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COLLINS FOODS LIMITED
ABN 13 151 420 781
COLLINS
FOODS
LIMITED
ANNUAL
REPORT
2014
Contents
2 Our financial performance
3 Chairman’s Message
4 CEO’s Report
6 Our year in review
8
Corporate Governance Statement
13 Directors’ Report
31 Auditor’s Independence Declaration
32 Consolidated Balance Sheet
33 Consolidated Income Statement
34 Consolidated Statement of Comprehensive Income
35 Consolidated Statement of Changes in Equity
36 Consolidated Statement of Cash Flows
37 Notes to the Consolidated Financial Statements
84 Directors’ Declaration
85 Independent Auditor’s Report
87 Shareholder information
IBC Corporate Directory
Key dates for 2015-2016
25 June 2014
4 July 2014
18 July 2014
3 September 2014
12 October 2014
27 November 2014
8 December 2014
18 December 2014
3 May 2015
Full year results released
Final dividend record date
Final dividend payment date
Annual General Meeting
End of 2015/16 half year
Half year results released
Interim dividend record date
Dividend payment date
End of 2015/16 full year
Japan
Sizzler (9)
Collins Foods Group
Strives to build the best restaurant
company in the world.
China
Sizzler (9)
Thailand
Sizzler (42)
Northern Territory
KFC (4)
Queensland
KFC (126)
Sizzler (18)
Western Australia
KFC (38)
Sizzler (5)
New South Wales
KFC (2)
Sizzler (3)
Collins Foods Limited continues
to lay new foundations for
growth and leverage upon its
extensive experience.
20
15
10
5
0
Our financial performance
Over the past 12 months Collins Foods Limited has
been firmly focused on growing its core business.
Revenue
Revenue (A$ million)
(A$ million)
440.6
423.9
405.9
3.9%
500
400
300
200
100
Revenue (excluding finance
revenue) was up 3.9%
compared to the previous
corresponding period.
0
FY12
FY13
FY14
7.0%
EBITDA
Earnings Before Interest, Tax, Depreciation
and Amortisation up, to $50.5 million.
(FY13: $47.2 million).
9.0%
Net operating cashflow
Net operating cashflow up, to
$44.9 million. (FY13: $41.2 million).
10.5%
Dividends
Total FY14 fully franked dividends paid up,
to 10.5 cps. (FY13: 9.5 cps).
Statutory NPAT
Statuatory NPAT ($ million)
(A$ million)
16.4
14.0
11.4
Ô
14.3%
20
15
10
5
FY12
FY13
FY14
Statutory NPAT was down
14.3% reflecting one off
costs of $3.9 million.*
0
9.3%
Underlying NPAT
Underlying NPAT up, to $17.9 million.
(FY13: $16.4 million).
0.8% Ô
KFC Qld – Same Store Sales
Same store sales down, reflecting a softer
Q4 period, compounded by not running a
discount coupon in that quarter. (FY13: up 4.2%)
9.3% Ô
Sizzler – Same Store Sales
Sizzler same store sales down,
reflecting ongoing transition and no
price increases over FY14.
* Includes KFC WA/NT net of acquisition costs and impairments mainly incurred in the first half of FY14.
2
Collins Foods Limited Annual Report 2014
Chairman’s Message
“The addition of 42 KFC stores in Western Australia
and the Northern Territory adds a new dimension to
our business and in particular to its growth potential.”
The Company’s performance in its 2014
financial year was generally very pleasing.
EBITDA growth of 7% and underlying
NPAT growth of 9% were driven primarily
by solid same store sales growth and margin
improvement in our KFC Queensland and
New South Wales restaurants, the opening
of four new KFC restaurants, and the
refurbishment/rebuild of 17 KFC restaurants.
These strong KFC results enabled us to achieve our overall
earnings targets and meet market expectations despite
another disappointing result from our Sizzler restaurants
whose same store sales were 9% behind prior year levels.
