ANNUAL
REPORT
Contents
CollecCollection House Group
Performance Highlights
2015 Annual Report
3
Performance Highlights ...............................................................................................................................3
Collection House – Leading the Way ...............................................................................................5
Chairman’s Message ....................................................................................................................................6
Managing Director and Chief Executive Officer’s Report ................................................8
Investing in…
Our Future – Strategy and Innovation ......................................................................................... 12
Technology ................................................................................................................................................ 14
Our People ................................................................................................................................................. 16
Leadership…
Directors ....................................................................................................................................................... 18
Executive Management Team ................................................................................................... 20
Building for the Future – Our Performance ................................................................................ 22
Corporate Social Responsibility .......................................................................................................... 28
Corporate Governance .......................................................................................................................... 30
Directors’ Report ........................................................................................................................................... 32
Auditor’s Independence Declaration ........................................................................................... 59
Financial Statements .................................................................................................................................. 60
Shareholder Information ........................................................................................................................127
Corporate Directory .................................................................................................................................129
Increase in
Dividend
Share
14%
(9.1cents)
Dividends per share
(cents)
Increase in
Net Profit
After Tax
20%
($22.5 m)
Profit after tax
($M)
Increase in
PDL Collections
& Commission
17%
($176.1m)
Net Debt/
Net Debt + Equity
Average
Return on
Equity
13.8%
PDL collections and
commission ($M)
Return on equity
(%)
39.6%
Increase in
Shareholder
Equity
9%
($170.7 m)
Increase in
Earnings
Per Share
17%
(17.2 cents)
Earnings per share
(cents)
Shareholder equity
($M)
Net Debt/Net debt + equity
ratio (%)
9.1
8.0
7.2
6.2
6.4
22.5
18.7
15.6
12.7
10.1
176.1
150.8
136.1
126.5
109.9
11
12 13 14 15
Year
17.2
14.7
13.7
12.1
10.4
170.7
156.0
11 12 13 14 15
Year
123.3
109.2
95.9
11 12 13 14 15
Year
44.3 44.5
41.4 38.9 39.6
12.4 13.4 13.4 13.8
10.8
11 12 13 14 15
Year
11 12 13 14 15
Year
11 12 13 14 15
Year
11 12 13 14 15
Year
Front cover: Brisbane Skyring within the historical Gasworks location of Newstead.
2
2015 Annual Report
5
Collection House
Leading the Way
Collection House Limited (the Group) is a leading
Australasian receivables management company,
providing solutions that span the entire credit
management lifecycle – from receivables
outsourcing to debt collection and debt purchase.
Collection House is Australia’s only public listed,
end-to-end receivables management company with
offices in Queensland, New South Wales, Victoria,
South Australia, New Zealand and the Philippines.
Our ASX code is CLH.
We have been operating for more than 22 years
and have more than 950 staff including a highly
experienced Executive Management Team.
The average tenure of this Team exceeds 10 years.
Collection House is different from its competitors due
to its approach to ethical debt recovery and adoption
of industry leading compliance standards. The Group
has achieved continued growth without diminishing
the ethical foundations that underpin the brand and
what Collection House stands for.
The Group has a strong culture that is focused on
creating value for customers and clients alike.
This is achieved by offering a multi-disciplined
service that includes:
• purchased debt
•
•
•
•
collection services
receivables management
legal and insolvency services
credit management training
The Group’s engagement with customers is efficient
and ethical, and is further enhanced by the use of
industry-leading technologies. These enable
Collection House to deliver effective and innovative
solutions to better assist customers and successfully
manage the debt recovery process. The Group has
created innovative proprietary software systems that
drive efficiency and productivity, and deliver improved
functionality as well as provide significant intellectual
property to the Group.
Collection House enjoys strong business relationships
with major Australian and international banks, financial
institutions, large corporations, public utilities and
government agencies.
Collection House continues to strive for excellence
through globally recognised best practice initiatives.
The Group continues to seek and develop strategies
that assist in educating the wider community about
financial hardship. Collection House also remains a
strong supporter of the National Hardship Register,
where financial counsellors can apply to register
eligible consumers so they can obtain relief from
debt collection activities.
Collection House is driven by an unwavering
commitment to business conduct that is compliant,
lawful and respectful. This commitment is
embedded in our values, our aspirational goals,
the professionalism and values of our staff and our
business practices.
To be proven by our
clients as the agency of
choice through our strong
relationships, superior range
of products and services,
and delivery of
outstanding results.
To be regarded by
regulators and consumer
representatives as leading
the way in ethical
practice.
To achieve superior
risk adjusted
shareholder returns.
To be viewed by our staff
as a first class working
environment built on values
of accountability,
innovation, respect,
ethics, professionalism,
performance and
teamwork.
110
MANILA
552
BRISBANE
64
NEW ZEALAND
78
ADELAIDE
48
SYDNEY
121
MELBOURNE
54
REGIONAL
VICTORIA
168
NEWCASTLE
Available Seats by Location
4
Chairman’s
Message
More than just a financial business
Dear fellow Shareholder,
It is with great pleasure I report to you that the 2015
financial year was the eighth consecutive year of
earnings growth for the Collection House Group.
Not only was the Group able to post a new record
profit of $22.5 million, but the result also marked the
achievement of average Net Profit After Tax (NPAT)
growth of 20 percent for the past five years.
For shareholders, this translates to a 14 percent
increase in dividends per share this financial year,
and a 17 percent increase in earnings per share.
By any measure, this is a strong success story.
It can be attributed to two main factors: firstly,
sensible stewardship by the Board and the Executive;
and secondly, prudent past investments that are now
coming to fruition. The commitment we made over
the past several years to invest in our people and
our technology is now delivering sustainable growth
across all of our business units, and ensuring a
robust platform for moving forward.
Heading into 2016, we remain steadfastly
resolute in our aim to deliver continued
incremental business growth and shareholder
value. We will do this with a focus on
improving our balance sheet structure while
allowing ourselves room for more growth,
and maintaining appropriate gearing
levels.
We will continue to look at
expansion through new
products and new segments
within our core markets.
The recent establishment
of the Australian Credit
Recoveries Trust in
partnership with Balbec
Capital LP is one
important strategy, which
will enable us to extend
our Purchased Debt
Ledgers market share, utilising our deep specialist
knowledge and expertise.
6
2015 Annual Report
7
in our aim to deliver continued incremental business
“ Heading into 2016, we remain steadfastly resolute
growth and shareholder value.”
We will continue to use our superior analytic
capabilities, and embrace new technology to better
understand and service our customers, as well as
drive new business opportunities.
Mobile technologies are driving rapid change in
many industries, and ours is no exception.
However, the Collection House Group is in the
fortunate position of having invested in technology
year in and year out. We recognised – long before
the term ‘digital disruption’ became a corporate
buzzword – that technology is an enabler of
everything we do. For this reason, the Group has
no need to play ‘catch up’ with technology. We are
in a sound position to research, explore and harness
new technological developments as they apply to
our business, and there are already a number of
exciting initiatives underway in this regard.
The Collection House Group has always had a
strong commitment to business conduct that is
ethical, lawful and respectful of both its community
and environment. Again this year, we have released
our Corporate Social Responsibility (CSR) report,
which details significant achievements in this area.
This report is a key milestone in our CSR journey,
which began in earnest in 2013.
We also continue to strive to achieve best practice
in all areas of our operations, as part of our desire
to ‘lead the way’. This ethos is embedded in our
Company culture, and is not something that we
simply pay lip service to.
Of course, the continued success of the Collection
House Group is only possible because of the
talented and dedicated people who work with us.
To the staff across Australia, New Zealand and in
the Philippines, to the Executive Management Team
led by Matthew Thomas (MD and CEO), and to my
fellow Board members: I extend my heartfelt thanks
for your important individual contributions.
I’d like to take this opportunity to acknowledge
Tony Coutts, who retired from the Board at the
end of June 2015 after 20 years with Collection
House. For three of those years he was the General
Manager, and for the remainder he was a member
of the Board. His knowledge and experience in
finance, insurance and debt collection was
invaluable during his tenure, and his guidance and
loyal association to the Group is greatly appreciated.
We wish Tony all the best for his retirement.
Working through the process of gathering data
for the Annual Report is always an opportunity for
reflection. Day-to-day, the advances seem minimal,
but over the course of 12 months they add up to
significant progress – and this year has been a
pivotal one in positioning the business for a future
that’s changing at a faster pace than anything we
have witnessed before.
The Collection House Group is well placed for this
next phase. We are on the precipice of exciting
times and the move to a new purpose-built
premises at 100 Skyring in Newstead, Brisbane
seems to be propitiously timed, as it too signifies
an important step forward in the journey.
Shareholders can have confidence in the diversity of
our business model, which although complex, limits
reliance on the performance of any single product
or segment of the market – ensuring strategic
resilience. It also provides the Group with a unique
perspective of the end-to-end debt collection
industry. It is this depth and breadth of industry
knowledge that is our greatest competitive
advantage, and it is precisely what gives us our
reputation and credibility as a market leader.
From this vantage point, the future looks bright.
I look forward to your ongoing support so we can
continue to go from strength to strength.
David Liddy,
Chairman
2015 Annual Report
9
Managing Director and
Chief Executive Officer’s Report
Our promise to improve growth
The 2014-15 period realised the benefits of the
’gear change‘ process of FY14, with a 20 percent
increase in PDL collections, and 17 percent increase
in consolidated revenue driving the solid overall profit
growth of 20 percent.
Our promise to deliver consistent earnings growth
has continued with year-on-year Net Profit After Tax
(NPAT) growth, which over the past five years
averages 20 percent and enables us to continue to
invest in the future. We see this as an imperative
for continued growth.
The acceleration of change through pervasive
internet technologies and other scientific advances
point to a tomorrow very different to today.
We recognise and accept the increasing power of
the consumer in the new digital economy, and have
focused on redefining our role in this emerging
new paradigm.
Since our overall purpose is to help clients and
consumers resolve their financial problems, we
regard digital tools as a platform to improve
consumer engagement and empower the customer.
Put simply, we think such technologies make it easier
to ‘help us to help our customers’ in our daily
objective of resolving debt challenges.
Through FY15 we have continued to invest in the
future of our business on a range of levels, and this
will continue into FY16 and beyond so the Group
can continue to evolve in a rapidly changing world.
The soundness of our strategy was proven in FY15
with the strength of results across all of our
business units.
In the Purchased Debt Ledger (PDL) area,
collections were up 20 percent being our highest
ever growth rate, and double that of last year. This is
despite new FY15 PDL investments ($72 million) being
12 percent lower than FY14, as was planned and
outlined in our original market guidance.
The underlying growth factor remains the quality
of the PDL portfolio, measured by the increasing
proportion of paying accounts in the overall book,
and the total cash yield. In FY15, that yield reached
8.3 percent of the book (PDL collections divided by
closing total Face Value). During the year, the rate
of expensing assets (Amortisation rate) averaged
42 percent over FY15 and has remained in tight range
of 42-45 percent since FY11. Of all PDL collections in
FY15, 36 percent were derived from accounts
purchased three or more years ago, reflecting the
ongoing consumer-friendly approach to
accommodating long-term debt resolution.
In Collection Services (third party servicing),
10 percent revenue growth, along with productivity
gains, drove the profit growth of 15 percent on the
prior year, with earnings before interest and tax (EBIT)
margins in the segment improving from 18.3 percent
to 19.2 percent. The more robust approach to
relationship management and business development
implemented in FY14 has supported these
achievements, with tangible results such as the
major renewed contract win with St George/Capital
Finance announced in February 2015.
Core strengths in compliance, ethics, innovation
and depth of experience continue to underpin our
ongoing growth within this business unit, which
largely comprises of Collection House, MCC Group
and CLH Lawyers.
While our overall growth is largely organic, we
continue to invest in the product development of
new debt solutions for both clients and customers,
explore new debt purchase markets and models,
and pursue acquisition or partnership opportunities.
This sums up our winning strategy to date: future
focused but balanced with present demands,
measured yet inspired.
During the year, our entry into providing consumer
financial services took a meaningful step forward.
The establishment of a finance brokerage has
8
assisted our Lion Finance customers with refinancing
through trusted partners. Both personal loans and
mortgages were originated by this brokerage and
we continue to develop the capability and systems
required to expand our consumer facing business.
Risk Management has been an area of focus with new
frameworks implemented by a newly appointed Head
of Risk. An integrated approach to risk identification,
mitigation and continuous improvement is aligned
from the Board to operational levels.
Within the risk portfolio, debt funding risk has moved
from a key focus area to a maintenance state,
following the significant changes in prior years to
diversify debt and reduce gearing. While nominal net
debt increased by $12 million over the year, gearing
(net debt/net debt plus equity) closed at just under
the 40 percent target mark. Serviceability improved
further to 16 times (EBITDA to Interest Expense).
To allow participation in larger once-off PDL
investment opportunities, with the option of not
increasing debt on the balance sheet, we helped
establish the Australian Credit Recoveries
Trust in partnership with Balbec Capital LP,
an affiliate of Starwood Global Capital.
This arrangement means we are prepared
to leverage the capital Balbec brings
through our deep PDL market knowledge,
relationships and servicing capability.
As in prior years, technology investment
has been strong and will increase further
in FY16.
The proprietary ‘C5’ core collections
platform has been enhanced in a
variety of areas and a number of
Collection Services’ clients have been
migrated. Those remaining on the
legacy platform now account for
under 10 percent of Group revenue.
“ The soundness of our strategy was proven in FY15 with
the strength of results across all of our business units.”
2015 Annual Report
11
In FY16, we will commence significant programs to
enhance our analytics capability, as well as
undertake increased research and development
activity in the digital area, under a newly appointed
Head of Digital.
Having recently seen the first class new
headquarters at Skyring Terrace, Newstead in
operation, I am certain we will see further gains
in our goals for having a truly engaged and happy
workforce.
Collection House Limited continues an unwavering
commitment to conduct itself in a manner that is
ethical, lawful and respectful of its community and
environment. Our long-standing goal of ‘leading
the way’ in ethical practice was advanced with the
inaugural release of our Corporate Social
Responsibility Scorecard last year, which has been
released again for 2015. I am proud of the many
achievements documented within that report and
urge the reader to review the document.
Equally, I am pleased that we have made another
jump in our independent AON Hewitt Staff
Engagement Survey. We’ve achieved a seven
percent increase in engagement score with 93
percent participation. This result took us above
the national average for the first time and extremely
close to the ‘Best Employer’ range.
We were also successful with our diversity
objectives and made real progress in becoming
an employer of choice. An example of this was the
implementation of changes to our core systems
to provide special assistance to visually impaired
employees.
I wish to thank the Board, Executive Management
Team and staff for their unwavering commitment
and the achievements to date. I look forward to the
next chapter of our growth journey together.
Matt Thomas,
Managing Director and Chief Executive Officer
10
To be the ‘household name’ for clients and customers seeking quality debt management solutions.VISIONTo help clients and customers resolve their financial problems.PURPOSETo build our business in a sustainable way to broaden the quality services we deliver to a growing customer base.STRATEGYTo achieve profitability in a socially and environmentally responsible manner. ETHOSTo be the ‘household name’ for clients and customers seeking quality debt management solutions.VISIONTo help clients and customers resolve their financial problems.PURPOSETo build our business in a sustainable way to broaden the quality services we deliver to a growing customer base.STRATEGYTo achieve profitability in a socially and environmentally responsible manner. ETHOS 2015 Annual Report
13
Investing in
Our Future
Strategy and Innovation
Collection House Call Centre Strategy –
This guides how we will implement a multi-channel
communications platform to offer our customers
an integrated and consistent cross-channel
experience. This will provide our customers
flexibility in choosing how they engage with us to
resolve their debt challenges, while generating
efficiencies and developing a ‘digital-ready’
workforce. In FY16 we will trial new technologies
capable of delivering these objectives.
formal strategy management system accompanied
by centralised project, program and portfolio
coordination. This allows for informed business
planning, capital allocations, creation of value-
adding projects and initiatives, and strategy
feedback and learning opportunities. In FY16, we
will further refine our strategy management system
and improve our project management maturity.
V A T
R
O
IN N
O
C
I O N FRAME
P O R A TE STRATE
W
O
R
K
G
Y
CALL CENTRE
STRATEGY
DIGITAL
STRATEGY
IT
STRATEGY
Collection House Information Technology Strategy
2015-18 – This details how we will invest in our IT
infrastructure and related capability over the next
three years. The strategy will boost productivity,
protect our systems against digital threats, build
on the existing advantages offered by our
proprietary systems, and intensify our use of
analytics for competitive advantage. In particular,
in FY16 we will enhance our analytical capability
through the appointment of an Executive Analyst.
PURPOSE
To help clients
and customers
resolve their
financial problems.
Collection House Digital Strategy – This guides
how we will implement suitable systems to take swift
advantage of the emerging opportunities offered by
the new digital economy. This includes the potential
to deliberately introduce digital disruption and
engage in the rapid experimentation and
development of digital products and services.
This approach will be prioritised in FY16 with the
appointment of a Head of Digital.
Collection House Innovation Framework
The deliberate introduction of ‘innovation’ as a
corporate value in FY15 was accompanied by an
active culture supportive of experimentation, research
and development, openness to change, and agility
in achieving our goals. This philosophy underpins our
planning frameworks and will continue in FY16.
Combined, these plans capture the sense of energy
and ambition driving the next phase of our growth.
ETHOS
To achieve
profitability in a
socially and
environmentally
responsible
manner.
They also ensure we have suitably adapted to the
realities of the new digital economy and its
emphasis on innovative products and services.
Applying a disciplined approach to planning
and achieving our goals
Our strong FY15 performance was underpinned by
our FY14 investments that were implemented as
part of the planned ’gear change’ approach across
the Group. Our ability to prepare and implement this
change allowed the Group to accrue its benefits
gained through rolling out the strategy in a disciplined
and well-planned way.
During FY15, we continued to methodically refine
the plans necessary to optimise our performance
while simultaneously introducing detailed strategies
to achieve future sustained growth. These strategies
specifically address how we will engage and
leverage opportunities within the rapidly changing
digital economy, and are outlined below.
VISION
Collection House Corporate Strategy
This is the core strategy that drives all business
To be the
activity and coordinates our sub-strategies.
‘household name’ for
Importantly, all projects, initiatives and change
clients and customers
activity must demonstrably align with one or more
seeking quality debt
of the four corporate goals specified in the strategy.
management
This allows us to identify key activities and
solutions.
objectives, and prioritise these accordingly.
This approach also clearly establishes how we
seek to satisfy our vision and purpose. We will
continue to adjust our Corporate Strategy in FY16
to take advantage of emerging opportunities.
STRATEGY
To build our business
in a sustainable way
to broaden the quality
services we deliver
to a growing
customer base.
12
Equally important is the harmonisation and
execution of these plans. This is achieved through a
Investing in
Technology
Developing a competitive advantage
2015 Annual Report
15
Analytics and Business Intelligence
In conjunction with the development of the data
vault, we will continue to invest in capability and
resources in the area of data mining and analytics.
Predictive modelling, for example, provides the kind
of business intelligence that enables us to make
confident decisions about how we can work more
effectively across all areas – from customer contact,
to being able to apply the right treatments to the
right debt. It is an area we are seeking to develop
as we identify wider applications for such models
across the business as a whole.
Digital – the future is now
Our Digital Strategy is strongly linked to both data
management and analytics. We have now
appointed a Head of Digital and Programming,
and this role will be responsible for identifying and
understanding how we can prepare ourselves for
changes in technology and how it may impact our
business. Currently, we are researching and
exploring ways we can continue to build our
‘trusted online community’ in readiness for more
digital-based engagement with customers.
At Collection House, technology is one of our
key competitive advantages.
The Group maintains an unwavering focus on using
technology to assist business growth in a number
of ways: to improve productivity and operational
efficiencies, to augment customer service and better
outcomes for clients, and to maintain our position as
an industry leader.
We are committed to development, innovation and
improvement, while still maintaining a sustained
investment in the maintenance and protection of our
current IT systems.
Over the past 12 months, we have continued the
rollout of our proprietary C5 software, which
delivers tangible benefits on a number of fronts.
These include time-saving for staff (particularly in
the area of training), uncomplicated document
management, and enhanced client communication
through an improved secure data exchange
environment. We have also replaced the core
payment facilities channel of our legacy C4 system
and migrated to the C5 equivalent. We continue to
improve and refine C5 as the need arises; the fact
that we can do this in-situ is one of the key benefits
of the C5 system.
Data Management
The Group’s move to new premises has allowed
us to review our data storage arrangements, and
prepare to migrate all Company data to two new,
custom-built facilities in the near future.
We are also planning to purpose build our own data
vault to cope with the increasing data volumes we
expect in the future. This strategic imperative is a
medium-to-long-term undertaking for the business.
Data is an asset and enabler for everything we do
at Collection House, thus we aim to ensure we can
continue to harness our data, protect it, and access
it in a way that is relevant to the needs of the
business and customers alike.
14
14
In addition to the Head of Digital and
Programming position, we have expanded the
specialist IT team by 30 percent to provide greater
capability and expertise as we plan for, and begin to
undertake, the exciting initiatives that are underway.
At present there is a lot of focus in the marketplace
about ‘digital disruption’ and the lack of
preparedness of some businesses and industries
as the world in general faces a greater reliance on
technology. The Group has made a strong financial
commitment to developing overall IT capabilities
in the next financial year, and will continue to do so.
This reflects our commitment to future proofing
our business.
Along with these new endeavours, we aim for
optimal results in compliance, and we are currently
working to align to ISO Standards 27001, 27002 and
27005. These standards relate to the management
of risk, IT processes and policies, data encryption
and the management of information.
All improvements in line with these guidelines are
aimed at achieving best practice.
We are resolute to seeing our current technology
plans to fruition and, as always, we remain open
to innovation as it presents itself in the context of
our overall business strategy.
ever-changing technology and digital
driven business environment.
“ Staying agile and adaptable in an
”
Design and technology seamlessly combine
to create innovative and convenient work
spaces while enhancing communication and
collaboration. In the new premises at Skyring
Terrace, Newstead, staff can instantly and
easily access and display content from their
hand-held devices via wireless network to
screens scattered around the collective
spaces or wall-mounted in meeting rooms.
