
Name
Balance Granted
at the start during the
of the
year
year as
compensation
Exercised Other
changes
during the
year
during
the
year
Balance
at the end
of the
year
Vested and
exercisable
at the end of
the year
Directors of Collection House Limited
A. Coutts
C. Day
Other key management personnel
of the Group
A. Ralston
M. Thomas
K. Lynam
B. Savage
B. Doherty
2005
Name
100,000
-
(100,000)
-
-
-
-
-
-
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
-
-
-
-
-
-
-
-
-
-
-
-
Balance Granted
at the start during the
of the
year
year as
compensation
Exercised Other
changes
during the
year
during
the
year
Balance
at the end
of the
year
Vested and
exercisable
at the end of
the year
Directors of Collection House Limited
A. Coutts
200,000
-
(100,000)
-
100,000
Other key management personnel
of the Group
C. Day
B. Doherty
A. Ralston
C. Stewart
M. Thomas
M. Watkins
(iv) Share holdings
-
-
-
-
-
-
40,000
40,000
-
-
-
-
(40,000)
(40,000)
-
60,000
(20,000)
(40,000)
40,000
20,000
-
-
(40,000)
(20,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
The numbers of shares in the Company held during the financial year by each director of Collection House
Limited and other key management personnel of the Group, including their personally related parties, are set
out below. There were no shares issued under the terms of the Employee Share Plan during the reporting
period as compensation.
{
Annual Report
}
2005 ~ 2006
2006
Name
Directors of Collection House Limited
Ordinary shares
D. Punches
B. Adams
B. Connelly
T. Coutts
B. Hiller
B. Kagel
S. Walker
R. King
C. Day
J. Pearce
Other key management personnel of the Group
Ordinary shares
M. Thomas
K. Lynam
A. Ralston
B. Savage
B. Doherty (departed 1 November 2005)
2005
Name
Directors of Collection House Limited
Ordinary shares
D. Punches
B. Adams
T. Aveling
B. Connelly
T. Coutts
B. Hiller
B. Gοranson
B. Kagel
S. Walker
J. Pearce
:
Other key management personnel of the Group
Ordinary shares
C. Day
B. Doherty
A. Ralston
C. Stewart
M. Thomas
M. Watkins
Balance Received during the
at the start year on the exercise
of the
year
of options
Other
changes
during the
year
Balance
at the end
of the
year
14,054,835
-
20,000
4,034,000
5,200
500,000
6,750,000
-
325,000
14,189,900
2,000
11,000
-
-
-
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,054,835
-
20,000
4,134,000
5,200
500,000
6,750,000
-
325,000
14,189,900
-
-
-
-
-
-
-
-
-
1,000
2,000
11,000
-
-
1,000
Balance Received during the
at the start year on the exercise
of the
year
of options
Other
changes
during the
year
Balance
at the end
of the
year
14,011,665
-
250,000
20,000
3,934,000
5,200
4,772,427
500,000
6,750,000
14,146,730
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
20,000
4,034,000
5,200
4,772,427
500,000
6,750,000
14,189,900
325,000
2,000
-
20,000
2,000
24,000
Details of loans made to directors of Collection House Limited and other key management personnel of the
Group, including their personally related parties, are set out below.
Collection House Limited // Page No: 079
(i) Aggregates for key management personnel
Group
2006
2005
Balance at
the start of
the year
$
-
-
Interest
paid and
payable for
the year
$
-
-
Interest
not
charged
$
-
-
Balance Number
in Group
at the
at the end
end of
of the year
the year
$
$
-
-
-
-
(ii) Individuals with loans above $100,000 during the financial year
No individual's aggregate loan balance exceeded $100,000 at any time during the financial year.
(e) Other transactions with key management personnel
No payments were made to directors or other key management personnel other than as appropriate payments for
performance of their duties as directors.
Note No:
32
Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity,
its related practices and non-related audit firms:
Consolidated
Company
30 June
2006
$
30 June
2005
$
30 June
2006
$
30 June
2005
$
(a) Assurance services
Audit services
Audit and review of financial reports and other audit work under
the Corporations Act 2001
Total remuneration for audit services
Audit of regulatory returns
Total remuneration for other assurance services
190,000
170,000 190,000
170,000
190,000
170,000 190,000
170,000
70,000
70,000
70,000
70,000
70,000
70,000
70,000
70,000
Total remuneration for assurance services
260,000
240,000 260,000
240,000
Note No:
33
Contingencies
(a) Contingent liabilities
The Parent Entity and Group had contingent liabilities at 30 June 2006 in respect of:
Claims
The Company is allowing for a possible contingent liability of $250,000 in relation to an injury claim resulting
from a Downie & Associates administration.
Claims disclosed in the 2005 Annual Report have been settled and the relevant expense has been included in the
results for the current period.
Guarantees
(a) Bank guarantees (secured) exist in respect of satisfactory contract performance in the normal course of business
for a subsidiary amounting to $889,000 (2005 - $852,000)
(b) On 29 October 2002 the Company and certain of its subsidiaries 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.
These guarantees may give rise to liabilities in the Company if the associates do not meet their obligations under
the terms of the contracts subject to the guarantees.
No material losses are anticipated in respect of any of the above contingent liabilities.
{
Annual Report
}
2005 ~ 2006
Note No:
34
Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
(i) Property, plant and equipment
Payable:
Within one year
Later than one year but not later than five years
Later than five years
(ii) Investments
Payable:
Within one year
Later than one year but not later than five years
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. There are no future obligations under this agreement.