Having completed during the year a full review of every aspect
of the Sizzler business and having launched late in the year
the first trials of new in-store initiatives, we begin our 2015
financial year with some confidence that these new initiatives
under the “Get Refreshed” banner may well be capable of
returning Sizzler to sustainable earnings growth .
The addition during the year of some 42 KFC restaurants in
Western Australia and the Northern Territory to our portfolio
of KFC restaurants represented a major investment decision
for the Company. The acquisition of Competitive Foods Pty
Ltd, and the integration of these stores has been extremely
well handled by our senior management team, and whilst
there is no significant financial impact on our 2014 results,
we expect them to be significantly earnings accretive in
FY2015, and in line with our business case forecast. At a
much lower investment cost we also during the year acquired
a 50% equity interest in Snag Stand, an early stage entrant
into the fast casual dining segment which is already delivering
encouraging results.
Clearly 2014 has been an extremely busy one for our senior
management team and all of our staff. Under the leadership
of Kevin Perkins (Chief Executive Officer and Director) and
Graham Maxwell (Chief Operating Officer and Group Chief
Financial Officer) this team has been truly outstanding in
driving top line revenue growth across our KFC stores at the
same time as they have initiated efficiency and productivity
gains across both KFC and Sizzler, developed and begun
implementation of the “Get Refreshed” program with the
objective of returning Sizzler to earnings growth in the
medium term, successfully executed the acquisition and
integration of Competitive Foods’ KFC stores in Western
Australia and the Northern Territory, and acquired a 50%
share in Snag Stand and taken on joint management of the
business. On behalf of the Board I want to congratulate Kevin,
Graham and the senior management team for their leadership
and direction, and all of our staff, who now number over
8,400 for their commitment and dedication throughout 2014.
We have begun a new financial year with confidence on the
back of the initiatives taken in 2014. The addition of 42 KFC
stores in Western Australia and the Northern Territory adds
a new dimension to our business and in particular to its
growth potential. If we can also sustain the early results from
the “Get Refreshed” program, and given reasonable market
conditions, I believe we are well placed to continue to deliver
solid earnings growth and increased shareholder value.
In closing I would also to thank my fellow non-executive
Directors, Bronwyn Morris, Newman Manion and Stephen
Copulos for their wise counsel and input throughout the
year, and finally I thank you, our shareholders, for your
support of the Company.
Russell Tate
Chairman
3
Collins Foods Limited Annual Report 2014 CEO’s Report
“We will continue to develop a range of efficiency
and productivity enhancing measures to improve the
performance of both our KFC and Sizzler businesses
and continue to invest in the Snag Stand business.”
The 2013/14 financial year was an exciting
12 months for the Collins Foods Group.
We acquired the KFC business in Western
Australia and the Northern Territory from
Competitive Foods Australia and invested
in a 50% equity interest in Snag Stand. The
acquisitions provide an ability to drive growth
in our KFC Division and an opportunity to
invest in a start-up company competing in
the rapidly growing “fast casual” segment.
At the same time that we expanded our KFC restaurants
footprint, we have focused on growing the top-line revenue
and improving our base margins with efficiency and
productivity initiatives that positively impact the customer’s
experience. Sizzler Australia is still experiencing challenges in
the current trading environment. “Get Refreshed”, an internal
initiative to contemporise Sizzler with a fresh new look and
feel has been incorporated into Cleveland with the intention
of re-engaging with our core guests. Initial results are very
positive and we will start the process of rolling out the “Get
Refreshed” initiative across the system.
We will continue to develop a range of efficiency and
productivity enhancing measures to improve the performance
of both our KFC and Sizzler businesses and continue to
invest in the Snag Stand business. I would like to take this
opportunity to thank all of our team for their hard work and
dedication over the past 12 months, and their commitment to
strengthening our business for the future.