For example, eight ‘huddle points’ (bench
seating fitted around TV monitors) will be shared
by 16 teams. A Senior Manager (or any member
of staff) will be able to conduct, via the TV
monitor, a quick meeting, formal training or daily
briefing session. What’s more, this Manager
can still conduct the meeting, without actually
being in the building, allowing the business to
work collaboratively both locally and nationally.
When not in use, these monitors can simply
communicate digital messages such as the
Collection House Core Values, motivational
messages, information about strategic initiatives
or workplace social engagements. Staff may
use the huddle points in their break times too,
which will mean that the areas become
conduits of informal communication as well.
These spaces are not only functional, they also
look good and will definitely improve the way
our people receive important broadcast
communications while at work.
<
S
k
y
r
i
n
g
H
u
d
d
e
P
o
n
t
l
i
Investing in
Our People
Sustainable growth is achieved through our people
17
At Collection House, we believe that our people are
our most valuable resource. We provide a first-class
working environment and a culture built on
accountability, respect, performance, ethics,
professionalism, teamwork and innovation.
This is integral to our business ethos and is always
our top priority.
First-class working environment
We acknowledge that for many of our staff their
workspace is important to them.
In July 2015, we commenced our staged relocation
to our new 8,000sqm headquarters to the Gasworks
precinct in Newstead. This relocation has allowed us
to focus heavily on future proofing our workspace,
and additionally takes into account opportunities for
further expansion.
Collaborative workspaces ensure our Managers
practice inclusive leadership, and the technology
driving this is also key in enabling them to invest in
coaching and developing their teams.
In addition to our Newstead office, we have also
been able to complete two smaller relocations in
our regional Victorian offices. These higher quality
premises have positively impacted our staffs’
workplace satisfaction.
Ongoing commitment to staff engagement
We value staff feedback and are focused on
ensuring that Collection House is a great place to
work. During December we conducted an
employee engagement survey, again partnering
with AON Hewitt. A very pleasing 93 percent of staff
completed the survey and with this level of
participation we are confident that the engagement
score is a true reflection of staff perception.
We saw a seven percent uplift year-on-year in
respect to our overall engagement score, putting
us four points above the Australian norm.
The largest improvements were seen across the
areas of performance management, collaboration
and communication.
16
PERFORMANCE
We embrace a performance based
culture where results, hard work
and determination are recognised.
INNOVATION
We empower our people to share
ideas and think creatively to build a
culture of improvement, adaptability
and growth.
ETHICS
We demonstrate integrity by being
open, honest and fair.
TEAMWORK
We support one another’s efforts,
ensuring we achieve common
goals by working together.
RESPECT
We treat staff, customers and clients
respectfully and recognise the
importance of diversity.
ACCOUNTABILITY
We expect individuals to own their
actions and take responsibility for
their work priorities, outcomes and
behaviour.
PROFESSIONALISM
We believe in honouring our
business and personal
commitments.
Investment in our leadership
We have implemented development programs
which assist in identifying and developing current
and future leaders within our business. As part
of our succession planning, we continually review
and recommend for promotion, employees who
show exceptional leadership qualities and strong
performance.
We appointed an additional 49 staff to our front line
management program - Leadership Excellence
and Development (LEAD), where the successful
participants will embark on a two year program
to equip them with the skills to be considered for
future leadership opportunities.
We have continued to partner with an external
leadership company, where all Senior Managers
complete a two day Impact Leadership program.
This program has helped to define the language
and leadership methodologies we have adopted
throughout the organisation.
During the year, 149 staff obtained a nationally
recognised qualification, Certificate III in Mercantile
Agents. This qualification is available to all staff upon
joining the Company.
Embracing a diverse workforce
The Collection House workforce is made up of many
individuals with diverse skills, values, backgrounds
and experiences. We value diversity and recognise
the organisational strength, deeper problem solving
ability and opportunity for innovation that it brings.
We also respect and leverage the unique contribu-
tions of employees with diverse backgrounds, ex-
periences and perspectives, to provide exceptional
customer service to an equally diverse community.
Driving innovation through our people
With innovation as a core value, we take a broad
definition of ‘innovation’ and the positive spirit it
represents. In particular, we see innovation as
the process of translating an idea into a product,
process, or service that contributes significant value
to the Company. This can be a significant improve-
981
staff are currently
employed by
Collection House
16%
of our workforce are bilingual
63%
of our workforce are
represented by women
87%
Full Time staff
8%
Part Time staff
5%
Casual staff
ment to something that already exists, or it can be
the creation of something new and transformational
that is not currently in place.
A key driver of innovation is our Collective Minds
program, which allows staff to proactively put
forward suggestions. The ideas can relate to any
part of the business, but essentially are captured
under the key themes of work environment, work
culture, business practice, IT systems and staff
wellbeing.
As a result of the program, we have received a
total of 314 staff ideas during the FY15 year and
have been able to progress a significant number
of these to fruition, which has improved our
efficiency. Forward thinking is encouraged and
celebrated at Collection House, which is also
facilitated via the program.
We believe that sustainable growth is achieved
through our people. We will continue to invest in
our staff and ensure our workforce is highly
engaged, rewarded for performance and provided
an environment where learning and development
opportunities are available to everyone.
The Collection House Group is led by an experienced and professional Board of Directors,
all of whom bring great breadth and depth of financial and commercial acumen to the business.
Leadership
Directors
David Liddy
Mr Liddy has over 43 years’ banking experience, including appointments in Australia,
London and Hong Kong. He was appointed as Collection House Limited’s Chair in
March 2012.
Mr Liddy is also a Non-Executive Director of Steadfast Group Limited, a position he
has held since 1 January 2013 and Emerchants Limited, a position he held since
27 April 2012.
Previously, he was MD and CEO of Bank of Queensland Limited from 2001-2011.
Mr Liddy holds an MBA, is a Senior Fellow of the Financial Services Institute of
Australasia and a Fellow of the Australian Institute of Company Directors.
Dennis Punches
Mr Punches was first appointed to the Collection House Limited Board in July 1998.
In 2000, he was appointed as Chair of the Board. In 2009 he stepped down as
Chair to become the Group’s Deputy Chair.
He is presently Co-Chair of International Collectors Group, on the Board of Capio
Partners, LLC and a Trustee for Wisconsin’s Carroll University.
He is a former Director of Attention LLC Inc, Analysis and Technology Inc, and
Co-Founder and former Chair of Payco American Corporation.
Matthew Thomas
Mr Thomas has over 23 years’ experience in the finance and collections industry and
has been with Collection House Limited for the past 16 years. He was appointed to
the Board in March 2013.
Since starting with Collection House as a Customer Service Officer in 1999,
Mr Thomas has been promoted to various positions, including IT Manager and Chief
Information Officer. In 2007, Mr Thomas was promoted to Chief Operating Officer.
In this role, he was responsible for all collection operations as well as Group IT
strategy and business analysis. Mr Thomas was appointed as the Group’s Chief
Executive Officer in July 2010.
Mr Thomas is currently Deputy Chair of the Australian Collectors and Debt Buyers
Association, a member of The CEO Institute and a Graduate Member of the
Australian Institute of Company Directors.
Tony Coutts (retired 30 June 2015)
Mr Coutts has over 39 years’ experience in the finance, insurance and debt collection
industry, including 20 years at Collection House Limited. He was Collection House
Limited’s General Manager from 1995 to 1998. In September 1998, he was appointed
as an Executive Director of Collection House Limited, responsible for sales.
From 1 July 2006, he became a Non-Executive Director.
18
2015 Annual Report
19
Kerry Daly
Mr Daly has over 31 years’ experience in the financial services sector. Mr Daly was
elected a Director of Collection House Limited on 30 October 2009.
Mr Daly is currently a Non-Executive Director of Trustees Australia Limited, a position he
has held since March 2009.
During the period 1987 to December 2000, Mr Daly was MD and CEO of The Rock
Building Society Limited where he initiated its demutualisation and was responsible
for its ASX listing. From January 2001-2007, he served as Executive Director of the fixed
interest brokerage and investment banking business, Grange Securities Limited.
David Gray
Mr Gray has over 21 years’ experience in senior executive positions with large
national and international companies. He is currently the Chair of Queensland Cyber
Infrastructure, a position he has held since March 2008, Chair of Australian Urban
Infrastructure Network, a position he has held since 2010 and is an adjunct professor
at QUT.
Previously, Mr Gray was Deputy Chair of the Civil Aviation Safety Authority (CASA) from
2009 to 2014, a Director of Brisbane Airport Corporation from 2010 to 2014, Chair of
Queensland Motorways from 2006 to 2010, Chair of WaterSecure from 2008 to 2011, MD
of Boeing Australia from 1995 to 2006, MD of GEC Marconi (Australia) from 1990 to 1995,
and Divisional Chief Executive of GEC (Australia) Heavy Engineering from 1984 to 1990.
Mr Gray was appointed to Collection House Limited’s Board on 28 June 2011 and
elected a Director on 28 October 2011.
Philip Hennessy
Mr Hennessy was, until February 2013, Queensland Chair of KPMG, Chartered
Accountants. After 12 years in that role and some 30 years being involved in all aspects
of corporate insolvency and reconstruction, he retired from KPMG in July 2013.
Mr Hennessy is currently Chair of Redland Investment Corporation Pty Ltd,
Chair of the Audit and Risk Committee of Metro Mining Limited, Chair of the Mater
Hospital Foundation, Director of the Starlight Children’s Foundation National Board,
Member of the University of Queensland Senate, Chair of the University of Queensland
Finance Committee and Chair of the Audit and Risk Committee of Blue Sky Alternatives
Access Fund Limited.
Mr Hennessy was appointed to the Board of Collection House Limited on 22 August 2013
and elected a Director on 25 October 2013.
Julie-Anne Schafer
Ms Schafer is an accomplished Director with experience across a broad range of
industries. She has worked in a number of Non-Executive Director roles with a focus on
business outcomes, customers, risk management and governance.
She is currently a Non-Executive Director of Catholic Church Insurance and Aviation
Australia Pty Ltd.
Ms Schafer was previously the Chair of RACQ and RACQ Insurance, with former
directorships including Queensland Rail and was Commissioner of the National Transport
Commission. She was a Non-Executive Director of the Territory Insurance Office prior
to its sale. Ms Schafer is a facilitator for the Australian Institute of Company Directors in
Governance, Strategy and Risk Management. She is also a member of the Australian
and New Zealand Institute of Insurance and Finance.
Ms Schafer was appointed to the Board of Collection House Limited on 28 January 2014
and elected as a Director on 31 October 2014.
Executive
Management Team
2015 Annual Report
21
Our Executive Management Team (EMT) builds value for our shareholders, customers and clients
through superior leadership skills and a focus on innovation, high quality service delivery and
long-term sustainable growth of the business. The average tenure of the EMT exceeds 10 years.
2.
1.
5.
6.
4.
3.
1. Matthew Thomas
Managing Director and CEO
Refer to Leadership Directors on page 18.
2. Paul Freer
Chief Operating Officer
As Chief Operating Officer, Mr Freer is responsible
for the business divisions of the Group. Mr Freer has
been with the organisation for over two years.
He has over 25 years’ experience across financial
services incorporating over 13 years in General
Management leadership positions covering
receivables management, risk management,
corporate and retail banking and funds management.
Mr Freer is an Associate of the Chartered Institute
of Bankers, he holds a Diploma in Marketing and is
a Graduate of the Australian Institute of Corporate
Directors.
3. Adrian Ralston
Chief Financial Officer
Mr Ralston is responsible for the overall financial
management of the Group. He has been with
Collection House for over 10 years.
Mr Ralston oversees all aspects of the Group’s
financial management, including reporting, planning
and analysis, merger and acquisition activities,
process management and investor relations.
Mr Ralston has over 20 years of operational and
financial management in the commercial sector.
He was formerly General Manager Finance and
Administration with Hevi Lift, part of the Swire Group
of companies, and was Chief Financial Officer at
BDS Group. He holds an MBA from Deakin University,
a Bachelor of Business (Accounting), Northern
Territory University and is a Fellow of CPA Australia.
4. Kylie Lynam
General Manager Human Resources and
Corporate Services
Mrs Lynam has almost 20 years’ experience in human
resource management and has been with the Group
for the past 15 years. During this time she has held
a number of different roles, including Company
Secretary in 2006.
Mrs Lynam’s principal role is to drive the Group’s
human resource management strategy and to
ensure that all employees have the right skills and
embrace the Group’s culture to enable strong
business performance.
Mrs Lynam leads the strategic projects, corporate
services and training support areas to achieve key
corporate objectives. She is also responsible for
workforce optimisation and continuous improvement
initiatives. She holds a double degree in Marketing
and HR from University of Queensland.
5. Marcus Barron
Chief Information Officer
Mr Barron has been with the Group for more than
12 years. As Chief Information Officer (CIO),
Mr Barron is responsible for all of the Group’s
information technology and data analysis
requirements. Applying his experience to both the
operational and technological divisions of the Group,
Mr Barron’s main responsibility is to deliver
superior technological systems for internal and
external stakeholders. In 2013, he joined the EMT
as Chief Information Officer.
He holds a Bachelor of Information Technology,
University of Queensland, and is a member of the
Australian Computer Society.
6. Julie Tealby
Company Secretary and Chief Risk Officer
Mrs Tealby has been with the Group for more than
14 years and has held the position of Company
Secretary since 2013. In addition to being Company
Secretary, in August 2014, Mrs Tealby was appointed
as Chief Risk Officer and oversees the Group’s Risk,
Internal Audit, Compliance, Resolutions and
Corporate Legal and Governance Departments.
Mrs Tealby holds a Bachelor of Business
(Accountancy), is a member of CPA Australia and
is a professional member of the Institute of Internal
Auditors. Mrs Tealby has completed her Graduate
Diploma in Corporate Governance through the
Governance Institute of Australia.
20
Building for the future
Our Performance
A diversified operating model
The scope and range of financial services provided
by the Collection House Group is primarily what sets
us apart from our competitors.
Our core operations are made up of four distinct
areas:
• Lion Finance
• Collection Services
• CLH Legal
• Midstate CreditCollect
While each of these businesses form an important
and integral part of the overall umbrella of the
Group’s brand, they each focus on a specific niche
within the financial services market. And they are
supported primarily by the internal business units.
Central Operations and Collective Learning and
Development (CLAD), as well as the Group’s
functional support teams.
1
59
164
357
Collection House
Core Business Units
- Number of Staff
215
56
Lion Finance
Midstate CreditCollect
Central Operations
Collective Services
CLH Legal
Collective Learning
and Development
2015 Annual Report
23
It is this integrated, yet diversified operating model,
which enables the Group’s diversity of clients,
revenue streams, geographical presence and
breadth and depth of specific industry expertise.
This is what gives the Group its core strength and
growth opportunities.
Operating in this way also limits reliance on the
performance of any single product or segment of
the market, which, in turn, ensures strategic
resilience. It also provides the Group with a unique
and holistic perspective of the end-to-end debt
collection industry – providing deep industry insights
and further enhancing our reputation and credibility
as a market leader.
FY15 Report Card
In terms of an overall report card for FY15, the
financial results attest to the fact that the business
units are performing to expectation. On the
following pages each business unit has provided
an individual summary outlining key highlights for
the past financial year, and how these indicators are
linked to overall strategy and planned growth
outcomes. In many respects, the past financial year
has been one of ‘building for the future’.
While each of the units has a different journey and a
different story to tell, it is an incontestable fact that
their successes, large and small, can be credited to
two key attributes: people and technology.
In all of the Group’s endeavours, our over-arching
goal is to conduct business in a highly ethical way,
and to continually seek business improvements that
will deliver real benefits to our clients, our staff and
to our shareholders.
Lion Finance
Lion Finance is the largest subsidiary of the
Collection House Group, measured by its
contribution to profit and its size. It accounts for
around one-third of the Group’s total staff numbers.
Lion Finance is responsible for the collection of
Purchased Debt Ledgers (PDLs). At the end of FY15
Lion Finance had more than 304,000 active debt
accounts with a combined face value of $1.5 billion.
Operational Management Team
22
Investing in people to position for the future
•
Reinforcing the Group’s overall focus on ‘building for
the future’, a strong focus on and an investment in
people has been a key driver for Lion Finance over
this past financial year.
The implementation of the Group’s leadership
training program over the past twelve months has
helped people at all levels within the business to
improve ‘soft skills’ such as coaching and mentoring,
with the aim of becoming better leaders.
Early feedback has been positive. Customer Service
Officers (CSOs) say they feel more supported as a
result of the training, and the most recent AON
Hewitt Employee Engagement Survey results attest
to improvements in staff engagement too.
Inevitably, improving staff engagement will filter
through into increased productivity and will lower
staff turnover, which will benefit the business both
in the short and long-term.
Also during the year, a significant investment was
made in recruitment for the purpose of expansion.
We are pleased to have met this milestone in the
long-term growth strategy for the business.
Key highlights
•
•
The successful start-up of CashFlow Financial
Advantage (CFFA). The role of Lion Finance in
this new advocacy service being offered by the
Group is primarily to identify customers who
meet specific criteria, and then connect them
to other services that will assist them to resolve
their financial situation. The long-term benefit
for our customers is that they will be able to
improve their financial position.
The enhancement of an online portal offering
customers another channel for engagement
and communication. While the telephone has
been – and continues to be – an important part
of our customer service contact strategy, we are
continually investigating and investing in ways to
harness technology to interact with customers
as alternatives to ‘over the phone’. This becomes
increasingly important as the population
generally becomes more migratory and more
reliant on digital and mobile technology.
24
The move to 100 Skyring. Lion Finance
Brisbane was the first business unit to move to
its new headquarters at Newstead. These new
premises will enable Lion Finance to expand its
existing Brisbane based operational staff
numbers as and when required.
Setting each of the above ‘building blocks’ in place
has been an important part of securing the
foundation for Lion Finance as it seeks further
opportunities for growth.
Looking ahead into FY16, we will continue to focus
on staff engagement for the betterment of
customer service, as we seek to create deeper and
more genuine relationships with customers.
We do this to reach ‘resolution at first contact’
– a better outcome for all parties. While considered
a delicate balancing act, this supports the Group’s
ethical values and longer-term financial strategies
around growing our repayment arrangement
portfolio with customers to underpin solid revenue
growth.
In order to support these endeavours with staff and
customers, we will continue to develop IT systems
and internal processes. This development is critical
so that Lion Finance can continue to remain
competitive and sustainable, as well as able to
swiftly adapt to any changes in the economic
environment, while ensuring compliance to the
highest ethical standards of debt collection and
legislative requirements.
Collection Services
The Collection Services division provides account
receivables management across a broad range of
industries including finance, banking, insurance,
utilities, telecommunications, government and
automotive under the Collection House brand name.
Creating long-term partnerships
Ensuring client satisfaction and building rewarding
long-term client partnerships has been a key driver
for Collection Services this year, as the division
prepares for the future.
Over the past financial year, the focus of our team
has been firmly upon securing long-term business
25
opportunities, and in February this year we were
successful in being awarded by St George, a four
year contract servicing the secured retail portfolio,
as well as the secured retail portfolio acquired from
Capital Finance (Australia) Limited.
In keeping with this drive to secure long-term
partnerships, Collection Services has also been
assessing its client service and satisfaction across
its entire client base. Our team is working to ensure
appropriate resourcing for clients, alongside
implementing changes to ensure productivity and
efficiency gains that provide better value to clients,
in terms of increased recoveries and net returns on
post write-off portfolios.
Key highlights
•
•
We have also put significant effort into
coaching and mentoring our own people.
This has meant developing better support
structures for some roles, as well as clear paths
for leadership throughout the entire team.
These initiatives are designed to create staff
satisfaction, while facilitating opportunities for
people to stay with the organisation for longer,
as well as identifying individual opportunities for
professional development as staff continue their
careers with the Group.
The successful on-boarding of a major utility
client onto our C5 proprietary collections and
CRM platform. We will continue to migrate more
clients over to this system during the next
financial year. Migrating more clients to this
system provides us with access to a greater and
more diverse set of data. This allows us to better
analyse the information so we can enhance the
way we serve our clients and customers. It also
allows us to better maintain our highly regarded
competitive standing and marketplace reputation
for receivables management and collections
expertise.
•
We recruited an experienced Executive to the
position of New Zealand Country Manager.
This is a key appointment in our strategic agenda
and reaffirms our commitment to retain and grow
our operations in New Zealand.
Central Operations
Central Operations is a shared services division,
providing support to other businesses within the
Group. Central Operations also includes Collection
House International, the operation in Manila.
Building a strong platform for growth
In keeping with the Group’s overall desire to ensure
solid foundations for the benefit of future expansion,
Central Operations has focused heavily on
streamlining processes over this past financial year.
This has been done to create a lean, efficient and
strong platform to support future growth.
Performance in the Philippines
Collection House International BPO, Inc. in the
Philippines, a call and services centre in Manila,
is reaching the end of the first year of a three-year
growth plan and has achieved its objectives for
the 2015 Financial Year.
Key highlights
•
•
Growth in staff numbers from 78 to 110 seats.
This has been achieved while increasing produc-
tivity levels, as demonstrated by the increased
operating revenues generated in Manila this year.
Increased operational efficiencies and outputs.
Chiefly these have been enhanced by improve-
ments made to the staff training model including
better orientation and support for new recruits,
therefore enabling staff to develop confidence
and capability more quickly. At the same time,
this new model also includes more accurate
performance measures and better processes
around performance improvement and
coaching. Early evidence also suggests that
the establishment of these new initiatives has
resulted in higher staff engagement levels.
This focus on people, coaching and performance
will continue throughout the next financial year as
we continue to look for more opportunities to utilise
our Manila operational capability to benefit Lion
Finance and Collection Services, and their clients.
2015 Annual Report
27
intention of steadfastly positioning MCC to grow into
the future.
As a small boutique firm, MCC is able to offer ‘case
management’ debt recovery – looking at each single
debt individually and applying tailored recovery
strategies as required.
Key highlights
•
•
•
New premises in Bendigo. The opening of a
brand new facility that has the capacity to house
30 people. National contracts and new business
opportunities will be serviced by this team.
Significant business wins. This includes a
contract with a major national utility.
Supplier of the Year Award. This award, from
Procurement Australia (a facilitator of tenders
and contracts for the public sector), underpins
MCC’s already strong reputation as a preferred
contractor to the local government sector in
Victoria.