(iii) Operating leases
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
(iv) Hire Purchase
Commitments in relation to hire purchase are payable as follows:
Within one year
Future finance charges
Recognised as a liability
Note No:
35
Related party transactions
Consolidated
Company
2006
$’000
2005
$’000
2006
2005
$’000
$’000
33
-
-
33
-
-
-
327
-
-
327
100
100
200
-
-
-
-
-
-
-
304
-
-
304
100
100
200
2,654
7,695
10,349
2,630
2,169
4,799
2,040
4,006
6,046
2,227
1,775
4,002
-
-
-
22
(1)
21
-
-
-
-
-
-
(a) Parent Entity
The Parent Entity within the Group is Collection House Limited. The ultimate Parent Entity is Collection
House Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 37.
(c) Key management and personnel compensation
Key management personnel compensation for the years ended 30 June 2006 and 2005 is set out in the
Remuneration report on pages 30 - 31.
(d) Other transactions with key management personnel or entities related to them
No other transactions were made to key management personnel or entities related to them other than as
appropriate payments for performance of their duties.
Collection House Limited // Page No: 081
(e) Key management personnel
Disclosures relating to key management personnel are set out in note 31.
(f) Transactions with 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
Transactions 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 Legal Services Pty Ltd, provided legal services to the
Company and other wholly owned Controlled Entities.
A wholly owned 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.
Transactions with non-director related parties
Revenue from sale of services to:
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
Partly owned Controlled Entities
Dividends receivable from:
Wholly owned Controlled Entities
Interest received from:
Partly owned Controlled Entities
Current receivables from non-director related entities
Wholly owned Controlled Entities (dividends)
Non-current receivables from non-director related entities
Wholly owned Controlled Entities (loans)
Partly owned Controlled Entities
Current payables to non-director related entities
Wholly owned Controlled Entities
Non-current payables from non-director related entities
Wholly owned Controlled Entities (loans)
Percentage of equity interest
Details of equity interest held in classes of related parties are set out in Note 37.
{
Annual Report
}
2005 ~ 2006
Company
30 June
2006
$’000
30 June
2005
$’000
17,826
17,889
-
2,249
-
2,489
284
248
16,892
1,253
26,683
614
28,969
840
6,254
-
11,000
12,000
-
-
11,000
13,098
77,740
550
97,579
5,579
4,517
-
-
9,761
Note No:
36
Business combination
Net identifiable assets acquired
-
Acquiree’s
carrying amount
Fair value
$’000
$’000
(a) On 1 July 2005 the Parent Entity acquired a
further 5.9% of the issued share capital of
Collection House Business Diagnostics Pty Ltd.
Collection House Business Diagnostics Pty Ltd and its
subsidiaries contributed revenues of $0.516 million and net loss of
$3.181 million to the Company for the period from 1 July 2005 to
30 June 2006.
Purchase consideration
Cash paid
Amount payable
Direct costs relating to the acquisition
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill note 16)
Current assets
Current liabilities
Non current assets
Non current liabilities
Net identifiable assets acquired
Minority interests
Net identifiable assets acquired
Note No:
37
Subsidiaries
100
-
1
101
(246)
347
430
(485)
1,770
(5,904)
(4,189)
3,943
(246)
430
(485)
1,770
(5,904)
(4,189)
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(b):
Name of entity
Country of
incorporation
Class of
shares
Equity holding
2005
2006
Collection House Limited
Australia
Ordinary
Controlled Entities - incorporated in Australia
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
-
-
100
100
100
100
100
71
100
84
100
100
-
-
100
100
100
100
100
71
100
79
100
100
Collection House Limited // Page No: 083
Name of entity
Country of
incorporation
Class of
shares
Equity holding
2005
2006
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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) New Zealand
Lion Finance Limited
New Zealand
National Tenancy Database Limited (formerly National
Revenue Corporation Limited) (1)
Rapid Ratings (NZ) Limited
New Zealand
New Zealand
New Zealand
New Zealand
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
(1) These Controlled Entities have not traded during the financial year
Note No:
38
Earnings per share
(a) Basic earnings per share
Earnings per share for:
Profit from continuing operations attributable to the ordinary equity holders of the Company
(b) Diluted earnings per share
Earnings per share for:
Profit from continuing operations attributable to the ordinary equity holders of the Company
(c) Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
Profit from continuing operations
(Profit) / loss from continuing operations attributable to minority interests
Profit attributable to the ordinary equity holders of the Company used in calculating
basic earnings per share
Diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the
Company used in calculating diluted earnings per share
{
Annual Report
}
2005 ~ 2006
100
100
100
71
100
100
100
100
100
100
84
100
100
-
100
100
100
100
100
84
100
100
100
71
100
100
100
100
100
100
79
100
100
-
100
100
100
100
100
79
Consolidated
30 June
2006
Cents
30 June
2005
Cents
6.2
13.3
6.2
13.3
5,825
12,328
252
618
6,077
12,946
6,077
12,946
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
earnings per share
Adjustments for calculation of diluted earnings per share:
Options
Consolidated
30 June
2006
30 June
2005
Number Number
97,297,626 97,135,427
-
53,166
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
97,297,626 97,188,593
Note No:
39
Share-based payments
(a) Executive 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.
