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{
COLLECTION HOUSE LIMITED
annual report 2011
2011
{ TABLE OF CONTENTS
{ COrp OrATE DIrECTOry
Collection House Limited 2011 Annual R eport
1 09
Chairman’s Statement
Chief Executive’s Report
02 grOUp OvErvIEw
02 2011 – Our Performance
03 Our Profile
04
05
06
06
06 Commission Collections
06 Cash Flow Management
07
OUr BOArD AND
ExECUTIvE TEAM
Purchased Debt
BUSINESS pErFOrMANCE
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
+61 7 3832 0222
Facsimile:
www.collectionhouse.com.au
Website:
LOCATIONS
Australia
Brisbane
Sydney
Melbourne
Adelaide
New Zealand
Auckland
Ballarat
Bendigo
Newcastle
Shepparton
STOCk ExCHANgE LISTINgS
Collection House Limited shares are listed on
the Australian Stock Exchange. The home
exchange is Brisbane.
ASX Code: CLH
COMpANy SECrETA ry
Michael Watkins
Phone:
Facsimile:
+61 7 3100 1229
+61 3414 7525
AUDITOrS
Lawler Hacketts Audit
Level 3
549 Queen Street
Brisbane Qld 4000
SHArE rEg ISTry
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
Financial Basics Foundation
Supporting the Environment
Corporate Governance
Statement
Community Engagement
Program
08 OUr rESpONSIBILITIES
08
08
09
10
20 DIrECTOr’S rEpOrT
39
41
105 INDEpENDENT AUDITOr’S
107
109 COrpOrATE DIrECTOry
FINANCIAL STATEMENTS
CONTENTS
AUDITOr’S INDEpENDENCE
DECLArATION
SHArEHOLDEr INFOrMATION
rEpOrT
NOTICE OF ANNUAL gENEr AL MEETIN g
The Annual General Meeting of Collection House Limited will be held on 28 October 2011 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.
C oll ection Hous e Limi ted 201 1 Annual Report
0 1
{ AspirAtionAl goAls our commitment to
stakeholders is:
our Clients
to hAve strong relAtionships with key orgAnisAtions in seleCted
mArket segments.
to be proven by our Clients As the AgenCy of ChoiCe in terms of
delivering vAlue And outstAnding results.
our Customers
to be regArded by regulAtors And Consumer representAtives As
leAding the wAy in ethiCAl debt ColleC tion And Compli AnCe.
our stAff
to be viewed by our stAff As A first ClAss working environment
built on vAlues of ACCountAbility, respeCt, Cle Ar CommuniCA tion,
teAmwork, professionAlism And innovAtion.
our sh Areholders
over time, to be AC hieving mArket se Ctor leAding in CreAses in
profitAbility And dividends.
to AChieve A shAre pri Ce more refleCtive of finAn CiAl performAn Ce.
building relationships to last
2011 02
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ group overview 2011 our performance
$M Profit before tax
Cents Dividends per share
16
14
12
10
8
6
4
2
0
FY09
10.5
FY10
11.8
12%
FY11
14.7
25%
8
7
6
5
4
3
2
1
0
FY09
4.9
FY10
5.8
18%
FY11
6.2
7%
Cents Earnings per share
$M Shareholders equity
16
14
12
10
8
6
4
2
0
FY09
7.6
FY10
9.2
21%
FY11
10.4
13%
98
96
94
92
90
88
86
84
82
FY09
88.0
FY10
91.9
4%
FY11
95.9
4%
C oll ection Hous e Limi ted 201 1 Annual Report
03
{ our profile
over 30 yeArs industry experienCe
+ more thAn 2000 shAreholders
+ 500 stAff in 9 loCAtions
Core businesses
Purchased Debt
We purchase portfolios of written down receivables with a wide geographic scope and segment
range comprised largely of unsecured consumer loans
Commission Collections
Collection of outstanding debts on a ‘fee for success’ basis with the objective of maximum
recovery of overdue amounts in the shortest possible timeframe
Cash Flow Management
Progressive companies outsourcing all or some of their receivables (minimum 1 day past due) for
efficient and effective cash flow management
speCi Alist serviCes
Jones King Lawyers Pty Ltd
Our in-house legal Recovery and Insolvency Administration subsidiary provides clients with
access to a cost effective and highly specialised legal recovery service
Midstate Credit Management Services Pty Ltd
This established agency offers a diverse range of collection and credit consulting services,
specialising in the area of local Government
CashFlow Accelerator Pty Ltd
A consultancy service specialising in the analysis of credit functions and performance,
identification of specific, relevant business opportunities internally or otherwise with an aim to
foster positive growth, increase return and optimise cash flow for business
Collection Learning and Development Pty Ltd
Our Registered Training Organisation, specialising in Financial Services and Frontline
Management since 2007, offers training services and development programmes to both the
public and private sectors
See page 6 for a more comprehensive update regarding our core services
finAn CiAl
up 25%
Profit before tax UP
25% to $14.7 million
up 13%
Earnings per share UP
13% to 10.4 cents
up 7%
Dividends per share UP
7% to 6.2 cents
operAtionAl
up 8.4%
Average length of service UP
8.4% to 31 months
up 12.3%
Purchased debt
collections UP
12.3% to $78 million
up 19%
Repayment arrangement
book UP
19% to $152 million
04
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ group overview chairman’s statement
“this has been a year of excellent growth both in
revenue and earnings”
This has been a year of excellent growth both
in revenue and earnings. Matt Thomas and
his team have stamped their mark on the
Company in a positive way and have set up a
future that looks sound and likely to produce
sustainable shareholder returns.
The Board’s decision of four years ago to go
forward with a core business focus is paying
dividends. The outlook for our key divisions is
sound and we are intensifying our marketing
efforts to capture as much quality business in
those areas as possible.
In February this year, we established a
board sub- committee to focus on capital
management, shareholder communication,
board independence and other areas with
the aim of boosting shareholder returns.
The sub- committee has been active
and recently the Board appointed a new
Independent Non-executive Director in
Mr David Gray to the Board as part of that
program. We have also announced the
release of new core services “Cashflow
Accelerator” and “Collective Learning and
Development.” Work continues on all stated
initiatives, particularly maximising the return on
invested capital. Further announcements will
be made as projects are finalised.
After 11 years as a public company we have
reached a maturity level with our executive
team and staff, compliance, systems and
reputation with our clients and regulators
that places us in an outstanding position to
continue to allow growth and sustainable
returns for our investors.
The Board will continue to focus on managing
growth and maximising returns for investors.
John Pearce
Chairman
C oll ection Hous e Limi ted 201 1 Annual Report
05
{ chief executive’s report
“a year on, I would also observe that even more
momentum has been established with clear goals
and strategies to drive the business forward in
FY12 and beyond”
Some of these positive factors were
considerations of our bankers in their decision
to increase credit facilities from $85m to
$100m during the year, and allow an increase
in the Loan-Valuation Ratio from 50% to
55%. This facility extension was sought for the
purpose of ensuring we have funding available
to capitalise on any extra debt purchasing
opportunities that arise other than those already
factored into operating cash flow plans.
As reported during the year, our commission
based collection business had a tougher year
but consolidated well in the second half with
new contracts contributing revenue more
significantly in the last quarter. With the
progress so far achieved through a sales focus
on quality clientele at a fair price, and the
release of new product offerings in late June,
we are confident of growth in this segment
during the year ahead.
I spoke last year about momentum that had
been achieved, and would observe that results
from this have been delivered despite some
setbacks along the way.
A year on, I would also observe that even
more momentum has been established with
clear goals and strategies to drive the business
forward in FY12 and beyond, now agreed
between the Board and Management.
The technology refresh project (C5) was
implemented into one business unit in October
2010 and optimisation of the live platform
as well as software development of the next
phase is continuing, with the next round of live
operations anticipated at the end of the current
financial year.
During the year, we also commenced
outsourced operations in Manilla through two
business partners with positive results starting
to become apparent, and plans to further
expand this capacity are being implemented.
outlook
In simple terms, our strategy for the mid term
(FY12) is to do more of the things that have
succeeded and less of those which have
underperformed. Therefore, we expect to:
•
•
•
•
•
•
again increase investment in purchased
debt portfolios
build and leverage strategic relationships
to secure more profitable commission
collections and legal services business
further promote our new products,
being credit risk consulting (CashFlow
Accelerator) and credit management
training services (Collective Learning and
Development)
continue to evaluate returns on assets
within business segments and pursue
opportunities to maximise shareholder
returns at every opportunity
leverage technology, analytics and new
ideas to find and implement further ways
of 'working smarter' and enhancing
competitive edge
maintain and enhance our core value
proposition: to offer quality collections
and cash flow management services at
reasonable rates while protecting the
brand of the Collection House Group and
our clients through market leadership in
compliance and ethical conduct.
I sincerely look forward to reporting to all
shareholders again on our progress in pursuing
the strategies above, which aim to achieve
optimum returns with a minimised exposure
to risk.
Matt Thomas
Chief Executive Officer
The 2010/2011 has been a memorable one –
my first as CEO and the first during which our
Head Office was forced to temporarily close
due to a natural disaster, being the Brisbane
floods in January 2011.
Those unanticipated challenges are the events
which challenge us personally, but also test the
tenacity and commitment of our people, and
on that count, the Company has been most
fortunate with another year of positive results
to prove the point.
highlights
Profitability increased for the fourth
consecutive year, with NPAT up 13% to
$A10.1m, and pre-tax profit up 25% to
$A14.6m. The lower NPAT growth is due to
a once off tax credit in the first half of FY10,
hence underlying earnings increased at a
higher rate than the headline result.
The "arrangement book" (being purchased
debts which are subject to repayment
arrangements) grew 19% to $152m, which
strongly underpins both future recoveries from
the purchase debt ledgers and in turn the
carrying value of those assets.
Strong cash flow of $A48m (up 21%) funded
a 65% increase in the amount invested in
purchasing fresh debts by Lion Finance during
the year, further enhancing the prospects of
strong future growth in performance.
06
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ business performAnCe divisional performance
purCh Ased debt
Our wholly owned debt purchase subsidiary,
Lion Finance Pty Ltd (Lion), remains the
largest division of Collection House. Lion
contributed 71% of the Group’s revenue in
2010/11. Investment in debt purchased over
the past 12 months was expected to be in the
range of $37-$47m. However, the investment
in new debt purchases reached a total
of $49m. Investments for 2011/12 are
expected to be between $60m and $70m for
which necessary funding arrangements are
in place.
The Purchased Debt Arrangement Book
(Book) is an important aspect of the Lion
portfolio. This Book holds a large volume of
accounts for customers who have entered
into regular repayment arrangements.
In 2010/11, the face value of the Book
grew from $128m to $152m. Over the past
3 years, the value of the Book has continued
to grow at a steady 20% per annum. Revenue
recovered from arrangements over the past
12 months has increased on previous years,
totalling a record $33m.
We continued our strong relationships with
key debt sellers and have secured valuable
components of our debt buying programme
for the coming year through forward flow
agreements with major banks and second
tier lenders.
Positive financial outcomes were achieved
within this segment not only through the
traditional letter and telephone campaigns, but
with innovative approaches to debt collection.
This was facilitated through the initiation of
a Centre of Excellence and strategic key
projects with a range of external parties.
Staff training and development remains a
strong focus and is a driving force behind our
success. Combined with our incentive and
benefit programmes, we have seen further
improvement in retaining our staff, with the
average length of service for our Lion Finance
Customer Service Officers increasing to
21 months.
With a planned increase to debt investment
volumes in 2011/12, along with continued
innovation, process improvement, an emphasis
on training and development, growth in
staffing and the continual exploration of
new opportunities, Lion is well positioned to
maintain quality outcomes.
Commission ColleCtions
Commission Collections remained a profitable
business division even though revenue from
this segment declined from the prior year.
The reduction in revenue was primarily due
to a number of contracts not being renewed
where market pricing hit unsustainable lows.
In addition, changes in credit consumption and
lending practices, and a shortage of major
new outsource contracts over the year also
contributed to a more difficult period.
Targeted and tactical relationship building
initiatives form part of the 2012 strategy and
are key to driving growth in 2011/12.
Our staff retention is excellent and the
experienced team will remain consistent
throughout the coming year with a strong
focus on performance and productivity.
CAsh flow mAnAgement
Previously known as 'Receivables
Management', this Business Division focuses
on the prevention of accounts from becoming
more outstanding, or "rolling" into later
delinquency stages. Accordingly, it now known
by the more descriptive name of 'Cash Flow
Management'.
The business is in its eleventh year of
successful operation and continues to refine
and mature processes to deliver market
leading results. Cash Flow Management is
suited to clients who are looking for more
sophisticated receivables management which
goes beyond total gross recoveries as being
the sole success factor.
This year has seen a year of positive change
with the launch of our new collections
platform; C5. The successful implementation
of this technology was evidenced in this
business unit with an observable increase
in efficiencies and collection metrics.
2011/12 will see us put in place other
planned system enhancements and resources
to continue to manage accounts in alignment
with our clients expectations.
A key strategy is growth through exceptional
results and focused sales and marketing
initiatives.
Purchased
Debt
Commission
Collections
Cash Flow
Management
C oll ection Hous e Limi ted 201 1 Annual Report
07
{ our boArd And exeCutive teAm
03
06
02
05
01
04
direC tors
01 John Pearce
Non-executive Chairman
02 Dennis Punches
Non-executive Deputy Chairman
03 Tony Coutts
Non-executive Director
04 Bill Kagel
Non-executive Director
05 Kerry Daly
Non-executive Director
06 David Gray
Non-executive Director
Mr Tony Aveling, former Managing
Director and Chief Executive Officer
retired on 31 July 2010
exeCutive teAm
07
Matthew Thomas
Chief Executive Officer (appointed 1 August 2010) previously
Chief Operating Officer
08
09
10
Adrian Ralston
Chief Financial Officer
Michael Watkins
General Counsel and Company Secretary
Kylie Lynam
General Manager – Human Resources and Corporate Services
10
07
08
09
08
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ our responsibilities corporate social responsibility
Exploring best practice and innovative
environmental management approaches
to the use of technology, property and
related resources
•
Building an environmentally aware
business culture.
Our EVP is available to view on our website.
finAn CiAl bAsi Cs foundAtion
The Financial Basics Foundation was
established in 2002 by Collection House in
response to the need for greater financial
literacy amongst young Australians.
The Foundation’s initiatives have had ongoing
and lasting positive benefits for young
Australians. National personal debt levels and
youth debt are major social issues for our
country. Financial literacy is a life skill that can
have far reaching positive social implications.
Partnering with the Financial Basics
Foundation has enabled Collection House to
take a proactive approach to addressing these
issues by supporting financial education and
fostering financial capacity building programs
in a very practical way.
Operation Financial Literacy is a hard
copy teaching resource that has now been
distributed free of charge to 1677 secondary
schools across Australia.
ESSI Money (Earning Saving Spending and
Investing) is the Foundation’s online e-learning
resource. As at June 2011, 1412 schools,
an increase of 512 schools from the previous
financial year, have registered to play ESSI
Money. Over 10,451 students completed the
game in 2010.
In September 2010 the Foundation hosted
the inaugural ESSI Money Challenge in which
students from across the country competed
for their chance to win a $1000 cash prize
for themselves and $4000 for their school.
Over 2,500 students competed in the financial
literacy competition.
supporting the environment
•
At Collection House, 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 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,
our 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.
Collection House is committed to
fostering the sustainable use of the
earth’s resources and has implemented
an Environmental Management Policy
(EVP) which is compliant with all relevant
environmental legislation, regulations, and
other initiatives to which is subscribes.
Key focus areas include:
•
•
•
•
Integrating environmental management
into business decision making at all levels
Reducing cost through better resource
procurement, usage and waste
management
Setting objectives and targets for
continuous improvement
Monitoring, reporting and reviewing
achievements
“My class have really enjoyed your program.
They have immersed themselves into making
money and competing against each other.
Thank you for the opportunity to use this
resource in our curriculum”.
Tracey (Victoria)
“I have used your site with yr9 and yr11 maths
classes and they all loved it. My yr9 which I
now have as yr 10 have asked if they can do
it again. This is a fantastic real life simulation
game where the kids learn a lot!”
Meagan (NSW)
“Dear ESSI Money
Ok listen up,
I’m not being rude here – but my teacher said
we can access our game when we get home
but it’s not even coming up and I’m already
finished but I want to do it again because it’s
FUN yet EDUCATIONAL. Can you please tell
me how I can play at home”.
Holly (aged 13 QLD)
The appointment of two new staff to the
Foundation will enable further development
of the partnership with Collection House
to include:
•
•
•
Teacher Forums (professional development
and networking for secondary school
teachers)
E-newsletter (regular and current online
financial literacy materials and resources)
Collection House Financial Education
Program(staff education opportunities)
Operation Financial Literacy and ESSI Money
are provided by the Foundation at no cost to
schools and charities throughout Australia. This
strategy, to educate young Australians about
sound financial management would not be
possible without the generous and continuing
support of our founding corporate partner,
Collection House Limited. Our partnership
is established with an understanding and
acknowledgement that financial literacy is an
important life skill for all young Australians.
For more information about the
Financial Basics Foundation, Operation
Financial Literacy or ESSI Money, go to
www. financialbasics.org.au
C oll ection Hous e Limi ted 201 1 Annual Report
09
{ our responsibilities corporate social responsibility
Community eng Agement
progrAm
While Collection House has worked with
various community groups, charities,
financial counsellors and other organisations
(collectively “agencies”) on a case by case
basis for a number of years, since late October
2010, Collection House has been investigating
ways it can work more effectively with
agencies that are likely to interact with some
of our customers.
The result
In March 2011, Collection House introduced
the Community Engagement Program or
CEP, which is designed to facilitate a better
understanding of how the various agencies
operate and to change the traditional
perception of a “debt collector” to that which
reflects Collection House’s strong compliance
credentials and ethical approach to what
we do.
In this respect, Collection House shares a
common goal with these agencies, namely
working cooperatively with our mutual
customers and assisting them in solving their
financial problems.
We believe that by focusing on this common
goal, we can make not only our work easier
and more efficient, but also that of the
agencies involved.
How will we achieve this?
Collection House offers a dedicated line of
communication between it and agencies
acting on behalf of customers who are
disadvantaged.
This communication line is facilitated by
Collection House’s Compliance Department.
The customer’s authorised representative
may contact the Compliance Manager or the
Compliance Officers directly to discuss their
concerns, any sensitive or complex matters,
or just to have a general discussion regarding
Collection House/Lion Finance policy and
procedure in relation to hardship, complaints
and disputes.
Collection House also welcomes opportunities
to become involved in community based
financial counselling and consumer advocate
organisational training programs, seminars and
conferences and invites these organisations
to provide information about their operations
which can be used in training our staff.
In addition, Collection House offers such
organisations the opportunity to discuss how
we may be able to assist in training and
development of their people through our own
registered training organisation, Collective
Learning and Development Pty Ltd.
