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COLLINS FOODS LIMITED ABN 13 151 420 781
aNNUal RePoRt
2012
COLLINS FOODS LIMITED
ABN 13 151 420 781
Key dates: 2012/2013
2011/12 full year results released
2011/12 final dividend record date
2011/12 final dividend payment date
annual General meeting
end of 2012/13 half year
2012/13 half year results released*
2012/13 interim dividend record date*
2012/13 dividend payment date*
end of 2012/13 full year
*Dates to be confirmed.
29 June 2012
13 July 2012
27 July 2012
4 september 2012
14 october 2012
3 december 2012
12 december 2012
24 december 2012
28 april 2013
CoNteNts
Chairman’s Message
CEO’s Report
Corporate Governance
Statement
Directors’ Report
Auditor’s Independence
Declaration
Consolidated
Balance Sheet
Consolidated
Income Statement
2
4
8
16
30
31
32
Consolidated Statement
of Comprehensive Income 33
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Auditor’s
Report
Shareholder Information
Corporate Directory
34
35
36
92
93
95
IBC
1
ColliNs Foods limited ANNUAL REPORT 2012
ChaiRmaN’s
messaGe
Everyone at Collins Foods
has had to adapt to
the significant changes
demanded of a listed
company at the same
time as dealing with
some of the most
difficult market
conditions we have
ever experienced.
dear shareholders,
the 2011/12 financial year marked the start of an
exciting new chapter in the 44 year history of the Collins
Foods limited group of companies, with the listing of
the Company on the asX on 4 august 2011. the initial
Public offering (iPo) was well supported, raising a total
of $201.7 million that was used primarily to acquire the
KFC and sizzler businesses previously owned and/or
operated by Collins Foods holding Pty ltd.
A Year Marked by Unprecedented Challenging Trading
Conditions
Unfortunately the past year was marked by extremely challenging trading
conditions. By the second quarter of our financial year it became apparent
that economic uncertainties at home and abroad and falling consumer
confidence had dampened retail spending generally. The September
school holiday period, which for the first time in corporate memory passed
by with no sales spike at all, signalled the challenges ahead for Collins
Foods, and led to a significant downgrade to our Prospectus forecasts.
Our management team implemented strategies to minimise the impact of
these unprecedented market conditions. These strategies were also aimed
at ensuring the business would be in the strongest possible position to
take advantage of improved market conditions when they returned.
Financial Performance In Line with Market Guidance
The financial performance of Collins Foods for the period ended 29 April
2012 (FY12) is set out in this report. The Group’s statutory Net Profit After
Tax (NPAT) for FY12 was $11.4 million, compared to the prior year result of
$1.4 million.
The proforma* results, which more accurately depict the Group’s
underlying performance, included:
– Revenue of $406.5 million against a prior year of $410.8 million
–
Earnings Before Interest and Tax (EBIT) of $34.0 million, down 16.7%
on the prior year
– NPAT of $18.4 million, down 19.3% on the prior year
The proforma NPAT result was in line with guidance provided to the
market and was achieved in light of the very challenging market conditions
as a result of the very hard work and dedication of all of our staff.
Dividend Policy Implemented and Maiden Dividend Paid
The continued strength of the Company’s balance sheet saw the Board
activate the Company’s dividend policy and declare its maiden dividend
with a fully franked final dividend of 6.5 cents per share. This dividend was
equivalent to 53% of statutory FY12 NPAT and was in line with our policy
to target a dividend payout ratio of at least 50% of statutory NPAT.
2
Strong Board
The new Board of Directors was appointed in advance of the IPO.
Collectively it provides significant listed-company experience and
expertise appropriate for our business, spanning operational, legal,
financial and marketing disciplines.
After steering the Group through its transition to a listed entity and
working with management to establish appropriate standards and
processes, the Board’s focus shifted to shaping and refi ning strategies
for Collins Foods’ future growth.
The Collins Foods Board is committed to adhering to the highest
standards of corporate governance. The Company’s corporate
governance practices, which are discussed in greater detail on pages
8 to 14 of this Annual Report are closely aligned with the ASX Corporate
8 to 14 of this Annual Report are closely aligned with the ASX Corporate
Governance Principles and Recommendations.
I would like to thank all of the Board members for their counsel, strategic
I would like to thank all of the Board members for their counsel, strategic
input, commitment and support during our fi rst year as a listed entity.
A Key Strength is our People
At the heart of our business is our people. Collins Foods employs over
6,000 magnifi cent employees across all of our operations. On behalf
of the Board I would like to thank our executive team led by CEO Kevin
Perkins, and all of our employees for their commitment and dedication
through what has been a very tough year.
Everyone at Collins Foods has had to adapt to the signifi cant changes
demanded of a listed company at the same time as dealing with some
of the most diffi cult market conditions we have ever experienced.
I commend every member of our team for the fantastic effort they have
put in over the past 12 months to reposition Collins Foods for growth.
Positive Outlook
Collins Foods is now well positioned to improve its underlying business
performance as market conditions improve.
We are in the unique position of being Australia’s largest operator
of KFC restaurants, with access to the systems of one of the world’s
largest restaurant companies in Yum!. The Company’s CEO sits on the
KFC International Brand Council ensuring issues and strategies relevant
to our Australian operations are addressed.
Product and operational initiatives are being accelerated for KFC to
return the business to a positive growth trajectory and increase market
share. Whilst still early into the new fi nancial year, we have seen an
increase in sales, a positive sign.
The Sizzler business is well positioned to capitalise on growth
The Sizzler business is well positioned to capitalise on growth
opportunities in the Asian market.
I am confident that our CEO Kevin Perkins and his experienced
I am confident that our CEO Kevin Perkins and his experienced
management team, which will be bolstered in the coming year when
management team, which will be bolstered in the coming year when
a new CFO is recruited, have the skills, energy and ambition to capitalise
a new CFO is recruited, have the skills, energy and ambition to capitalise
on the many growth opportunities available to Collins Foods.
on the many growth opportunities available to Collins Foods.
Thank you, our shareholders, for your continued support of Collins
Thank you, our shareholders, for your continued support of Collins
Foods. I look forward to reporting to you on our successes and progress
Foods. I look forward to reporting to you on our successes and progress
in 2012/13.
Yours sincerely
Russell tate
Chairman
*
*
Pro forma measures, which are unaudited, differ from statutory presentation to
Pro forma measures, which are unaudited, differ from statutory presentation to
refl ect the full year impact of the operating and capital structure of the Group
refl ect the full year impact of the operating and capital structure of the Group
that was established upon the IPO and capital reconstruction together with the
that was established upon the IPO and capital reconstruction together with the
elimination of IPO costs and related adjustments which are not expected to recur in
the future.
3
ColliNs Foods limited ANNUAL REPORT 2012
Ceo’s
RePoRt
A number of the
productivity, brand and
product initiatives we
have been working on
are well advanced, with
a number of others
about to be trialled.
These initiatives will help
position Collins Foods for
a return to sustainable
long-term growth.
the 2011/12 year was a signifi cant year for the
Collins Foods Group with its transformation from
private ownership to public listing. Unfortunately the
Company’s asX listing was overshadowed by a lower
than expected profi t performance given the extremely
challenging trading conditions, particularly during the
second half of the fi nancial year.
whilst decisive action was taken to counteract the
diffi cult operating environment, the speed of the
spending slowdown took us by surprise. i commend all
our staff for their focus, commitment and dedication
over the past 12 months that has enabled the Company
to come through the period even stronger, with
initiatives now being implemented to return Collins
Foods to a position of growth.
Financial Performance
Group Performance Overview
In addition to the fi nancial metrics outlined in the Chairman’s report, on
a statutory basis, Collins Foods reported Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) of $49.7 million as compared to
$48.8 million in the prior year.
On a proforma* basis, the Group reported EBITDA of $51.1 million which
was down 8.6% percent on the prior year, largely driven by reduced
margins as costs increases were not able to be passed on to customers
given the weaker trading environment.
The result for this year included approximately $2.4 million in pre-tax
savings that are not expected to recur in the future.
Statutory operating cash fl ow increased 3.8% on the prior year
to $35.6 million and the Group’s balance sheet remains strong
with comfortable gearing levels and substantial headroom in the
Company’s debt facilities.
Collins Foods’ strong balance sheet has allowed the Board to initiate the
Company’s dividend policy and pay a maiden fully franked fi nal dividend
of 6.5 cents per share.
4
Key
hiGhliGhts
Public listing on ASX
20 KFC and 3 Sizzler
restaurants refurbished
2 new KFC and 1 new
Sizzler restaurant opened
Strong balance sheet and
operating cash flows
Dividend policy initiated,
with maiden dividend
paid of 6.5 cents per share
Operational Performance
KFC
KFC same store sales were down 1.8% for the 2011/12 year due to
the weaker trading environment (2010/11: up 1.5%). The Quick Service
Restaurant (QSR) category was at the coal face of the downturn in
retail spending, that saw a year marked by aggressive discounting by
competitors. In order to maintain market share, KFC undertook higher
than anticipated levels of promotional discounting and was unable to
fully pass on increased input costs through price increases, impacting
both prices and margins.
Stores in food court locations generally underperformed during the year,
as did those in tourist dependent locations. In contrast, stores located in
mining industry areas performed strongly.
Twenty restaurants were refurbished during the year, representing 17%
of the total portfolio. Given the weak trading environment, the return
on investment from refurbishments has been less than those historically
experienced. As a result, we consciously slowed the refurbishment
program in order to reassess store capital strategies to ensure targeted
returns can be achieved over the long term.
One of the two new restaurants opened during the year was a service
centre model that has returned well above expectations, providing
exciting opportunities for this store model going forward.
Sizzler
Sizzler same store sales growth was down 4.0% for the 2011/12 year
after posting positive growth of 1.0% in the prior year. Like KFC, margins
were also impacted by trading conditions as planned price increases were
postponed and discounted promotional offerings were utilised to drive
customer numbers.
The division refurbished three restaurants and opened one new
restaurant during the year. Performance of these has been below
expectations, and as a result we are focused on refining the Sizzler
stores’ capital strategies and increasing capacity in remodelled
restaurants.
In Asia, franchised operations in Thailand continue to grow, whilst in
Japan a number of restaurants have been refurbished during the year,
delivering increased royalty flows.
5
ColliNs Foods limited ANNUAL REPORT 2012
Ceo’s
RePoRt
Key Growth Strategies
KFC
sizzler
Refocused store Rollout and
Refurbishment Programme
–
focused on new stores in growth
locations (eg mining centres) and in
service centre developments to deliver
strong returns on investment
Brand Building and
Product Development
Supported by New
Marketing Campaigns
– ongoing review of food court portfolio
refurbishments on the basis of revised
–
store capital strategy incorporating
sustainability considerations
–
re-emphasis of core, unique and
superior KFC products
– ongoing development of non-fried
products and ‘in-between’ meal
snacking options
– breakfast offering being trialled
by Yum!
–
raising quality of KFC experience and
educating customers on “Better For
You” initiatives
–
expansion of digital marketing
–
refurbishments on the basis of
revised store capital strategy
incorporating sustainability
considerations and increasing
seating capacity
–
further expansion in China
and Thailand
–
–
continual evolution and
upgrade of quality products
re-emphasis of core and
unique Sizzler offering
–
expansion of digital marketing
Operating Efficiencies
–
introduction of new and enhanced
service methods including online
ordering, kiosks and dual lane drive-
thrus trials
enhanced production planning tools
–
– menu simplification and electronic
order boards
– new service flow methodologies
–
testing of new and enhanced
ordering systems
– operations engineering
review of instore processes to
improve productivity
6
Key priorities for 2012/13
The introduction of the carbon tax, estimated to cost Collins Foods around $2.5 million pre-tax in 2012/13, is expected
to have a significant impact on our business. We plan to work with our suppliers to ensure these costs are being
minimised wherever possible, and all costs passed on to us are justified.
In relation to new restaurants and refurbishments, sustainability considerations will be considered as part of the store
capital strategy.
Our people are the lifeforce of our business and they will be a key priority for the coming year. We will continue to
focus on ensuring our remuneration strategies are aligned with performance and can effectively retain and motivate
employees. We are currently undertaking a search process for a new CFO following the retirement of Simon Perkins.
I would like to thank Simon for his substantial contribution to Collins Foods over many years. Pleasingly, Simon has
agreed to remain connected with the Group via his new role to drive strategic growth opportunities for the business.
KFC
We will be testing revisions to the store capital strategy to ensure returns on refurbishments are meeting targets and
looking for opportunities to open new restaurants.
Brand building and quality campaigns have already been launched in the form of the KFC “Goodification” and canola
oil campaigns. These will be supported by further campaigns emphasising core and quality products.
Trials are planned for breakfast offerings, online ordering and electronic order boards, and kiosks are already in test
in a number of locations.
New production planning tools and service flows will be rolled out to drive productivity improvements in stores.
Sizzler
Refurbishments will be based on the revised restaurant capital strategy that will continue to be tested and optimised.
In Asia, the focus in China will be on establishing the footprint model, in Japan on store refurbishments and in
Thailand, opening new stores.
Sizzler’s campaigns will focus on core and quality products, initially through its “Legendary Salad Bar” campaign.
Productivity and efficiencies will be driven by new systems and tools, possibly utilising tablet technology.
Outlook
A number of the productivity, brand and product initiatives we have been working on are well advanced, with a
number of others about to be trialled. These initiatives will help position Collins Foods for a return to sustainable
long-term growth.
Trading over the first two months of the current financial year is showing some positive signs. While still early, this
level of trading provides us with confidence that the Group’s strategies are beginning to penetrate in the current
market conditions.
This has been a year of action and evolution, thanks to the hard work of our employees and suppliers. I would like
to thank everyone for their support during this challenging year. We have worked hard to address the challenging
conditions over the past 12 months and put in place the foundations for a return to growth.
Yours sincerely
Kevin Perkins
Managing Director/CEO
*
Pro forma measures, which are unaudited, differ from statutory presentation to reflect the full year impact of the operating and capital
structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related
adjustments which are not expected to recur in the future.
7
ColliNs Foods limited ANNUAL REPORT 2012
CoRPoRate
GoveRNaNCe
statemeNt
Collins Foods Limited (the Company) and its Board of Directors strongly support high standards of corporate
governance, recognising that the adoption of good corporate governance protects and enhances Shareholder interests.
The following statement provides an overview of the Company’s governance practices and reports against the ASX
Corporate Governance Principles and Recommendations (ASX Principles). The Company’s corporate governance
practices were in place since the Company’s listing on 4 August 2011 and comply with the ASX Principles unless
otherwise stated.
The Company’s corporate governance practices are reviewed regularly and will continue to be developed and refined
to meet the needs of the Company and taking account of best practice.
1. Lay Solid Foundations for Management and Oversight
The Role of the Board
The Board’s primary role is the protection and enhancement of shareholder value in both the short and long term.
Central to this role is the establishment of a clear framework delineating the responsibilities of the Board and
management, to ensure the Company is properly managed.
The Board has identified the key functions which it has reserved for itself, which are set out in the Board Charter,
a copy of which is available on the Company’s website.
The responsibilities of the Board include:
Providing input to, and approval of, the Company’s strategic direction and budgets as developed by management;
–
– Directing, monitoring and assessing the Company’s performance against strategic and business plans, to determine
if appropriate resources are available;
– Approving and monitoring capital management and major capital expenditure, acquisitions and divestments;
– Overseeing the establishment and implementation of risk management and internal control systems and reviewing
the effectiveness of their implementation;
– Approving and monitoring internal and external financial and non-financial reporting, including reporting to
shareholders, the ASX and other stakeholders;
– Appointment and removal of the Managing Director (or equivalent) and the Company Secretary;
– Ratifying the appointment and removal of senior executives (which includes all executives who report directly
to the Managing Director);
– Approving criteria for assessing performance of senior executives and monitoring and evaluating their
performance; and
–
Ensuring ethical behaviour and compliance with the Company’s own governing documents, including the
Company’s Code of Conduct.
The Board has established Committees to assist in carrying out its responsibilities and to review certain issues and
functions in detail. The Board Committees are discussed at 2. below.
Non-executive Directors are issued with formal letters of appointment governing their roles and responsibilities.
Delegations to Management
The Board has delegated responsibility for implementing the Company’s strategy as approved by the Board and for
the day-to-day management and administration of the Company to the Chief Executive Officer (CEO) supported by
the senior executive management team.
Management must supply the Board with information in a form, timeframe and quality that will enable the Board to
discharge its duties effectively. Management report to the Board at regular Board meetings, providing updates on
initiatives and issues.
Senior executives are issued with formal letters of appointment governing their roles and undergo a formal
induction process.
8
Executive Performance Assessment
The Board approves criteria for assessing performance of the CEO and other senior executives and monitoring and
evaluating their performance.
The Remuneration and Nomination Committee is responsible to the Board for ensuring the performance of the CEO
and other senior executives are reviewed at least annually. The Committee reviews the performance of the CEO, while
the CEO is responsible for reviewing the performance of his direct reports.
Performance evaluations for the CEO and other senior executives are scheduled to take place by the end of July 2012,
within 12 months of the Company’s listing on the ASX in accordance with the above process.
2. Structure of the Board to Add Value
Board Composition
The Company’s Board is comprised of Directors with diverse yet complementary skills and experience, enabling it to
appropriately and effectively oversee all aspects of the Company’s operations and enhance performance.
The Board is currently comprised of four Directors (the Company’s Constitution provides for a minimum of three and
maximum of ten Directors), which the Board believes to be an appropriate size to discharge its duties as well as be
conducive to effective discussion and efficient decision making.
Three of the Company’s four Directors are non-executive Directors, including the Chairman, with one executive
Director. This structure enables an appropriate balance to be struck between Directors with experience and knowledge
of the business operations and Directors with an external perspective and a level of independence.
The Board is structured to maintain a majority of independent Directors, to ensure independent judgement is
brought to bear on all decisions. The Company’s three non-executive Directors, including the Chairman, are
independent Directors.
The Chairman is elected by the Board and is responsible for leading the Board, ensuring Directors are properly briefed
in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s
relationship with the Company’s senior executives, including the CEO, a role which is exercised by a separate individual.
The CEO is responsible for implementing Company strategies and policies.
Details for each Director of the Company, including details of skills, experience and expertise are set out in the
Directors’ Report.
Director Independence and Conflicts of Interest
A Director will be considered independent from the Company if he or she has no business or other relationship which
could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise
of their judgement.
The Board requires each Director to disclose any new information, matter or relationship which could, or reasonably
be perceived to, impair the Director’s independence, as soon as these come to light. All material personal interests are
verified at each Board meeting under a standing agenda item. Materiality is assessed on a case by case basis from the
perspective of both the Company and the Director concerned.
The Board periodically assesses the independence of each Director, utilising independence criteria aligned with the ASX
Principles. All of the non-executive Directors of the Company throughout the financial year and as at the date of this
report have been determined to be independent Directors.
In accordance with the Corporations Act 2001 (Cth) and the Constitution of the Company, Directors are restricted
in the involvement when the Board considers and votes on any matter in which a Director has a material
personal interest.
The Board also has procedures in place to ensure it operates independently of management. Non-executive Directors
meet together periodically in the absence of executive Directors and other executives of the Company to discuss the
operation of the Board and a range of other matters.
9
ColliNs Foods limited ANNUAL REPORT 2012
CoRPoRate
GoveRNaNCe
statemeNt
Board Access to Information and Advice
Directors and Board Committees have the right to seek independent professional advice at the Company’s expense
to assist them to discharge their duties. Whilst the Chairman’s prior approval is required, it may not be unreasonably
withheld.
All Directors have access to the Company Secretary, who supports the effectiveness of the Board and is accountable to
the Board on all governance matters. The appointment and removal of the Company Secretary is a matter for decision
by the Board as a whole.
Selection, Appointment and Re-election of Directors
When it is assessed that a new Director should be appointed to the Board, as an outcome from size and composition
review or succession planning, the Remuneration and Nomination Committee prepares a position brief identifying
the skills required. These skills identified ensure a complementary mix of financial, legal, industry and listed entity
knowledge and experience is maintained on the Board, having regard to the Company’s Diversity Policy. From this,
a short list of candidates is prepared, from already identified individuals and/or independent search consultants.
The Board appoints the most suitable candidate who must stand for re-election at the next annual general meeting.
The Remuneration and Nomination Committee is also responsible for making recommendations whether or not
Directors, whose term of office is expiring, should be proposed for re-election at the Company’s next annual
general meeting.
All Directors are expected to continue as Directors only for so long as they have the confidence of their fellow Board
members and the confidence of the Company’s shareholders.
In accordance with the Constitution of the Company, no Director, except the Managing Director shall hold office
for a continuous period in excess of three years or past the third annual general meeting following the Director’s
appointment, whichever is the longer, without submitting for re-election.
Selected Directors are then offered for re-election at the next annual general meeting, with sufficient details to allow
shareholders to make an informed decision on their election.
Commitment
The commitments of non-executive Directors are considered prior to a Director’s appointment to the Board and are
reviewed each year as part of the annual performance assessment.
Prior to appointment or being submitted for re-election, each non-executive Director is required to specifically
acknowledge that they have and will continue to have the time available to discharge their responsibilities to
the Company.
Commitment is required in relation to preparation and attendance at scheduled Board meetings, strategy workshops
and non-scheduled meetings called to address specific matters needing urgent attention.
Induction and Education
Each new Director appointed undergoes a formal induction which provides them with information to enable them to
actively participate in Board decision making as soon as possible, including information on the Company’s operations
and Board and management roles, responsibilities and interactions.
Directors are provided access to continuing education to update and enhance their skills and knowledge.
Review of Board Performance
In accordance with the Board Charter, the Board undertakes an annual Board evaluation. A review of the Board’s
performance is scheduled to take place by the end of July 2012, within 12 months of the Company’s listing on
the ASX.
The review involves consideration of the Board’s performance against the Board Charter, and sets forth the goals and
objectives for the Board for the upcoming year.
The Remuneration and Nomination Committee oversees the evaluation of the performance of the Board and each
Director, including an assessment of whether each Director has devoted sufficient time to their duties.
10
Board Committees
To assist in undertaking its duties, the Board has established the following Committees:
–
–
the Audit and Risk Committee
the Remuneration and Nomination Committee
Charters specify the responsibilities, composition, membership requirements, reporting processes and the manner
in which the Committee is to operate. These Charters are reviewed on an annual basis. All matters determined by
Committees are submitted to the Board as recommendations for Board decisions.