No options were granted under the Executive Option Plan during the 2005-2006 financial year.
Grant Date
Expiry
date
price
Exercise Balance Granted Exercised Expired Balance Exercisable
during at the end at the end
during
the
year
during the
year as
compensation
at the start
of the
year
of the
year
of the
year
the
year
4 Jul 2000
1 Jul 2005
1 Jul 2005
1 Jul 2005
Total
3 Nov 2005
30 Jun 2007
30 Jun 2008
30 Jun 2009
$1.00
$1.42
$1.42
$1.42
100,000
-
(100,000)
-
-
-
100,000
100,000
100,000
-
-
-
100,000
300,000 (100,000)
-
-
-
-
-
-
100,000
100,000
100,000
300,000
-
-
-
-
-
Weighted average exercise price
$1.00
$1.42
$1.00
$-
$-
$-
Consolidated and company - 2005
14 Jul 2003
14 Jul 2000
1 Jul 2004
1 Sep 2004
Total
3 Nov 2004
$1.00
3 Nov 2005
$1.00
30 Jun 2005
30 Sep 2005
$1.18
$1.36
100,000
100,000
-
-
-
-
(100,000)
-
20,000
(20,000)
-
-
-
736,000
-
(736,000)
-
100,000
-
-
200,000
756,000 (120,000) (736,000) 100,000
Weighted average exercise price
$1.00
$1.35
$1.03
$1.36
$1.00
-
-
-
-
$-
Collection House Limited // Page No: 085
No options were forfeited during the periods covered by the above tables.
The weighted average share price at the date of exercise of options exercised regularly during the year
ended 30 June 2006 was $1.49 (2005 - $1.75).
The weighted average remaining contractual life of share options outstanding at the end of the period
was 2.0 years.
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2006 is set out
below . The fair value at grant date is independently determined using a Black-Scholes option pricing
model that takes into account the exercise price, the term of the option, the impact of dilution, the share
price at grant date and expected price volatility of the underlying share, the expected dividend yield and
the risk free interest rate for the term of the option.
The model inputs and resulting valuations for options granted during the year ended 30 June 2006 included:
(i)
options are granted in three tranches of 100,000, exercisable in the years ended 30 June 2007,
2008 and 2009 after reaching a Return on Equity on CLH shares of 14.4%, 16.8%, and 19.2%
respectively
(ii)
exercise price: $1.42
(iii)
grant date: 1 July 2005
(iv)
expiry date: 30 June 2007, 2008 and 2009
(v)
(vi)
share price at grant date: $1.39
expected price volatility of the Company’s shares:
32.3% (2007) 36.1% (2008) 44.6% (2009)
(vii)
expected dividend yield:
3.61% (2007) 5.76% (2008) 6.71% (2009)
(viii) risk-free interest rate:
5.18% (2007) 5.14% (2008) 5.10% (2009)
The expected price volatility is based on the historic volatility (based on the remaining life of the
options), adjusted for any expected changes to future volatility due to publicly available information.
The resulting valuation per option is $0.17 (2007) $0.23 (2008) $0.31 (2009)
(b) Employee share scheme
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. Historically, the 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.
On application, employees must pay application monies of at least 10% of the value of the share offer.
The Company may, at its 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.
No shares issued under this plan in the year ended 30 June 2006 (2005: 225,500 shares; Issue price $1.22).
The amount recognised in the financial statements of the Consolidated Entity and the Company in
relation to employee shares issued in prior years was:
{
Annual Report
}
2005 ~ 2006
Employee loans
Bank
Issued Capital
Consolidated
Company
2006
$’000
23
-
23
2005
$’000
155
120
275
2006
2005
$’000
$’000
23
-
23
155
120
275
Note No:
40
Events occurring after the balance sheet date
An unfranked final dividend has been declared of 2.0 cents for a total of $1.9 million, payable on 24 November