Another key initiative of the CEP is the
introduction of a Corporate Giving program
which enables staff to make regular pre-tax
donations to a selected charity organisation
and Community Volunteering programs, which
allows staff to take one day’s paid leave per
year for the purpose of engaging in community
volunteer work. CEP participants are welcome
to be nominated for these programs.
1 0
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ our responsibilities corporate governance statement
1. introduCtion
This statement relates to the year under review.
(a) Date of statement
This Statement reflects our corporate
governance framework, policies and
procedures which have been in place since
1 January 2008 and which were reviewed and
re–endorsed by the Collection House Limited
Board on 23rd June 2011.
(b) Access to information on the website
This Corporate Governance Statement and
the documents referred to in the Statement,
can be viewed on our website in the corporate
governance section (unless otherwise stated)
at ‘www.collectionhouse.com.au’.
2. our A pproACh to Corpor Ate
governAn Ce
(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
Second Edition of the ‘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 thirty (30)
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
Recommendations, other than:
The Board is accountable to shareholders
for our performance, and the Board’s
responsibilities include:
•
•
•
Recommendations 2.1 and 2.2 – relate
to independence. Our reasoning on
independence and an explanation
for our variance on the ASXCGC’s
Recommendations 2.1 and 2.2 are set out
in section 3(e) of this Statement;
Recommendation 2.4 – establishment of
a nominations committee. Our reasoning
and an explanation for our variance with
ASXCGC’s Recommendation 2.4 are
set out in sections 3(j) and 4(a) of this
Statement; and
Recommendation 4.2 – establishment of
an audit and risk management committee
comprising at least three members.
Our reasoning and an explanation
for our variance with ASXCGC’s
Recommendation 4.2 are set out in
section 4(a) of this Statement.
A checklist summarising our compliance with
the ASXCGC’s Recommendations is on our
website at ‘www.collectionhouse.com.au’.
ASXCGC’s Recommendations 2.1, 2.2
and 2.6
3. the boArd of direC tors
(a) Membership and expertise of the Board
Directors’ membership, period of office held,
experience and shareholdings of each Director
at the date of the Annual Report are provided
in greater detail in the Directors’ Report on
pages 27 and 28.
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.
•
•
•
•
providing strategic direction and approving
significant corporate strategic initiatives;
providing input into, and approval of,
management’s development of corporate
strategy and performance objectives;
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 Chief Executive Officer (CEO) and
Non-executive Director remuneration;
considering and approving our half-yearly
and annual financial statements;
selecting and recommending to
shareholders the appointment of the
external auditor;
approving our risk management strategy
and various risk management frameworks
and monitoring their effectiveness;
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.
{ our responsibilities corporate governance statement
{ our responsibilities corporate governance statement
C oll ection Hous e Limi ted 201 1 Annual Report
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The Board has delegated to Executive
Management, responsibility for:
•
•
•
•
•
•
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
managing day-to-day operations in
accordance with 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.
From 30 October 2009, the Board assessed
its composition and size, and from time to
time recommended changes to the Board’s
composition together with 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 Board believes are necessary
for one or more of the Directors to possess.
Until 31 July 2010, the Board composition
consisted of two Non-independent Non-
executive Directors, three Independent
Non-executive Directors and one Executive
Director. On 31 July 2010, our Executive
Director, Tony Aveling retired as MD/CEO.
On 28 June 2011, the Board appointed David
Michael Gray as a Director of the Company,
subject to shareholder approval at the next
Annual General Meeting of the Company.
The Board determined that David Michael
Gray was the most suitable candidate for
appointment and will add value to the Board
given his proven board and governance
stewardship, strategic and visionary thinking
and business knowledge and experience
with current and previous directorships and
senior executive positions in large national and
international companies.
As at 30 June 2011, there were two
Non- independent Non-executive Directors,
and four Independent Non-executive Directors.
Our Constitution sets a maximum of ten
Directors. The Chairman of the Board is
non- executive, separate and independent of
the role of the CEO.
ASXCGC’s Recommendation 2.1
(d) The Chairman
The Board elects one of the Non-executive
Directors to be Chairman.
The 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, John Pearce, and the Deputy
Chairman, Dennis Punches are considered
by the Board not to be independent in terms
of the ASX Corporate Governance Council’s
definition of an 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
and Deputy Chairman of the Board.
ASXCGC’s Recommendation 2.2
(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.
Until 31 July 2010, when our Executive
Director Tony Aveling retired as MD/CEO, a
majority of the Board was not independent.
On and from 1 August 2010 until 30 June
2011, the Board considers that a majority of
the Board was independent. Notwithstanding,
the Board considers that the individuals on
the Board, that were, and are not presently
independent, 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 Board
believes that its current composition meets
these requirements.
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2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ our responsibilities corporate governance statement
The Directors’ Charter discloses a process for
the selection and appointment of new Directors
and the re-election of incumbent Directors.
The Directors’ Charter is available from the
corporate governance section of the Company’s
website at ‘www.collectionhouse.com.au’.
Exceptions to ASXCGC’s
Recommendations
2.1 A majority of the Board should be
Independent Directors
Until 31 July 2010, three Directors of the
Board, inclusive of John Pearce, Dennis
Punches and Tony Aveling, were not
considered to be independent in accordance
with Recommendation 2.1.
On and from 1 August 2010 and as at
30 June 2011, two Directors of our Board
are not considered to be independent in
accordance with Recommendation 2.1.
These Directors are John Pearce (Chairman
appointed 25 June 2009) and Dennis
Punches (Deputy Chairman appointed 25
June 2009). Tony Aveling retired as MD/CEO
on 31 July 2010.
Due only to their respective substantial
shareholdings in the Company, John Pearce
and Dennis Punches 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 in
the Directors’ Report on pages 27 and 28.
2.2 and 2.4 The Chairperson should be an
Independent Director
While the Chairman of the Board, John
Pearce and the Deputy 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 Dennis Punches, a member of the
Remuneration Committee, with a scope well
beyond that of other candidates, at either a
national or international level.
Until 31 July 2010, Tony Aveling was not
deemed to be independent by virtue of his role
as MD/CEO of the Company. Tony Aveling
retired as MD/CEO on 31 July 2010. Matthew
Thomas was appointed CEO effective as and
from 1 August 2010. Mr Thomas is not a
Director 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 (before 31 July 2010) of unfettered and
independent judgment.
ASXCGC’s Recommendations 2.1, 2.4 and 2.6
(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 are
available from the Company’s 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 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 on page 29.
(h) Succession planning
The Board considers Director succession and
is 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.
The Board is responsible for CEO succession
planning, for approving the CEO financial
and non-financial performance objectives and
for evaluating the performance of the CEO
against those objectives.
The CEO is actively involved with Executive
Management succession. The 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
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{ our responsibilities corporate governance statement
(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. These reviews are conducted for
the financial year 2010/ 2011 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
(i) Nomination and appointment of
new Directors
Until 30 October 2009, the Board had a
Nominations Committee. From 30 October
2009, the Board assumed the Nominations
Committee’s role, responsibilities and
functions. During the reporting period, the
Board used the process for the selection and
appointment of new Directors contained in
the Directors’ Charter when considering and
making recommendations for nominations of
new Directors to the Board.
A summary of the Directors’ Charter 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 to the requirements set out in
ASXCGC’s 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 Board reviews
the appointment criteria contained in the
Directors’ Charter 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 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 a Legal Practitioner 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 the
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.
(m) Diversity
From 1 July 2011, the ASXCGC’s
Recommendations provide that ASX listed
companies must establish a policy concerning
diversity including a requirement to set
measurable objectives for achieving gender
diversity. Those objectives and the progress
towards achieving the objectives are to be
reviewed annually and our findings are to be
contained in the annual report.
Recommendations 3.2, 3.3, 3.4 and 3.5.
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2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ our responsibilities corporate governance statement
On 21 April 2011, Collection House early
adopted its Diversity Policy in accordance with
the ASXCGC’s Recommendations.
Set out below is a summary of the Company’s
4. boArd Committees
gender diversity positions as at 30 June 2011.
(a) Board Committees and membership
The Collection House Board has previously
embraced diversity within its composition
and at executive and senior management
levels and will continue to embrace diversity,
particularly in terms of gender and cultural
diversity under its Diversity Policy, when it is
appropriate to do so and a vacancy arises.
A copy of our Diversity Policy is available from the
Corporate Governance section of the Company’s
website at www.collectionhouse.com.au
Position
Directors
Executives
Senior Managers
Middle Managers
Managers
Other Staff
Total Staff
Total
Number
Number of
Women
During the reporting year, we had three
standing Board Committees:
•
The Audit and Risk Management Committee;
• The Remuneration Committee; and
• The Board Sub-Committee.
The Committee Charters (available on our
website except for the Board Sub-Committee)
describe their roles and responsibilities, as
approved by the Board.
6
4
9
18
57
480
574
Nil
1
3
7
26
273
310
direC tors
John Pearce
Dennis Punches Bill Kagel
Tony Coutts
Kerry Daly
David Gray
Non-independent
Director
Independent
Director
Chairman and
Independent
Director
Independent
Director
Chairman and
Independent
Director
Appointed 24
February 2011
Appointed 24
February 2011
•
•
the Board considers that it is best placed
to deal with the nomination, appointment
and evaluation of Directors; and
the members of the Board have
sufficient industry experience,
knowledge and technical expertise to
discharge the Nominations Committee’s
mandate effectively.
From 30 October 2009, the Board, by
discontinuing the Nominations Committee
and assuming its role, responsibilities and
functions, is not compliant with ASXCGC’s
Recommendation 2.4. However, the Board
considers that given the revised nature, size
and composition of the Board; the allocation
of the scarce Director resources; and that
it is ultimately responsible for the role,
responsibilities and functions undertaken by
the Nominations Committee, it is best placed
to deal with the nomination, appointment and
evaluation of Directors and considers that the
efficiencies previously gained from having a
Nominations Committee, no longer exist.
ASXCGC’s Recommendation 2.4.
The Directors, taking into consideration the
revised nature, size and composition of the
Board, and that the Company is not an entity
that trades in the top 300 of the S&P All
Ordinaries Index, have resolved, in regards to
the Audit and Risk Management Committee
(the ARMC), that the membership of the
Committee should be two Independent Non-
executive Directors with sufficient industry
experience, knowledge and technical expertise
to discharge the ARMC’s mandate effectively.
Committee
Audit and Risk
Management
Committee
Remuneration
Committee
Board Sub-
Committee
(Committee
commenced 24
February 2011)
Chairman and
Non-Independent
Director
Appointed 24
February 2011
Attendances of Directors at Committee
meetings are set out on in the Directors’
Report on page 29.
ASXCGC’s Recommendations 2.4, 2.6, 4.1,
4.2, 4.3, 4.4, 8.1 and 8.2
Exceptions to the ASXCGC’s
Recommendations
The Directors, taking into consideration the
revised nature, size and composition of the
Board, and that the Company is not an entity
that trades in the top 300 of the S&P All
Ordinaries Index, have resolved, in regards to
the Nominations Committee, that:
•
the role, responsibilities and functions of
the Nominations Committee be assumed
by the Board as a whole;
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{ our responsibilities corporate governance statement
The ARMC during the reporting year, did
not comprise of three Independent Non-
Executive Directors in accordance with
Recommendation 4.2.
The current membership structure of the
ARMC is not compliant with ASXCGC’s
Recommendation 4.2. However, the Board
considers that the current members of Kerry
Daly, Chairman and Tony Coutts both being
independent non executive directors with
relevant industry experience and knowledge of
domestic trends in the collection industry, are
sufficient in number, independence, technical
expertise and skills to properly discharge
their roles and responsibilities effectively as
committee members of the ARMC.
ASXCGC’s Recommendation 4.2.
(b) Committee procedures
Composition and independence of
the Committees
Committee members are chosen for the skills,
experience and other qualities they bring to
the Committees.
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 CEO is invited to attend all
Committee meetings, except where the 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.
How the Committees report to the Board
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.
How Committees’ performance is evaluated
•
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 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 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 financial statements and
financial reporting systems;
making recommendations to the Board for
the appointment of the external auditor;
external auditor’s qualifications,
performance, independence and fees;
oversight and performance of the internal
audit function;
compliance with financial reporting and
related regulatory requirements;
reviews and approves the frameworks for
managing our market, operational and
compliance risk;
determines, approves and reviews the
limits and conditions that apply to the
taking of risk, including the authority
delegated by the Board to the CEO and
Executive Management;
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.
In fulfilling its responsibilities, the Audit and
Risk Management Committee:
•
•
•
•
•
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 CEO and CFO
have in place to support their certifications
to the Board;
reviews any significant disagreements
between the auditors and management,
irrespective of whether they have
been resolved;
meets separately with the external auditors
and the internal auditor at least twice a
year without Executive Management being
present; and
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2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
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•
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 6 occasions during the reporting year.
The Audit and Risk Management Committee
regularly updates the Board about its activities.
ASXCGC’s Recommendations 4.1, 4.2, 4.3,
4.4, 7.1 and 7.2
•
•
•
•
•
monitors organisational structure and
succession planning strategies;
evaluates and reviews current industry
standards and practices;
reviews and makes recommendations to
the Board on equity-based plans;
approves all performance recognition
expenditure; and
oversees general remuneration practices
across the Group.
(d) 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
CEO against the CEO’s corporate goals
and objectives;
makes recommendations to the Board on
the remuneration of the 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 CEO;
considers and evaluates the performance
of Executive Management when making
remuneration determinations and otherwise
as required;
The Remuneration Committee also reviews
and makes recommendations to the Board
concerning the recruitment, retention,
termination, and succession planning policies
and procedures for the CEO and for Executive
Management positions reporting directly to the
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
(e) Board Sub-Committee
The Board Sub-Committee was established
on 24 February 2011 to undertake a strategic
review process to assess and develop
initiatives to increase shareholder value and
returns in the short to medium term including:
•
Board succession planning and future
composition
• Shareholder communication
• Capital optimisation
• Segmental performance review
The Board Sub-Committee comprises
John Pearce as Chairman, Tony Coutts and
Kerry Daly both being Independent Non-
Executive Directors.
The Board Sub-Committee meets on a
regular basis and updates the full Board about
its activities.
5. Chief exeCutive offiCer
And Chief finAn CiAl
offiCer AssurAnCe
The Board receives regular reports about our
financial condition and operational results
as well as that of our controlled entities.
The CEO and CFO annually provide formal
statements to the Board, that in all material
respects confirms:
•
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
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
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{ our responsibilities corporate governance statement
6. promoting ethiCAl And
responsible 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 an online learning module titled ‘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 and procedures.
The Company’s internal policies and
procedures are quality assured via our two
accredited Quality Management Systems
in place:
•
•
Professional Practices Management
System which was developed by ACA
International (formerly the American
Collectors Association) and which is
specifically tailored for the collection
industry. Collection House has been
accredited for seven (7) years.
Brisbane Head Office of the Company
became ISO 9001 accredited on 24 June
2011 demonstrating our commitment to
quality management systems that support
our internal policies and procedures.
ASXCGC’s Recommendations 3.1
(c) Concern reporting and whistleblowing
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 Prescribed 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).
Directors and Prescribed Employees must also
notify the Chairman or the 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.
1 8
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ our responsibilities corporate governance statement
The Corporate Counsel Division monitors the
trading of the Company’s shares by Directors
and Prescribed Employees on a daily basis.
Directors and Prescribed Employees may
only deal in the Company securities outside
of these times with the express prior approval
of the Chairman, Deputy 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.
The expected outcomes of this remuneration
philosophy are:
•
•
•
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 Directors and employees to align
their interests with those of shareholders.
Many employees have participated in the
Company’s various share and option plans
from time to time.
In February 2007, the shareholders approved
certain share options in favour of Tony Aveling
(former MD/CEO) as part of his employment
agreement. Details of the share options
are set out in the Remuneration Report on
page 34.
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 (2007
ESOP) 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 CEO, subject to meeting the
Company’s statutory and ASX Listing Rule
disclosure obligations.
In June 2008, subject to shareholder approval,
the Board agreed to vary Tony Aveling’s
(former MD/CEO) remuneration package
and employment agreement to include certain
additional share options. This variation of
his remuneration package 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
on in the Remuneration Report on page 34.
In July 2008, certain additional share options
were issued to eligible senior employees
under the 2007 ESOP 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 on page 35.
In December 2010, the Board approved a new
Employee Share Option Plan (2010 ESOP),
in similar terms to the 2007 ESOP. Under the
2010 ESOP, certain eligible senior employees
were granted share options in March 2011.
The 2010 ESOP will be presented to
shareholders for approval at the 2011 Annual
General Meeting. Details of the share options
are set out in the Remuneration Report on
page 35.
No Directors participate in share plans.
Non-executive Directors receive only cash
compensation and reimbursement of expenses
for their services.
For additional information about the Company’s
remuneration practices and details relating
to Directors’ and executives’ remuneration
during the year, refer to the Directors’ Report
commencing on page 20.
Details of our remuneration framework are set
out in the Remuneration Report on page 30.
ASXCGC’s Recommendations 8.1, 8.2
and 8.3
8. mArket disClosure
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 and spells out that
information which a reasonable person
would expect to have a material effect on
the price of the Company’s securities, that
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.
All market announcements are released to the
ASX first in time.
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
C oll ection Hous e Limi ted 201 1 Annual Report
1 9
{ our responsibilities corporate governance statement
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
and continues to take initiatives to reduce its
carbon footprint.
The Board approved Shareholder
Communications Guidelines is available from the
corporate governance section of the Company’s
website at ‘www.collectionhouse.com.au’.
ASXCGC’s Recommendations 6.1 and 6.2
10. heAlth And sAfety
The Company aims to provide and maintain
a safe and healthy work environment within
all operations.
The Company acts to meet this commitment
by implementing work practices and
procedures throughout the Company that
comply with the relevant regulations governing
workplace health and safety.
Employees are expected to take all
practical measures to ensure a safe and
healthy working environment in keeping
with their defined responsibilities and the
relevant regulations.
ASXCGC’s Recommendations 3.1 and 3.3
11. internAtionAl finAn CiAl
reporting stAndArds (ifrs)
The Australian Accounting Standards Board
(AASB) has adopted International Financial
Reporting Standards (IFRS) for application
to reporting periods beginning on or after
1 January 2005. The AASB has issued
Australian equivalents to IFRS.
The Company adopted the Australian
equivalents to IFRS in its consolidated entity’s
financial statements since 31 December 2006.
ASXCGC’s Recommendations 3.1 and 3.3
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 Securities 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.
20
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Collection House Limited and the entities
it controlled for the financial year ended 30 June, 2011.
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 Coutts
Bill Kagel
Kerry Daly
David Gray (appointed 28 June 2011)
Tony Aveling (retired as Managing Director and Chief Executive Officer 31 July 2010)
See pages 27 to 28 for profile 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, 2010 of 3 cents fully franked (2009 – 2.6 cents fully
franked) per fully paid share paid on 26 November 2010.
Interim ordinary dividend for the year ended 30 June, 2011 of 3.1 cents fully franked (2010 – 2.8 cents fully
franked) per fully paid share paid on 25 March, 2011.