Financial Performance
Collins Foods generated revenues of $440.6 million for the
financial period ended 27 April 2014 (FY14), up 3.9% on
the prior corresponding financial period (FY13). This growth
was largely driven by strong sales growth from the Group’s
network of KFC restaurants. The Western Australia and
Northern Territory restaurants were part of our portfolio for
the last seven weeks of FY14.
The Group generated Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) of $50.5 million in
FY14. This was up 7.0% on the prior year as a result of direct
and indirect labour efficiencies and productivity initiatives.
Operating conditions continued to remain challenging in the
quick service and casual dining segments. In the context of
this operating environment it is pleasing to see Collins Foods
continue to grow top line revenues while generating faster
growth in earnings.
Underlying NPAT was $17.9 million, an increase of 9.3% after
adjusting for the acquisition of Collins Restaurants West and
other items disclosed in the Group Financial Statements.
Net Profit after Tax (NPAT) was $14 million, down 14.3%
on FY13 due to the impact of the acquisitions and other
significant items. The Group also generated net operating
cash flows of $44.9 million in FY14, up 9% on FY13. The
dividends paid for FY14 will be 10.5cps. A 10.5% increase
on FY13.
During the year, the Group refinanced its syndicated debt
facilities on improved terms and this debt package was
extended on similar terms for the acquisition of Collins
Restaurants West.
Operational Performance
KFC
KFC experienced continued revenue growth of 3.5% and
same store sales growth of 0.8%. We successfully integrated
42 restaurants in Western Australia and the Northern
Territory, built four new restaurants, closed one, undertook
12 major remodels and five minor remodels.
Value plays continue to resonate well with customers in
the current market and new and innovative products and
promotions have been successful in driving sales growth
at KFC. We have had a solid pipeline of marketing and
promotional activities with KFC’s ongoing sponsorship of
the cricket, in particular the “Green & Gold” campaign
was effective in building brand awareness.
4
Collins Foods Limited Annual Report 2014 Sizzler
Overall revenue for Sizzler was down 9.3% with Sizzler
Australia same store sales down 9.3%. This result for
Sizzler reflects the continued transition this business is
going through. There have been no menu price increases
implemented during FY14 and the revenue decline has put
pressure on margins. However, labour productivity and
efficiency improvements have slowed the margin decline.
A complete review of all areas of the Sizzler business was
undertaken and as an outcome of the review launched the
“Get Refreshed” initiative to return the business to positive
growth and achieve the brand ambition to be Australia’s
favourite family restaurant.
Sizzler franchise operations in Asia continue to expand,
with four new franchised locations added to the network
in FY14 in China and Thailand.
Snag Stand
On 6 June, Snag Stand opened a new stand in the Macquarie
Centre, Sydney and is the first stand to incorporate seating
to provide a complete brand experience. It set a sales record
on the opening week for the concept. A very encouraging
result as we continue to evolve and establish the brand
“Snag Stand”.
Corporate Social Responsibility
In the area of social responsibility we achieved a new
milestone. In our Workplace Giving Program, 53% of our
outstanding employees donate something each week to our
selected charities:
– Animal Welfare League;
– Breast Cancer Network Australia;
– Children’s Hospitals Foundation Australia;
– Good Beginnings Australia; and
– YoungCare.
The program to date has in total raised $2.4 million.
Key Priorities for 2014/15 and
Outlook for the Business
The quick service restaurant, fast casual dining and casual
dining landscapes continue to change. With increasing
competition, subdued retail demand and rising costs, trading
conditions remain challenging.
Our strengthened focus on innovation, and operational
efficiency initiatives will be key growth drivers for the business
going forward.
The KFC brand continues to be supported by strong new
product promotions and value offers remain an industry
focus. There is a solid pipeline of new KFC restaurants and
refurbishments planned for the next 12 months across
our KFC portfolio to capitalise on the attractive growth
opportunities that we have identified.
For the Sizzler business, the “Get Refreshed” initiative is the
first phase of three distinct phases in a longer-term strategy to
transform the Sizzler brand and return the business to positive
growth. Our Cleveland store was remodelled and reopened
on 2 June and early sales results have been very encouraging.