2006. No provision has been raised in these accounts.
Other than the matters discussed above, no matter or circumstance has arisen since 30 June 2006 that has
significantly affected, or may significantly affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Note No:
41
Reconciliation of profit after income tax to net
cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Impairment of other assets
Fair value losses on other financial assets
Write off of assets
Impairment of goodwill
Net (gain) loss on sale of non-current assets
Amounts capitalised to purchased debt
Share Based Payments
Legal costs capitalised
Amounts set aside to provisions
Net exchange differences
(Increase) in trade debtors and bills of exchange
(Increase) decrease in sundry debtors
(Increase) decrease in current tax receivables
(Increase) decrease in deferred tax assets
(Increase) decrease in other assets
(Decrease) increase in trade creditors
(Decrease) increase in other liabilities
Increase/(decrease) in sundry creditors and accruals
Increase (decrease) in provision for income taxes payable
Increase (decrease) in deferred tax liabilities
Increase (decrease) in other financial assets
Increase (decrease) in other provisions
Net cash (outflow) inflow from operating activities
Consolidated
Company
2006
$’000
5,825
4,843
1,639
21,661
(52)
348
36
-
39
-
-
17
3,390
(1,197)
(1,673)
3,791
1,183
(261)
(65)
908
377
(1,137)
-
327
39,999
2005
$’000
12,328
22,593
1,103
-
36
301
(290)
(1,075)
-
(19)
211
(7)
4,955
(1,876)
-
-
-
229
-
(1,202)
2,551
3,730
-
(189)
43,379
2006
$’000
2005
$’000
1,878
2,546
5,229
-
-
208
24
-
39
-
-
2
2,636
(677)
-
2,296
334
(317)
-
(90)
-
(135)
(11,173)
-
2,800
8,718
2,695
-
-
21
988
-
-
-
-
200
(6)
2,161
(17,603)
-
-
-
386
-
547
1,155
3,925
-
-
3,187
Collection House Limited // Page No: 087
Note No:
42
Explanation of transition to Australian equivalents to IFRSs
(01) Reconciliation of equity reported under previous Australian Generally Accepted Accounting
Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)
(a) At the date of transition to AIFRS: 1 July 2004
Consolidated
Company
Previous Effect of AIFRS Previous Effect of AIFRS
AGAAP transition
to AIFRS
$’000
AGAAP transition
to AIFRS
$’000
$’000
$’000
$’000
$’000
Assets
Current assets
Cash and cash equivalents
Receivables
Current tax receivables
Other current assets
Non-current assets classified
as held for sale
Total current assets
Non-current assets
Receivables
Purchased debt
Other financial assets
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Parent entity interest
Minority interest
Total equity
{
Annual Report
}
2005 ~ 2006
Note
(e)(f)
(f)
(e)
(c)(f)
(b)(c)
(c)
(e)
(h)
4,697
17,114
2,211
1,113
25,135
-
25,135
79
86,872
-
11,782
10,241
28,071
4,982
51
142,078
167,213
7,364
2,919
206
1,900
12,389
-
44,129
306
19,991
64,426
76,815
-
(4)
-
-
(4)
4,697
17,110
2,211
1,113
25,131
960
956
960
26,091
-
-
-
(3,626)
-
1,503
14
-
(2,109)
79
86,872
-
8,156
10,241
29,574
4,996
51
139,969
150
17,919
1,918
683
20,670
-
20,670
78,219
-
21,844
8,826
-
11,973
3,739
29
124,630
(1,153)
166,060
145,300
-
-
-
-
-
-
-
-
462
462
462
7,364
2,919
206
1,900
12,389
-
44,129
306
20,453
64,888
77,277
2,497
2,825
-
1,562
6,884
3,507
44,108
259
18,581
66,455
73,339
90,398
(1,615)
88,783
71,961
(a)(d)
(i)
66,757
524
23,626
90,907
(509)
90,398
-
(524)
(1,091)
(1,615)
-
(1,615)
66,757
-
22,535
89,292
(509)
88,783
66,757
-
5,204
71,961
-
71,961
-
-
-
-
-
-
-
-
-
-
(1,914)
-
1,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150
17,919
1,918
683
20,670
-
20,670
78,219
-
21,844
6,912
-
13,887
3,739
29
124,630
145,300
2,497
2,825
-
1,562
6,884
3,507
44,108
259
18,581
66,455
73,339
71,961
66,757
-
5,204
71,961
-
71,961
(b) At the end of the last reporting period under previous AGAAP: 30 June 2005
Consolidated
Company
Assets
Current assets
Cash and cash equivalents
Receivables
Current tax receivables
Other current assets
Derivative financial instruments
Total current assets
Non-current assets
Receivables
Purchased Debt
Property, plant and equipment
Databases
Intangible assets
Deferred tax assets
Other financial assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Deferred tax liabilities
Payables
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Parent entity interest
Minority interest
Total equity
Note
(c)(e)
(e)
(h)
(c)
(b)(c)
(c)(h)
(c)(e)
(e)
(h)
(a)(d)
(i)
(c)
Previous Effect of AIFRS Previous Effect of AIFRS
AGAAP transition
to AIFRS
$’000
AGAAP transition
to AIFRS
$’000
$’000
$’000
$’000
$’000
4,775
12,938
763
1,437
-
19,913
1,013
112,339
10,356
10,414
25,884
5,927
-
46
165,979
185,892
6,391
2,592
1,309
2,123
12,415
54,290
24,052
-
361
78,703
91,118
94,774
67,156
380
28,061
95,597
(823)
94,774
-
(9)
-
-
-
(9)
-
-
(3,790)
-
2,808
(5,036)
-
-
(6,018)
(6,027)
-
-
-
-
-
-
(4,923)
-
-
(4,923)
4,775
12,929
763
1,437
-
19,904
1,013
112,339
6,566
10,414
28,692
891
-
46
159,961
179,865
6,391
2,592
1,309
2,123
12,415
54,290
19,129
-
361
73,780
558
19,459
763
1,011
-
21,791
101,381
-
7,148
-
11,211
4,461
21,947
28
146,176
167,967
3,319
2,429
-
1,779
7,527
54,290
22,506
9,761
343
86,900
-
-
-
-
-
-
(22,167)
-
(1,590)
-
2,341
(339)
(988)
-
(22,743)
(22,743)
-
-
-
-
-
-
(22,506)
-
-
(22,506)
558
19,459
763
1,011
-
21,791
79,214
-
5,558
-
13,552
4,122
20,959
28
123,433
145,224
3,319
2,429
-
1,779
7,527
54,290
-
9,761
343
64,394
(4,923)
86,195
94,427
(22,506)
71,921
(1,104)
93,670
73,540
(237)