30 June 2011
$’000
30 June 2010
$’000
2,920
3,017
2,530
2,725
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 $3,017 million (3.1 cents per fully paid share) to be paid on 25 November 2011 out of retained profits and a positive net asset balance as
at 30 June 2011.
FY2011 HIGHLIGHTS
• Profit before tax for the year was $14.6 million (2010: $11.8 million)
• Earnings per share (EPS) were 10.4 cents (2010: 9.2 cents)
• Shareholder equity was $96 million (2010: $92 million)
• Total dividends for the year of 6.2 cents (interim 3.1 cents paid March 2011, final 3.1 cents to be paid November 2011), fully franked, up 7%
from FY10
C oll ection Hous e Limi ted 201 1 Annual Report
2 1
{ DIRECTORS’ REPORT for the year ended 30 june 2011
REVIEW OF OPERATIONS
The strong earnings result was due to a range of factors including:
• A continued disciplined approach to debt purchases while growing the Purchased Debt Ledger (PDL) book;
• Maintaining revenue growth despite increasing interest rates and inflationary pressures on household budgets;
• Successfully encouraging customers to enter into regular repayments which resulted in a 19 per cent increase in the value of repayment arrangements
in place; and
• Disciplined management of operation costs including the reduction of total Executive Management costs over the period.
Key Financial Results -
by Segment - Audited ($’000)
30 June 2011 30 June 2010 30 June 2011 30 June 2010 30 June 2011 30 June 2010
$ ‘000
$ ‘000
$ ‘000
$ ‘000
$ ‘000
$ ‘000
Commission collections
Account asset management
Consolidated
Revenue
Sales
Collections from Purchased
Debt Ledgers
Fair Value Movement in Purchased
Debt Ledgers
Total segment revenue
Intersegment elimination
Consolidated revenue
Results
Segment result
Interest expense & borrowing costs
Unallocated revenue less unallocated
expenses
Profit before Tax
Taxation
Net Profit After Tax
32,173
34,280
78,042
69,467
32,173
78,042
34,280
69,467
(33,073)
(29,879)
(33,073)
(29,879)
32,173
34,280
44,969
39,588
32,173
34,280
44,969
39,588
5,393
5,873
18,885
15,579
77,142
(364)
76,778
24,278
(5,645)
(4,050)
14,583
(4,466)
10,117
73,868
(22)
73,846
21,452
(4,771)
(4,859)
11,822
(2,899)
8,923
Lion Finance (Account asset management segment)
Total PDL purchases increased 65% year on year resulting in a 12% increase in collections. This increase was achieved with no increase in Full Time
Equivalent staff numbers (FTE).
The repayment arrangement book grew 19% year on year to $152m and now provides up to 47% of total collections monthly.
Commission Collections (including non-Lion Finance subsidiaries and other business revenue)
The Commission Collections market continues to be very competitive with commission rates at fine margins. Revenue declined by 6% year on year. In
response, the company has moved to improve marketing capabilities during the year and developed new service offerings which will both capitalise on
and reinforce our organisational strengths of people and culture, ethics and compliance, diversity and technology.
22
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Assets and liabilities
Consolidated net assets have increased from $91.9 million to $95.9 million, primarily due to the higher level of debt purchases during the year.
During the reporting period new debt portfolios were purchased for A$48.3 million, and NZ$0.9 million in the Australian and New Zealand markets
respectively, which were funded from operating cash flow and an increase in long term bank debt.
Cash flow
The consolidated cash flow from operating activities increased by 20.1% to $47.9 million (2010: $39.8 million) primarily due to increased collections
flowing from the higher levels of debt purchased and worked by the Group during the year.
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 dividend as stated on page 20.
OUTLOOK
Near term
The Company expects to benefit from a number of favourable factors during the coming year including improved collectability of debt as a result of a
higher savings rate and a propensity to pay down debt.
Nevertheless, a degree of caution remains appropriate because of the lagging effects of natural disasters, increases in household expenses such as
interest rates, home rentals, petrol prices and utilities, all of which put pressure on more vulnerable customers.
Based on past experience, the company will focus strongly on maintaining its current businesses during 2012, with the strong levels of debt purchases
and successful execution of strategic priorities during 2011 leaving the Company well placed to deliver further positive outcomes in FY 2012.
Lion Finance
PDL purchases at disciplined prices are expected to continue in 2012, towards a target of $60m to $70m of acquisitions for the year. The increased
investment in purchased debt ledgers will drive revenue growth and continue the upward trend in repayment arrangements.
To date, the majority of our PDL purchases are funded from operating cash flow, minimising pressure on the Company’s debt facility. However further
external funding is required to continue to build the PDL book. The company has recently extended its borrowing facility to allow the forecast higher levels
of debt acquisition to be achieved.
Commission Collections
The Commission Collections business remains challenging, but 2011 investments made in sales and marketing are starting to provide returns which
should continue into FY2012.
Long term
Collection House has established a sustained track record of increasing profitability and dividends for shareholders over recent years.
C oll ection Hous e Limi ted 201 1 Annual Report
23
{ DIRECTORS’ REPORT for the year ended 30 june 2011
STRATEGIC INITIATIVES
During the period, the Company has:
• Focused on increasing the number of repayment arrangements with customers. Debts under repayment arrangements are more profitable than those
which are not
• Focused on maximising productivity of staff across the Company
• Increased revenue from the PDL portfolio. Set against a relatively stable cost base, this has the effect of increasing profitability
• Developed new service offerings with a focus on “leading the way”. One of the new offerings “Collective Learning and Development” is currently
operational and the other “Cashflow Accelerator” is expected to be formally launched during 1H12
• Continued the renewal of its proprietary IT based collections platform. The next generation “C5” will take advantage of new technology and provide
better information and support to both operational and support staff, and better meet the needs of our clients
• Developed and implemented a new marketing plan
• Continued to invest in staff development and incentives
• Invested in new tools which allow better portfolio analytics and segmentation to improve collection strategies and profitability
Looking forward, the Company will continue to focus on these initiatives in the short term.
In the longer term, there are other opportunities to explore including:
• Secure predictable future revenue streams and enhance ledger values by continuing to grow the repayment arrangement book
• Alternative capital management strategies as a means of funding future growth and maximising shareholder returns
• New and innovative use of analytics and technology to drive competitiveness
• Identify and develop new products and services to meet the needs of future markets
• Restore long term growth to the Commission Collections segment
• Expand and strengthen strategic relationships
COLLECTION HOUSE LIMITED - OVERVIEW
Who we are
Collection House Limited is a public Company which listed on the Australian Securities Exchange on 4 October 2000. The Collection House Group of
Companies employs over 560 trained personnel in 9 Australasian locations.
The Group focuses on providing receivables management, debt purchasing and debt collection services in all Australian states and territories and
throughout New Zealand. The Company aims to position itself as a significant player in large corporate debt collection and purchasing markets in Australia
and New Zealand, with a reputation for reliability, integrity, high quality services, and as an ethical and compassionate collector of debts, a good employer
and corporate citizen.
The Company has two operating divisions, Commission collections conducted in the name of Collection House and our subsidiary Midstate Credit
Management Services Pty Ltd, and Account asset management conducted by our specialist subsidiary Lion Finance Pty Ltd. The Company operates
in New Zealand through our wholly owned subsidiary Collection House (NZ) Limited, collecting debt both on commission and referred purchased debt.
Included in the Commission collection services division is the wholly owned incorporated legal practice Jones King Lawyers Pty Ltd, which provides
in-house legal services to both the Commission collections and Account asset management businesses and acts for third party clients.
24
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Our markets
The Collection House Group operates in the Australian and New Zealand debt collection markets.
The Commission collections business collects debts on a commission basis for large corporate customers. Our market segments for this business are
large financial institutions, both bank and non-bank, and a range of corporate customers, including telecommunications, and insurance. This business
also provides a full receivables management service to customers on a fee for service basis if required. The Commission collections business does not
operate in the small end of this market place, as this segment can be better served by others.
The Account asset management division specialises in purchasing distressed and overdue debts from a range of debt issuers who are no longer willing
or able to collect them. Our market segments for this business are large banks, financial institutions and telecommunications companies.
The Company is the second largest operator in its chosen markets in both Australia and New Zealand.
Our strengths
The Company has a number of strengths which support its operations:
• Many years of experience in our chosen markets. The Company has been operating in its chosen markets as an ASX-listed entity since 2000, and
as a private organisation for a number of years before that. Over that time, the Company has gained significant experience and knowledge of the
businesses which it currently operates.
• Experience across the full debt collection spectrum in both Australia and New Zealand. An experienced, professional and stable board of directors and
executive team. The board of directors and senior management of the Company are all experienced professionals with a strong knowledge of debt
collection. Both the board and senior management have remained stable over many years, providing strength and continuity to the Company.
• An experienced, professional and stable employee team. The Company focuses on and commits significant resources to training and looking after its
employee team because we believe that the employees are the most important asset that it has. Stability within the employee team is as important, as
it is within the executive team, in order to maintain and take advantage of employee experience and knowledge in the Company.
• A strong corporate and compliance culture which promotes professionalism, ethical collections and employee ownership in everything we do.
• A sophisticated proprietary technology platform which is evolving in line with our chosen markets and customer needs.
• A database of over 7 million accounts.
Our drivers of financial success:
There are a number of critical factors which drive the success of the Company.
Critical factors which are common across the Company:
Good information sources
The key to successful debt collection is accurate and reliable information. Accurate information facilitates everything which the Company does. The
Company has invested significant resources into developing a strong and usable proprietary IT based collections platform which underpins all activity
across the Company.
The collections platform is under continuous development which allows the Company to take advantage of technology advances as they occur, and to
meet the needs of external clients on a timely basis.
Productive employees
Productive employees are a critical factor in the Company’s success. With constant pressure on costs, and employee costs being a significant item for
the Company, ensuring that all employees, both operational and support, are productive is critical to our success.
C oll ection Hous e Limi ted 201 1 Annual Report
25
{ DIRECTORS’ REPORT for the year ended 30 june 2011
A strong understanding of all aspects of the debt collection process
The Company considers that it is critical that all aspects of the debt collection process are understood in detail.
For operational staff, this means understanding how to collect debts in a professional, ethical, compliant but cost effective manner.
For support staff, this means understanding the dynamics of the debt collection process as it relates to their work, and providing effective and meaningful
support to operational staff.
Reliable, timely and accurate internal and external reporting systems
All activities of the Company need to be monitored and controlled on a timely basis. At Collection House this is facilitated by the provision of reporting on
a continuous basis to all levels of management.
Our collections platform is the centrepiece of the Company’s reporting systems, feeding statistical data to operational managers, financial data to the
finance team for financial reporting, and other relevant data to the other support teams.
Critical factors related to Commission collections
The ability to service the needs of clients in a manner that generate profits for the Company
Meeting the needs of clients is critical to this business. Margins are under constant pressure from clients, and there are many organisations prepared to
undercut Collection House to get business. The Company’s response to this is to provide pro-active and superior service to clients to meet their needs.
Our clients require ongoing reporting of performance and regular and timely remittance of funds collected on their behalf.
Critical factors related to Account asset management
The ability to accurately determine the price which the Company will pay for debts
The price paid for a debt is a critical input to being able to make a profit on any debt purchase. The Company has invested significant resources in being
able to accurately price debts prior to putting in a bid to purchase.
The ability to correctly price debts is reliant upon having access to good sources of information, and skilled employees making the pricing determination.
The Company has access to the complete history of its own debt collection activities, and uses this information extensively together with other publicly
available information to understand a particular debt portfolio prior to purchase.
Our employees are highly skilled and trained and are able to make accurate assessments of the correct price which should be paid for debts.
The ability to accurately determine the value of the purchased debt portfolio as any point in time
As important as purchasing debts at the correct price is knowing the true value of the portfolio on an ongoing basis. With this knowledge, the Company
is able to manage the portfolio on an ongoing basis and take corrective action if required.
The same information systems and employee skills which enable the Company to accurately price debts also enables the Company to effectively manage
the debt portfolio on a day to day basis.
The ability to put debtors onto a payment plan. Converting as many of the debts in the portfolio as possible into regular paying arrangements is critical to the business
success of the Company
Having a plan in place increases the recoverability of a debt, which increases the profitability of the portfolio and the Company. The Company puts
significant resources into putting as many purchased debts as possible onto arrangement as soon as possible.
26
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
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) Matthew Thomas was appointed CEO designate on 1 July 2010 and sole CEO on 1 August 2010. Tony Aveling, former Managing Director and
CEO, retired 31 July 2010;
b)
a $15m extension to the existing funding facility was negotiated with the Company’s bankers, along with an increase in the Loan Valuation
Ratio to 55%;
c)
in Australia, the Group purchased new debt portfolios for A$48.3 million; and
d) in New Zealand, the Group purchased new debt portfolios for NZ$0.9 million.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
1.
Dividend
The directors have recommended the payment of a final fully franked ordinary dividend of $3.017 million (3.1 cents per fully paid share) to be paid on 25
November 2011 out of retained profits and a positive net asset balance as at 30 June 2011.
2.
Varied Multiple Option Facility
On 14 June 2011, the Company’s Multiple Option Facility (MOF) with Westpac Banking Corporation (Westpac) was varied by an increase in the facility
limit from $85m to $100m in support of additional growth, with the Loan Valuation Ratio (LVR) increased to 55% reflecting a lower risk profile.
On 5 August 2011, the Company confirmed an interest rate swap transaction for an amount of $26m at a fixed rate of 4.50% per annum effective as
at 11 August 2011 and continuing until 12 August 2013. As the swap involves exchanging a variable interest borrowing for a fixed rate borrowing it is
not possible to quantify the potential financial impact of this transaction.
Other than the matters discussed above, no matter or circumstance has arisen since 30 June 2011 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
For details on likely developments across the Group, refer to review of operations.
Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report
because the directors believe it would be likely to result in unreasonable prejudice to the Group.
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.
C oll ection Hous e Limi ted 201 1 Annual Report
27
{ DIRECTORS’ REPORT for the year ended 30 june 2011
INFORMATION ON DIRECTORS as at 30 JUNE 2011
John Pearce
Experience
Non-executive Chairman. Age 66
Co-founder of Collection House Limited. Appointed to the Board in April 1993. In April 2003 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 on 26
October 2007 and for a further three year term on 29 October 2010 by shareholders. 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. A Board Member of The Rutherglen Cemetery Foundation. Director, Brisbane
Lions Foundation.
Special Responsibilities
Mr Pearce is Chair of the Board Sub-Committee established on 24 February 2011
Interest in shares and options
(direct & indirect)
11,765,538 ordinary shares in Collection House Limited
Dennis Punches
Non-executive Deputy Chairman. Age 75
Qualifications
Experience
BSC
Appointed to the Board in July 1998, and in 2000 was appointed as Chairman of Collection House Limited.
Re-elected Director 29 October 2010. 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 a Member of the Remuneration Committee.
Interest in shares and options
(direct & indirect)
Tony Coutts
Experience
19,101,266 ordinary shares in Collection House Limited
Non-executive director. Age 52
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. Re-elected 29
October 2010. 18 years in the finance and insurance industry (Australian Guarantee Corporation Ltd). 15 years in the
debt collection industry, the last 13 of which were spent at Collection House.
Special responsibilities
Mr Coutts is a Member of the Audit and Risk Management Committee, Chair of the Remuneration Committee and a
Member of the Board Sub-Committee established on 24 February 2011.
Interest in shares and options
(direct & indirect)
Bill Kagel
Experience
4,464,600 ordinary shares in Collection House Limited
Non-executive Director. Age 74
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. Re-elected
Director 31 October 2008.
Special responsibilities
Mr Kagel is a member of the Remuneration Committee.
Interest in shares and options
(direct & indirect)
1,551,269 ordinary shares in Collection House Limited
28
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Kerry Daly
Qualifications
Experience
Non-executive Director. Age 53
BBus (Acc), QUT
Mr Daly has over 30 years experience in the financial services sector. Mr Daly was elected a Director of Collection
House Limited on 30 October 2009. During the period 1987 to December 2000, Mr Daly was Managing Director
and Chief Executive Officer of The Rock Building Society Limited where he initiated its demutualisation and was
responsible for its ASX listing. From January 2001, he was appointed an Executive Director of fixed interest
brokerage and investment banking business Grange Securities Limited. Mr Daly is currently a non-executive Director
of AstiVita Renewables Limited, Tamawood Limited and Trustees Australia Limited.
Special responsibilities
Mr Daly is Chair of the Audit and Risk Management Committee and a Member of the Board Sub-Committee
established on 24 February 2011.
Interest in shares and options
(direct & indirect)
200,000 ordinary shares in Collection House Limited
David Gray
Qualifications
Experience
Non-executive Director. Age 64
BSc (UK), Honorary Doctorate, QUT
Mr Gray has more than 20 years experience in senior executive positions with large national and international
companies. Mr Gray is currently the Chairman of Queensland Cyber Infrastructure (March 2008), Chairman of
Australia Research Council for Aviation Automation (August 2007), Deputy Chairman of Civil Aviation Safety Authority
(CASA) (July 2009) and a Director of the Brisbane Airport Corporation (April 2010).
Previously, Mr Gray was Chairman of Queensland Motorways (2006-2010), Chairman of WaterSecure (2008-2011),
Managing Director of Boeing Australia (1995-2006), Managing Director of GEC Marconi (Australia)(1990-1995),
Divisional Chief Executive of GEC (Australia) Heavy Engineering (1984-1990) and Operations Manager of Teltech in
South Africa (1981-1984).
Mr Gray was appointed a Director of the Board on 28 June 2011.
Interest in shares and options
(direct & indirect)
Nil
Tony Aveling
Qualifications
Experience
Interest in shares and options
(direct & indirect)
Managing Director and Chief Executive Officer. Age 67 (retired on 31 July 2010)
SFFin, FAIM, FAICD
47 years in the financial services industry including 35 years at Westpac Banking Corporation. Senior positions
included Chief Executive Business and Private Banking, Managing Director and 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). Mr Aveling
retired as Managing Director and Chief Executive Officer on 31 July 2010.
505,000 ordinary shares in Collection House Limited at the time of Mr Aveling’s retirement.
2,000,000 options (Original Options) were issued to Mr Aveling in accordance with this Employment Agreement in
February 2007. While 400,000 of the Original Options had no price qualifying hurdles, all the Original Options expired
on 28 February 2011. None of the Original Options were exercised before expiry or during the Relevant Period.
A further 2,000,000 CLH options were issued to Mr Aveling in accordance with his varied Employment Agreement and
approved by Shareholders on 31 October 2008. The terms of Mr Aveling’s Employment Agreement as varied provided
that Mr Aveling may exercise those options when and if certain qualifying price hurdles were achieved before the expiry
date namely, 25 June 2013 and the options had vested (the Vesting Date was 25 June 2011). We confirm that 60%
of the 2,000,000 options (1,200,000 options) became exercisable on 25 June 2011. None of the qualified options
were exercised during FY11.