“Get Refreshed” will be rolled out to a number of restaurants
in coming months.
We continue to evolve the Snag Stand concept and will make
an ongoing investment in that brand.
The past 12 months have been spent building upon operating
efficiencies and acquiring and integrating two new businesses.
We have come out of this period with a stronger, more
resilient business and are well placed to continue delivering
earnings growth over the next 12 months.
Kevin Perkins
Managing Director /CEO
5
Collins Foods Limited Annual Report 2014
Our year in review
Efficiency and productivity measures have driven improved
margins in our KFC Queensland and New South Wales restaurants.
At the same time we have pursued new opportunities such as the
acquisition of KFC restaurants in Western Australia and the
Northern Territory to provide additional growth in future years.
Sizzler
Sizzler’s results reflect that this is a business in transition.
We are contemporising the
Sizzler brand to re-engage
with our customers.
6
6
Collins Foods Limited Annual Report 2014
Innovation and new
product development
remain a core focus.
In FY2014 we
launched
Get Refreshed.
Get Refreshed is our
new brand-wide initiative
for Sizzler that incorporates
a new look and feel for
the restaurants.
Corporate Governance StatementCollins Foods Limited Annual Report 2014 KFC
KFC improved margins and consolidated the
Western Australia and Northern Territory acquisition.
KFC WA/NT Acquisition
KFC Brand
KFC Capex
• Circa $20 million capex
spend for KFC in FY14.
• There were four new builds.
• 12 major and five minor
remodels carried out.
• Capex focused on growth.
• Completed transaction
• KFC Brand supported by
solid pipeline of products
and campaigns.
• Innovative and fun family
dinner offerings at centre
of Brand strategy.
• KFC Australia at forefront
of successfully leveraging
social media trend with
+750,000 Facebook ‘likes’.
Green & Gold
The Green & Gold
campaign supported the
Australian cricket team over
the summer.
on 7 March 2014.
• Integration of acquisition
complete.
Focusing on improving
operational performance
in KFC WA/NT to drive
top line growth and
margin improvement.
In FY2014 we
opened four
new stores.
Collins Foods Limited Annual Report 2014
7
7
Corporate Governance StatementCollins Foods Limited Annual Report 2014 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 for the entire year 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, performance assessment and, if appropriate,
removal of the Chief Executive Officer (CEO);
approving the appointment and/or removal of the
Chief Financial Officer (CFO) and Company Secretary
and other members of the senior executive management
team where appropriate;
–
–
8
– overseeing and contributing to the performance
–
assessment of members of the senior management
executive team; 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 CEO supported by the senior management
executive 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 reports to
the Board at regular Board meetings, providing updates on
initiatives and issues.
Senior management executives are issued with formal letters
of appointment governing their roles and undergo a formal
induction process.
Executive performance assessment
The Board approves criteria for assessing performance of the
CEO and other senior management 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 management executives is reviewed at least
annually. The Committee reviews the performance of the
CEO, while the CEO is responsible for performance reviews
of senior management executives.
Performance evaluations for the CEO and other senior
management executives were undertaken during the year
in accordance with the above process.
2. Structure the Board to add value
Board composition
Consistent with its Charter, 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.
Collins Foods Limited Annual Report 2014 The Board is comprised of five Directors (the Company’s
Constitution provides for a minimum of three and a
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.
Four of the Company’s five 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. Three of the Company’s four
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 roles 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
could 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
with the exception of Mr Copulos, who is not considered
independent on the following basis:
– Mr Copulos is Managing Director of the Copulos Group,
a substantial shareholder in the Company.
In accordance with the Corporations Act 2001 (Cth) and the
Constitution of the Company, Directors are restricted in their
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.
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
approval by the Board.
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 election or 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.
9
Collins Foods Limited Annual Report 2014 Corporate Governance
Statement
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.