73,303
-
(524)
(358)
(882)
(222)
(1,104)
67,156
(144)
27,703
94,715
(1,045)
93,670
67,156
-
6,384
73,540
-
73,540
-
-
(237)
(237)
-
(237)
67,156
-
6,147
73,303
-
73,303
Collection House Limited // Page No: 089
(02) Reconciliation of profit for the year ended 30 June 2005
Consolidated
Company
Revenue
Depreciation and amortisation
expense
Impairment
Foreign exchange losses (net)
Other expenses
Employee expenses
Search fees
Direct collection costs
Insurance claims costs
Bad and doubtful debts
Operating lease rental expense
Consultancy fees
Legal expenses
Other expenses - related parties
Impairment of other assets
Net (gain)/loss on disposal of property
Finance costs - net
Profit before income tax
Previous Effect of AIFRS Previous Effect of AIFRS
AGAAP transition
to AIFRS
$’000
AGAAP transition
to AIFRS
$’000
$’000
$’000
$’000
$’000
Note
(e)(g)
126,552
(980)
125,572
58,767
(36)
58,731
(b)(c)
(22,776)
183
(22,593)
(3,446)
(c)
(301)
5
-
-
(301)
5
-
-
(g)
(8,207)
980
(7,227)
(4,281)
751
(988)
-
36
(35,223)
(12,826)
(16,106)
(4,029)
(27)
(3,551)
(619)
(757)
68
(1,103)
263
(3,724)
17,639
(5,825)
11,814
11,814
-
-
-
-
-
-
-
-
-
-
-
-
183
331
514
514
222
(35,223)
(22,892)
(12,826)
(418)
(16,106)
(13,863)
(4,029)
(27)
-
59
(3,551)
(2,163)
(619)
(757)
68
(1,103)
263
(3,724)
17,822
(5,494)
12,328
12,328
(137)
(666)
-
-
-
(3,704)
7,256
1,699
8,955
8,955
618
-
-
-
-
-
-
-
-
-
-
-
-
-
(237)
-
(237)
(237)
-
(2,695)
(988)
-
(4,245)
(22,892)
(418)
(13,863)
-
59
(2,163)
(137)
(666)
-
-
-
(3,704)
7,019
1,699
8,718
8,718
-
Income tax expense
(c)
Profit from continuing operations
Profit for the year
Profit attributable to minority interest
(c)
396
Profit attributable to members
of Collection House Limited
12,210
736
12,946
8,955
(237)
8,718
(03) Reconciliation of cash flow statement for the year ended 30 June 2005
The adoption of AIFRSs has not resulted in any material adjustments to the cash flow statement.
(04) Notes to the reconciliations
(a) Foreign currency translation reserve: cumulative translation differences
The Group has elected to apply the exemption in AASB 1 First-time Adoption of Australian Equivalents to International
Financial Reporting Standards. The cumulative translation differences for all foreign operations represented in the
foreign currency translation reserve are deemed to be zero at the date of transition to AIFRSs. The effect is:
(i) At 1 July 2004 and 30 June 2005
For the Group the balance of the $524,000 credit in the foreign currency translation reserve is reduced to zero.
Retained earnings is increased by this amount.
(b) Business combinations
The Group has made a number of business acquisitions in recent years. The Group has elected to apply the
exemption in AASB 1 to all acquisitions prior to transition date. On 1 July 2004, the Group acquired a further 5.9%
interest in Collection House Business Diagnostics Pty Ltd.
At the date of acquisition all identifiable assets were recognised by the Group, and no adjustment was required for
the transition to AASB 3 - Business Combinations.
{
Annual Report
}
2005 ~ 2006
The effect is:
(i) At 1 July 2004
There is no effect on the Group or the Company.
(ii) At 30 June 2005
For the Company, the impact on the financial statements would have resulted in goodwill being $751,000 higher and
amortisation being $751,000 lower.
(c) Property, plant and equipment
Impairment
Under AIFRS, the Group is required to test certain assets for impairment at each reporting date. Goodwill is
required to be impairment tested at least annually, and other relevant assets are tested whenever there is evidence
that there may be an impairment.
The assets of the Rapid Ratings Group of companies have been identified as being impaired. This business has been
in a startup phase since it was acquired by the Group on 14 June 2001. In the intervening period the business has
not reached a sufficient size to support the value of the assets in the balance sheet.
Collection House Group has determined that the discounted value of the future cashflows of the business are less
than the current carrying value of the assets, and accordingly these assets are impaired.
The assets of National Revenue Corporation have been identified as being impaired. Collection House Group has
determined that the discounted value of the future cashflows of the business are less than the current carrying value
of the assets, and accordingly these assets are impaired.
The effects of this on the Balance sheet are:
(i) At 1 July 2004
For the Group there has been a decrease in plant and equipment of $48,000, and a decrease in intangible assets of
$1,119,000. Retained earnings has decreased by $1,088,000. Deferred Tax Assets have increased by $14,000.
(ii) At 30 June 2005
For the Group there has been a decrease in plant and equipment of $146,000, a decrease in receivables of $9,000
and a decrease in intangible assets of $836,000. Retained earnings has decreased by $352,000. Deferred Tax Assets
have increased by $346,000.
Minority Interests have decreased by $222,000.
For the Company, financial assets have decreased by $988,000.
The effects on the income statement are:
(iii) For the year ended 30 June 2005
For the Group depreciation and amortisation expense, including impairment charges, has decreased by $183,000,
and income tax expense has decreased by $331,000.
Minority interests in the profit have decreased by $222,000.