C oll ection Hous e Limi ted 201 1 Annual Report
29
{ DIRECTORS’ REPORT for the year ended 30 june 2011
COMPANY SECRETARY
The Company Secretary to 30 June, 2011 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 Group in 2000. Mr Watkins undertakes the combined roles of
General Counsel and Company Secretary for the Group.
MEETINGS OF DIRECTORS
The numbers of meetings of the Group’s board of directors and of each board committee held during the year ended 30 June 2011, and the numbers
of meetings attended by each director were:
Directors
Audit and Risk
Management
Remuneration
Sub-Committee*
Meetings of committees
2011
Dennis Punches
John Pearce
Tony Coutts
Bill Kagel
Kerry Daly
David Gray
(Appointed 28/6/11)
Tony Aveling
(Retired 31/7/10)
A
8
8
8
8
8
0
0
A Number of meetings attended
B
8
8
8
8
8
0
0
A
**
**
6
**
6
**
**
B
**
**
6
**
6
**
**
A
1
**
1
1
**
**
**
B
1
**
1
1
**
**
**
A
**
2
1
**
2
**
**
B
**
2
2
**
2
**
**
B Number of meetings held during the time the director held office or was a member of the committee during the year
* The CLH Board Sub-Committee was established on 24 February 2011 to undertake a strategic review process to assess and develop initiatives
to increase shareholder value and returns in the short to medium term including Board succession planning and future composition, Shareholder
communication, capital optimisation and segmental performance review. The Board Sub-Committee comprises John Pearce as Chairman, Tony Coutts
and Kerry Daly both being Independent Non-Executive Directors.
The Board Sub-Committee meets on a regular basis and updates the full Board about its activities.
** Not a member of the relevant committee
REMUNERATION REPORT
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Sharebased compensation
E Additional information
The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001.
30
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
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; and
• capital management.
In consultation with key members of the Board who have many years industry operational experience and the General Manager – Human Resources
and Corporate Services, 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
The current base fees were last reviewed with effect 25 August 2009. The Chairman continues to receive a non-executives director’s fee of $50,000
per annum plus superannuation and is not drawing any additional fees for being Chairman of the Group. The Chairman intends to use his director’s fees
to purchase shares in Collection House Limited.
C oll ection Hous e Limi ted 201 1 Annual Report
3 1
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Non-Executive Directors
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.
Payments are allowed for additional responsibilities for Board Chairmanship, Deputy Chairmanship, the Lead Independent Director role, for membership
of Board Committees and for Board Committee Chairmanship. Fees and payments to non-executive directors reflect the demands which are made on,
and the responsibilities of, the directors.
The following fees have applied:
FEES
Base fees
Chair
Other non-executive directors
Additional fees
Audit and Risk Management Committee Chair
Audit and Risk Management Committee Member
Lead Independent Director
For further information in relation to Directors remuneration, refer to page 33.
Executive Director
From 1 July 2010
to 30 June 2011
From 25 August 2009
to 30 June 2010
$50,000
$50,000
$30,000
$15,000
$50,000
$50,000
$30,000
$15,000
$ 5,000
$ 5,000
On 31 July 2010, Tony Aveling, Managing Director and Chief Executive Officer retired and ceased being an employee and Director of Collection House
Limited. Matt Thomas, previously Chief Operating Officer, commenced as CEO designate on 1 July 2010 and sole CEO on 1 August 2010. A summary
of Mr Aveling’s and Mr Thomas’ remuneration packages are set out in Section C of the Remuneration Report on page 34.
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 nonfinancial benefits at the executives’
discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. External remuneration consultants, as
required, 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 CEO in consultation with the Board.
32
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
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.
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 or by law.
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 the Collection
House Group are set out in the following tables.
The key management personnel of the Group, who have the authority and responsibility for planning, directing and controlling the activities of the entity,
are as follows:
• T. Aveling – MD/CEO (retired as Managing Director and Chief Executive Officer on 31 July 2010)
• M. Thomas – Chief Executive Officer (previously Chief Operating Officer, commenced as CEO designate on 1 July 2010 and sole CEO on
1 August 2010)
• A. Ralston – Chief Financial Officer
• M. Watkins – General Counsel and Company Secretary
• K. Lynam – General Manager – Human Resources and Corporate Services
• M. Voysey – Chief Marketing Officer (left the Company on 16 July 2010)
In addition, the following persons must be disclosed under the Corporations Act 2001 as they are among the highest remunerated Group executives:
• T. Aveling – MD/CEO (retired as Managing Director and Chief Executive Officer on 31 July 2010)
• M. Thomas – Chief Operating Officer (appointed Chief Executive Officer designate on 1 July 2010 and became sole CEO on 1 August 2010)
• A. Ralston – Chief Financial Officer
• M. Watkins – General Counsel and Company Secretary
• M. Jones – Head of Contingent Collections
• U. Danielian – Solicitor Director of Jones King Lawyers Pty Ltd (a subsidiary of the Group) retired from the Company on 31 October 2010.
C oll ection Hous e Limi ted 201 1 Annual Report
33
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Key management and highest paid personnel of the Group for the year ended 30 June 2011 is as follows:
Short Term Benefits
Salary
& Fees
$
Cash
Bonus
$
Non-
Monetary
Benefits
$
Other
$
Post
Employment
Benefits
Super (1)
$
Share
Based
Payments
Options
$
Name
DIRECTORS
J.Pearce
Chairman
D.Punches
Deputy Chairman
T. Coutts
Independent Director
B. Kagel
Independent Director
K. Daly
Independent Director
D. Gray (2)
Independent Director
T. Aveling (3)
Managing Director
B. Adams (4)
Lead Independent Director
B. Connelly (4)
Independent Director
B. Hiller (4)
Independent Director
GROUP EXECUTIVES
M. Thomas
Chief Executive Officer
A. Ralston
Chief Financial Officer
M. Watkins
General Counsel and
Company Secretary
K. Lynam
General Manager -
Human Resources and
Corporate Services
M. Jones
Head of Contingent
Collections
M. Voysey (5)
Chief Marketing Officer
U. Danielian (6)
Solicitor Director (Jones
King Lawyers Pty Ltd)
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
50,000
50,000
50,000
50,000
65,000
65,981
50,000
50,000
80,000
52,615
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
159,392
519,231
41,666
500,000
270
3,950
-
-
-
-
-
-
3,245
3,950
3,245
3,950
3,245
3,950
3,245
3,950
-
35,635
-
29,167
-
25,981
400,369
260,890
240,873
230,515
250,280
253,610
105,788
131,027
143,011
125,443
79,256
171,783
231,937
192,240
-
-
-
-
-
-
300,000
55,000
50,503
49,000
51,833
48,000
31,683
26,000
28,725
26,213
-
25,000
-
-
-
-
30,000
32,400
811
2,375
-
7,512
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,949
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
54,500
54,500
50,000
50,000
70,850
71,919
50,000
50,000
87,200
57,350
-
-
-
-
-
-
-
-
-
-
-
-
-
-
99,267
318,690
100,364
1,219,225
-
-
-
-
-
-
37,511
12,564
19,958
10,037
17,446
10,037
13,723
6,273
3,722
3,764
-
-
-
-
-
38,842
-
29,167
-
28,319
788,603
360,834
337,391
318,586
349,994
342,670
166,811
181,382
223,614
202,072
86,160
216,868
237,777
216,982
4,500
4,500
-
-
5,850
5,938
-
-
7,200
4,735
-
-
18,095
91,731
-
3,207
-
-
-
2,338
47,478
28,430
22,812
25,084
27,190
27,073
12,372
14,132
18,156
14,252
6,093
17,710
5,840
17,230
34
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
(1) Superannuation of 9% was paid on cash bonuses. The superannuation on the bonuses has been included in the superannuation figure in the
table on page 33.
(2) David Gray was appointed a Non-Executive Director of the CLH Board on 28 June 2011.
(3) Tony Aveling retired as Managing Director and Chief Executive Officer on 31 July 2010.
(4) Barrie Adams, Bill Hiller and Barry Connelly did not stand for re-election on 30 October 2009.
(5) Michael Voysey, Chief Marketing Officer, left the Company on 16 July 2010.
(6) Ulysses Danielian, Solicitor Director, left the Company on 31 October 2010.
The relative proportions of remuneration referred to in the table on page 33 that are fixed and linked to performance and share based options are
as follows:
Name
1. T. Aveling (retired 31 July 2010)
2 M. Thomas
3. A. Ralston
4. M. Watkins
5. K. Lynam
6. M. Jones
7. M. Voysey (left the Company 16 July 2010)
C Service Agreements (audited)
% Performance based
% Fixed
2011
2010
2011
2010
45
46
22
21
29
16
-
53
20
20
18
19
16
13
55
54
78
79
71
84
-
47
80
80
82
81
84
87
Remuneration and other terms of employment for the 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
(retired 31 July 2010)
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. Shareholder approval was given at the AGM on
31 October 2008. Mr Aveling retired from this position on 31 July 2010.
Annual base salary
$500,000 plus superannuation
Performance cash bonus
pro-rata to 31 July 2011
Maximum level of $500,000 plus superannuation. $45,416 inclusive of superannuation
was paid.
(Objectives as agreed by
the Board)
Options
At FY11 year end, the Board was provided with the financial and non-financial information
relating to the MD/CEO’s performance to 31 July 2011 (pro-rata). 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. The
payment was calculated based on performance against objectives and the Board’s exercise
of discretion.
2,000,000 options granted in 2007 were not exercised and lapsed on the Expiry Date
(28 February 2011). 2,000,000 options were granted in 2008. See note 31 for further details.
M. Thomas
Annual Base Salary
$436,000 inclusive of superannuation for the year ended 30 June 2011
Chief Executive Officer
(appointed CEO
designate on 1 July
2010 and became sole
CEO on 1 August 2010)
Performance cash bonus
$327,000 inclusive of superannuation was paid for the year ended 30 June 2011
Options
250,000 options granted in 2007 were not exercised and lapsed on the Expiry Date
(28 February 2011). 250,000 options were granted in 2008. 1,479,000 options were
granted in 2011. See note 31 for further details.
C oll ection Hous e Limi ted 201 1 Annual Report
35
{ DIRECTORS’ REPORT for the year ended 30 june 2011
A. Ralston
Annual Base Salary
$265,805 inclusive of superannuation for the year ended 30 June 2011
Chief Financial Officer
Performance cash bonus
$55,048 inclusive of superannuation was paid for the year ended 30 June 2011
Options
200,000 options granted in 2007 were not exercised and lapsed on the Expiry Date (28
February 2011). 200,000 options were granted in 2008. 591,000 options were granted
in 2011. See note 31 or further details.
M. Watkins
Annual Base Salary
$272,805 inclusive of superannuation for the year ended 30 June 2011
General Counsel and
Company Secretary
Performance cash bonus
$56,498 inclusive of superannuation was paid for the year ended 30 June 2011
Options
200,000 options granted in 2007 were not exercised and lapsed on the Expiry Date (28
February 2011). 225,000 options were granted in 2008. 443,000 options were granted
in 2011. See note 31 for further details.
K. Lynam
Annual Base Salary
$166,755 inclusive of superannuation for the year ended 30 June 2011
Performance cash bonus
$34,534 inclusive of superannuation was paid for the year ended 30 June 2011
General Manager –
Human Resources and
Corporate Services
Options
125,000 options granted in 2007 were not exercised and lapsed on the Expiry Date (28
February 2011). 150,000 options were granted in 2008. 443,000 options were granted
in 2011. See note 31 for further details.
$86,160 inclusive of superannuation for the year ended 30 June 2011. Mr Voysey left the
company on 16 July 2010.
M. Voysey
Annual Base Salary
Chief Marketing Officer
(left the Company on
31 October 2010)
Performance cash bonus
Nil
Options
Nil options granted
D Share based compensation (audited)
Options
Options have 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 31 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 Limited.
Details of options over ordinary shares in Collection House Limited provided as remuneration to each director of Collection House Limited and Group
Executives are set out below. Further information on the options is set out in note 31 of the financial statements.
Name
1. M. Thomas
2. A. Ralston
3. M. Watkins
4. K. Lynam
Number of options granted
during the year
Number of options vested
during the year
2011
1,479,000
591,000
443,000
443,000
2010
-
-
-
-
2011
150,000
120,000
135,000
90,000
2010
-
-
-
-
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 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.
36
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Shares provided on exercise of remuneration options
Details of ordinary shares in Collection House Limited provided as a result of the exercise of remuneration options to each director of Collection House
Limited and Group Executives are set out below.
Date of exercise
of options
Number of ordinary shares
issued on exercise of options
during the year
Amounts paid per ordinary share
Name
Directors of Collection House Limited
Group Executives
2011
2010
2011
2010
-
-
-
-
-
-
-
-
-
-
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 Group 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 remuneration policy and Group’s 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)
2007
$3.81
2 cents
franked
$1.03
$0.75
2008
$12.39
4.7 cents
franked
$0.78
$0.46
2009
$7.85
4.9 cents
franked
$0.465
$0.49
2010
$8.92
5.8 cents
franked
$0.47
$0.75
2011
$10.11
6.2 cents
franked
$0.76
$0.65
3.9 cents
12.7 cents
8.1 cents
9.2 cents
10.4 cents
Details of remuneration: cash bonuses and options
For each cash bonus and grant of options included in the tables on page 33, 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 on page 37.
No part of the bonuses is payable in future years. No options will vest unless the vesting conditions are met (see note 31 for details), hence the minimum
value of the options yet to vest is nil. The maximum value of the options yet to be expensed has been determined as the amount of the grant date fair
value of the options that is yet to be expensed.
C oll ection Hous e Limi ted 201 1 Annual Report
37
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Cash bonus
2011
Options
Forfeited
%
Year
granted
Vested
%
Forfeited
%
Lapsed
$
Financial years in which
options may vest (subject
to certain qualifying
hurdles). Refer to note 31
Minimum
total value of
options yet to
be expensed
Maximum
total value of
options yet to
be expensed
Name
1. M.Thomas
Paid
100
2. A. Ralston
95
3. M. Watkins
95
4. K. Lynam
95
-
5
5
5
8.3
91.7
5. T. Aveling
(retired on
31 July 2010)
2007
2008
2011
2007
2008
2011
2007
2008
2011
2007
2008
2011
2007
2008
-
60%
-
-
60%
-
-
60%
-
-
60%
-
-
60%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
-
-
100%
-
-
100%
-
-
100%
-
-
100%
-
2009 - 2011
2011 - 2013
2012 - 2013
2009 - 2011
2011 - 2013
2012 - 2013
2009 - 2011
2011 - 2013
2012 - 2013
2009 - 2011
2011 - 2013
2012 - 2013
2009 - 2011
2011 - 2013
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
200,001
0
0
79,919
0
0
59,906
0
0
59,906
0
0
Loans to directors and executives
Information on loans to Directors and Group Executives, including amounts, interest rates and repayment terms are set out in note 24 to the
financial statements.
Shares under option
Long term incentives are provided to certain eligible employees via the Executive Share Option Plan, see note 31 for further information. Unissued ordinary
shares of Collection House Limited 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
No of shares
issued
2011
31 October 2008
2,000,000
18 July 2008
1,437,500
1 March 2011
2,956,000
$0.4927
$0.4927
$0.6938
nil
nil
nil
Expiry date
25 June 2013
25 June 2013
20 December 2013
F.
ADDITIONAL INFORMATION (UNAUDITED)
Insurance of officers
During the financial year, the Group paid a premium of $30,766 to insure the directors and secretaries of the Group 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 Group. It is not possible to apportion the premium between
amounts relating to the insurance against legal costs and those relating to other liabilities.
38
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ REPORT for the year ended 30 june 2011
Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene
in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group 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 Group’s auditors have performed no other non-audit services in addition to their assurance duties. All other assurance services are subject to the
corporate governance procedures adopted by the Group.
Details of the amounts paid to the auditors of the Group, Lawler Hacketts Audit, are set out below.
DESCRIPTION
1. Audit services, Lawler Hacketts Audit
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, Lawler Hacketts Audit
Total remuneration for audit-related services
TOTAL REMUNERATION
Auditor’s independence declaration
Consolidated
30 June 2011
$
30 June 2010
$
148,000
137,000
148,000
82,500
82,500
230,500
137,000
82,000
82,000
219,000
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 39.
Rounding of amounts
The Group 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
Lawler Hacketts Audit 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
John Pearce
Chairman
25 August 2011
C oll ection Hous e Limi ted 201 1 Annual Report
39
40
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
C oll ection Hous e Limi ted 201 1 Annual Report
4 1
{ FINANCIAL STATEMENTS CONTENTS
Income
42 Income Statement
43 Statement of Comprehensive
44 Balance Sheet
45 Statement of Changes
in Equity
Statements
46 Cash Flow Statement
47 Notes to the Financial
104 Directors’ Declaration
105 Independent Auditor’s Report
building relationships to last
2011 42
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ INCOME STATEMENT for the year ended 30 june 2011
Commission
Other revenue
Collections of purchased debt ledgers
Change in Fair Value of purchased debt ledgers
Net gain on financial assets - purchased debt ledgers
Revenue from continuing operations
Depreciation and amortisation expense
Other expenses
Employee expenses
Direct collection costs
Operating lease rental expense
Finance costs
Profit before income tax
Income tax expense
Profit from continuing operations
Profit for the year
Profit is attributable to:
Owners of Collection House Limited
Earnings per share for profit from continuing operations attributable to the
ordinary equity holders of the company:
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share
Diluted earnings per share
The above income statement should be read in conjunction with the accompanying notes.
Consolidated
30 June 2011
$’000
30 June 2010
$’000
Notes
31,431
378
78,042
(33,073)
44,969
76,778
(2,901)
(4,632)
(34,547)
(11,017)
(3,453)
(5,645)
14,583
(4,466)
10,117
10,117
10,117
10,117
33,919
339
69,467
(29,879)
39,588
73,846
(2,618)
(4,551)
(34,873)
(11,930)
(3,280)
(4,772)
11,822
(2,899)
8,923
8,923
8,923
8,923
Cents
Cents
10.4
10.3
9.2
9.1
Cents
Cents
10.4
10.3
9.2
9.1
5
5
6
30
30
30
30
C oll ection Hous e Limi ted 201 1 Annual Report
43
{ STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 june 2011
Profit for the year
Other comprehensive income
Consolidated
30 June 2011
$’000
30 June 2010
$’000
Notes
10,117
8,923
Exchange differences on translation of foreign operations
22(a)
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Collection House Limited
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
(409)
9,708
9,708
9,708
(50)
8,873
8,873
8,873
44
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ BALANCE SHEET as at 30 june 2011
ASSETS
Current assets
Cash and cash equivalents
Receivables
Other financial assets at fair value through profit or loss
Other current assets
Total current assets
Non-current assets
Other financial assets at fair value through profit or loss
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
The above balance sheet should be read in conjunction with the accompanying notes.
