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2 overview
7 Business
Performance
8 Who We Are 9 our
responsibilities
Overview
Performance Highlights ......................... 2
Chairman’s Statement ........................... 3
Chief Executive’s Review ........................ 4
Notice of
ANNuAl GeNerAl
MeetiNG
The Annual General Meeting of Collection House Limited will be held on 30 October 2009
at 11.00am at the Emporium Hotel, 1000 Ann Street, Fortitude Valley, Brisbane, QLD.
The business of the meeting is outlined in the formal Notice and Proxy Form that are
enclosed with this report.
CORPORATE DIRECTORY
Head Office
Collection House Limited
ABN 74 010 230 716
Level 7
515 St Paul’s Terrace
Fortitude Valley, Qld 4006
GPO Box 2247, Fortitude Valley BC
Qld 4006
Telephone: +61 7 3292 1000
Facsimile: +61 7 3832 0222
Website:
www.collectionhouse.com.au
Registered Office
Collection House Limited
c/- Hacketts DFK
Level 3
549 Queen Street
Brisbane, Qld 4000
Locations
Australia
Brisbane
Ballarat
Sydney
Bendigo
Melbourne
Newcastle
Adelaide
Shepparton
Perth
New Zealand
Auckland (2)
Stock Exchange Listings
Collection House Limited shares are listed on the Australian Stock
Exchange. The home exchange is Brisbane.
ASX Code: CLH
Company Secretary
Michael Watkins
Phone:
Facsimile: +61 3414 7525
+61 7 3100 1229
Auditors
Hacketts DFK
Level 3
549 Queen Street
Brisbane, Qld 4000
Share Registry
Computershare Investor Services Pty Limited
GPO Box 242
Melbourne, VIC 3001
AUSTRALIA
For general enquiries:
Phone: 1300 552 270 for calls within Australia or +61 3 237 2100
outside Australia
Your Proxy form may be faxed to Computershare on 1800 783 447
(within Australia) or +61 3 9473 2555 (outside Australia)
To access your account or change your details, please visit the
Computershare website at www.computershare.com
COLLECTION HOUSE LIMITED
117
20 Directors’
Report
35 Auditor’s
Independence
Declaration
36 Financial
Statements
Contents
117 Corporate
Directory
Business Performance
Who We Are
Directors’ Report ............................. 20
Company Profile .................................... 7
Board of Directors .................................. 8
Auditor’s Independence Declaration 35
Divisional Performance .......................... 7
Executive Management .......................... 8
Financial Statements Contents ........ 36
Purchased Debt ................................7
Our Responsibilities
Independent Audit Report ...............113
Commission Collections Services ....7
Receivables Management ................7
Corporate Social Responsibility ............. 9
Shareholder Information ................115
Environment ......................................9
Corporate Directory ........................117
Financial Basics Foundation ............9
Learning for Life ...............................9
Corporate Governance Statement ....... 10
COLLECTION HOUSE LIMITED
1
OVERVIEW
Performance Highlights
2007
2008
2009
Pre tax underlying profit ($m)
% growth
4.4
10.1
130%
10.5
4%
EBITDA ($m)
% growth
34.6
44.7
29%
47.9
7%
Dividends per share (cents)
% growth
2.0
4.7
135%
4.9
4%
Shareholders equity ($m)
% growth
77.1
84.3
9%
88.0
4%
FY07
FY08
FY09
Pre tax underlying profit ($m’s)
FY07
FY08
FY09
EBITDA ($m’s)
FY07
FY08
FY09
Dividends per share (c)
$m’s
11
10
9
8
7
6
5
4
3
2
1
0
$m’s
50
45
40
35
30
25
20
15
10
0
Cents
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
$m’s
100
90
80
70
60
50
40
30
20
10
0
FY07
Shareholders equity ($m’s)
FY09
FY08
2
ANNUAL REPORT 2009
Chairman’s Statement
“The Company is well positioned to take advantage
of the significant opportunities that we believe will be
available in the Australasian market”
It is a pleasure to report that the Company has had another
excellent year under the stewardship of our CEO Tony Aveling and
his dedicated and enthusiastic team. Congratulations Tony to you
and your team on a great result. Investors know what a tough past
year it has been and for us to report a profit and dividend up on last
year, is indicative of both the great team effort of our people and the
excellent opportunity that the industry presents.
With my election as Chairman taking effect on the 1st of July 2009
I want to thank our Chairman since listing on the ASX on October
4th 2000, Dennis Punches, for his guidance of the Company.
His experience and financial support has been essential in us
reporting nine consecutive annual profit results. Congratulations
Dennis, we are delighted that you are remaining on the Board as
Deputy Chairman.
With the sound base that has been created, particularly over the last
two years, we are now in a position to both consolidate and capitalise
on that foundation. We believe that there will be more debt available
for both purchase and also in the contingent environment over the
next year. And we believe that there will not be as much capital
available for the purchase of the available debt. That, along with
other factors should lead to lower prices for the debt purchased
and increased opportunities for contingent work. This, added to the
much better climate for recruiting and retaining quality staff, allows
us to feel confident about the year ahead.
In the past year we have moved to our new Head Office at “Green
Square” in Brisbane, a wonderful facility, a new well fitted office
in Sydney and a smaller less expensive location in Perth. These
moves consolidate our locations and offices to suit the focused
direction in debt management and recovery that we have taken.
Put simply, the Company is well positioned to take advantage of
the significant opportunities that we believe will be available in the
Australasian market.
As your new Chairman my focus will be on encouraging Tony Aveling
and his team to continue working with our clients and customers
to obtain results that will increase shareholder value. I am
enthusiastic about the challenge and will work to maximize results
for all stakeholders.
John Pearce
Chairman
COLLECTION HOUSE LIMITED
3
OVERVIEW
Chief Executive’s Review
“Our Company is strong and prosperous,
and our task is to make absolutely
sure it stays that way”
Despite difficult economic conditions, Collection House again
exceeded expectations. This was evidenced by achieving an
underlying pre tax profit of $10.5 million which is the highest since the
introduction of new accounting standards in 2006; growing EBITDA
(Earnings Before Interest Tax Depreciation and Amortisation) by 7%
to $47.9 million; and delivering a Total Shareholder Return of 15.9%
on the back of double digit yielding fully franked dividends.
Who we are
Collection House is Australia’s leading receivables manager with
offices in Queensland, New South Wales (2), Victoria (4), South
Australia, Western Australia and New Zealand (2).
A difficult 08/09 operating environment
To state the blindingly obvious, the world, and to a lesser degree
Australia and New Zealand, have been through a severe economic
downturn which is by no means over. Investors are only too painfully
aware of this and hardly need reminding of that overused term,
‘Global Financial Crisis’.
Inevitably these depressive forces impacted our business, principally
because those of our customers who are under increased financial
pressure are often less able to meet their obligations. This is
particularly so where they have lost their jobs or fear that that is
likely to happen.
Our core businesses are Receivables Management, Commission
Collections and Debt Purchasing.
Time to amend the strategy
We focus on mainly blue chip clients including major banks,
financial institutions, insurance houses, large corporations, public
utilities and local governments.
Our competitive strength lies not only in being very good at collections,
but also in our people and training, our brand protection leadership
through following high ethical standards, our compliance culture,
our proprietary technology, and our management information.
What we have done
Collection House was floated on the Australian Stock Exchange in
2000. While there have been some ups and downs, the Company
has made profits and paid dividends every year since then.
Within the industry, we are a unique combination of Top 4 debt buyer,
usually top performing agent when contingent rankings are provided
by clients, and excellence in Local Government collections.
Since inception we have paid $338 million for purchases of debt with
a Face Value of $2.9 billion.
However, good companies don’t throw up their hands in despair
when life gets tough. They amend their strategies and they find a
better way.
When the financial system started falling apart, we recognised that
we not only needed to change but that we had to move fast.
The key changes we made were:
•
Helping protect our ongoing viability by securing longer term
funding from our bankers.
• Decreasing costs by reducing the number of support staff.
•
•
•
Growing our Purchased Debt Ledger book by taking a disciplined
approach to pricing debt purchases that reflect more difficult
economic conditions.
Maintaining book value and cash flow by emphasising the need
for customers to enter into repayment arrangements where
they were unable to make payment in full.
Growing our business by placing greater emphasis on the
commission businesses which are more likely to grow as clients
look to strengthen their cash flow from receivables.
4
ANNUAL REPORT 2009
•
•
•
•
•
•
•
•
•
What we achieved
An exceptional new Head Office
Thankfully these moves paid off with key results as follows:
After jumping from $4.4 million to $10.1 million in 2007/08,
underlying pre tax profits, ie excluding exceptional items, grew
to $10.5 million (lower tax credits saw after tax profits dip from
$7.5 million to $7.4 million).
Revenue from continuing activities was up 7% to $102 million with
rises in both Purchased Debt and Commission Collections.
EBITDA rose from $44.7 million to $47.9 million while EBIT was
up 9% to $15.5 million.
Net Assets per share increased to 90.4 cents, considerably
higher than the year end share price of 49 cents which itself was
up 56% from its November low of 31 cents.
Instead of the usual one year facility, we requested and received
a two year facility extension from our long term bankers. All
covenants were comfortably met.
Annual Reports do not usually cover moves to a new Head Office but
we are very excited about this and wish to share the news with you.
We have moved from two buildings in Brisbane’s Central Business
District to one on the fringe CBD. Our previous tenancies were old
and tired, had become totally unsuitable for a modern call centre
environment, and the rentals were about to more than double.
Instead we now have a state of the art Head Office, and as good a
call centre as any in Queensland. It presents a professional image
for our clients, it has been enthusiastically received by our staff and
aids both recruitment and retention. We achieved an exceptional
value for money fitout, and the rental is much lower than if we had
remained in our previous locations.
Best of all, the building achieved a 6 Star Green Star rating, the
first in Queensland. This feature is tremendously important to
the Company and our staff as we all try to play our part in limiting
damage to the environment.
We were disciplined with our Purchased Debt pricing, buying 73%
of the previous year’s Face Value but for only 48% of the cost.
Still a challenging external environment
The all important Purchase Debt Arrangement Book, where
there is a high propensity to pay, grew 13% to $106 million while
the default rate halved.
Cash flow was negative $6 million, this being due solely to the
one off costs of moving our Head Office.
Amortisation of our Purchase Debt Ledgers remained within our
usual 47-49% band.
•
Productivity rose despite the difficult environment.
•
The ratio of Support to Collection staff reduced yet again, this
time from 14.6% to 12.4%.
From the all important shareholder perspective, Collection House
recorded a positive TSR (Total Shareholder Return) of 15.9% on
the back of an attractive fully franked double digit dividend yield.
Dividends for the year grew from 4.7 cents to 4.9 cents.
While the economic outlook is currently looking brighter, it seems
likely to be quite some time before we return to ‘normal’.
From the perspectives of this business, the greatest challenge
is the near certainty of rising unemployment which will reduce
the recoverability of our debt. At the same time, household costs
are rising, especially power, water and transport costs, which are
squeezing household budgets.
We are also seeing Purchase Debt vendor expectations remaining
too high, a position encouraged by some purchasers. Our qualitative
and quantitative pricing models developed over many years do not
support these prices, nor does experience overseas.
Finally on the downside, we must acknowledge the benefits we
received through the Federal Government’s stimulatory measures in
2008/09 – benefits which will not be received this year.
COLLECTION HOUSE LIMITED
5
OVERVIEW
Chief Executive’s Review
There are many positives though. There is not likely to be a shortage
of debt for sale and potential Commission Collections volumes
could rise.
Relatively low interest rates will continue which benefits both our
customers and our own funding costs.
We also expect further improvement in the availability, quality and
retention of employees as job security assumes greater importance
than in recent years.
A special thanks to our enthusiastic staff
Recent employee satisfaction surveys go some way to explaining why
we are performing so well despite the economic doom and gloom.
For nearly all questions, over 80% of respondents agreed or strongly
agreed with the positive attributes of Collection House. Highlights
included 96% of respondents know what is expected of them in
their role, 92% understand what the Company’s objectives are
and how they contribute to these being achieved, 90% say that
communications are good, and 90% have a good relationship with
their immediate supervisor.
We have an experienced Executive Management team, hundreds of
enthusiastic Customer Service Officers, and a valued support staff
without whom none of this progress could have been achieved. To
them my sincere thanks.
Outlook
To maintain momentum, our strategies will focus upon building
the Arrangement Book, maximising productivity, maintaining
disciplined pricing for debt purchases, and gaining profitable new
commission clients.
Our Company is strong and prosperous, and our task is to make
absolutely sure it stays that way. I’m confident that the inspiration
of a sound strategy, the guidance of the Board, and the hard work
and talent of our people, will enable us to capitalise on our record of
growing profits and dividends.
Tony Aveling
Chief Executive Officer
6
ANNUAL REPORT 2009
BusInEss P ERfORmancE
Company Profile
Collection House Limited is Australia’s leading receivables manager.
Our core business is providing contingent collection services,
receivables management and debt purchasing services (Lion
Finance Pty Ltd).
As a public company, listed on the Australian Stock Exchange (ASX
Code: CLH), Collection House operates throughout Australia and
New Zealand.
We enjoy strong business relationships with a diverse range of blue
chip clients including major Australian and New Zealand banks,
financial institutions, insurance houses, large corporations, public
utilities and government authorities.
We focus on enhancing our stakeholders’ brand protection by
maintaining the highest ethical standards and a strong culture of
compliance with the laws and regulations governing our business.
We believe Collection House sets the benchmark in ethical
debt collection.
The success of our business is undoubtedly underpinned by
the quality of our people. Reinforcing these quality standards
are innovative training and development programs providing
professional career advancement in debt collection. Headquartered
in Brisbane, Collection House now employs over 580 staff in 11
Australasian offices.
For further shareholder, investment and career information, please
visit www.collectionhouse.com.au
Divisional Performance
Purchased Debt
The impact of the economic downturn has been offset by a continuous
emphasis on growing the Arrangement Book via strategies and
process improvements implemented throughout the year. This puts
in place a growing reoccurring revenue source and supports the
carrying value of the debt portfolio.
Discounting continued to be well managed and targeted letter
and telephony campaigns on older debt portfolios complemented
the activity of the Customer Service Officers work upon
newer purchases.
Staff retention strategies have been effective during the year with
an increase in the average length of service of Customer Service
Officers from 14 months to 16 months. Further developing our
valued staff, a more robust and dedicated training team was also
introduced into the Debt Purchase Division thus enhancing the
training, development and ongoing support that will underpin
future initiatives.
Commission Collections Services
Within the Commission Collections business we have experienced
solid organic growth from our key clients through the referral of
additional products.
Additionally we have continued to rationalise contracts which
were not delivering acceptable returns. While this led to revenue
reductions at times, underlying profitability increased.
Three primary areas within our Commission Collections Division,
being Banking and Finance collections, Insurance and Corporate
(Commercial) are all showing positive signs of growth and are
expected to be significant contributors to future results.
The fourth area, Midstate Credit Management Services Pty Ltd
which provides services to Local Government, achieved another
outstanding result despite difficulties posted by bushfires and
droughts (www.midstatecms.com.au).
Receivables Management
Global recession, increased living costs and higher unemployment
are creating a demand for our Receivables Management business
now in its ninth year of operation.
Whilst book growth continues, we have managed to maintain staff
numbers by up skilling and utilisation of new technology. Collection
House’s shared outbound calling team, the National Collections
Division, assisted in this by providing support for overflow and
conducting weekend and evening campaigns.
This year we introduced 100% call recording enabling training
and development of our Customer Service Officers. This tool is
invaluable as it will also ensure protection for Collection House, our
customers and our valued clients.
Revenue for the division has increased. As part of our growth
strategy we will work toward increased volumes and productivity
through the up skilling and retention of staff.
COLLECTION HOUSE LIMITED
7
WHO WE aRE
Board of Directors
1
2
7
3
4
8
5
6
1 | John Pearce
Chairman
4 | Barrie Adams
7 | Bill Hiller
Lead Independent
Director
Independent
Director
2 | Dennis Punches
Deputy Chairman
3 | Tony Aveling
Managing Director
& Chief Executive
Officer
5 | Tony Coutts
8 | Bill Kagel
Non-Executive
Director
Independent
Director
6 | Barry Connelly BJ.
Independent
Director
Further information on our
Directors is contained in
the Directors’ Report on
pages 23 to 25.
Executive Management
Adrian Ralston
Chief Financial Officer
Kylie Lynam
General Manager –
Human Resources
Matthew Thomas
Chief Operating Officer
Michael Watkins
General Counsel and
Company Secretary
8
ANNUAL REPORT 2009
OuR REsPOnsIBIlItIEs
Corporate Social Responsibility
Supporting the Environment:
New Head Office
As outlined earlier in this report, one of our primary business
objectives is attracting and retaining quality employees. In line with
this key objective in 2008/09 we relocated our Brisbane Head Office
to new premises which offers our people a significantly enhanced
working environment.
Located in the heart of the vibrant urban renewal precinct of Fortitude
Valley, Green Square North Tower occupies a prominent site, just 250
metres from Brunswick Street Railway Station – one of only three
major railway stations in Brisbane which are serviced by all trains.
Brisbane City Council buses servicing most Brisbane suburbs can
also be accessed directly in front of the site, offering our employees
an unparalleled range of convenient public transport options.
Green Square has achieved a coveted 6 star Green Star rating under
the Green Building Council of Australia Scheme – an environmental
rating tool which evaluates the environmental performance of
buildings based on extensive criteria.
In keeping with the 6 star Green Star rating, the new Head Office
has been fitted out with as many environmentally friendly facilities
as possible, which provides benefits to both our people and the
wider community.
Financial Basics Foundation
“Now, more than ever financial education is an essential life skill
for all young people. We need to start financial education early with
a planned and coherent program throughout the school years so
that all young people leaving school have the skills, knowledge and
confidence in financial matters to participate fully in society.” Barrie
Adams, Chairman Financial Basics Foundation.
The Financial Basics Foundation was established in 2002 by
Collection House in response to the need for greater financial
literacy amongst young Australians. We continue to be a major
supporter of the Foundation.
The completion of the review and update of the Operation
Financial Literacy material at the end of last year also included the
development of a new module for the Operation Financial Literacy
teaching resource. Module 11 - Scams has been incorporated, and
as with all of the Foundations resources - the material was written
by leading business educators and has been mapped to all state
and territory curriculum documents for ease of use in Australian
secondary schools.
A further 200 new schools have registered in the last financial year for
this material. Operation Financial Literacy has now been distributed
free of charge to some 1500 secondary schools across Australia.
Released in June 2007 the ESSI (Earning, Saving, Spending and
Investing) Money online game had 11,360 registered users within the
first 12 months. By June 2009 this figured has grown to over 28,848
registered users.The Foundation worked with the game’s developers
to produce a CD Rom version of ESSI Money to better facilitate
access to this important learning tool to regional schools and those
schools with limited bandwidth.
The global financial crisis has highlighted the need for programs
and resources that not only better educate young Australians about
sound financial management skills but that help young people
engage in their community and to build their own financial capacity.
With the lessons learned from this situation the Foundation is
working closely with the management of Collection House to utilise
these valuable educational tools with staff in the Company.
The Foundation continues to maintain a focussed and long term
approach to the development and enhancement of our resources
and this was a key outcome in 2009.
The Foundation’s resources are now also being provided to well
known charitable institutions in Australia. Charities that work
with young people who are often disengaged from the traditional
education system consider financial literacy as a critical life skill.
All of the learning materials and ESSI Money are provided
by the Foundation at no cost to schools and charities
throughout Australia.
For more information about the Financial Basics Foundation,
Operation Financial Literacy or ESSI Money go
to
www.financialbasics.org.au
Learning for Life
As we enter our fourth year supporting the Smith Family’s
Learning for Life program, Collection House’s commitment to this
worthwhile cause continues. Learning for Life supports financially
underprivileged children through education, assisting with books,
uniforms and excursions. This past year, Collection House
provided support for four students offering them the opportunity to
develop through literary support, mentoring, tutoring and personal
development initiatives supplied by the program. We intend to
continue the contribution to this very worthwhile program as part of
our commitment to social community responsibility.
COLLECTION HOUSE LIMITED
9
OuR REsPOnsIBIlItIEs
Corporate Governance Statement
1. Introduction
3. The Board of Directors
This statement relates to the year under review.
a) Membership and expertise of the Board
a) Date of statement
This Statement reflects our corporate governance framework,
policies and procedures which have been in place since 1 January
2008 and were re–approved and re–endorsed by the Collection
House Limited Board on 25 June 2009.
b) Access to information on the website
This Corporate Governance Statement, and the documents
referred to in the Statement, are available for viewing on our
website in the corporate governance section (unless otherwise
stated) at ‘www.collectionhouse.com.au’.
2. Our approach to corporate governance
Directors’ membership, period of office held, experience and
shareholdings are provided in greater detail on pages 23 to 25 of
the Directors’ Report.
ASXCGC’s Recommendations 2.6
b) Board role and responsibility
The role and responsibilities of the Board are formalised in the
Board Charter. The Charter also defines the matters that are
reserved for the Board and its Committees, and those that the
Board has delegated to management.
The Board is accountable to shareholders for our performance,
and the Board’s responsibilities include:
a) Framework and approach to corporate governance
Our approach to corporate governance is based on a set of
values and behaviours that underpin everyday activities, ensures
transparency and fair dealing, and protects stakeholder interests.
The Board continues to review this framework and our practices
to ensure that we meet the interests of our stakeholders.
This approach includes a commitment to the highest standards
of governance and the revised ‘Corporate Governance Principles
and Recommendations’ which our Board sees as fundamental
to shareholder and market confidence and to the sustainability
of our business and performance.
b) Compliance with the ASXCGC’s Principles
and Recommendations
The ASX Listing Rules require listed entities, such as our
Company, to include a statement in their Annual Report
disclosing the extent to which they have followed the twenty
seven (27) ASXCGC Principles and Recommendations (ASXCGC’s
Recommendations) during the reporting period, identifying any
recommendations that have not been followed and providing
reasons for that variance.
We believe that our corporate governance practices comply
with the ASXCGC’s Principles and Recommendations, other
than for Recommendations 2.1, 2.2, 2.4 and 4.2, which relate
to independence. Our reasoning on independence and an
explanation for our variance on the ASXCGC’s Recommendations
2.1, 2.2, 2.4 and 4.2 are set out in section 3(e) and section 4(b) of
this Statement.
A checklist summarising our compliance with
ASXCGC’s Recommendations
‘www. collectionhouse. com. au’.
the
is on our website at
ASXCGC’s Recommendations 2.1, 2.2 and 2.6
10
ANNUAL REPORT 2009
•
•
•
•
•
•
•
•
•
•
•
•
•
•
providing strategic direction and approving significant
corporate strategic initiatives;
providing input into, and approval of, management’s
development
and
performance objectives;
corporate
strategy
of
reviewing and approving business plans;
overseeing and monitoring the financial and non financial
key performance indicators;
Board performance and composition;
Board and executive leadership selection;
succession planning for the Board and executives;
enhancing and protecting the brand and reputation of
the Company;
setting MD/CEO and Non-executive Director remuneration;
considering and approving our half-yearly and annual
financial statements;
selecting and recommending
appointment of the external auditor;
to shareholders
the
approving our risk management strategy and various
risk management
and monitoring
their effectiveness;
frameworks
corporate responsibility – considering the social, ethical and
environmental impact of our activities, setting standards
and monitoring compliance;
maintaining a direct and ongoing dialogue with relevant
regulators in Australia and ensuring that the market and our
shareholders and other investors are continuously informed
of material developments; and
•
determining the scope of delegated authorities.
The Board has delegated a number of these responsibilities to
its Committees. The responsibilities of these Committees are
detailed in section 4 of this Statement.
The Board has delegated
responsibility for:
to Executive Management,
•
•
•
•
•
•
developing and implementing corporate strategies and
making recommendations on significant corporate
strategic initiatives;
making recommendations for the appointment of Executive
Management, determining terms of appointment, evaluating
performance, and developing and maintaining succession
plans for Executive Management roles;
developing our annual budget plan and managing day-to-
day operations within the budget plan;
maintaining effective risk management frameworks;
keeping the Board and market fully informed about material
developments; and
in accordance with
managing day-to-day operations
standards for social, ethical and environmental practices,
which have been set by the Board.
ASXCGC’s Recommendation 1.1
c) Board size and composition
The Board considers that the optimum number of Directors
is between six and eight, with Independent Non-executive
Directors, comprising the majority of the Board.