Details of Directors’ membership of each Committee and their attendance at meetings are set out in the
Directors’ Report.
3. Promote Ethical and Responsible Decision Making
Code of Conduct
The Company’s commitment to maintaining ethical standards in its business activities is demonstrated in its values and
Code of Conduct which embraces these values. The Code of Conduct, which applies to all Directors and employees of
the Company, contains policy statements and describes the standards of behaviour expected by the Company.
In summary, the Code requires that all Directors and employees perform their duties professionally, in compliance with
laws and regulations and act with the utmost integrity and objectivity, striving at all times to enhance the reputation
and performance of the Company.
Employees are actively encouraged to report any breaches of the Code or other policies and procedures in place and
has a Whistleblower Policy in place in support of this.
A copy of the Code of Conduct is available on the Company’s website.
Diversity Policy
The Company values and is proud of its strong and diverse workforce and is committed to supporting and further
developing this diversity. Accordingly the Company has developed a Diversity Policy which outlines the Company’s
diversity objectives in relation to gender, age, cultural background, and ethnicity. It includes requirements for the Board
to establish measureable objectives for achieving diversity, and for the Board to assess annually both the objectives and
the Company’s progress in achieving them.
The Board has established the overarching objective of females representing at least 51% of the organisation’s
workforce. The Board also endorses the objectives detailed by the organisation’s companies in their annual returns
submitted with the Australian Government’s Equal Opportunity for Women in the Workplace Agency. These currently
include measures in relation to female regional general manager levels, flexible working arrangements and maternity
and return to work arrangements.
Information on the actual number and proportion of women employed by the organisation is set out below.
Number of women employees in the whole organisation
Number of women in senior executive1 positions
Number of women on the Board
actual
Number
3,466
4
1
%
53%
24%
25%
1
Senior executives include Key Management Personnel, other managers who report directly to the Managing Director/CEO and other managers
who hold roles designated as senior executive roles.
A copy of the Diversity Policy is available on the Company’s website.
11
ColliNs Foods limited ANNUAL REPORT 2012
CoRPoRate
GoveRNaNCe
statemeNt
4. Safeguard Integrity in Financial Reporting
Audit and Risk Committee
The Audit and Risk Committee has been established to assist the Board to focus on issues relevant to the integrity of
the Company’s financial reporting.
The Committee operates in accordance with a Charter which is available on the Company’s website.
Its main responsibilities include:
– overseeing the Company’s financial reporting processes including reviewing the Company’s financial statements to
determine whether they are accurate and complete;
– overseeing the implementation and operation of the Company’s Risk Management Policy;
–
evaluating the adequacy and effectiveness of internal control and compliance programs;
–
recommending the external auditor’s appointment/removal, reviewing the external auditor’s performance
and scope;
– providing advice in relation to the adequacy of the Company’s occupational, health and safety management and
performance and auditing systems.
Consistent with its Charter, the Audit and Risk Committee is currently comprised of three non-executive Directors,
is chaired by an independent Chairperson who is not Chair of the Board and consists of all independent Directors
(a majority only is required under the Charter). All members of the Committee are financially literate and have an
appropriate understanding of the industry in which the Company operates and one member, Bronwyn Morris, has
extensive experience and expertise in accountancy, a former partner of a major accounting firm. The Committee
meets at least four times a year.
The background details of the Audit and Risk Committee members and attendance at Committee meetings are set out
in the Directors’ Report.
External Auditors
The Audit and Risk Committee reviews the effectiveness of the external auditors and makes assessments in relation
to their continued independence at least annually.
PwC was appointed external auditor in 2005. It is PwC’s policy to rotate audit engagement partners on listed
companies at least every five years.
An analysis of fees paid to the external auditors, including fees for non-audit services, is provided in the Directors’
Report and notes to the financial statements. It is the policy of PwC to provide an annual declaration of their
independence to the Audit and Risk Committee.
The external auditor will attend the annual general meeting and be available to answer shareholder questions about
the conduct of the audit and the preparation and content of the audit report.
Declaration by Management
The CEO and CFO provide formal assurance to the Board that the Company’s financial statements present a true and
fair view of the Company’s financial condition and operational results.
12
5. Make Timely and Balanced Disclosure
Continuous Disclosure and Shareholder Communications
The Company has policies and procedures in place in relation to continuous disclosure and shareholder
communications. These outline the Company’s commitment to providing all shareholders and investors with equal
access to the Company’s information and disclosing all information that a reasonable person would expect to have
a material effect on the share price to the ASX, in accordance with the continuous disclosure requirements of the
Corporations Act 2001 and ASX Listing Rules. Copies of these policies are available on the Company’s website.
The Company Secretary has primary responsibility for all communications with the ASX, overseeing and co-ordinating
all information disclosure to the ASX, shareholders and other relevant parties. All information released to the ASX is
posted on the Company’s website.
All employees have a responsibility to report any material price sensitive information to the Company Secretary and the
Company Secretary is responsible for ensuring the Board is then informed of this information.
The Company also has assigned Authorised Spokespersons for the Company, to ensure all public communications are
within the bounds of information that is already in the public domain, and/or is not material.
6. Respect the Rights of Shareholders
The Company is committed to effective communication with its stakeholders and seeks to ensure that all stakeholders,
market participants and the wider community are informed of its activities and performance. This commitment and
supporting policies are set out in the Company’s Communication Policy which is available on the Company’s website.
Information is communicated to shareholders through the Company’s website, annual report, ASX announcements
and media releases, dividend mailouts, email broadcasts and other means where appropriate.
The Company encourages attendance at, and participation in, general meetings.
The Company also periodically conducts investor briefings to its institutional investors, brokers and analysts.
7. Recognise and Manage Risk
Risk management is viewed by the Company as integral to its objective of creating and maintaining shareholder value
and is the responsibility of all Directors and employees.
The Board is responsible for satisfying itself annually, or more frequently as required, that management has developed
and implemented a sound system of risk management and internal control. The Board has delegated to the Audit and
Risk Committee responsibility for the detailed work involved in this oversight role.
The Company undertakes its risk management activities utilising a Business Risk Management Framework, the
methodology for which is consistent with the International Risk Management Standard ISO31000.
Registers of key business risks, utilising web enabled software, are maintained and regularly reviewed by management.
Those with assigned accountability for risks are required to sign off regularly that those risks have been managed
effectively. Business risks are reviewed periodically, but at least annually by the Audit and Risk Committee. The overall
results of this assessment are presented to the Board at its next meeting. The Board also considers risk management at
every Board meeting and requests additional information as required.
Compliance programmes operate to ensure the Company meets its regulatory obligations.
Management reports to the Board as to the effectiveness of the Company’s management of its material business risks
on an annual basis.
The Board receives a written assurance from the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO)
that to the best of their knowledge and belief, the declaration provided by them in accordance with section 295A of
the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system
is operating effectively in relation to financial reporting risks.
13
ColliNs Foods limited ANNUAL REPORT 2012
CoRPoRate
GoveRNaNCe
statemeNt
Risk Profile
Risks to which the Company is subject to include:
Supply chain disruption
The general state of the Australian economy
–
– Brand and reputation calamity
–
– Cessation of relationship with Yum! (franchisor of KFC)
– Adverse changes in government regulation
– A dramatic change in consumer sentiment
–
– Operational risks
Strategic risks including failure of growth drivers
8. Remunerate Fairly and Responsibly
Remuneration and Nomination Committee
The Remuneration and Nomination Committee has been established to assist the Board and operates in accordance
with a Charter which is available on the Company’s website.
Its main responsibilities, with respect to remuneration, include:
– providing advice in relation to remuneration packages of senior executives, non-executive Directors and executive
Directors, equity-based incentive plans and other employee benefit programs;
reviewing the Company’s recruitment, retention and termination policies; and
reviewing the Company’s superannuation arrangements.
–
–
Consistent with its Charter, the Remuneration and Nomination Committee is currently comprised of two
non-executive Directors and one executive Director, is chaired by an independent Chairperson and consists of a
majority of independent Directors.
The background details of the Remuneration and Nomination Committee members and attendance at Committee
meetings are set out in the Directors’ Report.
Information on Directors’ and executives’ remuneration, including principles used to determine remuneration, is set out
in the Directors’ Report under the heading “Remuneration Report”.
14
FiNaNCial
RePoRt
15
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Collins
Foods Limited (the Company) and the entities it controlled at the end of, or during, the period ended 29 April, 2012.
Directors
The names of the Directors of the Company during or since the end of the financial period are as follows:
Name
Russell Keith Tate
Kevin William Joseph Perkins
Newman Gerard Manion
Bronwyn Kay Morris
date of appointment
10 June 2011
15 July 2011
10 June 2011
10 June 2011
Principal Activities
During the period, the principal continuing activity of the Group was the operation, management and administration
of restaurants. The Group operates in Australia and Asia, predominantly in Thailand, Japan and China. There were no
significant changes in the nature of the Group’s activities during the period.
Review of Operations
The result for the financial period ended 29 April, 2012 was as follows:
Profit before related income tax expense
Income tax (expense)
Net profit attributable to members
2012
$’000
7,179
4,250
11,429
2011
$’000
4,445
(2,999)
1,446
A detailed review of operations of the Group and details of its business strategies and outlook is set out in the reports
of the Chairman and Managing Director in the Annual Report.
Dividends
No dividends were paid to members during the financial period.
Since the end of the financial period, the Directors of the Company have declared the payment of a fully franked final
dividend of 6.5 cents per ordinary share ($6.0 million) to be paid on 27 July, 2012 (refer to Note 25 of the financial
statements).
Significant Changes in the State of Affairs
The Company was incorporated on 10 June, 2011 and was listed on the Australian Stock Exchange (ASX) on 4 August,
2011, raising a total of $201.7 million through the issue of 80.7 million shares.
The successful capital raising triggered a number of structural changes to the Group. The KFC and Sizzler businesses
previously owned and/or operated by Collins Foods Holding Pty Ltd were acquired from its shareholders, through the
issue of 12.3 million new shares and $69.7 million in cash consideration ($60.4 million of this amount has been paid
to date). The Sizzler business franchised by SingCo Trading Pte Ltd was acquired from its shareholders.
Proceeds raised from the share issue were also used to pay down in part, amounts owing under syndicated finance
debt facilities, finance leases and associated derivatives of Collins Foods Holding Pty Ltd and its subsidiary companies.
The balance of amounts owing were repaid utilising funds raised as a result of the Group entering into new banking
facility agreements as set out in Note 21 of the financial statements.
The change in the Group structure of the Australian operations is considered a form of capital reconstruction and
group reorganisation as opposed to a business combination, and therefore the consolidated financial statements have
been prepared using the principles of a reverse acquisition, as a continuation of the financial statements of Collins
Foods Holding Pty Ltd and showing comparative information in the Remuneration Report and the financial statements.
The change in structure, with respect to Asian operations, is considered a business combination and therefore has
been treated as such in the financial statements.
16
Matters Subsequent to the End of the Financial Period
There has not arisen in the interval between the end of the financial period and the date of this report, any item,
transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect
significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future
financial periods.
Likely Developments and Expected Results of Operations
The Group will continue to pursue the increase of profitability of its major business segments during the next
financial period.
Further information on likely developments in the Group’s operations and the expected results of operations has not
been included in this financial report because the Directors believe it would be likely to result in unreasonable prejudice
to the Group.
Environmental Regulations
The Group is subject to environmental regulation in respect of the operation of its restaurant sites. To the best of the
Directors’ knowledge, the Group complies with its obligations under environmental regulations and holds all licences
required to undertake its business activities.
Information on Directors
director
experience, Qualifications and directorships
Russell tate
Kevin Perkins
Russell has over 30 years’ experience in senior executive and
consulting roles in marketing and media. He was CEO of ASX listed
STW Group Limited, Australia’s largest marketing communications
group, from 1997 to 2006, Executive Chairman from 2006 to 2008
and Deputy Chairman (non-executive) from 2008 to 2011. He is
currently Executive Chairman of Macquarie Radio Network, the
owner of leading Sydney stations 2GB and 2CH.
– B. Com (Econ.)
Other Directorships – Current or Held within Last 3 Years
– Macquarie Radio Network Limited (Chairman, since 2009)
– STW Communications Group Limited (1994 to 2011)
– Central Coast (Gosford) Stadium (Chairman, since 2002)
– Waratahs Rugby Limited (2009 to 2011)
Kevin is a highly experienced manager in the Quick Service
Restaurant (QSR) and casual dining segments of the Australian
restaurant industry. He has had more than 32 years’ experience
with the Collins Foods Group, having overseen its growth both
domestically and overseas over that time.
Kevin is one of the franchisee presidents currently sitting on the
KFC International Brand Council, an informal advisory group of
Yum! franchisees.
special
Responsibilities
Independent non-
executive Chair
Audit and Risk
Committee Member
Remuneration
and Nomination
Committee Member
Managing Director
Remuneration
and Nomination
Committee Member
17
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
director
experience, Qualifications and directorships
special
Responsibilities
Newman manion
Newman has had over 30 years’ experience in the food franchise
industry, including over 29 years since 1982 in various roles with
Yum! (Franchisor of KFC). Previously Newman served as a board
member for KFC Japan (from 2005 to 2008), General Manager
of KFC operations in Australia and New Zealand (from 1995 to
2004), development director of PepsiCo restaurants (including KFC)
in Australia (from 1990 to 1995) and general manager of KFC
New Zealand (from 1988 to 1990).
Independent non-
executive Director
Audit and Risk
Committee Member
Remuneration and
Nomination Committee
Chair
Bronwyn morris
Independent non-
executive Director
Audit and Risk
Committee Chair
Most recently Newman was Vice-President, Operations for Yum!’s
Asian franchise business (from 2004 until 2010).
Bronwyn is a Chartered Accountant with over 20 years’ experience
in accounting, audit and corporate services. A former partner of
KPMG, Bronwyn worked with that firm and its predecessor firms in
Brisbane, London and the Gold Coast. For the last 16 years Bronwyn
has been a full-time non-executive Director and has served on the
boards of a broad range of companies, including Queensland Rail
Limited, Stanwell Corporation Limited and Colorado Group Limited
and is a former Councillor of Bond University. She currently serves
as Chairman of, or a member of, the audit and risk committees with
respect to a number of her board roles.
– B Com, FCA, FAICD,
– Councillor – Queensland division of the Australian Institute
of Company Directors
Other Directorships – Current or Held within Last 3 Years
– Spotless Group Limited (since 2007)
– QIC Limited (since 2006)
– Care Australia (since 2007)
– Royal Automobile Club of Queensland Limited (since 2008)
– Gold Coast 2018 Commonwealth Games Bid Limited (since 2010)
– Taylors Group Limited (2008–2009)
18
The relevant interest of each Director in the share capital issued by the Company, at the date of this report is
as follows:
Name
Russell Tate
Kevin Perkins
Newman Manion
Bronwyn Morris
ordinary shares
20,001
7,340,833
20,001
5,001
Company Secretary
Simon Perkins has held the role of Company Secretary since his appointment to the role on 15 July, 2011. Simon has
extensive experience in management, accounting, finance, compliance and related fields. Simon joined the Collins
Foods Group in 1994, and has been CFO since 1995 (CFO Global since 2005). Prior to the Collins Foods Group
he worked for a number of accounting firms and corporations including Coopers & Lybrand, Daikyo Australia and
ARCO Coal.
David Nash was appointed joint Company Secretary of the Company on 11 October, 2011. David has over 20 years’
accounting, finance and management experience. David joined the Collins Foods Group in 1995, and has been CFO
– Australia since 2005. Prior to the Collins Foods Group he worked in Australia and the United States for Coopers
& Lybrand.
Russell Tate also held the position of Company Secretary during the financial period from his appointment on 10 June,
2011 until his resignation from this position on 15 July, 2011.
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the period
ended 29 April 2012, and the number of meetings attended by each Director were:
Full meetings of directors
audit and Risk Committee
Remuneration and
Nomination Committee
Number of
meetings1
meetings
attended
Number of
meetings1
meetings
attended
Number of
meetings1
meetings
attended
17
15
17
17
17
14
17
17
3
*
3
3
3
*
3
3
2
2
2
*
2
2
2
*
Russell Tate
Kevin Perkins
Newman Manion
Bronwyn Morris
1
*
Number of meetings represents the number of meetings held during the time the Director held office during the period.
Not a member of the relevant Committee.
19
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Remuneration Report
This Remuneration Report outlines the remuneration arrangements in place for Directors and Key Management
Personnel of the Group in accordance with the requirements of the Corporations Act 2001 and its regulations.
The information provided in this Remuneration Report has been audited as required by section 308(3C) of the
Corporations Act 2001.
Impact of Significant Changes During the Period
As a result of the treatment of the change in Group structure of the Australian operations triggered by the listing
of the Company, as a form of capital reconstruction and group reorganisation, the information supplied in this
Remuneration Report includes information relating to Collins Foods Holding Pty Ltd (former parent) and the entities
it controlled (former group) for the comparative period (where comparative information is required) and the period
of the financial period from 2 May, 2011 to 3 August, 2011. This is in addition to the information provided in relation
to the current Group companies.
Key Management Personnel Disclosed in this Report
Key Management Personnel (KMP) are those persons having authority and responsibility for planning, directing and
controlling activities of an entity, including any Director of that entity.
Prior to the capital reconstruction of the Group triggered by the listing of the Company, the KMP of the Group, other
than its Directors, were determined by reference to their inclusion as members of the senior executive group. Since
then, the executives who form part of the KMP have been determined to be those executives who report directly to
the Managing Director and who are members of the executive committee.
The KMP of the parent Company disclosed in this report are the non-executive and executive Directors listed at the
beginning of this report.
The KMP of the Group disclosed in this report are listed below:
KmP of Collins Foods holding Pty ltd
and the entities it controlled (former
group) and Position held1
KmP of Collins Foods limited
and the Group and Position held2
Non-executive Directors
Robert Koczkar
Shannon Wolfers
Russell Tate
Newman Manion
Bronwyn Morris
Executive Directors
Kevin Perkins
Simon Perkins
Other Key Management
Personnel
Simon Perkins
James Ryan
Martin Clarke
John Hands
David Nash
Adrian Argent
Trevor McDonald
Pamela Martin
Phillip Coleman
George Ryland
Non-executive Director
Non-executive Director
Executive Director
Executive Director
CEO – Sizzler
CEO – KFC
CSO/CIO
CFO – Australia
Director of Operations – KFC
Director of Operations – KFC
Director of Marketing – KFC
Director of Operations – Sizzler
Director of Marketing – Sizzler
Non-executive Director (since 10 June 2011)
Non-executive Director (since 10 June 2011)
Non-executive Director (since 10 June 2011)
Executive Director (since 15 July 2011)
CFO – Global
CEO – Sizzler
CEO – KFC
CSO/CIO
1
2
Positions held during whole period from 3 May, 2010 to 3 August, 2011 unless otherwise stated.
Positions held during period from 4 August, 2011 to 29 April, 2012 unless otherwise stated.
20
Role of the Remuneration and Nomination Committee
The main responsibility of the Board Remuneration and Nomination Committee with respect to remuneration is to
provide advice in relation to remuneration packages of senior executives, non-executive Directors and executive
Directors, equity-based incentive plans and other employee benefit programs.
More specifically, the Committee is responsible for making recommendations to the Board on:
–
–
–
–
an appropriate remuneration policy for senior executives and executive Directors of the Group;
remuneration packages of senior executives and executive Directors;
the executive remuneration framework and operation of incentive plans and other employee benefit programs; and
remuneration for non-executive Directors.
The Remuneration and Nomination Committee operates in accordance with its Charter, a copy of which is available on
the Company’s website.
Remuneration Principles
The performance of the Group is contingent upon the calibre of its Directors and executives.
The Group’s remuneration framework is based upon the following key principles:
–
a policy that enables the Company to attract and retain valued Directors and executives who create value
for shareholders;
– motivating for senior executives and executive Directors to pursue long-term growth and success of the Group,
aligned with shareholder’s interests;
– demonstrating a clear relationship between performance and remuneration;
–
–
regard to prevailing market conditions;
reflective of short-term and long-term performance objectives appropriate to the Company’s circumstances
and goals;
–
–
transparency; and
fairness and acceptability to shareholders.
Non-executive Director Remuneration
The remuneration for non-executive Directors is set, taking into consideration the following factors:
the level of fees paid to Board members of other publicly listed Australian companies of similar size;
the Group’s remuneration principles;
–
–
– operational and regulatory complexity; and
–
the responsibilities and workload requirements of each Board member.
Advice may be sought from independent remuneration consultants where appropriate. No advice has been sought
during the financial period.
Non-executive Directors’ remuneration comprises the following components:
– Board and Committee Fees; and
–
Superannuation (compulsory contributions).
Board fees are structured by having regard to the responsibilities of each position within the Board. Board Committee
fees are structured to recognise the differing responsibilities and workload associated with each Committee and the
additional responsibilities of each Committee Chairman.
The Company’s Constitution allows for additional payments to be made to Directors where extra or special services
are provided. No such payments were made during the period.
Non-executive Directors do not receive any performance or incentive-based pay. However, to promote further
alignment with shareholders, the non-executive Directors are encouraged to hold shares in the Company.
All current Directors hold shares in the Company as outlined in tables displayed in this report.
21
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Remuneration Report (continued)
Non-executive Directors’ fees and payments are reviewed annually by the Board. Non-executive Directors’ fees are
determined within an aggregate limit (including superannuation contributions). In accordance with the Company’s
Constitution, an initial limit was set by the Board on 15 July, 2011 in the amount of $700,000. On that same date, the
Board determined the initial fees payable to the non-executive Directors of the Company, appointed on 10 June, 2011.
The following fees (excluding superannuation) were set at that time and still apply:
Position
Chairman, Member of Audit and Risk Committee, Member of Remuneration
and Nomination Committee
Non-executive Director, Member of Audit and Risk Committee, Chair of Remuneration
and Nomination Committee
Non-executive Director, Chair of Audit and Risk Committee
Fees p.a.1
$180,000
$95,000
$105,000
1
Actual fees paid for the period are set out in the Remuneration tables below which represent these set fees for the period since listing and reflect
the Chairman’s decision not to draw fees for the final quarter of the financial period.
Executive Remuneration
The remuneration for executives is structured, taking into consideration the following factors:
–
–
–
–
the Group’s remuneration principles;
the level and structure of remuneration paid to executives of other publicly listed Australian companies
of similar size;
the position and responsibilities of each executive; and
appropriate benchmarks and targets to reward executives for Group and individual performance.