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.
Performance evaluations for the Board and each Director
were undertaken during the year in accordance with the
above process.
Board Committees
To assist in undertaking its duties, the Board has established
the following Committees:
–
–
the Audit and Risk Committee; and
the Remuneration and Nomination Committee.
Charters specify the responsibilities, composition, membership
requirements, reporting processes and the manner in which
the Committees are 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 its
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 of Conduct 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.
10
Employees are actively encouraged to report any breaches
of the Code of Conduct or other policies and procedures in
place, and the Company has a Whistleblower Policy in place in
support of this.
A copy of the Code of Conduct is available on the
Company’s website.
A copy of the Whistleblower Policy is also 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 other objectives
of the organisation’s businesses including 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.
2014 Actual
2013 Actual
Number
% Number
%
Number of women
employees in the whole
organisation
Number of women
in senior executive1
positions
Number of women on
the Board
4,370
51
3,525
53
6
1
30
20
5
1
26
20
1
Senior executives includes managers who hold roles designated as senior
executive roles, and includes Key Management Personnel and other managers
who report directly to the Managing Director/CEO.
A copy of the Diversity Policy is available on the
Company’s website.
Collins Foods Limited Annual Report 2014 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:
–
reviewing, assessing and recommending the Board approve
the annual and half-year financial reports and all other
financial information published by the Company or released
to the market;
– overseeing the implementation and effective operation of
the Company’s Risk Management system by management;
– monitoring the adequacy and effectiveness of the
Company’s internal control framework including
administrative, operating, accounting and financial controls
to produce reliable financial reporting information and
compliance with legal and regulatory obligations;
– making recommendations to the Board on the
appointment, reappointment or replacement and
remuneration of the external auditors, their terms of
engagement and scope of audits;
– monitoring the effectiveness and independence of the
external auditors;
– determining whether or not a formal internal audit function
should be in place and recommending the approval of
the appointment (and if appropriate, the removal) of the
internal auditor; and
– monitoring and reviewing Management’s performance in
establishing systems to provide for safe operations and for
safety management in all the Company’s workplaces.
In carrying out its responsibilities, the Committee is
authorised to:
– have access to, and meet with, auditors (external and
internal), employees of the Company and any external
advisors without executives or management of the
Company being present; and
seek any information it requires from an employee (and
all employees are directed to co-operate with any request
made by the Committee) or external parties.
–
Consistent with its Charter, the Audit and Risk Committee is
currently comprised of four non-executive Directors, is chaired
by an independent Chairperson who is not Chair of the
Board and consists of a majority of independent Directors.
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, as 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 its 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.
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 potentially
price or value sensitive information to the Company Secretary,
who is then responsible for ensuring this information is
advised to the Disclosure Committee which then makes
recommendations to the Board.
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.
11
Collins Foods Limited Annual Report 2014 Corporate Governance
Statement
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.
safety;
strategic risks including failure of growth drivers;
–
–
– margin risk; and
– operational risks.
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:
–
reviewing and making recommendations to the Board
with respect to the Company’s remuneration principles,
framework and policy for senior executives and Directors;
– providing advice in relation to remuneration packages of
senior management executives, non-executive Directors
and executive Directors;
reviewing and making recommendations to the Board
with respect to Company incentive schemes, including the
implementation and operation of equity-based incentive
plans, bonus plans and other employee benefit programs;
and
reviewing the Company’s recruitment, retention and
termination policies.
–
–
In carrying out its responsibilities, the Committee is authorised
to obtain outside professional advice as it determines
necessary and it has received briefings during the year from
external remuneration experts on various matters.
Consistent with its Charter, the Remuneration and
Nomination Committee is currently comprised of three
non-executive Directors and one executive Director, is chaired
by an independent Chairperson and consists of a majority of
independent Directors. The Committee meets at least three
times a year.
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’.
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.