These successes have positioned MCC for its next
phase of growth. MCC will continue to access and
leverage synergies as part of the Collection House
Group, such as integrated data and business
intelligence reporting. It is also an intention to assign
more resources to business development with the
aim of securing more work for the MCC team and
strengthening existing client relationships.
From a capacity perspective, MCC is also steadily
increasing headcount numbers in line with these
growth plans.
We are confident that MCC is now in a position to
reap tangible and financial benefits from the hard
work that has been done over the past couple of
years to consolidate the company post-merger.
Collective Learning and
Development
Collective Learning and Development (CLAD) is the
Group’s registered training organisation, and is part
of the National Training Framework, specialising in
the delivery of financial services courses and credit
and receivables management.
CLAD not only provides the Group’s internal training
requirements, it also provides staff development
and a wide range of training services to a
combination of external business and government
agencies.
Supporting our people now and in the future
This past financial year, CLAD achieved record
numbers of traineeship completion rates for the
Certificate III in Mercantile Agents. All staff joining
the Group are given the opportunity to complete
the nationally recognised qualification.
Looking to FY16
In the next 12 months, CLAD will continue to focus
on supporting our people by investing in online
learning channels, enabling greater flexibility in the
development and delivery of training courses.
The team will also conduct a review of the external
marketplace to identify the type of training it can
deliver to external clients in areas such as financial
literacy, financial hardship and credit, and
receivables management.
Streamlining Australian processes
Over the course of this financial year, we have
utilised our shared service concept to streamline
operational activities, in areas of the business where
centralisation can provide efficiency and best
practice advantages. This has been achieved by
managing Lions’ growing repayment arrangement
portfolio and the centralisation of a dedicated
campaign management team, focused on
performance analytics, workflow management
and debt treatment paths.
The developments made this year will generate
efficiencies into next year, and going forward we will
continue to ‘bed down’ these changes. This remains
part of our commitment to ensure a solid and stable
platform from which we can continue to grow.
CLH Legal Group
CLH Legal Group is a wholly owned subsidiary of
Collection House Group and an Incorporated Legal
Practice offering debt recovery and litigation as
well as insolvency solutions, across a broad range
of industries.
Strengthening our market offering
Incremental growth and a change of business name
have been key themes over the past financial year
for the CLH Legal Group, as the firm positions itself
for the future.
The name change in December 2014, enables CLH
Legal to better leverage its unique position as the
legal arm of the Collection House Group, as well as
leverage the Group’s enduring reputation for ethical
conduct, strong performance, and client-focused
services.
CLH Legal continues to enjoy steady growth.
This can be attributed to the fact that the firm has
earned a reputation in the marketplace for its deep
experience, knowledge and capability in a specialist
field. This with smart technology enables efficiencies
across our practice management, processes and
workflows. It can also be attributed to the distinct
advantage CLH Legal has in being integrated with
its highly regarded ASX listed parent company.
MIDSTATE CREDITCOLLECT PTY LTD
This view is shared by our client base and the
broader market – both regard the backing of the
Collection House Group as reassuring, and believe
the new name of CLH Legal Group better reflects
this relationship.
Key highlights
•
•
Growth of our external third-party client base.
This growth has diversified our revenue streams
and is a crucial part of our strategy.
Growth in local and state government sectors.
This has been achieved through the servicing of
Collection House clients.
Looking ahead, while we will be dedicating time
and resources to continue to build our external
third-party client base, our number one priority
continues to be to improve productivity and
efficiency so we can better service internal clients –
maximising their outcomes.
We are confident with our projections for future
growth. We are optimistic we can achieve this
growth by building on two of our core strengths:
our deep expertise in the specialist areas of
corporate and personal insolvency, debt
administration and commercial litigation; and by our
solid standing as part of the Collection House Group.
Midstate CreditCollect
Midstate CreditCollect (MCC) is a fully owned
subsidiary of the Collection House Group.
It is a boutique agency based in regional Victoria
offering professional credit management, debt
collection and legal services
Preparing for a stronger future
The MCC merge occurred in 2013. Post this merge,
MCC has focused on implementing the right
structures, as well as centralising administration
functions to eliminate duplication and create
synergies and efficiencies across the business as a
whole. There has been considerable focus on
creating a unified team culture across the four MCC
sites in Victoria, and with the wider Collection House
Group. Each of these imperatives was done with the
26
Corporate Social
Responsibility
The CSR Outcomes Report is available online
2015 Annual Report
2015 Annual Report
29
VISION
To be the
‘household name’ for
clients and customers
seeking quality debt
management
solutions.
Deepening our legacy of ethical conduct
The Collection House Group has always had a
strong commitment to business conduct that is
ethical, lawful and respectful of both its community
and environment. Since 2013, the Group has had
a dedicated Corporate Social Responsibility (CSR)
program that delivers specific initiatives across
four areas:
PURPOSE
supporting the community
To help clients
• protecting the environment
and customers
resolve their
financial problems.
• engaging stakeholders
respecting the law
•
•
The program follows the international standard ISO
26000 Guidance on Social Responsibility.
This enables CSR activity to be informed by
internationally recognised best practice.
Over the past 12 months the program has recorded
significant achievements, which are outlined below.
STRATEGY
To build our business
in a sustainable way
to broaden the quality
services we deliver
to a growing
customer base.
ETHOS
To achieve
profitability in a
socially and
environmentally
responsible
manner.
Engaging the Financial Basics Foundation
– investing in the future
Work with the Financial Basics Foundation over the
past financial year has centred on expanding our
partnership to improve staff awareness of, and
commitment to, supporting the Foundation’s efforts.
We also progressed plans to develop and
commence a 2015-16 education program with high
28
school students. The aim of this is to help young
people become ‘debt literate’ and develop an
understanding of debt through topics such as:
•
•
•
how people can get into debt that they
cannot later manage
the consequences of not controlling debt
or meeting repayment obligations
developing strategies for reducing the
likelihood of future debt problems
This is a priority area for the CSR program. There is
a lack of current and practical classroom resources
which address ‘over-indebtedness’. We believe that
by helping young people develop debt literacy they
will be better equipped to avoid future fiscal
hardship and financial exclusion.
Assisting the Clemente Learning Program
– improving whole-of-life outcomes
During the year we have also partnered with the
St Vincent de Paul Society, Queensland, to
participate in the Clemente Learning Program.
This program helps people re-engage in their
communities through a free-of-charge university
program designed to build confidence through
education. It is modelled on a successful program in
the USA that has been implemented in Queensland.
Collection House staff began training volunteers
as learning partners with Clemente students.
This prepared them to become learning partners
for the first semester program in the 2015-16
financial year. Through the program, learning
partners provide support, encouragement and
study skills assistance. Collection House also
contributes to the program costs.
This will continue into next year. By resourcing this
program, we seek to help socially excluded
individuals overcome adversity and achieve higher
education outcomes to improve their life
opportunities.
Investing in the National Hardship Register –
protecting the vulnerable
The Group continues to support and advocate for
the work undertaken by the National Hardship
Register (NHR). The NHR is a joint initiative between
the Australian Collectors and Debt Buyers
Association Limited and the community sector to
protect individuals experiencing long-term and
severe financial hardship from unnecessary debt
collection activity.
Supporting Conexu – improving community
outcomes
During the year we provided in-kind project
management services to the Conexu Foundation
to assist with the delivery of products and services
for people who are Deaf, hard of hearing, or speech
impaired. By working with Conexu to optimise their
project management processes, we have helped
them achieve measurable and significant improve-
ments in efficiency, process and output quality.
By lending our expertise and professional
knowledge to not-for-profit organisations, we seek
to help them achieve their community-focused
goals in an enduring way.
Going into the next financial year, we will continue to
seek innovative opportunities for the Group to ‘give
back’ to the community. Further, we will improve
the way we measure and report our CSR practices
consistent with ISO 26000.
The
2015 Corporate
Social Responsibility
Outcomes Report
is available at
collectionhouse.com.au
to view.
2015 Annual Report
31
Corporate
Governance
The Corporate Governance Statement is online
Collection House Limited’s Board (the Board) and
its Senior Executives are committed to achieving,
and demonstrating, the highest standard of good
corporate governance practices. We also foster a
culture that values ethical behaviour and integrity.
The Board keeps the governance system under
regular review to ensure it reflects changes in law
and keeps pace with best practice developments
in corporate governance.
Board Composition
As at 30 June 2015 the Board comprises of eight
Directors (including the Chair), seven of whom are
Non-Executive Directors. During the year, Mr Tony
Coutts announced his retirement as a Director
effective from 5.00 pm Tuesday 30 June 2015.
On and from 1 July 2015 the Board comprises seven
Directors (including the Chair), six of whom are
Non-Executive Directors. The Managing Director
(Matthew Thomas) is an Executive Director.
The Board considers its current members to have an
appropriate mix of skills, experience and
independence to enable the Board to discharge its
responsibilities and deliver the Company’s strategy
and corporate objectives.
Board Committees
The Board has established two Committees each
with its own Charter:
• Audit and Risk Management Committee
• Remuneration and Nomination Committee
The Board Committees play a crucial part in the
governance framework.
Communication with Shareholders
Collection House Limited uses a range of methods
to communicate with shareholders, including
written and electronic communications.
Shareholders are able to make enquiries with the
Group at any time through the Investor Enquiries
page on the Group’s website.
30
Board of
Directors
Managing
Director/
CEO
Remuneration
& Nomination
Committee
Audit & Risk
Management
Committee
Internal
Audit
Executive
Management
Team
The Corporate Governance Statement is online.
The Company’s listing on the Australian Securities
Exchange (ASX) means it must comply with the
Corporations Act 2001, the ASX Listing Rules and
other Australian laws. As part of this compliance,
Collection House Limited (the Group) is required to
disclose how it has applied the Recommendations
contained in the ASX Corporate Governance
Council’s Principles and Recommendations –
3rd Edition (the Principles and Recommendations)
during the financial year ending 30 June 2015
explaining any departures from them. The Group
has, unless otherwise stated, followed the Principles
and Recommendations throughout the year.
More information about Collection House Limited’s
Board and Management, corporate governance
policies and procedures, and practices is in the
Corporate Governance Statement available on the
website at www.collectionhouse.com.au under the
heading Investor Centre – Corporate Governance.
Directors’
Report
FY2015 highlights
•
•
•
•
Net profit after tax for the year was $22.5 million
(2014: $18.7 million)
Earnings per share (EPS) were 17.2 cents
(2014: 14.7 cents)
Shareholder equity was $170.7 million
(2014: $156 million)
Total dividends for the year of 9.1 cents
(interim 4.4 cents paid 27 March 2015, final
4.7 cents to be paid 16 October 2015), fully
franked (up 13.8 percent from financial year 2014).
Overview of Group operations and
financial results
The consolidated Net Profit After Tax (NPAT) of $22.5
million for the year ended 30 June 2015 increased
20.2 percent from $18.7 million in the previous year.
Total revenue for the Group was $126.0 million an
increase of 17.4 percent. Basic earnings per share
increased 17.1 percent to 17.2 cents per share.
The Directors present their report on the
consolidated entity (referred to hereafter as the
Company or the Group) consisting of Collection
House Limited and the entities it controlled for the
financial year ended 30 June 2015.
Directors
The following persons were Directors of the Group
during the whole of the financial period and up to
the date of this report, unless stated otherwise:
•
•
David Liddy
Dennis Punches
• Matthew Thomas
•
•
•
•
•
Tony Coutts (retired 30 June 2015)
Kerry Daly
David Gray
Philip Hennessy
Julie-Anne Schafer
See pages 36 to 38 for profile information on
the Directors.
Principal activities
The principal activities of the Group during the
financial year were the provision of debt collection
services and receivables management throughout
Australasia and the purchase of debt by its special
purpose subsidiary Lion Finance Pty Ltd.
There were no significant changes in the nature of
the activities of the Group during the year.
32
2015 Annual Report
33
Key financial results - by segment - Audited ($’000)
Collection services
Purchased Debt Ledgers
(PDLs)
Consolidated
30 June
2015
$ ‘000
30 June
2014
$ ‘000
30 June
2015
$ ‘000
30 June
2014
$ ‘000
30 June
2015
$ ‘000
30 June
2014
$ ‘000
Revenue
Sales
Interest income
48,751
44,433
Total segment revenue
48,751
44,433
Intersegment elimination
77,552
77,552
63,118
63,118
48,751
77,552
126,303
(260)
44,433
63,118
107,551
(214)
Consolidated revenue
48,751
44,433
77,552
63,118
126,043
107,337
Results
Segment result
Interest expense and
borrowing costs
Unallocated revenue less
unallocated expenses
Profit before tax
Taxation
NPAT
9,373
8,140
31,898
27,593
41,271
35,733
(5,915)
(5,474)
(3,464)
31,892
(9,409)
22,483
(3,299)
26,960
(8,255)
18,705
Collection Services business
PDLs business
Consolidated Collection Services (third party servicing)
revenue increased year-on-year by 9.7 percent. The
segment result for the year of $9.4 million increased
15.2 percent from the previous year result of $8.1 million.
The EBIT margin in the segment improved from 18.3
percent to 19.2 percent during the financial year.
Key growth was achieved in FY15 across this
sector through:
•
•
•
Expansion of the St George/Capital Finance
Contract (announced in late February 2015)
Increased market share in energy and
telecommunications
New business won in new service areas such
as back up servicing and insourcing
Total PDL collections increased 19.8 percent to $127.6
million for the year ended 30 June 2015. The segment
result for the year was $31.9 million, an increase of
15.6 percent. PDL acquisitions at cost were $72.3 million
compared to $82.2 million in 2014.
The underlying growth factor remains the quality of
the PDL portfolio due to the increase in proportion of
repayment arrangements in the overall book and total
yield, which reached 8.3 percent in FY15.
Total repayment arrangements and litigated accounts
portfolio increased to $389 million from $353 million in
the previous year. Total collections in the year from this
portfolio was 68 percent of total PDLs collections.
Directors’
Report
(cont’d)
35
Review of financial position
The Group’s net assets increased 9.4 percent to
$170.7 million. Total net borrowings increased to
$111.8 million in 2015, up from $99.4 million in 2014.
The Group’s net cash flow from operating activities
was $77.7 million, an increase of 17.7 percent.
Net debt increased by $12.4 million over the year, and
net debt/net debt plus equity closed at 39.6 percent.
The Board has confirmed its confidence in the
Group’s future prospects. The Directors have
recommended the payment of a final fully franked
dividend as stated on page 32.
Investment for future performance
The Group embraces innovation as a corporate value
and ongoing investment in future capability is a core
element of our strategy. Above all, we recognise our
people and culture as key drivers for positive and
sustainable future performance.
We continue to invest in our people through
engagement surveys and specialised leadership
training. We embrace the benefits of a diverse
workforce and increase our staff engagement
through our commitment to Corporate Social
Responsibility programs.
In June 2015 we commenced our staged relocation
to our new 8,000 sqm headquarters in Newstead,
and the full relocation is expected to be completed
before September 2016. Our Midstate CreditCollect
(MCC) brand also expanded and opened a new
office in Bendigo.
We continue to invest in our capability through the
continued expansion of the C5 collection platform.
Our future technology investments include a two year
analytics platform upgrade to build a substantially
more powerful ‘data vault’, which will enable faster
and more sophisticated data modeling and analysis.
We have also invested in a Head of Digital position
to ensure the Group is ‘leading the way’ in the new
digital economy.
The Group continues to invest in business and product
development. CashFlow Financial Advantage assists
consumer customers with refinancing through trusted
partners and has under development, plans for
additional complementary services for consumers.
The Group continues to show its commitment to
ethical debt collection practices through its dedicated
Hardship Assistance team.
PDL investment in FY16 is expected to be 90-110
percent of FY15 levels with $41 million of PDL
investment already committed under contract.
The April 2015 launch of a third party PDL investment
vehicle, Australian Credit Recoveries Trust, provides
the Group opportunities to source additional servicing
income from PDL investments.
Business strategies and prospects
for future financial years
Enduring strategic themes of innovation, differentiation
and people-focus will continue to underpin our overall
growth strategy.
The Group’s short-term strategies include:
•
•
•
•
Increasing sales through new and existing
products and clients, with particular focus
on leveraging core strengths in compliance,
innovation and depth of experience/data
Expanding collection capacity to increase
liquidation rates from PDL assets
Continuing expansion into high potential market
sectors, such as Government
Further expansion and maturity of our Manila
operations - Collection House International
(BPO), Inc.
The Group’s longer-term growth will be driven by:
•
•
Further organic growth of specialist subsidiaries:
Midstate CreditCollect and CLH Legal Group
Product development of new debt solutions for
both clients and customers
34
Ongoing investment in innovation, technology
and analytics – with quicker realisation of benefits
not been provided for and there are no income
tax consequences:
•
•
•
Pioneering new debt purchase markets
and models
Exploring acquisition or partnership opportunities
in adjacent service areas
Risks
The Group remains committed to managing its risks.
The most significant risks to the business include the
ability to service the needs of clients in a manner that
generate profits for the Group; the ability to accurately
determine the price which the Group will pay for
debts, the ability to accurately determine the value
of the purchased debt portfolio at a point in time; and
the ability to put debtors onto a payment plan.
Risk mitigation strategies are implemented for all key
risks and regularly reported on to the Audit and Risk
Mangement Committee, and the Board.
The Board and Management are resolved to deliver
consistent earnings growth year-on-year, while
maintaining gearing levels over time to deliver
superior risk adjusted returns.
Dividends
Dividends paid or declared by the Company to
members since the end of the previous financial
year were:
Declared and
paid during
the year 2015
Cents per
share
Total
amount
$’000
Date of
payment
Final 2014
ordinary
Interim 2015
ordinary
4.1
5,318.4
4.4
5,739.5
17
October
2014
27
March
2015
After the balance date the following dividends
were proposed by the Directors. The dividends have
Declared after
end of year
Cents per
share
Total
amount
$’000
Final 2015
ordinary
4.7
6,166.4
Date of
payment
16
October
2015
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) The Group raised capital of $3.0 million from a
Dividend Reinvestment Plan
(b) The Group purchased new debt ledger portfolios
for A$72.3 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 4.7 cents per
fully paid share to be paid on 16 October 2015 out of
retained profits and a positive net asset balance as at
30 June 2015.
Other than the matters discussed above, no matter or
circumstance has arisen since 30 June 2015 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.
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.
2015 Annual Report Directors’
Report
(cont’d)
Information on Directors as at 30 June 2015
David Liddy
Independent, Non-Executive Chair. Age 64.
Qualifications
MBA.
Experience
Mr Liddy has over 43 years of banking experience, including appointments
in Australia, London and Hong Kong. He was appointed as Collection House
Limited’s Chair in March 2012.
Mr Liddy is also a Non-Executive Director of Steadfast Group Limited, a position
he has held since 1 January 2013 and Emerchants Limited, a position he has held
since 27 April 2012.
Previously, he was MD and CEO of Bank of Queensland Limited from 2001-2011.
Mr Liddy holds an MBA, is a Senior Fellow of the Financial Services Institute of
Australasia and a Fellow of the Australian Institute of Company Directors.
Special responsibilities
Chair of the Board.
Member of the Remuneration and Nomination Committee.
Interest in shares
150,000 ordinary shares in CLH.
Dennis Punches
Non-Executive Deputy Chairman. Age 79.
Qualifications
BS.
Experience
Mr Punches was first appointed to the Collection House Limited Board in July
1998. In 2000 he was appointed as Chair of the Board. In 2009 he stepped
down as Chair to become the Group’s Deputy Chair.
He is presently Co-Chair of International Collectors Group and a Trustee for
Wisconsin’s Carroll University.
He is a former Director of Attention LLC Inc, Analysis and Technology Inc, and
co-founder and former Chair of Payco American Corporation.
Special responsibilities Deputy Chair of the Board.
Interest in shares
3,502,535 ordinary shares in CLH.
2015 Annual Report
37
Tony Coutts
Experience
Non-Executive Director. Age 56. (Retired 30 June 2015)
Mr Coutts has over 39 years of experience in the finance, insurance and debt
collection industry, including 20 years at Collection House Limited. He was
Collection House Limited’s General Manager from 1995 to 1998.
In September 1998, he was appointed as an Executive Director of Collection
House Limited with responsibilities for sales. He became a Non-Executive
Director from 1 July 2006.
Special responsibilities Member of the Audit and Risk Management Committee.
Interest in shares
1,460,207 ordinary shares in CLH.
Kerry Daly
Independent, Non-Executive Director. Age 57.
Qualifications
BBus (Acc).
Experience
Mr Daly has over 31 years’ experience in the financial services sector. Mr Daly was
elected a Director of Collection House Limited on 30 October 2009.
Mr Daly is also a Non-Executive Director of Trustees Australia Limited, a position
he has held since March 2009.
During the period 1987 to December 2000, Mr Daly was MD and CEO of The Rock
Building Society Limited where he initiated its demutualisation and was responsible
for its ASX listing. From January 2001, he served as Executive Director of the fixed
interest brokerage and investment banking business Grange Securities Limited.
Special responsibilities Chair of the Audit and Risk Management Committee.
Interest in shares
394,607 ordinary shares in CLH.
David Gray
Independent, Non-Executive Director. Age 68.
Qualifications
BSc (UK), Honorary Doctorate.
Matthew Thomas
Managing Director and Chief Executive Officer. Age 44.
Experience
Experience
Mr Thomas has over 23 years’ experience in the finance and collections industry
and has been with Collection House Limited for the past 16 years. He was
appointed to the Board in March 2013.
Since starting with Collection House as a Customer Service Officer in 1999,
Mr Thomas has been promoted to various positions, including IT Manager and
Chief Information Officer. In 2007, Mr Thomas was promoted to Chief Operating
Officer. In this role he had responsibility for all collection operations as well as
Group IT strategy and business analysis. Mr Thomas was appointed as the
Group’s Chief Executive Officer in July 2010.
Mr Thomas is currently Deputy Chair of the Australian Collectors and Debt Buyers
Association and a Graduate Member of the Australian Institute of Company Directors.
Special responsibilities Managing Director and Chief Executive Officer.
Interest in shares and
performance rights
447,137 ordinary shares in CLH. 1,442,612 performance rights over ordinary shares
in CLH.