Remuneration packages of executives may contain the following key remuneration framework components:
– Base pay and benefits, including superannuation (fixed);
–
–
Short-term incentives in the form of rewards, bonuses or special payments (variable); and
Long-term incentives in the form of rewards, bonuses, special measures or share participation via employee share
and option schemes (variable).
Base Pay and Benefits
Base pay is structured as a total employment cost package that may be delivered as a combination of cash and
prescribed non-financial benefits at the executive’s discretion. Base pay for executives is reviewed annually to ensure
that the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion. There are
no guaranteed base pay increases included in any executive’s contract. Executives receive benefits including health
insurance and car allowances.
Short-term Incentives
Executives have the ability to earn an annual short-term incentive if predefined targets are achieved. The level of
the incentive is set with reference to the accountabilities of the executive’s role and their ability to impact Group
performance. For the Managing Director/CEO the target percentage is 70% of base pay and the maximum is 154%.
For other executive KMPs, the average target percentage is approximately 45% of base pay and the maximum is
approximately 100%.
For the period covered by this report, the primary key performance indicator common to all participants was earnings
before interest, tax, depreciation and amortisation (EBITDA). The target EBITDA level was 110% of the Prospectus Pro
forma Forecast EBITDA. Below this, percentages of the target incentive were payable on a sliding scale to a minimum
level of 5% of the target incentive for achievement of 0.5% above the minimum EBITDA (the Prospectus Pro forma
Forecast EBITDA). For achievement at or below this level, including achievement of the Prospectus Pro forma Forecast
EBITDA, no incentive was payable. For achievement above the target EBITDA level, additional percentages of the target
incentive were payable on a sliding scale to a maximum level of 220% of the target incentive for achievement of 18%
above the minimum EBITDA.
22
In addition to the above short-term incentive plan, during the period, key individuals involved in the initial public
offering (IPO) and capital reconstruction of the Group were able to earn special bonuses on the successful completion
of the capital reconstruction and listing of the Company. The quantum of these bonuses were set with reference to the
accountabilities of the executive’s role in the capital reconstruction process.
As part of the Group capital reconstruction and listing, a former cash incentive scheme involving tracking stock was
finalised. Participating employees, including KMP, became entitled to cash payments under the scheme in the form of
a one off bonus payment.
Incentive levels and performance targets are reviewed and determined annually by the Board on the advice of the
Remuneration and Nomination Committee.
Long-term Incentives
Since the Company’s listing during the period, the Remuneration and Nomination Committee has reviewed long-term
incentive plan options and intends to recommend the Board approve a plan in the next financial period. For the current
period, the Board has considered other relevant mechanisms to retain and motivate KMP executives to create long-
term shareholder wealth, including the KMP share and escrow arrangements in place (refer below).
Executive Remuneration Mix
A significant number of employees of the Group earn a mix of fixed and at risk remuneration, reflecting the
Company’s belief in the importance of using incentives to drive short and long-term performance. For KMP executives,
a higher proportion of their target pay is structured to be at risk.
For the Group’s Managing Director and other KMP executives, between 22% and 58% of total remuneration was at
risk during 2011/12 (2010/11: 23% to 45%).
Alignment of Executive Remuneration with Performance/Shareholder Wealth Creation
The Group’s annual financial performance and indicators of shareholder wealth for the current financial period are
listed below. As the Company listed on 4 August, 2011 these performance measures have not been included for prior
financial periods. However, the performance measures for the 2011/12 financial period are based on results for the full
financial period where available, as the Group’s financial results have been prepared as a continuation of the Collins
Foods Holding Pty Ltd consolidated group.
Pro forma1 EBITDA
Pro forma1 EBIT
Pro forma1 NPAT
Dividends per share
EPS
2011/12
$51.1 million
$34.0 million
$18.4 million
n/a
14.4cps2
Closing share price/change in share price
Short-term incentive payments as % of target payments
(excluding special IPO bonuses)
$1.12 ($1.38 below retail price)
0%
1
2
Pro forma measures which are unaudited differ from statutory presentation to reflect the full year impact of the operating and capital structure
of the Group that was established upon the IPO and capital reconstruction, together with the elimination of IPO costs and related adjustments
which are not expected to recur in the future.
For the calculation of the EPS and how the period prior to listing on 4 August, 2011 was calculated, refer to Note 37 of the financial statements.
23
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Remuneration Report (continued)
The Managing Director/CEO, and the Chairman decided not to draw a salary or Director fees for the final quarter of
the financial period, in response to trading conditions.
Promoting further alignment with shareholders, the KMP executives of the Company all elected to receive a portion
of the consideration for their previous shareholding in Collins Foods Holding Pty Ltd in the form of shares in the
Company. Details of these shareholdings and escrow arrangements (restricting their dealings in these shares) in place
for these shares are outlined below.
Name of
escrowed party
Kevin Perkins
Kevin Perkins
Simon Perkins
Martin Clarke
James Ryan
John Hands
Number of shares
held in escrow
Percentage of shares
on issue in escrow
end of escrow Period
3.5 million
3.5 million
0.2 million
0.1 million
0.2 million
0.2 million
3.8%
3.8%
0.2%
0.1%
0.2%
0.2%
3 days after the 2012 financial report release
3 days after the 2013 financial report release
3 days after the 2012 financial report release
3 days after the 2012 financial report release
3 days after the 2012 financial report release
3 days after the 2012 financial report release
Details of Remuneration
Details of remuneration received by the Directors and other KMP of the Parent Company for the current financial
period are set out in the following table:
2012
short-term employee benefits
Post-
employment
benefits
long-term
benefits
Cash salary
(i)
and fees
$
Cash
bonus
$
(ii)
Non-
monetary
benefits
$
(i)
super-
(i)
annuation
$
long
service
(i)
leave
$
Name
Non-executive directors
Russell Tate1
Newman Manion1
Bronwyn Morris1
executive directors
Kevin Perkins2
total Company
96,923
67,596
78,750
243,269
382,877
626,146
–
–
–
–
–
–
–
–
–
–
24,406
24,406
8,723
6,084
7,087
21,894
36,772
58,666
total
$
105,646
73,680
85,837
265,163
–
–
–
–
9,232
9,232
453,287
718,450
1
2
(i)
(ii)
Appointed 10 June 2011. Remuneration was paid from 4 August, 2011.
Appointed 15 July 2011. Includes remuneration from 4 August, 2011, the date from which Kevin Perkins’ remuneration was charged
to the Company.
Remuneration not linked to performance.
Remuneration linked to performance.
24
Details of remuneration received by the Directors and other KMP of the Group (and former group) for the current and
previous financial period are set out in the following table. This list includes the five highest company executives in the
Group as required by the Corporations Act 2001.
2012
short-term employee benefits
Post-
employment
benefits
Cash salary
(i)
and fees
$
Cash
bonus
$
(ii)
Non-
monetary
benefits
$
(i)
super-
(i)
annuation
$
long-term
benefits
long
service
(i)
leave
$
Name
Non-executive directors
Russell Tate1
Newman Manion1
Bronwyn Morris1
Robert Koczkar2
Shannon Wolfers2
executive directors
Kevin Perkins
Simon Perkins3
other executive KmP
Simon Perkins3
James Ryan
Martin Clarke
John Hands
David Nash4
Adrian Argent4
Trevor McDonald4
Pamela Martin4
Phillip Coleman4
George Ryland4
total Group
96,923
67,596
78,750
–
–
243,269
591,304
113,102
277,959
226,855
215,285
244,471
58,562
38,269
33,984
42,570
45,872
50,171
–
–
–
–
–
–
–
167,000
–
–
10,187
–
67,000
–
–
–
–
–
1,938,404
2,181,673
244,187
244,187
–
–
–
–
–
–
32,903
1,902
5,462
7,376
18,103
5,737
1,641
4,743
2,314
6,437
1,905
1,731
90,254
90,254
8,723
6,084
7,087
–
–
21,894
53,574
23,850
26,460
22,547
18,107
21,600
10,440
3,181
2,825
3,543
3,330
3,713
total
$
105,646
73,680
85,837
–
–
265,163
–
–
–
–
–
–
12,446
2,271
690,227
308,125
6,522
4,175
7,465
7,277
1,836
1,006
547
1,202
1,529
1,031
316,403
260,953
269,147
279,085
139,479
47,199
39,670
53,752
52,636
56,646
193,170
215,064
47,307
2,513,322
47,307
2,778,485
1
2
3
4
5
(i)
(ii)
Appointed 10 June, 2011. Remuneration was paid from 4 August, 2011.
Resigned from former group on 3 August, 2011.
Remuneration as an executive Director includes period to 3 August, 2011 for Simon Perkin’s position in respect of the former group.
Remuneration as an other executive KMP of the Group includes period from 4 August, 2011.
Includes period from 1 May, 2011 to 3 August, 2011 for the executive’s position as KMP in respect of the former group.
The bonus payment to Martin Clarke relates to an entitlement paid and payable under an incentive scheme of the former group involving tracking
stock, which was finalised through the Group’s capital reconstruction (for which 50% of entitlements vested). All other bonus payments were
for completion of the IPO/Group capital reconstruction (for which 100% of entitlements vested). For the Group’s annual short-term incentive
scheme, no bonus amounts vested with all entitlements forfeited as a result of performance criteria not being met.
Remuneration not linked to performance.
Remuneration linked to performance.
25
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Remuneration Report (continued)
2011
short-term employee benefits
Post-
employment
benefits
Cash salary
(i)
and fees
$
Cash
bonus
$
(ii)
Non-
monetary
benefits
$
(i)
super-
(i)
annuation
$
–
–
–
764,596
395,986
176,177
180,648
245,943
206,058
134,132
116,858
149,375
156,339
179,327
2,705,439
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,396
7,179
6,837
17,479
9,824
5,916
19,139
17,218
27,456
6,836
6,411
–
–
–
66,304
33,129
13,346
15,293
20,171
16,581
12,072
10,517
13,444
11,980
14,175
long-term
benefits
long
service
(i)
leave
$
–
–
–
total
$
–
–
–
12,278
6,134
879,574
442,428
2,473
2,832
3,735
3,070
2,235
1,947
2,489
2,218
2,625
198,833
216,252
279,673
231,625
167,578
146,540
192,764
177,373
202,538
Name
Non-executive directors
Rob Koczkar
Shannon Wolfers
executive directors
Kevin Perkins
Simon Perkins
other executive KmP
James Ryan
Martin Clarke
John Hands
David Nash
Adrian Argent
Trevor McDonald
Pamela Martin
Phillip Coleman
George Ryland
total Group
160,691
227,012
42,036
3,135,178
(i)
(ii)
Remuneration not linked to performance.
Remuneration linked to performance.
Service Agreements
Key details of the service agreement of Kevin Perkins, Managing Director/CEO is as follows:
– 3 year contract commencing 4 August, 2011;
– may be terminated by either party after 30 months of the contract have expired with 6 months’ notice or payment
in lieu of notice in the case of the Company; and
–
includes a restraint of trade period of 12 months.
26
Key details of service agreements of any other person who was a KMP executive of the Group during the period are
set out below. No agreements provide for any termination payments, other than payment in lieu of notice.
Name
Simon Perkins
James Ryan
Martin Clarke
John Hands
David Nash1
Adrian Argent1
Trevor McDonald1
Pamela Martin1
Phillip Coleman1
George Ryland1
Position
CFO – Global
CEO – Sizzler
CEO – KFC
CSO/CIO
CFO – Australia
Director of Operations – KFC
Director of Operations – KFC
Director of Marketing – KFC
Director of Operations – Sizzler
Director of Marketing – Sizzler
minimum Notice Period
(months)
termination
by executive
termination
by Group
3
2
1
2
2
2
1
2
2
2
12
12
3
12
12
12
3
12
12
12
Contract
duration
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
1
2
KMP of former group. Ceased to be classified as KMP after 3 August, 2011.
Provision is also made for the Group to be able to terminate these agreements on 3 months’ notice in certain circumstances of serious ill health
or incapacity of the executive.
27
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
RePoRt
Indemnification and Insurance of Officers
The Company’s Constitution provides that it must in the case of a person who is or has been a Director or Secretary
of the Group, and may in the case of an officer of the Company, indemnify them against liabilities incurred whilst
acting as such officers and the legal costs of that person to the extent permitted by law. The Company has entered
into a Deed of Access, Indemnity and Insurance with each of the Company’s Directors and Company Secretaries.
No Director or officer of the Company has received benefits under an indemnity from the Company during or since
the end of the period.
The Company has paid a premium for insurance for officers of the Group. The cover provided by the insurance
contract is customary for this type of insurance policy. Details of the nature of the liabilities covered or the amount
of the premium paid in respect of this insurance contract are not disclosed as such disclosure is prohibited under the
insurance contract.
Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section
237 of the Corporations Act 2001.
Non-Audit Services
During the period, the Company’s auditor (PwC) performed other services in addition to its audit responsibilities.
Whilst their main role is to provide audit services to the Company, the Company does employ their specialist advice
where appropriate.
The Board of Directors has considered the position and, in accordance with advice received from the Audit and
Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision
of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements
of the Corporations Act 2001 for the following reasons:
– All non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the
impartiality and objectivity of the auditor; and
– None of the services undermine the general principles relating to auditor independence, including not reviewing or
auditing the auditor’s own work, not acting in a management or a decision making capacity for the Company, not
acting as advocate for the Company or not jointly sharing economic risk or rewards.
During the period the following fees were paid or payable for non-audit services provided by the auditor of the parent
entity, its related practices and non-related audit firms:
other assurance services
PricewaterhouseCoopers Australian firm:
Store sales certificates
Agreed upon procedures for covenant calculations
total remuneration for other assurance services
taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services, including review of company tax returns
Tax advice and consulting
total remuneration for taxation services
transaction services
PricewaterhouseCoopers Australian firm:
Transaction compliance services
total remuneration for transaction services
total remuneration for non-audit services
28
2012
$
2011
$
10,000
18,330
28,330
29,000
5,000
34,000
9,410
17,130
25,500
28,000
5,500
33,500
864,067
864,067
926,397
0
0
59,000
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 30.
Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report
have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
Auditor
PwC continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Russell tate
Director
Brisbane
29 June, 2012
29
ColliNs Foods limited ANNUAL REPORT 2012
aUditoR’s
Notes to the CoNsolidated
iNdePeNdeNCe
FiNaNCial statemeNts
deClaRatioN
30
CoNsolidated
BalaNCe sheet
AS AT 29 APRIL, 2012
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivable
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets, net
Deferred tax assets, net
Receivables
Investment accounted for using the equity method
Derivative financial instruments
Total non-current assets
total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Financial guarantees
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
total liabilities
Net assets
equity
Contributed equity
Reserves
Accumulated losses
total equity
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Note
7
8
9
10
11
13
14
15
18
16
17
18
19
20
21
18
22
23
24
25
2012
$000
19,243
1,820
4,272
–
2011
$000
43,708
3,554
4,520
583
25,335
52,365
57,549
235,818
14,741
317
501
–
308,926
334,261
45,547
–
19
–
3,485
49,051
52,743
222,808
9,851
11,400
–
542
297,344
349,709
51,350
13,649
29
10,671
3,417
79,116
104,480
228,025
83
1,379
105,942
154,993
179,268
–
1,460
229,485
308,601
41,108
182,098
55,530
163
–
(2,993)
(14,422)
179,268
41,108
31
ColliNs Foods limited ANNUAL REPORT 2012
CoNsolidated
iNCome statemeNt
FOR ThE PERIOD ENDED 29 APRIL, 2012
Revenue
Cost of sales
Gross profit
Selling, marketing and royalty expenses
Occupancy expenses
Restaurant related expenses
Administration expenses
Other expenses
Other income
Profit from continuing operations before finance income, finance costs
and income tax (EBIT)
Finance income
Finance costs
Share of net profit of associate accounted for using the equity method
Profit from continuing operations before income tax
Income tax benefit/(expense)
Profit from continuing operations
Net profit attributable to members of Collins Foods limited
Basic earnings per share
Diluted earnings per share
Weighted average basic ordinary shares outstanding
Weighted average diluted ordinary shares outstanding
The above Consolidated Income Statement should be read in conjunction with the accompanying notes.
Note
2012
$000
2011
$000
4
405,970
408,222
(192,587)
(192,487)
213,383
215,735
(83,814)
(31,378)
(42,699)
(32,381)
(1,426)
11,070
32,755
(82,781)
(29,246)
(38,603)
(25,070)
(58,595)
52,807
34,247
790
4,042
(26,453)
(33,844)
–
4,445
(2,999)
1,446
1,446
87
7,179
4,250
11,429
11,429
14.4cps
14.4cps
79,365,556
79,365,556
5
4
5
5
15
6
37
37
37
37
32
CoNsolidated statemeNt
oF ComPReheNsive iNCome
FOR ThE PERIOD ENDED 29 APRIL, 2012
Net profit attributable to members of Collins Foods limited
other comprehensive income/(expense):
Exchange difference upon translation of foreign operations
Cash flow hedges
Income tax relating to components of other comprehensive
income/(expense)
Other comprehensive income for the period, net of tax
total comprehensive income for the period
total comprehensive income for the period is attributable to:
owners of the parent
Note
24
24
6
2012
$000
11,429
260
(139)
42
163
11,592
2011
$000
1,446
–
747
(224)
523
1,969
11,592
1,969
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
33
ColliNs Foods limited ANNUAL REPORT 2012
CoNsolidated statemeNt
oF ChaNGes iN eQUity
FOR ThE PERIOD ENDED 29 APRIL, 2012
Contributed
equity
Reserves
(accumulated
losses)/
retained
earnings
total equity
Note
$000
$000
$000
$000
2011
Beginning of the financial period
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Buy-back of ordinary shares, net of tax
Contributions of shadow equity
Dividends deemed as a result of share buy-back
end of the financial period
2012
Beginning of the financial period
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Shares issued during the period
Less capital raising costs (net of tax)
end of the financial period
23
23
23
53,620
–
–
–
(4,701)
6,611
–
55,530
55,530
–
–
–
131,993
(5,425)
182,098
(523)
–
523
523
–
–
–
–
–
–
163
163
–
–
163
(13,580)
1,446
–
1,446
(241)
(137)
(1,910)
(14,422)
(14,422)
11,429
–
11,429
39,517
1,446
523
1,969
(4,942)
6,474
(1,910)
41,108
41,108
11,429
163
11,592
–
–
131,993
(5,425)
(2,993)
179,268
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
34
CoNsolidated statemeNt
oF Cash Flows
FOR ThE PERIOD ENDED 29 APRIL, 2012
Note
2012
$000
2011
$000
Cash flows from operating activities:
Receipts from customers
Payments to suppliers and employees
GST paid
Interest received – external parties
Interest received – related parties
Interest and other borrowing costs paid
Income tax received/(paid)
Net operating cash flows
Cash flows from investing activities:
Payment for acquisition of subsidiary, net of cash acquired
Purchase of franchise rights
Payments for plant and equipment
Proceeds from sale of plant and equipment
Net investing cash flows
Cash flow from financing activities:
Proceeds from borrowings – bank loan facilities
Repayment of borrowings and other obligations
Loans advanced – related parties
Acquisition of debt facilities
Refinance fees paid
Buyback of ordinary shares
Proceeds from issuance of shadow equity
Share capital buy-back costs
Shadow equity issuance costs
Dividends paid
Proceeds from share issue
Repurchase of shares
Costs associated with Initial Public Offer
Net financing cash flows
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the reporting period
Cash and cash equivalents at the end of the reporting period
Non-cash financing and investing activities
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
446,000
448,669
(373,717)
(365,397)
(21,109)
(26,213)
354
86
(16,204)
215
35,625
943
1,735
(18,244)
(7,175)
34,318
502
(88)
–
(278)
(18,797)
(15,540)
–
22
(18,383)
(15,796)
105,000
252,866
(262,530)
(176,269)
(139)
–
(696)
–
–
–
–
–
201,740
(60,371)
(24,711)
(41,707)
(24,465)
43,708
19,243
(602)
(51,451)
(12,096)
(4,701)
6,611
(241)
(137)
(1,910)
–
–
–
12,070
30,592
13,116
43,708
33
36
23
23
23
23
7
34
35
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies
The principal accounting policies adopted by the Company and its subsidiaries (Group) in the preparation of the
financial report are set out below. These policies have been consistently applied, unless otherwise stated.
Basis of preparation
These financial statements have been prepared as a general purpose financial report in accordance with Australian
Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent
Issues Group Interpretations and the Corporations Act 2001.
Collins Foods Limited is a for-profit entity for the purpose of preparing the Consolidated Financial Statements, was
incorporated on 10 June, 2011 and undertook an initial public offering on 4 August, 2011. The proceeds of the initial
public offering were used to acquire Collins Foods Holding Pty Limited and its controlled entities and SingCo Trading
Pte Ltd and its controlled entities.
The Group utilises a fifty-two, fifty-three week fiscal period ending on the Sunday nearest to 30 April. Fiscal period
2012 was a fifty-two week period ended on 29 April, 2012 (2011 was a fifty-two week period ended on 1 May, 2011).
The financial statements have also 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.
The financial report has been prepared on a going-concern basis which contemplates continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. Whilst the
Group is in a net current liability position, the accounts continue to be prepared on a going concern basis on the
grounds that future cash flow projections will be sufficient to meet operational needs and longer-term growth.
In addition, the Group has access to sufficient unused credit facilities with its banking syndicate.
Capital reconstruction
Collins Foods Limited has determined that the acquisition of Collins Foods Holding Pty Limited (Former Parent Entity)
by its wholly owned subsidiary does not represent a business combination as outlined in Australian Accounting
Standard AASB3 (AASB3) for accounting purposes. The appropriate accounting treatment for recognising the new
Group structure is on the basis that the transaction is a form of capital reconstruction and group reorganisation.
Therefore, the financial information has been prepared using the principles of a reverse acquisition by Collins Foods
Holding Pty Limited of Collins Foods Limited.
As a result, the consolidated financial statements have been prepared as a continuation of the financial statements
of the accounting acquirer, Collins Foods Holding Pty Limited. Accordingly, comparative information is provided for
the Consolidated Balance Sheet as at 1 May, 2011 and for the Consolidated Income Statement and Consolidated Cash
Flow Statement for the period ended 1 May, 2011.
As a result:
–
–
–
The retained earnings of the Group represent the retained earnings of Collins Foods Holding Pty Limited from the
date of its incorporation, plus the results of the combined entities from the date of acquisition.