Key risk registers and business risk registers, 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. Key risk registers are reviewed periodically, but
at least twice 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 programs 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 CEO and
the 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.
Risk profile
Risks which the Company is subject to include:
–
reduction in consumer demand, economic and market
environment changes;
adverse changes in government regulation;
supply chain disruption;
–
–
– negative change to relationship with Yum!;
– brand and reputation calamity;
12
Collins Foods Limited Annual Report 2014 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 27 April 2014.
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
Stephen Copulos
Date of appointment
10 June 2011
15 July 2011
10 June 2011
10 June 2011
12 April 2013
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.
Operating and financial review
Group overview
The Group’s business is the operation, management and administration of restaurants, currently comprising three restaurant
brands, KFC Restaurants, Sizzler Restaurants and Snag Stand joint venture outlets.
On 7 March 2014, the Group announced completion of the acquisition of Collins Restaurants West Pty Ltd (formerly Competitive
Foods Pty Ltd), the largest franchisee of KFC restaurants in Western Australia and the Northern Territory. The Group also
announced that it had made a strategic investment for a 50% interest in the Snag Stand Group.
Following the acquisition of Collins Restaurants West Pty Ltd, the Group operates 168 franchised KFC restaurants in Queensland,
northern New South Wales, Western Australia and Northern Territory which compete in the quick service restaurant market.
The Group owns and operates 26 Sizzler restaurants in Australia, which operate in the casual dining restaurant market. It is also
a franchisor of the Sizzler brand in South East Asia, with 60 franchised stores predominantly in Thailand, but also in China and
Japan. Snag Stand operates five corporate owned outlets and one franchised outlet.
The KFC brand is owned globally by Yum! and is one of the world’s largest restaurant chains. The Group is the largest franchisee
of KFC restaurants in Australia.
In the casual dining market in which it operates, Sizzler, competes with other casual dining concepts as well as taverns and clubs,
fast food and home cooking. Sizzler is a small to modest sized market participant.
Snag Stand is a small early stage company competing in the fast casual dining market. Other operators in the fast casual dining
market include Grill’d Burgers and Guzman Y Gomez.
The Group relies on the regular supply of a number of key input products in its operations. Of these, chicken is the most
significant input product. The Group maintains relationships with a number of suppliers for its key inputs to help mitigate supply
and supplier dependency risks.
13
Collins Foods Limited Annual Report 2014 Directors’
Report
Group financial performance
Key statutory financial metrics in respect of the current financial period and the prior financial period are summarised in the
following table:
Statutory financial metrics
Total revenue ($m)
Earnings before interest, tax, depreciation and amortisation
(adjusted EBITDA) ($m)
Earnings before interest and tax (EBIT) ($m)
Profit before related income tax expense ($m)
Income tax (expense)/benefit ($m)
Net profit attributable to members (NPAT) ($m)
Earnings per share (EPS) basic (cents per share)
Total dividends paid/payable in relation to financial period (cents per share)1
Net assets ($m)
Net operating cash flow ($m)
1
Dividends paid/payable is inclusive of dividends declared since the end of the relevant reporting period.
2013/14
2012/13
Change
440.6
423.9
3.9%
50.5
26.9
20.9
(6.9)
14.0
15.1
10.5
191.4
44.9
47.2
29.8
23.7
(7.3)
16.4
17.6
9.5
185.5
41.2
7.0%
(9.7%)
(11.8%)
(5.5%)
(14.6%)
(14.2%)
10.5%
3.2%
9.0%
The Group’s net assets increased by 3.2% compared with the prior corresponding period, which is largely consistent with and
attributable to the current financial period’s after tax profit less dividends paid together with the movement in equity reserves.
The Company refinanced its syndicated debt facilities on improved terms in July 2013 with two members of the then existing
syndicate. The debt package was extended on similar terms for the acquisition of Collins Restaurants West Pty Ltd. The Group
has undrawn debt facilities of $9.7 million available.