36
Mr Gray has more than 21 years of experience in senior executive positions
with large national and international companies. He is currently the Chair of
Queensland Cyber Infrastructure, a position he has held since March 2008,
Chair of Australian Urban Infrastructure Network, a position he has held since
2010 and is an adjunct professor at QUT.
Previously, Mr Gray was Deputy Chair of the Civil Aviation Safety Authority (CASA)
from 2009 to 2014, a Director of Brisbane Airport Corporation from 2010 to 2014,
Chair of Queensland Motorways from 2006 to 2010, Chair of WaterSecure from
2008 to 2011, MD of Boeing Australia from 1995 to 2006, MD of GEC Marconi
(Australia) from 1990 to 1995 and Divisional Chief Executive of GEC (Australia)
Heavy Engineering from 1984 to 1990.
Mr Gray was appointed to Collection House Limited’s Board on 28 June 2011
and elected a Director on 28 October 2011.
Special responsibilities
Chair of the Remuneration and Nomination Committee.
Interest in shares
183,098 ordinary shares in CLH.
Directors’
Report
(cont’d)
39
Philip Hennessy
Independent, Non-Executive Director. Age 62.
Experience
Mr Hennessy was, until February 2013, Queensland Chair of KPMG, Chartered
Accountants. After 12 years in that role and some 30 years being involved in all
aspects of corporate debt insolvency and reconstruction, he retired from
KPMG in July 2013.
As Queensland Chair of KPMG, he was responsible for the leadership in the
Queensland market. This role included operational efficiency, strategic direction,
go to market strategy, engagement of the firm’s people, engagement with its
clients and its connection to the community.
Mr Hennessy is currently a Chairman of Redland Investment Corporation Pty Ltd,
Chair of the Audit and Risk Committee of Metro Mining Limited, a position he has
held since 30 September 2014, Chair of the Mater Hospital Foundation, Director
of the Starlight Children’s Foundation National Board, Member of the University
of Queensland Senate, Chair of the University of Queensland Finance Committee
and Chair of the Audit and Risk Committee of Blue Sky Alternatives Access Fund
Limited, a position he has held since 15 April 2014.
Mr Hennessy was appointed to the Board of Collection House Limited on
22 August 2013 and elected a Director on 25 October 2013.
Special responsibilities Member of the Audit and Risk Management Committee.
Member of the Remuneration and Nomination Committee.
Interest in shares
50,000 ordinary shares in CLH.
Julie-Anne Schafer
Independent, Non-Executive Director. Age 61.
Qualifications
LLB (Hons), FAICD
Experience
Ms Schafer is an accomplished Director with experience across a broad range
of industries. She has worked in a number of Non-Executive Director roles with
a focus on business outcomes, customers, risk management and governance.
She is currently a Non-Executive Director of Catholic Church Insurance and
Aviation Australia Pty Ltd.
Ms Schafer was previously the Chair of RACQ and RACQ Insurance, also had
former directorships including Queensland Rail and was a Commissioner of the
National Transport Commission. She was a Non-Executive Director of the
Territory Insurance Office prior to its sale.
Ms Schafer is a facilitator for the Australian Institute of Company Directors in
Governance, Strategy and Risk Management. She is also a member of the
Australian and New Zealand Institute of Insurance and Finance.
Ms Schafer was appointed to the Board of Collection House Limited on
28 January 2014 and elected as a Director on 31 October 2014.
Special responsibilities Member of the Remuneration and Nomination Committee.
Interest in shares
62,500 ordinary shares in CLH.
38
Company Secretary
The Company Secretary to 30 June 2015 was Julie Tealby.
Mrs Tealby holds a Bachelor of Business (Accountancy), has been
a member of CPA Australia for 16 years and is a professional member of the Institute of Internal Auditors.
In June 2015, Mrs Tealby completed her Graduate Diploma in Corporate Governance through the Governance
Institute of Australia. Previously Mrs Tealby held Board and Company Secretary positions with the Financial Basics
Foundation and the Financial Basics Community Foundation. Prior to 2001, Mrs Tealby held the position of
Financial Controller and Company Secretary with Collection House Limited. From 2005-2014, Mrs Tealby had
also been the Company’s Internal Auditor. Since August 2014, Mrs Tealby has been the Group’s Chief Risk Officer.
Meetings of Directors
The number of meetings of the Group’s Board of Directors and of each board committee held during the year
ended 30 June 2015, and the number of meetings attended by each Director were:
Meetings of committees
2015
Directors
Audit and Risk Management
Remuneration and
Nomination*
David Liddy
Dennis Punches
Matthew Thomas
Tony Coutts
Kerry Daly
David Gray
Philip Hennessy
Julie-Anne Schafer
A
7
7
7
6
7
7
7
7
B
7
7
7
7
7
7
7
7
A
**
**
**
6
7
**
7
**
B
**
**
**
7
7
**
7
**
A
4
**
**
**
**
5
3***
5
B
5
**
**
**
**
5
4
5
A Number of meetings attended.
B Number of meetings held during the time the Director held office or was a member of the committee during the year.
* The Remuneration and Nomination Committee was re-established on 10 July 2014.
** Not a member of the relevant Board Committee.
*** Philip Hennessy appointed to Remuneration and Nomination Committee on 1 August 2014.
2015 Annual Report
Directors’
Report
(cont’d)
Remuneration Report
Dear Shareholders,
I am pleased to present to you Collection House
Limited’s (the Group’s) Remuneration Report for the
financial year ended 30 June 2015.
The objective of the Group’s executive remuneration
framework is to motivate their individual and team
performance to achieve outcomes expected from
our shareholders, customers and the communities
we operate in.
It is also an important tool in attracting and retaining
critical staff.
The Board seeks to ensure that the remuneration
levels and practices are in line with our industry
and align with shareholder expectations. To this
end, we have continued our engagement with
outside advisers, Mercer Consulting (Australia) Pty
Ltd (Mercer), who report directly to the Chair of the
Remuneration and Nomination Committee.
We have also continued the practice of engaging
directly with key shareholders and proxy advisers to
solicit their opinions.
Our guidance for industry trends is based on a ‘peer
group’ of companies within the financial services industry
and of comparable financial dimensions to Collection
House, that have been developed with Mercer.
Our executive ‘packages’ have three elements; total
fixed remuneration, short-term incentive (STI) and
long-term incentive (LTI).
The FY15 guidance remuneration mix for our MD and
CEO is 33.33 percent fixed and 66.66 percent at risk,
while the FY15 remuneration guidance mix for all other
Executives is 60 percent fixed and 40 percent at risk.
Goals for the STI are established with each Executive
Management Team (EMT) member and reflect both their
own individual responsibilities and those of the team.
They are challenging, but achievable. Both lag (typically
financial) and lead (enabling) indicators are used.
Lead indicators, which align with the Group’s strategic
framework, include but are not limited to: employee
engagement, ethical and compliant collection
practices, client relationships and industry recognition.
LTI targets are heavily weighted towards Earnings Per
Share (EPS), with 30 percent of the award granted if
the target is achieved and up to a further 50 percent
awarded if the target is exceeded by a pre-agreed
stretch amount. Awards of 10 percent each are
provided for achieving average ROE and net debt/net
debt plus equity targets.
Following external consultation the Board has
determined that from FY16, the allocation of LTI to
EMT will be determined on a face value basis.
The Board is confident it has the right approach to
remuneration that supports the business strategy of
the Group and is appropriately responsive to various
stakeholders’ expectations.
Notwithstanding, the Board will continue to monitor
its effectiveness and adjust if necessary. Thank you
for your continuing support and for taking the time to
read this report.
David Gray
Chair, Remuneration and Nomination Committee
40
41
Remuneration Report – AUDITED
This Remuneration Report outlines the overall
remuneration strategy, framework and practices
adopted by the Group for FY15 for Non-Executive
Directors (NEDs), the Executive Director and other
key management personnel. It has been prepared
in accordance with the requirements of the
Corporations Act 2001 (Cth), as amended (the Act)
and its regulations. The information provided in this
Remuneration Report has been audited as required
by Section 308(3C) of the Act. The Remuneration
Report contains the following sections:
A Directors and other key management personnel
disclosed in this report
B Remuneration governance
C
Executive remuneration policy and framework
D Relationship between remuneration and the
Group’s performance
E Non-Executive Director remuneration policy
F Details of remuneration of Directors and key
management personnel
G
Service agreements
H Share-based compensation
I
Equity instruments held by key management
personnel
J
Additional information
A Directors and other key management
personnel disclosed in this report
The key management personnel include those
who have the authority and responsibility, directly
or indirectly, to plan, direct and control the major
activities of the Group.
The Group’s Directors and key management
personnel for FY15
Board of Directors
David Liddy
Chair (Non-Executive)
Dennis Punches
Deputy Chair (Non-Executive)
Matthew Thomas
Tony Coutts
Kerry Daly
David Gray
Managing Director (MD)
and Chief Executive Officer
(CEO) (Executive)
Director (Non-Executive)
(retired 30 June 2015)
Director (Non-Executive)
Director (Non-Executive)
Philip Hennessy
Director (Non-Executive)
Julie-Anne Schafer
Director (Non-Executive)
Executive Management Team (EMT)
Matthew Thomas
MD and CEO
Adrian Ralston
Chief Financial Officer (CFO)
Paul Freer
Chief Operating Officer (COO)
Kylie Lynam
General Manager –
Human Resources and
Corporate Services
Marcus Barron
Chief Information Officer (CIO)
Julie Tealby
Company Secretary and Chief
Risk Officer (appointed 11
August 2014)
There were no changes to the Directors or EMT after
the reporting date and before the date the financial
report was authorised for issue.
2015 Annual Report
Directors’
Report
(cont’d)
In determining the remuneration of all key
management personnel, the Board aims to ensure
that the remuneration policies and framework:
•
•
•
•
•
Are fair and competitive and align with the long-
term interests of the Group
Incentivise all key management personnel to
pursue the short and long-term growth and
success of the Group within an appropriate risk
control framework
Are competitive and reasonable, enabling the
Group to attract and retain key talent, knowledge
and experience
Are aligned to the Group’s strategic and business
objectives and the creation of shareholder value
Has a transparent reward structure with a risk
proposition that is linked to the achievement of
pre-determined performance targets
Use of external consultants
In performing its role, the Committee may directly
commission and receive information, advice and
recommendations from independent, external
advisers. This is done to ensure the Group’s
remuneration packages are appropriate, reflect
industry standards and will help achieve the
objectives of the Group’s remuneration strategy.
During FY15 the Committee engaged the services of
Mercer Consulting (Australia) Pty Ltd (Mercer) to:
•
•
Conduct a review of fees paid to its Board
Chairman and NEDs relative to a comparator
group of Australian listed companies (comparator
group) and propose recommendations on future
Board fee structure
Conduct a review of remuneration paid
to the members of the EMT relative to a
comparator group of companies and propose
recommendations on the EMT members
remuneration levels and structure
B Remuneration governance
The Remuneration and Nomination Committee (the
Committee) comprises four independent NEDs.
The Committee primarily considers and makes
recommendations to the Board regarding:
•
•
•
How the remuneration policies are applied to
members of the EMT
The basis of short and long-term performance-
based incentive payments for members of the EMT
The appropriate fees for NEDs
The MD and CEO attends certain Committee
meetings by invitation, where management input
is required. The MD and CEO is not present during
any discussions related to his own remuneration
arrangements.
Fundamental to all arrangements is that all key
management personnel must contribute to the
achievement of short and long-term objectives,
enhance shareholder value, avoid unnecessary or
excessive risk taking and discourage behaviour that is
contrary to the Group’s values.
Details of the short and long-term incentive schemes
are set out below in the ‘Executive Remuneration Policy
and Framework’ section of the Remuneration Report.
The objectives of the Group’s remuneration
policies are to ensure remuneration packages for
key management personnel reflect their duties,
responsibilities and level of performance – as well
as to ensure all key management personnel are
motivated to pursue the long-term growth and
success of the Group.
42
43
Both Mercer and the Committee are satisfied the
advice received from Mercer is free from undue
influence from the KMP to whom the
recommendations apply. The fees paid to Mercer
for remuneration recommendations were $40,000
(ex GST). Other services provided by Mercer included
advisory services totalling $16,000 (ex GST).
To ensure that the remuneration recommendations
were free from undue influence the Committee
ensured the following arrangements were followed:
• Mercer was engaged by, and reported directly
to, the Chair of the Committee. Any agreements
for the provision of remuneration consulting
services were executed by the Chair of the
Committee under delegated authority on behalf
of the Board
•
The report containing the remuneration
recommendations was provided by Mercer
directly to the Chair of the Committee
• Mercer was permitted to speak to Management
throughout the engagement to understand
company processes, practices and other
business issues and obtain Management
perspectives. However, Mercer was not
permitted to provide any member of
Management with a copy of their draft or
final report that contained the remuneration
recommendations
Securities Trading Policy
The trading of shares issued to eligible employees
under any of the Group’s employee equity plans was
subject to, and conditional upon, compliance with
the Group’s Securities Trading Policy. Members of the
EMT are prohibited from entering into any hedging
arrangements over unvested performance rights
under the Group’s Performance Rights Plan (PRP).
The Group would consider a breach of this policy as
misconduct, which may lead to disciplinary action
and potentially dismissal.
C Executive remuneration policy
and framework
The Group’s executive remuneration strategy
is designed to attract, motivate and retain high
performing individuals and align the interests of
Executives with shareholders.
The Board reviews the remuneration packages for
members of the EMT annually by reference to
individual performance against key individual
objectives, the Group’s consolidated results and market
data. The performance review of the MD and CEO is
undertaken by the Chair of the Board who then makes
a recommendation to the Board via the Remuneration
and Nomination Committee. The performance review
of the other members of the EMT is undertaken by
the MD and CEO and approved by the Board via the
Remuneration and Nomination Committee.
The Group aims to reward members of the EMT with
a level of remuneration commensurate with their
responsibilities and position within the Group, and
their ability to influence shareholder value creation.
The remuneration framework links rewards with the
strategic objectives and performance of the Group.
The EMT pay and reward framework has
three components:
•
•
•
Total fixed remuneration (TFR) including
superannuation and benefits
Short-term incentives (STIs), paid in cash
Long-term incentives (LTIs) through participation
in the Performance Rights Plan (PRP), which has
been approved by the Board
The combination of these components amount to the
total remuneration package or total employment cost
for members of the EMT.
2015 Annual Report Directors’
Report
(cont’d)
Total fixed remuneration
Structured as a total employment cost package, the
total fixed remuneration (TFR) may be delivered as
a combination of cash and prescribed non-financial
benefits at the discretion of the EMT member.
Members of the EMT are offered a competitive TFR
that comprises the cash salary and superannuation
and non-monetary benefits. TFR for EMT members
is reviewed annually to ensure the pay is in line with
the role, experience and performance and remains
competitive with the market. Group and individual
performance are considered during the annual
remuneration review. TFR is usually fixed for a 12-month
period with any changes effective from 1 September
each financial year. An EMT member’s remuneration is
also reviewed upon any change of duties.
The Board approved an overall TFR increase of three
percent for the majority of the EMT in FY15. The
GMHR and Corporate Services TFR increased by
11 percent and CIO TFR increased by 20 percent in
line with Mercer’s recommendations based on the
Comparative Group.
Retirement benefits for EMT
There are no additional retirement benefits made
available to members of the EMT, other than those
required by statute or by law.
Short-term incentives (STIs)
To ensure that remuneration for members of the EMT
are aligned to the Group’s performance, a portion of
their remuneration, in line with their ability to influence
results, is performance based and, therefore, ‘at risk’.
EMT members have the opportunity to earn an annual
cash-based STI if pre-defined targets are achieved.
The MD and CEO has a target STI opportunity of
100 percent of TFR. Other EMT personnel have a STI
opportunity of 30 percent of TFR.
The following summarises the target remuneration
mix of the EMT:
33.3%
33.3%
MD and CEO
Remuneration Mix
33.3%
Fixed Remuneration
STI
LTI
Remuneration Mix
Fixed Remuneration
44
45
STIs for the EMT in FY15 were based on scorecard
measures and weightings. The MD and CEO key
performance objective targets were set by the Board
at the beginning of the financial year and aligned
to the Group’s strategic and business objectives, as
outlined below.
The non-financial KPIs have a high degree of
variability between projects, people, and processes
that reflect the individual roles, and include measures
such as achieving strategic outcomes, developing
people, growth, differentiation, innovation and other
key initiatives during the financial year.
The STIs for other members of the EMT are
recommended by the MD and CEO to the Board
based on the MD and CEO’s financial and non-
financial target performance objectives.
There is a high degree of alignment between the
Company strategy and the EMT’s STI performance
objective targets. The relative weights of financial
versus non-financial performance targets for each
Executive are detailed below and are based on their
position and influence on the financial results. The
weightings strive to provide a balance between the
Company’s overall financial goals and the ability of
the individual Executives to influence these and other
strategic outcomes.
Each Executive has a high degree of clarity on their
individual performance objectives and priorities, as
established by their scorecard. They also have an
understanding of the inter-relationship of their
individual performance objectives to the objectives
of the other members of the EMT.
Objectives, once agreed, are identified as strategic
projects or initiatives. These are tracked via the
Strategic Project Team, who provide updates on a
monthly basis. The process provides oversight for the
Board on the progress of all agreed objectives.
This structure ensures that STIs are only paid when an
individual member of the EMT delivers against their
performance objectives and the Group’s strategic goals.
Financial
Performance
Objectives
Non-
Financial
Performance
Objectives
MD and CEO STI targets for FY15
Performance
category
Metrics
Weighting
(%)
Position
Managing Director
and CEO
Chief Financial Officer
Chief Operating Officer
GM HR and
Corporate Services
Chief Information Officer
Company Secretary
& Chief Risk Officer
60%
60%
60%
20%
20%
20%
40%
40%
40%
80%
80%
80%
Net profit after tax, return
on earnings, debt and
debt plus equity, earnings
before interest and taxes
(EBIT) margin, and earnings
per share (EPS)
Key strategic initiatives
annually agreed by the
Board
Employee engagement
and other strategic HR
initiatives
Financial
Strategic
People
The financial performance objectives are the same for
all Senior Executives, providing a common objective
for the EMT.
Technological
Various strategic IT initiatives
including Controller Five
deployment
60
30
5
5
A summary of the actual STI Financial outcomes
achieved is included in Section D Group performance
and its link to STI.
2015 Annual Report Cessation of employment
For resignation or termination for cause, any STI is
forfeited, unless otherwise determined by the Board.
For any other reason, the Board may award STI on a
pro-rata basis taking into account time and the current
level of performance against performance hurdles.
Long-term incentives (LTIs)
LTIs are awarded to the Group’s EMT by way of
performance rights via the Performance Rights Plan
(PRP). The LTI program has the objective of delivering
long-term shareholder value by incentivising
members of the EMT to achieve sustained financial
performance over a three-year period (with no
opportunity to retest).
Annual grants of performance rights are proposed
to be made to the Group’s EMT under the PRP. The
MD and CEO was granted performance rights in
FY15 representing 100 percent of TFR. Other EMT
personnel were granted performance rights in FY15
representing 30 percent of TFR. The number of
performance rights granted is calculated based on
weighted average share price over the five trading
days before the grant date. Sections H and I provide
details of performance rights granted, vested,
exercised and lapsed during the year.
Directors’
Report
(cont’d)
The performance rights will not vest unless the
Group’s financial performance meet these hurdles
as at 30 June 2017. The Board set these challenging
hurdles to ensure that the EMT were focused on
the delivery of increased shareholder value through
the achievement of the short and long-term goals
of the Group. Participants in the PRP do not receive
distributions or dividends on unvested LTI grants. The
table below outlines each hurdle, the proportion of
performance rights that will vest, as a percentage,
if the target is achieved and the reason the Board
established the hurdle.
Financial
measurements
Board’s reasoning for targets
Earnings Per
Share (EPS)
EPS growth has been chosen to
ensure long-term shareholder value
is achieved.
The FY15 LTI has been heavily
weighted towards EPS growth with
30 percent of performance rights
awarded if a base EPS is achieved
in FY17. Up to a further 50 percent is
awarded, with a straight line vesting
between target and stretch, if an
agreed stretch EPS is achieved in FY17.
ROE measures the Group’s
profitability relative to security holder
investment in the Group.
Ten percent of performance rights
will vest if a target level of ROE is
achieved in FY17.
The Board has set a general Net
Debt/Net Debt plus Equity threshold
limit of 40 percent.
Ten percent of performance rights
will vest if the agreed Net Debt/Net
Debt plus Equity is achieved in FY17.
Performance rights were awarded to various eligible
employees on and from 1 July 2014 pursuant to the
PRP, at a nil exercise price and subject to a three-year
tenure hurdle. This is with the achievement of certain
financial performance hurdles, which were approved
by the Board for the financial period ended 30 June
2017 (FY17).
Average Return
on Equity (ROE)
Net Debt/
Net Debt
plus Equity
For the period 1 July 2014 to 30 June 2017, 680,184
unlisted performance rights over ordinary shares
in the Company were granted during the current
year under the PRP to the EMT and other eligible
employees. The performance rights will vest (and
therefore be capable of being exercised) depending
on the Group achieving certain performance hurdles
as at 30 June 2017 as highlighted above.
46
47
Cessation of employment
D Relationship between remuneration and
For ‘uncontrollable events’ (including death, serious
injury and disability and forced early retirement,
retrenchment or redundancy), any LTI that are
capable of becoming exercisable if performance
hurdles are met at the next test date will become
vested performance rights. The Board, at its
discretion, may determine the extent to which any
other unvested performance rights, that have not
lapsed, will become vested performance rights.
For any other reason, all unvested LTI awards will lapse
immediately, unless otherwise determined by the Board.
Change of control
Where a proposal is publicly announced in relation
to the Group which the Board reasonably believes
may lead to a change in control event, all unvested
LTI awards, that have not lapsed, will vest and
become exercisable.
Clawback
The Group will reduce, cancel or clawback any
performance-based remuneration in the event of
serious misconduct or a material misstatement of
the Group’s financial statements.
the Group’s performance
Group performance and its link to STI
Based on the achievements of the Group this year,
the Committee determined that the EMT had achieved
between 84 and 90 percent of their target opportunity.