For the Company impairment charges increase by $988,000.
Reclassification of computer software as an intangible item
AASB 138 Intangible Assets, computer software formerly classified as property, plant and equipment has been
reclassified as an intangible asset.
The effect is:
(iv) At 1 July 2004 and 30 June 2005
For the Group, property, plant and equipment has decreased by $3,501,000 and $3,644,000 respectively. Intangible
assets have increased by corresponding amounts.
For the Company, property, plant and equipment has decreased by $1,914,000 and $1,590,000 respectively.
Intangible assets have increase by the corresponding amounts.
(d) Share-based payments
Under AASB 2 Share-based Payment from 1 July 2004 the Company is required to recognise an expense for those
options that were issued to employees under the Collection House Option Plan after 7 November 2002 but that had
not vested by 31 January 2005. All options issued under these plans have vested or expired by 31 January 2005, and
no adjustment is required.
Collection House Limited // Page No: 091
(e) Financial instruments
The Group has elected to apply the exemption from restatement of comparatives for AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement. It
has therefore continued to apply the previous AGAAP rules to derivatives, financial assets and financial liabilities
and also to hedge relationships for the year ended 30 June 2005. The adjustments required for differences between
previous AGAAP and AASB 132 and AASB 139 have been determined and recognised at 1 July 2005. Refer to 1(m)
for further details.
In note 35 to the 30 June 2005 financial statements, the purchased debt portfolio was classified an an "Available for
sale financial asset", which was the Company's view based on work that had been done to that date.
Following amendments to AASB 139, most recently in June 2005, further consultation with advisors and clarification
by the International Accounting Standards Board, the Company is of the opinion that the portfolios now fall into any
of the "Loans and Receivables" category, the "Available for sale" category, or, subject to certain tests, the "At fair value
through profit or loss" category. The Company has chosen the "At fair value through profit or loss" category which
also best reflects the nature and accounting for these assets.
(f) Assets and liabilities of a disposal group held for sale
On 2 March 2004 the Group resolved to sell the business and assets of the New Zealand branch of the National
Revenue Corporation and initiated an active program to locate a buyer and complete the sale. The business was sold
on 20 August 2004 for an amount in excess of the carrying value of the assets that were sold.
On 28 July 2004 the Group resolved to to sell the business and assets of the Downie & Associates Unit Trust and
initiated an active program to locate a buyer and complete the sale. The business was sold on 17 September 2004
for an amount in excess of the carrying value of the assets that were sold.
Under previous AGAAP these assets were classified in the balance sheet by their nature (plant and equipment,
receivables and inventory). AIFRS requires these assets to be re-classified and separately identified in the balance
sheet as part of a disposal group held for sale.
(i) At 1 July 2004
For the Group $77,000 of property, plant and equipment, $4,000 of receivables, $24,000 of computer software, and
$879,000 of goodwill have been re-classified as part of assets held for sale.
(ii) For the year ended 30 June 2005
There is no effect on the Group or the Company.
(g) Proceeds on sale of non-current assets
Under previous AGAAP, proceeds from the sale of non-current assets were included in revenue and the book value
of the assets sold was included in other expense. Under AIFRS, net gains on the sale of assets are presented in other
income and net losses in other expense. The effect of this is:
(i) At 1 July 2004
There is no effect on the Group or the Company.
(ii) For the year ended 30 June 2005
For the Group, revenue and other expense have decreased by $980,000.
For the Company, revenue and other expense have decreased by $36,000.
(h) Income Tax
Under previous AGAAP income tax expense was calculated by reference to the accounting profit after allowing for
permanent differences. Deferred tax was not recognised in relation to amounts recognised directly in equity. The
adoption of AIFRS has resulted in a change in accounting policy. The application of AASB 112 Income Taxes has
resulted in the recognition of deferred tax liabilities on revaluations of non-current assets as well as deferred tax
balances arising during the year in relation to fair value adjustments on the acquisition of a Controlled Entity and
the equity component of convertible notes issued.
{
Annual Report
}
2005 ~ 2006
Deferred tax liability
(i) At 1 July 2004 and at 30 June 2005
The effects on the deferred tax liability of the adoption of AIFRS are as follows (tax rate of 30%):
1 July 2004
30 June 2005
Consolidated Company Consolidated Company
Notes
$’000
$’000
$’000
$’000
Adjustments arising from adoption of AASB 112
Databases
Increase in deferred tax liability
462
462
-
-
458
458
-
-
In accordance with UIG 1052 with the derecognition by the Company of deferred tax liabilities and assets
relating to subsidiaries, deferred tax liabilities have decreased by $22,346,000, deferred tax assets have increased
by $179,000 and a decrease of $22,167,000 to non-current receivables of the Company.
(ii) For the year ended 30 June 2005
For the Group this has decreased income tax expense by $331,000.
(iii) For the year ended 30 June 2005
In accordance with AASB 112, $5,381,000 of deferred tax liabilities have been off set against deferred tax assets,
resulting in a $5,381,000 decrease of deferred tax liabilities and deferred tax assets respectively for the Group.
For the Company, the required adjustment resulted in a $160,000 decrease in deferred tax liabilities and
deferred tax assets, respectively.