The Consolidated Balance Sheet comprises the existing consolidated net assets of Collins Foods Holding Pty Limited
and its controlled entities measured at their historical cost plus the fair value of the net assets of the other
combining entities.
The comparatives for the Consolidated Income Statement and cash flow comprise the resulting consolidated
statements of Collins Foods Holding Pty Limited and its controlled entities.
36
Compliance with IFRS
The Consolidated Financial Statements of the Group also comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
Principles of consolidation
The consolidated financial statements include the financial statements of the parent entity, Collins Foods Limited
(the Company) and its subsidiaries (see note 26 on subsidiaries). All transactions and balances between companies in
the Group are eliminated on consolidation. The term “Group” used throughout these financial statements means the
parent entity and its subsidiaries. Subsidiaries are all those entities over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.
Where an entity began to be controlled during the reporting period, the results are included only from the date control
commenced. Where a subsidiary ceased to be controlled during the reporting period, the results are included only
through to the date control ceased. Except as noted above in relation to the capital reconstruction, the acquisition
method of accounting is used to account for the acquisition of subsidiaries by the Group. Consistent accounting
policies are employed in the preparation and presentation of the consolidated financial statements.
Associates
Associates are all entities over which the Group has significant influence but not control or joint control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting, after initially being recognised at cost.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of
post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-
acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from
associates are recognised as reduction in the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue from the sale of goods is
recognised when the Group has passed control of the goods to the customer, interest income is recognised on a time
proportion basis using the effective interest method and traineeship income is recognised as revenue when the right to
receive payment is established. Revenue arising from the sale of property, plant and equipment is recognised when the
risks and rewards have been transferred, which is considered to occur on settlement.
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 the
performance of the operating segments has been identified as the Managing Director/Chief Executive Officer.
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based
on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and
to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The
relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure
the deferred tax asset or liability.
37
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
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 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly
in equity.
Tax consolidation
The Company and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation
as of 23 June, 2011. The Former Parent Entity and its wholly-owned Australian controlled entities implemented the
tax consolidation legislation as of 15 April, 2005. The Company, as the head entity in the tax consolidated group and
its wholly-owned Australian controlled entities continue to account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer
in its own right.
In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group. Assets or liabilities arising under the tax funding agreement with the tax
consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details
about the tax funding agreement are disclosed in note 6.
Foreign currency translation
Items included in the financial statements of each of the Group entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The consolidated financial statements are
presented in Australian dollars, which is the functional and presentation currency of the Company.
Transactions in foreign currencies are converted at the exchange rates in effect at the dates of each transaction.
Amounts payable to or by the Group in foreign currencies have been translated into Australian currency at the
exchange rates ruling on balance date. Gains and losses arising from fluctuations in exchange rates on monetary
assets and liabilities are included in the Consolidated Income Statement in the period in which the exchange rates
change, except when deferred in equity as qualifying cash flow hedges.
Employee entitlements
Provision has been made in the accounts for benefits accruing to employees up to balance date, such as annual leave,
long service leave and bonus. No provision is made for non-vesting sick leave as the anticipated pattern of future sick
leave taken indicates that accumulated non-vesting leave will never be paid. Annual leave provisions are measured at
their nominal amounts using the remuneration rates expected to apply at the time of settlement and are classified in
provisions. Long service leave provisions are measured as the present value of expected future payments to be made
in respect of services provided by employees up to reporting date using the projected unit credit method. Expected
future payments are discounted using market yields at reporting date on national government bonds with terms to
maturity that match estimated future cash outflows.
All on-costs, including superannuation, payroll tax, workers’ compensation premiums and fringe benefits tax are
included in the determination of provisions.
Cost of sales
For the purposes of the Consolidated Income Statement, cost of sales includes the carrying amount of inventories sold
during the reporting period and an estimated allocation of labour incurred in relation to preparing those inventories
for sale.
Occupancy expenses
Occupancy expenses include: fixed rentals, contingent rentals, land tax, outgoings and depreciation relating to
buildings and leasehold improvements.
38
Restaurant related expenses
Restaurant related expenses include: utilities, maintenance, labour and on-costs (except those allocated to cost of
sales), cleaning costs, depreciation of plant and equipment (both owned and leased) located in restaurants and
amortisation of KFC franchise rights.
Cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand, at call deposits with banks
or financial institutions, and other short-term, highly liquid investments in money market instruments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain
derivatives as either cash flow hedges or fair value hedges.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair value or
cash flows of hedged items.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
Consolidated Income Statement, together with any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are designated
and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in reserves in equity.
The gain or loss relating to the ineffective portion is recognised immediately in the Consolidated Income Statement.
Changes in fair value of any derivative instrument that does not qualify for hedge accounting are recognised
immediately in the Consolidated Income Statement.
Amounts accumulated in equity are recycled in the Consolidated Income Statement in the periods when the hedged
item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a
non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from
equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair value or
cash flows of hedged items.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
Consolidated Income Statement, together with any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk. The effective portion of changes in the fair value of derivatives that are designated
and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in reserves in equity.
The gain or loss relating to the ineffective portion is recognised immediately in the Consolidated Income Statement.
Changes in fair value of any derivative instrument that does not qualify for hedge accounting are recognised
immediately in the Consolidated Income Statement.
Amounts accumulated in equity are recycled in the Consolidated Income Statement in the periods when the hedged
item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a
non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from
equity and included in the measurement of the initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in the Consolidated Income Statement. When a forecast transaction is
no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the
Consolidated Income Statement.
39
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies (continued)
Borrowings
Bank loans are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the Consolidated Income Statement over the period of the borrowings using the effective
interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the
actual draw-down of the facility, are capitalised and amortised on a straight-line basis over the term of the facility.
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.
Receivables
Trade and related party receivables are recognised initially at fair value and subsequently measured at amortised cost,
less any provision for doubtful debts. Trade receivables are generally due for settlement no more than 30 days from
the date of recognition. Collectability of trade and related party receivables are reviewed on an ongoing basis. Debts
which are known to be uncollectable are written off. A provision for doubtful debts is raised when there is objective
evidence that the Group will not be able to collect all amounts due. The amount of the impairment loss is recognised
in the Consolidated Income Statement within other expenses. When a receivable for which an impairment allowance
has been recognised becomes uncollectable 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 the Consolidated
Income Statement.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is assigned on a first-in first-out basis and
includes expenditure incurred in acquiring the stock and bringing it to the existing condition and location.
Business combinations
Except as set out above in relation to the capital reconstruction in respect of the acquisition of the Former Parent Entity
by CFG Finance Pty Limited, the acquisition method of accounting is used to account for all business combinations
regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets
given, shares issued or liabilities incurred or assumed at the date of exchange. Where equity instruments are issued in
an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare
circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair
value and that other evidence and valuation methods provide a more reliable measure of fair value. On an acquisition-
by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. Transaction costs arising on the
issue of equity instruments are recognised directly in equity. Transaction costs arising from business combinations are
expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess
of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference
is recognised directly in the Consolidated Income Statement, but only after a reassessment of the identification and
measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted
to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms
and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
40
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 flows (cash-generating units). If, in a subsequent Period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the
reversal of the previously recognised impairment loss is recognised in the Consolidated Income Statement.
Property, plant and equipment
All property, plant and equipment is recorded at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably.
Property, plant and equipment, excluding freehold land is depreciated at rates based upon the expected useful
economic life as follows:
Buildings
Leasehold improvements
Plant & equipment
Equipment under finance lease
method
Straight line
Straight line
Straight line
Straight line
life
20 years
Primary term of lease
8 years
4–8 years
Leasehold improvements are depreciated over the unexpired period of the primary lease or the estimated life of the
improvement, whichever is the shorter. Finance leased assets are depreciated over the shorter of the asset’s estimated
useful life and the lease term.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
The gain or loss on disposal of all non-current assets is determined as the difference between the carrying amount of
the asset at the time of disposal and the proceeds on disposal, and is included in the Consolidated Income Statement
of the Group in the period of disposal.
Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership
are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of
the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net
of finance charges, are included in other long-term payables. Finance lease payments are allocated between interest
expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying
the interest rate implicit in the lease to the outstanding lease liability at the beginning of each lease payment period.
Finance leased assets are depreciated on a straight-line basis over the shorter of the asset’s estimated useful life and
the lease term.
Where the risks and rewards of ownership are retained by the lessor, leased assets are classified as operating leases
and are not capitalised. Rental payments are charged to the Consolidated Income Statement on a straight-line basis
over the period of the lease.
41
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies (continued)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortised. Instead, goodwill
is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for
the purpose of impairment testing.
Deferred franchise rights
Costs associated with franchise licenses which provide a benefit for more than one financial period are deferred and
amortised over the remaining term of the franchise license. Capitalised costs associated with renewal options for
franchise licences are deferred and amortised over the renewal option period. The unamortised balance is reviewed
each balance date and charged to the Consolidated Income Statement to the extent that future benefits are no
longer probable.
Other intangibles – Sizzler brand
Sizzler brand intangibles which are owned and registered by the Group are considered to have a useful life of 20
years and are amortised accordingly. These intangibles will be tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. Sizzler brand intangibles are carried at
amortised cost less impairment losses.
Investments and other financial assets
The Group classifies its financial assets in the following categories: loans and receivables, held-to-maturity investments,
and available-for-sale financial assets. The classification depends on the purpose for which the investments were
acquired. Management determines the classification of its investments at initial recognition and re-evaluates this
designation at each reporting date.
All investments and other financial assets with the exception of held-to-maturity investments and loans and receivables
are measured at fair value. Held-to-maturity investments and loans and receivables are measured at amortised cost.
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. Changes in
fair value are either taken to the Consolidated Income Statement or an equity reserve.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date, which are classified as non-current assets. Loans and receivables are included in current receivables
(note 8) and non-current receivables (note 14) in the Consolidated Balance Sheet.
Available-for-sale financial assets comprise principally non-marketable securities. They are included in non-current
assets unless management intends to dispose of the investment within 12 months of the end of the reporting period.
Investments are designated as available-for-sale if they do not have determinable payments and management intends
to hold them for the medium to long term.
Accounts payable
These amounts represent liabilities for goods and services provided prior to the end of the reporting period and which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Provisions
Provisions for legal claims and make good obligations 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 can be reliably estimated. Provisions are not recognised for future operating losses.
As the Group is required to restore the leased premises of certain retail stores to their original condition upon exit,
an annual review of leased sites is conducted to revise its estimate of the provision required. However, as leases are
traditionally renewed, the Group only recognises a provision for those restaurants where make good costs will result
in a probable outflow of funds. The provision recognised is the present value of the estimated expenditure required
to remove any leasehold improvements and decommissioning costs. 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.
42
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except:
(i)
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of expense; or
(ii)
for receivables and payables which are recognised inclusive of GST.
The net amount of GST payable to the taxation authority is included as part of trade and other payables (see note 16).
Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis. The GST component of cash
flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
Share-based payment transactions
The Group currently has no share based compensation benefits. Share-based compensation benefits were provided
by the Former Parent Entity to employees (including executive directors) via either the Tracking Stock Bonus Plan or
Performance Shares. Information relating to these schemes is set out in notes 22 and 23 respectively.
Performance Shares were an equity-settled share-based incentive to reward certain employees for their efforts in
improving the Former Parent Entity’s performance and as such were considered to have been issued in exchange for
services. Employees who subscribed for Performance Shares were required to pay an initial subscription price equal
to the fair market value of the shares at issuance date. Therefore, the holders were not provided with any benefits at
issuance as they were liable to the Former Parent Entity for the fair value of the shares at that date. Accordingly, no
amount was recorded as an expense in relation to these shares as the services were provided.
The Tracking Stock Bonus Plan was a cash-settled share-based incentive plan which rewarded eligible employees for
their efforts in improving the Former Parent Entity’s performance and as such was considered to be in exchange for
services. An employee benefit expense and a liability was recognised as the Former Parent Entity received the services
for the fair value of the services. The fair value of the liability was remeasured at each reporting date with changes in
the fair value recorded through profit and loss.
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount
and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather
than through continuing use. An impairment loss is recognised for any initial or subsequent write-down of the asset
(or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less
costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of sale of the non-current asset (or disposal group) is recognised at
the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they
are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified
as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal
group classified as held for sale are presented separately from other assets in the Consolidated Balance Sheet. The
liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Consolidated
Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and
that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated
plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a
view to resale. The results of discontinued operations are presented separately on the face of the Consolidated
Income Statement.
43
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies (continued)
Financial risk management
The Group’s activities expose it to a variety of financial risks; market risk (including price risk), credit risk, liquidity
risk and cash flow interest rate risk. The Group’s overall risk management approach focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group uses derivative financial instruments such as interest rate swaps to hedge certain risk exposures.
The Board of Directors has delegated specific authorities to the central finance department in relation to financial risk
management. The finance department identifies, evaluates and hedges financial risks in close co-operation with the
Group’s operating units. The Board has provided written policies covering the management of interest rate risk and the
use of derivative financial instruments. All significant decisions relating to financial risk management require specific
approval by the Board of Directors.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability
is initially measured at fair value and subsequently at the higher of the amount determined in accordance with
AASB 137 Provisions, Contingent Liabilities and Contingent Assets, and the amount initially recognised less the
cumulative amortisation, where appropriate.
The fair value of financial guarantees are determined as the present value of the difference in net cash flows
between the contractual payments under the debt instrument, and the payments that would be required without
the guarantee, or the estimated amount that would be payable to a third party for assuming the obligation.
Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation,
the fair values are accounted for as a contribution and recognised as part of the cost of the investment.
Contributed equity
Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the
contractual arrangement. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from proceeds. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
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 owners. 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 owners.
Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the Company, on or before the end of the financial period but not distributed at balance date.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Company
–
– by the weighted average number of ordinary shares outstanding during the financial period
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.
44
Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report
have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases,
the nearest dollar.
Standards issued but not yet effective
Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not
been adopted for the annual reporting period ended 29 April 2012, are as follows:
aasB
amendment
AASB 2009-11
AASB 2010-7
affected standards
AASB 9 Financial
Instruments, AASB 2009-11
Amendments to Australian
Accounting Standards
arising from AASB 9 and
AASB 2010-7 Amendments
to Australian Accounting
Standards arising from
AASB 9 (December 2010)
AASB 2011-4 AASB 2011-4 Amendments
AASB 13 and
AASB 2011-8
to Australian Accounting
Standards to Remove
Individual Key Management
Personnel Disclosure
Requirements
AASB 13 Fair Value
Measurement and AASB
2011-8 Amendments to
Australian Accounting
Standards arising from
AASB 13
AASB 2011-9 AASB 2011-9 Amendments
to Australian Accounting
Standards – Presentation
of Items of Other
Comprehensive Income
AASB 10 Consolidated
Financial Statements
AASB 10
Nature of change and impact
on accounting policy
The Group is still to assess its full
impact.
application date
of standard*
application date
for the Group*
01-January-2013 29-April-2013
No change to accounting policy
required. Change to note
disclosure required.
01-July-2013
28-April-2014
The Group is still to assess its full
impact.
01-January-2013 29-April-2013
01-July-2012
29-April-2013
01-January-2013 29-April-2013
No change to accounting policy
required. Change to presentation
of Consolidated Statement of
Comprehensive Income required.
AASB 10 replaces all of the guidance
on control and consolidation
in AASB 127 Consolidated and
Separate Financial Statements, and
Interpretation 12 Consolidation –
Special Purpose Entities. The core
principle that a consolidated entity
presents a parent and its subsidiaries
as if they are a single economic
entity remains unchanged, as do the
mechanics of consolidation. While
the Group does not expect the new
standard to have a significant impact
on its composition, it has yet to
perform a detailed analysis of the
new guidance in the context of its
various investees that may or may not
be controlled under the new rules.
45
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 1. Statement of Significant Accounting Policies (continued)
aasB
amendment
AASB 11
affected standards
AASB 11 Joint
Arrangements
AASB 119,
AASB 2011-
10 &
AASB 2011-11
IAS 32
IFRS 7
Revised AASB 119
Employee Benefits, AASB
2011-10 Amendments
to Australian Accounting
Standards arising from
AASB 119 (September
2011) and AASB 2011-11
Amendments to AASB 119
(September 2011) arising
from Reduced Disclosure
Requirements
Offsetting Financial Assets
and Financial Liabilities
(Amendments to IAS 32) #
Disclosures – Offsetting
Financial Assets and
Financial Liabilities
(Amendments to IFRS 7) #
Nature of change and impact
on accounting policy
AASB 11 introduces a principles-
based approach to accounting for
joint arrangements. The focus is no
longer on the legal structure of joint
arrangements, but rather on how
rights and obligations are shared by
the parties to the joint arrangement.
Based on the assessment of rights
and obligations, a joint arrangement
will be classified as either a joint
operation or joint venture. Joint
ventures are accounted for using
the equity method, and the choice
to proportionately consolidate will
no longer be permitted. Parties to
a joint operation will account their
share of revenues, expenses, assets
and liabilities in much the same way
as under the previous standard.
AASB 11 also provides guidance
for parties that participate in joint
arrangements but do not share joint
control. The Group is yet to evaluate
its joint arrangements in light of the
new guidance.
These amendments introduce various
modifications including changes to
the measurement of defined benefit
plans, change in the timing for
recognition of termination benefits
and amend the definition of short-
term and other long-term employee
benefits. The Directors anticipate this
standard will have no material impact
on the Financial Statements, but the
full impact has not yet been assessed.
No change to accounting policy
required. Therefore, no impact.
application date
of standard*
application date
for the Group*
01-January-2013 29-April-2013
01-January-2013 29-April-2013
01-July-2014
04-May-2015
No change to accounting policy
required. Therefore, no impact.
01-July-2013
28-April-2014
* Application date is for annual reporting periods beginning on or after the date shown in the above table.
46
Note 2. Critical accounting estimates and judgements
Significant accounting judgements, estimates and assumptions
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.
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the next annual reporting period are:
(a) Impairment of goodwill
The Group determines whether goodwill with indefinite useful lives are impaired at least on an annual basis. This
requires an estimation of the recoverable amount of the cash-generating units to which the goodwill with indefinite
useful lives relate. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill
with indefinite useful lives are discussed in note 11.
(b) Review for impairment triggers of brand and property plant and equipment assets
The Group reviews annually whether the triggers indicating a risk of impairment exist. The recoverable amounts of
cash-generating units have been determined based on value-in-use calculations. These calculations require the use
of estimates (refer notes 10 and 11).
(c) Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant
judgement is required in determining the worldwide provision for income taxes. There are certain transactions and
calculations undertaken during the ordinary course of business for which the ultimate tax determination is based upon
management’s interpretation and application of the related tax law. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred income
tax assets and liabilities in the period in which such determination is made.
In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are
sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against which
the unused tax losses can be utilised. However, utilisation of the tax losses also depends on the ability of the Group to
generate sufficient taxable income in the future.
47
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 3. Segment information
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Managing Director/Chief
Executive Officer that are used to make strategic decisions. Management has identified three reportable segments,
KFC Restaurants, competing in the quick service restaurant market, Sizzler Restaurants, competing in the full service
restaurant market and Shared Services which performs a number of administrative and management functions for the
Group’s KFC and Sizzler Restaurants.
(b) Segment information provided to the executive committee
The following is an analysis of the revenue and results by reportable operating segment for the periods under review:
2012
Total segment revenue
Adjusted EBITDA
Depreciation, amortisation and impairment
KFC franchise rights written off
Reversal of provisions
Finance costs – net(i)
Income tax (benefit)/expense
2011
Total segment revenue
Adjusted EBITDA
Depreciation, amortisation and impairment
Impairment of receivables
Reversal of provisions
Finance costs – net(i)
Income tax (benefit)/expense
(i)
Refer note 5 for a detailed breakdown.
KFC
Restaurants
$000
sizzler
Restaurants
$000
300,758
105,212
47,431
11,206
3,732
–
–
10,391
3,706
–
–
405
KFC
Restaurants
$000
sizzler
Restaurants
$000
303,267
104,955
50,979
9,787
–
1,350
–
11,096
3,099
–
–
–
shared
services
$000
–
(6,739)
2,042
–
(10,671)
25,264
shared
services
$000
–
(5,470)
1,688
57,135
51,093
29,802
all other
segments
$000
–
335
5
–
–
(6)
all other
segments
$000
–
368
7
–
–
–
total
$000
405,970
51,418
16,959
3,732
(10,671)
25,663
(4,250)
total
$000
408,222
56,973
14,581
57,135
52,443
29,802
2,999
48
The following is an analysis of the Group’s assets and liabilities by reportable operating segment:
The amounts provided to the Board with respect to total assets and liabilities are measured in a manner consistent with
that of the financial statements. The values are allocated based on the operations of the segment.
2012
Assets
Inter-segment eliminations
Liabilities
Inter-segment eliminations
2011
Assets
Inter-segment eliminations
Liabilities
Inter-segment eliminations
KFC
Restaurants
$000
sizzler
Restaurants
$000
389,949
(152,200)
237,749
3,647
–
3,647
69,522
(6,389)
63,133
3,060
(1,798)
1,262
KFC
Restaurants
$000
sizzler
Restaurants
$000
407,936
(174,928)
233,008
16,210
–
61,862
(13,438)
48,424
1,421
shared
services
$000
30,301
–
30,301
307,704
(157,570)
150,134
shared
services
$000
65,333
–
65,333
479,686
all other
segments
$000
3,857
(779)
3,078
(50)
–
(50)
all other
segments
$000
3,213
(269)
2,944
(81)
–
(81)
total
$000
493,629
(159,368)
334,261
314,361
(159,368)
154,993
total
$000
538,344
(188,635)
349,709
497,236
(188,635)
308,601
–
(188,635)
16,210
1,421
291,051
(c) Other segment information
(i) Segment revenue
There are no sales between segments. The revenue from external parties reported to the Board is measured in
a manner consistent with that in the Consolidated Income Statement.
Revenue from external customers is derived from the sale of food in KFC and Sizzler restaurant outlets.
(ii) Adjusted EBITDA
The Board assesses the performance of the operating segments based on a measure of adjusted EBITDA.
This measurement basis excludes the effects of the reorganisation and Initial Public Offering (IPO) income and
expenditure from the operating segments such as restructuring costs, legal expenses and goodwill impairments when
the impairment is the result of an isolated, non-recurring event. Furthermore, the measure excludes the effects of
unrealised gains/(losses) on financial instruments. Interest income and expenditure are not allocated to segments,
as this type of activity is driven by the central treasury function, which manages the cash position of the Group.