In making this assessment, the Committee
considered the following factors:
•
•
•
•
•
•
Increase in Net Profit after Tax from $18.7 million
to $22.5 million
Increase in Return on Equity from 13.4 percent to
13.8 percent
Net Debt/Net Debt plus Equity remained under
the 40 percent target
EBIT margin remained at 30 percent
EPS increased from 14.7 cents to 17.2 cents
Achievement of progress towards non-financial
supporting objectives under strategic, people
and technology with 38 percent of the 40
percent MD/CEO weighting being achieved
The table below shows the actual STI Financial
outcomes achieved for FY15.
Financial Performance
Measure
Net Profit after Tax
Return on Equity
Debt and Debt plus Equity
EBIT margin
EPS
Maximum
Potential
%
Actual
Achieved
%
15
10
10
10
15
10*
7
10
10
10*
* Net profit after tax and EPS included challenging stretch targets
which were not achieved.
2015 Annual Report Directors’
Report
(cont’d)
49
Group performance and its link to LTI
Details of remuneration: cash bonuses and performance rights
The overall level of reward for members of the EMT takes into account the performance of the Group over
a number of years, with greater emphasis given to the current and previous year. Details of the relationship
between the remuneration policy and Group’s performance over the last five years is detailed below.
Net Profit after Tax ($m)
2011
$10.1
2012
$12.6
2013
$15.6
2014
$18.7
2015
$22.5
Dividends declared (franked)
6.2 cents
6.4 cents
7.2 cents
8.0 cents
9.1 cents
Share price commenced
Share price ended
Basic EPS (including
discontinued operations)
$0.76
$0.65
$0.69
$0.79
$0.80
$1.65
$1.65
$1.88
$1.88
$2.23
10.4 cents
12.1 cents
13.6 cents
14.7 cents
17.2 cents
The vesting of LTI awards is linked to the Group’s EPS, average ROE and Gearing performance. Based on the
achievements of the Group’s financial performance over the three-year performance period ended 30 June 2015
the Committee determined that the EMT had achieved 80 percent of its performance hurdles.
The table below outlines the Group’s performance measures for the three-year performance period ended 30
June 2015 and the actual percentage achieved to these targets.
Performance Measure
EPS
Average ROE
Net Debt/Net Debt plus Equity
Maximum
Potential %
Actual
achieved %
50
25
25
39
20
25
Based on the above performance, the Board awarded 80 percent of performance rights vested for the
performance period ended 30 June 2015 (the FY13 grant). The performance rights will be issuable on
1 September 2015.
48
For each cash bonus and grant of performance rights included in the table on page 53 the percentage of the
available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited
because the person did not meet the service and performance criteria, is set out below. No part of the bonus
is payable in future years. No performance rights will vest unless the vesting conditions are met (see note 33
for details), hence the minimum value of the performance rights yet to vest is nil. The maximum value of the
performance rights yet to be expensed has been determined as the amount of the grant date fair value of the
performance rights that are yet to be expensed.
Cash bonus
2015
Performance rights
Financial
years in
which
performance
rights may
be issued
(subject
to certain
qualifying
hurdles)
Vested
%
Forfeited
%
Lapsed
%
Refer to
note 33
Minimum
total value of
performance
rights yet to
be expensed
Maximum
total value of
performance
rights yet to
be expensed
Awarded
%
Forfeited
%
Financial
year
granted
85
15
90
10
89
11
84
16
84
16
90
10
Matthew
Thomas
Adrian
Ralston
Paul
Freer
Kylie
Lynam
Marcus
Barron
Julie
Tealby
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
80
–
–
80
–
–
80
–
–
80
–
–
80
–
–
80
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20
–
–
20
–
–
20
–
–
20
–
–
20
–
–
20
–
–
2016
2017
2018
2016
2017
2018
2016
2017
2018
2016
2017
2018
2016
2017
2018
2016
2017
2018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
325,003
584,458
–
43,550
103,959
–
43,550
109,358
–
43,550
74,573
–
15,925
65,754
–
33,799
69,412
2015 Annual Report Directors’
Report
(cont’d)
51
E Non-Executive Director remuneration policy
Non-Executive Director’s (NEDs) 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
or performance rights. The maximum aggregate fee pool and the fee structure is reviewed annually against fees
paid to NEDs of comparable companies. The Board considers advice from external advisors when undertaking
the annual review process.
The maximum annual aggregate Directors’ fee pool limit is $900,000 per annum and was approved by
shareholders at the Group’s AGM on 25 October 2013. The FY15 aggregate total Non-Executive Director fees
distribution is $697,435 (including superannuation). The Board will not seek any increase to the annual aggregate
NED fee pool limit at the 2015 AGM.
Payments are allowed for additional responsibilities for the Board’s Chair, for membership of a Board Committee
and for the Chair of each Board Committee. Fees and payments to Non-Executive Directors reflect the demands
that are made on, and the responsibilities of, the Directors.
The table below summarises the NED fees for FY15 (exclusive of superannuation):
FEES
Base fees
Chair
Other Non-Executive Directors
Additional fees
Audit and Risk Management Committee Chair
Audit and Risk Management Committee Member
Remuneration and Nomination Committee Chair
Remuneration and Nomination Committee Member
* The Chair’s fee will cover his entire engagement on the Board.
From 9
December 2013
From 1 March 2013 to
8 December 2013
$158,000*
$70,000
$25,000
$10,000
$10,000
$5,000
$158,000*
58,000
$30,000
$15,000
$15,000
$15,000
For further information in relation to Directors’ remuneration, including fees paid in accordance with statutory
rules and applicable accounting standards, refer to Section F below.
Following a remuneration review during FY15, the Board has approved NED fee changes from 1 July 2015.
The table below summarises the NED fees for FY16 (exclusive of superannuation):
FEES
Base fees
Chair
Other Non-Executive Directors
Additional fees
Audit and Risk Management Committee Chair
Audit and Risk Management Committee Member
Remuneration and Nomination Committee Chair
Remuneration and Nomination Committee Member
From 1 July 2015
$165,000
$90,000
$15,000
$Nil
$15,000
$Nil
Note that the changes in the NED fee structure do not require an increase in the Directors’ fee pool limit.
50
Retirement allowances for Directors
There are no retirement allowances paid to Non-Executive Directors.
F Details of remuneration of Directors and key management personnel
Amounts of remuneration
Details of the remuneration of Directors and all other key management personnel (as defined in AASB 124 Related
Party Disclosures) of the Group are set out below.
Short-term benefits
Salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Other
$
Post-
employment
benefits
super
$
Share-
based
payments
options
$
2015
158,000
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
158,000
70,000
61,848
82,154
76,769
95,000
91,769
80,000
76,769
84,442
62,158
75,000
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,010
14,615
–
–
7,805
7,101
9,025
8,489
7,600
7,101
8,022
5,750
7,125
2,775
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
173,010
172,615
70,000
61,848
89,958
83,870
104,025
100,258
87,600
83,870
92,464
67,908
82,125
32,775
Non-Executive Directors
David Liddy
Chair
Dennis Punches
Deputy Chair
Tony Coutts
Non-Executive Director
Kerry Daly
Non-Executive Director
David Gray
Non-Executive Director
Philip Hennessy
Non-Executive Director
Julie-Anne Schafer
Non-Executive Director
2015 Annual Report Directors’
Report
(cont’d)
53
For recently appointed KMP, the remuneration information provided in the table below relates to the period from
the date of appointment as KMP to FY15, unless otherwise stated.
Short-term benefits
Executive Director and other
key management personnel
Salary
and
fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Other
$
Post-
employment
benefits
super
$
Share-based
payments
performance
rights
$
Total
$
Matthew Thomas
MD and CEO
Adrian Ralston
CFO
Paul Freer
COO
Kylie Lynam
General Manager –
Human Resources and
Corporate Services
Marcus Barron
CIO
Julie Tealby*
Company Secretary
and Chief Risk Officer
(appointed KMP 11
August 2014)
2015
527,479 498,096
2014
512,115
505,900
2015
311,413
94,096
2014
302,343
75,700
2015
327,754
97,822
2014
293,135
78,400
2015
219,446
64,096
2014
165,529
49,600
2015
187,237
56,096
2014
161,183
41,400
2015
202,808
63,096
3,747
3,650
3,747
3,650
3,747
3,650
3,747
3,650
3,747
3,650
3,747
2014
–
–
–
* Amounts in table for Julie Tealby are from 1 July 2014.
–
–
–
–
–
–
–
–
–
–
–
–
50,110
58,077
29,688
28,078
31,215
27,115
20,952
15,422
21,739
18,165
21,271
483,283
1,562,715
346,257
1,425,999
66,336
505,280
53,902
463,673
110,003
570,541
70,420
472,720
58,990
367,231
48,940
283,141
45,738
314,557
20,187
244,585
26,418
317,340
–
–
–
The relative proportions of remuneration referred to in the preceding table that are fixed and linked to
performance and share-based options/share-based performance rights are detailed below.
Fixed remuneration (%)
At risk – STIs (%)
At risk – LTIs* (%)
Name
2015
2014
2015
2014
2015
2014
Matthew Thomas
Adrian Ralston
Paul Freer
Kylie Lynam
Marcus Barron
Julie Tealby
37
68
64
66
68
72
40
72
68
65
75
–
32
19
17
17
18
20
36
16
17
18
17
–
31
13
19
16
15
8
24
12
15
17
8
–
* LTIs are provided by way of options and performance rights based on the value of options and performance rights expensed during the year.
52
G Service agreements
Remuneration and other terms of employment for the MD and CEO and other key management personnel are
also formalised in service agreements. Except as otherwise stated, all contracts with members of the EMT may
be terminated early by either party with three months’ notice. Collection House, at its full discretion, may make
a payment in lieu of the notice period, either partially or in full. Major provisions of the agreements relating to
remuneration are set out below.
$584,458 inclusive of superannuation and non-monetary benefits for FY15.
$584,458 was the maximum STI opportunity in relation to FY15.
628,119 at risk performance rights were issued in FY13.
419,919 at risk performance rights were issued FY14.
394,574 at risk performance rights were granted during FY15.
See note 33 for further details.
$346,533 inclusive of superannuation and non-monetary benefits for FY15.
$103,960 was the maximum STI opportunity in relation to FY15.
62,812 at risk performance rights were issued in FY13.
56,269 at risk performance rights were issued in FY14.
70,184 at risk performance rights were issued during FY15.
See note 33 for further details.
$364,527 inclusive of superannuation and non-monetary benefits for FY15.
$109,358 was the maximum STI opportunity in relation to FY15.
100,000 at risk performance rights were issued in FY13.
56,269 at risk performance rights were issued in FY14.
73,829 at risk performance rights were issued during FY15.
See note 33 for further details.
$248,577 inclusive of superannuation and non-monetary benefits for FY15.
$74,573 was the maximum STI opportunity in relation to FY15.
62,812 at risk performance rights were issued in FY13.
56,269 at risk performance rights were issued in FY14.
50,345 at risk performance rights were issued during FY15.
See note 33 for further details.
$219,178 inclusive of superannuation and non-monetary benefits for FY15.
$65,753 was the maximum STI opportunity in relation to FY15.
25,125 at risk performance rights were issued in FY13.
43,671 at risk performance rights were issued in FY14.
44,391 at risk performance rights were issued during FY15.
See note 33 for further details.
Matthew
Thomas
MD and CEO
Annual fixed remuneration
Performance cash bonus
Performance rights
Adrian Ralston
CFO
Annual fixed remuneration
Performance cash bonus
Performance rights
Paul Freer
COO
Annual fixed remuneration
Performance cash bonus
erformance rights
Annual fixed remuneration
Performance cash bonus
Performance rights
Annual fixed remuneration
Performance cash bonus
Performance rights
Kylie Lynam
General Manager
– Human
Resources
and Corporate
Services
Marcus Barron
CIO
Julie Tealby
Company
Secretary and
Chief Risk
Officer
(appointed to KMP
11 August 2014)
Annual fixed remuneration
Performance cash bonus
Performance rights
$231,375 inclusive of superannuation and non-monetary benefits for FY15.
$69,412 was the maximum STI opportunity in relation to FY15.
46,861 at risk performance rights were issued during FY15.
See note 33 for further details.
2015 Annual Report 55
The assessed fair value at the relevant date of options granted to the individuals is allocated over the period from
grant date to vesting date, and the amount is included in the remuneration table in this report. Fair values at grant
date are independently determined using a modified binomial option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield, and the risk free interest rate for the term of the option.
The assessed fair value at grant date of performance rights compensation granted to members of the EMT has
been independently determined and is calculated using the five day volume weighted average price (VWAP).
The expense is recognised over the vesting period. The expense for each relevant financial year will require an
assessment at each reporting date of the probability that each performance hurdle will be achieved.
Shares provided on exercise of remuneration options
Details of ordinary shares in the Group provided as a result of the exercise of remuneration options to members of
the EMT are set out below.
Name
ESOP 2010
1. Matthew Thomas
2. Adrian Ralston
3. Kylie Lynam
Number of ordinary shares
issued on exercise of options
during the year
2015
2014
-
-
-
295,800
118,200
88,600
Amounts paid per ordinary share
$
2015
-
-
-
$
2014
0.6938
0.6938
0.6938
Directors’
Report
(cont’d)
H Share-based compensation
Performance rights
Performance rights have been granted to certain
eligible employees under the Collection House
Performance Rights Plan (PRP).
The terms and conditions of all options and
performance rights mentioned above affecting
remuneration in the previous, current or future
reporting periods are set out in note 33 of the financial
statements. Refer to page 118.
Performance rights granted under the PRP
respectively carry no dividend or voting rights. When
exercisable, each performance right is convertible
into one ordinary share of Collection House Limited.
Details of options and performance rights
over ordinary shares in the Group provided as
remuneration to members of the EMT are set out
below. Further information on the options and
performance rights are set out in note 33 of the
financial statements. Refer to page 118.
Name
1. Matthew Thomas
2. Adrian Ralston
3. Paul Freer
4. Kylie Lynam
5. Marcus Barron
Name
1. Matthew Thomas
2. Adrian Ralston
3. Paul Freer
4. Kylie Lynam
5. Marcus Barron
6. Julie Tealby (appointed 11 August 2014)
Number of options granted
Number of options vested
during the year
2015
2014
2015
2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
295,800
118,200
–
88,600
–
Number of performance
rights granted/issued during
the year
Number of performance
rights vested/issuable
during the year
2015
2014
2015
2014
394,574
419,919
502,495
70,184
73,829
50,345
44,391
46,861
56,269
56,269
56,269
43,671
20,576
50,250
80,000
50,250
20,100
10,050
–
–
–
–
–
–
54
2015 Annual Report Directors’
Report
(cont’d)
I
Equity instruments held by key management personnel
Performance rights
Details of performance rights over ordinary shares in the Company provided as remuneration to each Director of
Collection House Limited and other key management personnel of the Group, are set out below.
2015
Matthew
Thomas
Adrian
Ralston
Paul Freer
Kylie
Lynam
Marcus
Barron
Julie
Tealby
Balance at start
of the year
Granted as
compensation
Vested
Lapsed
Balance at end
of the year
Vested and
issuable
Un-vested
1,048,038
394,574
502,495
125,624
814,493
502,495
814,493
119,081
156,269
70,184
73,829
50,250
12,562
80,000
20,000
126,453
130,098
50,250
126,453
80,000
130,098
119,081
50,345
50,250
12,562
106,614
50,250
106,614
68,796
44,391
20,100
5,025
88,062
20,100
88,062
33,138
46,861
10,050
2,512
67,437
10,050
67,437
Note, the FY13 performance rights grant will be issuable on 1 September 2015.
Share holdings
The number of shares in the Company held during the financial year by each Director of Collection House Limited
and other key management personnel of the Group, including their personally related parties, are set out below.
2015
Non-Executive
Directors
Balance at start
of the year
Received during
the year on
the exercise of
options
Received on
vesting of rights
to deferred
shares
Other changes
during the year
Balance at the
end of the year
David Liddy
150,000
Dennis Punches
10,502,535
Tony Coutts
4,829,059
Kerry Daly
David Gray
Philip Hennessy
Julie-Anne
Schafer
394,607
195,999
50,000
38,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,000,000)
(3,368,852)
-
-
-
150,000
3,502,535
1,460,207
394,607
195,999
50,000
24,000
62,500
56
57
2015
Executive
Director and
other key
managment
personnel
Matthew Thomas
Adrian Ralston
Paul Freer
Kylie Lynam
Marcus Barron
Julie Tealby
Balance at start
of the year
Received during
the year on
the exercise of
options
Received on
vesting of rights
to deferred
shares
Other changes
during the year
Balance at the
end of the year
647,137
25,000
6,500
161,987
1,000
6,101
-
-
-
-
-
-
-
-
-
-
-
-
(200,000)
-
500
6,790
-
95
447,137
25,000
7,000
168,777
1,000
6,196
J Additional information
Loans to Directors and Executives
There were no loans to Directors or members of the EMT during FY15.
Shares under performance rights
LTIs are provided to certain eligible employees via the PRP, see note 33 for further information.
Un-issued ordinary shares of the Group under performance rights at the date of this report are detailed below.
Performance
rights
Date rights
effective
Number
of rights
granted/to be
issued
Issue price
of shares
No of shares
issued 2015
No of unvested
shares and vested
but not yet issued
shares under rights
PRP
PRP
PRP
PRP
1/7/12
4/3/13
1/7/13
1/7/14
1,256,238
100,000
839,830
680,184
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
939,667
80,000
816,733
680,184
Expiry date
30 September 2015
30 September 2015
30 September 2016
30 September 2017
Additional information – Unaudited
Insurance of officers
During the financial year the Group paid premiums of
$87,701 in respect of Directors’ and Officers’ liability
and legal expenses’ and insurance. This was for
current and former Directors and Officers, including
Senior Executives of the Group and Directors, Senior
Executives and Secretaries of its controlled entities.
The liabilities insured are legal costs that may be
incurred in defending civil or criminal proceedings that
may be brought against the Directors or Officers in their
capacity as Directors or Officers of entities in the Group,
and any other payments arising from liabilities incurred
by the Directors or Officers in connection with such
proceedings. This does not include such liabilities that
arise from conduct involving a wilful breach of duty
by the Directors or Officers or the improper use by the
Directors or Officers of their position or of information to
gain advantage for themselves or someone else or to
cause detriment to the Group.
2015 Annual Report Directors’
Report
(cont’d)
2015 Annual Report
59
Auditor’s Independence
Declaration
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,
was satisfied that the provision of the non-audit
services during the year was compatible with the
general standard of independence for auditors
imposed by the Corporations Act 2001. During the
year, the Group’s auditors performed no other
non-audit services in addition to their assurance
duties. All other assurance services were subject
to the corporate governance procedures adopted
by the Group.
Details of the amounts paid to the auditors of the
Group, PKF Hacketts Audit, are set out below.
Description
1. Audit services, PKF 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, PKF Hacketts Audit
Total remuneration for audit-related services
Total remuneration
Auditor’s independence declaration
Auditor
Consolidated
30 June
2015
30 June
2014
148,900
148,900
88,000
88,000
144,500
144,500
85,500
85,500
236,900
230,000
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act
2001 is set out on page 59.
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.
PKF 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
David Liddy,
Chairman
20 August 2015
58
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF COLLECTION HOUSE LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, there have
TO THE DIRECTORS OF COLLECTION HOUSE LIMITED
been:
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
(a)
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, there have
relation to the audit; and
been:
(b)
(a)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
PKF HACKETTS AUDIT
no contraventions of any applicable code of professional conduct in relation to the audit.
PKF HACKETTS AUDIT
Shaun Lindemann
Partner
Brisbane, 20 August 2015
Shaun Lindemann
Partner
Brisbane, 20 August 2015
Financial Statements
61
Income statement
For the year ended 30 June 2015
Contents
Income statement ....................................................................................................................................... 61
Statement of comprehensive income .......................................................................................... 62
Revenue
Balance sheet ................................................................................................................................................. 63
Revenue from continuing operations
Statement of changes in equity ........................................................................................................ 64
Statement of cash flows .......................................................................................................................... 65
Notes to the financial statements..................................................................................................... 66
Directors’ declaration .............................................................................................................................124
Independent auditor’s report to the members ....................................................................125
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:
Equity holders of Collection House Limited
Notes
5
6
6
6
7
Consolidated
30 June
2015
$’000
126,043
126,043
(2,445)
(6,638)
(56,551)
(16,515)
(6,087)
(5,915)
31,892
(9,409)
22,483
30 June
2014
$’000
107,337
107,337
(1,681)
(5,928)
(48,486)
(14,115)
(4,693)
(5,474)
26,960
(8,255)
18,705
22,483
18,705
22,483
22,483
18,705
18,705
Cents
Cents
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
32
32
17.2
17.1
14.7
14.5
The above income statement should be read in conjunction with the accompanying notes.
60
2015 Annual ReportFinancial Statements:
Statement of comprehensive income
For the year ended 30 June 2015
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss
Consolidated
30 June
2015
$’000
22,483
30 June
2014
$’000
18,705
Notes
Exchange differences on translation of foreign operations
25(a)
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Equity holders of Collection House Limited
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
(684)
(684)
725
725
21,799
19,430
21,799
21,799
19,430
19,430
63
Balance sheet
As at 30 June 2015
Consolidated
Notes
30 June
2015
$’000
30 June
2014
$’000
8
9
10
11
10
12
14
15
16
17
18
19
20
21
23
24
25(a)
25(b)
7,222
10,265
57,167
1,089
75,743
198,822
5,475
35,614
239,911
704
9,574
51,669
1,044
62,991
182,581
5,436
34,222
222,239
315,654
285,230
16,013
–
2,027
3,067
2,149
23,256
13,628
323
7,071
2,906
1,600
25,528
119,000
99,800
1,854
402
477
121,733
144,989
1,331
356
2,226
103,713
129,241
170,665
155,989
105,307
2,188
63,170
170,665
102,285
1,959
51,745
155,989
ASSETS
Current assets
Cash and cash equivalents
Receivables
Purchased debt ledgers
Other current assets
Total current assets
Non-current assets
Purchased debt ledgers
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Other financial liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
62
The above balance sheet should be read in conjunction with the accompanying notes.