As at 30 June 2009, there were three Non-independent Non-
executive Directors, four Independent Non-executive Directors
and one Executive Director on our Board. Our Constitution sets
a maximum of ten Directors. The Chairman of the Board is non-
executive, separate and independent of the role of the MD/CEO.
The Nominations Committee assesses: the Board composition
and size and recommends to the Board changes to the Board
composition and size; and the skills required to discharge the
Board’s duties, having regard to our business mix, financial
position and strategic direction, including specific qualities or
skills that the Nominations Committee believes are necessary
for one or more of the Directors to possess.
ASXCGC’s Recommendations 2.1, 2.3 and 2.4
d) The Chairman
The Board elects one of the Non-executive Directors to
be Chairman.
The current Chairman, John Pearce, is a Non-executive Director.
He has been a Director of the Company since 9 April 1993 and
Chairman since 25 June 2009. The Chairman is a member of
the Remuneration Committee.
Until 25 June 2009, Dennis Punches was Chairman, having held
that position since 2000.
Both the Company’s current Chairman, John Pearce, and the
previous Chairman, Dennis Punches, are considered by the Board
not to be independent in terms of the ASX Corporate Governance
Council’s definition of Independent Director. However, the Board
considers that for the reasons set out in section 3(e), both
John Pearce and Dennis Punches have extensive experience
and professionalism which allows them to exercise quality,
unfettered and independent judgment on all relevant issues
falling within the scope of the role of Chairman of the Board.
Dennis Punches is Chairman of the Nominations Committee.
ASXCGC’s Recommendation 2.2, 2.4
e) Director independence
Directors are considered to be independent if they are
independent of management and free from any business or
other relationship that could materially interfere with, or could
reasonably be perceived to materially interfere with, the exercise
of their unfettered and independent judgment. Materiality
is assessed on a case-by-case basis by reference to each
Director’s individual circumstances rather than by applying
general materiality thresholds.
Directors must disclose any interests or relationships, including
any related financial or other details, to the Board to determine
whether the relationship could, or could reasonably be perceived
to, materially interfere with the exercise of a Director’s unfettered
and independent judgment.
The Board considers that until 30 June 2009, a majority of the
Board is not independent. However, the Board considers that the
individuals on the Board can, and do exercise quality, unfettered
and independent judgment in the best interests of the Company,
on all relevant issues. Directors who have 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.
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
its current composition meets
Board believes
these requirements.
that
The Nominations Committee charter discloses a process for
selection and appointment of new Directors and re-election of
incumbent Directors.
COLLECTION HOUSE LIMITED
11
OuR REsPOnsIBIlItIEs
Corporate Governance Statement
Exceptions to ASXCGC’s Recommendations
f) Avoidance of conflicts of interest by a Director
The Board is conscious of its obligations to ensure that Directors
avoid conflicts of interest (both real and apparent) between their
duties as Directors of the Company and their other interests
and duties.
In accordance with our Constitution, all Directors are required
to disclose any actual or potential conflict of interest on
appointment as a Director and are required to keep these
disclosures up to date.
Any Director with a material personal interest in a matter
being considered by the Board must declare their interest and,
unless the Board resolves otherwise, they may not participate in
boardroom discussions or vote on matters in respect of which
they have a conflict.
Our Constitution and Code of Conduct for Directors and
Senior Executives can be obtained from our website at ‘www.
collectionhouse.com.au’.
ASXCGC’s Recommendation 3.1
g) Meetings of the Board and their conduct
The Board has scheduled meetings each year and meets
whenever necessary between scheduled meetings to deal with
specific matters needing attention.
The Chairman, with input from the MD/CEO and the Company
Secretary, establishes meeting agendas for assessing our
coverage of financial, strategic and major risk areas, throughout
the year. The Directors have the opportunity to review meeting
materials in advance. Directors are always encouraged to
participate with a robust exchange of views and to bring their
independent judgments to bear on the issues and decisions
at hand.
Details of meetings attended by Directors during the year are
reported in the Directors’ Report.
h) Succession planning
The Board considers Director succession in conjunction with
the Nominations Committee. Together they are responsible
for developing and implementing succession planning for Non-
executive Directors, taking into account the challenges and
opportunities facing us and the skills and expertise which are
likely to be needed on the Board today and in the future.
is
responsible
The Board
for MD/CEO succession
planning. The MD/CEO is actively involved with Executive
Management succession.
2.1 A majority of the Board should be
Independent Directors
Of our Board, four Directors are considered not to be independent
in accordance with Recommendation 2.1, as at 30 June 2009.
These Directors are John Pearce (Chairman appointed 25 June
2009) (previously Deputy Chairman), Dennis Punches (Deputy
Chairman appointed 25 June 2009) (previously Chairman), Tony
Aveling (MD/CEO) and Tony Coutts (Non-Executive Director).
Due only to their respective substantial shareholdings in the
Company, John Pearce and Dennis Punches and also Tony
Coutts, as a previous Executive Director (resigned 30 June 2006),
are not classed as Independent Directors. The Board maintains
however, that their individual and combined industry experience
and knowledge of international and domestic trends in the
collection industry are invaluable to the Company. Directors’
experience and shareholdings are provided in greater detail on
pages 23 to 25 of the Directors’ Report.
2.2 and 2.4 The Chairperson should be an
Independent Director
While the Chairman of the Board, John Pearce and the previous
Chairman, Dennis Punches, are not classed as independent
(Recommendations 2.2 and 2.4), their experience and knowledge
of the industry, both individually and collectively, coupled with
their ability to lead, have enabled both of them to be, and
continue to be, a valuable and effective Chairman and Deputy
Chairman respectively of the Board and in the case of John
Pearce, a member of the Remuneration Committee and in
the case of Dennis Punches, Chairman of the Nominations
Committee, with a scope well beyond that of other candidates,
at either a national or international level.
As noted, Tony Aveling is not deemed to be independent by virtue
of his role as MD/CEO of the Company.
Notwithstanding, the Board does not consider there are any
matters that may materially interfere with the exercise by John
Pearce, Dennis Punches and Tony Aveling of unfettered and
independent judgment.
The appointment of Barrie Adams, in June 2003, as Lead
Independent Director coupled with the remaining Independent
Non-executive Directors, ensures that the Board can operate
independently of Executive Management and provides for special
professional expertise.
ASXCGC’s Recommendations 2.1, 2.4 and 2.6
12
ANNUAL REPORT 2009
The Board is responsible for approving the MD/CEO financial
and non-financial performance objectives and for evaluating
the performance of the MD/CEO against those objectives. The
MD/CEO oversees the process of objective setting for Executive
Management and monitors the performance of Executive
Management against those objectives.
ASXCGC’s Recommendation 1.2
i) Review of Board and Committee performance
The Board undertakes an annual review of its performance and
of the performance of the Chairman, individual Directors and
Board Committees.
The performance review process is facilitated internally, and can
include interviews with Directors and written surveys of Directors,
Executive Management and the Company Secretary and General
Counsel. These reviews are conducted in accordance with the
Company’s performance evaluation process for Directors and
Executive Management. The Chairman formally discusses the
results with individual Directors and Committee chairs.
The Chairman is reviewed by his fellow Directors adjudging his
performance and contributions to the Board, Board discussions,
leadership, and in guiding and assisting the Board to comply
with its charter.
A performance evaluation of the Directors and Senior Executives
consistent with the approach above has occurred during the
reporting period.
ASXCGC’s Recommendations 2.5, 2.6 and 8.1
j) Nomination and appointment of new Directors
The Nominations Committee considers and makes
recommendations for nominations of new Directors to the
Board as a whole and operates in 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’.
New Directors receive a letter of appointment, which sets
out their duties, the terms and conditions of appointment
including expected term of appointment, remuneration and the
expectations of the role. This letter conforms with ASXCGC’s
Principles and Recommendations.
If the Board appoints a new Director during the year, that
person will stand for election by shareholders at the next
Annual General Meeting (AGM). Shareholders are provided with
relevant background information on the candidates for election.
The Nominations Committee reviews appointment criteria from
time to time and makes recommendations concerning the
re-election of any Director by shareholders.
ASXCGC’s Recommendation 2.4
k) Board access to information and advice
All Directors have unrestricted and unfettered access to
Company records and information and receive regular detailed
financial and operational reports from Executive Management to
enable them to carry out their duties.
The Chairman and other Non-executive Directors regularly
consult with the MD/CEO, the CFO, Company Executives, the
Company Secretary and General Counsel. In addition, Directors
may consult with, and request additional information from, any
of our employees.
The Board collectively, and each Director individually, has the
right to seek independent professional advice, at the Company’s
expense, to help them carry out their responsibilities. While the
Chairman’s prior approval is needed, it may not be unreasonably
withheld and, in the Chairman’s absence, Board approval may
be sought.
ASXCGC’s Recommendation 2.1 and 2.6
l) Company Secretary
Our Company Secretary is Michael Watkins, who combines
his role as Company Secretary and as General Counsel of the
Company. Michael is also a Solicitor Director of Jones King
Lawyers Pty Ltd, a wholly owned subsidiary of the Company.
Michael joined us in 2000 as General Counsel and was appointed
to his present role as Company Secretary and General Counsel
in December 2006 with responsibility for the management and
delivery of company secretarial, legal and governance advice and
support to the Board, executive and business. Responsibilities
for the secretariat function include providing advice to Directors
and officers on corporate governance and regulatory matters,
developing and implementing our governance framework,
coordinating the completion and dispatch of the Board and
Committee Meeting agendas and papers, and giving practical
effect to the Board’s and the Committees’ decisions.
Prior to Michael’s current appointment, he practised commercial
law in private practice from 1978 and was a partner in his
own Brisbane CBD law firm from 1980, until accepting the
appointment as General Counsel of the Company in 2000.
All Directors have access to advice from the Company Secretary
and General Counsel at any time.
4. Board Committees
a) Board Committees and membership
We have three standing Board Committees. The Committee
Charters (available on our website) describe their roles and
powers, as approved by the Board.
COLLECTION HOUSE LIMITED
13
OuR REsPOnsIBIlItIEs
Corporate Governance Statement
The three Board Committees and their membership at 30 June 2009 are set out in the table below:
Barrie Adams Bill Hiller
Barry Connelly Bill Kagel
Dennis Punches
John Pearce
Tony Coutts
Audit and Risk
Management
Committee
Chairman
and Lead
Independent
Director
Independent
Director
Independent
Director –
resigned 30
October 2008
Nominations
Committee
Independent
Director
Independent
Director
Remuneration
Committee
Lead
Independent
Director
Chairman and
Non-independent
Director
Non-independent
Director
Non-
independent
Director
Chairman and
independent
Director
Non-independent
Director –
appointed 30
October 2008
Attendances of Directors at Committee meetings are set out in
the Directors’ Report at page 25.
ASXCGC’s Recommendations 2.6, 4.1, 4.2, 4.3, 4.4, 8.1 and 8.2
to attend all Committee meetings, except where the MD/CEO
has a material personal interest in a matter being considered.
Executive Management and other selected employees are
invited to attend Committee meetings as necessary.
b) Committee procedures
How the Committees report to the Board
Composition and independence of the Committees
Committee members are chosen for the skills, experience and
other qualities they bring to the Committees.
At the next Board meeting following each Committee meeting, the
Board is given an oral report by the Chair of each Committee. In
addition, all Committee minutes are tabled at Board meetings.
Exceptions to the ASXCGC’s Recommendations
How Committees’ performance is evaluated
The Audit and Risk Management Committee, on and from 30
October 2008, did not consist only of Independent Non-Executive
Directors in accordance with Recommendation 4.2. The Audit
and Risk Management Committee was until 30 October 2008,
composed of only Independent Non-executive Directors. On and
from 30 October 2008, Barry Connelly (Independent Director)
resigned, and Tony Coutts was appointed to the Audit and Risk
Management Committee.
Due only to Tony Coutts’ tenure as an Executive Director, which
concluded on 30 June 2006, and the intervening period of 3
years, Tony is considered a Non-Independent Non-Executive
Director. From 30 October 2008 the Audit and Risk Management
Committee is considered non compliant with Recommendation
4.2. Given Tony Coutts’ industry experience and knowledge of
domestic trends in the collection industry, the Board maintains
that he is, and will continue to be, a valuable and effective
Director in the Audit and Risk Management Committee.
On and from 1 July 2009, the Audit and Risk Management
Committee is composed of Independent Non-Executive Directors
and is structured in compliance with Recommendation 4.2.
Operation of the Committees and reporting to the Board
During the year, the Board Committees meet at least annually,
and at other times as necessary. Each Committee is entitled
to the resources and information it requires and has direct
access to our employees and advisers. The MD/CEO is invited
14
ANNUAL REPORT 2009
The performance of Committees is discussed and reviewed
initially within each Committee and then reviewed as part of
the Board’s performance review. The performance of each
Committee member (other than the MD/CEO) is evaluated as
part of the annual review of each Director.
ASXCGC’s Recommendation 2.5, 4.1, 4.2, 4.4, 7.1, 7.2, 7.4, 8.1, 8.2
and 8.3
c) Audit and Risk Management Committee
Role of the Committee
The Audit and Risk Management Committee operates in
accordance with its Board approved charter, a copy of which
is available from the corporate governance section of the
Company’s website at ‘www.collectionhouse.com.au’.
The Audit and Risk Management Committee oversees the risk
profile and approves our risk management framework within
the context of the risk-reward strategy determined by the Board.
The Committee monitors the alignment of our risk profile with
our risk appetite. The Committee oversees how we manage the
risks which are relevant to our operations.
The determination of the risk-reward strategy
includes
recommendations from the Audit and Risk Management
Committee, the MD/CEO and Executive Management on the
parameters of our risk-reward profile and appropriate strategy.
Our Board shares oversight responsibility for risk management
with the Audit and Risk Management Committee.
The Audit and Risk Management Committee, oversees all
matters concerning:
integrity of
the
reporting systems;
financial statements and
financial
making recommendations to the Board for the appointment
of the external auditor;
external auditor’s qualifications, performance, independence
and fees;
•
•
meets separately with the external auditors and the internal
auditor at least twice a year without Executive Management
being present;
provides the internal and external auditors with a clear line
of direct communication at any time to either the Chairman
of the Committee or the Chairman of the Board.
The Audit and Risk Management Committee met on 7 occasions
during the reporting year.
The Audit and Risk Management Committee regularly updates
the Board about its activities.
oversight and performance of the internal audit function;
ASXCGC’s Recommendations 4.1, 4.2, 4.3, 4.4, 7.1 and 7.2
compliance with
regulatory requirements;
financial
reporting and
related
d) Nominations Committee
•
•
•
•
•
•
•
•
•
•
•
•
reviews and approves the frameworks for managing our
market, operational and compliance risk;
determines, approves and reviews
limits and
conditions that apply to the taking of risk, including the
authority delegated by the Board to the MD/CEO and
Executive Management;
the
monitors the risk profile, performance, capital levels,
exposures against limits and management and control of
our risks;
monitors changes anticipated for the economic and business
environment and other factors considered relevant to our
risk profile;
reviews and monitors any related party transactions and
assesses their propriety;
oversees the development and ongoing review of appropriate
policies that support our frameworks for managing risk;
reviews significant issues that may be raised by internal
audit as well as the length of time and action taken to
resolve such issues; and
•
reviews our approach to corporate governance.
fulfilling
In
Management Committee:
its responsibilities,
the Audit and Risk
•
•
•
•
receives regular reports from management, the internal and
external auditors;
meets with the internal and external auditors at least twice
a year, or more frequently, if necessary;
reviews the processes the MD/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;
Role of the Committee
The Nominations Committee operates in accordance with its
Board approved charter, a summary of which is available from
the corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
The Nominations Committee assists the Board in fulfilling its
oversight responsibility to shareholders. 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, and to make recommendations for
the appointment and removal of Directors. The Nominations
Committee is responsible for:
•
•
•
•
•
•
•
developing and reviewing policies on Board composition,
strategic function and size;
performance review process of the Board, its Committees
and individual Directors;
conducting an annual review of, and conclude on, the
independence of each Director;
succession planning for the Board including developing
eligibility criteria for nominating Directors;
developing and implementing induction programs for new
Directors and ongoing education for existing Directors;
recommending appointment of Directors to the Board; and
making
and appointments.
recommendations on Board composition
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.
COLLECTION HOUSE LIMITED
15
OuR REsPOnsIBIlItIEs
Corporate Governance Statement
When selecting new Directors for recommendation to the Board,
the Committee reviews prospective Directors’ CVs, meets with
them and speaks with their referees and others who have
previously worked with them to assess their suitability.
The Board has also adopted a Director’s Letter of Appointment
covering the matters referred to in Principle 1 of the ASX
Corporate Governance Guidelines ensuring Directors clearly
understand their corporate duties and responsibilities.
ASXCGC’s Recommendation 2.4
e) Remuneration Committee
Role of the Committee
The Remuneration Committee operates in accordance with
its Board approved charter, a copy of which is available from
the corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
The Remuneration Committee assists the Board by reviewing and
approving its remuneration policies and practices. 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 Remuneration Committee:
•
•
•
•
•
•
•
•
•
•
•
reviews and approves executive remuneration policy;
reviews and makes recommendations to the Board on
the performance of the MD/CEO against the MD/CEO’s
corporate goals and objectives;
makes recommendations to the Board on the remuneration
of the MD/CEO;
makes recommendations to the Board on the remuneration
of Non-executive Directors, taking
into account the
shareholder approved fee pool;
approves contracts and remuneration packages for positions
reporting directly to the MD/CEO;
considers and evaluates the performance of Executive
Management when making remuneration determinations
and otherwise as required;
monitors organisational structure and succession
planning strategies;
evaluates and reviews current
and practices;
industry standards
reviews and makes recommendations to the Board on
equity-based plans;
approves all performance recognition expenditure; and
oversees general remuneration practices across the Group.
The Remuneration Committee also reviews and makes
recommendations to the Board concerning the recruitment,
retention, termination, and succession planning policies and
procedures for the MD/CEO and for Executive Management
positions reporting directly to the MD/CEO. This process was
undertaken during the reporting year.
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 remuneration consultants to benchmark our reward
practices and levels against market practice, where it considers
this necessary in order to effectively discharge its responsibilities.
ASXCGC’s Recommendations 1.2, 1.3 and 8.1
5. Managing Director and Chief
Executive Officer and Chief Financial
Officer assurance
The Board receives regular reports about our financial condition
and operational results as well as that of our controlled entities.
The MD/CEO and CFO annually provide formal statements to the
Board that in all material respects:
•
the financial records of the Company for the financial year
have been properly maintained in that they:
-
-
-
-
are complete and present;
correctly record and explain its transactions and financial
position and performance;
enable true and fair financial statements to be prepared
and audited; and
are retained for seven years after the transactions
covered by the records are completed.
•
•
•
•
•
the financial statements and notes required by the
accounting standards for the financial year comply with the
accounting standards;
the financial statements and notes for the financial year
give a true and fair view of the Company’s and consolidated
entities’ financial position and of their performance;
any other matters that are prescribed by the Corporations
Act regulations as they relate to the financial statements
and notes for the financial year are satisfied;
the risk management and internal compliance and control
systems are sound, appropriate and operating efficiently and
effectively; and
that the statement is founded on a sound system of risk
management and internal compliance and control which
implements the policies adopted by the Board.
ASXCGC’s Recommendation 4.4 and 7.3
16
ANNUAL REPORT 2009
6. Promoting ethical and responsible
c) Concern reporting and whistleblowing
behaviour
a) Our Principles for Doing Business and Code
of Conduct
Our Code of Conduct and Philosophy sets out the principles that
govern our conduct and the behaviours that stakeholders can
expect from us.
The Principles apply without exception to all Directors,
executives, management and employees, and are aligned to our
core values. Our Code of Conduct and Philosophy sets out the
seven foundation principles, namely:
•
•
•
•
•
•
•
act with honesty and integrity;
respect the law and act accordingly;
respect confidentiality and do not misuse information;
act professionally, ethically and honourably;
act as a team;
manage conflicts of interest responsibly; and
strive to be a good corporate citizen with the highest
standards of integrity, ethics, practice, privacy and security.
A summary of the Company’s Code of Conduct for Directors
and Senior Executives and our Philosophy are available from
the corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
ASXCGC’s Recommendations 3.1 and 3.3
b) Internal policies and procedures
In addition to our Code of Conduct and Philosophy, we
are committed to external regulator guidelines, such as
the Australian Securities and Investments Commission and
Australian Competition and Consumer Commission Debt
Collection Guideline: for collectors and creditors.
We also have a number of key policies to manage our compliance
and human resource requirements. There is a range of
guidelines, communications and training processes and tools
to support these policies. These tools include a dynamic online
learning module ‘Code of Conduct’ which incorporates training
for a range of key compliance requirements. Individual business
units also have systems and procedures in place to support
Company policies.
ASXCGC’s Recommendations 3.1 and 3.3
All employees are encouraged to bring any concerns or problems
to the attention of management, the human resources team or
the compliance team. This includes activities or behaviours that
may not be in accord with our Philosophy, the Code of Conduct,
Securities Trading Policy, other policies, or other regulatory
requirements or laws.
In 2005, 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, anonymously through the Company’s
online whistleblower reporting system, or by telephone.
Any concerns that are reported are assessed and handled by
the Disclosure Coordinator, in conjunction with the Company’s
Company Secretary and General Counsel.
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.
ASXCGC’s Recommendations 3.1 and 3.3
d) Securities trading policy
Directors and employees are restricted from dealing in our
shares if they are in possession of inside information.
To highlight the importance of compliance with these requirements
and to ensure high standards of conduct, we have a Securities
Trading Policy which applies to all employees. Additional
restrictions apply for Directors and any employees who, because
of their seniority or the nature of their position, come into contact
with key financial or strategic information about the Company all
or most of the time (Prescribed Employees). Those restrictions
limit the periods in which the Directors and Prescribed Employees
can trade in our shares or other company securities. Further,
Directors and employees are not permitted to trade in closed
periods which operate for two months immediately preceding the
half yearly results and the full year results respectively.
The periods in which Directors and Prescribed Employees
can trade (Trading Windows) commence two business days
after the release of our half year and full year results (Trading
Window - normally 60 days) and after our Annual General
Meeting (Trading Window - normally 30 days).
COLLECTION HOUSE LIMITED
17
OuR REsPOnsIBIlItIEs
Corporate Governance Statement
Directors and Prescribed Employees must also notify the MD/
CEO in writing of their intention to trade during those periods
and confirm they do not have any inside information. Any trading
remains subject to legal obligations to not trade while in the
possession of inside information.
The Corporate Counsel Division monitors the trading of the
Company’s shares by Directors and Prescribed Employees on a
daily basis.
Directors and senior executives may only deal in the Company
securities outside of these times with the express prior approval
of the Chairman or the Managing Director.
A summary of the Securities Trading Policy is available from
the corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
ASXCGC’s Recommendations 3.2 and 3.3
7. Remuneration framework
It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a high quality Board and Executive
Management team by remunerating Directors and key executives
fairly and appropriately in accordance with market conditions
and reflective of their contribution.
In June 2008, subject to shareholder approval, the Board
agreed to vary the MD/CEO’s remuneration and employment
agreement to include certain additional share options. The MD/
CEO’s variation of his remuneration and employment agreement
and the grant of additional share options were approved by
shareholders at the Company’s Annual General Meeting in
October 2008. Details of the share options are set out in the
Remuneration Report.
In June 2008, certain additional share options were issued to
eligible senior employees under the Executive Share Option
Plan previously approved by shareholders at the Annual General
Meeting of the Company in October 2007. Details of the share
options are set out in the Remuneration Report.
No Directors participate in share plans. Non-executive
Directors receive only cash compensation and reimbursement
of expenses for their services.
For additional information relating to the Company’s remuneration
practices and details relating to Directors’ and executives’
remuneration during the year, refer to the Directors’ Report.
Details of our remuneration framework are included in the
Remuneration Report.
ASXCGC’s Recommendations 8.1, 8.2 and 8.3
The expected outcomes of this remuneration philosophy are:
8. Market disclosure
•
•
•
retention and motivation of key executives;
attraction and retention of quality management to the
Company; and
performance incentives which allow executives to share the
rewards of the success of the Company.
The Board is keen to encourage equity holdings by employees
to align staff interests with those of shareholders. Many
employees have participated in the Company’s vario us share
and option plans from time to time.
In February 2007, the shareholders approved certain share
options in favour of the MD/CEO as part of his employment
agreement. Details of the share options are set out in the
Remuneration Report.
In June 2007, certain share options were issued to eligible
senior employees under an Executive Share Option Plan.