49
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 3. Segment information (continued)
A reconciliation of adjusted EBITDA to profit from continuing operations before income tax is provided as follows:
Adjusted EBITDA
Finance costs – net
Impairment of related party receivable
Release of related party financial liabilities – borrowings
Release of related party financial liability – retirement plan
Investment services fees
Tracking stock
Costs of the IPO expensed
Depreciation
Amortisation
Impairment of property plant and equipment
Impairment of KFC franchise rights
KFC franchise rights written off
Share of net profit of associate accounted for using the equity method
Profit from continuing operations before income tax
Note 4. Revenue and other income
Revenue from continuing operations
Sales revenue
Sale of goods
Other revenue
Franchise revenue from external parties
other income
Net gain on disposal of property, plant and equipment
Traineeship income
Reversal of impairment of related party receivable(i)
Gain on release of guarantee of related party financial liability
– retirement plan(i) (refer note 19)
Gain on release of guarantee of related party financial liability
– borrowings(i)
Total other income
2012
$000
51,418
(25,663)
–
–
10,671
(264)
235
(8,614)
(14,288)
(1,512)
(976)
(183)
(3,732)
87
7,179
2011
$000
56,973
(29,802)
(57,135)
51,093
1,350
(1,600)
(290)
(1,563)
(12,946)
(1,325)
(241)
(69)
–
–
4,445
404,177
404,177
408,222
408,222
1,793
1,793
–
–
405,970
408,222
–
290
109
22
342
–
10,671
1,350
–
11,070
51,093
52,807
(i)
These items of reorganisation and IPO income have arisen as part of the capital reconstruction of the Group and its related parties in the lead up
to, and in association with, the initial public offering of Collins Foods Limited.
50
Note 5. Expenses
Profit from continuing operations before income tax includes the following
specific expenses:
depreciation, amortisation and impairment:
Depreciation:
Buildings
Leasehold improvements
Plant and equipment
Equipment under finance lease
Amortisation of:
Franchise rights
Sizzler brand – Australia
Sizzler brand – Asia
Impairment of:
Property plant and equipment
KFC Franchise rights
Total depreciation, amortisation and impairment
Finance income and costs:
Interest income:
Interest from external parties
Interest from related parties
Interest expense:
Finance lease interest
Bank loan interest
Interest on undesignated cash flow hedges
Transfer from cash flow hedge reserve
Amortisation of borrowing costs
Borrowing costs written off on loan extinguishment(i)
Net finance costs
employee benefits expense:
Wages and salaries
Defined contribution superannuation expense
Employee entitlements
Total employee benefits expense
operating lease rentals:
Minimum lease payments
Contingent rentals
Total rent expense relating to operating leases
Net (gain)/loss on disposal of property, plant and equipment
KFC franchise rights written off(i)
2012
$000
2011
$000
73
7,412
6,612
191
92
7,062
5,086
706
14,288
12,946
473
563
476
762
563
–
1,512
1,325
976
183
1,159
16,959
241
69
310
14,581
(334)
(456)
(1,028)
(3,014)
41
13,135
1,910
(26)
1,371
10,022
25,663
136
26,494
–
747
6,467
–
29,802
102,626
102,190
7,751
6,784
7,618
6,389
117,161
116,197
20,023
1,685
21,708
116
3,732
18,406
2,171
20,577
218
–
(i)
This item of reorganisation and IPO expense have arisen as part of the capital reconstruction of the Group and its related parties in the lead up
to, and in association with, the initial public offering of Collins Foods Limited.
51
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 5. Expenses (continued)
Inventory write-downs and other (gains)/losses
Costs of the IPO expensed(i)
other expenses:
Other miscellaneous
Impairment of promissory notes receivable(i)
Impairment of related party receivable(i)
2012
$000
24
8,614
1,426
–
–
1,426
2011
$000
78
1,563
1,460
3,906
53,229
58,595
(i)
This item of reorganisation and IPO expense have arisen as part of the capital reconstruction of the Group and its related parties in the lead up
to, and in association with, the initial public offering of Collins Foods Limited.
Note 6.
Income Tax
income tax (benefit)/expense
Current tax
Deferred tax
Under/(over) provided in prior periods
Income tax (benefit)/expense is attributable to:
Profit from continuing operations(ii)
Aggregate income tax (benefit)/expense
Deferred income tax expense/(revenue) included in income tax expense comprises:
Increase in deferred tax assets (note 13)
Decrease in deferred tax liabilities (note 13)
Numerical reconciliation of income tax (benefit)/expense to prima facie tax payable:
Profit from continuing operations before income tax (benefit)/expense
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-deductible entertainment
Other non-deductible expenses
R&D claim – net of non-deductible expenses
Debts forgiven
Withholding tax credits not brought to account
Non-assessable income received
Release of related party financial liabilities – retirement plan
Release of related party financial liabilities – borrowings
Impairment of promissory notes receivable
Tax asset base adjustment(iii)
Amounts over provided in prior periods
Income tax (benefit)/expense
344
(4,530)
(64)
(4,250)
(4,250)
(4,250)
(3,696)
(834)
(4,530)
7,179
2,153
46
923
(22)
–
276
(192)
(3,201)
–
–
(17)
(4,169)
(64)
(4,250)
4,848
(1,716)
(133)
2,999
2,999
2,999
(1,224)
(492)
(1,716)
4,445
1,334
18
779
(59)
827
–
–
(405)
(15,328)
15,969
3,135
–
(136)
2,999
(ii)
(iii)
The current period tax benefit includes $6.6 million associated with the IPO and capital restructuring costs.
As discussed below, the tax base of certain assets was adjusted as a result of the application of Tax Consolidation legislation.
52
tax expense (income) relating to items of other comprehensive income
Cash flow hedges (note 13)
tax losses
Unused capital tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30%
All unused tax losses were incurred by Australian entities.
amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly debited
or credited to equity:
Current tax – credited directly to equity
Net deferred tax – credited directly to equity
2012
$000
(42)
(42)
2011
$000
224
224
61,276
18,383
80,640
24,192
465
1,860
2,325
–
–
–
Tax Consolidation
The Former Parent Entity and its wholly-owned Australian controlled entities implemented the tax consolidation
legislation on 15 April, 2005. Additional controlled entities were added to the Tax Consolidated Group on 17
October, 2005 upon them becoming wholly-owned Australian controlled entities (Former Tax Consolidated Group).
The accounting policy on implementation of the legislation is set out in note 1.
The Company and its wholly-owned Australian controlled entities implemented the tax consolidation legislation on
23 June, 2011 (Tax Consolidated Group). Additional controlled entities, which had previously formed the Former Tax
Consolidated Group, were added to the Tax Consolidated Group on 4 August, 2011 upon them becoming wholly-
owned Australian controlled entities (Current Tax Consolidated Group). As a consequence, the Company was required
to determine an allocable cost amount under Australian income tax law and the tax base of certain assets was
adjusted appropriately. The accounting policy on implementation of the legislation is set out in note 1.
On adoption of the tax consolidation legislation, the entities in the Current Tax Consolidated Group entered into
a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned
entities within the Current Tax Consolidated Group in the case of a default by the Company.
On adoption of the tax consolidation legislation, the entities in the Former Tax Consolidated Group had entered into a
tax sharing agreement which, in the opinion of the directors of the Former Parent Entity, limited the joint and several
liability of the wholly-owned entities within the Former Tax Consolidated Group in the case of a default by the Former
Parent Entity.
The entities in the Current Tax Consolidated Group have also entered into a tax funding agreement (Current Tax
Funding Agreement) under which the wholly-owned entities of that group fully compensate the Company for any
current tax payable assumed and are compensated by the Company for any current tax receivable and deferred
tax assets relating to unused tax losses or unused tax credits that are transferred to the Company under the tax
consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-
owned entities’ financial statements.
The entities in the Former Tax Consolidated Group had also entered into a tax funding agreement (Former Tax Funding
Agreement) under which the wholly-owned entities of that group fully compensated the Former Parent Entity for
any current tax payable that had been assumed and were compensated by the Former Parent Entity for any current
tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that were transferred to the
Former Parent Entity under the tax consolidation legislation. The funding amounts were determined by reference to the
amounts recognised in the wholly-owned entities’ financial statements.
53
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 6.
Income Tax (continued)
The amounts receivable/payable under the Current Tax Funding Agreement are due upon receipt of the funding
advice from the Company, which is issued as soon as practicable after the end of each reporting period. The amounts
receivable/payable under the Former Tax Funding Agreement were due upon receipt of the funding advice from the
Former Parent Entity, which was issued as soon as practicable after the end of each reporting period. The Company
may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The
Former Parent Entity also could require payment of interim funding amounts to assist with its obligations to pay tax
instalments. The funding amounts are recognised as current inter-company receivables or payables.
Note 7. Current assets – Cash and cash equivalents
Cash at bank and on hand
Cash at bank and on hand has an average floating interest of 4.0% (2011: 4.6%)
Note 8. Current assets – Receivables
Trade receivables
Interest receivable
Prepayments
Information concerning the effective interest rate and credit risk of both current and
non-current receivables is set out in the non-current receivables note (note 14)
Note 9. Current assets – Inventories
Raw materials and stores, at cost
Provision for diminution in value
Inventories recognised as an expense during the reporting period ended 29 April, 2012
amount to $134,048,000 (2011: $135,344,000)
2012
$000
2011
$000
19,243
43,708
1,168
27
625
1,820
1,169
87
2,298
3,554
4,287
(15)
4,272
4,531
(11)
4,520
54
Note 10. Non-current assets – Property, plant and equipment
Freehold land
Cost
Opening balance
Closing balance
Buildings
Cost
Opening balance
Additions
Closing balance
Accumulated depreciation
Opening balance
Depreciation
Closing balance
Net book value
leasehold improvements
Cost
Opening balance
Additions
Transfers from construction in progress
Disposals
Closing balance
Accumulated depreciation and impairment
Opening balance
Depreciation
Impairment charge
Disposals
Closing balance
Net book value
Plant and equipment
Cost
Opening balance
Additions
Transfers from construction in progress
Transfers from equipment under finance lease
Disposals
Closing balance
2012
$000
2011
$000
3,534
3,534
1,567
6
1,573
(530)
(73)
(603)
970
3,534
3,534
1,563
4
1,567
(438)
(92)
(530)
1,037
59,549
2,118
10,206
(520)
53,902
2,492
3,697
(542)
71,353
59,549
(36,169)
(7,412)
(567)
477
(43,671)
27,682
42,977
4,620
4,337
6,266
(1,905)
56,295
(29,566)
(7,062)
(29)
488
(36,169)
23,380
36,678
5,207
1,823
–
(731)
42,977
55
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 10. Non-current assets – Property, plant and equipment (continued)
Accumulated depreciation and impairment
Opening balance
Depreciation
Impairment charge
Transfers from equipment under finance lease
Disposals
Closing balance
Net book value
equipment under finance lease
Cost
Opening balance
Additions
Transfers to plant and equipment
Disposals
Closing balance
Accumulated depreciation
Opening balance
Depreciations
Transfers to plant and equipment
Disposals
Closing balance
Net book value
Construction in progress
Cost
Opening balance
Additions
Transfers to leasehold improvements and plant and equipment
Disposals
Closing balance
Total property, plant and equipment, net
56
2012
$000
2011
$000
(22,474)
(6,612)
(409)
(4,549)
1,841
(32,203)
24,092
6,266
–
(6,266)
–
–
(4,358)
(191)
4,549
–
–
–
2,381
13,442
(14,543)
(9)
1,271
57,549
(17,804)
(5,086)
(212)
–
628
(22,474)
20,503
5,401
866
–
(1)
6,266
(3,653)
(706)
–
1
(4,358)
1,908
1,012
6,971
(5,520)
(82)
2,381
52,743
Note 11. Non-current assets – Intangible assets
Goodwill
Cost
Opening balance
Purchase of controlled entities
Foreign currency translation
Closing balance
Net book value
Franchise rights
Cost
Opening balance
Additions
KFC franchise rights written off(i) (refer note 5)
Closing balance
Accumulated amortisation and impairment
Opening balance
KFC franchise rights written off(i) (refer note 5)
Amortisation
Impairment charge
Closing balance
Net book value
sizzler brand – australia
Cost
Opening balance
Closing balance
Accumulated amortisation
Opening balance
Amortisation
Closing balance
Net book value
sizzler brand – asia
Cost
Opening balance
Purchase of controlled entities (refer note 36)
Foreign currency translation
Closing balance
Accumulated amortisation
Opening balance
Amortisation
Closing balance
Net book value
Total intangible assets, net
2012
$000
2011
$000
210,675
210,675
873
17
211,565
211,565
–
–
210,675
210,675
8,026
5,232
(8,026)
5,232
(4,123)
4,294
(473)
(183)
(485)
4,747
11,261
11,261
(3,031)
(563)
(3,594)
7,667
–
12,080
235
12,315
–
(476)
(476)
11,839
7,748
278
–
8,026
(3,292)
–
(762)
(69)
(4,123)
3,903
11,261
11,261
(2,468)
(563)
(3,031)
8,230
–
–
–
–
–
–
–
–
235,818
222,808
(i)
Effective upon completion of the IPO, a subsidiary of the Company entered into new KFC franchise arrangements with the franchisor, resulting in
a requirement to write-off previously capitalised KFC franchise rights.
57
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 11. Non-current assets – Intangible assets (continued)
(a) Impairment test for indefinite life intangibles
Allocation of Goodwill
segment
Carrying Value
KFC Restaurants
sizzler Restaurants
2012
$000
2011
$000
2012
$000
183,529
183,529
28,036
2011
$000
27,146
Goodwill is tested for impairment at a cash-generating unit level. The recoverable amount of a cash-generating unit
is determined based on value-in-use calculations. Management recognises that there are various reasons that the
estimates used in the assumptions may vary. For all cash-generating units, there are no reasonable and likely changes
in assumptions which would result in an impairment.
(b) Key assumptions used for value-in-use calculations
2012
KFC Restaurants
The cash flows by restaurant have been estimated after applying growth rates from the commencement of 2013
through to the end of the 2017 financial period, which average 0.4%. Management believes that these growth
percentages are reasonable considering the growth that has been seen in this operating segment during the 2012
and prior financial periods, adjusted to reflect an estimated increase in energy, supply chain and transport costs
arising from the introduction of the Clean Energy Legislation (Clean Energy Act 2011 and supporting legislation) from
1 July, 2012. A pre-tax discount rate of 13.8% has been applied to years one to five. An indefinite terminal cash flow
calculation has been applied for cash flows beyond year five, using the year five cash flow as a base. The growth rate
of 3.0% has been used in determining the terminal value, which does not exceed the long-term average growth rate
for the business in which the restaurant operates.
Sizzler Restaurants
The cash flows by restaurant have been estimated after applying growth rates from the commencement of 2013
through to the end of the 2017 financial period, which average 1.3%.
Management believe that these growth percentages are reasonable considering the growth that has been seen in this
operating segment during the 2012 and prior financial periods, adjusted to reflect an estimated increase in energy,
supply chain and transport costs arising from the introduction of the Clean Energy Legislation (Clean Energy Act 2011
and supporting legislation) from 1 July, 2012. A pre-tax discount rate of 15.0% has been applied to years one to five.
An indefinite terminal cash flow calculation has been applied for cash flows beyond year five, using the year five cash
flow as a base. The growth rate of 3.0% has been used in determining the terminal value, which does not exceed the
long-term average growth rate for the business in which the restaurant operates.
2011
KFC Restaurants
The cash flows by restaurant for years one to five have been estimated after applying a growth rate of 3.9%.
This figure is based on the growth in forecast average same store sales from the commencement of 2012 through
to the end of the 2016 financial period.
Management believes that this growth percentage is reasonable considering the sales growth that has been seen in
this operating segment during the 2011 and prior financial periods. A pre-tax discount rate of 13.1% has been applied
to years one to five. An indefinite terminal cash flow calculation has been applied for cash flows beyond year five,
using the year five cash flow as a base. The growth rate of 3.0% has been used in determining the terminal value,
which does not exceed the long-term average growth rate for the business in which the restaurant operates.
58
Sizzler Restaurants
The cash flows by restaurant for years one to five have been estimated after applying a growth rate of 3.6%.
This figure is based on the growth in forecast average same store sales from the commencement of 2012 through to
the end of the 2016 financial period.
Management believes that this growth percentage is reasonable considering the sales growth that has been seen in
this operating segment during the 2011 and prior financial periods. A pre-tax discount rate of 14.8% has been applied
to years one to five. An indefinite terminal cash flow calculation has been applied for cash flows beyond year five,
using the year five cash flow as a base. The growth rate of 3.0% has been used in determining the terminal value,
which does not exceed the long-term average growth rate for the business in which the restaurant operates.
Note 12. Non-current assets – Available for sale financial assets
Unlisted securities
Preference shares (refer note 29(e))
Provision for impairment of preference shares
Total available for sale financial assets, net
Note 13. Non-current assets – Deferred tax assets, net
deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Depreciation
Employee benefits
Provisions
Finance leases
Receivables
Capitalised costs
Tax losses
Amounts recognised in other comprehensive income:
Cash flow hedges
Deferred tax assets
Movements:
Opening balance
Credited to the Consolidated Statement of Changes in Equity
Credited to the Consolidated Income Statement (note 6)
Credited/(charged) to other comprehensive income (note 6)
Closing balance
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
2012
$000
2011
$000
–
–
–
52,052
(52,052)
–
14,070
3,036
548
–
35
2,606
804
21,099
10,128
2,927
1,689
287
–
–
–
15,031
42
–
21,141
15,031
15,031
2,372
3,696
42
21,141
3,943
17,198
21,141
14,031
–
1,224
(224)
15,031
5,161
9,870
15,031
59
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 13. Non-current assets – Deferred tax assets, net (continued)
deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Inventories
Franchise fees/Sizzler brand
Prepayments
Capitalised costs
Other
Deferred tax liabilities
Movements:
Opening balance
Acquisition of subsidiaries (see note 36)
Credited to the Consolidated Income Statement (note 6)
Closing balance
Deferred tax liabilities to be recovered within 12 months
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax assets
Deferred tax liabilities
Deferred tax assets, net
Note 14. Non-current assets – Receivables
Loans to related parties(i)
Provision for impairment of loans to related parties
Security deposits
2012
$000
2011
$000
639
5,737
24
–
–
587
3,639
24
717
213
6,400
5,180
5,180
2,054
(834)
6,400
1,138
5,262
6,400
21,141
(6,400)
14,741
286
–
286
31
317
5,672
–
(492)
5,180
1,477
3,703
5,180
15,031
(5,180)
9,851
14,130
(2,758)
11,372
28
11,400
(i)
The balance as at 1 May, 2011 related to a receivable from SingCo Trading Pte Ltd. This company was acquired by a subsidiary of the Company
(refer note 36) and eliminates on consolidation as at 29 April, 2012.
Fair values
The fair values of the non-current receivables of the Company equate to their carrying values as disclosed above.
Where applicable, the interest rates charged are market variable rates (refer to table below on interest rate risk).
60
Interest rate risk
The Group’s exposure to interest rate risk and the average interest rate by maturity period is set out in the
following table:
2012
Trade and interest receivables
Related party receivables
Other receivables
Notes
8
14
14
Fixed interest
maturing in:
average interest rate
Floating
interest
rate
$000
5 years
or less
$000
more
than
5 years
$000
Non-
interest
bearing
$000
total
$000
Floating
Fixed
–
–
–
–
–
–
–
–
–
–
–
–
1,195
1,195
286
31
286
31
1,512
1,512
2011
Trade and interest receivables
Related party receivables
Other receivables
Notes
8
14
14
Floating
interest
rate
$000
–
9,765
–
9,765
Fixed interest
maturing in:
5 years
or less
$000
more
than
5 years
$000
Non-
interest
bearing
$000
–
–
–
–
–
–
–
–
1,256
1,607
28
2,891
12,656
average interest rate
total
$000
1,256
Floating
Fixed
11,372
16.5%
28
Credit Risk
There is no concentration of credit risk with respect to external current and non-current receivables. The Group
had related party loans in place at 1 May, 2011 which had been impaired during that year. Prior to the capital
reconstruction, these loans were partially forgiven and then purchased as part of the acquisition of SingCo Trading
Pte Ltd (refer note 36).
Note 15. Non-current assets – Investment accounted for using the equity method
Interest in associate
Acquisition of investment accounted for using the equity method
Share of net profit of associate accounted for using the equity method
Note 16. Current liabilities – Trade and other payables
Trade payables and accruals – unsecured
Other payables(i)
Total payables
(i)
Includes $9.3 million of consideration payable for the purchase of the Former Parent Entity.
2012
$000
501
501
414
87
501
2011
$000
–
–
–
–
–
27,559
17,988
45,547
43,214
8,136
51,350
61
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 17. Current liabilities – Borrowings
Bank loan – secured(i)
Fees on bank loan – capitalised
Bank loan – net
Finance lease liabilities – secured
(i)
Refer note 21.
2012
$000
–
–
–
–
–
2011
$000
17,760
(4,943)
12,817
832
13,649
Details of the fair values of borrowings for the Group are set out in note 21 along with details of the security pledged
and the Group’s exposure to interest rate changes. Sensitivity to interest rate risk is set out in note 35.
Note 18. Derivative financial instruments
Current assets
Interest rate swap contracts – cash flow hedges
Non-current assets
Interest rate swap contracts – cash flow hedges
Current liabilities
Interest rate swap contracts – cash flow hedges
Non-current liabilities
Interest rate swap contracts – cash flow hedges
–
–
19
83
–
542
29
–
Instruments used by the Group
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure
to fluctuations in interest rates in accordance with the Group’s financial risk management policies (refer note 1).
Interest rate swap contracts – cash flow hedges:
On 4 August, 2011 the existing loan facilities of the Group were repaid and the related interest rate swap contracts
settled. As at that date a subsidiary of the Company, CFG Finance Pty Limited, entered into a $135 million Syndicated
Facility Agreement (Syndicated Facility) and a $10 million Working Capital Facility Agreement (Working Capital Facility).
The Syndicated Facility was drawn to $105 million on 4 August, 2011. On 10 November, 2011 the Group entered into
an $80 million interest rate swap contract to hedge a designated portion of the interest rate exposure of this facility.