2015 Annual ReportFinancial Statements:Financial Statements:
Statement of changes in equity
For the year ended 30 June 2015
Statement of cash flows
For the year ended 30 June 2015
65
Consolidated
Balance at 1 July 2013
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Contributions of equity net of
transaction costs
Employee share options value of
employee services
Dividends provided for or paid
Balance at 30 June 2014
Balance at 1 July 2014
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Contributions of equity net of
transaction costs
Employee share options value of
employee services
Dividends provided for or paid
Attributable to owners of
Collection House Limited
Notes
Contributed
equity
$’000
80,095
–
–
–
22,190
–
–
22,190
102,285
102,285
–
–
–
3,022
–
–
3,022
24
25
26
24
25
26
Reserves
$’000
489
–
725
725
–
745
–
745
1,959
1,959
–
(684)
(684)
–
913
–
913
Retained
earnings
$’000
42,683
18,705
–
18,705
–
–
(9,643)
(9,643)
Total
equity
$’000
123,267
18,705
725
19,430
22,190
745
(9,643)
13,292
51,745
155,989
51,745
22,483
–
22,483
–
–
(11,058)
(11,058)
155,989
22,483
(684)
21,799
3,022
913
(11,058)
(7,123)
Balance at 30 June 2015
105,307
2,188
63,170
170,665
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated
Notes
30 June
2015
$’000
30 June
2014
$’000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Income taxes paid
Net cash inflow (outflow) from operating activities
35
Cash flows from investing activities
Payments for property, plant and equipment
Payments for leasehold improvements
Payments for purchased debt ledgers
Payments for intangible assets
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Borrowing costs
Interest paid
Dividends paid to Company’s shareholders
Proceeds from issues of shares and other equity securities
Net cash (outflow) inflow 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
26
8
The above statement of cash flows should be read in conjunction with the accompanying notes.
180,702
(89,103)
91,599
(13,930)
77,669
(540)
(297)
(71,396)
(3,093)
(75,326)
19,700
(1,364)
(1,439)
(4,224)
(11,058)
3,022
4,637
6,980
381
(139)
7,222
151,903
(74,462)
77,441
(11,470)
65,971
(203)
(312)
(81,270)
(3,854)
(85,639)
30,321
(20,000)
(1,782)
(3,476)
(9,643)
22,192
17,612
(2,056)
2,400
37
381
64
2015 Annual ReportFinancial Statements:Financial Statements:
67
1 Summary of significant accounting policies
1 Summary of significant accounting policies (continued)
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 (the Group).
The financial statements were authorised for issue on 20 August 2015 by the directors of the Company.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
Collection House Limited is a for profit entity for the purpose of preparing the financial statements.
(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) New and amended standards adopted by the Group
The group has applied the following standards and amendments for the first time for their annual reporting period
commencing 1 July 2014:
•
•
AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and
Financial Liabilities;
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets.
The adoption of these new standards did not materially affect any of the amounts recognised in the current
period or any prior period and are not likely to affect future periods.
(iii) Early adoption of standards
The Group has elected to continue to early adopt the following pronouncements:
•
AASB 9 Financial Instruments (December 2010) and AASB 2010-7 Amendments to Australian Accounting
Standards arising from AASB 9 (December 2010)
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 a result of applying these standards.
(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 2015 and the results of all subsidiaries for the year then
ended. Collection House Limited and its subsidiaries together are referred to in these financial statements as the
Group or the consolidated entity.
Subsidiaries are all entities (including special purpose entities) over which the Group has control. The group
controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power to direct the activities of the 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 non-controlling interests in the Group.
(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 entities are measured using the currency of the
primary economic environment in which it operates (‘the functional currency’). The consolidated financial statements
are presented in Australian dollars, which is Collection House Limited’s functional and presentation currency.
(iv) Historical cost convention
(ii) Transactions and balances
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.
(v) 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.
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 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.
66
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 69
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
(iii) Group companies
(e) Revenue recognition (continued)
(iii) Sale of non-current assets
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
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.
•
all resulting exchange differences are recognised in other comprehensive income.
(f)
Income tax
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, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
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.
(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)
Interest income – PDL’s
Interest income is recognised using the effective interest method under AASB 9 Financial Instruments. Interest
is shown net of any adjustments to the carrying amount of purchased debt ledgers as a result of changes in
estimated cash flows.
(ii) Rendering of services – commission revenue
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.
68
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 liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the company is able to control the timing of the reversal of
the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
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.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 71
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(f)
Income tax (continued)
(h) Business combinations (continued)
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 (“TOFA”) legislation
TOFA began to apply to the group on 1 July 2010. The regime aims to align the tax and accounting treatment of
financial arrangements. The Group elected to adopt the reliance on financial reports methodology. This election,
together with the transitional election, had the effect of bringing to account deferred tax balances on financial
arrangements that existed at 30 June 2010, over at four year period. The deferred tax in relation to the transitional
adjustment that this created was fully amortised in the 30 June 2014 financial year.
(g) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards
of ownership are classified as finance leases (notes 18 and 23). Finance leases are capitalised at the lease’s
inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments.
The corresponding rental obligations, net of finance charges, are included in other current financial liabilities and
other non-current financial liabilities. Each lease payment is allocated between the liability and finance costs.
The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired
under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the
lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as
lessee are classified as operating leases (note 29). Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a straight line basis over the period of the lease.
(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’ proportionate share of the acquiree’s net
identifiable assets.
70
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 receivables 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.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 73
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(k) Trade receivables (continued)
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.
(l) Other financial assets
Classification
The Group classifies financial assets as subsequently measured at either amortised costs or fair value on the
basis of both the Group’s business model for managing the financial assets and the contractual cash flow
characteristics of the financial asset.
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 subsequently measured at amortised cost - Purchased debt ledgers (PDLs)
Classification
Purchased debt ledgers have been included in this category of financial assets as the Group’s business model for
managing the PDLs and the characteristics of the contractual cash flows of the financial asset are consistent with
this measurement approach.
PDLs 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.
Subsequent Measurement
PDLs are initially recognised at cost, as cost reflects fair value plus any incidental costs of acquisition and
thereafter measured at amortised cost using the effective interest method, less any impairment losses.
Net gains on financial assets are disclosed in the income statement as interest income net of any change in value
of the ledgers.
Impairment
The carrying amount of the PDLs is continuously reviewed to ensure that the carrying amount is not impaired.
PDLs are collectively assessed for impairment as they are not considered to be individually significant within the
portfolio and they have similar credit risk characteristics.
A PDL is considered to be impaired if the carrying amount exceeds the present value of the estimated future cash
flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in the income
statement. When a subsequent change in estimated future cash flows causes the amount of impairment loss
to reverse, the reversal in impairment is recognised in the income statement to the initial amount of the original
impairment loss.
72
(l) Other financial assets (continued)
(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 i.e. 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.
(iii)
Impairment
The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition and that loss event has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be readily estimated.
(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.
(n) Other current assets
(i) Legal and court costs capitalised
Significant legal and court costs associated with purchased debt and incurred subsequent to acquisition have
been capitalised in recognition that it is expected beyond reasonable doubt future economic benefits will flow to
the Group as a result of the expenditure being incurred.
These costs are amortised on a straight line basis over the period of their expected benefit, which is not expected
to exceed twelve months.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 75
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(o) Property, plant and equipment
All assets acquired including property, plant and equipment and intangibles other than goodwill are initially recorded
at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental
costs directly attributable to the acquisition. When equity instruments are issued as consideration, their market
price at the date of acquisition is used as fair value. Transaction costs arising on the issue of equity instruments are
recognised directly in equity subject to the extent of proceeds received, otherwise these costs are expensed.
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(s).
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
4-12 years
3-5 years
Leased plant and equipment
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.
(p) Intangible assets
(i) Goodwill
Goodwill is measured as described in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but it is tested for impairment every six months, 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 15 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) Customer contracts
The customer contracts were acquired as part of a business combination (see note 31 for details). They are
recognised at their fair value at the date of acquisition and are subsequently amortised on a straight-line basis
over periods ranging from 2 to 10 years.
(iv) Other intangible assets
Licences and intellectual property are considered to have a 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.
(q) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
(r) Borrowings
All borrowings are recognised at their principal amounts subject to set off arrangements which represent the present
value of future cash flows associated with servicing the debt. Where interest is payable in arrears the interest expense
is accrued over the period it becomes due and it is recorded at the contracted rate as part of “Other payables”.
Where interest is paid in advance, the interest expense is recorded as a part of “Prepayments” and released over
the period to maturity.
74
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 77
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(r) Borrowings (continued)
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.
(s) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that
is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation
of ancillary costs incurred in connection with arrangement of borrowings, foreign exchange losses net of any
hedged amounts on borrowings, including trade creditors and lease finance charges.
Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the
life of the borrowings.
(u) Employee benefits (continued)
(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.
The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have
an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when
the actual settlement is expected to occur.
(iii) Superannuation Plans
The Company and other controlled entities make statutory contributions to several superannuation funds in
accordance with the directions of its employees. Contributions are expensed in the period to which they relate.
(t) Provisions
(iv) Share-based payments
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.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.
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 each 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.
(u) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non monetary benefits and 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.
Share-based compensation benefits are provided to the Chief Executive Officer via 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 33.
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.
76
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 79
1 Summary of significant accounting policies (continued)
1 Summary of significant accounting policies (continued)
(u) Employee benefits (continued)
(iv) Share-based payments (continued)
Performance Rights compensation benefits are provided to key employees via the Collection House Performance
Rights Plan (PRP). The fair value of the performance rights granted under the PRP was independently determined.
The fair value at grant date has been calculated using the five day volume weighted average price (VWAP).
The expense is recognised over the vesting period. The expense for each relevant financial year will require an
assessment at each reporting date of the probability that each performance hurdle will be achieved. This probability
factor will then be multiplied by the total number of rights apportioned to each performance hurdle to determine
the number used in calculating the charge to profit and loss. Further details are set out in note 33.
(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.
(v) 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.
Where any group company purchases the Company’s equity instruments, for example as the result of a share
buy-back or a share-based payment plan, the consideration paid, including any directly attributable incremental
costs (net of income taxes) is deducted from equity attributable to the equity holders of Collection House Limited
as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently
reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the equity holders of Collection House Limited.
(w) 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.
(x) 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 32).
•
•
78
(x) Earnings per share (continued)
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(y) 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.
(z) 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.
(aa) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for the 30
June 2015 reporting period and have not been early adopted by the Group. The Group’s assessment of the
impact of these new standards and interpretations is set out below.
At the date of authorisation of the financial report, the following relevant Standards and Interpretations were
issued but not yet effective:
(i) AASB 9 Financial Instruments (December 2014) and associated Amending Standards (applicable to annual
reporting periods beginning on or after 1 January 2018);
(ii) AASB 15 Revenue from Contracts with Customers (applicable to annual reporting periods commencing on
or after 1 January 2017).
The Group does not expect to adopt the new standards before their operative date. The Group is currently
evaluating the impact of the new standards, however they are not expected to have a material impact on the Group.
There are no other standards that are not yet effective and that are expected to have a material impact on the
Group in the current or future reporting periods and on foreseeable future transactions.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 81
1 Summary of significant accounting policies (continued)
2 Financial risk management
(ab) Parent entity financial information
The financial information for the parent entity, Collection House Limited, disclosed in note 36 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.
(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.
(ac) Change in accounting estimates
In accordance with AASB138 Intangible assets, the Group has reviewed its accounting estimates with regard to
the useful life of IT development and software. The useful life of IT development and software was previously
amortised over a period ranging from 2 to 12 years. During the year the Group has reviewed the useful life of
internally generated software and have concluded that the useful life be extended to 15 years commencing from
1 July 2014. The effects of this change is not material to the current years results, and it not expected to have a
material impact on future years results.
80
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
cash flow analysis to determine the risk associated with the Purchased Debt Ledger portfolio.
Risk management is carried out by the finance department under policies approved by the Audit and Risk
Management Committee of the Board. Under the authority of the Board of Directors the Audit and Risk Management
Committee ensures that the total risk exposure of the Group is consistent with the Business Strategy and within the
risk tolerance of the Group. Regular risk reports are tabled before the Audit and Risk Management Committee.
Within this framework, the Finance team identifies, evaluates and manages financial risks in close co-operation
with the Group’s operating units.
a)
Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the NZ Dollar and the Philippine Peso.
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 2015, had the Australian Dollar weakened/strengthened by 10% against the NZ Dollar or the Philippine
Peso 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, if the borrowings are carried at fair value. During 2015 and 2014, the Group borrowings at variable
rates 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.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 2 Financial risk management (continued)
(a) Market risk (continued)
(iii) Cash flow and fair value interest rate risk (continued)
Trade interest rate risk (continued)
Interest rate hedges and swaps are an available tool for managing interest rate risk within the Group. The Board
has authorised their use and if it is determined that it would be profitable and / or advantageous to the Group,
these tools will be used.
On 17 September 2012, the Company confirmed an interest rate swap transaction for an amount of $15m at a fixed
rate of 3.02% per annum effective as at 7 September 2012 and continuing until 7 September 2015. On 21 September
2012, the Company confirmed an interest rate swap transaction for an amount of $14.5m at a fixed rate of 2.86% per
annum effective as at 21 September 2012 and continuing until 21 September 2015. On 29 January 2014, the Company
confirmed an interest rate swap transaction for an amount of $12.6m at a fixed rate of 2.895% per annum effective as
at 30 January 2014 and continuing until 1 February 2016. On 16 May 2014, the Company confirmed an interest rate
swap transaction for an amount of $46m at a fixed rate of 3.05% per annum effective as at 28 July 2014 and continuing
until 27 January 2017. On 9 February 2015, the Company confirmed an interest rate swap transaction for an amount of
$20m at a fixed rate of 1.86% per annum effective as at 9 February 2015 and continuing until 9 February 2018.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap
contracts outstanding:
30 June 2015
30 June 2014
Weighted
average
interest rate
%
3.5%
3.7%
Weighted
average
interest rate
%
3.6%
4.0%
Balance
$’000
119,000
(108,100)
10,900
Balance
$’000
100,123
(88,100)
12,023
Consolidated
Bank overdrafts and bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Investment interest rate risk
In addition the Group is exposed to Investment interest rate risk which arises from the significant investment in
Purchased Debt Ledgers. 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 2015, 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 $21,000 lower/higher (2014 change of
25 bps: $23,000 lower/higher), mainly as a result of higher/lower interest expense from net borrowings.
Other components of equity would have been $21,000 lower/higher (2014 $23,000 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.
82
83
2 Financial risk management (continued)
(a) Market risk (continued)
(iv) Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
Carrying
amount
$’000
931
10,900
Carrying
amount
$’000
1,280
12,023
Interest rate risk
-25 bps
+25 bps
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
2
19
21
21
2
19
21
21
(2)
(19)
(21)
(21)
(2)
(19)
(21)
(21)
Interest rate risk
-25 bps
+25 bps
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
2
21
23
23
2
21
23
23
(2)
(21)
(23)
(23)
(2)
(21)
(23)
(23)
Consolidated
30 June 2015
Financial liabilities
Borrowings
Total increase / (decrease)
in financial liabilities
Total increase / (decrease)
Consolidated
30 June 2014
Financial liabilities
Borrowings
Total increase / (decrease)
in financial liabilities
Total increase / (decrease)
(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
services are made to customers with an appropriate credit history.
Investment credit risk
In addition the Group is exposed to Investment credit risk which arises from the significant investment in
Purchased Debt Ledgers. A number of different types of risk arise from the PDL investments. All PDL risks are
managed together as described below.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 85
2 Financial risk management (continued)
(c) Liquidity risk
2 Financial risk management (continued)
(c) Liquidity risk (continued)
Prudent liquidity risk management implies maintaining sufficient cash and 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 to maintain 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.
Cash flows are 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 the following borrowing facilities throughout the year:
Term debt facility
Group set off
Consolidated
30 June
2015
$’000
125,000
7,500
30 June
2014
$’000
115,000
5,000
The group set off can be drawn upon at any time and the term debt option can be drawn upon within 2 days,
the group set off is repayable on demand, and the term debt is repayable at the end of the term.
The facility, which was syndicated in January 2014, was subject to meeting a number of financial undertakings.
The undertakings are reviewed by the Audit and Risk Management Committee each month, and are reported on
to the finance provider bi-annually. 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 and interest rate swaps entered into during the year are set out in note 19.
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.
Contractual
maturities of
financial liabilities
Less than
6 months
6-12
months
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
cash flows
Carrying
amount
(assets) /
liabilities
At 30 June 2015
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Non-derivatives
Non-interest bearing
16,013
Variable rate
–
Total non-derivatives
16,013
–
–
–
–
931
931
–
119,000
119,000
–
–
–
16,013
119,931
135,944
–
–
–
Less than
6 months
6-12
months
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Total
contractual
cash flows
Carrying
amount
(assets) /
liabilities
At 30 June 2014
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
13,628
323
13,951
–
–
–
–
1,280
1,280
–
99,800
99,800
–
–
–
13,628
101,403
115,031
–
–
–
(d) Cash flow and fair value interest rate risk
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 2015, the Group has entered into five interest rate swaps as per note 2(a).
84
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
3 Critical accounting estimates and judgements
3 Critical accounting estimates and judgements
87
(b) Critical judgements in applying the entity’s accounting policies (continued)
(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(o) 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: Collection Services and Purchased Debt Ledgers. 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.
Collection Services
The earning of commissions on the collection of debts for clients.
Purchased Debt Ledgers
The collection of debts from client ledgers acquired by the Group.
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(p). The recoverable amounts of cash generating units have been determined
based on value in use calculations. These calculations require the use of assumptions. Refer to note 14 for details
of these assumptions and the potential impact of changes to the assumptions.
(ii) Estimated impairment of non-financial assets and intangible assets other than goodwill
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 note 1(m). The calculation of fair value requires the use of assumptions.
(iv) Performance rights
The Group determines the amount to be posted to the share-based payments reserve based on management’s
best estimate of employees meeting their performance hurdles. The value of performance rights could change if
the number of employees that meet their performance hurdles differs significantly from managements estimate.
(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
discount rates
experience of employee departures and period of service
86
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 4 Segment information (continued)
(b) Segment information provided to the Board
4 Segment information (continued)
(b) Segment information provided to the Board (continued)
89
Collection
services
$’000
Purchased
debt
ledgers
$’000
Intersegment
eliminations/
unallocated
$’000
Total
continuing
operations
$’000
Discontinued
operations
$’000
Consolidated
$’000
2015
Segment revenue
Sales to external customers
47,848
Collection
services
$’000
Purchased
debt
ledgers
$’000
Intersegment
eliminations/
unallocated
$’000
Total
continuing
operations
$’000
Discontinued
operations
$’000
Consolidated
$’000
Intersegment sales
Total sales revenue
Interest income
Total segment revenue
Intersegment elimination
Consolidated revenue
Segment result
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
Unallocated liabilities
Total liabilities
Other segment information
Acquisitions of property,
plant and equipment,
intangibles and other non-
current segment assets
Total acquisitions
Depreciation and
amortisation expense
Total depreciation and
amortisation
903
48,751
–
48,751
–
–
–
77,552
77,552
–
–
–
–
–
47,848
903
48,751
77,552
126,303
(260)
126,043
9,373
31,898
–
41,271
(5,915)
(3,464)
31,892
(9,409)
22,483
182,145
259,515
(126,006)
315,654
–
Segment liabilities
19,766
131,564
(129,217)
3,475
73,819
–
1,148
886
411
2,445
Other non cash expenses
245
50,247
1,226
88
–
315,654
22,113
122,876
144,989
77,294
77,294
2,445
51,718
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
47,848
903
48,751
77,552
126,303
(260)
126,043
41,271
(5,915)
(3,464)
31,892
(9,409)
22,483
315,654
–
315,654
22,113
122,876
144,989
77,294
77,294
2,445
2,445
51,718
2014
Segment revenue
Sales to external customers
Intersegment sales
Total sales revenue
Interest income
Total segment revenue
Intersegment elimination
Consolidated revenue
Segment result
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
Depreciation and
amortisation expense
Total depreciation and
amortisation
43,785
648
44,433
–
44,433
–
–
–
63,118
63,118
–
–
–
–
–
43,785
648
44,433
63,118
107,551
(214)
107,337
8,140
27,593
–
35,733
(5,474)
(3,299)
26,960
(8,255)
18,705
173,573
233,678
(122,021)
285,230
19,553
127,109
(125,944)
5,092
82,833
–
–
285,230
20,718
108,522
129,240
87,925
87,925
1,005
783
(107)
1,681
Other non cash expenses
104
43,664
927
1,681
44,695
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
43,785
648
44,433
63,118
107,551
(214)
107,337
35,733
(5,474)
(3,299)
26,960
(8,255)
18,705
285,230
–
285,230
20,718
108,522
129,240
87,925
87,925
1,681
1,681
44,695
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
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
2015
$’000
121,001
4,399
–
30 June
2014
$’000
101,089
5,814
–
30 June
2015
$’000
304,526
9,893
1,236
125,400
106,903
315,654
30 June
2014
$’000
273,172
11,437
621
285,230
30 June
2015
$’000
77,288
3
3
30 June
2014
$’000
87,071
854
–
77,294
87,925
Australia
New Zealand
Philippines
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 (c)
and 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, 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 payables,
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 segment revenue
(d) Other segment information
Collection services
Purchased debt ledgers
30 June
2015
%
19
30 June
2014
%
18
30 June
2015
%
41
30 June
2014
%
44
Sales between segments are carried out at arm’s 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.
90
91
Consolidated
30 June
2015
$’000
77,552
47,970
521
126,043
30 June
2014
$’000
63,118
43,903
316
107,337
5 Revenue
Interest income
Commission
Other revenue
Revenue from continuing operations
Adjustments to the carrying amount of purchased debt ledgers as a result of changes in estimated cash flows
were not significant during the year. These have been included in interest revenue above.
6 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements, plant and equipment
Total depreciation
Amortisation
Computer software
Customer contracts
Business formation costs
Stamp Duty
Total amortisation
Total depreciation and amortisation
Finance expenses
Interest and finance charges paid/payable
Amount capitalised (a)
Finance costs expensed
Rental expense relating to operating leases
Minimum lease payments
Total rental expense relating to operating leases
(a) Capitalised borrowing costs
Consolidated
30 June
2015
$’000
30 June
2014
$’000
1,116
1,116
535
330
38
426
1,329
2,445
6,357
(442)
5,915
6,087
6,087
1,120
1,120
42
148
19
352
561
1,681
5,753
(279)
5,474
4,693
4,693
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 5.1% (2014 – 4.1%).