Details of the Executive Share Option Plan were presented,
ratified and approved by the shareholders at the Annual General
Meeting of the Company in October 2007. The Board considers
that the composition of executive remuneration and equity
related staff incentive plans are the domain of the Board and the
MD/CEO, subject to meeting the Company’s statutory and ASX
Listing Rule disclosure obligations.
We are committed to maintaining a level of disclosure that meets
the highest standards and provides all investors with timely and
equal access to information. In achieving these standards we
have a Board approved Continuous Disclosure Policy, which
governs how we communicate with our shareholders and with
the investment community.
The policy reflects the ASX continuous disclosure obligations.
The policy spells out that information which a reasonable
person would expect to have a material effect on the price of the
Company’s securities, must be immediately disclosed, subject
to certain exceptions.
The Board is primarily responsible for:
•
•
making decisions on what should be disclosed publicly
under the market disclosure policy, and for developing and
maintaining relevant guidelines, including guidelines on
information that may be price sensitive; and
for ensuring compliance with the continuous disclosure
requirements of the listing rules of the ASX, relevant
securities and corporations legislation, and overseeing and
coordinating information disclosure to regulators, analysts,
brokers, shareholders, the media and the public.
18
ANNUAL REPORT 2009
All market announcements are released to the ASX first in time.
10.
Health and safety
We also publish on our website the Annual Reports, profit
announcements, presentations, notices of meetings and
media releases.
A copy of the Continuous Disclosure Policy is available from
the corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
ASXCGC’s Recommendations 5.1, 5.2 and 6.1
9. Shareholder communications
and participation
We are also committed to giving all shareholders comprehensive,
timely and equal access to information about our activities so
that they can make informed investment decisions.
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
via the Company’s website or a printed version upon request
(other than those who elect not to receive it);
the Annual General Meeting 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 and investor presentations
issued by the Company are posted on the Company’s website
as soon as it is disclosed to the ASX;
encouraging active participation by shareholders at
shareholder meetings;
actively encouraging shareholders to provide their email
address to facilitate more timely and effective communication
with shareholders at all times;
contacting shareholders who have provided their email
addresses directly to provide details of upcoming events of
interest; and
encouraging all shareholders who are unable to attend
general meetings to communicate issues or ask questions
by writing to the Company.
of
copy
approved Shareholder
A
the Board
Communications Guidelines
the
is available
corporate governance section of the Company’s website at
‘www.collectionhouse.com.au’.
from
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 the relevant regulations.
ASXCGC’s Recommendations 3.1 and 3.3
11.
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
financial statements since
in
31 December 2006.
its consolidated entity’s
ASXCGC’s Recommendations 3.1 and 3.3
12. Carbon Emissions Trading
Collection House is committed to reducing its energy consumption
and carbon emissions. In this regard, Collection House has
reviewed its business operations and obligations under the
prevailing Environmental legislation to determine whether it is
required to establish a Carbon Emissions Trading Scheme.
Based on the prescribed reporting thresholds contained in the
current law, Collection House does not have an obligation to
report to the relevant regulators as its energy consumption and
carbon emissions do not exceed the specified thresholds.
Notwithstanding, Collection House has taken initiatives to
reduce its carbon footprint with the relocation of our Head Office
to a 6 Star, Green Star rated building in Brisbane.
ASXCGC’s Recommendations 6.1 and 6.2
COLLECTION HOUSE LIMITED
19
DIREctORs' REPORt
The directors present their report on the consolidated entity (referred to hereafter as the Company or the Group, as the context requires)
consisting of Collection House Limited and the entities it controlled for the financial year ended 30 June, 2009.
Directors
The following persons were directors of Collection House Limited during the whole of the financial period and up to the date of this report,
unless stated otherwise:
John Pearce
Dennis Punches
Tony Aveling
Barrie Adams
Tony Coutts
Barry Connelly
Bill Hiller
Bill Kagel
See pages 23 to 25 for information on the directors.
Principal activities
The principal activities of the Group during the financial year were the provision of debt collection services and receivables
management throughout Australasia and the purchase of debt by its special purpose subsidiary Lion Finance Pty Ltd.
Dividends paid to members during the financial year
Final ordinary dividend for the year ended 30 June, 2008 of 2.5 cents fully franked
(2007 - 2 cents unfranked) per fully paid share paid on 28 November 2008.
Interim ordinary dividend for the year ended 30 June, 2009 of 2.3 cents fully franked
(2008 - 2.2 cents fully franked) per fully paid share paid on 27 March, 2009.
30 June 2009
$’000
30 June 2008
$’000
2,433
2,238
4,671
1,946
2,141
4,087
In addition to the above dividends, since the end of the financial year, the directors have recommended the payment of a final fully franked
ordinary dividend of $2.5 million (2.6 cents per fully paid share) to be paid on 27 November 2009 out of retained profits as at 30 June 2009.
20
ANNUAL REPORT 2009
DIREctORs' REPORt
Review of operations
A summary of consolidated revenues and results by significant industry segments is set out below:
Revenue
Results
Collection Services
Account Asset Management
Intersegment eliminations
Discontinued operations
Unallocated revenue less unallocated expenses
Profit before income tax expense
Income tax expense
Profit for the year
Less: Profit / (loss) attributable to minority interest
Profit / (loss) attributable to members of
Collection House Limited
30 June
2009
$’000
36,043
71,313
(5,419)
219
30 June
2008
$’000
34,465
64,183
(3,152)
16,213
30 June
2009
$’000
7,230
17,366
(6,005)
219
(7,832)
10,978
(3,124)
7,854
-
30 June
2008
$’000
5,704
15,966
(5,918)
11,327
(10,795)
16,284
(3,896)
12,388
1
7,854
12,387
Comments on the operations and the results of those operations are as follows:
Results
Excluding exceptional items, net profit after tax was $7.4 million compared with $7.5 million for the corresponding period. Net profit after
tax for the year was $7.9 million compared to $12.4 million for the corresponding period.
Total income from continuing operations ordinary activities increased by $6.5 million up to $102 million (2008: $95.5 million).
Revenue from the Purchased Debt segment grew up 11.1% to $71.3 million. Revenue from commission collections grew 4.9% to $32.1 million.
The company anticipates growing its commission collections services segment in 2010.
EBITDA for the year (before fair value adjustments and impairment) was up by 7.2% to $47.9 million (2008: $44.7 million).
Basic earnings per share excluding discontinued operations (“EPS”) were 7.9 cents (2008: 4.0 cents).
The decreased profit after tax attributable to members reflects the impact of the disposal of non-core businesses in the previous year.
Excluding this item, profit after tax from continuing operations has increased by 104.8%, reflecting tight cost control and efficiencies from the
restructuring process that the company has undertaken in the past two years.
Assets and liabilities
Consolidated net assets have increased from $84.3 million to $88.0 million predominantly due to growth in the purchased debt portfolio,
new assets acquired in the move to Green Square, and the absence of a bank overdraft at 30 June 2009. Net assets for the prior year have
changed as a result of a prior period correction to the way that employee expenses are accounted for, as disclosed in note 5 of the financial
statements.
In September 2008, Colpro Pty Ltd a non-core business was sold, making a small profit. A number of non-trading entities within the group
were voluntarily deregistered in the financial year 2008/2009. See note 39 for details.
During the reporting period new debt portfolios were purchased for A$33.3 million and NZ$2.1 million in the Australian and New Zealand
markets respectively, which was funded from operating cash flow and an increase in long term bank debt.
COLLECTION HOUSE LIMITED
21
DIREctORs' REPORt
Cash flow
The consolidated cash flow from operating activities (including discontinued operations) was $40.6 million for the year compared to $38.3
million for the previous year, an increase of 6.2%.
The Board has confirmed its confidence in the Group’s current and future trading position. The directors have recommended the payment of
a final fully franked ordinary dividend as stated on page 20.
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 new debt portfolios for A$33.3 million;
(b) in New Zealand, the Group purchased new debt portfolios for NZ$2.1 million;
(c) Colpro Pty Ltd (a non core business) was sold; and
(d) the Group successfully relocated its Head Office operations to Green Square North Tower, St Pauls Terrace, Fortitude Valley, Brisbane as
planned with no delays. The new premises comprising two floors (3,952 m2) has consolidated the Group’s 300 Brisbane-based staff in one
building, providing the Group room to continue on its current strong growth path.
Exceptional items
Summary of movements in exceptional items:
Items
Gain on the divestment of subsidiaries
Qld State Office of Revenue (1)
Restructuring costs(2)
Exceptional Profits/(losses)
Before income tax($m’s)
After income tax($m’s)
2009
-
1.3
(0.7)
0.7
2008
10.4
(2.4)
(1.9)
6.1
2009
-
0.9
(0.4)
0.5
2008
8.0
(1.8)
(1.3)
4.9
(1)All aspects of the Stamp Duties issue as reported previously have been resolved with the Office of State Revenue, Queensland. The issue
was finalised with a final settlement payment of $1.2 million before income tax. The settlement results in the provision raised at 30 June 2008
being cleared, including the write back of overprovided expenses as set out in note 9 to the financial statements.
(2)Excess existing restructuring provisions were written back to profit as no longer required on completion of that stage of restructuring.
Additional restructuring provisions were raised during the year for new restructuring activities. The net impact after tax was a negative
expense $0.4 million. Further details are set out in note 24 to the financial statements.
Prior period correction
At the Company’s election, an adjustment has been made to employee expenses to correct prior period errors. The adjustment was posted
against the opening balance of retained earnings. Refer note 5 of the financial statements.
22
ANNUAL REPORT 2009
DIREctORs' REPORt
Matters subsequent to the end of the financial year
The directors have recommended the payment of a final fully franked ordinary dividend of $2.5 million (2.6 cents per fully paid share) to be paid
on 27 November 2009 out of retained profits as at 30 June 2009.
Other than the matters discussed above, no matter or circumstance has arisen since 30 June 2009 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 from time to time that have not been finalised at the date of this report.
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 Company or the Group.
Environmental regulation
The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state
or territory.
Information on directors as at 30 June 2009
John Pearce
Experience
Chairman. Age 64
Co-founder of Collection House Limited. Appointed to the Board in April 1993. In April 2003, Mr Pearce returned
to former position of Managing Director and Chief Executive Officer which had been held from mid 1998 until
December 2002. Stepped down as Chief Executive Officer effective 30 June 2005 and was appointed Managing
Director and Deputy Chairman effective 1 July 2005. Resigned as Managing Director on 26 October 2006.
Re-elected Director 26 October 2007. Appointed Chairman of the Board effective 25 June 2009. Member of the
International Fellowship of Certified Collectors. Chairman of Financial Basics Foundation 2002 to 2007. Board
Member of The Rutherglen Cemetery Foundation. Director, Brisbane Lions Foundation.
Special responsibilities Mr Pearce is a member of the Remuneration Committee.
Interest in Shares and
Options (direct & indirect)
11,416,130 ordinary shares in Collection House Limited
Nil options
Dennis Punches
Deputy Chairman. Age 73
Qualifications
Experience
BSC
Appointed to the Board in July 1998, and in 2000 was appointed as Chairman of Collection House Limited.
Re-elected Director 26 October 2007. Stepped down as Chairman to become Deputy Chairman effective 25 June
2009. Former Director of Attention LLC Inc, Analysis and Technology Inc, and co-founder and former Chairman
of Payco American Corporation. Co-Chairman of the International Collectors Group and a Trustee for Wisconsin’s
Carroll College.
Special responsibilities Mr Punches is also the Chairman of the Nomination Committee and a member of the Remuneration Committee.
Interest in shares and
options (direct & indirect)
17,857,384 ordinary shares in Collection House Limited
Nil options
COLLECTION HOUSE LIMITED
23
DIREctORs' REPORt
Tony Aveling
Qualifications
Experience
Managing Director and Chief Executive Officer. Age 65
SFFin, FAIM, FAICD
46 years in the financial services industry including 34 years at Westpac Banking Corporation. Senior positions
included Chief Executive Business and Private Banking, Managing Director & Chief Executive Officer Australian
Guarantee Corporation Limited, and General Manager Europe. 3 years as Chief Executive Officer Australian Bankers’
Association. Is a Senior Fellow of the Financial Services Institute of Australasia (SFFin), a Fellow of the Australian
Institute of Management (FAIM), a Fellow of the Australian Institute of Company Directors (FAICD), and a graduate
of the Advanced Management Program of the Harvard Business School. Honorary Governor Science Foundation for
Physics within the University of Sydney. Resigned as Director of Global MoneyLine Limited (March 2008).
In October 2008, the Shareholders approved the issue of a further 2,000,000 share options in favour of Mr
Aveling as part of his varied employment agreement. The full terms of the options are contained in the Notice
of General Meeting announcement to shareholders on 19 September 2008. For details see note 41 of the
financial statements.
Interest in shares and
options (direct & indirect)
449,400 ordinary shares in Collection House Limited
400,000 options
Barrie Adams
Qualifications
Experience
Lead Independent Director. Age 64
PSM, FCPA
Appointed to the Board in November 2002 as Independent Lead Director and Chairman of the Audit and Risk
Management Committee in January 2003. Chairman of Financial Basics Foundation and associated companies.
Director of Ingeus Limited. Appointed Chairman, Infocus Wealth Management Ltd and its subsidiaries (December
2008). Resigned as Director of Steel Foundations Limited and associated companies and Nuplant Ltd (June 2009).
Resigned as Director of Pro Super Holdings (October 2006). Resigned as a Member of Nominations Committee
(October 2007).
Special Responsibilities Mr Adams is the Chairman of the Audit and Risk Management Committee and a member of the
Remuneration Committee.
Interest in shares and
options (direct & indirect)
Nil ordinary shares in Collection House Limited
Nil options
Tony Coutts
Experience
Non-Executive Director (Independent Director as at 1 July 2009). Age 50
General Manager of Collection House Limited from 1995 to 1998. Appointed an Executive Director in September
1998 with executive responsibilities as Director of Sales. Non-Executive Director from 1 July 2006. 18 years in the
finance and insurance industry (Australian Guarantee Corporation Ltd). 13 years in the debt collection industry,
the last 11 of which were spent at Collection House.
Special responsibilities Mr Coutts was appointed a Member of the Audit and Risk Management Committee 30 October 2008.
Interest in shares and
options (direct & indirect)
4,464,600 ordinary shares in Collection House Limited
Nil options
Barry Connelly
Independent Director. Age 69
Qualifications
Experience
BJ
Appointed to the Board in June 2003. Charter member of the Board of NASDAQ listed company, First Advantage,
Board Member of privately held Microbilt Corp. of Kenesaw, GA. Appointed Director of Huaxia D & B China
in November 2008. 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.
Special responsibilities Mr Connelly is a Member of the Nominations Committee.
Interest in shares and
options (direct & indirect)
77,143 ordinary shares in Collection House Limited
Nil options
24
ANNUAL REPORT 2009
DIREctORs' REPORt
Bill Hiller
Experience
Independent Director. Age 70
Appointed to the Board June 2003. 40 years experience in the automotive finance industry including as General
Manager - Automotive Finance for St George Bank Limited.
Special responsibilities Mr Hiller is a Member of the Audit and Risk Management and Nominations Committees.
Interest in shares and
options (direct & indirect)
93,000 ordinary shares in Collection House Limited
Nil options
Bill Kagel
Experience
Independent Director. Age 72
Appointed to the Board in February 2000. Over 40 years debt collection industry experience. Co-founder and Senior
Vice President of Payco American Corporation, USA and former Director of Outsourcing Solutions Inc.
Special responsibilities Mr Kagel is Chairman of the Remuneration Committee.
Interest in shares and
options (direct & indirect)
951,269 ordinary shares in Collection House Limited
Nil options
Company secretary
The Company Secretary to 30 June, 2009 was Michael Watkins. Mr Watkins was appointed to the position of Company Secretary on 21
December 2006. Before joining Collection House Limited, Michael Watkins was in practice as a commercial lawyer from 1978 and as a
partner in his own Brisbane CBD law firm from 1980, until accepting the appointment as General Counsel of the Company in 2000. Mr
Watkins undertakes the combined roles of General Counsel and Company Secretary for Collection House Limited and its subsidiaries.
Meetings of directors
The numbers of meetings of the Company’s board of directors and of each board committee held during the year ended 30 June 2009, and
the numbers of meetings attended by each director were:
2009
Full meetings of
directors
Audit and Risk Management
Nomination
Remuneration
Meetings of committees
Dennis Punches
John Pearce
Tony Aveling
Barrie Adams
Tony Coutts
Barry Connelly
Bill Hiller
Bill Kagel
A
6
6
6
6
6
6
6
6
B
6
6
6
6
6
6
6
6
A
**
**
**
7
5
2
7
**
B
**
**
**
7
4
Appointed
30/10/2008
2
Resigned
30/10/2008
7
**
A
1
**
**
**
**
1
1
**
B
1
**
**
**
**
1
1
**
A
2
2
**
2
**
**
**
2
B
2
2
**
2
**
**
**
2
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
25
DIREctORs' REPORt
Remuneration Report
The remuneration report is set out under the following main headings:
A
B
C
D
E
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information.
The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001.
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 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 linkage / alignment of executive compensation
transparency
capital management.
In consultation with key members of the Board who have many years industry operational experience and the General Manager - Human
Resources, the Group has structured an executive remuneration framework that is market competitive and complementary to the reward
strategy of the organisation.
Alignment to shareholders’ interests:
•
•
has economic profit as a core component of plan design;
focuses on sustained growth in 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
•
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.
Directors’ fees
Fees and payments are reviewed annually by the Remuneration Committee. The Committee’s recommendations are forwarded for approval
by the Board.
26
ANNUAL REPORT 2009
DIREctORs' REPORt
Non-Executive Directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors.
Payments are allowed for additional responsibilities for Board Chairmanship, Deputy Chairmanship, the Lead Independent Director role and
for membership of Board Committees. Mr John Pearce, appointed as Chairman on 25 June 2009 receives a non-executive director’s fee of
$50,000 per annum plus superannuation from 1 July 2009 but is not currently drawing any additional fees for being Chairman of the Collection
House Group. Mr Pearce intends to use his director’s fees to purchase shares in the Company. Dennis Punches, Deputy Chairman as at
25 June 2009, receives an annual fee of $50,000 per annum inclusive of being Chair of the Nominations Committee. Barrie Adams, as Lead
Independent Director, receives an annual fee of $100,000. Mr Adams’ fee is comprised of a $60,000 director’s fee, (including $10,000 being
a fee as Lead Independent Director), and $40,000 as Chairman of the Audit and Risk Management Committee. Bill Kagel, as Chair of the
Remuneration Committee, has waived the fee normally due to him for this role.
Non executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by
shareholders. Non-executive directors do not receive share options.
Executive Directors
Tony Aveling was appointed as Managing Director and Chief Executive Officer (MD/CEO) on 27 November 2006 with a projected end date being
28 February 2009. On 26 June 2008, subject to shareholder approval, the Collection House Board agreed to vary Mr Aveling’s employment
for no fixed term and Mr Aveling’s Remuneration and Employment Agreement (Agreement) was varied accordingly on 28 August 2008. Mr
Aveling’s Agreement was approved by shareholders at the Company’s Annual General Meeting on 31 October 2008. A summary of the varied
remuneration package is set out in section C of the remuneration report.
Executive pay
The executive pay and reward framework has three components:
•
base pay and short term incentive (STI);
•
long term incentives through participation in the Executive Share 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 executives is reviewed annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed
on promotion.
Short Term Incentive
A portion of an executive’s pay is by way of an “at risk” bonus. This is subject to satisfactory completion of set objectives and payable at the
discretion of the MD/CEO in consultation with the Board. For the past year, a decision was made to hold executive base pay and increase
the “at risk” component.
Long Term Incentive
Certain eligible employees are offered long term incentives via the Executive Share Option Plan, see section D of the remuneration report
for details.
COLLECTION HOUSE LIMITED
27
DIREctORs' REPORt
Benefits
The major benefit provided to executives and eligible employees is the ability to participate in the Executive Share Option Plan.
Retirement allowances for Directors
There are no retirement allowances paid to non-executive directors, in line with recent guidance on non executive directors’ remuneration.
Retirement Benefits for Executives
There are no retirement benefits made available to executives, other than as are required by statute.
B Details of remuneration (audited)
Amounts of remuneration
Details of the remuneration of the directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of
Collection House are set out in the following tables.
The key management personnel of the Group includes Tony Aveling as MD/CEO and the following executive officers who have authority and
responsibility for planning, directing and controlling the activities of the entity:
•
•
•
•
A. Ralston - Chief Financial Officer
M. Thomas - Chief Operating Officer
M. Watkins - General Counsel and Company Secretary
K. Lynam - General Manager – Human Resources
In addition, the following persons must be disclosed under the Corporations Act 2001 as they are among the highest remunerated Group
and/or Company executives:
•
•
•
•
•
T. Aveling – MD/CEO
A. Ralston - Chief Financial Officer
M. Thomas – Chief Operating Officer
M. Watkins - General Counsel and Company Secretary
U. Danielian – Solicitor Director, Jones King Pty Ltd (a subsidiary of the Group)
28
ANNUAL REPORT 2009
DIREctORs' REPORt
Key management and highest paid personnel of the Group for the year ended 30 June 2009 is as follows:
Short Term Benefits
Salary
& Fees
$
Cash
Bonus
$
Non-
Monetary
Benefits
$
Post
Employment
Benefits
Share Based
Payments
Other
$
Superannuation*
$
Options
$
Total
$
-
-
50,000
50,000
100,000
107,692
62,308
50,000
56,667
71,667
70,000
70,000
50,000
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
500,000
475,000
216,672
216,415
245,103
234,635
241,821
239,818
121,638
119,560
-
101,750
-
40,000
19,000
46,000
21,000
40,000
21,000
22,000
11,000
-
-
-
41,077
154,715
184,299
18,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,638
6,052
5,638
6,052
5,638
6,052
5,638
6,052
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,300
98,800
-
3,392
-
-
-
-
-
9,257
-
-
-
-
-
-
-
-
-
-
9,000
9,692
5,608
4,500
-
-
6,300
6,300
-
-
96,327
87,750
23,100
21,493
26,127
23,007
25,292
23,474
12,855
12,583
-
-
-
17,615
18,207
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
50,000
109,000
117,384
67,916
54,500
56,667
71,667
76,300
76,300
50,000
50,000
225,656
1,392,283
200,651
1,362,201
26,554
23,426
33,192
29,283
26,554
23,426
16,596
14,641
-
-
-
-
-
-
311,964
289,778
356,060
313,977
339,305
313,770
178,727
173,092
-
101,750
-
213,407
220,506
-
Name
DIRECTORS
J. Pearce **
Chairman
D. Punches **
Deputy Chairman
B. Adams
Lead Independent Director
T. Coutts ***
Non- Executive Director
B. Connelly
Independent Director
B. Hiller
Independent Director
B. Kagel
Independent Director
T. Aveling
Executive Director
COMPANY EXECUTIVES
A. Ralston
Chief Financial Officer
M. Thomas
Chief Operating Officer
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
M. Watkins
General Counsel and Company
Secretary
2009
2008
K. Lynam
General Manager
– Human Resources
B. Savage (Consultant to
9 November 2007)
GROUP EXECUTIVES
K. Hansen
(to 21 September 2007)
U.Danielian
Solicitor Director (Jones King
Lawyers Pty Ltd)
2009
2008
2009
2008
2009
2008
2009
2008
*
**
Superannuation of 9% was paid on cash bonuses. The superannuation on the bonuses has been included in the superannuation figure in the table above.
John Pearce was appointed Chairman 25 June 2009. Dennis Punches stepped down as Chairman to become Deputy Chairman effective 25 June 2009.
Both held their retrospective positions from 1 July 2009 to 24 June 2009.
*** In accordance with ASX Corporate Governance Principle and Recommendation 2.1, Tony Coutts is deemed an Independent Director from 1 July 2009.
COLLECTION HOUSE LIMITED
29
DIREctORs' REPORt
The relative proportions of remuneration that are fixed and linked to performance and share based options are as follows:
Name
1. T. Aveling
2. A. Ralston
3. M. Thomas
4. M. Watkins
5. K. Lynam
6. B. Savage (Consultant) (1 July 2007 to 9 November 2007)
C
Service agreements (audited)
% Performance based
% Fixed
2009
2008
2009
55.4
22.4
23.4
20.7
22.4
-
52.7
15.2
16.6
14.8
15.4
-
44.6
77.6
76.6
79.3
77.6
-
2008
47.3
84.8
83.4
85.2
84.6
100.0
Remuneration and other terms of employment for the MD/CEO and other key management personnel are also formalised in service
agreements. Except as otherwise stated, all contracts with executives may be terminated early by either party with three months notice.