(i) Retained earnings
The effect on retained earnings of the changes set out above are as follows:
Foreign currency translation reserve
Impairment
Deferred tax liabilities
Total Adjustment
Equity holders of the Company
Minority interest
1 July 2004
30 June 2005
Consolidated Company Consolidated Company
Notes
$’000
$’000
$’000
$’000
(a)
(b)(c)
(h)
(524)
1,153
462
1,091
1,091
-
1,091
-
-
-
-
-
-
-
(524)
424
458
358
136
222
358
-
237
-
237
237
-
237
Collection House Limited // Page No: 093
(05) Adjustments on transition to AASB 132 Financial Instruments: Disclosure and Presentation and
AASB 139 Financial Instruments: Recognition and Measurement: 1 July 2005
Consolidated
Company
1 July AASB 139
Transition
2005
Adjustment
$’000
$’000
1 July
2005
$’000
1 July AASB 139
Transition
2005
Adjustment
$’000
$’000
1 July
2005
$’000
Assets
Current assets
Cash and cash equivalents
Receivables
Current tax receivables
Other current assets
Total current assets
Non current assets
Receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
Purchased debt
Databases
Total non-current assets
Total assets
Liabilities
Current liabilities
Interest bearing liabilities
Provisions
Current tax liabilities
Payables
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities
Payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Parent Entity interest
Minority interest
Total equity
4,775
12,929
763
1,437
19,904
1,013
-
6,566
891
28,692
46
112,339
10,414
159,961
179,865
2,592
2,123
1,309
6,391
12,415
54,290
361
19,129
-
73,780
86,195
93,670
67,156
(144)
27,703
94,715
(1,045)
93,670
-
(388)
-
-
(388)
4,775
12,541
763
1,437
19,516
558
19,459
763
1,011
21,791
(970)
84,198
-
116
-
665
(112,339)
-
(28,330)
43
84,198
6,566
1,007
28,692
711
-
10,414
131,631
79,214
20,959
5,558
4,122
13,552
28
-
-
123,433
(28,718)
151,147
145,224
-
-
-
-
-
-
-
(8,242)
-
(8,242)
(8,242)
2,592
2,123
1,309
6,391
12,415
54,290
361
10,887
-
65,538
77,953
2,429
1,779
-
3,319
7,527
54,290
343
-
9,761
64,394
71,921
(20,476)
73,194
73,303
-
-
(20,476)
(20,476)
-
(20,476)
67,156
(144)
7,227
74,239
(1,045)
73,194
67,156
-
6,147
73,303
-
73,303
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
558
19,459
763
1,011
21,791
79,214
20,959
5,558
4,122
13,552
28
-
-
123,433
145,224
2,429
1,779
-
3,319
7,527
54,290
343
-
9,761
64,394
71,921
73,303
67,156
-
6,147
73,303
-
73,303
{
Annual Report
}
2005 ~ 2006
Transition to AASB 132 and AASB 139
The Company has taken the exemption available under AASB 1 First-time Adoption of Australian Equivalents
to International Financial Reporting Standards to apply AASB 132 Financial Instruments: Disclosure and
Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.
Purchased debt with a carrying value of $111,674,000 that were classified in the balance sheet under previous
AGAAP as "Purchased debt" were designated and re-classified as "Other financial assets at fair value through
profit and loss".
An adjustment of $27,476,000 ($19,234,000 net of tax) was recognised. This represented an initial loss on
remeasurement to fair value of assets that, under previous AGAAP, had been measured at amortised cost.
The residual balance of $665,000 that was classified in the balance sheet under previous AGAAP as "Purchased
debt" and which represented capitalised court and legal costs (net) were re-classified as "Other non-current
assets". There was no change to the measurement of this balance at 1 July 2005.
The non-current receivable arising from the sale of the business of Downie & Associates on 19 September 2004,
together with the trade debtors and work-in-progress retained by the Collection House Group have been
impaired with an adjustment of $1,358,000 ($1242,000 net of tax) recognised. This represented a deficiency
between the carrying amount and the recoverable amount from current and discounted future cashflows.
For further information refer to note 1(e).
Collection House Limited // Page No: 095
15
Directors' declaration
to the members of Collection House Limited
}
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 40 - 95 are in accordance with the Corporations
Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Company’s and Consolidated Entity's financial position as at
Friday, 30 June 2006 and of its performance, as represented by the results of its operations,
changes in equity and its cash flows, for the financial year ended on that date; 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; and
(c) the audited remuneration disclosures set out on pages 28 - 35 of the Directors’ Report comply with
Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial
Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
John Pearce
MANAGING DIRECTOR
Brisbane, 30 August 2006
{
Annual Report
}
2005 ~ 2006
16
Independent Audit Report }
to the members of Collection House Limited
Scope
The financial report and directors’
responsibility
The financial report comprises the balance sheet,
income statement, statement of changes in equity,
cash flow statement, accompanying notes to the
financial statements, and the directors' declaration
(the
for both Collection House Limited
Company) and Controlled Entities, for the year
ended 30 June 2006. The Consolidated Entity
comprises both the Company and the entities it
controlled during that year.
The Company has disclosed information about
the remuneration of key management personnel
(remuneration disclosures) as required by AASB
124, under the heading "remuneration report" on
pages 28 - 35 of the directors’ report, as permitted
by the Corporations Regulations 2001.
2001. This
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
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
Australian Auditing Standards, in order to provide
reasonable assurance as to whether the financial
report is free of material misstatement and the
remuneration disclosures comply with AASB 124
and the Corporations Regulations 2001. 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,
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, changes in equity and
cash flows. We also performed procedures to assess
whether the remuneration disclosures comply with
AASB 124 and the Corporations Regulations 2001.