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
7
Income tax expense
8 Current assets – Cash and cash equivalents
(a) Income tax expense
Income tax expense – Profit from continuing operations
9,409
8,255
Cash at bank and in hand
Consolidated
30 June
2015
$’000
30 June
2014
$’000
93
Consolidated
30 June
2015
$’000
7,222
7,222
30 June
2014
$’000
704
704
Income tax expense is attributable to:
Current tax
Deferred tax
Under (over) provided in previous years
Aggregate income tax expense
Deferred income tax (revenue) expense included in income tax expense comprises:
Decrease (increase) in deferred tax assets (note 13)
(Decrease) increase in deferred tax liabilities (note 20)
9,708
523
(822)
9,409
125
398
523
11,983
(2,890)
(838)
8,255
(261)
(2,629)
(2,890)
(b) Numerical reconciliation of income tax expense to prima facie
tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2014 – 30%)
31,892
9,568
26,960
8,088
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non deductible expenses
Effect of tax rates in foreign jurisdictions
Tax exempt (income) / loss
Adjustments for current tax of prior periods
231
25
(201)
9,623
(214)
(214)
390
14
(91)
8,401
(146)
(146)
Income tax expense
9,409
8,255
92
(a) Reconciliation of cash at the end of the year
The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows
as follows:
Balances as above
Bank overdrafts (note 16)
Balances per statement of cash flows
(b) Risk exposure
Consolidated
30 June
2015
$’000
7,222
–
7,222
30 June
2014
$’000
704
(323)
381
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.
9 Current assets –Trade and other receivables
Net trade receivables
Trade receivables
Provision for impairment of receivables (a)
Other receivables (c)
Prepaid expenses
Consolidated
30 June
2015
$’000
30 June
2014
$’000
5,302
(96)
5,205
3,360
1,699
10,265
5,065
(49)
5,016
3,295
1,263
9,574
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 9 Current assets –Trade and other receivables (continued)
9 Current assets –Trade and other receivables (continued)
(a)
Impaired trade receivables
(b) Past due but not impaired
95
As at 30 June 2015, trade receivables of the Group of $1,056,000 (2014 – $2,357,000) were past due but not
impaired. These relate to a number of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Up to 3 months
Over 3 months
(c) Other receivables
These amounts relate to accrued revenue and other assets.
(d) Foreign exchange and interest rate risk
Consolidated
30 June
2015
$’000
1,052
4
1,056
30 June
2014
$’000
1,589
768
2,357
Information about the Group’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.
(f) Risk exposure
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.
As at 30 June 2015 current trade receivables of the Group with a nominal value of $426,000 (2014 – $218,000)
were assessed as potentially impaired. The amount of the provision was $96,000 (2014 – $49,000). 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
Over 3 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
Unused amount reversed
Consolidated
30 June
2015
$’000
30 June
2014
$’000
–
426
426
–
218
218
Consolidated
30 June
2015
$’000
30 June
2014
$’000
49
81
(1)
(33)
96
102
49
–
(102)
49
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.
94
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 97
10 Purchased debt ledgers
(a) Other financial assets subsequently measured at amortised cost
12 Non-current assets – Property, plant and equipment
Current
Non-current
Total other financial assets subsequently measured at amortised cost
Consolidated
30 June
2015
$’000
57,167
198,822
255,989
30 June
2014
$’000
51,669
182,581
234,250
PDLs are measured at amortised cost using the effective interest method in accordance with AASB 9
Financial Instruments.
The effective interest rate is the implicit interest rate based on forecast collections determined in the period of
acquisition of an individual PDL and equates to the Internal Rate of Return (IRR) of the forecast cash flows without
any consideration of collection costs.
(b) Risk exposure
Information about the Group’s exposure to credit risk, foreign exchange and price risk are provided in note 2.
11
Current assets – Other current assets
Other deposits
Legal and court costs capitalised – net
Consolidated
30 June
2015
$’000
120
969
1,089
30 June
2014
$’000
103
941
1,044
96
Plant and
equipment
$’000
Leasehold
improvements
$’000
Leased
plant and
equipment
$’000
Work-in-
progress
$’000
6,962
(5,143)
1,819
1,819
624
(1)
(708)
66
1,800
7,682
(5,882)
1,800
3,892
(1,519)
2,373
2,373
157
–
(398)
465
2,597
4,520
(1,923)
2,597
–
–
–
–
–
–
–
–
–
–
–
–
513
–
513
513
1,057
–
–
(531)
1,039
1,039
–
1,039
Plant and
equipment
$’000
Leasehold
improvements
$’000
Leased
plant and
equipment
$’000
Work-in-
progress
$’000
1,800
99
(8)
(666)
1,261
2,486
8,952
(6,466)
2,486
2,597
–
(8)
(450)
297
2,436
4,806
(2,370)
2,436
–
–
–
–
–
–
–
–
–
1,039
1,072
–
–
(1,558)
553
553
–
553
Total
$’000
11,367
(6,662)
4,705
4,705
1,838
(1)
(1,106)
–
5,436
13,241
(7,805)
5,436
Total
$’000
5,436
1,171
(16)
(1,116)
–
5,475
14,311
(8,836)
5,475
At 1 July 2013
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation charge
Transfers
Closing net book amount
At 30 June 2014
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Disposals
Depreciation charge
Transfers
Closing net book amount
At 30 June 2015
Cost or fair value
Accumulated depreciation
Net book amount
(a) Non-current assets pledged as security
Refer to note 19 for information on non-current assets pledged as security by the Group.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
13 Non-current assets – Deferred tax assets
14 Non-current assets – Intangible assets
99
The balance comprises temporary differences attributable to:
Tax losses
Provisions and employee benefits
Accruals
Doubtful debts
Future deductible windup costs
Other
Set-off of deferred tax liabilities pursuant to set-off provisions (note 20)
Net deferred tax assets
Movements:
Opening balance at 1 July
Change in tax rate
Credited / (charged) to the income statement (note 7)
Closing balance at 30 June
Consolidated
30 June
2015
$’000
30 June
2014
$’000
238
1,356
53
29
6
12
297
1,257
224
15
9
17
1,694
1,819
(1,694)
(1,819)
–
–
1,819
–
(125)
1,694
1,558
–
261
1,819
Movements –
Consolidated
Tax losses
$’000
Provisions
and
employee
benefits
$’000
Accruals
$’000
Doubtful
debts
$’000
Future
deductible
windup
costs
$’000
Other
$’000
Total
$’000
At 30 June 2013
• to profit or loss
At 30 June 2014
192
105
297
1,027
230
1,257
277
(53)
224
31
(16)
15
16
(7)
9
15
2
17
1,558
261
1,819
Movements –
Consolidated
Tax losses
$’000
Provisions
and
employee
benefits
$’000
Accruals
$’000
Doubtful
debts
$’000
Future
deductible
windup
costs
$’000
Other
$’000
Total
$’000
At 30 June 2014
• to profit or loss
At 30 June 2015
297
(59)
238
1,257
99
1,356
224
(171)
53
15
14
29
9
(3)
6
17
(5)
12
1,819
(125)
1,694
98
Computer
software
$’000
Customer
contracts
$’000
Goodwill
Other
intangible
assets
$’000
Work-in-
progress
– cost *
$’000
Total
$’000
At 1 July 2013
Cost
Accumulated amortisation and
impairment
Net book amount
Year ended 30 June 2014
Opening net book amount
Exchange differences
Acquisition of business
Additions – internal development
Amortisation charge
Disposals
Transfers
23,231
8,062
(3,763)
19,468
(6,948)
1,114
19,468
1,114
13
240
–
–
–
–
–
–
128
(42)
–
–
–
–
–
–
–
2,487
–
(148)
–
–
Closing net book amount
19,721
1,200
2,339
At 30 June 2014
Cost
Accumulated amortisation and
impairment
Net book amount
Year ended 30 June 2015
Opening net book amount
Exchange differences
Acquisition of business
Additions – internal development
Amortisation charge
Disposals
Transfers
23,484
8,190
2,487
(3,763)
19,721
(6,990)
1,200
(148)
2,339
19,721
(2)
–
–
–
–
–
–
–
63
(535)
(7)
2,642
3,363
–
–
–
(330)
–
–
2,009
Closing net book amount
19,719
At 30 June 2015
Cost
Accumulated amortisation and
impairment
Net book amount
23,482
10,887
2,487
(3,763)
19,719
(7,524)
3,363
(478)
2,009
–
–
–
–
–
–
–
(19)
–
184
165
184
(19)
165
7,670
38,963
–
7,670
(10,711)
28,252
7,670
28,252
–
–
3,311
–
–
(184)
10,797
13
2,727
3,439
(209)
–
–
34,222
10,797
45,142
–
(10,920)
10,797
34,222
–
–
–
(38)
–
–
127
184
(57)
127
–
–
2,241
–
–
(2,642)
10,396
(2)
–
2,304
(903)
(7)
–
35,614
10,396
47,436
–
10,396
(11,822)
35,614
1,200
2,339
165
10,797
34,222
* Work in progress includes capitalised development costs of an internally generated intangible asset which is under development.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 14 Non-current assets – Intangible assets (continued)
14 Non-current assets – Intangible assets (continued)
(a)
Impairment tests for goodwill
(d) Impact of possible changes in key assumptions
Goodwill is allocated to the Company’s cash-generating units (CGUs) identified according to business segment.
Collection services
101
A segment level summary of the goodwill allocation is presented below.
2015
Goodwill
2014
Goodwill
Collection
services
$’000
Purchased
debt ledgers
$’000
19,718
19,718
–
–
Collection
services
$’000
Purchased
debt ledgers
$’000
19,721
19,721
–
–
Total
$’000
19,718
19,718
Total
$’000
19,721
19,721
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 22.5% at 30 June 2015 rather than 12.5%,
there would have been no impact on the resulting impairment evaluation (2014: Nil). Because of the large excess
of fair value over carrying value, at no reasonable risk free rate is there an impairment issue for the CGU.
If the estimated revenue growth is increased to 10.00% and expenses growth held at 3.00%, 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 3.00%, 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.
15 Current liabilities – Trade and other payables
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 are no intangible assets associated with the purchased debt ledgers CGU, therefore no further analysis of
this segment is required.
(b) Key assumptions used for value-in-use calculations
Trade payables
Accrued expenses
Other payables
(a) Risk exposure
CGU
Growth rate (revenue)*
Growth rate (expenses) **
Discount rate ***
Information about the Group’s exposure to foreign exchange risk is provided in note 2.
30 June
2015
%
30 June
2014
%
30 June
2015
%
30 June
2014
%
30 June
2015
%
30 June
2014
%
Collection services
5.00
5.00
3.00
3.00
12.50
12.50
* Revenue growth has been set at 5% for the period of the calculation.
** Expense growth rate has been set at the current inflation rate for the period of the calculation.
*** In performing the value-in-use calculation, the Group has applied the pre tax discount weighted average cost of capital to discount the forecast
future attributable pre tax cash flows.
(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 (2014: Nil).
16 Current liabilities – Borrowings
Secured
Bank overdraft
Total secured current borrowings
Total current borrowings
Further information relating to Borrowings is set out in note 19.
100
Consolidated
30 June
2015
$’000
4,790
9,626
1,597
16,013
30 June
2014
$’000
3,254
8,619
1,755
13,628
Consolidated
30 June
2015
$’000
30 June
2014
$’000
–
–
–
323
323
323
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 103
Consolidated
30 June
2015
$’000
119,000
119,000
30 June
2014
$’000
99,800
99,800
–
–
119,000
99,800
Consolidated
30 June
2015
$’000
119,000
119,000
30 June
2014
$’000
100,123
100,123
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
All bank loans and overdrafts 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.
17 Current liabilities – Provisions
19 Non-current liabilities – Borrowings
Employee benefits
Other
(a) Movements in provisions
Consolidated
30 June
2015
$’000
3,039
28
3,067
30 June
2014
$’000
2,865
41
2,906
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
2015
Current
Carrying amount at start of year
- additional provisions recognised
- payments / other sacrifices of economic benefits
Carrying amount at end of year
2014
Current
Carrying amount at start of year
- additional provisions recognised
- payments / other sacrifices of economic benefits
Carrying amount at end of year
18 Current liabilities – Other financial liabilities
Contingent consideration (note 31 (a))
Finance lease liabilities
Other current financial liabilities
102
Other
$’000
41
194
(207)
28
36
183
(178)
41
Consolidated
30 June
2015
$’000
30 June
2014
$’000
1,545
454
150
2,149
810
635
155
1,600
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 19 Non-current liabilities – Borrowings (continued)
(a) Secured liabilities and assets pledged as security
19 Non-current liabilities – Borrowings (continued)
(c) Risk exposures
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Information about the Group’s exposure to interest rate and foreign currency changes is provided in note 2.
105
Current
Floating charge
Cash and cash equivalents
Receivables
Purchased debt ledgers
Total current assets pledged as security
Non-current
Floating charge
Purchased debt ledgers
Plant and equipment
Total non-current assets pledged as security
Total assets pledged as security
(b) Fair value
Consolidated
Notes
30 June
2015
$’000
30 June
2014
$’000
8
9
10
10
12
7,222
10,265
57,167
74,654
704
9,574
51,669
61,947
198,822
5,475
204,297
182,581
5,436
188,017
278,951
249,964
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
30 June 2015
30 June 2014
Carrying
amount
$’000
Fair value
$’000
Carrying
amount
$’000
Fair value
$’000
–
119,000
119,000
–
119,000
119,000
323
99,800
100,123
323
99,800
100,123
For an analysis of the sensitivity of borrowings to interest rate risk and foreign exchange risk refer to note 2.
On 17 September 2012, the Company confirmed an interest rate swap transaction for an amount of $15m at a fixed
rate of 3.02% per annum effective as at 7 September 2012 and continuing until 7 September 2015. On 21 September
2012, the Company confirmed an interest rate swap transaction for an amount of $14.5m at a fixed rate of 2.86% per
annum effective as at 21 September 2012 and continuing until 21 September 2015. On 29 January 2014, the Company
confirmed an interest rate swap transaction for an amount of $12.6m at a fixed rate of 2.895% per annum effective as
at 30 January 2014 and continuing until 1 February 2016. On 16 May 2014, the Company confirmed an interest rate
swap transaction for an amount of $46m at a fixed rate of 3.05% per annum effective as at 28 July 2014 and continuing
until 27 January 2017. On 9 February 2015, the Company confirmed an interest rate swap transaction for an amount of
$20m at a fixed rate of 1.86% per annum effective as at 9 February 2015 and continuing until 9 February 2018.
A financial asset or financial liability has not been recognised in relation to the arrangement, as it is not considered
to have a material impact on the results.
20 Non-current liabilities – Deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Purchased debt
Prepayments
Other
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions (note 13)
Net deferred tax liabilities
Consolidated
30 June
2015
$’000
30 June
2014
$’000
2,956
577
4
11
3,548
3,548
(1,694)
1,854
2,255
882
2
11
3,150
3,150
(1,819)
1,331
Consolidated
30 June
2015
$’000
30 June
2014
$’000
3,150
–
398
3,548
5,779
–
(2,629)
3,150
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.
Movements:
Opening balance at 1 July
Change in tax rate
Charged / (credited) to the income statement (note 7)
Closing balance at 30 June
104
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 107
20 Non-current liabilities – Deferred tax liabilities (continued)
24 Contributed equity
Movements – Consolidated
At 1 July 2013
• to profit or loss
At 30 June 2014
Movements – Consolidated
At 30 June 2014
• to profit or loss
At 30 June 2015
Property,
plant and
equipment
$’000
Purchased
debt
$’000
Prepayments
$’000
Other
$’000
1,418
837
2,255
4,353
(3,471)
882
3
(1)
2
5
6
11
Property,
plant and
equipment
$’000
Purchased
debt
$’000
Prepayments
$’000
Other
$’000
2,255
701
2,956
882
(305)
577
2
2
4
11
–
11
Total
$’000
5,779
(2,629)
3,150
Total
$’000
3,150
398
3,548
21 Non-current liabilities – Provisions
Employee benefits
22 Employee benefits
(a) Superannuation plans
Consolidated
30 June
2015
$’000
402
402
30 June
2014
$’000
356
356
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.
(a) Share capital
Ordinary shares
Fully paid
Company
Company
2015
Shares
2014
Shares
2015
$’000
2014
$’000
131,199,651
129,717,785
131,199,651
129,717,785
105,307
105,307
102,285
102,285
Total contributed equity
105,307
102,285
(b) Movements in ordinary share capital:
Issues of ordinary shares during the year
Date
1 July 2013
30 August 2013
3 September 2013
4 September 2013
1 October 2013
30 October 2013
28 March 2014
Details
Opening balance
Employee options exercised
Share Issue
Employee options exercised
Share Issue
Dividend reinvestment plan issues
Dividend reinvestment plan issues
Less: Transaction costs arising on share issue
Number
of Shares
115,437,740
414,000
7,878,780
177,200
4,242,478
818,950
748,637
–
$’000
80,095
287
13,000
123
7,000
1,323
1,305
(848)
30 June 2014
Closing balance
129,717,785
102,285
1 July 2014
17 October 2014
27 March 2015
Opening balance
129,717,785
102,285
Dividend reinvestment plan issues
Dividend reinvestment plan issues
Less: Transaction costs arising on share issues
725,442
756,424
–
1,424
1,617
(19)
30 June 2015
Closing balance
131,199,651
105,307
23 Non-current liabilities – Other financial liabilities
(c) Ordinary shares
Contingent consideration (note 31 (a))
Finance lease liabilities
Other non-current financial liabilities
106
Consolidated
30 June
2015
$’000
–
477
–
477
30 June
2014
$’000
1,516
579
131
2,226
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.
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 24 Contributed equity (continued)
(d) Dividend reinvestment plan
The Company has established a dividend reinvestment plan under which holders of ordinary shares may elect
to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being
paid in cash. Shares are issued under the plan at a 5% discount to the market price.
(e) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set
out in note 33.
(f) Performance rights
Information relating to the performance rights plan adopted as a means of rewarding and incentivising key
employees, including details of rights issued during the financial year, is set out in note 33.
(g) 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 financiers 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 Group’s projected growth plus a buffer. As far as possible, asset purchases
are funded from operational cash flow, 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 the mix between debt and equity impacts the Group’s Cost of Capital and hence ability to
provide returns to stakeholders, primarily the funding institutions and shareholders. The Group 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.
108
109
24 Contributed equity (continued)
(g) Capital risk management (continued)
The financing facility includes all funding provided by the Group’s main bankers. 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.
As part of the financing facility, the Company is required to monitor a number of financial indicators as specified
by the financiers. The Group monitors the indicators on a monthly basis and reports to the funding providers
every six months. The Group has comfortably met these covenants at all times during the year.
This strategy was followed during both the 2015 and 2014 financial years.
25 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
Consolidated
30 June
2015
$’000
3,429
(1,241)
2,188
30 June
2014
$’000
2,516
(557)
1,959
Consolidated
30 June
2015
$’000
30 June
2014
$’000
2,516
913
3,429
1,771
745
2,516
Consolidated
30 June
2015
$’000
30 June
2014
$’000
(557)
(684)
(1,241)
(1,282)
725
(557)
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 111
26 Dividends (continued)
(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 4.7 cents per fully paid ordinary share
(2014 – 4.1 cents, fully franked). The aggregate amount of the proposed dividend
expected to be paid on 16 October 2015 out of retained profits and a positive net
balance sheet at 30 June 2015, but not recognised as a liability at year end, is
Consolidated
30 June
2015
$’000
30 June
2014
$’000
6,166
6,166
5,318
5,318
(c) Franked dividends
The franked portions of the final dividends recommended after 30 June 2015 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 2016.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended
30 June 2015 and will be recognised in subsequent financial reports.
Franking credits available for subsequent financial years based on a tax rate of 30%
(2014 – 30%)
Consolidated
30 June
2015
$’000
30,397
30,397
30 June
2014
$’000
26,204
26,204
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.
25 Reserves and retained earnings
(b) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Dividends
Balance 30 June
(c) Nature and purpose of reserves
(i) Share-based payments reserve
Consolidated
30 June
2015
$’000
51,745
22,483
(11,058)
63,170
30 June
2014
$’000
42,683
18,705
(9,643)
51,745
The share-based payments reserve is used to recognise the fair value of performance rights issued to employees
that have not yet vested, or those that have vested at year end but not yet been issued as shares.
(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.
26 Dividends
(a) Ordinary shares
Fully franked final dividend for the year ended 30 June 2014 –
4.1 cents per share (2013 – 3.6 cents)
Fully franked interim dividend for the year ended 30 June 2015 –
4.4 cents per share (2014: 3.9 cents)
Dividends paid in cash or satisfied by the issue of shares under the dividend
reinvestment plan during the years ended 30 June 2015 and 2014 were as follows:
Paid in cash
Satisfied under the Dividend Reinvestment Plan
110
Consolidated
30 June
2015
$’000
30 June
2014
$’000
5,318
5,740
11,058
4,613
5,030
9,643
Consolidated
30 June
2015
$’000
30 June
2014
$’000
8,017
3,041
11,058
7,016
2,627
9,643
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
27 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:
(a) PKF Hacketts Audit
Audit services
Audit and review of financial reports
Audit-related services
Total auditors’ remuneration
(b) Non PKF Hacketts Audit audit firms
Audit services
Audit and review of financial reports
Total auditors’ remuneration
28 Contingencies
(a) Contingent liabilities
Consolidated
30 June
2015
$’000
30 June
2014
$’000
148,900
88,000
236,900
144,500
85,500
230,000
4,143
4,143
1,497
1,497
The Group had contingent liabilities at 30 June 2015 in respect of:
Claims
There were no claims of a material nature during the relevant period.
Relocation
Due to the relocation of the Brisbane head office to new premises over the coming year, it is likely a make good
will be required on the current premises. However due to a number of factors, the make good liability is unable
to be reliably determined at this stage. It is also expected from a cash flow perspective, any outflows incurred
in relation to make good in future periods is likely to be offset through lease incentives negotiated on the new
premises at Skyring Terrace.
Guarantees
(a) Bank Guarantees (secured) exist in respect of satisfactory contract performance in the normal course of
business for the Group amounting to $7,293,344 (2014: $1,991,592). During the period, the Group replaced Bank
Guarantees to secure our continued performance in the normal course of business resulting in the increase.