Major provisions of the agreements relating to remuneration are set out below.
T. Aveling
MD/CEO
Deed of Variation of
Employment Agreement
On 26 June 2008, the Collection House Board agreed to vary the MD/CEO’s
remuneration package, subject to shareholder approval. This approval was given at
the AGM on 31 October 2008.
Annual base salary
$500,000 plus superannuation.
Living away from home
Up to $2,000 per week (ceased on 27 February 2009).
Performance cash bonus
Maximum level of $500,000 plus superannuation.
(Objectives as agreed by the
Board)
Options
At the year end, the Board was provided with the financial and non-financial
information relating to the MD/CEO’s performance. The key objective related to
Collection House profitability. Supporting objectives covered leadership, sales,
stakeholder relationships, recruitment, trade debtors, organisational structure,
succession planning, funding, premises, book quality, compliance and regulatory
obligations. Based on this information, the Board determined the level of STI to be
made to the MD/CEO. For the year ended 30 June 2009, the Board determined that
the MD/CEO’s STI payment would be $500,000 plus superannuation which is 100%
of the payment target specified in his contract. The payment was calculated based
on performance against objectives and the Board’s exercise of discretion.
In accordance with the variation of Employment Agreement approved by the Board
on 28 August 2008, a further 2,000,000 options were approved and granted on 31
October 2008 after shareholder approval. Each component tranche is subject
to certain conditions in order for the options to be exercised. See note 41 for
material terms.
A. Ralston
Chief Financial Officer
Annual Base Salary
$237,000 inclusive of superannuation for the year ended 30 June 2009.
Performance cash bonus
$43,600 inclusive of superannuation was paid for the year ended 30 June 2009.
Options
Pursuant to the Executive Share Option Plan approved by shareholders in October
2007, a further 200,000 options were issued. Each component tranche is subject
to certain conditions in order for the options to be exercised. See note 41 or
further details.
30
ANNUAL REPORT 2009
DIREctORs' REPORt
M. Thomas
Chief Operating Officer
Annual Base Salary
$267,000 inclusive of superannuation for the year ended 30 June 2009.
Performance cash bonus
$50,140 inclusive of superannuation was paid for the year ended 30 June 2009.
Options
Pursuant to the Executive Share Option Plan approved by shareholders in October
2007, a further 250,000 options were issued. Each component tranche is subject
to certain conditions in order for the options to be exercised. See note 41 for
further details.
M. Watkins
General Counsel and
Company Secretary
Annual Base Salary
$263,000 inclusive of superannuation for the year ended 30 June 2009.
Performance cash bonus
$43,600 inclusive of superannuation was paid for the year ended 30 June 2009.
Options
Pursuant to the Executive Share Option Plan approved by shareholders in October
2007, a further 225,000 options were issued. Each component tranche is subject
to certain conditions in order for the options to be exercised. See note 41 for
further details.
K. Lynam
General Manager –
Human Resources
Annual Base Salary
$132,000 inclusive of superannuation for the year ended 30 June 2009.
Performance cash bonus
$23,980 inclusive of superannuation was paid for the year ended 30 June 2009.
Options
Pursuant to the Executive Share Option Plan approved by shareholders in October
2007, a further 150,000 options were issued. Each component tranche is subject
to certain conditions in order for the options to be exercised. See note 41 for
further details.
D
Share based compensation (audited)
Options
Options have been granted to T. Aveling as MD/CEO under his Employment Agreement (as varied). Options have also been granted to certain
eligible employees under the Collection House Executive Share Option Plan.
The terms and conditions of all options mentioned above affecting remuneration in the previous, this or future reporting periods are set out
in note 41 of the financial statements.
Options granted under the Executive Share Option Plan carry no dividend or voting rights. When exercisable, each option is convertible into
one ordinary share of Collection House.
Details of options over ordinary shares in the Company provided as remuneration to each director of Collection House and each of the key
management personnel of the Group are set out below. Further information on the options is set out in note 41 of the financial statements.
Name
1. T. Aveling
2. A. Ralston
3. M. Thomas
4. M. Watkins
5. K. Lynam
Number of options granted during the year
No of options vested during the year
2009
2,000,000
200,000
250,000
225,000
150,000
2008
-
-
-
-
-
2009
400,000
40,000
50,000
40,000
25,000
2008
-
-
-
-
-
The assessed fair value at grant date of options granted to the individuals is allocated over the period from grant date to vesting date, and the
amount is included in the remuneration table in this report. Fair values at grant date are independently determined using a modified binomial
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.
COLLECTION HOUSE LIMITED
31
DIREctORs' REPORt
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
and other key management personnel of the Group are set out below.
Name
Directors of Collection House Limited
Other key management personnel of the Group
Date of
exercise of
options
-
-
Number of ordinary shares issued
on exercise of options during the
year
Amounts paid per ordinary share
2009
2008
2009
2008
-
-
-
-
-
-
-
-
No shares issued on the exercise of options during the period.
E
Additional information (audited)
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
5 years is detailed below.
Net profit after tax ($m’s)
Dividends Declared
Share price commenced
Share price ended
Basic Earnings per share (including
discontinued operations)
2005
2006
2007
2008
2009
$12.95
$6.08
$3.81
$12.39
$7.85
8 cents unfranked 2 cents unfranked
2 cents franked 4.7 cents franked 4.9 cents franked
$1.54
$1.40
$1.41
$0.975
$1.03
$0.75
$0.78
$0.46
$0.465
$0.49
13.3 cents
6.2 cents
3.9 cents
12.7 cents
8.1 cents
Details of remuneration: cash bonuses and options
For each cash bonus and grant of options included in the table on page 29, 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. No options will vest unless the vesting conditions are met (see note 41
for details), hence the minimum value of the options yet to vest is nil. The maximum value of the options yet to vest has been determined as
the amount of the grant date fair value of the options that is yet to be expensed.
32
ANNUAL REPORT 2009
DIREctORs' REPORt
Cash bonus
Options
Name
Paid
Forfeited
%
Year
granted
Vested
%
Forfeited
%
Lapsed
$
Financial years in which
options may vest (subject to
certain qualifying hurdles). Refer
to note 41
Minimum total
value of grant
yet to vest
Maximum total
value of grant
yet to vest
1. T. Aveling
100.0
0.0
2. A. Ralston
83.3
16.7
3. M.Thomas
85.2
14.8
4. M. Watkins
75.5
24.5
5. K. Lynam
81.5
18.5
20%
-
20%
-
20%
20%
20%
2007
2009
2007
2009
2007
2009
2007
2009
2007
2009
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loans to directors and executives
2009 - 2011
2011 - 2013
2009 - 2011
2011 - 2013
2009 - 2011
2011 - 2013
2009 - 2011
2011 - 2013
2009 - 2011
2011 - 2013
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
199,600
NIL
$20,000
NIL
$25,000
NIL
$22,500
NIL
$15,000
Information on loans to directors and executives, including amounts, interest rates and repayment terms are set out in note 34 to the financial
statements.
Shares under option
Long term incentives are provided to certain eligible employees via the Executive Share Option Plan, see note 41 for further information.
Unissued ordinary shares of the Company under option at the date of this report are as follows:
MD/CEO Options
Executive Share Option Plan
Date options
granted
Number under
option
Issue price of
shares
12 March 2007
31 October 2008
15 June 2007
18 July 2008
2,000,000
2,000,000
1,250,000
1,437,500
$1.0327
$0.4927
$1.0327
$0.4927
No of shares
issued
2009
nil
nil
nil
nil
Expiry date
Refer to note 41
Refer to note 41
Refer to note 41
Refer to note 41
E
Additional information (unaudited)
Insurance of officers
During the financial year, Collection House paid a premium of $35,455 to insure the directors and secretaries of the Company and its
Australian based controlled entities, and the executives 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
33
DIREctORs' REPORt
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 and 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 non-audit or assurance services in addition to their statutory duties. All
other assurance services are subject to the corporate governance procedures adopted by the Company.
Details of the amounts paid to the auditors of the Company, Hacketts DFK, are set out below.
DESCRIPTION
1. Audit services, Hacketts DFK
Audit and review of the financial reports and other audit work under the Corporations Act 2001.
Total remuneration for audit services
2. Other assurance services, Hacketts DFK
Total remuneration for audit-related services
TOTAL REMUNERATION
Auditor’s independence declaration
Consolidated
30 June 2009
$
30 June 2008
$
137,000
137,000
82,050
82,500
219,050
145,000
145,000
79,000
79,000
224,000
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 35.
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 DFK continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
COLLECTION HOUSE LIMITED
Tony Aveling
Managing Director and Chief Executive Officer
Brisbane
25 August 2009
34
ANNUAL REPORT 2009
auDItOR's InDEPEnDEncE DEclaRatIOn
COLLECTION HOUSE LIMITED
35
38 Income
Statement
3 9 Balance
Sheet
40 Statement of
Changes in
Equity
41 Cash Flow
Statement
36
ANNUAL REPORT 2009
42 Notes to the
Financial
Statements.
112 Directors’
Declaration
113 Independant
Audit Report
Income Statement ................................ 38
Directors’ Declaration ........................ 112
Balance Sheet ....................................... 39
Independent Audit Report .................. 113
Statement of Changes in Equity .......... 40
Shareholder Information .................... 115
Cash Flow Statement ........................... 41
Notes to the Financial Statements ...... 42
COLLECTION HOUSE LIMITED
COLLECTION HOUSE LIMITED
37
37
IncOmE statEmEnt
for the year ended 30 June 2009
Revenue from continuing operations
Other income
Depreciation and amortisation expense
Other expenses
Employee expenses
Search fees
Direct collection 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
Restructuring costs
Profit before income tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Profit is attributable to:
Equity holders of Collection House Limited
Minority Interest
Earnings per share for profit from continuing
operations attributable to the ordinary equity holders
of the company:
Basic earnings per share
Earnings per share for profit attributable to the
ordinary equity holders of the company:
Basic earnings per share
6
7
8
9
17
8,9
10
11
40
40
Consolidated
Company
Notes
30 June 2009
$’000
30 June 2008
$’000
30 June 2009
$’000
30 June 2008
$’000
101,959
(23)
(2,295)
(3,533)
95,497
(5)
(2,307)
(4,370)
62,940
65,446
-
(1,531)
(3,679)
-
(1,621)
(5,090)
(34,072)
(33,172)
(29,048)
(27,434)
(545)
(648)
(12,737)
(10,369)
171
(3,128)
(52)
103
-
(98)
-
19
(5,097)
(655)
6,663
5,083
11,746
-
11,746
243
(2,120)
(103)
(53)
-
(3,693)
-
(6)
(4,862)
(1,872)
7,818
3,180
10,998
13
11,011
12,387
11,746
11,011
1
-
12,388
11,746
11,011
(656)
(11,649)
132
(3,779)
(59)
102
(24)
-
(680)
(9,997)
203
(3,169)
(230)
(56)
-
-
(30,265)
(29,730)
10
(5,133)
(1,872)
4,989
(1,229)
3,760
8,628
12,388
43
(4,467)
(655)
10,759
(3,059)
7,700
154
7,854
7,854
-
7,854
Cents
Cents
7.9
8.1
4.0
12.7
The above income statement should be read in conjunction with the accompanying notes.
38
ANNUAL REPORT 2009
BalancE sHEEt
as at 30 June 2009
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
Other financial assets at fair value through profit or loss
Receivables
Available-for-sale financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Payables
Borrowings
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Minority interest
Total equity
Consolidated
Company
Notes
30 June 2009
$’000
30 June 2008
$’000
30 June 2009
$’000
30 June 2008
$’000
12
13
14
15
14
16
17
18
20
19
21
22
23
24
25
26
28
27
30
31(a)
31(b)
32
584
4,630
29,999
-
996
36,209
937
4,188
36,511
2,312
1,489
45,437
132
3,206
-
-
943
4,281
801
2,598
-
2,974
645
7,018
116,917
106,959
-
-
-
-
6,957
20,496
-
229
144,599
180,808
4,622
-
1,596
2,000
-
8,218
-
69,700
211
14,719
-
84,630
92,848
87,960
67,256
171
20,533
87,960
-
87,960
-
-
3,516
20,259
-
292
131,026
176,463
7,324
2,801
-
3,070
105
13,300
-
61,100
159
17,428
192
78,879
92,179
84,284
67,256
(319)
18,665
85,602
(1,318)
84,284
154,885
134,929
16,017
6,602
13,980
1,934
-
193,418
197,699
14,885
4,678
303
1,701
-
21,567
21,858
69,700
182
-
-
91,740
113,307
84,392
67,256
878
16,258
84,392
-
84,392
16,116
3,242
13,736
2,515
-
170,538
177,556
13,636
4,099
-
2,738
105
20,578
18,631
61,100
144
-
192
80,067
100,645
76,911
67,256
475
9,180
76,911
-
76,911
The above balance sheet should be read in conjunction with the accompanying notes.
COLLECTION HOUSE LIMITED
39
statEmEnt Of cHangEs In EquIty
for the year ended 30 June 2009
Total equity at the beginning of the financial year
84,284
77,080
76,911
70,550
Consolidated
Company
Notes
30 June 2009
$’000
30 June 2008
$’000
30 June 2009
$’000
30 June 2008
$’000
Adjustment on adoption of AASB 127, net of tax, to:
Retained profits - Minority Interest
1,32
(1,318)
-
Adjustment on correction of prior period error to:
Retained profits - accrued wages
31
-
(909)
Restated total equity at the beginning of the
financial year
Profit for the year
Transactions with equity holders in their capacity as
equity holders:
Dividends provided for or paid
Movement in Share-based payments reserve
Movement in Foreign Currency translation reserve
Total changes in minority interest
33
31a
32
Total equity at the end of the financial year
Total recognised income and expense for the year is
attributable to:
Equity holders of Collection House Limited
Minority interest
82,966
7,854
76,171
12,388
(4,671)
(4,088)
406
87
1,318
(2,860)
87,960
7,854
-
7,854
347
(540)
6
(4,275)
84,284
12,388
-
12,388
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-
-
76,911
11,746
(4,671)
406
-
-
(4,265)
84,392
11,746
-
11,746
-
(909)
69,641
11,011
(4,088)
347
-
-
(3,741)
76,911
11,011
-
11,011
40
ANNUAL REPORT 2009
Consolidated
Company
Notes
30 June 2009
$’000
30 June 2008
$’000
30 June 2009
$’000
30 June 2008
$’000
105,644
109,093
41,556
42,954
casH flOW statEmEnt
for the year ended 30 June 2009
Cash flows from operating activities
Receipts from customers (inclusive of goods and
services tax)
Payments to suppliers and employees (inclusive of
goods and services tax)
Interest received
Other sundry income
Interest paid
Income taxes refund / (paid)
Net cash inflow (outflow) from operating activities
43
Cash flows from investing activities
Proceeds from sale of property, plant & equipment
Payments for property, plant and equipment
Payments for leasehold improvements
Payments for purchased debt
Payments for intangible assets
Payment for Legal costs capitalised
Proceeds from sale of discontinued operation
(59,042)
46,602
1,817
146
(5,203)
(2,744)
40,618
23
(2,877)
(3,551)
(34,715)
(979)
-
-
Net cash (outflow) inflow from investing activities
(42,099)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to company’s shareholders
33
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
12
8,600
-
(4,671)
3,929
2,448
(1,864)
-
584
(65,203)
43,890
1,477
323
(5,132)
(2,295)
38,263
-
(1,246)
(180)
(73,525)
(34)
-
31,370
(43,615)
4,900
(23)
(4,088)
789
(4,563)
2,699
(32,593)
8,963
106
-
(5,097)
(1,976)
1,996
-
(2,658)
(3,551)
-
(964)
-
-
(41,137)
1,817
287
-
(4,355)
1,568
(683)
-
(1,043)
(222)
-
(34)
-
-
(7,173)
(1,299)
8,600
-
(4,671)
3,929
(1,248)
(3,298)
4,900
-
(4,088)
812
(1,170)
(2,128)
-
-
-
(1,864)
(4,546)
(3,298)
The above cash flow statements should be read in conjunction with the accompanying notes.
COLLECTION HOUSE LIMITED
41
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 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.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with IFRS
The financial report of Collection House Limited also complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
Early adoption of standards
The Group has elected to apply the following pronouncements to the annual reporting period beginning 1 July 2008:
•
•
AASB 127 - The Group has elected to apply the amendments to AASB 127 Consolidated and Separate Financial Statements dated March
2008 to the annual reporting period beginning 1 July 2008. In accordance with the transitional provisions of the standard, comparatives
have not been restated.
AASB 3 - The Group has elected to apply the amendments to AASB 3 Business Combinations dated March 2008 to the annual reporting
period beginning 1 July 2008. In accordance with the transitional provisions of the standard, comparatives have not been restated.
This includes applying the revised pronouncement to the comparatives in accordance with AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors. None of the items in the financial statements had to be restated as the result of applying these standards.
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 2009 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 to
minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests
42
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(b) Principles of consolidation (continued)
result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable
net assets of the subsidiary.
Changes in the parent company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions, and do not pass through the Profit and Loss.
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 in the consolidated income statement and balance
sheet respectively.
(c) Segment reporting
A business segment is identified for 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 identified when products or services are provided
within a particular economic environment 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 they are
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a
foreign operation.
Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences
on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the
fair value gain or loss. Translation differences on non-monetary assets 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:
•
•
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
financial instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or any
borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the income
statement, as part of the gain or loss on sale where applicable.
COLLECTION HOUSE LIMITED
43
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
Goodwill and fair value adjustments arising on the acquisition of a foreign entity 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 Australian Taxation Office. Exchanges of goods and services of the same nature and value without any cash consideration are not
recognised as revenue.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to
the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered
to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results,
taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(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 net gain or loss on disposal are included as either a revenue or an expense at the date control of the asset passes to the buyer, usually
when an unconditional contract of sale is signed.
The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net
proceeds on disposal.
Any related balance in the asset revaluation reserve is transferred to the capital profits reserve on disposal.
(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.
(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 applicable income
tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
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.
44
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
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 Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003.
The Head Entity, Collection House Ltd, 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 Ltd 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 (note 10).
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, as lessee, has substantially all the risks and rewards of ownership are classified
as finance leases (note 18). Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the
present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term
and long-term payables. Each lease payment is allocated between the liability and finance cost. 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 asset’s useful life or over the shorter of the asset’s
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases (note 37). 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, equity instruments 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 contingent liabilities assumed in a business 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.
COLLECTION HOUSE LIMITED
45
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(i)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired. Other assets 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 inflows which are largely independent of the cash inflows from other assets or groups of assets (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. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
(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.
Collectibility of trade receivables is reviewed on an ongoing basis. 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.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the
income statement within ‘other expenses’. When a trade receivable is uncollectible, it is written off against the allowance account for trade
receivables. Subsequent recoveries of amounts previously written off are credited against other expense in the income statement.
(l) Non-current assets (or disposal groups) held-for-sale and discontinued operations
Non-current assets (or disposal groups) are classified as held-for-sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. They are measured at the lower of their carrying amount and fair value less costs to sell,
except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are
carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held-for-sale.
Interest and other expenses attributable to the liabilities of a disposal group classified as held-for-sale continue to be recognised.
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.
A discontinued operation is a component of the entity that has been disposed of or is classified as held-for-sale and that represents a
separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business
or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented
separately on the face of the income statement.
(m) Financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, available-for-sale financial
assets, and loans and receivables. The classification depends on the purpose for which the investments were acquired. Management
determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.
46
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(m) Financial assets (continued)
(i)
Financial assets at fair value through profit or loss - Purchased debt ledgers (PDL’s)
Purchased debt ledgers have been included in this category of financial assets as it is managed and its performance is evaluated on a fair
value basis.
Purchased debt ledgers 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 the anticipated future cash flows
discounted to present value.
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.
Purchased debt ledgers 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
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. Loans and receivables are included in trade and other receivables in the balance sheet.
The Company assesses at each balance date whether there is objective evidence that loans and receivables are impaired.
(iii)
Shares in subsidiaries
Available-for-sale financial assets comprise investments in the ordinary issued capital of various entities. There are no fixed returns or fixed
maturity date attached to these investments.
The fair value of unlisted available-for-sale financial assets cannot be reliably measured as variability in the range of reasonable fair value
estimates is significant. As a result, all unlisted investments are reflected at cost.
Unlisted available-for-sale financial assets exist within active markets and could be disposed of if required.
Impairment
At each reporting date, the group assesses whether there is objective evidence whether any available-for-sale financial instruments have
been impaired. In the case of available-for-sale financial instruments, a prolonged or significant decline in the value of the instrument is
considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.
(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.
COLLECTION HOUSE LIMITED
47
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(o) Property, plant and equipment (continued)
Where settlement of any part of cash consideration is deferred, the amounts payable are recorded at their present value, discounted at the
rate applicable to the Company if similar borrowings were obtained from an independent financier under comparable terms and conditions.
The costs of assets constructed or internally generated by the consolidated Entity, other than goodwill, include the cost of materials and
direct labour. Directly attributable overheads and other incidental costs are also capitalised to the asset. Borrowing costs are capitalised to
qualifying assets as set out in note 1(s).
Expenditure, including that on internally generated assets, is only recognised as an asset when the Entity controls future economic benefits
as a result of the costs incurred, it is probable that those future economic benefits will eventuate, and the costs can be measured reliably.
Costs attributable to feasibility and alternative approach assessments are expensed as incurred.
All assets, including intangibles other than goodwill, are depreciated / amortised using the straight-line method over their estimated useful
lives taking into account estimated residual values with the exception of purchased debt which subject to fair value adjustments based upon
the benefits to be derived from the asset.
Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is
completed and held ready for use.
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are
reflected prospectively in current and future periods only.
- Plant and equipment
- Computer equipment
2009
4-8 years
3-5 years
- Leased plant and equipment
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Term of Lease
2008
4-8 years
3-5 years
Term of Lease
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 any 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 acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment
annually, or more frequently if events or changes 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.
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
materals and services, direct payroll and payroll-related costs of employees’ time spent on the project. Amortisation is applied on a straight
line basis over period generally ranging over periods of 2 to 12 years.
(iii) 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.
48
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(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 30 days of recognition.
(r) Borrowings
All borrowings are recognised at their principal amounts subject to setoff arrangements which represent the present value of future cash
flows associated with servicing the debt. Where interest is payable in arrears the interest expense is accrued over the period it becomes due,
is recorded at the contracted rate as part of “Other creditors and accruals”.
Where interest is paid in advance, the interest expense is recorded as a part of “Prepayments” and released over the period to maturity.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or finance costs.
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 reporting 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 ancillary costs incurred in
connection with arrangement of borrowings, foreign exchange losses net of any hedged amounts on borrowings, including trade creditors
and lease finance charges.
Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings.
(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.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is treated as part of the expense
related to the particular provision.
(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.
(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.
COLLECTION HOUSE LIMITED
49
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(u) Employee benefits (continued)
(iii)
Superannuation Plans
The Company and other controlled entities make statutory contibutions to several superannuation funds in accordance with the directions of
it’s employees. Contributions are expensed in the period to which they relate.
(iv)
Share-based payments
Share-based compensation benefits are provided to the Chief Executive Officer via the the employment agreement between the Company
and the Chief Executive Officer.
Share-based compensation benefits are provided to employees other than the Chief Executive Officer via the Collection House Limited
Executive Share Option Plan. Further details are set out in note 41.
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 and the CEO employment agreement 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 Monte Carlo 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 is adjusted to reflect market vesting conditions, but 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
Termination benefits are payable when 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
termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after
reporting 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 and excluding treasury shares (note 30).
50
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
1 Summary of significant accounting policies (continued)
(w) Earnings per share (continued)
(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 additional ordinary shares that would have been outstanding assuming the conversion of all dilutive
potential ordinary shares.
(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 flows.
(y) 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 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) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The
Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.
(i)
AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from
AASB 8 (effective from 1 January 2009)
AASB 8 requires adoption of a ‘management approach’ to reporting on financial performance. The information being reported will be based
on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to operating
segments. The Group will adopt AASB 8 from 1 July 2009, however it is unlikely to result in any impact upon the group as segment information
is already presented based upon the structure that key decision makers use.
(ii)
Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian
Accounting Standards arising from AASB 101 (effective from 1 January 2009)
The September 2007 revised AASB 101 requires the presentation of a statement of comprehensive income and makes changes to the
statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior
period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial
position), this one being as at the beginning of the comparative period. The Group will apply the revised standard from 1 July 2009.