Bank loans of the Group currently bear variable interest at BBSY which at balance date was 4.38% (2011: 4.97%)
plus margins which vary with the gearing of the Group. At balance date, the weighted average margin was 1.9%
(2011: 4.45%). It is the policy of the Group to protect a designated portion of the loans from exposure to increasing
interest rates. Accordingly, the Group has entered into interest rate swap contracts under which it is obliged to receive
interest at variable rates and to pay interest at fixed rates.
Swaps currently in place cover approximately 76% (2011: 75%) of the loan principal outstanding and are timed to
expire as each loan repayment falls due. The fixed interest rate is 3.71% (2011: rates range between 5.92% and 5.93%)
and the variable rates are BBSY which at balance date was 4.38% (2011: 4.97%).
62
The notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
Less than 1 year
1–2 years
2–3 years
Notional Principal amount
2012
$000
–
–
80,000
80,000
2011
$000
9,158
8,325
106,605
124,088
The contracts require settlement of net interest receivable or payable each 30 days. The settlement dates coincide
with the dates on which interest is payable on the underlying debt. The contracts are settled on a net basis.
The derivative financial instrument entered into on 10 November, 2011 was designated as a cash flow hedge at
inception, as such the gain or loss from remeasuring the hedging instrument at fair value is recognised in other
comprehensive income and deferred in equity in the hedging reserve, to the extent that the hedge was effective.
The fair value amounts deferred in equity are subsequently reclassified into the profit and loss when the hedged
interest expense is recognised. The derivative financial instruments settled on 4 August, 2011 were not designated
as cash flow hedges at inception, as such, the gain or loss from remeasuring the hedging instruments at fair value
was recognised within finance costs.
At balance date these contracts were payables with a fair value of $0.1 million (2011: receivables totalling $0.5 million).
Credit risk exposures
At 29 April, 2012 the contracts gave rise to payables for unrealised losses on derivative instruments of $0.1 million
(2011: $0.5 million receivables for unrealised gains) for the Group from interest rate swap contracts. Management
have undertaken these contracts with the Australia and New Zealand Banking Group Limited which is an AA rated
financial institution.
Interest rate risk exposures
Refer to note 21 and note 35 for the Group’s exposure to interest rate risk on interest rate swaps.
Note 19. Current liabilities – Financial guarantees
Financial guarantees
Total financial guarantees
2012
$000
–
–
2011
$000
10,671
10,671
In the prior period a subsidiary of the Company, Collins Restaurants Queensland Pty Ltd (CRQ) had raised a provision
of $10.7 million in relation to a guarantee of the retirement plan commitments of Worldwide Restaurants Inc. (WRC),
a former related party totalling $USD11.7 million. This provision was made in accordance with the Group’s accounting
policies on the basis that it was more likely than not based on the financial position of WRC at the respective
financial period end, that CRQ would be required to fulfil its contractual obligations in relation to this financial liability.
The provision was an estimate of the amount CRQ would rationally pay to transfer the guarantee obligation to a third
party. On 8 June, 2011 a subsidiary of the Company, Collins Foods Finance Pty limited (CFF), disposed of its interest in
WRC’s holding company, Sizzler USA Holdings Inc. In conjunction with this transaction, CRQ was released as guarantor
of the retirement plan commitments of WRC.
63
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 20. Current liabilities – Provisions
Employee entitlements
Note 21. Non-current liabilities – Borrowings
Bank loan(i)
Fees on bank loan – capitalised
Bank loan – net
Finance lease liabilities – secured
Total non-current liabilities – Borrowings
2012
$000
3,485
2011
$000
3,417
105,000
232,963
(520)
(6,279)
104,480
226,684
–
1,341
104,480
228,025
(i)
As part of the capital reconstruction on 4 August, 2011, the secured financing structure in place at 1 May, 2011 was paid down and new
unsecured funding drawn down.
Assets pledged as security
The new funding drawn down on 4 August, 2011 was unsecured. In the prior period the bank loans of the subsidiaries
were secured by first mortgages over the Group’s freehold land and buildings and a floating charge over the other
assets. Lease liabilities were effectively secured as the rights to leased assets reverted to the lessor in the event of
default. Further information on finance lease commitments is set out in note 27.
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Note
2012
$000
2011
$000
Current
Floating charge
Cash and cash equivalents
Receivables
Inventories
Total current assets pledged as security
Non-current
First mortgage
Freehold land and buildings
Finance lease
Plant and equipment
Floating charge
Receivables
Plant and equipment
Leasehold improvements
Construction in progress
Total non-current assets pledged as security
Total assets pledged as security
64
7
8
9
–
–
–
–
–
–
–
–
–
–
–
–
–
43,708
3,554
4,520
51,782
4,571
1,908
11,400
20,503
23,380
2,381
57,664
64,143
115,925
available financing facilities
Restricted access was available at balance date to the following lines of credit:
Credit standby arrangements:
Total facilities
Working capital facility
Revolving cash advance facility – Facility A
Revolving cash advance facility – Facility B
Capital expenditure facility
Used at balance date
Working capital facility
Revolving cash advance facility – Facility A
Revolving cash advance facility – Facility B
Capital expenditure facility
Unused at balance date
Working capital facility
Revolving cash advance facility – Facility A
Revolving cash advance facility – Facility B
Capital expenditure facility
Bank loan facilities excluding credit standby arrangements:
Total facilities less mandatory scheduled or prepaid repayments made
Used at balance date
Unused at balance date
2012
$000
2011
$000
10,000
5,000
25,000
–
40,000
13,000
–
–
30,000
43,000
227
2,297
–
–
–
227
9,773
5,000
25,000
–
39,773
–
–
11,000
13,297
10,703
–
–
19,000
29,703
105,000
105,000
–
239,723
239,723
–
On 4 August, 2011 the existing loan facilities of the Group were repaid. As at that date a subsidiary of the Company,
CFG Finance Pty Limited, entered into a $135 million Syndicated Facility Agreement (Syndicated Facility) and
a $10 million Working Capital Facility Agreement (Working Capital Facility). The Syndicated Facility was drawn to
$105 million on 4 August, 2011 and these funds were utilised to partly repay the loan facilities of the Group that
existed at that date. The balance of the repayment of the loan facilities that existed at that date was funded by the
proceeds from shares issued by the Company on 4 August, 2011.
Facilities drawn on 4 August, 2011
Facility A and Facility B
The Syndicated Facility comprises Facility A and Facility B for $110.0 million and $25.0 million respectively.
The Syndicated Facility provides for a three-year term expiring on 3 August, 2014. There are no scheduled
repayments for Facility A or Facility B. Conditions exist regarding the voluntary repayment of debt. The balance
as at the end of the financial period for Facility A was $105.0 million, while Facility B remained undrawn.
The rate of interest under Facility A and Facility B was BBSY, which at balance date was 4.38% plus the
applicable margin of between 1.5% and 2.2% depending upon the gearing ratio of the Company. At balance
date, the margin applicable was 1.9%. There is a commitment fee calculated daily and payable on the undrawn
commitment of between 0.75% and 1.1% (depending upon the gearing ratio of the Company). At balance date,
this commitment fee rate was 0.95% and was payable quarterly in arrears.
65
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 21. Non-current liabilities – Borrowings (continued)
Working Capital
The Working Capital Facility was initially allocated to a $2.0 million revolving cash advance facility, a $6.7
million overdraft facility, a $1.0 million leasing facility and a $0.3 million letter of credit facility. Any undrawn
amount under either option can be reallocated at any time by the borrowers to either of the other options.
On 10 August, 2011 the allocation was amended to a $9.7 million overdraft facility and a $0.3 million letter of
credit facility.
Letters of credit of $0.2 million were drawn under the Working Capital Facility as at balance date. The remainder
of the Working Capital Facility was undrawn at that date. There is a commitment fee calculated daily and
payable on the undrawn commitment of between 0.75% and 1.10% (depending upon the gearing ratio of the
Company). At balance date, this commitment fee rate was 0.95% and was payable quarterly in arrears.
The rate of interest for cash advances under the revolving advance facility of the Working Capital Facility is BBSY
plus the applicable margin. The interest rate applicable to the overdraft facility is the “Overdraft Base Rate”,
a weekly average of the 30-day BBSY rate and at balance date was 4.3% plus the applicable margin. Fees on
letters of credit issued under the Working Capital Facility are at a rate of 75% of the applicable margin. The
applicable margin for the purposes of the cash advance, overdraft and letters of credit facility is between 1.5%
and 2.2% (depending upon the gearing ratio of the Company). At balance date, the applicable margin was
1.90%. The rate of interest for the leasing facility is specific to each drawdown under the facility and is the base
rate based upon the cost of funds to the lender at the time of the drawdown plus a margin of 1.5%. At balance
date the leasing facility remains undrawn.
The Syndicated Facility and Working Capital Facilities are subject to certain financial covenants and restrictions, such
as net leverage ratios, interest coverage ratios and others which management believe are customary for these types
of loans. The Company and its subsidiaries (other than subsidiaries outside of the Closed Group) were registered
guarantors of all the obligations in respect of these loan facilities.
Facilities repaid on 4 August, 2011
Facility A, Facility B and Mezzanine Facility
The amended senior facility comprised Facility A and Facility B for $36.0 million and $135.0 million respectively.
The amended senior facility provided for a three-year term expiring on 28 June, 2013. The amended Mezzanine
Facility was for $70.0 million and had a three and a half year term expiring on 28 December, 2013. Scheduled
repayments were set out for Facility A over the term of the loan. Conditions existed regarding the voluntary
and mandatory repayment of debt. These facilities were fully repaid on 4 August, 2011, however the balances
as at the end of the prior financial period comprised Facility A $30.5 million, Facility B $135.0 million and the
Mezzanine Facility $74.2 million (inclusive of “PIK” interest).
The rate of interest under Facility A and Facility B was BBSY, which as at 1 May, 2011 was 4.97% plus the
applicable margin of between 3.25% and 4.25% for Facility A and between 3.50% and 4.50% for Facility B
depending upon the gearing ratio of the Company. At 1 May, 2011, the margins applicable were 4.25% for
Facility A and 4.50% for Facility B. Under the Mezzanine Facility, the rate of interest was 8.0% fixed rate cash
pay interest due quarterly and 8.0% “PIK” interest which was capitalised quarterly. Facilities A and B of the
amended senior facility and the entire amended mezzanine facility were fully drawn at 1 May, 2011.
Capital expenditure facility
The amended senior facilities also provided for a $30.0 million capital expenditure facility, Facility C, which could
only be used for the purpose of permitted capital expenditures and could be utilised provided the drawing would
not result in a breach of leverage ratio covenants. The rate of interest on Facility C was BBSY plus the applicable
margin of between 3.50% and 4.50%, depending upon the gearing ratio of the Company. At 1 May, 2011
the margin applicable to Facility C was 4.50% and the balance was $11.0 million. There was a fee applicable to
any undrawn portion of Facility C equal to 65% of the applicable margin. The fee was calculated daily and was
payable quarterly in arrears.
66
Working Capital
The Amended Working Capital Facility was only to be used for general working capital purposes and was
allocated to a $5.0 million revolving cash advance facility, a $4.8 million overdraft facility, a $3.0 million leasing
facility and a $0.2 million letter of credit facility. Any un-drawn amount under either option could be reallocated
at any time by the borrowers to either of the other options.
Lease obligations and letters of credit of $2.2 million and $0.1 million respectively were drawn under the
Amended Working Capital Facility as at 1 May, 2011. The remainder of the Amended Working Capital Facility
was undrawn at that date. There was a line fee calculated daily and payable on the leasing facility total
commitment of between 1.75% and 2.75% (depending upon the gearing ratio of the Company). The remaining
facilities of the Amended Working Capital Facility attracted a line fee calculated daily of between 2.1% and
2.8% (depending upon the gearing ratio of the Company). At 1 May, 2011, this line fee rate was 2.8% and was
payable quarterly in arrears.
The rate of interest for cash advances under the revolving facility of the Amended Working Capital Facility was
BBSY plus the applicable margin. The interest rate applicable to the overdraft facility was the “Overdraft Base
Rate”, a weekly average of the 30 day BBSY rate and at 1 May, 2011 was 4.79% plus the applicable margin. Fees
on letters of credit issued under the Amended Working Capital Facility were at a rate of 75% of the applicable
margin. The applicable margin for the purposes of the cash advance, overdraft and letters of credit facility was
between 1.14% and 1.49% (depending upon the gearing ratio of the Company). At 1 May, 2011, the applicable
margin was 1.49%. The rate of interest for the leasing facility was specific to each drawdown under the facility and
was the base rate based upon the cost of funds to the lender at the time of the drawdown plus a margin of 1.5%.
The amended senior, mezzanine and working capital facilities were subject to certain financial covenants and
restrictions such as interest coverage ratios, profitability ratios and others which management believe are customary
for these types of loans. The Former Parent Entity and its subsidiaries (other than dormant subsidiaries) were registered
guarantors of all the obligations in respect of these loan facilities.
Interest rate risk exposures
The following table summarises interest rate risk for the Group, together with effective interest rates as at the end of
the reporting period. Sensitivity to interest rate risk is set out in note 35.
2012
Trade and other payables
Financial guarantees
Floating
interest
rate
$000
–
–
Notes
16
19
Borrowings
17, 21 105,000
Derivative financial instruments*
18 (80,000)
80,000
25,000
80,000
Fixed interest
maturing in:
5 years
or less
$000
more
than
5 years
$000
Non-
interest
bearing
$000
average interest rate
total
$000
Floating
Fixed
–
–
–
–
–
–
–
–
–
–
–
45,547
45,547
–
–
– 105,000
–
–
45,547 150,547
4.4%
4.4%
3.7%
average interest rate
Floating
Fixed
total
$000
51,350
10,671
250,723
8.2%
2,173
–
8.2%
6.4%
5.9%
Non-
interest
bearing
$000
51,350
10,671
–
–
–
62,021
314,917
–
–
–
–
–
–
Fixed interest
maturing in:
5 years
or less
$000
more
than
5 years
$000
Floating
interest
rate
$000
–
–
Notes
16
19
17, 21
250,723
27
18
–
2,173
(124,088) 124,088
126,635 126,261
67
ColliNs Foods limited ANNUAL REPORT 2012
2011
Trade and other payables
Financial guarantees
Borrowings
Finance lease liabilities
Derivative financial instruments*
* Notional principal amounts.
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 21. Non-current liabilities – Borrowings (continued)
Fair value
The carrying amounts and fair values of borrowings at balance date are:
Carrying
amount
$000
2012
Fair value
$000
Carrying
amount
$000
2011
Fair value
$000
Bank loan (net of establishment costs)
104,480
105,050
239,501
250,773
Finance lease liabilities
–
–
2,173
2,173
104,480
105,050
241,674
252,946
The fair value of lease liabilities equate to their carrying values as disclosed above. The fair value of the bank loan is
inclusive of costs which would be incurred on settlement of the liability and is based upon market prices.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual
maturities for:
(a) all non-derivative financial liabilities; and
(b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an
understanding of the timing of the cash flows.
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. For interest rate swaps, the cash flows have been
estimated using forward interest rates applicable at the end of each reporting period.
Contractual maturities
of financial liabilities
at 29 april 2012
Non-derivatives
less
than 1 year
Between
1 and 2
years
Between
2 and 5
years
over
5 years
total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
$000
$000
$000
$000
$000
$000
Trade and other payables
Borrowings (excluding finance leases)
Total non-derivatives
derivatives
45,547
6,057
51,604
–
6,057
6,057
–
112,667
112,667
Net settled (interest rate swaps)
(21)
(116)
29
–
–
–
–
45,547
45,547
124,781
104,480
170,328
150,027
(108)
(102)
Contractual maturities
of financial liabilities
at 1 may 2011
Non-derivatives
Trade and other payables
Borrowings (excluding finance leases)
Finance lease liabilities
Total non-derivatives
derivatives
less
than 1 year
Between
1 and 2
years
Between
2 and 5
years
over
5 years
total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
$000
$000
$000
$000
$000
$000
51,350
46,271
1,120
98,741
–
–
34,061
238,058
676
916
34,737
238,974
–
–
–
–
–
51,350
51,350
318,390
239,501
2,712
2,173
372,452
293,024
(571)
(513)
Net settled (interest rate swaps)
23
(513)
(81)
68
Note 22. Non-current liabilities – Provisions
Employee entitlements
Tracking stock bonus plan
2012
$000
1,324
55
1,379
2011
$000
1,103
357
1,460
The non-current provision for employee entitlements is in respect of long service leave. It covers all conditional
entitlement for which provision is made, but where employees have not yet completed the required period of service.
Upon completion of the required period of service the group no longer has an unconditional right to defer settlement
of these obligations and as such the obligation is then presented as a current liability.
Under the main terms of the Tracking Stock Bonus Plan each eligible employee was granted an equal number of
A Class Tracking Stock Units (ATS Units) and B Class Tracking Stock Units (BTS Units) which mimic the performance
criteria for Performance Shares (see note 23 for details on performance shares). The B Class Performance Shares
became eligible for conversion upon the sale of Collins Foods Holding Pty Limited (CFH) to CFG Finance Pty Limited,
a subsidiary of the Company, which occurred on 4 August, 2011 (Transaction), thus a bonus payment was made
to BTS unit holders. The internal rate of return hurdles that were a requirement of conversion eligibility of A Class
Performance Shares were not attained in the Transaction, thus the A Class Performance Shares did not become eligible
for conversion and therefore no bonus payment was made to ATS unit holders.
An employee benefit expense and a liability were recognised as the company received the services for the fair value
of the services. The fair value of the liability was remeasured at 1 May, 2011 with changes in the fair value recorded
through profit and loss. The change between the fair value as at 1 May, 2011 and the amount paid to ATS and BTS
unit holders following the Transaction was recorded through profit and loss.
At 1 May, 2011, the independently determined fair value of the ATS and BTS units was determined using a simulation
analysis that took into account the estimated share price for CFH’s active ordinary shares at that date; the estimated
time at which the institutional shareholders of CFH would choose to exit their investment; the distribution of possible
values for those shares at various potential exit points; the internal rate of return hurdles which applied to the
Performance Shares, and valuation discounts for illiquidity and lack of control, given that eligible employees could
not sell their Tracking Stock, forfeited them upon ceasing to be an employee and had no control over the timing of
institutional shareholders exiting from their investment.
The decrease in the value of the ATS and BTS units during the current period resulted in a credit being recognised
in the Consolidated Income Statement for $235,000 (2011: charge recognised for $289,000).
Note 23. Contributed equity
Balance
Shadow equity issuance
Selective share buy-back
Balance
Shares issued during the period(i)
Capital reconstruction(ii)
2 May, 2010
29 June, 2010
23 September, 2010
1 May, 2011
4 August, 2011
4 August, 2011
Less capital raising costs (net of tax)
4 August, 2011
Balance
29 April, 2012
Parent entity
share
Capital
$000
53,620
–
(4,701)
48,919
131,993
6,611
(5,425)
total
equity
$000
53,620
6,611
(4,701)
55,530
131,993
–
(5,425)
182,098
182,098
shadow
equity
$000
–
6,611
–
6,611
–
(6,611)
–
–
(i)
(ii)
Proceeds from share issue $201.7 million less repurchase of shares $69.7 million (including $60.4 million paid in cash consideration on 4 August,
2011 and $9.3 million payable at balance date (refer note 16)).
Refer Note 1.
69
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 23. Contributed equity (continued)
Share capital
Ordinary shares – fully paid
Active ordinary shares – fully paid
Passive ordinary shares – fully paid
Active preferred ordinary shares – fully paid
Passive preferred ordinary shares – fully paid
Deferred shares – fully paid
A-class performance shares
Called to $0.0185
B-class performance shares
Called to $0.0640
Shadow equity units which represent:
Active ordinary shares – fully paid
Passive ordinary shares – fully paid
Active preferred ordinary shares – fully paid
Passive preferred ordinary shares – fully paid
Parent entity
2012
shares
2011
shares
93,000,003
2
–
31,639,342
– 3,163,934,200
–
17,200,833
– 1,720,083,300
–
–
–
200,000
2,942,500
2,942,500
93,000,003 4,938,942,677
–
–
–
–
–
4,359,653
435,965,300
177,689
17,768,900
458,271,542
93,000,003 5,397,214,219
Equity of Current Parent Company
Movements in ordinary share capital during the reporting period were as follows:
details
Ordinary shares, fully paid
Balance
Issue of equity – capital reconstruction (refer note 1)
Balance
date
Number of
shares
1 May, 2011
–
4 August, 2011
93,000,003
29 April, 2012
93,000,003
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of 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. 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.