Consolidated
30 June 2011
$’000
30 June 2010
$’000
Notes
7
8
9
9
10
12
13
14
15
16
17
19
18
21
22(a)
22(b)
283
6,692
44,598
17
51,590
459
5,459
35,234
16
41,168
117,439
111,251
6,221
22,813
414
146,887
198,477
6,948
2,744
5,772
2,072
17,536
73,900
360
10,817
85,077
102,613
95,864
67,256
106
28,502
95,864
95,864
6,572
21,786
177
139,786
180,954
4,088
601
842
2,095
7,626
66,900
337
14,219
81,456
89,082
91,872
67,256
294
24,322
91,872
91,872
C oll ection Hous e Limi ted 201 1 Annual Report
45
{ STATEMENT OF CHANGES IN EQUITY for the year ended 30 june 2011
Attributable to members of
Collection House Limited
Consolidated
Balance at 1 July 2009
Opening balance adjustment
Restated total equity at the beginning of the financial year
Profit for the year
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends provided for or paid
Employee share options - value of employee services
Total transactions with owners
Balance at 30 June 2010
Balance at 1 July 2010
Opening balance adjustment
Profit for the year
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends provided for or paid
Employee share options - value of employee services
Total transactions with owners
Balance at 30 June 2011
Contributed
equity
$’000
Reserves
$’000
Notes
Retained
earnings
$’000
Total
equity
$’000
20,533
87,960
121
20,654
8,923
-
8,923
121
88,081
8,923
(50)
8,873
(5,255)
(5,255)
-
(5,255)
24,322
24,322
-
173
(5,082)
91,872
91,872
-
10,117
10,117
171
-
171
-
(50)
(50)
-
173
173
294
294
-
-
(409)
(409)
-
10,117
(409)
9,708
-
221
221
106
(5,937)
(5,937)
-
(5,937)
28,502
221
(5,716)
95,864
22
22
22
22
22
22
67,256
-
67,256
-
-
-
-
-
-
67,256
67,256
-
-
-
-
-
-
-
67,256
The above statement of changes in equity should be read in conjunction with the accompanying notes.
46
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ CASH FLOW STATEMENT for the year ended 30 june 2011
Cash flows from operating activities
Receipts from customers and debtors (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest paid
Income taxes refunded / (paid)
Net cash (outflow) inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant & equipment
Payments for property, plant and equipment
Payments for leasehold improvements
Payments for other financial assets at fair value through profit or loss
Payments for intangible assets
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to company’s shareholders
Net cash inflow (outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
The above cash flow statement should be read in conjunction with the accompanying notes.
Consolidated
30 June 2011
$’000
30 June 2010
$’000
Notes
114,486
(58,009)
56,477
(5,607)
(2,938)
47,932
1
(976)
(5)
(48,626)
(1,695)
(51,301)
7,008
-
(5,937)
1,071
(2,298)
(142)
(16)
(2,456)
109,947
(61,272)
48,675
(4,771)
(4,151)
39,753
-
(862)
(31)
(29,448)
(2,083)
(32,424)
-
(2,800)
(5,255)
(8,055)
(726)
584
-
(142)
33
10
17
23
7
C oll ection Hous e Limi ted 201 1 Annual Report
47
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Collection
House Limited and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have 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.
(i)
Compliance with IFRS
The consolidated financial statements of the Collection House Limited group also comply with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
(ii)
Early adoption of standards
The Group has elected to apply the following pronouncements to the annual reporting period beginning 1 July 2010:
AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from
1 January 2013).
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.
(iii)
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets,
financial assets and liabilities (including derivative instruments) at fair value through profit or loss, and certain classes of property, plant and equipment.
(iv)
Critical accounting estimates
The preparation of financial statements 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 2011 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 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 acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(h)).
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.
There are currently no minority interests in the group.
48
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the
Board of Directors.
(d) Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the Group’s operations are measured using the currency of the primary economic environment
in which it operates (‘the functional currency’). The financial statements are presented in Australian dollars, which is the Group’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 profit or loss, 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.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(iii)
Group companies
The results and financial position of foreign operations (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 and statement of comprehensive income 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 in other comprehensive income.
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 recognised in other comprehensive income. When a foreign operation is sold or any
borrowings forming part of the net investment are repaid, a proportionate share of such exchange difference is reclassified to profit or loss, as part of the
gain or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
C oll ection Hous e Limi ted 201 1 Annual Report
49
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances,
rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the
Group 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)
Gains and losses on financial assets
Net gains on financial assets are disclosed in the income statement as collections of Purchased Debt ledgers net of any change in fair value of the ledgers.
The company classifies purchased debt ledgers as financial assets at fair value through profit or loss.
The net gain on these assets is disclosed as revenue in the income statement.
Net gains or losses on financial assets are recognised as they accrue.
(ii)
Rendering of services
Revenue from rendering services is recognised to the extent that it is probable that the revenue benefits will flow to the Group and the revenue can be
reliably measured.
(iii)
Sale of non-current assets
The net gain or loss on disposal is 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.
(iv)
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.
50
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(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.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries
where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
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, deferred tax liabilities are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also 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 end of the reporting period 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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Collection House Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence,
these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Taxation of Financial Arrangements legislation
The Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 (TOFA legislation) was passed in 2009. The TOFA legislation provides a
framework for the taxation of financial arrangements, potentially providing closer alignment between tax and accounting requirements. The regime also
includes comprehensive tax hedging rules that would allow the tax recognition of gains and losses on many hedging instruments to be matched to the
accounting recognition of gains and losses of the underlying hedged items. At 30 June 2011, the company does not have any hedged instruments and
has never used them up to this date.
TOFA is mandatory for the Company for the tax year beginning 1 July 2010. There are specific transitional provisions in relation to the taxation of existing
financial arrangements outstanding at the transition date (i.e. there is a choice to bring pre-commencement financial arrangements into the new regime
subject to a balancing adjustment being calculated on transition to be returned over the next succeeding four tax years). Based on analysis conducted
by the Company, the Company has elected to bring pre-commencement financial arrangements into the TOFA regime.
Further, the Company has performed a review in relation to whether to adopt certain tax-timing methodologies under the TOFA regime. As a result of
this review, the Company has elected to adopt the reliance on financial reports methodology. This election, together with the transitional election, has the
effect of bringing to account deferred tax balances on financial arrangements, that existed at 30 June 2010, over a four year period. Further, there will
be a closer alignment between tax and accounting recognition and measure of financial arrangements and consequently less deferred taxes associated
with these financial arrangements in future years.
(g) Leases
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 27). Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line
basis over the period of the lease.
C oll ection Hous e Limi ted 201 1 Annual Report
51
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and
the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent
consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at
their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interests in the acquiree either
at fair value or at the non-controlling interests’s proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition-date fair value of any previous
equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is
recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date
of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
(i)
Impairment of assets
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
For the purpose of presentation in the cash flow statement, 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 in the consolidated balance sheet.
(k) Trade receivables
Trade receivables are recognised initially at fair value less provision for impairment. Trade receviables are due for settlement no more than 30 days from
the date of recognition, and are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying
amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators
that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted
if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance
had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are credited against other expenses in profit or loss.
52
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(l) Other financial assets
Classification
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss and loans and receivables.
The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets
at initial recognition and re-evaluates this designation at each reporting date.
(i)
Financial assets at fair value through profit or loss - Purchased debt ledgers (PDL’s)
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 the carrying value of a ledger is greater than the present value of its expected future cashflows the carrying amount is reduced to its recoverable
amount (fair value), being the anticipated future cash flows discounted to present value.
Net gains on financial assets are disclosed in the income statement as collections of purchased debt ledgers net of any change in fair value of the ledgers.
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 and held to maturity investments are subsequently carried at amortised cost using the effective interest method.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified
to profit or loss as gains and losses from investment securities.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through
profit or loss are expensed in profit or loss.
Details on how the fair value of financial instruments is determined are disclosed in note 2.
(m) 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 Group uses estimated
discounted cash flows to determine fair value.
Refer to Note 2 for further details of fair value determination.
C oll ection Hous e Limi ted 201 1 Annual Report
53
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(n) 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.
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 Group, 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(r).
Expenditure, including that on internally generated assets, is only recognised as an asset when the Group 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
- Leased plant and equipment
4-12 years
3-5 years
Term of Lease + expected renewal
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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 profit or loss. 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.
54
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(o)
Intangible assets
(i)
Goodwill
Goodwill is measured as described in note 1(h). 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 but it 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. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments
(note 4).
(ii)
IT development and software
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits
through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials
and service and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over
periods generally ranging from 2 to 12 years.
IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical
feasibility and where the Group has an intention and ability to use the asset.
(iii) Other intangible assets
Licences and intellectual property are considered to have an definite useful life and are carried at cost less accumulated amortisation. All costs associated
with the maintenance and protection of these assets are expensed in the period consumed.
(p) 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. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months from the reporting date.
(q) 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 consolidated 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 profit or loss as 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 period.
C oll ection Hous e Limi ted 201 1 Annual Report
55
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(r) 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.
(s) Provisions
Provisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable 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.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of
the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(t) Employee benefits
(i)
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave expected to be settled within 12 months after the end of the period in
which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All
other short-term employee benefit obligations are presented as payables.
(ii)
Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees
render the related service 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 end of the reporting period. 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 end of the reporting
period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii)
Superannuation Plans
The Company and other controlled entities make statutory contibutions to several superannuation funds in accordance with the directions of its employees.
Contributions are expensed in the period to which they relate.
56
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(t) Employee benefits (continued)
(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 31.
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 to providing termination benefits as a result of an offer made
to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
(u) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the acquisition as part of the
purchase consideration.
If the entity reacquires its own equity instruments, for example as the result of a share buy-back, those instruments are deducted from equity and the
associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental
costs (net of income taxes) is recognised directly in equity.
(v) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the
end of the reporting period but not distributed at the end of the reporting period.
C oll ection Hous e Limi ted 201 1 Annual Report
57
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(w) Earnings per share
(i)
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners 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 21).
(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 consolidated 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 statements. Amounts in the financial statements 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
In the current year, the Group has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board that are relevant to its operations and effective for the current annual reporting period. The adoption of these new and revised Standards
and Interpretations did not have any material financial impact on the amounts recognised in the financial statements of the Group, however they may have
impacted the disclosures presented in the financial statements.
58
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(z) New accounting standards and interpretations (continued)
At the date of authorisation of the financial report, the following relevant Standards and Interpretations were issued but not yet effective:
(i)
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective for annual reporting
periods beginning on or after 1 January 2011)
(ii) AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments and AASB 2009-13 Amendments to Australian Accounting
Standards arising from Interpretation 19 (effective 1 July 2010)
(iii) AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding Requirement (effective 1 January 2011)
(iv) AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are
designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB
139 Financial Instruments: Recognition and Measurement and have not been changed. The Group has not yet decided when to adopt the amendments
to AASB 9.
(v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets (effective for annual reporting periods
beginning on or after 1 July 2011)
(vi) AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012)
(vii) AASB 2010-9 Amendments to Australian Accounting Standards - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
(effective from 1 July 2011) and AASB 2010-10 Further Amendments to Australian Accounting Standards - Removal of Fixed Dates for First-time
Adopters (effective from 1 July 2013)
(viii) IFRS 10 Consolidated Financial Statements (effective for annual reporting periods beginning on or after 1 January 2013)
(ix) IFRS 11 Joint Arrangements (effective for annual reporting periods beginning on or after 1 January 2013)
(x) IFRS 12 Disclosure of Interests in Other Entities (effective for annual reporting periods beginning on or after 1 January 2013)
(xi) IFRS 13 Fair Value Measurement (effective for annual reporting periods beginning on or after 1 January 2013)
The Group will apply the amendment from the date of mandatory adoption in Australia. It is currently evaluating the impact of the new standard.
Other than as noted above, the directors anticipate that the adoption of these standards and Interpretations in future period will have no material impact
on the financial statements of the Group.
(aa) Parent Entity financial information
The financial information for the Parent Entity, Collection House Limited, disclosed in note 34 has been prepared on the same basis as the consolidated
financial statements, except as set out below.
(i)
Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Collection House Limited.
Dividends received from associates are recognised in the Parent Entity’s profit or loss, rather than being deducted from the carrying amount of these
investments.
C oll ection Hous e Limi ted 201 1 Annual Report
59
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
1 Summary of significant accounting policies (continued)
(aa) Parent Entity financial information (continued)
(ii)
Tax consolidation legislation
Collection House Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Collection House Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Collection House Limited also recognises the current tax liabilities (or assets) and the deferred
tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate Collection House Limited for
any current tax payable assumed and are compensated by Collection House Limited for any current tax receivable and deferred tax assets relating to
unused tax losses or unused tax credits that are transferred to Collection House Limited under the tax consolidation legislation. The funding amounts are
determined by reference to the amounts recognised in the wholly owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as
soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations
to pay tax instalments.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable
to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to
(or distribution from) wholly owned tax consolidated entities.
(iii)
Financial guarantees
The parent entity has provided no financial guarantees in relation to loans and payables of subsidiaries.
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.
60
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(a) Market risk
(i)
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the NZ dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s
functional currency.
Sensitivity
At 30 June 2011, 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 group is not exposed to price risk, as there are no subsidiary company investments in the consolidated results.
(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’s main trade interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group currently has no fixed rate borrowings. During 2011
and 2010, the Group borrowings at variable rate were denominated in Australian Dollars only.
The Group 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 group and market expectations of interest rate levels for the
coming year.
Interest rate hedges and swaps are an available tool for managing interest rate risk within the group. If it is determined that it would be profitable and /
or advantageous to the group, these tools will be used. Interest rate hedges or swaps have not been used by the Group during the year ended 30 June
2011 (2010: $Nil).
As at the reporting date, the Group had the following variable rate borrowings outstanding:
Consolidated
Bank overdrafts and bank loans
Net exposure to cash flow interest rate risk
30 June 2011
30 June 2010
Weighted
average
interest rate
%
5.8%
Balance
$’000
76,639
76,639
Weighted
average
interest rate
%
4.8%
Balance
$’000
67,501
67,501
C oll ection Hous e Limi ted 201 1 Annual Report
6 1
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(a) Market risk (continued)
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 2011, 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 $134,000 lower/higher (2010 - change of 25 bps: $118,000 lower/higher), mainly as a result of higher/lower interest
expense from net borrowings. Other components of equity would have been $134,000 lower/higher (2010 - $118,000 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.
(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 2011
Financial liabilities
Borrowings
Total increase/
(decrease) in financial assets
Total increase/ (decrease)
Consolidated
30 June 2010
Financial liabilities
Borrowings
Total increase/(decrease) in financial assets
Total increase/ (decrease)
Carrying
amount
$’000
-
76,639
Carrying
amount
$’000
-
67,501
Interest rate risk
‑25 bps
+25 bps
Equity
$’000
-
134
134
134
Profit
$’000
-
(134)
(134)
Equity
$’000
-
(134)
(134)
(134)
(134)
Interest rate risk
‑25 bps
+25 bps
Equity
$’000
-
118
118
118
Profit
$’000
-
(118)
(118)
(118)
Equity
$’000
-
(118)
(118)
(118)
Profit
$’000
-
134
134
134
Profit
$’000
-
118
118
118
62
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(b) Credit risk
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 has 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.
(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 on the basis of expected cash flows. This is generally carried out
at local level in the operating companies of the Group in accordance with practice and limits set by the Group. These limits vary by location to take into
account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in
major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external
regulatory requirements and maintaining debt financing plans.
Financing arrangements
The Group had access to a $85,000,000 Multiple Option Facility throughout the year (2010: $75,000,000 with a temporary extension to $85,000,000
throughout the year). The facility, which was replaced in June 2011, was 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 was replaced with a $100,000,000 Multiple Option Facility which expires
on 1 July 2013. The new facility is subject to the same undertakings as the old facility was, and is subject to review at the end of its 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 $100,000,000 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 17.
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.
C oll ection Hous e Limi ted 201 1 Annual Report
63
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(c) Liquidity risk (continued)
Contractual maturities
of financial liabilities
At 30 June 2011
Less than
6 months
$’000
6 - 12
months
$’000
Between
1 and 2 years
$’000
Between 2
and 5 years
$’000
Over 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
At 30 June 2010
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
6,238
2,638
8,876
-
-
-
-
73,900
73,900
-
-
-
-
-
-
6,238
76,538
82,776
-
-
-
Less than
6 months
$’000
6 - 12
months
$’000
Between
1 and 2 years
$’000
Between 2
and 5 years
$’000
Over 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
4,088
479
4,567
-
-
-
-
-
-
-
66,900
66,900
-
-
-
4,088
67,379
71,467
4,088
67,379
71,467
(d) Fair value measurements
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) 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.
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.
64
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(d) Fair value measurements (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 carrying value in line with 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.
AASB7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from
prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The purchased debt ledger assets of the group are classified as Level 3 in the fair value measurement hierarchy. Details of the group’s assets and liabilities
measured and recognised at fair value are set out in Note 9.
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted
market price used for financial assets of this nature is the current bid price. These instruments are included in level 1. The Group has no level 1
financial instruments.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques
maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required
to fair value an instrument are observable, the instrument is included in level 2. The Group has no level 2 financial instruments.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for purchased debt
ledgers which comprise all of the financial instruments held by the Group.
The changes in level 3 instruments for the year ended 30 June 2011 are set out in note 9.
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 recent Global Financial crisis, and recent experience, the reasonably likely range of the sensitivity analysis has stabilised from the prior
year and has been set at 3.34% (2010: 4.08%).
Other than as set out in the following table, there are no other reasonably possible alternative assumptions that would have a material impact on fair value.
C oll ection Hous e Limi ted 201 1 Annual Report
65
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
2 Financial risk management (continued)
(d) Fair value measurements (continued)
Consolidated
30 June 2011
Financial assets
Financial assets at FVTPL
Total increase/(decrease) in financial assets
Total increase/ (decrease)
Consolidated
30 June 2010
Financial assets
Financial assets at FVTPL
Total increase/(decrease) in financial assets
Total increase/ (decrease)
(e) Cash flow and fair value interest rate risk
Carrying
amount
$’000
162,037
Carrying
amount
$’000
146,485
Recoverability
‑3.34%
+3.34%
Equity
$’000
Profit
$’000
Equity
$’000
(747)
(747)
(747)
747
747
747
747
747
747
Recoverability
‑4.08%
+4.08%
Equity
$’000
Profit
$’000
Equity
$’000
(911)
(911)
(911)
911
911
911
911
911
911
Profit
$’000
(747)
(747)
(747)
Profit
$’000
(911)
(911)
(911)
The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk.
Group finance facilities are a combination of overdraft and short term commercial bill facilities, all of which are on a variable interest rate basis. In the
current interest rate environment, this approach maximises available cash with minimal exposure to interest rate movements. All aspects of the financing
arrangements, including interest rate structuring can be reviewed as required during the life of the facility. The Board of Directors has authorised the use
of interest rate swaps as a tool to manage interest rate risk. At 30 June 2011, the group had not entered into any such arrangements.