(iii)
AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate (effective 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1 First-time Adoption of International Financial Reporting Standards and AABS 127
Consolidated and Separate Financial Statements. The Group will apply the revised rules prospectively from 1 July 2009. After that date, all
dividends received from investments in subsidiaries, jointly controlled entities or associates will be recognised as revenue, even if they are
paid out of pre-acquisition profits, but the investments may need to be tested for impairment as a result of the dividend payment. Under the
entity’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a new intermediate parent entity is
created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts of the net assets of the subsidiary
rather than the subsidiary’s fair value.
COLLECTION HOUSE LIMITED
51
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk
and liquidity 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. The Group uses different methods to measure different types of risk
to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, aging
analysis for credit risk and cashflow analysis to determine the risk associated with the Purchased Debt Ledger portfolio.
Risk management is carried out by the finance department under policies approved by the Audit and Risk Management Committee of the
Board. Under the authority of the Board of Directors the Audit and Risk Management Committee ensures that the total risk exposure of the
group is consistent with the Business Strategy and within the risk tolerance of the Group. Regular risk reports are tabled before the Audit
and Risk Management Committee.
Within this framework, the Finance team identifies, evaluates and manages financial risks in close co-operation with the Group’s
operating units.
(a) Market risk
(i)
Foreign exchange risk
The Group and the parent entity operate internationally and are exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the NZ dollar.
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 and net investments in foreign operations.
At 30 June 2009, had the Australian Dollar weakened/strengthened by 10% against the NZ Dollar with all other variables held constant, the
impact for the year would have been immaterial to both profit for the year and equity.
(ii)
Price risk
The parent is exposed to price risk in respect of its investments in unlisted private subsidiary companies. The group is not exposed to price
risk, as there are no subsidiary company investments in the consolidated results.
The price risk for the unlisted securities is immaterial in terms of the possible impact on profit or loss or total equity. It has therefore not
been included in the sensitivity analysis.
(iii) Cash flow and fair value interest rate risk
The Group is exposed to interest rate risk from two sources – Trade interest rate risk and Investment interest rate risk.
Trade 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 and Parent main trade interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group
and Parent to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group and Parent to fair value interest rate risk.
Neither the Group nor the Parent currently has fixed rate borrowings. During 2008 and 2009, the Group and Parent borrowings at variable
rate were denominated in Australian Dollars only.
The Group and Parent analyses Trade interest rate exposure in the context of current economic conditions. Management is aware of the
impact on profits of specific interest rate increases, and annual budgets and ongoing forecasts are framed based upon the company’s and
the market’s expectations of interest rate levels for the coming year.
Interest rate hedges and swaps are an available tool for managing interest rate risk in the company. If it is determined that it would be profitable
and / or advantageous to the company, these tools will be used. No interest rate hedges or swaps are currently in place (2008: $Nil).
52
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management (continued)
(a) Market risk (continued)
As at the reporting date, the Group had the following variable rate borrowings outstanding:
30 June 2009
30 June 2008
Weighted
average
interest rate
%
6.0%
Weighted
average
interest rate
%
6.8%
Balance
$’000
63,901
63,901
Balance
$’000
69,700
69,700
Bank overdrafts and bank loans
Net exposure to cash flow interest rate risk
Investment interest rate risk
In addition the Group is exposed to Investment interest rate risk which arises from the significant investment in Purchased Debt Ledgers
(“PDL”). A number of different types of risk arise from the PDL investments. All PDL risks are managed together as described below.
Interest rate risk
Group sensitivity
At 30 June 2009, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax
profit for the year would have been $122,000 lower/higher (2008 - change of 25 bps: $112,000 lower/higher), mainly as a result of higher/lower
interest expense from net borrowings. Other components of equity would have been $122,000 lower/higher (2008 - $112,000 lower/higher)
mainly as a result of an increase/decrease in cash not required for interest payments. Other financial assets and liabilities are not interest
bearing and therefore are not subject to interest rate risk.
Parent entity sensitivity
At 30 June 2009, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax
profit would have been $115,000 lower/higher (2008 - change of 25 bps: $114,000 lower/higher) mainly as a result of lower interest expense
from net borrowings. Other components of equity would have been $115,000 lower/higher (2008 - $114,000 lower/higher) as a result of an
increase decrease in cash not required for interest payments. Other financial assets and liabilities are not interest bearing and therefore are
not subject to interest rate risk.
Foreign exchange risk
Sensitivity to changes in the exchange rate between AUD and NZD has been assessed within a range of -0.5% to +10.0% and has been found
to be immaterial against both group and parent profits and equity.
Other price risk
As none of the financial assets or liabilities of the group and the parent are traded in financial markets, there is no other price risk in either
the group or the parent.
COLLECTION HOUSE LIMITED
53
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management (continued)
(a) Market risk (continued)
(iv)
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
Consolidated
30 June 2009
Financial assets
Financial liabilities
Borrowings
Total increase/ (decrease)
Consolidated
30 June 2008
Financial liabilities
Borrowings
Total increase/ (decrease)
Company
30 June 2009
Financial liabilities
Borrowings
Total increase/ (decrease)
Company
30 June 2008
Financial liabilities
Borrowings
Total increase/ (decrease)
(b) Credit risk
Carrying
amount
$’000
69,700
63,901
65,778
65,199
Interest rate risk
-25 bps
+25 bps
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
122
122
112
112
115
115
114
114
122
122
112
112
115
115
114
114
(122)
(122)
(122)
(122)
(112)
(112)
(112)
(112)
(115)
(115)
(115)
(115)
(114)
(114)
(114)
(114)
The Group is exposed to credit risk from two sources – Trade credit risk and Investment credit risk.
Trade credit risk
Trade credit risk is managed on a Group basis. Trade credit risk arises from cash and cash equivalents, derivative financial instruments
and deposits with banks and financial institutions, as well as credit exposures to clients, including outstanding receivables and
committed transactions.
The Group and Parent have no significant concentrations of trade credit risk. The Group has policies in place to ensure that the 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.
Investment credit risk
In addition the group is exposed to Investment credit risk which arises from the significant investment in Purchased Debt Ledgers (“PDL”). A
number of different types of risk arise from the PDL investments. All PDL risks are managed together as described below.
54
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management (continued)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, 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 Finance Team aims at maintaining flexibility in funding by keeping committed credit lines available.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow. Cashflow is forecast on a
day-to-day basis across the group to ensure that sufficient funds are available to meet requirements.
Financing arrangements
The Group and the parent had access to a $75,000,000 Multiple Option Facility throughout the year (2008: $70,000,000 facility with an
additional $5,000,000 cash advance for fitout of leased premises). The facility expires on 3 January 2011, and is subject to meeting a number
of financial undertakings. The undertakings were materially met at all times during both the current and prior years. The facility is subject
to review at the end of the term.
The facility is made up of a Cash Advance option, a Commercial Bill option, an Overdraft option, and a Set-off option. The cash advance option
or the commercial bill option can be drawn upon with 2 days notice to the finance provider, and the overdraft option or the set-off option may
be drawn upon at any time. The allocation between the various options is at the discretion of the Group subject to the total not exceeding the
$75,000,000 commitment from the finance provider. The overdraft and set-off options are repayable on demand, and the Commercial Bill and
cash advance options are repayable at the end of the term.
The undertakings are reviewed by the Audit and Risk Management Committee each month, and are reported on to the finance provider
quarterly. All companies within the group are required to notify the finance provider of any event of default as soon as it becomes aware
of them.
In addition to the above the Group is required to keep the finance provider fully informed of relevant details of the group as they arise.
Further details of the banking facility are set out in note 26.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date
to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances, as the impact of discounting is not significant.
Less than 6
months
6 - 12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Total
contractual
cash flows
Carrying
Amount
(assets)/
liabilities
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Group - At 30 June 2009
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
Group - At 30 June 2008
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
4,622
-
4,622
1,610
2,801
4,411
-
-
-
-
-
-
-
69,700
69,700
-
61,100
61,100
-
-
-
-
-
-
-
-
-
-
-
-
4,622
69,700
74,322
1,610
63,901
65,511
4,622
69,700
74,322
1,610
63,901
65,511
COLLECTION HOUSE LIMITED
55
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management (continued)
(c) Liquidity risk (continued)
Less than 6
months
6 - 12 months
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Total
contractual
cash flows
Carrying
Amount
(assets)/
liabilities
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Parent - At 30 June 2009
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
Parent - At 30 June 2008
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
14,885
4,678
19,563
10,310
4,099
14,409
(d) Fair value estimation
-
-
-
-
-
-
-
69,700
69,700
-
61,100
61,100
-
-
-
-
-
-
21,858
-
36,743
74,378
36,743
74,378
21,858
111,121
111,121
14,745
-
14,745
25,055
65,199
90,254
25,055
65,199
90,254
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 (for example, purchased debt portfolios in the group, and
investments in subsidiaries in the parent) is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance date. Other techniques, such as estimated discounted cash flows,
are also used to determine fair value for the financial instruments.
The key assumption which underpins the valuation of Financial Instruments in the group is the recovery rate. Assumptions are made about
the recovery rate based on experience and market conditions. Sensitivity of profit and equity to changes in the actual recovery rate achieved
is set out in the sensitivity analysis below.
Other Financial Assets at Fair Value through the Profit and Loss as disclosed in the parent entity represent investments in subsidiary
companies. These investments in the parent are valued based upon the carrying value of the underlying assets in the subsidiaries. These
assets are carried at the lower of cost or valuation in accordance with Australian Accounting Standards. Sensitivity to movements in the
variables noted above has been determined to be immaterial in relation to both profit and equity.
The carrying value less doubtful debts provision of trade receivables and payables is a reasonable approximation of their fair values due to
the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
Purchased Debt Ledgers
Other Financial Assets at Fair Value through the Profit and Loss as disclosed in the group entity represent investments in debt ledgers. To
manage the interest rate and credit risks arising from investments in debt portfolios, the Group analyses the price to be paid for each tranche
before it is purchased. Debt prices paid are determined by a bidding process in the market place, with each bidder determining the prices
which they are prepared to pay based on their own analysis.
The price offered by the Group for any particular tranche of debt is determined based upon existing in-house knowledge of the tranche,
macro-economic and micro-economic factors and the experience of senior management. In-house knowledge of a tranche exists if the
tranche has been previously worked by the company on a commission basis.
Due to contractual restrictions on the company’s ability to subsequently deal with the purchased debt portfolio, it is considered that there is
not an active market in debt portfolios in which the company can participate.
56
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
2 Financial risk management (continued)
(d) Fair value estimation (continued)
Initial recognition value
The factors that determine the price paid for a particular tranche of debt are:
1. The Face Value of the debt being purchased
The face value of debt is dependent upon the value of debt that the vendor is prepared to sell.
2. The expected Recovery Rate of the debt being purchased
The expected recovery rate is the percentage of the face value of a debt that is expected to be recovered as a result of collection activity, and
is based upon the company’s historical experience with the particular tranche being purchased. Historical experience can vary from a detailed
knowledge of the tranche if it has been previously worked by the company on a commission basis, to a general knowledge of the type of debt
being purchased from a new vendor, and specific knowledge discovered as part of a pre-purchase due diligence process.
3. The Price Multiple which can be obtained
The price multiple is the discount factor between the recoverable amount of the debt and the price which is paid for it. The discount factor is
determined by the amount that the vendor is prepared to accept in exchange for the debt, and the amount that the company is able to pay to
acquire the debt and achieve an acceptable profit margin.
Subsequent measurement of carrying value
After a tranche has been purchased, fair value adjustments are made against the the carrying value in line with the revenue collected against
it. The carrying value is continuously reviewed to ensure that it is not in excess of fair value based upon a discounted cash flow (DCF) model.
The inputs to the DCF model are the same as are used in the original purchase price calculation with actual results substituted for expected
estimates. In this context the only variable is the recovery rate, as neither the face value nor the price multiple can change as a result of
working a debt.
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets at Fair Value through the Profit & Loss to the achieved
recovery rate.
As a result of the Global Financial crisis, the reasonably likely range for the sensitivity analysis has increased to +/- 4.4% in 2009
(2008: +/- 2.0%).
Consolidated
30 June 2009
Financial assets
Financial assets at FVTPL
Total increase/ (decrease)
Consolidated
30 June 2008
Financial assets
Financial assets at FVTPL
Total increase/ (decrease)
Carrying
amount
$’000
146,919
Carrying
amount
$’000
143,470
Recoverability
-4.4%
+4.4%
Other
Equity
$’000
(1,185)
(1,185)
Profit
$’000
1,185
1,185
Recoverability
-2.0%
+2.0%
Other
Equity
$’000
(415)
(415)
Profit
$’000
415
415
Other
Equity
$’000
1,185
1,185
Other
Equity
$’000
415
415
Profit
$’000
(1,185)
(1,185)
Profit
$’000
(415)
(415)
COLLECTION HOUSE LIMITED
57
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
3 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.
(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. Refer to note 2 for details of these assumptions and the potential impact of changes to the assumptions.
(ii)
Estimated impairment of non-financial assets and intangible assets other than goodwill
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in
determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course
of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
The Group tests annually whether the non-financial assets or intangible assets of the Group (other than goodwill) have 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.
(iii)
Estimated fair value of other financial assets
At each reporting date the Group determines the fair value of financial assets in accordance with the accounting policy stated at 1(n). The
calculation of impairment requires the use of assumptions.
(b) Critical judgements in applying the entity’s accounting policies
Employee benefits
Management judgment is applied in determining the key assumptions used in the calculation of long service leave at balance date:
- future increases in wages and salaries
- future on-cost rates
- experience of employee departures and period of service
Impairment of available-for-sale financial assets
The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement on determining when an available-for-sale
financial asset is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other
factors, the underlying assets of the investee company.
Useful lives of property, plant and equipment
The Group’s management determines the estimated useful lives and related depreciation charges for property, plant and equipment at the
time of acquisition. As described in note 1(o) useful lives are reviewed regularly throughout the year for appropriateness.
58
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
4 Segment information
(a) Description of segments
Individual business segments are identified on the basis of grouping individual products or services subject to similar risks and returns. The
business segments reported are: Contingent Collection Services, and Account Asset Management. In prior years, there was one business
allocated to Credit Reporting and two businesses allocated to Other Operations. These businesses were sold during the years ended 30
June 2008 and 30 June 2007 respectively, and the information regarding these businesses is now in the Discontinued operations column. For
further information refer to note 9.
The consolidated Entity comprises the following business segments, based on the group’s management reporting system:
Contingent Collection Services
The earning of commissions on the collection of debts for clients;
Account Asset Management
The collection of debts from client ledgers acquired by the Company;
Although the consolidated entity’s divisions are managed on a global basis they operate in two main geographical areas, Australia and
New Zealand.
(b) Primary reporting format - business segments
Collection
services
Account asset
management
Intersegment
eliminations/
unallocated
Total
continuing
operations
Discontinued
operations
(note 11)
Consolidated
$’000
$’000
$’000
$’000
$’000
$’000
2009
Segment revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue
Total segment revenue/income
Profit on discontinued operations
Consolidated revenue
Segment result
32,097
4,392
36,489
55
36,544
71,300
-
71,300
13
71,313
(1,459)
(4,392)
(5,851)
(68)
(5,919)
Segment result (notes [ii])
7,230
17,366
(6,005)
Interest expense & borrowing costs
Unallocated revenue less unallocated
expenses
Profit before income tax
Income tax benefit / (expense)
Profit for the year
101,938
-
101,938
-
101,938
-
101,938
18,591
(4,467)
(3,365)
10,759
(3,059)
7,700
-
-
-
219
219
-
219
219
-
-
219
(65)
154
101,938
-
101,938
219
102,157
-
102,157
18,810
(4,467)
(3,365)
10,978
(3,124)
7,854
COLLECTION HOUSE LIMITED
59
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
4 Segment information (continued)
(b) Primary reporting format - business segments (continued)
Collection
services
Account asset
management
Intersegment
eliminations/
unallocated
Total
continuing
operations
Discontinued
operations
(note 11)
Consolidated
$’000
$’000
$’000
$’000
$’000
$’000
150,816
151,929
(121,937)
180,808
2009
Segment assets and liabilities
Segment assets
Intersegment elimination
Unallocated assets
Total assets
Segment liabilities
Intersegment elimination
Unallocated liabilities
Total liabilities
Other segment information
Acquisitions of property, plant and equipment,
intangibles and other non-current segment
assets
Total acquisitions
Depreciation and amortisation expense
Total depreciation and amortisation
Other non-cash expenses
2008
Segment revenue
Sales to external customers
Intersegment sales
Total sales revenue
Profit from discontinued operations / Other
revenue
Total segment revenue
Unallocated revenue
Consolidated revenue
Segment result
11,943
132,191
(135,708)
7,338
70,840
-
291
199
669
1,335
31,568
(310)
30,604
3,833
34,437
64,183
-
64,183
28
-
34,465
64,183
54
(3,847)
(3,793)
641
(3,152)
Segment result (notes (ii))
5,736
15,966
(5,918)
Interest expense & borrowing costs
Unallocated revenue less unallocated
expenses
Profit before income tax
Income tax benefit / (expense)
Profit for the year
60
ANNUAL REPORT 2009
-
-
180,808
8,426
-
84,422
92,848
78,178
78,178
2,295
2,295
31,457
94,841
(14)
94,827
669
95,496
-
95,496
15,784
(5,133)
(5,662)
4,989
(1,229)
3,760
-
-
-
-
-
-
-
-
-
-
-
-
-
5,696
15
5,711
98
5,809
10,404
16,213
11,327
-
-
11,327
(2,699)
8,628
180,808
-
-
180,808
8,426
-
84,422
92,848
78,178
78,178
2,295
2,295
31,457
100,537
1
100,538
767
101,305
10,404
111,709
27,111
(5,133)
(5,662)
16,316
(3,928)
12,388
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
4 Segment information (continued)
(b) Primary reporting format - business segments (continued)
2008
$’000
$’000
$’000
$’000
$’000
$’000
Collection
services
Account asset
management
Intersegment
eliminations/
unallocated
Total
continuing
operations
Discontinued
operations
(note 11)
Consolidated
132,195
146,135
(116,007)
162,323
9,403
171,726
Segment assets and liabilities
Segment assets
Intersegment elimination
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
7,331
118,645
(120,196)
Other segment information
Acquisitions of property, plant and equipment,
intangibles and other non-current segment
assets
Total acquisitions
2,693
56,193
-
Depreciation and amortisation expense
122
645
1,540
-
4,737
167,060
5,780
81,692
87,472
58,886
58,886
2,307
2,307
-
-
-
-
9,403
4,707
-
4,707
1,350
1,350
-
-
-
-
-
4,737
176,463
10,487
81,692
92,179
60,236
60,236
2,307
2,307
-
-
Total depreciation and amortisation
Impairment of goodwill (note 20)
Impairment of other assets
Other non-cash expenses
-
-
-
-
-
-
(72)
30,480
502
30,910
(45)
30,865
(c) Secondary reporting format - geographical segments
Segment revenues from
sales to external customers
Segment assets
Acquisitions of property,
plant and equipment,
intangibles and other
non-current segment assets
30 June
2009
$’000
96,873
5,282
30 June
2008
$’000
92,658
7,663
30 June
2009
$’000
171,559
9,249
30 June
2008
$’000
162,004
9,344
102,155
100,321
180,808
171,348
30 June
2009
$’000
78,016
162
78,178
30 June
2008
$’000
60,236
65
60,301
-
4,737
180,808
176,085
Australia
New Zealand
Unallocated assets
Total assets
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
COLLECTION HOUSE LIMITED
61
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
4 Segment information (continued)
(c) Secondary reporting format - geographical segments (continued)
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
Margin on sales revenue
Collection Services
Account Asset Management Discontinued Operations
30 June
2009
30 June
2008
30 June
2009
30 June
2008
30 June
2009
30 June
2008
%
19
%
16
%
24
%
25
%
100
%
70
5 Correction of error in reporting expenses in the previous year
As noted in the 31 December 2008 half year report, the Company has moved to correct its approach to accounting for employment costs,
which have previously been accounted for on an effectively cash basis which is inconsistent with accrual accounting principles. This practice
goes back to the incorporation of the company, and it is impraticable to make corrections from when the issue first arose. The cumulative
error has been corrected from 1 July 2007, by recognising an accrual for outstanding wages at that time of $1,317,000, together with an
adjustment against current tax receivables of $408,000. The $909,000 after tax profit effect of this initial adjustment has been posted as a
reduction against the opening balance of retained earnings.
It has become necessary for the correction to be made in the current year as a result of it becoming a material adjustment in the context
of the company’s expectations of financial performance and financial position in the new environment of the world economic crisis. In prior
years, based on the best information available to management, this issue has always been immaterial and not required adjustment.
The impact of the change from cash to accrual accounting in respect of wages cost in the current year has been to increase the NPAT by
$71,000. Retained earnings and net assets in the balance sheet have reduced by a corresponding amount.
The change will have no effect on the cashflows of the consolidated group.
The balance sheet for all future years will carry a liability for wages unpaid at the end of the reporting period. This liability can vary between
3 and 13 days for any given year and will be calculated using the most recent payroll data available.
In addition to the impact on the prior year’s results as identified above, the change will also have an impact on the way that the Company
would have accounted for wages in each financial year, where, as a result of the scheduling of wage payments, the Company would physically
pay more wages than have accrued for that working year. One such financial year is that ending 30 June 2010. In that financial year, the effect
of the proposed change to accounting for wages is that expenses for wages and salaries for that year under the proposed change will be lower
than would have been the case if no change had been made to the method of accounting for wages expenses. That is, the expense from the
additional cash payment of wages will be reallocated to the earlier years to which it relates.
Adjustments to the current and prior years have been made using the payroll and staffing levels as they stood at the relevant date.
The correction has been made during the year ended 30 June 2009 by restating each of the affected financial statement line items for the
prior year, as described above.
Basic and diluted earnings per share for the prior year have also been restated. The amount of the correction for both basic and diluted
earnings per share was an increase of 0.07 cents per share.