70
Equity of Former Parent Entity
Movements in share capital were as follows:
details
Ordinary shares
Balance
Balance
Capital reconstruction (refer note 1)
Balance
Active ordinary shares
Balance
Selective share buy-back
Balance
Conversion from passive ordinary shares
Capital reconstruction (refer note 1)
Balance
Passive ordinary shares
Balance
Selective share buy-back
Balance
Conversion to active ordinary shares
Capital reconstruction (refer note 1)
Balance
Active preferred ordinary shares
Balance
Selective share buy-back
Balance
Conversion from passive preferred ordinary shares
Capital reconstruction (refer note 1)
Balance
Passive preferred ordinary shares
Balance
Selective share buy-back
Balance
Conversion to active preferred ordinary Shares
Capital reconstruction (refer note 1)
Balance
date
2 May, 2010
1 May, 2011
4 August, 2011
29 April, 2012
Number of
shares
2
2
(2)
–
2 May, 2010
23 September, 2010
1 May, 2011
8 June, 2011
4 August, 2011
29 April, 2012
35,998,970
(4,359,628)
31,639,342
893
(31,640,235)
–
2 May, 2010
3,599,897,000
23 September, 2010
(435,962,800)
1 May, 2011
8 June, 2011
3,163,934,200
(893)
4 August, 2011
(3,163,933,307)
29 April, 2012
–
2 May, 2010
23 September, 2010
1 May, 2011
8 June, 2011
4 August, 2011
29 April, 2012
17,378,515
(177,682)
17,200,833
29,692,271
(46,893,104)
–
2 May, 2010
1,737,851,500
23 September, 2010
(17,768,200)
1 May, 2011
8 June, 2011
1,720,083,300
(29,692,271)
4 August, 2011
(1,690,391,029)
29 April, 2012
–
71
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 23. Contributed equity (continued)
details
A-class performance shares
Balance
Balance
Capital reconstruction (refer note 1)
Balance
B-class performance shares
Balance
Balance
Capital reconstruction (refer note 1)
Balance
Deferred shares
Balance
Balance
Capital reconstruction (refer note 1)
Balance
Shadow equity units which represent active ordinary shares
Balance
Shadow equity issuance
Balance
Capital reconstruction (refer note 1)
Balance
Shadow equity units which represent passive ordinary shares
Balance
Shadow equity issuance
Balance
Capital reconstruction (refer note 1)
Balance
Shadow equity units which represent active preferred ordinary shares
Balance
Shadow equity issuance
Balance
Capital reconstruction (refer note 1)
Balance
Shadow equity units which represent passive preferred ordinary shares
Balance
Shadow equity issuance
Balance
Capital reconstruction (refer note 1)
Balance
72
date
2 May, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
29 June, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
29 June, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
29 June, 2010
1 May, 2011
4 August, 2011
29 April, 2012
2 May, 2010
29 June, 2010
1 May, 2011
4 August, 2011
29 April, 2012
Number of
shares
2,942,500
2,942,500
(2,942,500)
–
2,942,500
2,942,500
(2,942,500)
–
200,000
200,000
(200,000)
–
–
4,359,653
4,359,653
(4,359,653)
–
–
435,965,300
435,965,300
(435,965,300)
–
–
177,689
177,689
(177,689)
–
–
17,768,900
17,768,900
(17,768,900)
–
Active ordinary shares
Active ordinary shares entitled the holder to participate, subject to the Umbrella Deed, in the dividends and proceeds
on winding up of the Former Parent Entity in proportion to the number of shares held. On a show of hands every
holder of active ordinary shares present at a meeting in person or by proxy was entitled to one vote. Upon a poll, the
voting rights attaching to each share were determined by a formula which operated such that the holders of active
ordinary shares and the holders of active preferred ordinary shares held by non-institutional investors were entitled
(in aggregate) to the balance of voting rights not exercisable by institutional investors.
Passive ordinary shares
Passive ordinary shares did not entitle the holder to participate in the dividends and proceeds on winding up of the
Former Parent Entity. Holders of passive ordinary shares were not entitled to vote at a meeting in person or by proxy.
Upon a poll no voting rights attached to these shares.
Active preferred ordinary shares
Active preferred ordinary shares entitled the holder to participate, subject to the Umbrella Deed, in the dividends and
proceeds on winding up of the Former Parent Entity in proportion to the number of shares held. On a show of hands
every holder of active preferred ordinary shares present at a meeting in person or by proxy was entitled to one vote.
Upon a poll the voting rights attached to each share were determined by a formula which, subject to the Umbrella
Deed, operated such that the holders of active ordinary shares and the holders of active preferred ordinary shares held
by non-institutional investors were entitled (in aggregate) to the balance of voting rights not exercisable by institutional
investors. Subject to the Umbrella Deed, Institutional investors were always entitled to 52% of the total aggregate
voting rights of the Former Parent Entity and its related corporation, Sizzler USA Holdings Inc. Subject to the terms
of the Former Parent Entity constitution, Active Preferred Ordinary Shares were redeemable in certain situations with
the occurrence of a Recapitalisation Event or in connection with an Exit Event.
Passive preferred ordinary shares
Passive preferred ordinary shares did not entitle the holder to participate in the dividends and proceeds on winding
up of the Former Parent Entity. Holders of passive preferred ordinary shares were not entitled to vote at a meeting
in person or by proxy. Upon a poll no voting rights attached to these shares.
Deferred shares
Deferred shares did not entitle the holder to participate in the dividends and proceeds on winding up of the Former
Parent Entity. Holders of deferred shares were not entitled to vote at a meeting in person or by proxy. Upon a poll no
voting rights attached to these shares.
Umbrella Deed
The Former Parent Entity and a related corporation, Sizzler USA Holdings Inc, in conjunction with the shareholders
of the Former Parent Entity and the related corporation, had entered into the Umbrella Deed. This deed provided
a mechanism whereby the value of each Active Ordinary and Active Preferred Ordinary Share was based on the
combined value of the Former Parent Entity and the related corporation. The deed also provided a mechanism to
restore the relative equity interests of each shareholder in the event of a sell down in the Former Parent Entity or the
related corporation. This mechanism utilised either the conversion of Active Ordinary Shares to Passive Ordinary Shares,
Active Preferred Ordinary Shares to Passive Preferred Ordinary Shares or Passive Ordinary Shares to Active Ordinary
Shares, Passive Preferred Ordinary Shares to Active Preferred Ordinary Shares to restore equilibrium.
A-Class performance shares
A-Class performance shares did not entitle the holder to participate in the dividends and proceeds on winding up of
the Former Parent Entity. Holders of A-class performance shares were not entitled to vote at a meeting in person or
by proxy. Upon a poll no voting rights attached to these shares. Upon the attainment of certain internal rate of return
hurdles, A-class performance shares were capable of conversion, when an exit event occurred, into active ordinary
shares or active preferred ordinary shares.
73
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 23. Contributed equity (continued)
B-Class performance shares
B-Class performance shares did not entitle the holder to participate in the dividends and proceeds on winding up of
the Former Parent Entity. Holders of B-class performance shares were not entitled to vote at a meeting in person or
by proxy. Upon a poll no voting rights attach to these shares. Every period, 20% of the B-class performance shares
became capable of conversion, when an exit event occurs, into active ordinary shares or active preferred ordinary
shares. Upon the attainment of certain internal rate of return hurdles, this conversion was accelerated.
As the holders of Performance Shares had paid the fair value of the shares at the date of issuance, the employees
had been provided no net benefit and no amount was recorded as an expense in relation to these shares as these
employees provided services.
Shadow equity
In conjunction with the refinancing of its bank loans on 29 June 2010, the Former Parent Entity entered into a shadow
equity deed with three co-investor funds (who were also mezzanine debt providers under the refinanced bank loan
facilities) in relation to its ordinary share classes. The extent of shadow equity units granted was measured by reference
to the number of underlying ordinary shares it represented. One unit of shadow equity represented one share of the
relevant share class. The co-investors are issued certificates (underpinned by shadow equity deeds and the shareholder
agreements) stating the number of units of shadow equity that had been granted and the underlying ordinary share
classes to which each unit related.
The holders of shadow equity are entitled to dividends, returns of capital and other distributions equivalent to those of
the ordinary share classes to which the shadow equity related. Such distributions become mandatory only in the event
that such distributions were declared in respect of the underlying ordinary share classes. If the Former Parent Entity
issued any ordinary classes of shares to the existing shareholders, the co-investors were offered the right to increase
the number of units of shadow equity they held by paying the subscription price that they would have paid if they had
held the relevant shares.
In the event that the number of issued shares was changed by a reorganisation of the Former Parent Entity’s capital
conducted as a consolidation of capital, a subdivision of capital or a pro-rated cancellation of capital (Reconstruction)
(except the permitted share buy-backs which occurred on 23 September, 2010) the number of units of shadow equity
held by each co-investor would be proportionately adjusted to ensure the number of such units of shadow equity
represented the same percentage of the Former Parent Entity’s share capital following that Reconstruction as it would
have represented if that Reconstruction had not taken place.
In the event of an exit event, the Former Parent Entity was required to pay each co-investor an equivalent payment to
the payment received by the shareholders for the sale of their shares per the ordinary share class to which the shadow
equity related. An exit event was defined as:
–
–
–
the date on which a prospectus is lodged with the Australian Securities and Investments Commission, the U.S.
Securities and Exchange Commission, or any other relevant regulatory body in relation to a listing of the Former
Parent Entity’s shares;
the date on which an agreement for the sale of the share capital of the Former Parent Entity is completed;
the date on which, following a trade sale of the Former Parent Entity and following the passing of a resolution of
shareholders to approve the distribution and payment to shareholders of the proceeds of sale that are available
for distribution or payment to shareholders, whether in a winding up, by return of capital, share buy-back or
otherwise, a final determination is made of the amount that will be paid to shareholders; and
–
the date on which the original investors no longer hold any shares in connection with a recapitalisation.
The co-investors did not have the right to appoint any directors to the Board. The co-investors did not have the right
to vote or participate at a meeting of shareholders (other than as an observer). However, no resolution of shareholders
would be carried if the relevant resolution would not have been carried if the co-investors’ shadow equity had entitled
them to vote as if the co-investors were management shareholders and they notified the Former Parent Entity in
writing before the resolution that they would have voted against the resolution. However, if a resolution was not
carried, but would have been carried if the co-investors’ shadow equity had entitled them to vote as if the co-investors
were management shareholders and they notified the Former Parent Entity in writing before the resolution that they
would have voted in favour of the resolution, the relevant resolution would be deemed to have been carried.
74
Any transaction or change to the terms of the capital structure of the Former Parent Entity varying the rights attaching
to the shadow equity held by the co-investors could not occur without the prior written consent of one or more of the
co-investors. If the Former Parent Entity was to be wound up, the proceeds of the winding up were to be distributed to
the shareholders in accordance with their respective proportions, taking into account any payments that must be made
to the co-investors.
Note 24. Reserves
Hedging – cash flow hedges
Foreign currency translation
Movements in hedging reserve – cash flow hedges:
Opening balance
Revaluation – gross
Deferred tax (note 13)
Transfer to net profit – gross
Deferred tax (note 13)
Closing balance
Movements in foreign currency translation reserve:
Opening balance
Exchange fluctuations arising on net assets of foreign operations
Closing balance
2012
$000
(97)
260
163
–
(102)
31
(37)
11
(97)
–
260
260
2011
$000
–
–
–
(523)
–
–
747
(224)
–
–
–
–
Nature and purpose of reserves
Hedging reserve – cash flow hedges:
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised
in other comprehensive income, as described in note 1. Amounts are recognised in profit and loss when the associated
hedged transaction affects profit and loss.
Note 25. Retained earnings/(accumulated losses)
Retained earnings/(accumulated losses):
Opening balance
Net profit/(loss)
Share capital buy-back costs
Shadow equity issuance costs
Dividends deemed in relation to share buy-back
Closing balance
Franking credits available for the subsequent financial period based on a tax rate of 30%
(14,422)
11,429
–
–
–
(2,993)
44,583
(13,580)
1,446
(241)
(137)
(1,910)
(14,422)
43,441
The above amount represents 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 income tax payable as at the end of the reporting period,
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
(c) franking credits that may be prevented from being distributed in the subsequent period.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits
of subsidiaries were paid as dividends.
75
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 25. Retained earnings/(accumulated losses) (continued)
Dividends not recognised at the end of the reporting period
Since the end of the financial period, the Directors of the Company have declared the payment of a fully franked
final dividend of 6.5 cents per ordinary share ($6.0 million) to be paid on 27 July, 2012. The aggregate amount of the
dividend to be paid on that date, but not recognised as a liability at year end, is $6,045,000.
Note 26. Subsidiaries and Deed of Cross Guarantee
The consolidated financial statements at 29 April, 2012 include the following subsidiaries. The reporting period end
of all subsidiaries is the same as that of the parent entity.
Name of controlled entity
CFG Finance Pty Limited
Collins Foods Holding Pty. Limited
Collins Foods Finance Pty. Limited
Collins Foods Group Pty. Ltd.
Collins Restaurants Queensland Pty. Ltd.
Collins Restaurants NSW Pty. Ltd.
Sizzler Restaurants Group Pty. Ltd.
Collins Restaurants Management Pty. Ltd.
Collins Property Development Pty. Ltd
Club Sizzler Pty. Ltd.
Collins Foods Australia Pty. Ltd.
Collins Finance and Management Pty. Ltd.
Sizzler South Pacific Pty. Ltd.
SingCo Trading Pte Ltd
Sizzler International Marks LLC
Sizzler Asia Holdings LLC
Sizzler South East Asia LLC
Sizzler New Zealand LLC
Sizzler Restaurant Services LLC
Notes
(b) (d)
(b) (d)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(c)
(e)
(e)
(e)
(e) (f)
(e) (f)
(e) (f)
Place of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Nevada, USA
Singapore
Delaware, USA
Delaware, USA
Delaware, USA
Delaware, USA
Delaware, USA
Name
acronym
CFGF
CFH
CFF
CFG
CRQ
CRN
SRG
CRM
CPD
CSP
CFA
CFM
SSP
SingCo
SIM
SAH
SSEA
SNZ
SRS
% of
shares
held 2012
% of
shares
held 2011
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
n/a
–
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
(a)
(b)
(c)
(d)
Collins Foods Limited is domiciled in Brisbane, Australia. The Registered office is located at
16 Edmondstone Street, Newmarket QLD 4051.
These companies have entered into a Deed of Cross Guarantee dated 23 February, 2012 with Collins Foods
Limited which provides that all parties to the deed will guarantee to each creditor, payment in full of any
debt of each company participating in the deed on winding-up of that company. As a result of Class Order
98/1418 issued by the Australian Securities and Investments Commission, these companies are relieved from the
requirement to prepare financial statements.
Sizzler South Pacific Pty. Ltd. (SSP) is a company with no net assets. The directors have resolved to liquidate this
company. This company is not an Australian registered company and is not covered by the Class Order 98/1418.
Collins Foods Limited and CFG Finance Pty Limited were not incorporated within the previous corresponding
period, however, as at 1 May, 2011, a subsidiary of the Company, Collins Foods Holding Pty Limited, was the
holding company of the group acquired by the Company on 4 August, 2011.
(e)
SingCo Trading Pte Ltd and its subsidiaries were purchased by CFG Finance Pty Limited on 4 August, 2011.
These companies are not Australian registered companies and are not covered by the Class Order 98/1418.
(f)
Originally incorporated in Nevada, upon conversion to a LLC became registered in Delaware.
76
The Consolidated Income Statement, Consolidated Statement of Comprehensive Income and summary of movements
in consolidated retained profits of the entities in the Class Order 98/1418 “closed group” are as follows:
As there are no other parties to the Deed of Cross Guarantee that are controlled by Collins Foods Limited, the below
also represents the “Extended Closed Group”.
Consolidated Income Statement
Sales revenue
Cost of sales
Gross profit
Selling, marketing and royalty expenses
Occupancy expenses
Restaurant related expenses
Administration expenses
Other expenses
Other income
Finance revenue
Finance costs
Profit from continuing operations before income tax
Income tax benefit/(expense)
Profit from continuing operations
Statement of Consolidated Comprehensive Income
Profit from continuing operations
other comprehensive income:
Exchange difference upon translation of foreign operations
Cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income for the period, net of tax
total comprehensive income for the period
total comprehensive income for the period is attributable to:
owners of the parent
Summary of movements in consolidated retained profits
Retained profits/(losses) at the beginning of the period
Profit for the period
Buy-back of ordinary shares, net of tax
Contributions of shadow equity
Dividends deemed as a result of share buy-back
accumulated losses at the end of the period
Closed Group
2012
$000
2011
$000
404,177
408,222
(192,587)
(192,487)
211,590
215,735
(83,790)
(31,378)
(42,699)
(31,418)
(1,386)
10,961
1,196
(82,781)
(29,246)
(38,603)
(25,070)
(58,595)
52,807
4,042
(26,453)
(33,844)
6,623
4,480
11,103
4,445
(2,999)
1,446
11,103
1,446
260
(139)
42
163
–
747
(224)
523
11,266
1,969
11,266
1,969
(14,364)
11,103
–
–
–
(13,522)
1,446
(241)
(137)
(1,910)
(3,261)
(14,364)
77
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 26. Subsidiaries and Deed of Cross Guarantee (continued)
The Consolidated Balance Sheet of all entities in the Class Order 98/1418 “closed group” as at the end of the reporting
period are as follows:
Closed Group
2012
$000
2011
$000
18,804
3,450
4,272
–
43,708
5,297
4,520
583
26,526
54,108
57,549
223,040
16,762
31
–
9,827
307,209
333,735
45,463
–
19
–
3,485
48,967
52,743
222,808
9,851
9,657
542
58
295,659
349,767
51,350
13,649
29
10,671
3,417
79,116
104,480
228,025
83
1,379
105,942
154,909
178,826
–
1,460
229,485
308,601
41,166
182,098
55,530
(11)
–
(3,261)
(14,364)
178,826
41,166
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax receivable
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets, net
Deferred tax assets, net
Receivables
Derivative financial instruments
Other financial assets
Total non-current assets
total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Financial guarantees
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
total liabilities
Net assets
equity
Contributed equity
Reserves
Retained profits
total equity
78
Note 27. Commitments for expenditure
Capital commitments
Property, plant and equipment
Aggregate capital expenditure contracted for at balance date but not recognised
as liabilities, payable
5,112
1,345
2012
$000
2011
$000
operating leases
Operating leases relate to land, buildings and equipment with lease terms ranging from
3 to 25 years and expire on varying dates through 2023. The Company has the right to
extend many of these leases and many contain market review clauses. Certain leases
require contingent rent, determined as a percentage of sales, when annual sales exceed
specified levels.
Operating lease commitments:
Aggregate lease expenditure contracted for at balance date but not recognised
as liabilities, payable:
Not later than one year
Later than one year but not later than five years
Later than five years
Less recoverable Goods and Services Tax
Minimum lease payments
Finance leases
All finance leases were paid out as part of the IPO and refinance which occurred on
4 August, 2011. Any gain or loss associated with the early payment of these leases
is included in administration expenses. In the prior period finance leases related to
equipment with lease terms of 3 or 5 years expiring on varying dates through to 2015.
The Group had classified these obligations as a finance lease as substantially all the risks
and benefits incident to ownership had been passed to it by the lessor.
Finance lease commitments:
Commitments in relation to finance leases are payable as follows:
Not later than one year
Later than one year but not later than five years
Later than five years
Less: recoverable Goods and Services Tax
Minimum lease payments
Less: future finance charges
Total lease liabilities
Included in the financial statements as:
Current liabilities (see note 17)
Non-current liabilities (see note 21)
24,311
63,377
19,309
106,997
(9,727)
97,270
22,060
60,836
14,544
97,440
(8,858)
88,582
–
–
–
–
–
–
–
–
–
–
–
1,120
1,592
–
2,712
(247)
2,465
(292)
2,173
832
1,341
2,173
79
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 28. Related parties
Parent entity
The parent entity and ultimate parent entity within the Group is Collins Foods Limited (prior period parent entity and
ultimate parent entity was Collins Foods Holding Pty Limited, refer note 1).
Key management personnel
Key management personnel include the Directors for the parent entity and Directors and executives for the Group as
detailed in the Remuneration Report. Disclosures relating to key management personnel are disclosed in note 29.
Subsidiaries
The ownership interests in subsidiaries are set out in note 26.
Transactions between entities within the Group during the reporting period consisted of loans advanced and repaid,
interest charged and received, operating expenses paid, non-current assets purchased and sold, and tax losses
transferred. These transactions were undertaken on commercial terms and conditions.
All transactions with related parties are conducted on commercial terms and conditions.
transaction type
loans to related parties
Interest receivable
Interest received
other transactions
Operating expenses paid for
Acquisition of loan owing by related party
Acquisition of a related party receivable
Reversal of a provision for impairment of a related
party receivable
aggregate unsecured amounts receivable from,
and payable to related parties at balance date:
Non-current assets – Receivables
Class of related party
Related entity(i)
Related entity(i)
Related entity(i)
Related entity(i)
Related entity – Associate
Related entity – Associate
Related entity
Non-current assets – Provision for Doubtful Receivable
Related entity
(i)
Prior to acquisition of related party (refer note 36).
whole dollars
2012
$
2011
$
410,104
1,774,176
–
1,548,828
139,428
602,368
11,921,786
177,012
108,988
–
–
–
286,000
14,130,254
–
(2,758,000)
286,000
11,372,254
Note 29. Key Management Personnel compensation and equity instrument disclosures
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
2,516,114
2,866,130
215,064
47,307
227,012
42,036
2,778,485
3,135,178
Detailed remuneration disclosures are provided in the remuneration report included in the Directors’ Report.
80
(b) Equity instrument disclosures relating to Key Management Personnel
(i) Shareholdings
The numbers of shares in the Company (and the Former Parent Company) held during the financial period by
the Directors of the Company (and Former Parent Company) and the Key Management Personnel of the Group
(and former group), including their personally related parties, are set out below. There were no shares granted
during the reporting period as compensation or as a result of exercise of options or rights.
Balance
2-may-10
active
Former Parent
Company
1
shares
Balance
1-may-11
active
Former Parent
Company
shares
1
selective
share
2
Buy-back
Capital
Reconstruction
3
Purchase of
shares
4
Balance
29-april-124
–
–
–
18,291,011
153,426
–
–
–
–
–
–
–
–
–
–
–
–
–
20,001
20,001
5,001
20,001
20,001
5,001
18,291,011
(11,290,178)
340,000
7,340,833
153,426
–
**
**
1,983,076
(179,145)
1,535,227
270,505
–
–
1,340,002
(213,051)
650,561
(131,644)
749,873
335,168
860,240
495,792
234,250
–
(72,667)
(93,253)
–
–
1,803,931
1,535,227
270,505
1,126,951
518,917
749,873
262,501
766,987
495,792
234,250
(1,635,529)
(1,356,080)
(144,243)
(916,542)
**
**
**
**
**
**
**
**
–
–
–
–
**
**
**
**
**
**
**
**
168,402
179,147
126,262
210,409
**
**
**
**
**
**
directors
Russell Tate*
Newman Manion*
Bronwyn Morris*
Kevin Perkins
Robert Koczkar
Shannon Wolfers
other Key
management Personnel
Simon Perkins
James Ryan
Martin Clarke
John Hands
David Nash
Adrian Argent
Trevor McDonald
Pamela Martin
Phillip Coleman
George Ryland
*
**
1
2
3
4
Appointed as Directors of the Company on 10 June 2011. At no stage were these individuals, Directors or KMP of the former group and were not
holders of any class of shares of the former group.
Directors or KMP of former group. Ceased to be Directors or KMP on 3 August, 2011.
Shares held in Collins Foods Holding Pty Limited (the Former Parent Company), which were either active ordinary shares or active preferred
ordinary shares (refer note 23 for a description of the rights attaching to these share classes).
The total cash consideration received by all KMP under the share buy-back was $1,004,980.
Movements in the capital reconstruction include the conversion of Passive Ordinary Shares to Active Ordinary Shares; the conversion of Passive
Preferred Ordinary Shares to Active Preferred Ordinary Shares on 8 June, 2011 (refer note 23); the exchange of active share classes by certain
shareholders of the Former Parent Company for cash consideration; and the exchange of active share classes by certain shareholders of the
Former Parent Company for shares in the Company in the ratio of 2.29 active shares for each ordinary share in the Company. The total cash
consideration received or receivable by KMP for active share classes in the capital reconstruction was $10,328,893.