The increase in net operating cash flows of 9.0% on the prior corresponding period, reflects the flow through effect from
increased sales, lower interest payments from lower interest rates, offset to an extent by increased tax payments with tax losses
of prior periods now fully utilised.
Underlying financial metrics excluding the acquisitions and other significant items which occurred in the current period are
summarised as follows:
Underlying financial metrics
Total revenue ($m)
Earnings before interest, tax, depreciation and amortisation (EBITDA) ($m)
Net profit attributable to members (NPAT) ($m)
Earnings per share (EPS) basic (cents)
2013/14
2012/13
Change
425.1
49.0
17.9
19.2
423.9
47.2
16.4
17.6
0.3%
3.8%
9.3%
9.3%
Operational strategies have resulted in improved underlying business operations overall. Increased revenues (0.3% underlying
increase) coupled with cost controls and productivity and efficiency initiatives have more than offset cost increases.
Underlying NPAT has increased by 9.3% this financial period, compared with the prior corresponding period, due largely to
margin improvements in KFC Qld/NSW. These are discussed further in the review of underlying operations below.
14
Collins Foods Limited Annual Report 2014 The impact of acquisitions and other significant items on the statutory results are summarised below:
Impact of acquisitions and other significant items
Total revenue ($m)
Earnings before interest, tax, depreciation
and amortisation (EBITDA) ($m)
Net profit attributable to members (NPAT) ($m)
2013/14
statutory
KFC WA/NT
impact1
Significant
items2
2013/14
underlying
440.6
50.5
14.0
15.4
1.5
(2.1)
425.1
49.0
17.9
(1.8)
1
2
The acquisition of Collins Restaurants West Pty Ltd on 7 March 2014 added $15.4 million in revenue and $1.5 million in EBITDA to the statutory results of the current
period. Acquisition related costs of $2.1 million, depreciation and amortisation of $0.5 million, long term incentive costs of $0.5 million, and interest on debt drawn to
fund the acquisition of $0.5 million were also incurred in the current period. The total after tax impact on statutory NPAT from the acquisition and related costs was a loss
of $2.1 million.
The statutory results of the current period include the impact of impairment of property, plant and equipment of $2.1 million, acquisition costs of $0.2 million in respect
of the investment in the Snag Stand Group, share of net loss of Snag Stand joint venture $0.2 million and expenses in relation to performance rights of $0.1 million. The
total after tax impact on statutory NPAT from these significant items was a loss of $1.8 million.
Review of underlying operations
KFC Qld/NSW Restaurants
Revenues in KFC Qld/NSW were up 3.5% on the prior
corresponding period to $329.3 million, driven by increased
restaurant numbers (4 opened; 1 closed) as well as positive
same store sales growth (+0.8%).
Whilst retail conditions remain challenging, strong summer
marketing campaigns, targeted value offers and new product
offerings have proven successful in driving an increase in
sales, predominantly in free standing and dual branded
locations. While improving, food court locations have
continued to underperform compared to both historical
performance and other locations.
KFC Qld/NSW EBITDA was up $5.5 million (+12.2%) on
the previous corresponding period. Higher profit margins
(+120bps) were achieved despite the continuing competitive
trading environment and the increases in key input costs
particularly energy costs and labour rates.
Margin improvements were primarily the result of improved
labour productivity and efficiency initiatives, including a new
service flow operating platform. These are discussed further
in the strategy and performance section below.
In meeting its restaurant refurbishment obligations with
Yum! and investing in new restaurant capital, KFC Qld/NSW
invested $14.5 million in new restaurant and refurbishment
capital. Returns on capital spend have shown improvement
on the previous corresponding period.
Sizzler Restaurants
Revenues in Sizzler were down 9.3% on the prior
corresponding period to $95.8 million, with same store sales
declining by 9.3%.
The retail conditions in the casual dining market have
remained challenging and highly competitive. During the
period, Sizzler focused upon improving its value proposition
and relevance and the performance of Sizzler reflects the
ongoing transition. We have developed comprehensive
initiatives designed to address these issues which are
outlined further under the strategy and future performance
section below.