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
remuneration disclosures, and
// assessing
the appropriateness of
the
accounting policies and disclosures used
and the reasonableness of significant
accounting estimates made by the directors.
Our procedures
include reading the other
information in the Annual Report to determine
whether it contains any material inconsistencies
with the financial report.
While we considered the effectiveness of
management’s internal controls over financial
reporting when determining the nature and extent
of our procedures, our audit was not designed to
provide assurance on internal controls.
Independence
In conducting our audit, we followed applicable
independence
requirements of Australian
professional ethical pronouncements and the
Corporations Act 2001.
Audit opinion
In our opinion
(a) The financial report of Collection House
Limited:
// gives a true and fair view, as required by the
Corporations Act 2001 in Australia, of the
financial position of Collection House
Limited and its consolidated entities as at
30 June 2006, and of their performance for
the year ended on that date, and
// is presented
in accordance with the
Corporations Act
2001, Accounting
Standards and other mandatory financial
reporting requirements in Australia, and the
Corporations Regulations 2001.
(b) The audited remuneration disclosures that are
contained on pages 28 - 35 of the Directors’
Report comply with Accounting Standard
AASB 124 Related Party Disclosures (AASB
124) and the Corporations Regulations 2001.
Hacketts Chartered Accountants
Brisbane, 30 August 2006
Liam Murphy
PARTNER
Collection House Limited // Page No: 097
17
Shareholder information
The shareholder information set out below was
applicable as at 12 August 2006
}
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
100,001
-
-
-
-
1000
5,000
10,000
100,000
and over
Class of equity security
Ordinary shares
Shares
Options
Redeemable
preference shares
Convertible
notes
546,025
5,233,459
4,725,645
14,156,040
72,660,712
97,321,881
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
There were 207 holders of less than a marketable parcel of ordinary shares. There is no current on-market buy back.
(b) Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Mr Dennis George Punches
George Laurens (Qld) Pty Ltd
ANZ Nominess Limited
Mr Stephen Walker
City Plaza Inc
R P Prospects Pty Ltd
National Nominees Limited
Anthony Coutts & Jennifer Coutts
Citicorp Nominess Pty Limited
J P Morgan Nominess Australia Limited
Westpac Custodian Nominess Limited
Custodial Services Limited
Bernie No 132 Nominess Pty Ltd
Ankla Pty Ltd
Mr Anthony Coutts
Mr William Kagel
Mr John Oliver
Mr Raymond Larkin
Mr Neil Francis Day
Mr Krisno David Mumby
{
Annual Report
}
2005 ~ 2006
Ordinary shares
Number held
Percentage of
issued shares
14,054,835
14,000,000
8,042,365
6,750,000
4,772,427
4,000,000
3,934,660
3,600,000
2,182,475
1,519,128
826,662
698,500
681,988
596,485
534,000
500,000
418,125
400,000
320,100
250,000
14.44
14.39
8.26
6.94
4.90
4.11
4.04
3.70
2.24
1.56
0.85
0.72
0.70
0.61
0.55
0.51
0.43
0.41
0.33
0.26
68,081,750
69.95
Restricted securities
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:
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 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 12
August, 2006 there are 56,000 ordinary shares (0.58% 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.
(c) Substantial holders
Substantial holders in the Company are set out below:
Ordinary shares
Mr Dennis George Punches
George Laurens (Qld) Pty Ltd
ANZ Nominees Limited
Mr Stephen Walker
Options
Number held
Percentage
14,054,835
14,000,000
8,042,365
6,750,000
-
14.44%
14.39%
8.26%
6.94%
- %
(d) Voting rights
The voting rights attaching to each class of equity securities are set out below:
(i) 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.
(ii) Options
No voting rights.
Collection House Limited // Page No: 099
18
Corporate Directory
Corporate Office
Collection House Limited
ABN 74 010 230 716
488 Queen St, Brisbane Qld 4000
GPO Box 2584, Brisbane Qld 4001
Telephone: +61 7 3292 1000
Facsimile: +61 7 3831 6655
Email: shares@collectionhouse.com.au
Website: www.collectionhouse.com.au
Company Secretary
Kylie Lynam
Locations
Sydney
Brisbane
Melbourne
Adelaide
Perth
Auckland
Ballarat
Bendigo
Newcastle
Shepparton
Albury
Share Registry
Computershare Investor
Services Pty Ltd
Level 19, 307 Queen St, Brisbane Qld 4000
Telephone: 1300 52 22 70
Facsimile: +61 7 3229 9860
Website: www.computershare.com
Auditors
Hacketts Chartered Accountants
Level 3, 549 Queen St, Brisbane Qld 4000
Stock Exchange listings
Collection House Limited shares are listed on
the Australian Stock Exchange. The home
exchange is Brisbane.
{
{
}
}
Annual Report 2005 ~ 2006
2005 ~ 2006
Annual Report
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Brisbane, QLD, 4000
{
Collection House Limited
Street Address:
Postal Address:
Tel:
Level 3, 488 Queen St,
GPO Box 2584,
Brisbane, QLD, 4001
+61 7 3832 0222
Fax:
www.collectionhouse.com.au
+61 7 3292 1000
Website:
{
Annual Report
}
2005 ~ 2006
Company:Collection House Limited