(b) Guarantees and Indemnities (secured) given by the Company and certain of its subsidiaries in support of
Later than one year but not later than five years
the existing Multiple Option Facility provided by Westpac Banking Corporation and Commonwealth Bank of
Australia, are currently in place.
Paragraphs (a) and (b) above are secured by a Fixed and Floating charge over the assets of the Company and
certain of its subsidiaries of the Group and may give rise to liabilities in the Group, if the associates do not meet
their respective 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.
Later than five years
Minimum lease payments
Less: Future finance charges
Recognised as a liability
112
113
29 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Purchased debt ledgers
(b) Non-cancellable operating leases
Consolidated
30 June
2015
$’000
41,372
41,372
30 June
2014
$’000
53,305
53,305
The Group leases its offices under non-cancellable operating leases expiring at various times during the next
eleven 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
(c) Non-cancellable finance leases
Consolidated
30 June
2015
$’000
30 June
2014
$’000
5,626
23,532
36,771
65,929
4,861
7,496
–
12,357
During the year, the Group leased two items of plant and equipment and intangibles with a carrying amount of
$383,000 (2014 – $1,140,000) under finance leases expiring within three years.
Commitments for minimum lease payments in relation to non-cancellable finance
leases are payable as follows:
Within one year
Consolidated
30 June
2015
$’000
30 June
2014
$’000
572
495
–
1,067
(54)
1,013
687
610
–
1,297
(83)
1,214
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
115
31 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):
Parent and Ultimate Parent company:
Collection House Limited
Controlled entities – incorporated in Australia
Cashflow Accelerator Pty Ltd
CashFlow Financial Advantage Pty Ltd
Collective Learning and Development Pty Ltd
CLH Legal Group Pty Ltd (formerly Reliance Legal Group Pty Ltd)
Lion Finance Pty Ltd
Midstate CreditCollect Pty Ltd
PH Collections (Australasia) Pty Ltd
Controlled entities – incorporated in New Zealand
Collection House (NZ) Limited
Lion Finance Limited
Controlled entities – incorporated in Philippines
Collection House International BPO, Inc *
2015
%
2014
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
* Collection House International BPO, Inc started up on 10 May 2012 and commenced business operations on 1 April 2013. While Collection
House Limited holds legal and beneficial ownership of 9,995 issued shares in the subsidiary, it has beneficial ownership of 5 issued shares in
the subsidiary, held on trust for Collection House Limited by each of the five appointed directors of the subsidiary, in accordance with
Philippines law, representing all of the issued shares in the subsidiary currently.
(a) Other acquisitions
Collection House acquired the commercial agency business of CreditCollect on 14 February 2013, via its subsidiary
Midstate CreditCollect Pty Ltd (formerly Midstate Credit Management Services Pty Ltd). The agreement for
the sale of the business calculates a possible aggregate purchase price of $4,077,500 including a contingent
consideration component of $3,323,500 of which $1,778,535 has been paid at 30 June 2015. The remaining
consideration of $1,544,965 which is contingent on achieving EBIT targets has been recorded as a liability in
relation to this acquisition. Total goodwill of $836,500 was recognised in relation to the business acquisition, in
addition to customer contracts intangible assets of $2,487,000, as outlined in note 14.
30 Related party transactions
(a) Group companies
Details of the parent company, the ultimate parent company and interests in subsidiaries are set out in note 31.
(b) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
30 June
2015
$’000
30 June
2014
$’000
3,316,517
3,033,070
229,562
790,768
204,648
554,559
4,336,847
3,792,277
Detailed remuneration disclosures are provided in sections A-J of the remuneration report on pages 41 to 58.
(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.
114
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
117
32 Earnings per share (continued)
(d) Weighted average number of shares used as the denominator
Consolidated
30 June
2015
Number
30 June
2014
Number
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
130,500,443
127,159,372
Adjustments for calculation of diluted earnings per share:
Performance Rights
884,800
1,420,777
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
131,385,243
128,580,149
(e)
Information concerning the classification of securities
(i) Performance rights
Performance rights issued to employees under the Performance Rights Plan (PRP) are considered to be
potential ordinary shares and have been included at the probability rate of 79% in the determination of diluted
earnings per share to the extent to which they are dilutive. The performance rights have not been included in the
determination of basic earnings per share. Details relating to the performance rights are set out in note 33.
32 Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders of
the Company
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
Total diluted earnings per share attributable to the ordinary equity holders of
the Company
(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
Diluted earnings per share
Profit attributable to the ordinary equity holders of the Company used in
calculating diluted earnings per share
Consolidated
30 June
2015
$’000
30 June
2014
$’000
17.2
17.2
17.1
17.1
14.7
14.7
14.5
14.5
Consolidated
30 June
2015
$’000
30 June
2014
$’000
22,483
22,483
18,705
18,705
22,483
22,483
18,705
18,705
116
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements: 119
33 Share-based payments (continued)
(a) Performance Rights Plan (continued)
During the reporting period ending 30 June 2014, 839,828 unlisted performance rights were issued to a number
of eligible employees pursuant to the PRP. A summary of these performance rights is identified below as PR2014.
Effective date
1 July 2013
Earliest possible Vesting date
The performance rights cannot vest earlier than the Test Date(2)
PR2014
Performance hurdles
based on the satisfactory
achievement of confidential
performance conditions
approved by the Board
Exercise conditions and
Vesting Date
Exercise price
Expiry date
Performance Conditions
% off Pool
Average ROE
Debt/Debt + Equity
EPS Base
EPS Stretch
Total
25%
15%
30%
30%
100%
The Performance Rights Test Date will be 30 June 2016 (Test Date) after which, the
Board will determine whether or not the Performance Hurdles have been achieved.
As soon as reasonably practicable after each Test Date applicable to any
Performance Period, the Board shall determine in respect of each eligible employee,
as at that Test Date:
(a) whether, and to what extent, the Performance Hurdles applicable as at the Test
Date have been satisfied;
(b) the number of Performance Rights (if any) that will become Vested Performance
Rights as at the Test Date; and
(c) the number of Performance Rights (if any) that will lapse as a result of the
non-satisfaction of Performance Hurdles as at the Test Date;
and shall provide written notification to each eligible employee as to that determination.
Nil
30 September 2016
A Performance Right lapses, to the extent it has not been exercised, on the earlier to
occur of:
(a) where Performance Hurdles have not been satisfied as at the relevant Test Date;
(b) if an eligible employee’s employment with the Company or Related Body
Corporate ceases before the Vesting Date;
(c) the day the Board makes a determination that the Performance Rights lapses
because of breach, fraud or dishonesty; and
(d) 30 September 2016.
5 Day volume weighted
average Share price
$1.5479
(2) Test Date: the date at which assessment against the Performance Conditions are made by the Board. For PR2014, the Test Date will be 30 June 2016.
33 Share-based payments
(a) Performance Rights Plan
In line with the executive remuneration framework, the Board approved and adopted the Performance Rights
Plan (PRP), effective on and from 1 July 2012, as a means of rewarding and incentivising its key employees.
The PRP was extended to the then Chief Executive Officer (CEO), now Managing Director and CEO and to
eligible employees.
Future performance rights may be issued by the Board pursuant to the PRP. Such future performance rights will
be subject to not only individual performance being considered, but also, Company performance hurdles being
achieved before performance rights may vest at the discretion of the Board.
During the reporting period ending 30 June 2015, 680,184 unlisted performance rights were issued to a number
of eligible employees pursuant to the PRP. A summary of these performance rights is identified below as PR2015.
Effective date
1 July 2014
Earliest possible Vesting date
The performance rights cannot vest earlier than the Test Date(1)
PR2015
Performance hurdles
based on the satisfactory
achievement of confidential
performance conditions
approved by the Board
Exercise conditions and
Vesting Date
Exercise price
Expiry date
Performance Conditions
% off Pool
Average ROE
Debt/Debt + Equity
EPS Base
EPS Stretch
Total
10%
10%
30%
50%
100%
The Performance Rights Test Date will be 30 June 2017 (Test Date) after which, the
Board will determine whether or not the Performance Hurdles have been achieved.
As soon as reasonably practicable after each Test Date applicable to any
Performance Period, the Board shall determine in respect of each eligible employee,
as at that Test Date:
(a) whether, and to what extent, the Performance Hurdles applicable as at the Test
Date have been satisfied;
(b) the number of Performance Rights (if any) that will become Vested Performance
Rights as at the Test Date; and
(c) the number of Performance Rights (if any) that will lapse as a result of the
non-satisfaction of Performance Hurdles as at the Test Date;
and shall provide written notification to each eligible employee as to that determination.
Nil
30 September 2017
A Performance Right lapses, to the extent it has not been exercised, on the earlier to
occur of:
(a) where Performance Hurdles have not been satisfied as at the relevant Test Date;
(b) if an eligible employee’s employment with the Company or Related Body
Corporate ceases before the Vesting Date;
(c) the day the Board makes a determination that the Performance Rights lapses
because of breach, fraud or dishonesty; and
(d) 30 September 2017.
5 Day volume weighted
average Share price
$1.8515
(1) Test Date: the date at which assessment against the Performance Conditions are made by the Board. For PR2015, the Test Date will be 30 June 2017.
118
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
33 Share-based payments (continued)
(a) Performance Rights Plan (continued)
During the reporting period ending 30 June 2013, 1,356,238 unlisted performance rights were issued to a number
of eligible employees pursuant to the PRP. A summary of these performance rights is identified below as PR2013.
Effective date
1 July 2012(3)
Earliest possible Vesting date
The performance rights cannot vest earlier than the Test Date(4)
PR2013
Performance hurdles
based on the satisfactory
achievement of confidential
performance conditions
approved by the Board
Exercise conditions and
Vesting Date
Exercise price
Expiry date
Performance Conditions
% off Pool
Average ROE
Debt/Debt + Equity
EPS Base
EPS Stretch
Total
25%
25%
25%
25%
100%
The Performance Rights Test Date will be 30 June 2015 (Test Date) after which, the
Board will determine whether or not the Performance Hurdles have been achieved.
As soon as reasonably practicable after each Test Date applicable to any
Performance Period, the Board shall determine in respect of each eligible employee,
as at that Test Date:
(a) whether, and to what extent, the Performance Hurdles applicable as at the Test
Date have been satisfied;
(b) the number of Performance Rights (if any) that will become Vested Performance
Rights as at the Test Date; and
(c) the number of Performance Rights (if any) that will lapse as a result of the
non-satisfaction of Performance Hurdles as at the Test Date;
and shall provide written notification to each eligible employee as to that determination.
Nil
30 September 2015
A Performance Right lapses, to the extent it has not been exercised, on the earlier to
occur of:
(a) where Performance Hurdles have not been satisfied as at the relevant Test Date;
(b) if an eligible employee’s employment with the Company or Related Body
Corporate ceases before the Vesting Date;
(c) the day the Board makes a determination that the Performance Rights lapses
because of breach, fraud or dishonesty; and
(d) 30 September 2015.
5 Day volume weighted
average Share price
$0.7960
(3) Except for Paul Freer, whose Performance Rights commenced 4 March 2013, and five day volume weighted average share price is $1.5950.
(4) Test Date: the date at which assessment against the Performance Conditions are made by the Board. For PR2013, the Test Date will be 30 June 2015.
120
121
33 Share-based payments (continued)
(a) Performance Rights Plan (continued)
Set out below are summaries of rights issued under the plan:
Effective
Date
Expiry date
Exercise
price
Balance
at start
of the
year
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
Balance
at end of
the year
Vested
and
issuable
at end of
the year*
Number Number
Number Number Number
Number
Company - 2015
1 July 2012
30 September 2015
4 March 2013 30 September 2015
1 July 2013
30 September 2016
1 July 2014
30 September 2017
Nil
Nil
Nil
Nil
1,231,114
100,000
831,430
–
–
–
–
680,184
939,667
80,000
291,447
20,000
–
–
939,667
80,000
–
–
14,697
816,733
–
680,184
–
–
Total
2,162,544
680,184
1,019,667
326,144
1,496,917
1,019,667
* Vested performance rights will be issuable on 1 September 2015.
Effective
Date
Expiry date
Exercise
price
Balance
at start
of the
year
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
Balance
at end of
the year
Vested
and
issuable
at end of
the year
Number Number
Number
Number
Number Number
Company - 2014
1 July 2012
30 September 2015
4 March 2013 30 September 2015
1 July 2013
30 September 2016
Total
Fair Value of Performance Rights Issued
Nil
Nil
Nil
1,256,238
100,000
–
–
–
839,828
1,356,238
839,828
–
–
–
–
25,124
1,231,114
–
100,000
8,398
831,430
33,522
2,162,544
–
–
–
–
The assessed fair value at issue date of all performance rights is set out above. The fair value at issue date is
determined based on the five day volume weighted average share price prior to issue date.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Employee share options
Employee performance rights
Total expenses arising from share-based payment transactions
Consolidated
30 June
2015
$’000
30 June
2014
$’000
–
913
913
99
646
745
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
123
34 Events occurring after the reporting period
(a) Dividend
36 Parent entity financial information
(a) Summary financial information
A fully franked final dividend of 4.7 cents, totalling $6.2 million, has been declared, payable on 16 October 2015.
No provision has been raised in these accounts for this amount.
The individual financial statements for the parent entity show the following aggregate amounts:
35 Reconciliation of profit after income tax to net cash inflow from
operating activities
Profit for the year
Depreciation and amortisation
Amortisation of purchased debt ledgers
Non cash employee benefits expense – share-based payments
Provision for doubtful debts
Other non cash expenses
Borrowing costs
Interest paid
Change in operating assets and liabilities
(Increase) / decrease in trade debtors and bills of exchange
(Increase) / decrease in sundry debtors
(Increase) / decrease in other non-current 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
Consolidated
30 June
2015
$’000
22,483
4,839
50,090
913
47
524
1,439
4,480
(126)
(1,287)
(2,440)
1,581
(353)
(5,044)
523
30 June
2014
$’000
18,705
3,644
43,417
745
(53)
320
1,782
3,693
646
(2,048)
(2,283)
400
218
(325)
(2,890)
Net cash inflow (outflow) from operating activities
77,669
65,971
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
Retained earnings
Consolidated
30 June
2015
$’000
30 June
2014
$’000
6,375
276,474
282,849
17,061
141,345
158,406
4,993
252,014
257,007
24,978
115,779
140,757
105,309
102,283
3,430
15,704
2,517
11,450
Capital and reserves attributable to owners of Collection House Limited
124,443
116,250
Profit or loss for the year
Total comprehensive income
15,311
14,308
15,311
14,308
(b) Guarantees entered into by the parent entity
The parent entity has entered into guarantees with certain of its subsidiaries as set out in note 28.
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
Refer to note 28 for contingent liabilities entered into by the parent entity. For information about guarantees given
by the parent entity, please see above.
122
2015 Annual ReportNotes to the financial statementsNotes to the financial statements30 June 201530 June 2015Financial Statements:Financial Statements:
Directors’ declaration
Independent auditor’s report to the members
125
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 61 to 123 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 2015 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.
David Liddy,
Chairman
Brisbane
20 August 2015
124
Independent Auditor’s Report to the members of
Collection House Limited
Report on the Financial Report
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF COLLECTION HOUSE LIMITED
We have audited the accompanying financial report of Collection House Limited, which
comprises the consolidated balance sheet as at 30 June 2015, and the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, there have
changes in equity and consolidated statement of cash flows for the year then ended, notes
been:
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.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(a)
Directors’ Responsibility for the Financial Report
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
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.
PKF HACKETTS AUDIT
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
Shaun Lindemann
Partner
Brisbane, 20 August 2015
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. We have given to the directors of the company a written Auditor’s
Independence Declaration, a copy of which is included in the directors’ report.
2015 Annual Report30 June 201530 June 2015Financial Statements:Financial Statements:
Independent auditor’s report to the members
127
Shareholder
Information
Opinion
In our opinion:
a)
the financial report of Collection House Limited is in accordance with the Corporations
Act 2001, including:
i) giving a true and fair view of the consolidated entity’s financial position as at 30
June 2015 and of its performance for the year ended on that date; and
ii) 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.
The shareholder information set out below was applicable as at 20 August 2015.
A. Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
Class of equity security
Ordinary shares
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total
Report on the Remuneration Report
There were 354 holders of less than a marketable parcel of ordinary shares.
We have audited the Remuneration Report included on pages 40 to 58 of the Directors’
Report for the year ended 30 June 2015. 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 2015 complies with section 300A of the Corporations Act 2001.
PKF HACKETTS AUDIT
Shaun Lindemann
Partner
Brisbane, 20 August 2015
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
1. HSBC Custody Nominees (Australia) Limited
2. Ankla Pty Ltd
3. JP Morgan Nominees Australia Limited
4. Citicorp Nominees Pty Limited
5. National Nominees Limited
6. Mr Dennis George Punches (D G Punches Revocable Account)
7. Brispot Nominees Pty Ltd (House Head Nominee No. 1 Account)
8. Tombenet Pty Ltd (Coutts Superannuation A/C)
9. Garrett Smythe Limited
10. BNP Paribas Noms Pty Ltd (DRP)
11. Mr William Walter Kagel
12. Mr Dennis George Punches (Grantor Ret Annuity No. 2 Account)
13. Mr Anthony Robin Aveling
14. Mr Frederick Benjamin Warmbrand (FB & LJ Warmbrand Super A/C)
15. Nowcastle Pty Ltd
16. Ripeland Pty Ltd
17. Mr Lev Mizikovsky and Mrs Emily Dorothy Mizikovsky (Superfun Superfund Account)
18. Durbin Superannuation Pty Ltd (Durbin Family S Fund A/C)
19. Mr Raymond Larkin and Mrs Joan Larkin (Larkin Revocable Account)
20. HSBC Custody Nominees (Australia) Limited – Account 3
Holders
Shares
2,730
4,857
1,593
1,281
77
1,579,671
13,449,583
12,057,516
28,995,624
75,117,257
10,538
131,199,651
Units
% of issued
capital
16,361,942
11,564,049
9,226,617
7,441,703
4,563,368
2,302,535
1,793,628
1,460,207
1,139,778
1,024,543
1,000,000
1,000,000
968,273
867,040
813,251
694,142
623,944
618,241
550,000
505,002
12.47
8.81
7.03
5.67
3.48
1.75
1.37
1.11
0.87
0.78
0.76
0.76
0.74
0.66
0.62
0.53
0.48
0.47
0.42
0.38
126
Total
64,518,263
49.18
2015 Annual Report30 June 2015Financial Statements:
Shareholder
Information
(cont’d)
Unquoted equity securities
Details of these Performance Rights are set out at note 33 of the financial statements.
Effective
Date
Expiry date
Exercise
price
Balance
at start
of the
year
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
Balance
at end of
the year
Vested
and
issuable
at end of
the year*
Number Number
Number Number Number
Number
Company - 2015
1 July 2012
30 September 2015
4 March 2013 30 September 2015
1 July 2013
30 September 2016
1 July 2014
30 September 2017
Nil
Nil
Nil
Nil
1,231,114
100,000
831,430
–
–
–
–
680,184
939,667
80,000
291,447
20,000
–
–
939,667
80,000
–
–
14,697
816,733
–
680,184
–
–
Total
2,162,544
680,184
1,019,667
326,144
1,496,917
1,019,667
* Vested performance rights will be issuable on 1 September 2015.
Restricted securities
All issued shares in Collection House Limited are quoted on the ASX and there are no shares subject to escrow or
other regulated restrictions other than as follows:
Voluntary restrictions on securities
There is a restriction on the relevant interest in the 371,024 shares held by Mark G Answerth & Associates Pty Ltd
under section 608(1) of the Corporations Act.
C. Substantial Holders
Substantial shareholders of ordinary shares in the Company are set out below:
Holder
Units
% of issued
capital
1. HSBC Custody Nominees (Australia) Limited
16,361,942
12.47
2. Mr Lev Mizikovsky, Ankla Pty Ltd, Sunstar Australia Pty Ltd, Ripeland Pty
Ltd and Rollee Pty Ltd, Nowcastle Pty Ltd, L & E Mizikovsky Superfun
Superfund (combined shareholdings)
3. JP Morgan Nominees Australia Limited
4. Citicorp Nominees Pty Limited
D. Voting Rights
14,233,787
9,226,617
7,441,703
10.85
7.03
5.67
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.
128
129
Corporate
Directory
Directors
David Liddy – Chair (Non-Executive)
Dennis Punches – Deputy Chair (Non-Executive)
Matthew Thomas – Managing Director and Chief
Executive Officer (Executive)
Tony Coutts – Director (Non-Executive)
(retired 30 June 2015)
Kerry Daly – Director (Non-Executive)
David Gray – Director (Non-Executive)
Philip Hennessy – Director (Non-Executive)
Julie-Anne Schafer – Director (Non-Executive)
Company Secretary
Julie Tealby
Executive Management Team
Matthew Thomas – Managing Director and Chief
Executive Officer
Adrian Ralston – Chief Financial Officer
Paul Freer – Chief Operating Officer
Kylie Lynam – General Manager – Human
Resources and Corporate Services
Marcus Barron – Chief Information Officer
Julie Tealby – Chief Risk Officer and
Company Secretary
Main contact
Matthew Thomas
Managing Director and Chief Executive Officer
t. +61 7 3100 1245
e. matthew.thomas@collectionhouse.com.au
Principal registered office in Australia
Level 7, 515 St Paul’s Terrace
Fortitude Valley Qld 4006
t. +61 7 3292 1000
f.
+61 7 3832 0222
w. www.collectionhouse.com.au
Postal address
PO Box 2247
Fortitude Valley BC Qld 4006
Share register
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne Vic 3000
1300 850 505
+61 7 3237 2152
t.
f.
w. www.computershare.com.au
Auditor
PKF Hacketts Audit
Level 6, 10 Eagle Street
Brisbane Qld 4000
Stock exchange listing
Collection House Limited shares are listed on
the Australian Securities Exchange (ASX).
The home exchange is Sydney.
ASX code
CLH
Investor and client presentation
The Group’s latest investor and client presentation
is available at www.collectionhouse.com.au.
Notice of Annual General Meeting
The AGM of Collection House Limited will be held on
23 October 2015 at 11.00 am at the Emporium Hotel,
1000 Ann Street, Fortitude Valley, Brisbane, Queensland
2015 Annual Report