62
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
5 Correction of error in reporting expenses in the previous year
(continued)
The error had the the effect on various line items in the financial statements in the following manner:
(a) Consolidated
Balance Sheet
Current tax receivables
Total assets
Current payables
Total liabilities
Retained earnings
Total equity
Income Statement
Employee expenses
Profit before income tax
Income tax expense
Profit from continuing operations
Profit for the year
(b) Parent
Balance Sheet
Current tax receivables
Total assets
Current payables
Total liabilities
Retained earnings
Total equity
30 June 2008
(as reported)
$’000
1,937
understated by
375
176,085
(6,107)
understated by
(90,962)
(19,504)
(85,123)
overstated by
375
(1,217)
(1,217)
839
839
30 June 2008
(as reported)
$’000
33,275
overstated by
(103)
(4,886)
understated by
1,197
understated by
(3,689)
understated by
(12,317)
understated by
(103)
31
(71)
(71)
30 June 2008
(as reported)
$’000
2,599
understated by
177,181
375
375
(12,419)
understated by
(1,217)
30 June 2008
(revised and per
current balance
sheet)
$’000
2,312
176,460
(7,324)
(92,179)
(18,665)
(84,284)
30 June 2008
(revised and per
current Income
statement)
$’000
33,172
(4,989)
1,228
(3,760)
(12,388)
30 June 2008
(revised and per
current balance
sheet)
$’000
2,974
177,556
(13,636)
(99,428)
(10,019)
(77,750)
overstated by
(1,217)
(100,645)
839
839
(9,180)
(76,911)
COLLECTION HOUSE LIMITED
63
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
5 Correction of error in reporting expenses in the previous year
(continued)
(b) Parent (continued)
Income Statement
Employee expenses
Profit before income tax
Income tax expense
Profit from continuing operations
Profit for the year
6 Revenue
From continuing operations
Sales revenue
Revenue from rendering of services
Other revenue
Rent received
Interest
Dividends
Other Income
Net gain / (loss) from sale of businesses and related assets (excluding
discontinued operations)
Total revenue from continuing operations
(a) Revenue from discontinued operations
From discontinued operations (note 11)
National Revenue Corporation Pty Ltd
Insurance Claims Solutions Pty Ltd (formerly CHIP #1 Pty Ltd)
Australian Business Research group / National Tenancy Database Pty Ltd
Downie and Associates Unit Trust
64
ANNUAL REPORT 2009
30 June 2008
(as reported)
$’000
27,537
(7,715)
(3,211)
overstated by
understated by
understated by
(10,927)
understated by
(10,940)
understated by
30 June 2008
(revised and per
current Income
statement
(103)
(103)
31
(71)
(71)
$’000
27,434
(7,818)
(3,180)
(10,998)
(11,011)
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
99,743
99,743
272
1,817
-
127
-
2,216
101,959
-
-
-
219
219
93,769
93,769
63
1,477
-
188
-
1,728
95,497
535
312
4,962
-
5,809
38,909
38,909
272
107
23,422
208
22
24,031
62,940
-
-
-
-
-
39,417
39,417
63
577
25,164
210
15
26,029
65,446
-
-
-
-
-
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
7 Other income
Foreign exchange gains/(losses) (net)
8 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Dep - Leasehold improvements, plant and equipment
Total depreciation
Amortisation
Amortisation - Leased plant and equipment
Amortisation - Other intangibles
Amortisation - Legal and court cost capitalised
Total amortisation
Finance costs
Interest and finance charges paid/payable
Total Finance Costs
Fair Value losses
Fair Value losses on other financial assets (note 14)
Total Fair Value losses on other financial assets
Consolidated
Company
30 June
2009
$’000
(23)
30 June
2008
$’000
(5)
30 June
2009
$’000
-
30 June
2008
$’000
-
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
1,626
1,626
-
-
669
669
4,467
4,467
30,265
30,265
1,666
1,666
1
27
613
641
5,133
5,133
29,730
29,730
1,531
1,531
1,594
1,594
-
-
-
-
5,097
5,097
-
-
-
27
-
27
4,862
4,862
-
-
9 Write back of over-provided expenses
The following expenses include expense write backs in respect of the release
of an overprovision relating to the settlement of the stamp duty issue as
disclosed inthe 2008 Annual Report:
Other expenses
Legal expenses
Finance costs
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
(443)
(165)
(736)
(1,344)
-
-
-
-
-
(165)
-
(165)
-
-
-
-
COLLECTION HOUSE LIMITED
65
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
10 Income tax expense
Consolidated
Company
30 June
2009
30 June
2008
(a)
Income tax expense
Current income tax provision
Deferred income tax provision
Tax on discontinued operations
Under (over) provided in prior years
Income tax expense is attributable to:
Income tax expense/(benefit) - Profit from continuing operations
Income tax expense/(benefit) - Profit from discontinued operations
Aggregate income tax expense
Deferred income tax (revenue) expense included in income tax expense
comprises:
Decrease (increase) in deferred tax assets (note 19)
(Decrease) increase in deferred tax liabilities (note 27)
$’000
3,235
(2,711)
-
2,600
3,124
3,059
65
3,124
1,407
(4,118)
(2,711)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Profit from discontinuing operations before income tax expense
Tax at the Australian tax rate of 30% (2008 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
10,759
219
10,978
3,293
$’000
1,708
2,661
-
(443)
3,926
1,229
2,697
3,926
77
2,584
2,661
4,989
11,327
16,316
4,895
Non-deductible expenses
Non-deductible depreciation
Non-deductible amortisation
Non-deductible impairment
Non-assessable inter-company dividends from members of the
tax-consolidated Group
Capital gain on consolidation of new group members
Tax benefit on wind up of discontinued operations
Non-deductible writedown of investments in subsidiaries
Tax losses not recognised
Sundry items
(16)
278
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(700)
-
-
62
30 June
2009
$’000
(5,784)
575
-
126
30 June
2008
$’000
(3,679)
542
-
(37)
(5,083)
(3,174)
(5,083)
(3,180)
-
6
(5,083)
(3,174)
546
29
575
6,663
-
6,663
1,999
132
-
-
29
562
(20)
542
7,818
19
7,837
2,351
138
-
-
-
(7,027)
(7,549)
-
-
-
-
-
-
-
1,452
-
1,014
(2,594)
3,277
4,535
(4,867)
66
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
10 Income tax expense (continued)
(b)
Numerical reconciliation of income tax expense to prima facie tax payable (continued)
Consolidated
Company
30 June
2009
$’000
-
(153)
-
-
(153)
3,124
30 June
2008
$’000
32
(641)
-
-
(609)
3,926
30 June
2009
$’000
-
(216)
-
-
30 June
2008
$’000
-
(580)
-
-
(216)
(5,083)
(580)
(3,174)
Difference in overseas tax rates
Adjustments for current tax of prior periods
Previously unrecognised tax losses used to reduce deferred tax expense
Previously unrecognised tax losses now recouped to reduce current
tax expense
Income tax expense
11 Discontinued operation
National Revenue Corporation Pty Ltd
In February 2008 the company entered into agreements for the sale of the business of National Revenue Corporation Pty Ltd, which was
included in the Contingent Collections segment of the company. The sale transaction was completed on 22 February 2008 and the company
is reported as a discontinued operation.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Further information is set
out in note 4 - segment information.
(a)
Financial performance and cash flow information
Revenue (note 6)
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Gain on sale of the division before income tax
Income tax expense
Gain on sale of the division after income tax
Profit from discontinued operation
Net cash inflow (outflow) from operating activities
Net cash inflow (outflow) from investing activities
Net cash (outflow) from financing activities
Net increase in cash generated by the division
Consolidated
Company
30 June
2009
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
30 June
2008
$’000
535
(625)
(90)
27
(63)
254
108
362
299
-
-
-
-
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36
(11)
25
25
-
-
-
-
COLLECTION HOUSE LIMITED
67
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
11 Discontinued operation (continued)
National Revenue Corporation Pty Ltd (continued)
(b)
Details of the sale of the division
Consideration received or receivable:
Cash
Total disposal consideration
Carrying amount of net assets sold
Expenses
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
91
91
-
163
254
108
362
-
-
-
-
-
-
-
17
17
-
19
36
(11)
25
Insurance Claims Solutions Pty Ltd (formerly CHIP #1)
(a)
Description
On 22 February 2008, the company sold its majority shareholding in Insurance Claims Solutions Pty Ltd (formerly Chip No 1 Pty Ltd) to the
minority shareholders of that company. The sale of this business and its financial performance to disposal date is reported in this financial
report as a discontinued operation.
(b)
Financial performance and cash flow information
The financial performance and cash flow information presented are for the period ended 22 February 2008 (2008 column).
Consolidated
Company
30 June
2009
$’000
-
-
-
-
-
-
-
-
-
30 June
2008
$’000
312
(387)
(75)
23
(52)
225
28
253
201
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24)
7
(17)
(17)
Revenue (note 6)
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Gain on sale of the division before income tax
Income tax expense
Gain on sale of the division after income tax
Profit from discontinued operation
68
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
11 Discontinued operation (continued)
National Revenue Corporation Pty Ltd (continued)
(c) Details of the sale of the division
Cash
Present value of amount due on 31 March 2011
Carrying amount of net assets sold
Cost of disposal
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
250
-
(14)
(11)
225
28
253
-
-
-
-
-
-
-
250
-
(260)
(14)
(24)
7
(17)
As a result of the sale of Insurance Claims Solutions Pty Ltd in the previous year, intellectual property with the value of $500,000 in CHIP
No. 1 Pty Ltd was written off to nil. This transaction does not relate to the final sale of Insurance Claims Solutions Pty Ltd (formerly CHIP #1
Pty Ltd).
Australian Business Research group/ National Tenancy Database Pty Ltd
(a)
Description
On 30 June 2007 the company entered into conditional agreements for the sale of the group businesses of Australian Business Research Pty
Ltd and National Tenancy Database Pty Ltd, which made up the credit reporting segment of the company. The agreements, subject to certain
conditions precedent, also required regulatory clearance from the Australian Competition and Consumer Commission. This clearance was
given in August 2007, and the other conditions were met in September 2007. The sale transaction was completed on 6 September 2007, and
the division is reported in this financial report as a discontinued operation.
Financial information relating to the discontinued operation for the period to the date of disposal (31 December 2006) is set out below. Further
information is set out in note 4 - segment information.
(b)
Financial performance and cash flow information
The financial performance and cash flow information presented are for the two months ended 31 August 2007 (2008 column).
Revenue (note 6)
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Gain on sale of the division before income tax
Income tax expense
Gain on sale of the division after income tax
Profit from discontinued operation
Consolidated
Company
30 June
2009
$’000
-
-
-
-
-
-
-
-
-
30 June
2008
$’000
4,962
(3,879)
1,083
(325)
758
9,928
(2,558)
7,370
8,128
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
(2)
5
5
COLLECTION HOUSE LIMITED
69
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
11 Discontinued operation (continued)
Australian Business Research group/ National Tenancy Database Pty Ltd (continued)
Consolidated
Company
30 June
2009
$’000
-
-
-
-
30 June
2008
$’000
(5,861)
31,070
-
25,209
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
Consolidated
Company
30 June
2009
$’000
-
-
-
-
6 September
2007
$’000
268
18,144
18,412
18,412
30 June
2009
$’000
31 August
2008
$’000
-
-
-
-
-
-
-
-
Consolidated
Company
30 June
2009
$’000
-
-
-
-
-
-
-
30 June
2008
$’000
31,070
-
(18,412)
(2,730)
9,928
(2,558)
7,370
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
-
-
7
7
(2)
5
Net cash inflow (outlow) from operating activities
Net cash inflow (outflow) from investing activities
Net cash (outflow) from financing activities
Net increase in cash generated by the division
(c)
Carrying amounts of assets and liabilities
The carrying amounts of assets sold as at the date of sale (6 September 2007):
Property, plant and equipment
Intangibles
Total assets
Net assets
(d) Details of the sale of the division
Cash
Present value of amount due on 31 March 2011
Carrying amount of net assets sold
Expenses
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
70
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
11 Discontinued operation (continued)
Downie & Associates Unit Trust
(a)
Recovery of previously impaired assets
As reported in the year ended 30 June 2005, on 17 September 2004 the consolidated entity sold the business of Downie & Associates, recording
a profit on disposal of $78,000, and recognising a non-current receivable of $970,000. As part of the transition to AIFRS, on 1 July 2005, the
company adopted AASB132 - Financial Instruments: Disclosure and Presentation and AASB139 - Financial Instruments: Recognition and
Measurement, and at that date, based on management’s assessment, the $970,000 receivable was fully impaired as there appeared to be no
prospect of recovery. Under the stricter rules of AIFRS, the company was required to impair the debt to the level of potential recovery.
Subsequent to the impairment, $219,000 has been recovered ($151,000 after income tax), which has been included as a profit from
discontinued operations. As management has no expectation of further recoveries in future periods, no amounts have been reinstated for
this receivable. Any future recoveries will be recorded as profits from discontinued operations as they are received.
Financial information relating to the discontinued operation for the period to the date of disposal (11 May 2007) is set out below. Further
information is set out in note 4 - segment information.
(b)
Financial performance and cash flow information
The financial performance and cash flow information presented are for the 12 months ended 30 June 2009. There were no recoveries of the
non-current receivable in the prior year.
Revenue (note 6)
Income tax expense
Profit from discontinued operation
(c) Details of the sale of the division
Consideration received or receivable:
Cash
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
Summary of Discontinued Operations
National Revenue Corporation Pty Ltd
Insurance Claims Solutions Pty Ltd (formerly CHIP #1)
Australian Business Research group/ National Tenancy Database Pty Ltd
Downie & Associates Unit Trust
Profit from discontinued operations
Consolidated
Company
30 June
2009
$’000
219
(65)
154
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
-
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
154
154
-
-
-
-
299
201
8,128
-
8,628
-
-
-
-
-
-
-
-
-
-
-
-
-
25
(17)
5
-
13
COLLECTION HOUSE LIMITED
71
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
12 Current assets - Cash and cash equivalents
Cash at bank and in hand
Consolidated
Company
30 June
2009
$’000
584
584
30 June
2008
$’000
937
937
30 June
2009
$’000
132
132
30 June
2008
$’000
801
801
(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 23)
Balances per statement of cash flows
(b) Cash at bank and on hand
Consolidated
Company
30 June
2009
$’000
584
-
584
30 June
2008
$’000
937
(2,801)
(1,864)
30 June
2009
$’000
132
(4,678)
(4,546)
30 June
2008
$’000
801
(4,099)
(3,298)
Information concerning the effective interest rates is set out in the non-current receivables note 16.
(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.
72
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
13 Current assets - Receivables
Net trade receivables
Trade debtors
Provision for impairment of receivables (note (a))
Loans to controlled entities
Other loans
Other debtors
(a)
Impaired trade receivables
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
2,078
(318)
1,760
(7)
(7)
48
2,829
2,877
4,630
2,927
(690)
2,237
(9)
(9)
49
1,911
1,960
4,188
1,462
(185)
1,277
206
206
49
1,674
1,723
3,206
1,889
(448)
1,441
201
201
48
908
956
2,598
As at 30 June 2009 current trade receivables of the Group with a nominal value of $468,000 (2008 - $907,000) were impaired. The amount of
the provision was $318,000 (2008 - $690,000). The individually impaired receivables mainly relate to debtors which have been outstanding for
more than 90 days. It has been assessed that a portion of these receivables are expected to be recovered.
As at 30 June 2009 current trade receivables of the Parent with a nominal value of $185,000 (2008 - $603,000) were impaired. The amount
of the provision was $185,000 (2008 - $448,000). The individually impaired receivables mainly relate to debtors which have been outstanding
for more than 90 days. It has been assessed that a portion of these receivables are expected to be recovered.
The ageing of these receivables is as follows:
1 to 3 months
3 to 6 months
Consolidated
Company
30 June
2009
$’000
-
468
468
30 June
2008
$’000
-
907
907
30 June
2009
$’000
-
185
185
30 June
2008
$’000
-
603
603
Movements in the provision for impairment of receivables are as follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectible
Unused amount reversed
Consolidated
Company
30 June
2009
$’000
690
85
-
(457)
318
30 June
2008
$’000
1,808
456
(891)
(683)
690
30 June
2009
$’000
448
53
-
(316)
185
30 June
2008
$’000
1,374
367
(652)
(641)
448
COLLECTION HOUSE LIMITED
73
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
13 Current assets - Receivables (continued)
(a)
Impaired trade receivables (continued)
The creation and release of the provision for impaired receivables has been included in ‘other expenses’ in the income statement. Amounts
charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit history
of these other classes, it is expected that these amounts will be received when due. The Group does not hold any collateral in relation to
these receivables.
(b) Past due but not impaired
As of 30 June 2009, trade receivables of the Group of $291,000 (2008 - $556,000) were past due but not impaired. These relate to a number
of independent customers for whom there is no recent history of default.
As of 30 June 2009, trade receivables of the Parent of $259,000 (2008 - $488,000) were past due but not impaired. These relate to a number
of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Up to 3 months
3 to 6 months
(c) Other receivables
Consolidated
Company
2009
$’000
291
-
291
2008
$’000
556
-
556
2009
$’000
259
-
259
2008
$’000
488
-
488
These amounts relate to accrued revenue and rental bonds of the Group and the Parent. In addition, for the parent entity, this item includes
receivables from group companies.
(d) 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 16.
(e) Foreign exchange and interest rate risk
Refer to note 16(d) for an analysis of Group’s exposure to foreign currency risk in relation to trade and other receivables.
Information about the Group’s and the parent entity’s exposure to exposure to foreign currency risk and interest rate risk in relation to trade
and other receivables is provided in note 2.
(f) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to note
2 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.
74
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
14 Other financial assets at fair value through profit or loss
Current and Non-Current
At beginning of year
Reclassification of capitalised costs
Adjustment on adoption of AASB 132 and AASB 139
Additions
Fair value gain / (loss)
At end of year
Other Financial Assets at fair value through Profit and Loss
The amount of the above financial assets are classified as follows:
Current
Non Current
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
143,470
102,669
-
-
33,711
(30,265)
146,916
-
-
70,395
(29,594)
143,470
-
-
-
-
-
-
Consolidated
Company
2009
$’000
146,916
146,916
2008
$’000
143,470
143,470
2009
$’000
-
-
Consolidated
Company
2009
$’000
29,999
116,917
146,916
2008
$’000
36,511
106,959
143,470
2009
$’000
-
-
-
-
-
-
-
-
-
2008
$’000
-
-
2008
$’000
-
-
-
Gains / (losses) in fair values of other financial assets at fair value through profit or loss are recorded in the income statement.
(a) Risk exposure
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and price risk are provided in note 2.
15 Current assets - Other current assets
Other deposits
Prepayments
Other
Consolidated
Company
2009
$’000
16
980
-
996
2008
$’000
22
695
772
1,489
2009
$’000
1
942
-
943
2008
$’000
-
645
-
645
COLLECTION HOUSE LIMITED
75
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
16 Non-current assets - Receivables
Loans to controlled entities
* Refer to note 13 for the current portions of these receivables.
Consolidated
Company
2009
$’000
-
-
2008
$’000
-
-
2009
$’000
154,885
154,885
2008
$’000
134,929
134,929
Further information relating to loans to related parties and key management personnel is set out in notes 34 and 38 respectively.
(a)
Impaired receivables and receivables past due
None of the non-current receivables are impaired or past due but not impaired.
(b) Fair values
The fair values and carrying values of non-current receivables are as follows:
Parent entity
Loans to related parties
2009
2008
Carrying
amount
$’000
154,885
154,885
Fair value
$’000
154,885
154,885
Carrying
amount
$’000
134,929
134,929
Fair value
$’000
134,929
134,929
The carrying amount of the intercompany receivable is reviewed each year to ensure that there are sufficient underlying assets in the related
party to recover the debts. If there are insufficient assets, the carrying amount is reduced accordingly.
(c)
Interest rate risk
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.
Floating
interest rate
$’000
-
-
-
-
579
579
6.0%
Non-
interest
bearing
$’000
1,760
-
2,877
Total
$’000
1,760
-
2,877
146,916
146,916
5
584
151,558
152,137
-%
2009
Trade receivables
Other deposits
Other receivables
Purchased Debt
Cash & cash equivalents
Weighted average interest rate (%)
76
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
16 Non-current assets - Receivables (continued)
(c)
Interest rate risk (continued)
2008
Trade receivables
Other deposits
Other receivables
Purchased debt
Cash & cash equivalents
Weighted average interest rate
Floating
interest rate
$’000
-
-
-
-
238
238
7.5%
Non-
interest
bearing
$’000
2,240
24
1,899
Total
$’000
2,240
24
1,899
143,470
143,470
4
242
147,637
147,875
-%
(d) Foreign currency and interest rate risk
The carrying amounts of the Group’s and parent entity’s current and non-current receivables are denominated in Australian dollars.
(e) Credit risk
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. The Group
does not hold any collateral as security. Refer to note 2 for more information on the risk management policy of the Group.
17 Non-current assets - Available-for-sale financial assets
At beginning of year
Additions
Disposals (sale and redemption)
Losses from impairment
(a) Fair values
Consolidated
Company
2009
$’000
2008
$’000
-
-
-
-
-
-
-
-
-
-
2009
$’000
16,116
-
-
(99)
16,017
2008
$’000
20,432
844
(1,467)
(3,693)
16,116
Available-for-sale financial assets include the following classes of financial assets:
Unlisted securities (note (b))
Equity securities
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
-
16,017
16,116
COLLECTION HOUSE LIMITED
77
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
17
Non-current assets - Available-for-sale financial assets
(continued)
(b) Unlisted securities
Unlisted securities are traded in inactive markets. Their fair value is determined based on the fair value of the net assets of the underlying
subsidiaries. The assets of each subsidiary are tested for impairment annually using expected cashflows for the entity within its cash
generating unit. If the net assets are less than the carrying value of the investment and it is considered that the carrying value of the asset is
not recoverable, the investment is impaired to the point at which the carrying amount is recoverable from the underlying assets.
18 Non-current assets - Property, plant and equipment
Plant and
equipment
Motor vehicles
Leasehold
improvements
Leased plant &
equipment
$’000
$’000
$’000
$’000
909
(241)
668
668
557
(269)
-
(83)
-
873
1,090
(217)
873
8
(5)
3
3
-
-
-
(1)
-
2
8
(6)
2
11,584
(9,251)
2,333
2,333
560
(342)
-
(703)
-
1,848
10,719
(8,871)
1,848
Work-in-
progress
$’000
472
-
472
472
768
-
-
-
(456)
784
-
-
-
-
9
-
-
-
-
9
9
-
9
Total
$’000
12,973
(9,497)
3,476
3,476
1,894
(611)
-
(787)
(456)
3,516
Consolidated
At 1 July 2007
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2008
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Transfers
Closing net book amount
At 30 June 2008
Cost or fair value
Accumulated depreciation
Net book amount
Consolidated
At 1 July 2007
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2008
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Transfers
Closing net book amount
78
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
18
Non-current assets - Property, plant and equipment
(continued)
Consolidated
At 30 June 2008
Cost or fair value
Accumulated depreciation
Net book amount
Consolidated
Year ended 30 June 2009
Opening net book amount
Additions
Disposals
Reversal of Impairment charge in profit and loss
Transfers to assets held for sale
Depreciation charge
Transfers
Closing net book amount
At 30 June 2009
Cost or fair value
Accumulated depreciation
Net book amount
Consolidated
Year ended 30 June 2009
Opening net book amount
Additions
Disposals
Reversal of Impairment charge in profit and loss
Transfers to assets held for sale
Depreciation charge
Transfers
Closing net book amount
At 30 June 2009
Cost or fair value
Accumulated depreciation
Net book amount
Work-in-
progress
$’000
784
-
784
Total
$’000
12,610
(9,094)
3,516
Plant and
equipment
Motor vehicles
Leasehold
improvements
Leased plant &
equipment
$’000
$’000
$’000
$’000
873
56
(1,647)
-
-
(245)
3,494
2,531
2,815
(284)
2,531
2
-
(2)
-
-
-
-
-
2
(2)
-
1,848
315
(395)
18
-
(679)
3,247
4,354
7,399
(3,045)
4,354
Work-in-
progress
$’000
784
6,886
-
-
-
-
(7,605)
65
65
-
65
9
-
-
-
-
(2)
-
7
9
(2)
7
Total
$’000
3,516
7,257
(2,044)
18
-
(926)
(864)
6,957
10,290
(3,333)
6,957
COLLECTION HOUSE LIMITED
79
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
18
Non-current assets - Property, plant and equipment
(continued)
Company
At 1 July 2007
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2008
Opening net book amount
Additions
Disposals
Depreciation charge
Transfers
Closing net book amount
At 30 June 2008
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2009
Opening net book amount
Additions
Disposals
Reversal of Impairment charge in profit and loss
Depreciation charge
Impairment loss
Transfers
Closing net book amount
At 30 June 2009
Cost or fair value
Accumulated depreciation
Net book amount
Plant and
equipment
Leasehold
improvements
$‘000
$’000
Work-in-
progress
$’000
10,556
(8,507)
2,049
2,049
543
(121)
(710)
(164)
1,597
9,897
(8,300)
1,597
1,597
130
(366)
19
(612)
-
3,246
4,014
6,586
(2,572)
4,014
849
(220)
629
629
552
(240)
(80)
-
861
1,071
(210)
861
861
56
(1,647)
-
(242)
-
3,495
2,523
2,796
(273)
2,523
558
-
558
558
768
-
-
(542)
784
784
-
784
784
6,886
-
-
-
-
(7,605)
65
65
-
65
Total
$’000
11,963
(8,727)
3,236
3,236
1,863
(361)
(790)
(706)
3,242
11,752
(8,510)
3,242
3,242
7,072
(2,013)
19
(854)
-
(864)
6,602
9,447
(2,845)
6,602
(a) Non-current assets pledged as security
Refer to note 26 for information on non-current assets pledged as security by the parent entity and its controlled entities.