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 Group 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
Each six months the Group tests whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(o).
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 12 for details of these assumptions and the potential impact of changes to the assumptions.
66
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
3 Critical accounting estimates and judgements (continued)
(a) Critical accounting estimates and assumptions (continued)
(ii)
Estimated impairment of non-financial assets and intangible assets other than goodwill
Each six months the Group tests 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(m). The calculation
of impairment requires the use of assumptions.
(b) Critical judgements in applying the entity’s accounting policies
(i)
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
(ii)
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(n) useful lives are reviewed regularly throughout the year for appropriateness.
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: Commission Collections, and Account Asset Management. The Group has identified its operating segments based on the internal
reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation
of resources.
The consolidated entity is organised on a global basis into the following divisions by product and service type.
Commission 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;
C oll ection Hous e Limi ted 201 1 Annual Report
67
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
4 Segment information (continued)
(b) Segment information provided to the Board
Commission
Collection
Services
$’000
Account
Asset
Management
$’000
Intersegment
eliminations/
unallocated
$’000
Total
continuing
operations
$’000
Discontinued
operations
$’000
Consolidated
$’000
31,327
846
32,173
-
-
-
32,173
-
-
-
78,042
(33,073)
44,969
44,969
-
-
-
-
-
-
-
-
31,327
846
32,173
78,042
(33,073)
44,969
77,142
(364)
76,778
24,278
(5,645)
(4,050)
14,583
(4,466)
10,117
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,327
846
32,173
78,042
(33,073)
44,969
77,142
(364)
76,778
24,278
(5,645)
(4,050)
14,583
(4,466)
10,117
Segment result (notes (ii))
5,393
18,885
2011
Segment revenue
Sales to external customers
Intersegment sales
Total sales revenue
Collections of Purchased Debt Ledgers
Fair Value movement on Purchased Debt ledgers
Net gain on financial assets
Total segment revenue
Intersegment elimination
Consolidated revenue
Segment result
Interest expense and borrowing costs
Unallocated revenue less unallocated expenses
Profit before income tax
Income tax expense
Profit for the year
Segment assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Other segment information
Acquisitions of property, plant and equipment,
intangibles and other non-current segment assets
Total acquisitions
133,290
163,640
(98,237)
198,693
(216)
198,477
10,878
100,789
(102,287)
-
198,693
9,380
93,233
102,613
2,695
49,277
-
51,972
-
-
(216)
198,477
-
-
-
-
-
-
-
-
9,380
93,233
102,613
51,972
51,972
1,950
1,950
33,670
Depreciation and amortisation expense
1,281
421
Total depreciation and amortisation
Other non-cash expenses
131
33,250
248
289
51,972
1,950
1,950
33,670
68
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
4 Segment information (continued)
(b) Segment information provided to the Board (continued)
Commission
Collection
Services
$’000
Account
Asset
Management
$’000
Intersegment
eliminations/
unallocated
$’000
Total
continuing
operations
$’000
Discontinued
operations
$’000
Consolidated
$’000
2010
Segment revenue
Sales to external customers
Intersegment sales
Total sales revenue
Collections of Purchased Debt Ledgers
Fair Value movement on Purchased Debt ledgers
Net gain on financial assets
33,432
848
34,280
-
-
-
Change in Fair Value of Purchased Debt Ledgers
34,280
-
-
-
69,467
(29,879)
39,588
39,588
5,873
15,579
Intersegment elimination
Consolidated revenue
Segment result
Segment result (notes (ii))
Interest expense and borrowing costs
Unallocated revenue less unallocated expenses
Profit before income tax
Income tax expense
Profit for the year
Segment assets and liabilities
Segment assets
Intersegment elimination
Unallocated assets
Total assets
Segment liabilities
Intersegment elimination
Unallocated liabilities
Total liabilities
Acquisitions of property, plant and equipment,
intangibles and other non-current segment assets
Total acquisitions
2,988
30,142
-
Depreciation and amortisation expense
418
418
1,150
Total depreciation and amortisation
Impairment of trade receivables (note 8)
Other non-cash expenses
Changes to the segment note and comparatives
-
(217)
-
30,157
-
114
-
-
-
-
-
-
-
-
33,432
848
34,280
69,467
(29,879)
39,588
73,868
(22)
73,846
21,452
(4,771)
(4,859)
11,822
(2,899)
8,923
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,432
848
34,280
69,467
(29,879)
39,588
73,868
(22)
73,846
21,452
(4,771)
(4,859)
11,822
(2,899)
8,923
-
-
181,168
7,121
-
81,961
89,082
33,130
33,130
1,986
1,986
-
30,054
-
-
-
-
(214)
180,954
-
-
-
-
-
-
-
-
-
-
7,121
-
81,961
89,082
33,130
33,130
1,986
1,986
-
30,054
134,654
146,920
(100,406)
181,168
(214)
180,954
12,779
98,904
(104,562)
Due to the changing nature of the Collection House businesses, the Group has revised the segment note to better reflect the way in which the two
segments of the business operate and the relationship between them. This change, which consistent with the internal reporting to the Chief Operating
Decision Maker, is reflected in the 30 June 2011 segment note and the 30 June 2010 comparative disclosure in the segment note has also been
restated. The same adjustments were reflected in the half year report.
C oll ection Hous e Limi ted 201 1 Annual Report
69
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
4 Segment information (continued)
(c) Geographical information
The consolidated entity operates in two main geographical areas, Australia and New Zealand.
Segment revenues from sales
to external customers
Segment assets
Acquisitions of property, plant
and equipment, intangibles
and other non-current
segment assets
30 June 2011
$’000
30 June 2010
$’000
30 June 2011
$’000
30 June 2010
$’000
30 June 2011
$’000
30 June 2010
$’000
71,283
5,012
76,295
66,067
6,953
73,020
187,278
11,199
198,477
198,477
169,377
11,577
180,954
180,954
51,449
523
51,972
33,093
37
33,130
Australia
New Zealand
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 8
Operating Segments.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the
segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, inventories,
property, plant and equipment and goodwill and other intangible assets, net of related provisions. While most of these assets can be directly attributable
to individual segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment
liabilities consist primarily of trade and other creditors, employee benefits and interest bearing liabilities. Segment assets and liabilities do not include
income taxes.
Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest bearing loans, borrowing costs and corporate assets
and expenses.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.
(ii)
Segment margins
Margin on sales revenue
17
17
42
39
Commission Collection Services
Account Asset Management
30 June 2011
%
30 June 2010
%
30 June 2011
%
30 June 2010
%
(d) Other segment information
Sales between segments are carried out at arms length and are eliminated on consolidation. The revenue from external parties reported to the
Chief Operating Decision Maker is consistent with that in the income statement.
70
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
5 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements, plant and equipment
Total depreciation
Amortisation
Legal and court cost capitalised
Total amortisation
Total depreciation and amortisation
Finance expenses
Interest and finance charges paid/payable
Amount capitalised (a)
Finance costs expensed
Fair Value losses on other financial assets
Rental expense relating to operating leases
Minimum lease payments
Total rental expense relating to operating leases
(a) Capitalised borrowing costs
Consolidated
30 June 2011
$’000
30 June 2010
$’000
1,950
-
1,950
951
951
2,901
5,786
(141)
5,645
33,100
33,100
3,450
3,450
1,986
-
1,986
632
632
2,618
4,817
(45)
4,772
29,879
29,879
3,272
3,272
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s
outstanding borrowings during the year, in this case 7.02% (2010 - 7.45%).
6
Income tax expense
Income tax expense
(a)
Income tax expense - Profit from continuing operations
Income tax expense is attributable to:
Current tax
Deferred tax
Under (over) provided in previous years
Deferred income tax (revenue) expense included in income tax expense comprises:
Decrease (increase) in deferred tax assets (note 11)
(Decrease) increase in deferred tax liabilities (note 18)
Consolidated
30 June 2011
$’000
30 June 2010
$’000
4,466
2,899
7,995
(3,405)
(124)
4,466
224
(3,629)
(3,405)
4,253
(495)
(859)
2,899
376
(871)
(495)
C oll ection Hous e Limi ted 201 1 Annual Report
71
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
6
Income tax expense (continued)
(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% (2010 - 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-deductible expenses
Adjustments for current tax of prior periods
Income tax expense
7 Current assets - Cash and cash equivalents
Cash at bank and in hand
Consolidated
30 June 2011
$’000
30 June 2010
$’000
14,583
-
4,375
99
4,474
(8)
(8)
4,466
11,822
-
3,547
84
3,631
(732)
(732)
2,899
Consolidated
2011
$’000
283
283
2010
$’000
459
459
(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 cash flow statement as follows:
Bank overdraft right of set-off
Balances as above
Bank overdrafts (note 15)
Balances per cash flow statement
(b) Risk exposure
Consolidated
2011
$’000
283
(2,739)
(2,456)
2010
$’000
459
(601)
(142)
The Group’s and the parent entity’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the reporting date is
the carrying amount of each class of cash and cash equivalents mentioned above.
(c) 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
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
8 Current assets - Trade and other receivables
Net trade receivables
Trade receivables
Provision for impairment of receivables ((a))
Other receivables((c))
Prepaid expenses
(a)
Impaired trade receivables
Consolidated
2011
$’000
2,939
(172)
2,767
2,793
1,132
6,692
2010
$’000
1,833
(319)
1,514
2,603
1,342
5,459
As at 30 June 2011 current trade receivables of the Group with a nominal value of $269,000 (2010 - $323,000) were impaired. The amount of the
provision was $172,000 (2010 - $319,000). 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
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
Bad debts recovered
Unused amount reversed
Consolidated
2011
$’000
-
269
269
2010
$’000
-
323
323
Consolidated
2011
$’000
319
46
(92)
-
(101)
172
2010
$’000
318
13
(15)
45
(42)
319
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.
C oll ection Hous e Limi ted 201 1 Annual Report
73
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
8 Current assets - Trade and other receivables (continued)
(b) Past due but not impaired
As of 30 June 2011, trade receivables of the Group of $1,299,000 (2010 - $620,000) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default.
The past due trade debtors relate to regular customers of the group with no history of default. The majority of the 2011 past due amount was collected
within 30 days of the end of the financial year.
The ageing analysis of these trade receivables is as follows:
Consolidated
2011
$’000
860
-
860
2010
$’000
218
-
218
Up to 3 months
3 to 6 months
(c) Other receivables
These amounts relate to accrued revenue and rental bonds.
(d) Foreign exchange and interest rate risk
Information about the Company’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 2.
(e) 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
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
9 Other financial assets at fair value through profit or loss
The following table presents the group’s assets which are measured and recognised at fair value at 30 June 2011. The assets below are financial
instruments which are classified as level 3 under the hierarchy set out in AASB 7 - Financial Instruments: Disclosures. Further details are set out in Note 2.
Current and Non-Current
At beginning of year
Additions
Collections disclosed in profit
Fair value gain / (loss) disclosed in profit
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
2011
$’000
146,485
48,625
(75,268)
42,195
162,037
2010
$’000
146,916
29,448
(67,137)
37,258
146,485
Consolidated
2011
$’000
162,037
162,037
2010
$’000
146,485
146,485
Consolidated
2011
$’000
44,598
117,439
162,037
2010
$’000
35,234
111,251
146,485
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 exposure to credit risk, foreign exchange and price risk are provided in note 2.
C oll ection Hous e Limi ted 201 1 Annual Report
75
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
10 Non-current assets - Property, plant and equipment
At 1 July 2009
Cost or fair value
Accumulated depreciation
Net book amount
Year 30 June 2010
Opening net book amount
Additions
Disposals
Impairment charge recognised in profit and loss
Depreciation charge
Transfers
Closing net book amount
At 30 June 2010
Cost or fair value
Accumulated depreciation
Net book amount
Year 30 June 2011
Opening net book amount
Additions
Disposals
Depreciation charge
Transfers
Closing net book amount
At 30 June 2011
Cost or fair value
Accumulated depreciation
Net book amount
Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
Leased plant
& equipment
$’000
Work-in-
progress
$’000
7,399
(3,045)
4,354
4,354
876
(81)
-
(943)
-
4,206
7,902
(3,696)
4,206
9
(2)
7
7
-
(5)
-
(2)
-
-
-
-
-
2,815
(284)
2,531
2,531
35
(3)
-
(266)
-
2,297
2,844
(547)
2,297
2
(2)
-
2
-
(2)
-
-
-
-
2
(2)
-
25
-
25
25
618
-
-
-
(574)
69
69
-
69
Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
Leased plant
& equipment
$’000
Work-in-
progress
$’000
4,206
231
(46)
(977)
29
3,443
7,823
(4,380)
3,443
-
-
-
-
-
-
-
-
-
2,297
5
(2)
(309)
692
2,683
3,534
(851)
2,683
-
-
-
-
-
-
2
(2)
-
69
747
-
-
(721)
95
95
-
95
Total
$’000
10,250
(3,333)
6,917
6,919
1,529
(91)
-
(1,211)
(574)
6,572
10,817
(4,245)
6,572
Total
$’000
6,572
983
(48)
(1,286)
-
6,221
11,454
(5,233)
6,221
(a) Non-current assets pledged as security
Refer to note 17 for information on non-current assets pledged as security by the Group.
76
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
11 Non-current assets - Deferred tax assets
The balance comprises temporary differences attributable to:
Tax losses
Accruals
Future deductible windup costs
Doubtful debts
Provisions and employee benefits
Fixed assets
Sundry
Set-off of deferred tax liabilities pursuant to set-off provisions (note 18)
Net deferred tax assets
Movements:
Opening balance at 1 July
Credited/(charged) to the preliminary consolidated income statement (note 6)
Closing balance at 30 June
2011
$’000
2010
$’000
196
300
24
52
885
-
41
1,498
(1,498)
-
1,722
(224)
1,498
152
262
343
97
813
-
55
1,722
(1,722)
-
2,096
(374)
1,722
Movements - Consolidated
At 1 July 2009
(Charged)/credited
‑ to profit or loss
At 30 June 2010
Movements - Consolidated
At 1 July 2009
(Charged)/credited
‑ to profit or loss
At 30 June 2010
Movements - Consolidated
At 30 June 2010
‑ to profit or loss
At 30 June 2011
Movements - Consolidated
At 30 June 2010
‑ to profit or loss
At 30 June 2011
Tax losses
$’000
Employee
benefits
$’000
Doubtful
Debts
$’000
Fixed Assets
$’000
Receivables
impairment &
accruals
$’000
Future
deductible
windup costs
$’000
95
2
97
43
(43)
-
194
68
262
623
(280)
343
-
152
152
Sundry
$’000
431
(376)
55
710
103
813
Total
$’000
2,096
(374)
1,722
Tax losses
$’000
Employee
benefits
$’000
Doubtful
Debts
$’000
Fixed assets
$’000
Receivables
impairment &
accruals
$’000
Future
deductible
windup costs
$’000
97
(45)
52
-
-
-
262
38
300
343
(319)
24
152
44
196
Sundry
$’000
55
(14)
41
813
72
885
Total
$’000
1,722
(224)
1,498
C oll ection Hous e Limi ted 201 1 Annual Report
77
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
12 Non-current assets - Intangible assets
At 1 July 2009
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2010
Opening net book amount
Additions - acquisition
Impairment charge
Amortisation charge
Disposals
Transfers
Closing net book amount
At 30 June 2010
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2011
Opening net book amount
Additions - internal development
Amortisation charge
Disposals
Transfers
Closing net book amount *
At 30 June 2011
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$’000
Computer
software
$’000
Other
intangible
assets
$’000
Work-in-
progress -
Cost *
$’000
28,027
(9,737)
18,290
18,290
-
-
-
-
-
7,138
(5,002)
2,136
2,136
170
-
(785)
-
-
1,039
(970)
69
69
-
-
-
-
-
18,290
1,521
69
28,030
(9,739)
18,291
7,308
(5,787)
1,521
519
(450)
69
41
-
41
41
1,883
-
-
-
(19)
1,905
1,905
-
1,905
Computer
software
$’000
Other
intangible
assets
$’000
Work-in-
progress -
Cost *
$’000
1,521
81
(665)
(15)
808
1,730
8,179
(6,449)
1,730
69
-
-
-
-
69
69
-
69
1,905
1,632
-
-
(808)
2,729
2,729
-
2,729
Goodwill
$’000
18,291
-
-
(6)
-
18,285
22,048
(3,763)
18,285
Total
$’000
36,245
(15,709)
20,536
20,536
2,053
-
(785)
-
(19)
21,785
37,762
(15,976)
21,786
Total
$’000
21,786
1,713
(665)
(21)
-
22,813
33,025
(10,212)
22,813
* Work-in-progress includes capitalised development costs of an internally generated intangible asset which is under development.
78
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
12 Non-current assets - Intangible assets (continued)
(a)
Impairment tests for goodwill
Goodwill is allocated to the Company’s cash-generating units (CGUs) identified according to business segment.
A segment-level summary of the goodwill allocation is presented below.
2011
Goodwill
2010
Goodwill
Commission
collections
$’000
Account asset
management
$’000
18,285
18,285
-
-
Commission
collections
$’000
Account asset
management
$’000
18,291
18,291
-
-
Total
$’000
18,285
18,285
Total
$’000
18,291
18,291
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial
budgets approved by management covering a five-year period. Cash flows are not extrapolated beyond five-years. The growth rate does not exceed the
long-term average growth rate for the business in which the CGU operates.
There is no goodwill associated with the Account asset management CGU.
(b) Key assumptions used for value-in-use calculations
CGU
Collection services
Account asset management
Growth rate (revenue)*
Growth rate (expenses) **
Discount rate ***
30 June
2011
30 June
2010
30 June
2011
30 June
2010
30 June
2011
30 June
2010
%
0.00
0.00
%
0.00
0.00
%
2.80
2.80
%
2.90
2.90
%
6.17
6.17
%
5.08
5.08
* Revenue growth has been set at Nil for the period of the calculation to minimise the risk of overstating the Value-in-use.
** Expense growth rate has been set at the current inflation rate for the period of the calculation.
*** In performing the value-in-use calculations for each CGU, the Group has applied pre-tax discount rates to discount the forecast future attributable
pre-tax cash flows.
These assumptions have been used for the analysis of each CGU within the business segment. Management determined the operational budget based
on past performance and its expectations for the future. The growth rates used reflect management expectations and are consistent with forecast inflation
as published by the Australian Bureau of Statistics. The discount rates used is based upon the risk-free rate adjusted to reflect specific risks relating to
the relevant segments in which they operate.
Considering the current uncertainties surrounding the Government’s proposed emissions trading scheme, the entity has not made any adjustments to their
future estimated cash outflows for any possible impact from the introduction of such a scheme.
C oll ection Hous e Limi ted 201 1 Annual Report
79
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
12 Non-current assets - Intangible assets (continued)
(c)
Impairment charge
As a result of the impairment evaluation, the Group has determined that the carrying value of intangible assets does not exceed their value-in-use,
and no impairment charge was required (2010: Nil).