Ordinary shares held in the Company (refer note 23 for a description of the rights attaching to ordinary shares).
81
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 29. Key Management Personnel compensation and equity instrument disclosures
(continued)
Balance
2-may-10
Passive
Former Parent
Company
5
shares
Balance
1-may-11
Passive
Former Parent
Company
shares
5
selective
share
6
Buy-back
Capital
Reconstruction
Balance
7 29-april-128
1,829,101,100
15,342,600
–
–
–
–
1,829,101,100 (1,829,101,100)
15,342,600
–
**
**
198,307,600
(17,914,500)
180,393,100
(180,393,100)
153,522,700
27,050,500
–
–
153,522,700
(153,522,700)
27,050,500
(27,050,500)
134,000,200
(21,305,100)
112,695,100
(112,695,100)
65,056,100
(13,164,400)
51,891,700
74,987,300
–
74,987,300
33,516,800
(7,266,700)
26,250,100
86,024,000
(9,325,300)
76,698,700
49,579,200
23,425,000
–
–
49,579,200
23,425,000
**
**
**
**
**
**
–
**
**
–
–
–
–
**
**
**
**
**
**
directors
Kevin Perkins
Robert Koczkar
Shannon Wolfers
other Key management Personnel
Simon Perkins
James Ryan
Martin Clarke
John Hands
David Nash
Adrian Argent
Trevor McDonald
Pamela Martin
Phillip Coleman
George Ryland
**
5
6
7
8
Directors or KMP of former group. Ceased to be Directors or KMP on 3 August, 2011.
Shares held in Collins Foods Holding Pty Limited (the Former Parent Company), which were either Passive Ordinary Shares or Passive Preferred
Ordinary Shares (refer note 23 for a description of the rights attaching to these share classes).
The selective buy-back of passive share classes occurred on 23 September 2010 for nominal consideration.
Movements in the capital reconstruction include the conversion of Passive Ordinary Shares to Active Ordinary Shares; the conversion of Passive
Preferred Ordinary Shares to Active Preferred Ordinary Shares on 8 June 2011 (refer note 23); and, the exchange of passive ordinary share classes
by all shareholders of the Former Parent Company for nil consideration on 4 August 2011.
Under the Terms of Offer of the Share Purchase Offer Deed, passive and performance share classes in the Former Parent Company were not
capable of being exchanged for ordinary shares in the Company.
82
Balance
2-may-10
Performance
Former Parent
Company
shares10 movements
Balance
1-may-11
Performance
Former Parent
Company
shares
Capital
10 Reconstruction
11
directors
Kevin Perkins
Robert Koczkar
Shannon Wolfers
other Key management Personnel
Simon Perkins12
James Ryan
Martin Clarke
John Hands
David Nash
Adrian Argent
Trevor McDonald
Pamela Martin
Phillip Coleman
George Ryland
455,000
–
–
400,000
400,000
65,000
200,000
200,000
200,000
65,000
200,000
200,000
200,000
–
–
–
–
–
–
–
–
–
–
–
–
–
455,000
(455,000)
–
–
**
**
400,000
400,000
65,000
200,000
200,000
200,000
65,000
200,000
200,000
200,000
(400,000)
(400,000)
(65,000)
(200,000)
**
**
**
**
**
**
Balance
29-april-129
–
**
**
–
–
–
–
**
**
**
**
**
**
**
9
10
11
12
Directors or KMP of former group. Ceased to be Directors or KMP on 3 August, 2011.
Under the Terms of Offer of the Share Purchase Offer Deed, passive and performance share classes in the Former Parent Company were not
capable of being exchanged for ordinary shares in the Company.
Shares held in Collins Foods Holding Pty Limited (the Former Parent Company), which were either A-class or B-class performance shares (refer
note 23 for a description of the rights attaching to these share classes).
Under the Terms of Offer of the Share Purchase Offer Deed, A-lass performance shares in the Former Parent Company were exchanged for nil
consideration and B-class performance shares were exchanged for cash consideration. The total cash consideration received or receivable by
KMP for performance share classes in the capital reconstruction was $82,548.
In addition to the shares listed, Simon Perkins also held 200,000 deferred shares (refer note 23 for a description of the rights attaching to these
share classes) at 2 May 2010 and up until 4 August 2011. Under the Terms of Offer of the Share Purchase Offer Deed, these deferred shares were
exchanged for nil consideration.
(c) Loans with Directors and Director-related entities
As of the end of the reporting period, there were no loans with Directors and Director-related entities. As of the end
of the prior reporting period, there were no loans with Former Parent Entity Directors and their related entities.
(d) Other transactions with Key Management Personnel
Directors and other Key Management Personnel of the Group, and their personally related entities, may purchase
goods from the Company or its controlled entities from time to time. These transactions are made using terms
available to other employees of the Group and customers generally.
83
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 29. Key Management Personnel compensation and equity instrument disclosures
(continued)
The Directors and other Key Management Personnel of the former group were shareholders of SingCo Trading Pte Ltd,
which the Group acquired on 4 August 2011 on terms for one dollar from these shareholders, consideration deemed
fair and reasonable by all parties to the transaction. Further details relating to the acquisition are set out in Note 36.
The Managing Director/CEO, Kevin Perkins, is a Director and major shareholder of Sizzler USA Acquisition Inc..
Collins Foods Finance Pty Ltd, a subsidiary within the former Group, sold the preference shares it held in Sizzler
USA Holdings, Inc. to Sizzler USA Acquisition Inc. on 2 June 2011 for one US dollar, consideration deemed fair and
reasonable by all parties to the transaction.
Note 30. Superannuation
The Group maintains two superannuation plans which cover substantially all of its employees. Each participating
employer entity in the Group has a legal obligation to contribute to the plans or other plans as chosen by the
employees. The default plans chosen by the employer entity are as follows:
(a)
(b)
Management employees – a non-contributory accumulated benefits scheme which is administered by Plum
Financial Services Limited.
Staff – non-contributory accumulated benefits plans which are administered by Westpac Financial Services Group
Limited, Sunsuper or Australian Retirement Fund.
Note 31. Contingencies
Contingent liabilities
The parent entity and certain controlled entities indicated in note 26 have entered into Deeds of Cross Guarantee
under which the parent entity has guaranteed any deficiencies of funds on winding up of the controlled entities which
are party to the deeds. At the date of this statement there are reasonable grounds to believe that the Company will be
able to meet any obligations or liabilities, to which it is, or may become, subject by virtue of the deeds.
As described in note 21, CFG Finance Pty. Limited (a subsidiary) and several other related entities entered into
Syndicated and Working Capital credit facilities. As a consequence of this, the Company and its subsidiaries
(other than subsidiaries outside the Closed Group) became registered guarantors of all the obligations in respect
of these loan facilities.
84
Note 32. Remuneration of auditors
During the reporting period 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:
assurance services
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other audit work under
the Corporations Act 2001
Audit and review of financial reports and other audit work for foreign subsidiary
Other assurance services
PricewaterhouseCoopers Australian firm
Store sales certificates
Agreed upon procedures for covenant calculations
total remuneration for assurance services
taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review of company tax returns
Tax advice and consulting
total remuneration for taxation services
transaction services
PricewaterhouseCoopers Australian firm
Transaction compliance services
Total remuneration for transaction services
total remuneration for services
whole dollars
2012
$
2011
$
313,810
20,000
333,810
143,500
–
143,500
10,000
18,330
28,330
9,410
17,130
25,500
362,140
169,000
29,000
5,000
34,000
28,000
5,500
33,500
864,067
864,067
–
–
1,260,207
202,500
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties
where PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are
principally tax advice, due diligence reporting on acquisitions and capital raisings, or where PricewaterhouseCoopers
is awarded assignments on a competitive basis. It is the Company’s policy to seek competitive tenders for all major
consulting projects.
85
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 33. Notes to the Consolidated Statement of Cash Flows
Reconciliation of profit from continuing operations to net cash inflow from operating activities
2012
$000
11,429
16,959
3,732
116
10,022
1,371
4
(13)
(109)
–
–
–
(10,671)
(544)
(3,493)
97
340
222
244
1,670
(410)
(87)
2011
$000
1,446
14,581
–
218
–
6,467
(14)
579
–
3,906
53,229
(51,093)
(1,350)
(2,456)
(1,913)
(149)
(21)
(240)
(432)
(335)
(1,278)
–
(6,789)
13,173
11,535
35,625
–
34,318
Profit from continuing operations
adjustments for non-cash income and expense items:
Depreciation and amortisation
KFC franchise rights written off
Loss on disposal of property, plant and equipment
Borrowing costs written off on loan extinguishment
Amortisation of borrowing costs
Transfer to/(from) provisions:
Provision for diminution in value of inventory
Provision for employee entitlements
Reversal of impairment of related party receivable
Impairment of related party receivable
Impairment of promissory notes receivable
Release of related party financial liabilities – borrowings
Release of related party financial liability – retirement plan
Movement in:
Income tax payable
Deferred tax balances
Fringe benefits tax payable
Goods and services tax payable
Changes in assets and liabilities:
(Increase)/decrease in assets:
Receivables
Inventory
Prepayments and other assets
Receivables from related parties
Share of profits of associate
(Decrease)/increase in liabilities:
Trade payables and accruals
Financing activities included in loss from continuing operations:
Costs associated with Initial Public Offer
Net operating cash flows
86
Note 34. Non-cash financing and investing activities
Acquisition of plant and equipment by means of leases
Total acquisition by means of leases
Note 35. Financial risk management
2012
$000
1,717
1,717
2011
$000
866
866
The Group’s activities expose it to a variety of financial risks: Market risk (including currency risk, interest risk and price
risk), liquidity risk and limited credit 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’s activities expose it primarily to the financial risk of changes in interest rates and it utilises interest rate
swaps to manage its interest rate risk exposure. The use of financial instruments is governed by the Group’s policies
approved by the Board of Directors, and are not entered into for speculative purposes.
(a) Market Risk
(i) Foreign exchange risk
During 2012 and 2011, the financial instruments of the Group and the parent entity were denominated in Australian
dollars apart from certain bank accounts, trade receivable and trade payables in respect of the Group’s Asian
operations following its acquisition and a portion of the financial guarantee in the prior period, (refer note 19), which
were denominated in foreign currencies at the Group level. Management has decided not to hedge this foreign
exchange risk exposure. The Group’s exposure to foreign currency risk at the reporting date is disclosed in the tables
below. The decline in foreign currency risk during 2012 is due to the release of the financial guarantee.
(ii) Cash flow and interest rate risk
The Group’s main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the
Group to cash flow interest rate risk while borrowings issued at fixed rates expose the Group to fair value interest rate
risk. Information about the Group’s variable rate borrowings, outstanding interest rate swap contracts and an analysis
of maturities at the reporting date is disclosed in note 21.
(iii) Price risk
The Group manages commodity price risk by forward contracting prices on key commodities and by being actively
involved in relevant supply co-operatives.
(b) Credit Risk
Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks, other trade
receivables and with related parties. The Group has adopted a policy of only dealing with creditworthy counterparties
and in the situation of no independent rating being available, will assess the credit quality of the customer taking into
account its financial position, past experience and other factors.
Trade receivables consist of a small number of customers and ongoing review of outstanding balances is conducted on
a periodic basis. The balance outstanding (disclosed in notes 8 and 14) is not past due nor impaired (2011: nil past due).
The credit risk on liquid funds and derivative financial instruments is limited as the counterparties are banks with high
credit ratings assigned by international credit rating agencies.
Related party transactions are conducted on commercial terms and conditions. Recoverability of these transactions are
assessed on an ongoing basis with a provision for doubtful debts having been recognised in relation to an outstanding
balance in the prior period (refer note 14). This loss was realised upon acquisition of the related entity during the
period, consequently the receivable is now eliminated on consolidation.
Credit risk further arises in relation to financial guarantees given to certain parties (see notes 19, 21 and 26 for details).
Such guarantees are only provided in exceptional circumstances and are subject to specific Board approval.
87
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 35. Financial risk management (continued)
(c) Liquidity Risk
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve banking facilities by
continuously monitoring forecast and actual cash flows. This approach enables the Group to manage short, medium
and long term funding and liquidity management as reported in note 21. Non-interest bearing liabilities are due within
six months. For maturities of interest bearing liabilities and interest rate swaps of the Group, refer to notes 18 and 21.
(d) Fair Value Estimation
The fair values of financial assets and financial liabilities are estimated for recognition and measurement or for
disclosure purposes. The fair value of financial instruments is determined using estimated discounted cash flows and
market conditions existing at each balance date. The fair value of interest rate swaps is calculated as the present value
of the estimated cash flows.
The carrying value less impairment provision of receivables and payables are assumed to approximate their fair values
due to their short-term nature. The fair value for financial liabilities for disclosure purposes is estimated by discounting
the future contractual cash flow at the current market interest rate that is available to the Group for similar financial
instruments. The fair value of current borrowings approximates the carrying amount, as the impact of discounting is
not significant.
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
AASB 7 Financial Instruments disclosures require presentation of fair value measurements using the following fair value
measurement hierarchy:
(a)
(b)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices) (level 2); and
(c)
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following tables present the Group’s assets and liabilities measured and recognised at fair value.
at 29 april 2012
at 1 may 2011
level 1
$000
level 2
$000
level 3
$000
level 1
$000
level 2
$000
level 3
$000
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
–
–
–
102
–
–
–
–
542
29
–
–
For assets that are measured using quoted prices in active markets, fair value is the published market price per unit
multiplied by the number of units held without consideration of transaction costs. The fair value of the derivative
financial instruments are estimated using the net present value of a series of cash flows on both the fixed and variable
components of the interest rate swaps. These cash flows are based on yield curves which take into account the
contractual terms of the derivatives, including the period to maturity and market-based parameters such as interest
rates and volatility. Management incorporated non-performance risk by adjusting the present value of each liability
position utilising an estimation of credit risk.
88
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk
and foreign exchange risk only, as the Group is not exposed to other price risks:
interest Rate Risk
Foreign exchange Risk
–1%
+1%
–20%
+20%
Carrying
amount
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
29 April 2012
Financial assets
Cash and cash equivalents
19,243
(135)
Trade and other receivables
Related party receivables
Financial liabilities
1,195
286
Trade and other payables
45,547
–
–
–
Borrowings
105,000
175
–
–
–
–
–
135
–
–
–
(175)
–
–
–
–
–
Derivative financial instruments
102
–
(1,256)
–
1,256
88
34
57
(10)
–
–
Total increase/(decrease)
40 (1,256)
(40) 1,256
169
–
–
–
–
–
–
–
(88)
(34)
(57)
10
–
–
(169)
–
–
–
–
–
–
–
interest Rate Risk
Foreign exchange Risk
–1%
+1%
–20%
+20%
Carrying
amount
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
Profit
$000
equity
$000
1 May 2011
Financial assets
Cash and cash equivalents
43,708
(306)
Trade and other receivables
Current tax receivable
Related party receivables
Derivative financial instruments
Financial liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Financial Guarantees
– $USD Denominated
Total increase/(decrease)
1,256
583
14,130
542
51,350
252,896
29
10,671
–
–
(68)
(787)
–
902
(590)
–
(849)
–
–
–
–
–
–
–
–
–
–
306
–
–
68
787
–
(902)
590
–
849
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,134)
(2,134)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,134
2,134
–
–
–
–
–
–
–
–
–
–
89
ColliNs Foods limited ANNUAL REPORT 2012
Notes to the CoNsolidated
FiNaNCial statemeNts
Note 36. Business combinations
Summary of acquisition
On 4 August, 2011, CFG Finance Pty. Limited, a subsidiary of the Company, acquired 100% of the issued share capital
of SingCo Trading Pte Ltd for one dollar. The primary reason for the acquisition was to ensure the Group has control of
all Sizzler trademarks in the Australasian region.
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Other intangibles – Sizzler brand
Interest in associate
Trade and other payables
Deferred tax liability, net
Net identifiable (liabilities) acquired
Goodwill
Fair value
$000
502
338
12,080
414
(12,153)
(2,054)
(873)
873
Acquisition-related costs
Nominal acquisition-related costs were incurred in the purchase of SingCo Trading Pte Ltd and are included in
administration expenses in the Consolidated Income Statement.
Revenue and profit contribution
The acquired business contributed revenues of $1.8 million and net profit of $0.3 million to the Group for the
period 4 August, 2011 to 29 April, 2012. If the acquisition had occurred on 2 May, 2011, the contributed revenue
for the period ended 29 April, 2012 would have been $2.4 million with a corresponding net profit of $0.1 million
(after inter-company interest of $0.9 million).
Note 37. Earnings per share
Due to the capital reconstruction accounted for using the principles of reverse acquisition referred to in note 1, the
capital structure of the Group changed on 4 August, 2011. Immediately prior to the IPO there were 5,397,214,219
Collins Foods Holdings Pty Limited shares and shadow equity units which represented shares on issue. Following the
IPO there were 93,000,003 Collins Foods Limited shares on issue. The EPS calculation (performed in accordance with
the accounting policy) has not been disclosed for the prior period on the basis that there were significant changes
in share structure throughout this period that would render an EPS disclosure for the prior period irrelevant when
compared to the shareholding structure in the period ended 29 April, 2012. For the current period, the weighted
average number of shares (79,365,556 shares) has been calculated using an exchange ratio, as defined in the relevant
accounting standard, relevant to the transaction’s share price to determine the number of equivalent and relevant
shares outstanding from the start of the period to 4 August, 2011.
90
Note 38. Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholder’s equity
Issued capital(i)
Accumulated losses/retained earnings
(loss)/profit for the period
Total comprehensive (loss)/income
2012
$000
90
242,712
242,802
–
18,499
18,499
224,303
228,426
(4,122)
224,303
(4,122)
(4,122)
(i)
Represents share capital of the parent entity. This differs from the share capital of the Group due to the capital reconstruction (refer note 1).
(b) Guarantees entered into by the parent entity
The parent entity has provided unsecured financial guarantees in respect of bank loan facilities amounting to
$105 million as stated in note 21. In addition, there are cross guarantees given by the parent entity as described in
note 26. All controlled entities will together be capable of meeting their obligations as and when they fall due by
virtue to the Deed of Cross Guarantee dated 23 February, 2012. No liability was recognised by the parent entity in
relation to these guarantees, as their fair value is considered immaterial.
(c) Contingent liabilities of the parent entity
Except as described above in relation to guarantees, the parent entity did not have any contingent liabilities as at
29 April, 2012.
91
ColliNs Foods limited ANNUAL REPORT 2012
diReCtoRs’
deClaRatioN
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 31 to 91 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 29 April, 2012 and of its
performance for the period ended on that date; and
(b)
(c)
there are reasonable grounds to believe that Collins Foods Limited will be able to pay its debts as and when they
become due and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed
group identified in note 26 will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the Deed of Cross Guarantee described in note 26.
Note 1 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 the chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
R tate
Director
Brisbane
29 June 2012
92
iNdePeNdeNt
aUditoR’s
RePoRt
Independent auditor’s report to the members of Collins Foods
Independent auditor’s report to the me
mbers of Collins Foods Limited
Report on the financial report
Report on the financial report
We have audited the accompanying financial report of Collins Foods Limited (the company), which comprises the
Limited (the company), which comprises the
We have audited the accompanying financial re
, and the income statement, the statement of comprehensive income, statement
balance sheet as at 29 April 2012, and the income statement, the statement of comprehensive income, statement
balance sheet as at 29 April 2012
of changes in equity and statement of cash flows for the period
accounting policies, other explanatory notes and the directors
accounting policies, other explanatory notes and the directors’ declaration for the Collins Food
ties it controlled at the period
consolidated entity). The consolidated entity comprises the company and the entities it controlled at the period
consolidated entity). The consolidated entity comprises the company and the enti
end or from time to time during the
ement of cash flows for the period ended on that date, a summary of signif
’ declaration for the Collins Foods Limited group (the
ended on that date, a summary of significant
time during the reporting period.
Directors’ responsibility for the financial report
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
Corporations Act 2001 and for such internal
view in accordance with Australian Accounting Standards and the
view in accordance with Australian Accounting Standards and the Corporations Act 2001
control as the directors determi
ne is necessary to enable the preparation of the financial report that is free from
control as the directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In note 1(a), the directors also state, in accordance with
material misstatement, whether due to fraud or error. In note 1(a), the directors also state, in accordance with
material misstatement, whether due to fraud or error. In note 1(a), the directors also state, in accordance with
, that the financial statements comply with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
Accounting Standard AASB 101
International Financial Reporting Standards.
International Financial Reporting
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ralian Auditing Standards. These Auditing Standards require that we comply with relevant
ralian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance whether the financial report is free from material misstatement.
assurance whether the financial report is free from material mis
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of
material misstatement of the f
inancial report, whether due to fraud or error. In making those risk assessments, the
material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in
auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in
auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in
order to design audit procedures that are appropr
iate in the circumstances, but not for the purpose of expressing
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
appropriateness of accounting policies used and the reasonableness of accounting estima
appropriateness of accounting policies used and the reasonableness of accounting estima
directors, as well as evaluating the overall presentation of the financial report.
directors, as well as evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any
Our procedures include reading the other information in the Annual Report to determine whether it contains any
Our procedures include reading the other information in the Annual Report to determine whether it contains any
material inconsistencies with the financial report.
material inconsistencies with the financial r
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
In conducting our audit, we have complied with the independence requirements of the
In conducting our audit, we have complied with the independence requirements of the
, ABN 52 780 433 757
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, GPO BOX 150, BRISBANE QLD 4001
Riverside Centre, 123 Eagle Street, GPO BOX 150, BRISBANE QLD 4001
DX 77 Brisbane, Australia
T +61 7 3257 5000, F +61 7 3257 5999, www.pwc.com.au
T +61 7 3257 5000, F +61 7 3257 5999,
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
93
93
ColliNs Foods limited ANNUAL REPORT 2012
iNdePeNdeNt
aUditoR’s
RePoRt
94
shaReholdeR
iNFoRmatioN
The shareholder information set out below was applicable as at 26 June 2012.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
holding
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
There were 102 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the 20 largest holders of quoted equity securities are listed below:
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Kevin Perkins
HSBC Custody Nominees (Australia) Limited
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