80
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
19 Non-current assets - Deferred tax assets
The balance comprises temporary differences attributable to:
Accruals
Future deductible windup costs
Doubtful debts
Provisions and employee benefits
Receivables impairment (note 13(a))
Fixed assets
Sundry
Set-off of deferred tax liabilities pursuant to
set-off provisions (note 27)
Net deferred tax assets
Movements:
Opening balance at 1 July
Change on adoption of AASB 132 and AASB 139 (note 1)
Credited/(charged) to the income statement (note 10)
Closing balance at 30 June
Consolidated
Company
2009
$’000
194
623
95
710
-
43
431
2,096
2008
$’000
407
934
200
713
68
320
863
3,505
(2,096)
(3,505)
-
-
3,505
-
(1,409)
2,096
3,582
-
(77)
3,505
2009
$’000
2008
$’000
194
623
60
610
-
51
428
1,966
(32)
1,934
2,518
-
(546)
1,972
271
934
87
601
-
318
307
2,518
(3)
2,515
3,080
-
(562)
2,518
Tax losses
Employee
benefits
Doubtful
Debts
Fixed Assets
Receivables
impairment &
accruals
Future
deductible
windup costs
Movements - Consolidated
At 1 July 2007
(Charged)/credited to the income statement
At 30 June 2008
Movements - Consolidated
At 1 July 2007
(Charged)/credited to the income statement
At 30 June 2008
$’000
135
(135)
-
Sundry
$’000
138
725
863
$’000
820
(107)
713
Total
$’000
3,582
(77)
3,505
$’000
542
(342)
200
$’000
$’000
395
(75)
320
306
169
475
$’000
1,246
(312)
934
COLLECTION HOUSE LIMITED
81
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
19 Non-current assets - Deferred tax assets (continued)
Employee
benefits
Doubtful
Debts
Fixed assets
Receivables
impairment &
accruals
Future
deductible
windup costs
$’000
200
(105)
95
$’000
320
(277)
43
$’000
475
(281)
194
$’000
934
(311)
623
Movements - Consolidated
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
Movements - Consolidated
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
$’000
713
(3)
710
Total
$’000
3,505
(1,409)
2,096
Sundry
$’000
863
(432)
431
Tax losses
Employee
benefits
Doubtful
Debts
Fixed Assets
Receivables
impairment &
accruals
Future
deductible
windup costs
Movements - Company
At 1 July 2007
(Charged)/credited to the income statement
At 30 June 2008
Movements - Company
At 1 July 2007
(Charged)/credited to the income statement
At 30 June 2008
Movements - Company
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
Movements - Company
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
$’000
121
(121)
-
Sundry
$’000
-
307
307
$’000
688
(87)
601
Total
$’000
3,080
(562)
2,518
Employee
benefits
Doubtful
Debts
$’000
$’000
87
(26)
61
601
9
610
Total
$’000
2,518
(546)
1,972
$’000
412
(325)
87
$’000
$’000
377
(59)
318
236
35
271
$’000
1,246
(312)
934
Receivables
impairment &
accruals
Future
deductible
windup costs
Fixed Assets
$’000
318
(267)
51
$’000
271
(77)
194
$’000
934
(311)
623
Sundry
$’000
307
126
433
82
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
20 Non-current assets - Intangible assets
Consolidated
At 1 July 2007
Cost
Accumulated amortisation and impairment
Net book amount
Year 30 June 2008
Opening net book amount
Additions
Impairment charge
Amortisation charge
Disposals
Closing net book amount
At 30 June 2008
Cost
Accumulated amortisation and impairment
Net book amount
Consolidated
Year 30 June 2009
Opening net book amount
Additions
Impairment charge
Amortisation charge
Disposals
Transfers
Closing net book amount
At 30 June 2009
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
Computer
software
Other
intangible
assets
$’000
$’000
$’000
28,696
(6,993)
21,703
21,703
-
-
-
(3,856)
17,847
28,026
(10,179)
17,847
7,587
(5,624)
1,963
1,963
826
-
(820)
(42)
1,927
6,194
(4,267)
1,927
1,587
(1,162)
425
425
60
-
-
-
485
1,005
(520)
485
Goodwill
Computer
software
Other
intangible
assets
$’000
$’000
$’000
17,847
-
-
-
(6)
-
17,841
28,028
(10,187)
17,841
1,927
222
-
(735)
-
722
2,136
7,138
(5,002)
2,136
485
34
-
-
-
-
519
20,496
1,039
(520)
519
36,205
(15,709)
20,496
Total
$’000
37,870
(13,779)
24,091
24,091
886
-
(820)
(3,898)
20,259
35,225
(14,966)
20,259
Total
$’000
20,259
256
-
(735)
(6)
722
COLLECTION HOUSE LIMITED
83
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
20 Non-current assets - Intangible assets (continued)
Goodwill
Computer
software
Other
intangible
assets
$’000
$’000
$’000
14,687
(3,333)
11,354
11,354
450
-
-
11,804
14,687
(2,883)
11,804
5,306
(3,407)
1,899
1,899
810
(807)
(5)
1,897
6,124
(4,227)
1,897
450
-
450
450
35
-
(450)
35
485
(450)
35
Goodwill
Computer
software
Other
intangible
assets
$’000
$’000
$’000
11,804
-
-
-
-
-
11,804
14,687
(2,883)
11,804
1,897
208
-
(720)
-
722
2,107
7,054
(4,947)
2,107
35
34
-
-
-
-
69
13,980
519
(450)
69
22,260
(8,280)
13,980
Total
$’000
20,443
(6,740)
13,703
13,703
1,295
(807)
(455)
13,736
21,296
(7,560)
13,736
Total
$’000
13,736
242
-
(720)
-
722
Company
At 1 July 2007
Cost
Accumulated amortisation and impairment
Net book amount
Year 30 June 2008
Opening net book amount
Additions
Amortisation charge
Disposals
Closing net book amount
At 30 June 2008
Cost
Accumulated amortisation and impairment
Net book amount
Company
Year 30 June 2009
Opening net book amount
Additions
Impairment charge
Amortisation charge
Disposals
Transfers
Closing net book amount
At 30 June 2009
Cost
Accumulated amortisation and impairment
Net book amount
84
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
21 Non-current assets - Other non-current assets
Legal and court costs capitalised
Legal & Court costs - accumulated amortisation
22 Current liabilities - Payables
Trade creditors
Other creditors and accruals
Intercompany Loans
Consolidated
Company
2009
$’000
3,929
(3,700)
229
2008
$’000
3,322
(3,030)
292
2009
$’000
-
-
-
2008
$’000
-
-
-
Consolidated
Company
2009
$’000
1,979
2,643
-
4,622
2008
$’000
1,162
6,162
-
7,324
2009
$’000
2,600
3,723
8,562
14,885
2008
$’000
1,352
3,829
8,455
13,636
(a) Risk exposure
Information about the Group’s and the parent entity’s exposure to foreign exchange risk is provided in note 2.
23 Current liabilities - Borrowings
Secured
Bank overdraft
Total secured current borrowings
Unsecured
Total unsecured current borrowings
Further information relating to Borrowings is set out in note 26.
Consolidated
Company
2009
$’000
-
-
-
2008
$’000
2,801
2,801
2009
$’000
4,678
4,678
2008
$’000
4,099
4,099
-
-
-
COLLECTION HOUSE LIMITED
85
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
24 Current liabilities - Provisions
Provisions - Employee benefits
Restructuring 2008
Restructuring 2009
(a) Movements in provisions
Consolidated
Company
2009
$’000
1,950
-
50
2,000
2008
$’000
2,054
1,016
-
3,070
2009
$’000
1,651
-
50
1,701
2008
$’000
1,722
1,016
-
2,738
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Restructuring
2008
Restructuring
2009
$’000
$’000
Consolidated - 2009
Current
Carrying amount at start of year
- additional provisions recognised
- amounts incurred and charged
- unused amounts reversed
Carrying amount at end of year
Company - 2009
Current
Carrying amount at start of year
- additional provisions recognised
- payments/other sacrifices of economic benefits
- amounts incurred and charged
- unused amounts reversed
Carrying amount at end of year
1,016
399
-
(1,117)
(298)
-
-
554
-
(504)
-
50
25 Non-current liabilities - Payables
Loans from controlled entities (unsecured)
Consolidated
Company
2009
$’000
-
-
2008
$’000
-
-
2009
$’000
21,858
21,858
2008
$’000
18,631
18,631
86
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
26 Non-current liabilities - Borrowings
Secured
Secured - Bank loans
Total non-current borrowings
(a) Total secured liabilities
Consolidated
Company
2009
$’000
69,700
69,700
2008
$’000
61,100
61,100
2009
$’000
69,700
69,700
2008
$’000
61,100
61,100
The total secured liabilities (current and non-current) are as follows:
Bank overdrafts and bank loans
Total secured liabilities
69,700
69,700
63,901
63,901
74,378
74,378
65,199
65,199
(b) Secured liabilities and assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Bank overdrafts and bank loans
Total secured liabilities
69,700
69,700
63,901
63,901
74,378
74,378
65,199
65,199
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.
Other loans are secured by a fixed and floating charge over the assets of a controlled entity.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Consolidated
Company
Cash and cash equivalents
Receivables
Financial assets at fair value through profit or loss
Finance lease
Plant and equipment
Available-for-sale financial assets
Plant and equipment
Notes
12
13
14
18
17
18
2009
$’000
584
4,630
2008
$’000
937
4,186
146,916
143,470
-
-
6,957
6,957
2
-
1,848
1,848
Total assets pledged as security
159,087
150,443
2009
$’000
132
3,206
-
-
16,017
6,602
22,619
25,957
2008
$’000
801
2,599
-
-
16,116
1,597
17,713
21,113
COLLECTION HOUSE LIMITED
87
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
26 Non-current liabilities - Borrowings (continued)
(c) Fair value
The carrying amounts and fair values of borrowings at balance date are
Group
On-balance sheet (i)
Non-traded financial liabilities
Bank overdrafts
Bank loans
On-balance sheet (i)
Non-traded financial liabilities
Bank overdrafts
Bank loans
At 30 June 2009
At 30 June 2008
Carrying
amount
Fair value
Carrying
amount
Fair value
$’000
$’000
$’000
$’000
-
69,700
69,700
4,678
69,700
74,378
-
69,700
69,700
4,678
69,700
74,378
2,801
61,100
63,901
4,099
61,100
65,199
2,801
61,100
63,901
4,099
61,100
65,199
As noted, none of the classes of liabilities are readily traded on organised markets in standardised form.
(i)
On-balance sheet
The fair value of current borrowings equals their carrying amount. The facility is structured as a series of loan instruments which are renewed
on a regular basis with terms of less than six months, and the impact of discounting on such instruments is not material. The overall facility
is classified as non-current.
(d) Risk exposures
Information about the Group‘s and parent entity‘s exposure to interest rate and foreign currency changes is provided in note 2.
For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to note 2.
88
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
27 Non-current liabilities - Deferred tax liabilities
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
The balance comprises temporary differences attributable to:
Prepayments
Purchased debt
Intangibles
Fixed Assets
Sundry (note 30)
Setoff of deferred tax liabilities pursuant to setoff provisions (note 19)
Net deferred tax liabilities
Movements:
Opening balance at 1 July
Change on adoption of AASB 132 and AASB 139 (note 1)
Charged/(credited) to the income statement (note 10)
Closing balance at 30 June
4
6
16,384
20,873
-
-
427
16,815
(2,096)
14,719
43
11
-
20,933
(3,505)
17,428
20,933
18,349
-
(4,118)
16,815
-
2,584
20,933
Property,
plant and
equipment Prepayments
Purchased
debt
Movements - Consolidated
$’000
$’000
At 1 July 2007
Charged/(credited) to the income statement
At 30 June 2008
63
(52)
11
77
(71)
6
$’000
18,102
2,771
20,873
Property,
plant and
equipment Prepayments
Purchased
debt
Movements - Consolidated
$’000
$’000
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
11
(11)
-
6
(2)
4
$’000
20,873
(4,489)
16,384
Movements - Company
At 1 July 2007
Assumption of tax losses from tax consolidated entities
At 30 June 2008
At 30 June 2008
Charged/(credited) to the income statement
At 30 June 2009
Intangibles
$’000
45
(2)
43
Intangibles
$’000
43
(43)
-
Prepayments
$’000
2
1
3
3
(1)
2
2
-
-
-
30
32
(32)
-
3
-
29
32
Other
$’000
62
(62)
-
Other
$’000
-
427
427
Other
$’000
21
(21)
-
-
30
30
3
-
-
-
-
3
(3)
-
23
-
(20)
3
Total
$’000
18,349
2,584
20,933
Total
$’000
20,933
(4,118)
16,815
Total
$’000
23
(20)
3
3
29
32
COLLECTION HOUSE LIMITED
89
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
28 Non-current liabilities - Provisions
Consolidated
Company
2009
$’000
211
211
2008
$’000
159
159
2009
$’000
182
182
2008
$’000
144
144
Provisions - Employee benefits
29 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.
30 Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Total contributed equity - parent entity
(b) Movements in ordinary share Capital:
Issues of ordinary shares during the year
Date
1 July 2007
30 June 2008
1 July 2008
30 June 2009
(c) Ordinary shares
Company
Company
2009
Shares
2008
Shares
2009
$’000
2008
$’000
97,321,881
97,321,881
97,321,881
97,321,881
67,256
67,256
67,256
67,256
67,256
67,256
Details
Number of shares
Opening balance
97,321,881
Closing Balance
97,321,881
Opening balance
97,321,881
Closing Balance
97,321,881
$’000
67,256
67,256
67,256
67,256
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.
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.
90
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
30 Contributed equity (continued)
(d) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 41.
(e) Options
Information relating to options provided as part of the the MD/CEO remuneration package and option provided under the Collection House
Executive Share 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 41.
(f) Capital risk management
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, and to
provide adequate returns for shareholders and benefits for other stakeholders.
“Capital” includes all funding provided under the group’s funding facility (net of cash balances for which a right of offset is held) plus Equity
as shown in the balance sheet.
In order to maintain or adjust the capital structure, the Group may:
•
•
•
•
•
draw down or repay debt funding,
adjust the amount of dividends paid to shareholders;
negotiate new or additional facilities or cancel existing ones,
return capital to shareholders or issue new shares or
sell assets to reduce debt.
The Group and the parent entity manage capital to ensure that the goals of continuing as a going concern, and the provision of acceptable
stakeholder returns are met.
Arrangements with the group’s financier are in place to ensure that there is sufficient undrawn credit available to meet unforeseen
circumstances should they arise. Financing facilities are renegotiated on a regular basis to ensure that they are sufficient for the company’s
projected growth plus a buffer. As far as possible, asset purchases are funded from operational cashflow, allowing undrawn balances to be
maintained. Cash is monitored on a daily basis to ensure that immediate and short term requirements can be met. By maintaining a buffer
of undrawn funds, the company reduces the risk of liquidity and going concern issues.
Management of mix between debt and equity impacts the company’s Cost of Capital and hence ability to provide returns to stakeholders,
primarily the funding institutions and shareholders. The company maintains its debt-to-equity mix in accordance with its immediate needs
and forecasts at any point in time. Effective management of the capital structure maximises profit and hence franked dividend returns to
shareholders.
When additional funding is required, it is sourced from either debt or equity, depending upon management’s evaluation as to which is the
most appropriate at that point in time.
The financing facility includes all funding provided by the group’s main banker. Details of drawn and undrawn financing facilities are set out
in note 2(c).
Quantitative analyses are conducted by management using contributed equity balances shown above together with the the drawn and
undrawn loan balances disclosed in note 2(c).
As part of the financing facility, the company is required to monitor a number of financial indicators as specified by the financier. The group
monitors the indicators on a monthly basis and reports to the funding provider every six months. The company has materially met these
covenant at all times during the year.
This strategy was followed during both the 2009 and 2008 financial years.
COLLECTION HOUSE LIMITED
91
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
31 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
Balance 30 June
Movements:
Foreign currency translation reserve
Balance at beginning of period
Net investment hedge
Currency translation differences arising during the year :
Balance 30 June
(b) Retained profits
Movements in retained profits were as follows:
Balance 1 July
Net profit for the year
Dividends
Adjustment on adoption of accounting standard (net of tax) (note 14)
Balance 30 June
(c) Nature and purpose of reserves
(i)
Share-based payments reserve
Consolidated
Company
2009
$’000
878
(707)
171
475
403
878
2008
$’000
475
(794)
(319)
128
347
475
(794)
(255)
83
(711)
(539)
(794)
2009
$’000
2008
$’000
878
-
878
475
403
878
-
-
-
475
-
475
128
347
475
-
-
-
Consolidated
Company
2009
$’000
18,665
7,854
(4,671)
(1,315)
20,533
2008
$’000
10,366
12,387
(4,088)
-
2009
$’000
9,183
11,746
(4,671)
-
18,665
16,258
2008
$’000
2,257
11,011
(4,088)
-
9,180
The share based payments reserve is used to recognise the fair value of options issued to employees 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.
92
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
32 Minority interest
Interest in:
Minority interest - Retained profits
The remaining 15.8 % minority interest in the Rapid Ratings subsidiary
group (Collection House Business Diagnostics Pty Ltd and ACN 096 967
485 Pty Ltd) was purchased for $1 during the year in preparation for the
deregistration of the two subsidiary companies. As disclosed in note 1(a), the
group has adopted the amendments to AASB 3 and AASB 127 from 1 July
2008, and the Minority Interest in Equity has been transferred directly
to Retained Earnings.
33 Dividends
Consolidated
Company
2009
$’000
-
-
2008
$’000
(1,318)
(1,318)
2009
$’000
2008
$’000
-
-
-
-
(a) Ordinary shares
Fully franked final dividend for the year ended 30 June 2008 - 2.5 cents per share
(2007 - 2.0 cents, unfranked)
Fully franked interim dividend for the year ended 30 June 2009 - 2.3 cents per share (2008: 2.2 cents)
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 fully
franked final dividend of 2.6 cents per fully paid ordinary share (2008 - 2.5 cents, fully franked). The aggregate
amount of the proposed dividend expected to be paid on 27 November 2009 out of retained profits at 30 June
2009, but not recognised as a liability at year end, is
Company
30 June
2009
$’000
30 June
2008
$’000
2,433
2,238
4,671
1,946
2,142
4,088
Company
30 June
2009
30 June
2008
$’000
4,671
4,671
$’000
4,088
4,088
Company
30 June
2009
$’000
30 June
2008
$’000
2,530
2,530
2,433
2,433
COLLECTION HOUSE LIMITED
93
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
33 Dividends (continued)
(c) Franked dividends
The franked portions of the final dividends recommended after 30 June 2009 will be franked out of existing franking credits or out of franking
credits arising from the payment of income tax in the year ending 30 June 2010.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2009 and will be
recognised in subsequent financial reports.
Franking credits available for subsequent financial years based on a tax rate
of 30% (2008 - 30%)
Consolidated
Company
30 June
2009
$’000
30 June
2008
$’000
30 June
2009
$’000
30 June
2008
$’000
-
-
-
-
-
-
-
-
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, and
(d) franking credits that may be prevented from being distributed in subsequent financial years.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were
paid as dividends.
The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end,
will be a reduction in the franking account of $1,084,000 (2008: $1,043,000).
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
94
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
34 Key management personnel disclosures
(a) Directors
The following persons were directors of Collection House Limited during the financial year:
(i)
Chairman - non-executive director
J.M. Pearce (Appointed Chairman 25 June 2009)
(ii)
Executive directors
A.R. Aveling – Managing Director and Chief Executive Officer
(iii)
Non-executive directors
Mr D Punches (Stepped down as Chairman and became Deputy Chairman 25 June 2009)
B. E. Adams (Lead independent director)
A.F. Coutts
D. B. Connelly
W. L. Hiller
W. W. Kagel
(b) 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
Tony Aveling
Adrian Ralston
Matthew Thomas
Michael Watkins
Kylie Lynam
Position
Employer
Managing Director and Chief Executive Officer
Collection House Limited
Chief Financial Officer
Chief Operating Officer
Collection House Limited
Collection House Limited
General Counsel and Company Secretary
Collection House Limited
General Manager - Human Resources
Collection House Limited
All of the above persons were also key management persons during the year ended 30 June 2008.
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Detailed remuneration disclosures are provided in sections A-D of the remuneration report on pages 26 to 34.
Consolidated
30 June
2009
$
30 June
2008
$
2,657,360
2,689,986
222,816
206,414
-
-
-
-
328,552
291,427
3,208,728
3,187,827
COLLECTION HOUSE LIMITED
95
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
34 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 41.
(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 .
(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.
2009
Name
Balance at
start of the
year
Granted as
compensation Exercised Other changes
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors of Collection House Limited
A. Aveling
2,000,000
2,000,000
Other key management personnel of the Group
250,000
200,000
200,000
125,000
250,000
200,000
225,000
150,000
-
-
-
-
-
-
-
-
-
-
4,000,000
400,000
3,600,000
500,000
400,000
425,000
275,000
50,000
40,000
40,000
25,000
450,000
360,000
385,000
250,000
M. Thomas
A. Ralston
M. Watkins
K. Lynam
2008
Name
Balance at
start of the
year
Granted as
compensation Exercised Other changes
Directors of Collection House Limited
A. Aveling
2,000,000
Other key management personnel of the Group
M. Thomas
A. Ralston
M. Watkins
K. Lynam
250,000
200,000
200,000
125,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96
ANNUAL REPORT 2009
Balance at
end of the
year
2,000,000
250,000
200,000
200,000
125,000
Vested and
exercisable
Unvested
-
-
-
-
-
2,000,000
250,000
200,000
200,000
125,000
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
34 Key management personnel disclosures (continued)
(d)
Equity instrument disclosures relating to key management personnel (continued)
(iv)
Share holdings
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.
2009
Name
Directors of Collection House Limited
Balance at the
start of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the end
of the year
Ordinary shares
John Pearce
Dennis Punches
Tony Aveling
Barrie Adams
Tony Coutts
Barry Connelly
Bill Hiller
Bill Kagel
Other key management personnel of the Group
Ordinary shares
M. Thomas
A. Ralston
M. Watkins
K. Lynam
2008
Name
Directors of Collection House Limited
Ordinary shares
John Pearce
Dennis Punches
Tony Aveling
Barrie Adams
Tony Coutts
Barry Connelly
Bill Hiller
Bill Kagel
Other key management personnel of the Group
Ordinary shares
M. Thomas
A. Ralston
M. Watkins
K. Lynam
B. Savage (Consultant)
11,816,130
14,150,101
226,400
-
4,164,600
20,000
43,000
551,269
102,000
-
25,000
11,000
-
-
-
-
-
-
-
-
-
-
-
-
(400,000)
3,707,283
223,000
-
300,000
57,143
50,000
400,000
-
-
-
-
11,416,130
17,857,384
449,400
-
4,464,600
77,143
93,000
951,269
102,000
-
25,000
11,000
Balance at the
start of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the end
of the year
11,738,200
14,098,835
100,000
-
4,164,600
20,000
20,000
500,000
2,000
-
25,000
11,000
62,000
-
-
-
-
-
-
-
-
-
-
-
-
-
77,930
51,266
126,400
-
-
-
23,000
51,269
100,000
-
-
-
(34,150)
11,816,130
14,150,101
226,400
-
4,164,600
20,000
43,000
551,269
102,000
-
25,000
11,000
27,850
COLLECTION HOUSE LIMITED
97
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
34 Key management personnel disclosures (continued)
(e) Loans to key management personnel
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.
(i)
Aggregates for key management personnel
Group
2009
2008
Balance at the
start of the year
Interest paid and
payable for the
year
Interest not
charged
Balance at the end
of the year
Number in Group
at the end of 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.
In 2008, there were no loans to individuals that exceeded $100,000 at any time.
(f) 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.
98
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
35 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
2009
$
137,000
82,050
219,050
30 June
2008
$
145,000
79,000
224,000
30 June
2009
$
137,000
82,050
219,050
30 June
2008
$
145,000
79,000
224,000
Audit services
Audit and review of financial reports
Audit-related services
36 Contingencies
(a) Contingent liabilities
The parent entity and Group had contingent liabilities at 30 June 2009 in respect of:
Claims
All previous claims have now been settled and provisions for these claims have been utilised.
Guarantees
(a) Bank guarantees (secured) exist in respect of satisfactory contract performance in the normal course of business for the Group amounting
to $1,449,478 (2008: $1,460,913) which includes a bank guarantee for the fitout of the new Head Office premisies at Green Square North
Tower of $1,002,218 (2008: $993,652).
(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.
COLLECTION HOUSE LIMITED
99
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
37 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Payable:
Within one year
Later than one year but not later than five years
Later than five years
Other financial assets at fair value through the Profit or Loss
Payable:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
-
-
-
3,416
-
-
3,416
-
-
-
-
3,416
-
-
3,416
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
29,250
31,200
-
-
-
-
29,250
31,200
-
-
-
-
-
-
-
-
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
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
Later than five years
Commitments not recognised in the financial statements
7,969
9,002
4,149
21,120
21,120
3,449
3,930
-
7,379
7,379
5,985
8,969
4,149
19,103
19,103
3,271
3,918
-
7,189
7,189
100
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
38 Related party transactions
(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 39.
(c) Key management personnel
Disclosure relating to key management personnel are set out in note 34.
(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.
(e) 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
Transaction between non director related parties are on normal commercial terms and conditions no more favourable than those available
to other parties unless otherwise stated.
The Company provided collection services to and received from 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 Jones King Lawyers Pty Ltd (formerly 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.