(d) Impact of possible changes in key assumptions
Commission collections
There is a substantial margin between the calculated Value-in-use and the carrying value of all assets within the CGU. If the risk-free rate used in the
value-in-use calculation had been 10% at 30 June 2011 rather than 6.17%, there would have been no impact on the resulting impairment evaluation.
Because of the large excess of fair value over carrying value, at no reasonable risk free rate is there a impairment issue for the CGU.
If the estimated revenue growth is increased to 4.00% and expenses growth held at 2.80%, there is no impact on the resulting impairment evaluation.
If the revenue growth rate is decreased to -2.00% (i.e. declining revenue) and expense growth is set at 2.00%, there is no impact on the resulting
impairment evaluation. To reflect the company’s current practice of managing revenue and expenses simultaneously, growth in revenue and growth in
expenses has been considered together rather than in isolation.
13 Non-current assets - Other non-current assets
Legal and court costs capitalised
Legal & Court costs - accumulated amortisation
14 Current liabilities - Trade and other payables
Trade payables
Other payables
(a) Risk exposure
Information about the Group’s exposure to foreign exchange risk is provided in note 2.
Consolidated
2011
$’000
5,694
(5,280)
414
2010
$’000
4,509
(4,332)
177
Consolidated
2011
$’000
1,582
5,366
6,948
2010
$’000
1,564
2,524
4,088
80
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
15 Current liabilities - Borrowings
Secured
Bank overdraft
Total secured current borrowings
Unsecured
Unsecured - Other loans
Total unsecured current borrowings
Total current borrowings
Further information relating to Borrowings is set out in note 17.
16 Current liabilities - Provisions
Employee benefits
Other
(a) Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
2011
Current
Carrying amount at start of year
‑ additional provisions recognised
‑ payments/other sacrifices of economic benefits
Carrying amount at end of year
2010
Current
Carrying amount at start of year
‑ additional provisions recognised
‑ amounts incurred and charged
Carrying amount at end of year
Restructuring
2009
$’000
50
-
(50)
-
Consolidated
2011
$’000
2,739
2,739
5
5
2,744
2010
$’000
601
601
-
-
601
Consolidated
2011
$’000
2,044
28
2,072
2010
$’000
2,054
41
2,095
Other
$’000
41
98
(111)
28
Other
$’000
-
41
-
41
C oll ection Hous e Limi ted 201 1 Annual Report
81
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
17 Non-current liabilities - Borrowings
Secured
Secured - Bank loans
Total secured non-current borrowings
Unsecured
Total unsecured non-current borrowings
Total non-current borrowings
(a) 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
Consolidated
2011
$’000
73,900
73,900
-
73,900
2010
$’000
66,900
66,900
-
66,900
Consolidated
2011
$’000
76,639
76,639
2010
$’000
67,501
67,501
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 parent entity and certain of its controlled entities.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Current
Floating charge
Cash and cash equivalents
Receivables
Financial assets at fair value through profit or loss
Total current assets pledged as security
Non-current
Floating charge
Financial assets at fair value through profit or loss
Plant and equipment
Total non-current assets pledged as security
Total assets pledged as security
Consolidated
2011
$’000
2010
$’000
Notes
7
8
9
9
10
283
5,560
44,598
50,441
117,439
6,221
123,660
123,660
174,101
459
4,117
35,234
39,810
111,251
6,572
117,823
117,823
157,633
82
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
17 Non-current liabilities - Borrowings (continued)
(b) Fair value
The carrying amounts and fair values of borrowings at the end of reporting period are:
Group
On-balance sheet (i)
Non-traded financial liabilities
Bank overdrafts
Bank loans
At 30 June 2011
At 30 June 2010
Carrying amount
$’000
Fair value
$’000
Carrying amount
$’000
Fair value
$’000
2,739
73,900
76,639
76,639
2,739
73,900
76,639
76,639
601
66,900
67,501
67,501
601
66,900
67,501
67,501
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 rolling nature of the loan instruments is
designed to provide the Group with maximum flexibility within the overall facility, however the overall facility is classified as non-current.
(c) Risk exposures
Information about the Group’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.
18 Non-current liabilities - Deferred tax liabilities
The balance comprises temporary differences attributable to:
Prepayments
Purchased debt
Fixed Assets
Sundry
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions (note 11)
Net deferred tax liabilities
Consolidated
2011
$’000
7
12,093
157
58
12,315
12,315
(1,498)
10,817
2010
$’000
7
15,836
92
6
15,941
15,941
(1,722)
14,219
C oll ection Hous e Limi ted 201 1 Annual Report
83
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
18 Non-current liabilities - Deferred tax liabilities (continued)
Consolidated
Movements:
Opening balance at 1 July
Charged/(credited) to the preliminary consolidated income statement (note 6)
Closing balance at 30 June
2011
$’000
15,944
(3,629)
12,315
Other
$’000
427
(418)
9
2010
$’000
16,815
(871)
15,944
Total
$’000
16,815
(871)
15,944
Total
$’000
15,944
(3,629)
12,315
Property, plant
and equipment
$’000
Prepayments
$’000
Purchased debt
$’000
-
92
92
4
3
7
16,384
(548)
15,836
Property, plant
and equipment
$’000
Prepayments
$’000
Purchased debt
$’000
Other
$’000
92
65
157
7
-
7
15,836
(3,743)
12,093
9
49
58
Movements - Consolidated
At 1 July 2009
Charged/(credited)
‑ to profit or loss
At 30 June 2010
Movements - Consolidated
At 30 June 2010
Charged/(credited)
‑ to profit or loss
At 30 June 2011
19 Non-current liabilities - Provisions
Provisions - Employee benefits
20 Employee benefits
(a) Superannuation plans
Consolidated
2011
$’000
360
360
2010
$’000
337
337
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.
84
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
21 Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Total contributed equity
(b) Movements in ordinary share capital:
Issues of ordinary shares during the year
Date
1 July 2009
30 June 2010
1 July 2010
30 June 2011
(c) Ordinary shares
Company
Company
2011
Shares
2010
Shares
2011
$’000
2010
$’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.
Ordinary shares have no par value and the company does not have a limited amount of authorised capital.
(d) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 31.
(e) Options
Information relating to options provided as part of the the MD/CEO remuneration package and options 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 31.
C oll ection Hous e Limi ted 201 1 Annual Report
85
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
21 Contributed equity (continued)
(f) Capital risk management
The Group’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 manages 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 financing facilities are set out in note 2.
Quantitative analyses are conducted by management using contributed equity balances shown above together with 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 2011 and 2010 financial years.
86
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
22 Reserves and retained earnings
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Movements:
Share-based payments reserve
Balance 1 July
Option expense
Balance 30 June
Movements:
Foreign currency translation reserve
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
(b) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Opening balance adjustment
Items of other comprehensive income recognised directly in retained earnings
Dividends
Balance 30 June
Consolidated
2011
$’000
1,271
(1,165)
106
2010
$’000
1,050
(756)
294
Consolidated
2011
$’000
1,050
221
1,271
2010
$’000
878
172
1,050
Consolidated
2011
$’000
(756)
(409)
(1,165)
2010
$’000
(707)
(49)
(756)
Consolidated
2011
$’000
24,322
10,117
-
(5,937)
-
28,502
2010
$’000
20,533
8,923
121
(5,255)
-
24,322
C oll ection Hous e Limi ted 201 1 Annual Report
87
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
22 Reserves and retained earnings (continued)
(c) Nature and purpose of reserves
(i)
Share-based payments reserve
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 operations are recognised in other comprehensive income as described in note 1(d) and
accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
23 Dividends
(a) Ordinary shares
Fully franked final dividend for the year ended 30 June 2010 - 3.0 cents per share (2009 - 2.6 cents)
Fully franked interim dividend for the year ended 30 June 2011 - 3.1 cents per share (2010: 2.8 cents)
Dividends paid in cash during the years ended 30 June 2011 and 2010 were as follows:
Paid in cash
(b) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since year end the directors have recommended the payment of a fully
franked final dividend of 3.1 cents per fully paid ordinary share (2010 - 3.0 cents, fully franked). The
aggregate amount of the proposed dividend expected to be paid on 25 November 2011 out of retained profits
and a positive net balance sheet at 30 June 2011, but not recognised as a liability at year end, is
Consolidated
30 June 2011
$’000
30 June 2010
$’000
2,920
3,017
5,937
2,530
2,725
5,255
Consolidated
30 June 2011
$’000
30 June 2010
$’000
5,937
5,937
5,255
5,255
Consolidated
30 June 2011
$’000
30 June 2010
$’000
3,017
2,920
3,017
2,920
88
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
23 Dividends (continued)
(c) Franked dividends
The franked portions of the final dividends recommended after 30 June 2011 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 2012.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2011 and will be recognised
in subsequent financial reports.
Franking credits available for subsequent financial years based on a tax rate of 30% (2010 - 30%)
Consolidated
30 June 2011
$’000
30 June 2010
$’000
6,750
6,750
47
47
The above amounts represent the balance of the franking account as at the end of the reporting period, 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 $1,293,000 (2010: $1,251,000).
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
24 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
(ii)
Executive director
A.R. Aveling – Managing Director and Chief Executive Officer (retired 31 July 2010)
(iii)
Non-executive directors
D. G. Punches
A. F. Coutts
W. W. Kagel
K. J. Daly
D.M. Gray (appointed 28 June 2011)
C oll ection Hous e Limi ted 201 1 Annual Report
89
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
24 Key management personnel disclosures (continued)
(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:
Tony Aveling
Managing Director and Chief Executive Officer (retired 31 July 2010)
Collection House Limited
Matthew Thomas
Previously Chief Operating Officer, commenced as CEO designate on 1 July
2010 and sole CEO on 1 August 2010.
Collection House Limited
Adrian Ralston
Chief Financial Officer
Collection House Limited
Michael Watkins
General Counsel and Company Secretary
Collection House Limited
Kylie Lynam
General Manager - Human Resources and Corporate Services
Collection House Limited
Michael Voysey
Chief Marketing Officer (left the company 16 July 2010)
Collection House Limited
All of the above persons were also key management persons during the year ended 30 June 2010.
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
30 June 2011
$
30 June 2010
$
2,020,704
2,655,509
152,590
187,905
224,878
139,275
2,361,199
3,019,662
Detailed remuneration disclosures are provided in sections A-D of the remuneration report on pages 30 to 36.
90
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
24 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 four
specified executives of the Company 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 31.
(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 Group 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.
2011
Name
Directors of Collection House Limited
Balance
at start of
the year
Granted as
compensation Exercised
Other
changes *
Balance
at start of
the year
Vested and
exercisable Unvested
A. Aveling
4,000,000
-
-
(2,000,000)
2,000,000
1,200,000
800,000
Other key management personnel of the Group
M. Thomas
A. Ralston
M. Watkins
K. Lynam
500,000
400,000
425,000
275,000
1,479,000
591,000
443,000
443,000
-
-
-
-
(250,000)
1,729,000
150,000
1,579,000
(200,000)
791,000
120,000
(200,000)
668,000
135,000
671,000
533,000
(125,000)
593,000
90,000
503,000
* “Other changes” represent options which have expired. For further information regarding the expiry of options see note 31
2010
Name
Directors of Collection House Limited
A. Aveling
Balance
at start of
the year
4,000,000
Other key management personnel of the Group
M. Thomas
A. Ralston
M. Watkins
K. Lynam
(iv)
Share holdings
500,000
400,000
425,000
275,000
Granted as
compensation Exercised
Other
changes
Balance
at start of
the year
Vested and
exercisable Unvested
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
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 on page 91. There were no shares issued under the terms of the
Employee Share Plan during the reporting period as compensation.
C oll ection Hous e Limi ted 201 1 Annual Report
9 1
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
24 Key management personnel disclosures (continued)
(d) Equity instrument disclosures relating to key management personnel (continued)
2011
Name
Directors of Collection House Limited
Ordinary shares
John Pearce
Dennis Punches
Tony Coutts
Bill Kagel
Kerry Daly
David Gray (appointed 28 June 2011)
Tony Aveling (retired 31 July 2010)
* for Tony Aveling, balance at date of retirement, 31 July 2010.
Other key management personnel of the Group
Ordinary shares
M. Thomas
A. Ralston
M. Watkins
K. Lynam
2010
Name
Directors of Collection House Limited
Ordinary shares
John Pearce
Dennis Punches
Tony Coutts
Bill Kagel
Kerry Daly (as at date of appointment, 30 October 2009)
Tony Aveling (retired 31 July 2010)
Barrie Adams (resigned 30 October 2009)
Barry Connelly (resigned 30 October 2009)
Bill Hiller (resigned 30 October 2009)
Other key management personnel of the Group
Ordinary shares
M. Thomas
A. Ralston
M. Watkins
K. Lynam
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 *
11,461,015
17,907,384
4,464,600
951,269
140,000
-
505,000
-
102,000
-
25,000
11,000
-
-
-
-
-
-
-
-
-
-
-
-
304,523
11,765,538
1,193,882
19,101,266
-
600,000
60,000
-
-
-
4,464,600
1,551,269
200,000
-
505,000
-
28,000
130,000
-
-
(5,000)
-
25,000
6,000
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
11,416,130
17,857,384
4,464,600
951,269
90,000
449,400
-
77,143
93,000
102,000
-
25,000
11,000
-
-
-
-
-
-
-
-
-
-
-
-
-
44,885
50,000
-
-
50,000
55,600
-
-
(43,000)
-
-
-
-
11,461,015
17,907,384
4,464,600
951,269
140,000
505,000
-
77,143
50,000
102,000
-
25,000
11,000
92
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
24 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
2011
2010
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 2010, 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
or as employees.
25 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:
Audit services
Audit and review of financial reports
Audit-related services
Total auditors’ remuneration
Consolidated
30 June 2011
$
30 June 2010
$
148,000
82,500
230,500
137,000
82,000
219,000
C oll ection Hous e Limi ted 201 1 Annual Report
93
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
26 Contingencies
(a) Contingent liabilities
The Group had contingent liabilities at 30 June 2011 in respect of:
Claims
There were no claims of a material nature during this period.
Guarantees
(a) Bank guarantees (secured) exist in respect of satisfactory contract performance in the normal course of business for the Group amounting to
$1,783,803.76 (2010: $1,449,478). The increase in the bank guarantee liabilities related to the Company entering into a Lease Agreement for new
business premises at 525 Flinders Street, Melbourne. The Lease Agreement for the new Melbourne Premises, while not commencing until 1 November
2011, required the delivery of a Bank Guarantee in the amount of $328,945 to initially secure the Company’s fitout obligations prior to relocation in
November 2011 and subsequently, the Company’s performance obligations during the Lease term. The bank guarantee for the Company’s existing
premises at 477 Collins Street, Melbourne in an amount of $254,712 is required to remain in place until 28 February 2012 under the existing Lease
Agreement notwithstanding that the existing Lease expires on 30 November 2011.
(b) On 29 October 2002, the parent entity 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 Group 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.
27 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Other financial assets at fair value through the Profit and Loss
Payable:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2011
$’000
2010
$’000
29,441
30,000
-
-
-
-
29,441
30,000
94
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
27 Commitments (continued)
(b) Non-cancellable operating leases
The Group leases its offices under non-cancellable operating leases expiring at various times during the next seven years. The leases have varying terms,
escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
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
28 Related party transactions
(a) Group companies
Consolidated
2011
$’000
2010
$’000
3,484
10,899
642
15,025
3,679
10,601
2,474
16,754
Details of the parent company, the ultimate parent company and interests in subsidiaries are set out in note 29.
(b) Key management personnel
Disclosures relating to key management personnel are set out in note 24.
(c) 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.
(d) Transactions with other related parties
The classes of non director-related parties are:
> wholly owned controlled entities;
> directors of related parties and their director-related entities.
Transactions
There were no transactions with non-wholly owned related parties. Transactions with wholly owned related parties are eliminated on consolidation.
C oll ection Hous e Limi ted 201 1 Annual Report
95
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
29 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
Parent and Ultimate Parent company:
Collection House Limited
Controlled entities - incorporated in Australia
ACN 007 279 129 Pty Ltd (formerly Countrywide Mercantile Credit Services Pty Ltd) **
ACN 010 920 411 Pty Ltd (formerly Australian Business Research Pty Ltd) **
Cashflow Accelerator Pty Ltd (formerly Collection House ALR Pty Ltd) ***
Collective Learning and Development Pty Ltd
Jones King Lawyers Pty Ltd
Lion Finance Pty Ltd
Midstate Credit Management Services Pty Ltd
Controlled entities - incorporated in New Zealand
Collection House (NZ) Limited
Lion Finance Limited
1071066 Limited (formerly abr.nz Limited) **
Equity holding of ordinary shares
2011
2010
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
** These controlled entities have not traded during the financial year
*** Cashflow Accelerator Pty Ltd, formerly Collection House ALR Pty Ltd commenced trading on 14 December 2010.
30 Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the company
From discontinued operation
Total basic earnings per share attributable to the ordinary equity holders of the company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the company
From discontinued operation
Total diluted earnings per share attributable to the ordinary equity holders of the company
Consolidated
30 June 2011
$’000
30 June 2010
$’000
10.4
-
10.4
10.3
-
10.3
9.2
-
9.2
9.1
-
9.1
96
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
30 Earnings per share (continued)
(c) Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share
From continuing operations
Diluted earnings per share
Profit from continuing operations attributable to the ordinary equity holders of the company:
From continuing operations
Profit attributable to the ordinary equity holders of the company used in calculating diluted earnings per share
(d) Weighted average number of shares used as the denominator
Consolidated
30 June 2011
$’000
30 June 2010
$’000
10,117
10,117
10,117
10,117
8,923
8,923
8,923
8,923
Consolidated
30 June 2011
Number
30 June 2010
Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
97,321,881
97,321,881
Adjustments for calculation of diluted earnings per share:
Options
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in
calculating diluted earnings per share
990,650
946,286
98,312,531
98,268,167
(e)
Information concerning the classification of securities
(i)
Options
Options granted to employees under the Collection House Ltd Executive Share Option Plan are considered to be potential ordinary shares and have been
included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination
of basic earnings per share. Details relating to the options are set out in note 31.
31 Sharebased payments
Share options for MD/CEO
For the purposes of this note to the financial statements, we advise that Mr Tony Aveling, MD/CEO retired on 31 July 2010. Mr Matthew Thomas was
appointed CEO designate on 1 July 2010 and sole CEO on 1 August 2010.
In February 2007, the Shareholders approved the issue of 2,000,000 share options in favour of the then MD/CEO as part of his Employment Agreement.
The full terms of the options were contained in the Notice of General Meeting announced to Shareholders on 12 January 2007. While 400,000 of these
options had no price qualifying hurdles, all the share options expired on 28 February 2011. None of these options were exercised before expiry or during
the Relevant Period. A summary of these options is identified in this note as MD/CEO 1.