COLLECTION HOUSE LIMITED
101
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
38 Related party transactions (continued)
(e) Transactions with related parties (continued)
Other transactions
Revenue from sale of services to:
Wholly-owned controlled entities (note 30(c))
16,800,111
22,947,232
Company
30 June
2009
$
30 June
2008
$
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
Current receivables from non-director related entities
Wholly owned controlled entities (loans)
Non-current receivables from non-director related entities
Wholly owned controlled entities (loans)
Provision for impairment (loans)
Wholly owned controlled entities (dividends)
Current payables from non-director related entities
Wholly owned controlled entities
Non current-payables from non-director related entities
Wholly owned controlled entities (loans)
Partly owned controlled entities (loans)
Details of equity interest held in classes of related parties are set out in note 39.
-
-
4,391,592
3,832,502
-
60,277
20,863,747
43,775,282
-
1,560,775
4,276,910
19,537,876
-
420,708
23,421,970
25,164,453
20,696,210
9,687,656
111,991,216
110,823,290
(1,018,434)
(1,018,434)
23,421,970
25,164,453
9,432,674
9,420,807
20,987,226
18,472,890
-
157,854
102
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
39 Subsidiaries
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
Collection House Limited – incorporated in Australia
Class of shares: Ordinary
Controlled entities incorporated in Australia
ABR Publications Pty Ltd (3)
ACN 007 279 129 Pty Ltd (formerly Countrywide Mercantile Credit Services Pty Ltd)(4)
ACN 010 920 411 Pty Ltd (formerly Australian Business Research Pty Ltd)
ACN 073 212 772 Pty Ltd (formerly National Revenue Corporation Pty Ltd) (3)
ACN 096 967 485 Pty Ltd (formerly known as Rapid Ratings Pty Ltd) (a wholly owned subsidiary of Collection
House Business Diagnostics Pty Ltd) (1)(3)*
ACN 079 105 025 Pty Ltd (formerly National Tenancy Database Pty Ltd) (3)
Australian Corporate Reporting Pty Ltd (3)
Collection House ALR Pty Ltd (deregistered in 2007/2008 and reinstated in 2008/2009) (1)
Collection House Business Diagnostics Pty Ltd (CHBD) (1)(2)(3)
Collective Learning and Development Pty Ltd
Jones King Lawyers Pty Ltd
Lion Finance Pty Ltd
Midstate Credit Management Services Pty Ltd (4)
Controlled entities incorporated in New Zealand
Collection House (NZ) Limited
Lion Finance Limited
1071066 Limited (formerly abr.nz Limited)
The following Australian companies were voluntarily deregistered in 2008/09 financial year:
ACN 100 115 571 Pty Ltd (formerly Insurance Claims Solutions Pty Ltd) (1)
The following New Zealand companies were voluntarily deregistered in 2008/09 financial year:
ACN 096 967 485 Pty Ltd (formerly Rapid Ratings Pty Ltd (registered in NZ as an overseas company) (a wholly
owned subsidiary of Collection House Business Diagnostics Pty Ltd) (1)*
1189419 Limited (formerly National Tenancy Database Limited)
Insurance Claims Solutions Limited (1)
1594421 Limited (formerly Rapid Ratings (NZ) Limited) wholly owned by ACN 096 967 485 Pty Ltd (formerly
Rapid Ratings Pty Ltd (registered in NZ as an overseas company) (a wholly owned subsidiary of Collection
House Business Diagnostics Pty Ltd) (1)*
The following Collection House Limited controlled entities’ business assets were sold in 2008/09 financial
year. Refer to note 11 for details in relation to discontinued operations:
Equity holding
of ordinary shares
2009
%
2008
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
84
100
100
100
84
100
100
100
100
100
100
100
100
84
100
100
84
Colpro Pty Ltd
100
100
(1) These controlled entities have not traded during the financial year.
(2) In November 2008, Collection House Business Diagnostics Pty Ltd became a wholly owned subsidiary of the Group. It remains the sole
shareholder of the subsidiaries marked with the asterisk above.
(3) These controlled entities were voluntarily deregistered on 1 July 2009.
(4) The company further streamlined its business activities by the merger of two of its country Victoria subsidiaries Countrywide Mercantile
Credit Services Pty Ltd and Midstate Credit Management Services Pty Ltd into one operating business unit. The merged entity will
commence trading as Midstate Credit Management Services Pty Ltd from 1 May 2009.
COLLECTION HOUSE LIMITED
103
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
40 Earnings per share
(a) Basic earnings per share
Profit / (loss) from continuing operations attributable to the ordinary equity holders of the company
Profit / (loss) from discontinued operation
Total basic earnings per share attributable to the ordinary equity holders of the company
(b) Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
Profit from continuing operations
from continuing operations
(Profit) / Loss from continuing operations attributable to Minority Interests
from discontinued operation
(c) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings
per share
Consolidated
30 June
2009
Cents
7.9
0.2
8.1
30 June
2008
Cents
4.0
8.7
12.7
Consolidated
30 June
2009
$’000
30 June
2008
$’000
7,700
-
154
7,854
3,689
(1)
8,628
12,316
Consolidated
30 June
2009
Number
30 June
2008
Number
97,321,881
97,321,881
104
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments
(a) Share options for MD/CEO
In February 2007, the Shareholders approved the issue of 2,000,000 share options in favour of the MD/CEO as part of his Employment
Agreement. The full terms of the options are contained in the Notice of General Meeting announced to shareholders on 12 January 2007. A
summary of these options is identified below as MD/CEO 1.
In October 2008, the Shareholders approved the issue of a further 2,000,000 share options in favour of the MD/CEO as part of his varied
employment agreement. The full terms of the options are contained in the Notice of General Meeting announced to shareholders on 19
September 2008. A summary of these options is identified below as MD/CEO 2.
Exercise price
MD/CEO 1 options
$1.0327
Earliest possible vesting date
28 February 2009
MD/CEO 2 options
$0.4927
25 June 2011
Performance hurdles
Tranche
# of options
Qualifying
Price
Tranche
# of options
Qualifying
Price
1
2
3
4
5
400,000
400,000
400,000
400,000
400,000
0.00
1.25
1.50
1.75
2.00
1
2
3
4
5
400,000
400,000
400,000
400,000
400,000
0.60
0.70
0.80
0.90
1.00
Expiry date
25 June 2013
The options will expire on:
(a) the business day after the expiration of three
(3) months, or any longer period determined by
the Company after the MD/CEO ceases to be
employed by the Company or a subsidiary of the
Company;
(b) the MD/CEO ceasing to be employed by the
Company or a subsidiary of the Company due to
fraud or dishonesty;
(c) or 28 February 2011.
Fair value of options granted
The assessed fair value at grant date of all options granted is set out below. The fair value at grant date is independently determined using
a Monte Carlo option pricing model in relation to MD/CEO 1 options and a combination of Bermudan and Barrier - style option pricing model
in relation to MD/CEO 2 options 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
respective options.
COLLECTION HOUSE LIMITED
105
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments (continued)
(a) Share options for MD/CEO (continued)
The model inputs and resulting valuations for options granted included:
MD/CEO 1 options
MD/CEO 2 options
Exercise conditions
The options will vest on the later of:
(a) 28 February 2009; and
(b) in respect of 400, 000 options, the options will
be exercisable with no qualifying price applying;
and
(c) in respect of the remaining 1,600,000 options,
the options will only be exercisable, pro-rata, if
and when the company’s share price reaches
certain qualifying prices between $1.25 and
$2.00.
The options will vest on the later of:
• 25 June 2011; and
• for each tranche of options, as follows:
A. In respect of the first tranche options, the date that
the weighted average closing price shares over a 10
business day period (Qualifying Price) for the first
tranche options (namely $0.60) is satisfied;
B. In respect of the second tranche options, the
Qualifying Price for the second tranche options
(namely $0.70) is satisfied;
C. In respect of the third tranche options, the Qualifying
Price for the second tranche options (namely $0.80)
is satisfied;
D. In respect of the forth tranche options, the Qualifying
Price for the second tranche options (namely $0.90)
is satisfied; and
E. In respect of the fifth tranche options, the Qualifying
Price for the second tranche options (namely $1.00)
is satisfied.
Exercise price
Grant date
Expiry date
$1.0327 per option
22 February 2007
0.4927 per option
31 October 2008
25 June 2013
The options will expire on:
(a) the business day after the expiration of three
(3) months, or any longer period determined by
the Company after the MD/CEO ceases to be
employed by the Company or a subsidiary of the
Company; or
(b) the MD/CEO ceasing to be employed by the
Company or a subsidiary of the Company due
to fraud or dishonesty;
(c) or 28 February 2011.
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
$0.91
43.8%
3.29%
5.99%
$0.48
55.6%
9%
6.64%
The expected price volatility is usually 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 as follows:
Tranche
MD/CEO 1 options
MD/CEO 2 options
1
2
3
4
5
$0.26881
$0.23054
$0.19578
$0.16085
$0.12945
$0.153
$0.152
$0.151
$0.148
$0.146
106
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments (continued)
(b) Executive Share Option Plan
Participation in the Executive Share option Plan (ESOP) is determined by the MD/CEO, through Board approval. The MD/CEO prepares a list
of executives and their proposed level of participation in the ESOP. The ESOP was approved by the Board and 1,250,000 options were issued
to eligible senior employees on 15 June 2007. The options were submitted for shareholder ratification and approval at the Company’s Annual
General Meeting in October 2007. A summary of these options is identified below as EXEC1.
A further 1,437,500 options were issued to a number of eligible senior employees pursuant to the ESOP on 18 July 2008. A summary of
these options is identified below as EXEC2.
Future options may be issued pursuant to the ESOP with not only individual performance being considered, but also company performance
hurdles to be achieved before options may be exercised.
Exercise price
Earliest possible vesting date
Performance hurdles
EXEC1 options
$1.0327
28 February 2009
EXEC2 options
$0.4927
25 June 2011
Tranche
# of options
Qualifying
Price
Tranche
# of options
Qualifying
Price
Expiry date
1
2
3
4
5
25 June 2013
287,500
287,500
287,500
287,500
287,500
0.60
0.70
0.80
0.90
1.00
1
2
3
4
5
250,000
250,000
250,000
250,000
250,000
0.00
1.25
1.50
1.75
2.00
the options will expire on:
(a) the business day after the expiration of three (3)
months, or any longer period determined by the
Company after the eligible employees cease to
be employed by the Company or a subsidiary of
the Company;
(b) the eligible employee ceasing to be employed by
the Company or a subsidiary of the Company due
to fraud or dishonesty; or
(c) 28 February 2011.
Fair value of options granted
The assessed fair value at grant date of all options granted is set out below. The fair value at grant date is independently determined using
a Monte Carlo option pricing model in relation to EXEC 1 options and a combination of Bermudan and Barrier - style option pricing model in
relation to EXEC 2 options 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.
COLLECTION HOUSE LIMITED
107
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments (continued)
(b) Executive Share Option Plan (continued)
The model inputs and resulting valuations for options granted included:
EXEC 1 options
EXEC2 options
The options will vest on the later of:
• Namely 25 June 2011; and
• for each tranche of options, as follows:
A. In respect of the first tranche options,
the date that the weighted average closing
price shares over a 10 business day period
(Qualifying Price) for the first tranche options
(namely $0.60) is satisfied;
B. In respect of the second tranche options,
the Qualifying Price for the second tranche
options (namely $0.70) is satisfied;
C. In respect of the third tranche options,
the Qualifying Price for the second tranche
options (namely $0.80) is satisfied;
D. In respect of the forth tranche options,
the Qualifying Price for the second tranche
options (namely $0.90) is satisfied; and
E. in respect of the fifth tranche options,
the Qualifying Price for the second tranche
options (namely $1.00) is satisfied.
0.4927 per option
18 July 2008
25 June 2013
Exercise conditions
The options will vest on the later of:
(a) 28 February 2009; and
(b) in respect of 250, 000 options, the options will be
exercisable, pro rata to each eligible employee
respectively, with no qualifying price applying;
and
(c) in respect of the remaining 1,000,000 options, the
options will only be exercisable, pro-rata, if and
when the company’s share price reaches certain
qualifying prices between $1.25 and $2.00.
Exercise price
Grant date
Expiry date
$1.0327 per option
15 June 2007
The options will expire on:
(a) the business day after the expiration of three (3)
months, or any longer period determined by the
Company after the eligible employee ceases to
be employed by the Company or a subsidiary of
the Company; or
(b) the eligible employee ceasing to be employed by
the Company or a subsidiary of the Company due
to fraud or dishonesty; or
(c) 28 February 2011
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
$0.89
48.5%
2.91%
6.14%
$0.48
55.6%
9%
6.64%
108
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments (continued)
(b) Executive Share Option Plan (continued)
The expected price volatility is usually 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 as follows:
Tranche
Exec 1 options
Exec 2 options
1
2
3
4
5
$0.28614
$0.24279
$0.20739
$0.17240
$0.14097
$0.153
$0.152
$0.151
$0.148
$0.146
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Expired during
the year
Balance at
end of the
year
Vested and
exercisable
at end of the
year
Grant Date
Expiry date Exercise price
Number
Number
Number
Number
Number
Number
Consolidated and company - 2009
31 October 2008
18 July 2008
12 March 2007
15 June 2007
As stated
above
As stated
above
As stated
above
As stated
above
$0.49
$0.49
2,000,000
1,437,500
-
2,000,000
125,000
1,312,500
-
-
$1.03
2,000,000
$1.03
1,250,000
-
-
-
-
-
-
2,000,000
400,000
150,000
1,100,000
250,000
275,000
6,412,500
650,000
Total
3,250,000
3,437,500
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Expired during
the year
Balance at
end of the
year
Vested and
exercisable
at end of the
year
Grant Date
Expiry date Exercise price
Number
Number
Number
Number
Number
Number
Consolidated and company - 2008
12 March 2007
15 June 2007
As stated
above
As stated
above
$1.03
2,000,000
$1.03
1,250,000
Total
3,250,000
-
-
-
-
-
-
-
-
-
2,000,000
1,250,000
3,250,000
-
-
-
COLLECTION HOUSE LIMITED
109
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
41 Share-based payments (continued)
(c) 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 were issued under this plan in the year ended 30 June 2009 (2008: nil shares issued).
The amount recognised in the financial statements of the consolidated entity and the Company in relation to employee shares issued in prior
years were:
Employee loans
Consolidated
Company
30 June
2009
$’000
0
0
30 June
2008
$’000
9
9
30 June
2009
$’000
0
0
30 June
2008
$’000
9
9
42 Events occurring after the reporting period
Dividend
A fully franked final dividend of 2.6 cents, totalling $2.5 million, has been declared, payable on 27th November, 2009. No provision has been
raised in these accounts.
A number of non-trading entities within the group were voluntarily deregistered on 1 July 2009. Refer to note 39.
110
ANNUAL REPORT 2009
nOtEs tO tHE fInancIal statEmEnts
for the year ended 30 June 2009
43
Reconciliation of profit after income tax to net cash inflow
from operating activities
Consolidated
Company
Profit for the year
Depreciation, amortisation and impairment
Fair value losses on other financial assets
Non-cash employee benefits expense - share-based payments
Restructuring expense
Management service fee
Stamp duty related expenses written back
Dividend and interest income
Net (gain) loss on sale of discontinued operations
Provision for doubtful debts
Assets written off
Other non-cash expenses
Change in operating assets and liabilities, net of effects from purchase of
controlled entity and sale of discontinued operation
(Increase)/decrease 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
Increase/(decrease) in trade creditors
Increase/(decrease) in sundry creditors and accruals
Increase/(decrease) in current tax liability
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in deferred expenditure
Increase/(decrease) in non-current payables
Increase/(decrease) in other provisions
Other
Net cash inflow (outflow) from operating activities
30 June
2009
$’000
7,854
2,295
30,265
403
655
-
(1,344)
-
-
(127)
1,184
(674)
651
(883)
2,312
-
(281)
820
(1,395)
1,595
(2,709)
-
-
-
(3)
40,618
30 June
2008
$’000
12,388
2,307
29,730
347
1,016
-
-
-
(12,974)
-
-
(796)
6,418
(782)
(143)
-
416
(431)
(1,858)
-
2,661
(2)
-
37
(71)
38,263
30 June
2009
$’000
11,746
1,629
-
403
655
(1,264)
(165)
30 June
2008
$’000
11,011
5,331
-
347
1,016
3,921
-
(23,422)
(23,847)
-
-
1,160
(221)
322
(767)
2,974
581
4,735
1,247
(828)
-
-
-
3,227
39
(55)
1,996
19
-
-
(114)
1,745
(322)
(1,628)
542
254
510
518
-
-
-
-
85
(71)
(683)
COLLECTION HOUSE LIMITED
111
DIREctORs' DEclaRatIOn
for the year ended 30 June 2009
In the directors’ opinion:
(a) the financial statements and notes set out on pages 38 to 111 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 30 June 2009 and of their performance
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
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.
Tony Aveling
Managing Director and Chief Executive Officer
Brisbane
25 August 2009
112
ANNUAL REPORT 2009
INDEPENDENT AUDIT REPORT TO THE MEMBERS
OF COLLECTION HOUSE LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Collection House Limited
(the company), which comprises the balance sheets as at 30 June 2009, and the income statements, cash
flow statements and statement of changes in equity for the year ended on that date, a summary of
significant accounting policies and other explanatory notes and the directors’ declaration of the
company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal controls relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note
1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards (IFRS) ensures that the financial report, comprising the consolidated financial
statements and notes, complies with International Financial Reporting Standards (IFRS).
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Liability limited by a scheme approved under Professional Standards Legislation
Auditor’s Opinion
In our opinion:
a)
the financial report of Collection House Limited is in accordance with the Corporations Act
2001, including:
i.
ii.
giving a true and fair view of the company’s and consolidated entity’s financial
position as at 30 June 2009 and of their performance for the year ended on that date;
and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
b)
the financial report also complies with International financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report (Sections A to E) included in the directors’ report for the
year ended 30 June 2009. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report (Sections A to E) of Collection House Limited for the year
ended 30 June 2009, complies with section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited financial report
This auditor’s report relates to the financial report and remuneration disclosures of Collection House
Limited (the company) for the year ended 30 June 2009 included on Collection House Limited’s web
site. The company’s directors are responsible for the integrity of the Collection House Limited web
site. We have not been engaged to report on the integrity of this web site. The auditor’s report refers
only to the statements and remuneration disclosures named above. It does not provide an opinion on
any other information which may have been hyperlinked to/from these statements or the remuneration
disclosures. If users of this report are concerned with the inherent risks arising from electronic data
communications they are advised to refer to the hard copy of the audited financial report and
remuneration disclosures to confirm the information included in the audited financial report and
remuneration disclosures presented on this web site.
HACKETTS DFK
Liam Murphy
Partner
Brisbane 25 August 2009
Liability limited by a scheme approved under Professional Standards Legislation
sHaREHOlDER InfORmatIOn
The shareholder information set out below was applicable as at 10 August 2009.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1-1000
1,001-5000
5,001-10,000
10,001-100,000
100,001 and over
Total
There were 552 holders of less than a marketable parcel of ordinary shares.
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
Trans Tasman Collections Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
George Laurens (QLD) Pty Ltd (Pearce Family Account)
National Nominees Limited
Ankla Pty Ltd
Mr John Marshall Pearce and Mrs Sandra Anne Pearce (Collection House S/Fund Account)
Mr Anthony Francis Coutts and Mrs Jennifer Elsie Coutts (Coutts S/Fund A/C)
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – GSCO ECA
Anthony Coutts and Jennifer Coutts (The Coutts Family A/C)
Mr William Walter Kagel
Mr Philip Julian Eriksen and Mr Julian Hans Eriksen (Ace A/C)
Mr Lev Mizikovsky and Mrs Emily Dorothy Mizikovsky (Superfun Superfund A/C)
Sunstar Australia Pty Ltd
Jasscove Pty Ltd (Walker Family Account)
TBIC Pty Ltd (Crommelin Family Super A/C)
Mooloolaba Consulting Pty Ltd (Super Fund A/C)
Mr Lev Mizikovsky
Mr Raymond Larkin
Total
Class of equity security
Ordinary shares
Holders
549
1,076
321
373
56
Shares
355,884
2,926,011
2,567,630
10,989,578
80,482,778
2375
97,321,881
Units
17,806,118
9,997,798
8,998,111
7,237,925
7,131,383
4,195,020
4,085,905
2,707,000
2,208,377
1,992,460
1,727,000
951,269
746,183
684,363
657,895
600,000
500,000
444,400
438,182
400,000
% of issued
capital
18.30
10.27
9.25
7.44
7.33
4.31
4.20
2.78
2.27
2.05
1.77
0.98
0.77
0.70
0.68
0.62
0.51
0.46
0.45
0.41
73,509,389
75.53
COLLECTION HOUSE LIMITED
115
sHaREHOlDER InfORmatIOn
Unquoted equity securities
The following ordinary share options have been issued to the MD/CEO, as part of his employment agreement and certain of the company’s
executives. Details of these options are set out at note 41 of the financial statements.
Grant date
MD/CEO OPTIONS
31 October 2008
12 March 2007
EXECUTIVE OPTIONS*
18 July 2008
15 June 2007
*No executive holds 20% or more of these securities.
Restricted securities
Balance at 1
July 2008
Granted
during the
year
Exercised
during the
year
Expired during
the year
Balance at
the end of the
year
2,000,000
1,437,500
2,000,000
1,250,000
2,000,000
2,000,000
125,000
150,000
1,312,500
1,100,000
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. Details of the
Employee Share Plan are set out in note 41 of the financial statements.
Under the Collection House Employee Share Plan and Collection House Executive Share 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 10 August 2009, no shares are restricted on this basis. Shares
restricted under voluntary arrangements rank pari passu with all fully paid ordinary shares in all other respects.
C. Substantial holders
Substantial shareholders of ordinary shares in the Company are set out below:
Holder
1. Dennis George Punches (combined shareholdings)
Units
17,857,384
2. John Marshall Pearce and Sandra Anne Pearce/George Laurens (Qld) Pty Ltd (combined shareholdings)
11,347,830
3. Mackenzie Financial Corporation
4. Trans Tasman Collections Investments Pty Limited
5. Mr Lev Mizikovsky, Ankla Pty Ltd and Sunstar Australia Pty Ltd (combined shareholdings)
11,091,909
9,997,798
5,975,460
% of issued
capital
18.35
11.66
11.40
10.27
6.14
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
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.
Options
No voting rights.
116
ANNUAL REPORT 2009
2 overview
7 Business
Performance
8 Who We Are 9 our
responsibilities
Overview
Performance Highlights ......................... 2
Chairman’s Statement ........................... 3
Chief Executive’s Review ........................ 4
Notice of
ANNuAl GeNerAl
MeetiNG
The Annual General Meeting of Collection House Limited will be held on 30 October 2009
at 11.00am at the Emporium Hotel, 1000 Ann Street, Fortitude Valley, Brisbane, QLD.
The business of the meeting is outlined in the formal Notice and Proxy Form that are
enclosed with this report.
CORPORATE DIRECTORY
Head Office
Collection House Limited
ABN 74 010 230 716
Level 7
515 St Paul’s Terrace
Fortitude Valley, Qld 4006
GPO Box 2247, Fortitude Valley BC
Qld 4006
Telephone: +61 7 3292 1000
Facsimile: +61 7 3832 0222
Website:
www.collectionhouse.com.au
Registered Office
Collection House Limited
c/- Hacketts DFK
Level 3
549 Queen Street
Brisbane, Qld 4000
Locations
Australia
Brisbane
Ballarat
Sydney
Bendigo
Melbourne
Newcastle
Adelaide
Shepparton
Perth
New Zealand
Auckland (2)
Stock Exchange Listings
Collection House Limited shares are listed on the Australian Stock
Exchange. The home exchange is Brisbane.
ASX Code: CLH
Company Secretary
Michael Watkins
Phone:
Facsimile: +61 3414 7525
+61 7 3100 1229
Auditors
Hacketts DFK
Level 3
549 Queen Street
Brisbane, Qld 4000
Share Registry
Computershare Investor Services Pty Limited
GPO Box 242
Melbourne, VIC 3001
AUSTRALIA
For general enquiries:
Phone: 1300 552 270 for calls within Australia or +61 3 237 2100
outside Australia
Your Proxy form may be faxed to Computershare on 1800 783 447
(within Australia) or +61 3 9473 2555 (outside Australia)
To access your account or change your details, please visit the
Computershare website at www.computershare.com
COLLECTION HOUSE LIMITED
117
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