In October 2008, the Shareholders approved the issue of a further 2,000,000 share options in favour of the then MD/CEO as part of his varied
Employment Agreement. The full terms of the options were contained in the Notice of General Meeting announced to Shareholders on 19 September
2008. The terms of Mr Aveling’s Employment Agreement as varied provided that Mr Aveling may exercise those options when and if certain qualifying
price hurdles were achieved before the expiry date namely, 25 June 2013 and the options had vested (the Vesting Date was 25 June 2011). 60% of
the 2,000,000 options (1,200,000 options) became exercisable on 25 June 2011. None of the qualified options were exercised during the Relevant
Period. A summary of these options is identified in this note as MD/CEO 2.
C oll ection Hous e Limi ted 201 1 Annual Report
97
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
31 Sharebased payments (continued)
Grant date
Earliest possible vesting date
MD/CEO 1 options
22 February 2007
28 February 2009
MD/CEO 2 options
31 October 2008
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
The options expired on 28 February 2011.
25 June 2013, subject to the following, in the event that:
(a) the MD/CEO’s employment ceased due to genuine
retirement, death, disablement, sickness or if the
employment was terminated without cause, then the
MD/CEO would be entitled to options granted prior to
the date of cessation and for which the vesting date had
occurred or which subsequently occurred, prior to the
expiry date.
(b) the Company terminated the MD/CEO’s employment
for poor performance (in the reasonable opinion of the
Company), the MD/CEO may only exercise within 12
months after the date of termination. All other options
immediately lapsed.
(c) the MD/CEO resigned or had his employment
terminated for cause, the MD/CEO may only exercise
within 1 month of the date of termination those options
which have vested prior to the date of termination or
resignation. All other options immediately lapsed.
Exercise conditions and
Vesting Date
The options would vest on the later of:
The options 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 reached certain qualifying prices
between $1.25 and $2.00.
No options were exercised in respect of the
MD/CEO1 options.
(a) 25 June 2011; and
(b) 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) was satisfied;
B. In respect of the second tranche options, the Qualifying
Price for the second tranche options (namely $0.70)
was satisfied;
C. In respect of the third tranche options, the Qualifying
Price for the third tranche options (namely $0.80)
was satisfied;
D. In respect of the fourth tranche options, the Qualifying
Price for the fourth tranche options (namely $0.90) is
satisfied; and
E. In respect of the fifth tranche options, the Qualifying
Price for the fifth tranche options (namely $1.00)
is satisfied.
Exercise price
$1.0327 per option
$0.4927 per option
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%
98
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
31 Sharebased payments (continued)
The expected price volatility was usually based on the historic volatility (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 (expired 28 February 2011)
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
(b) Executive Share Option Plan
Participation in the Executive Share Option Plan (ESOP1) to 31 July 2010 was determined by the then MD/CEO. Participation for the remainder of the
relevant period to 30 June 2011 was determined by the Board.
On 15 June 2007, 1,250,000 options were issued to a number of eligible employees pursuant to ESOP1. A summary of these options is identified in
this note as EXEC1. On 26 October 2007, at an Annual General Meeting, the shareholders approved ESOP1 and ratified the prior issue of options.
On 26 June 2008, the Board resolved that the then MD/CEO be authorised, at his discretion, to offer certain options on suitable terms and conditions
to eligible employees under ESOP1.
On 18 July 2008, the MD/CEO issued a further 1,437,500 options to a number of eligible employees pursuant to ESOP1. A summary of these options
is identified in this note as EXEC2.
On 2 December 2010, the Board approved a new Executive Share Option Plan (ESOP2). The Board also authorised that its Chairman be authorised to
offer certain options in the case of the CEO and/or Matt Thomas, CEO in the case of the other eligible employees, to offer Options to eligible employees
under ESOP2, at his/their discretion respectively.
On 1 March 2011, the Chairman issued or caused to be issued 2,956,000 options to a number of eligible employees pursuant to ESOP2. A summary
of these options is identified in this note as EXEC3.
Future options may be issued pursuant to ESOP2 subject to not only individual performance being considered, but also Company performance hurdles
being achieved before options may be exercised.
C oll ection Hous e Limi ted 201 1 Annual Report
99
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
31 Sharebased payments (continued)
(b) Executive Share Option Plan (continued)
Grant date
Earliest possible
vesting date
Performance
hurdles
Exercise conditions
and Vesting Date
EXEC1 options
15 June 2007
28 February 2009
EXEC2 options
18 July 2008
25 June 2011
EXEC3 options
1 March 2011
20 December 2012
Tranche # of options
Hurdle
Price
Tranche # of options
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
1
2
3
4
5
287,500
287,500
287,500
287,500
287,500
Hurdle
Price
0.60
0.70
0.80
0.90
1.00
Tranche # of options
1
2
3
4
591,200
591,200
1,182,400
591,200
Hurdle
Price
1.00
1.25
1.50
1.75
The options vested on the later of:
The options vest on the later of:
The options will vest on the later of:
(a) 28 February 2009; and
(a) 25 June 2011; and
(a) 20 December 2012; and
(b) in respect of 250,000 options, the
(b) for each tranche of options, as follows:
(b) for each tranche of options, as follows:
options were 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 were only
exercisable, pro-rata, if and when
the Company’s share price reaches
certain qualifying prices between $1.25
and $2.00.
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) was
satisfied;
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 $1.00)
is satisfied;
B. In respect of the second tranche
B. In respect of the second tranche
options, the Qualifying Price for the
second tranche options (namely $0.70)
was satisfied;
options, the Qualifying Price for the
second tranche options (namely $1.25)
is satisfied;
C. In respect of the third tranche options,
C. In respect of the third tranche options,
the Qualifying Price for the third tranche
options (namely $0.80) was satisfied;
the Qualifying Price for the third tranche
options (namely $1.50) is satisfied; and
D. In respect of the fourth tranche options,
D. In respect of the fourth tranche
the Qualifying Price for the fourth
tranche options (namely $0.90) is
satisfied; and
options, the Qualifying Price for the
fourth tranche options (namely $1.75)
is satisfied.
E. in respect of the fifth tranche options,
the Qualifying Price for the fifth tranche
options (namely $1.00) is satisfied.
Exercise price
$1.0327 per option
$0.4927 per option
$0.6938 per option
1 00
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
31 Sharebased payments (continued)
(b) Executive Share Option Plan (continued)
EXEC1 options
EXEC2 options
EXEC3 options
Expiry date
The options will expired on
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%
25 June 2013, subject to the
following, in the event that:
(a) the eligible employee’s
employment ceases due to death,
disablement, sickness or if the
employment is terminated without
cause, then the eligible employee
shall be entitled to options granted
prior to the date of cessation and
for which the vesting date has
occurred or which subsequently
occurs, prior to the expiry date.
(b) the Company terminates the
eligible employee’s employment
for poor performance (in the
reasonable opinion of the
Company), the eligible employee
may only exercise within 12
months after the date of
termination those options which
have vested prior to the date of
termination. All other options shall
immediately lapse.
(c) the eligible employee resigns or
has employment terminated for
cause, the eligible employee may
only exercise within 1 month of
the date of termination those
options which have vested prior
to the date of termination or
resignation. All other options shall
immediately lapse.
$0.48
55.6%
9%
6.64%
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 an associated
body corporate of the Company; or
(b) the eligible employee ceasing to
be employed by the Company
or an associated body corporate
of the Company due to fraud or
dishonesty; or
(c) 20 December 2013.
$0.72
50.0%
8.29%
5.198%
The expected price volatility is usually based on the historic volatility (for 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
Exec 3 options
1
2
3
4
5
$0.2688
$0.2305
$0.1958
$0.1609
$0.1295
$0.1530
$0.1520
$0.1510
$0.1480
$0.1460
$0.1522
$0.1522
$0.1522
$0.1522
$0.1522
C oll ection Hous e Limi ted 201 1 Annual Report
1 01
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
31 Sharebased payments (continued)
(b) Executive Share Option Plan (continued)
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Expired
during the
year
Number
Balance at
end of the
year
Number
Exercise
price
Vested and
exercisable
at end of the
year
Number
$0.69
$0.49
$0.49
$1.03
$1.03
-
2,956,000
2,000,000
1,275,000
2,000,000
1,037,500
-
-
-
-
6,312,500
2,956,000
-
-
-
-
-
-
-
-
-
2,956,000
-
2,000,000
1,200,000
1,275,000
765,000
2,000,000
1,037,500
-
-
-
-
3,037,500
6,231,000
1,965,000
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Expired
during the
year
Number
Balance at
end of the
year
Number
Exercise
price
Vested and
exercisable
at end of the
year
Number
$0.49
$0.49
$1.03
$1.03
2,000,000
1,312,500
2,000,000
1,100,000
6,412,500
-
-
-
-
-
-
-
-
-
-
-
2,000,000
37,500
1,275,000
-
2,000,000
62,500
1,037,500
100,000
6,312,500
-
-
400,000
250,000
650,000
Grant Date
Expiry date
Consolidated 2011
1 March 2011
As stated above
31 October 2008
As stated above
18 July 2008
12 March 2007
15 June 2007
Total
As stated above
As stated above
As stated above
Grant Date
Expiry date
Consolidated 2010
31 October 2008
As stated above
18 July 2008
12 March 2007
15 June 2007
Total
As stated above
As stated above
As stated above
Fair value of options granted
The assessed fair value at grant date of all options granted is set out above. The fair value at grant date is independently determined using a Monte Carlo
option pricing model in relation to MD/CEO 1, EXEC1 and EXEC3 options and a combination of Bermudan and Barrier - style option pricing model in
relation to MD/CEO 2 and EXEC2 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.
32 Events occurring after the reporting period
(a) Dividend
A fully franked final dividend of 3.1 cents, totalling $3.0 million, has been declared, payable on 25th November, 2011. No provision has been raised in
these accounts.
(b) Varied Multiple Option Facility
On 14 June 2011, the Company’s Multiple Option Facility (MOF) with Westpac Banking Corporation (Westpac) was varied by an increase in the facility
limit from $85m to $100m in support of additional growth, with the Loan Valuation Ratio (LVR) increased to 55 per cent reflecting a lower risk profile.
On 5 August 2011, the Company confirmed an interest rate swap transaction for an amount of $26m at a fixed rate of 4.50% per annum effective as
at 11 August 2011 and continuing until 12 August 2013. As the swap involves exchanging a variable interest borrowing for a fixed rate borrowing it is
not possible to quantify the potential financial impact of this transaction.
1 02
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
33 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation, amortisation and impairment
Fair value losses on other financial assets
Non-cash employee benefits expense - share-based payments
Provision for doubtful debts
Assets written off
Other non-cash expenses
Change in operating assets and liabilities
(Increase) in trade debtors and bills of exchange
(Increase) decrease in sundry debtors
(Increase) decrease in other non-current 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
Net cash inflow (outflow) from operating activities
34 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
Retained earnings
Capital and reserves attributable to owners of Collection House Limited
Profit or loss for the year
Total comprehensive income
Consolidated
30 June 2011
$’000
30 June 2010
$’000
10,117
2,902
33,073
221
(57)
42
433
(1,198)
(641)
(1,185)
-
18
2,679
4,930
(3,402)
47,932
8,923
2,619
29,879
173
(3)
61
321
241
300
(580)
(362)
(415)
(152)
(752)
(500)
39,753
Company
2011
$’000
3,839
175,630
179,469
(20,167)
(90,896)
2010
$’000
3,789
170,004
173,793
(13,367)
(86,753)
(111,063)
(100,120)
67,256
1,271
(121)
68,406
449
449
67,256
1,050
5,367
73,673
(5,813)
(5,813)
C oll ection Hous e Limi ted 201 1 Annual Report
1 03
{ NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 june 2011
34 Parent entity financial information (continued)
(b) Guarantees entered into by the parent entity
The parent entity has entered into a deed of cross guarantee with certain of its subsidiaries as set out in Note 26(b).
No liability was recognised by the parent entity or the consolidated entity in relation to this guarantee, as the fair value is immaterial.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2011 or 30 June 2010. For information about guarantees given by the parent
entity, please see above.
1 04
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ DIRECTORS’ DECLARATION - 30 june 2011
In the directors’ opinion:
(a) the financial statements and notes set out on pages 42 to 103 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 consolidated entity’s financial position as at 30 June 2011 and of its performance for the financial year ended
on that date,
(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
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations
Act 2001.
This declaration is made in accordance with a resolution of the directors.
John Pearce
Chairman
Brisbane
25 August 2011
Independent Auditor’s 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”) and its controlled entities (“the consolidated entity”), which comprises the
balance sheet as at 30 June 2011, and the income statement, statement of
comprehensive income, statement of changes in equity and cash flow statement for the
year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the Directors’ declaration of the consolidated entity
comprising 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 of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and
the Corporations Act 2001 and for such internal control as the Directors determine is
necessary to enable the preparation of the financial report that gives a true and fair
view and is free from material misstatement, whether due to fraud or error.
In Note 1, the Directors also state, in accordance with Accounting Standard AASB 101:
Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
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. Those
standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about
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 company’s preparation of the financial
report that gives a true and fair view 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 company’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.
Opinion
In our opinion:
a) the financial report of Collection House Limited and its controlled entities is in
accordance with the Corporations Act 2001, including:
i)
ii)
giving a true and fair view of the consolidated entity’s financial position as
at 30 June 2011 and of its performance for the year ended on that date;
and
complying with Australian Accounting Standards 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 included on pages 17 to 24 of the Directors’
Report for the year ended 30 June 2011. 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.
Opinion
In our opinion the Remuneration Report of Collection House Limited for the year ended
30 June 2011 complies with section 300A of the Corporations Act 2001.
Matters Relating to the Electronic Presentation of the Financial Report
This auditor’s report relates to the financial report of the consolidated entity for the year
ended 30 June 2011 included on the website of the Collection House Limited. The
directors of the Company are responsible for the integrity of the website and we have
not been engaged to report on its integrity. This audit report refers only to the financial
report identified above and it does not provide an opinion on any other information
which may have been hyperlinked to or from the financial report. 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 to confirm the
information included in the audited financial report presented on the Company’s
website.
LAWLER HACKETTS AUDIT
Liam Murphy
Partner
Brisbane, 25 August 2011
C oll ection Hous e Limi ted 201 1 Annual Report
1 07
{ SHAREHOLDER INFORMATION for the year ended 30 june 2011
The shareholder information set out below was applicable as at 12 August 2011.
A.
DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
Class of equity security
Ordinary shares
1-1000
1,001-5000
5,001-10,000
10,001-100,000
100,001 and over
Total
Holders
497
949
317
452
72
2,287
There were 256 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
George Laurens (Qld) Pty Ltd (Pearce Family A/C)
HSBC Custody Nominees (Australia) 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
Merrill Lynch (Australia) Nominees Pty Limited
Mr William Walter Kagel
J P Morgan Nominees Australia Limited
Mr Dennis George Punches (Grantor Ret Annuity No.1 A/C)
Garrett Smythe Limited
Mr Stephen Walker + Mrs Susan Walker (Walker Super Fund Account)
Mr Lev Mizikovsky and Mrs Emily Dorothy Mizikovsky (Superfun Superfund A/C)
Sunstar Australia Pty Ltd
Mooloolaba Consulting Pty Ltd (Super Fund A/C)
Mr Frederick Benjamin Warmbrand (FB & LJ Warmbrand Super A/C)
TBIC Pty Ltd (Crommelin Family Super A/C)
George Laurens (WA) Pty Ltd (Laurens Super Fund A/C)
Shares
320,400
2,626,593
2,549,453
13,870,988
77,969,447
97,336,881
Units
18,101,266
9,997,798
6,987,925
5,178,054
4,725,569
4,335,905
4,037,000
2,257,333
1,875,444
1,551,269
1,441,777
1,000,000
906,183
778,000
684,363
657,895
620,000
579,526
516,705
500,000
% of issued
capital
18.60
10.27
7.18
5.32
4.85
4.45
4.15
2.32
1.93
1.59
1.48
1.03
0.93
0.80
0.70
0.68
0.64
0.60
0.53
0.51
Total
66,732,012
68.56
1 08
2 011 Annual Repor t C ol le cti on H ou s e Li m it ed
{ SHAREHOLDER INFORMATION for the year ended 30 june 2011
B.
EQUITY SECURITY HOLDERS (continued)
Unquoted equity securities
Details of these options are set out at note 31 of the financial statements.
Grant date
MD/CEO OPTIONS
Balance at
1 July 2010
Granted during
the year
Exercised during
the year
Expired during
the year
Balance at the
end of the year
31 October 2008
2,000,000
EXECUTIVE OPTIONS*
1 March 2011
18 July 2008
2,956,000
1,275,000
*No executive holds 20% or more of these securities.
Restricted securities
2,000,000
2,956,000
1,275,000
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.
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 12 August 2011, 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
Dennis George Punches (combined shareholdings)
Units
19,101,266
John Marshall Pearce and Sandra Anne Pearce/George Laurens (Qld) Pty Ltd (combined shareholdings)
11,765,538
Trans Tasman Collections Investments Pty Limited
Mr Lev Mizikovsky, Ankla Pty Ltd and Sunstar Australia Pty Ltd (combined shareholdings)
HSBC Custody Nominees (Australia) Limited
9,997,798
6,067,827
5,178,054
% of issued
capital
19.62
12.09
10.27
6.23
5.32
D.
VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
(a) 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.
(b) Options
No voting rights.
{ TABLE OF CONTENTS
{ COrp OrATE DIrECTOry
Collection House Limited 2011 Annual R eport
1 09
Chairman’s Statement
Chief Executive’s Report
02 grOUp OvErvIEw
02 2011 – Our Performance
03 Our Profile
04
05
06
06
06 Commission Collections
06 Cash Flow Management
07
OUr BOArD AND
ExECUTIvE TEAM
Purchased Debt
BUSINESS pErFOrMANCE
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
+61 7 3832 0222
Facsimile:
www.collectionhouse.com.au
Website:
LOCATIONS
Australia
Brisbane
Sydney
Melbourne
Adelaide
New Zealand
Auckland
Ballarat
Bendigo
Newcastle
Shepparton
STOCk ExCHANgE LISTINgS
Collection House Limited shares are listed on
the Australian Stock Exchange. The home
exchange is Brisbane.
ASX Code: CLH
COMpANy SECrETA ry
Michael Watkins
Phone:
Facsimile:
+61 7 3100 1229
+61 3414 7525
AUDITOrS
Lawler Hacketts Audit
Level 3
549 Queen Street
Brisbane Qld 4000
SHArE rEg ISTry
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
Financial Basics Foundation
Supporting the Environment
Corporate Governance
Statement
Community Engagement
Program
08 OUr rESpONSIBILITIES
08
08
09
10
20 DIrECTOr’S rEpOrT
39
41
105 INDEpENDENT AUDITOr’S
107
109 COrpOrATE DIrECTOry
FINANCIAL STATEMENTS
CONTENTS
AUDITOr’S INDEpENDENCE
DECLArATION
SHArEHOLDEr INFOrMATION
rEpOrT
NOTICE OF ANNUAL gENEr AL MEETIN g
The Annual General Meeting of Collection House Limited will be held on 28 October 2011 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.
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COLLECTION HOUSE LIMITED
annual report 2011
2011