Sizzler EBITDA was down $2.3 million (–22.7%) on the
previous corresponding period, due largely to lower gross
profit margins and increased costs of operations. Gross profit
margins reflect menu pricing and promotional discounting
to drive sales countered by strong cost of sales and labour
productivity controls in the face of reduced sales. The increase
in the costs of operations was primarily driven by increased
energy costs and labour rates.
Sizzler franchise operations in Asia contributed an increase of
$0.1 million to this result over the prior corresponding period,
as a result of an increase in restaurant numbers.
Strategy and future performance
Group
The strategies and growth prospects for the Group’s existing
business operations are outlined below.
The medium term strategy (or as opportunities arise) is to
further build economies of scale and grow the Group’s
returns to enhance shareholder value. This could be through
KFC expansion opportunities in other states and territories
(such as the acquisition of Collins Restaurants West Pty Ltd)
or the acquisition or development of other operations in
the retail food and restaurant industry sector (such as the
investment made by the Group in Snag Stand).
KFC Restaurants
Whilst KFC expects the retail environment to remain
challenging in the short term and upwards pressure on input
costs to continue, more recent growth patterns of the sector
in Queensland, and of the underlying KFC business, are
expected to continue.
The acquisition of KFC restaurants in Western Australia
and Northern Territory leverages the Group’s experience in
this category.
Key strategies which underpin this growth are:
–
continued implementation and revision of strategies for the
management and operation of food courts;
continued trials of the breakfast offering;
continued rollout of digital menu boards;
–
–
– developing mobile ordering solution;
–
improving operational efficiencies through service flow
changes, the rollout of tandem drive-thrus and speak/pay/
pick up drive-thrus;
continued implementation of strategies to reduce utility
usage and further reduce maintenance costs;
–
– opening new stores in underdeveloped territories/growth
corridors (four to five planned for the next financial period);
reducing the cost of new store builds and refurbishments;
and
improving people capability.
–
–
15
Collins Foods Limited Annual Report 2014 Directors’
Report
Sizzler Restaurants
As indicated above, as a result of the profit decline and
market feedback, Sizzler instigated a review of all areas of
the business.
As an outcome of the review, the ‘Get Refreshed’ initiative
has been launched to return the business to positive growth.
The brand ambition is to become Australia’s favourite family
restaurant over the upcoming years.
The longer term strategy to transform the Sizzler brand
has three distinct phases of which ‘Get Refreshed’ is the
first. The second stage focuses on embedding the ‘Get
Refreshed’ elements into the culture and bring day in day
out consistency, while the third focuses more on evolving
the format.
The ‘Get Refreshed’ strategy is designed to contemporise the
Sizzler brand and re-engage with our guests.
Key elements of ‘Get Refreshed’ include:
–
–
–
–
creating a fresh/contemporary look and feel in
the restaurants;
elevating both the food and presentation of food on the
Salad Bar creating a fresher more appealing experience;
elevating service and hospitality delivering a warm,
engaging, fun and relaxed experience;
creating a modern and integrated eating environment
within the restaurant; and
– new brand communication to reflect its repositioning.
In relation to its Asian operations, Sizzler’s strategy is to
continue to expand the number of franchised site locations
at an expected rate of five to seven per year.
Snag Stand
Our joint venture investment in the start-up company Snag
Stand, is a small investment in an innovative concept and
provides an opportunity to invest in the fast casual dining
sector. The Snag Stand Group has been focused upon
improving operational efficiencies and costs in existing
outlets. The business operating plan is being further
developed with focus on achieving business operating
objectives in new store development, marketing, menu
development, overhauling and improving all operations
systems, training, simplifying and streamlining supply chain,
information technology and human resources in the next
financial year.
Material risks
The material risks faced by the Group that have the potential
to have an effect on the financial prospects of the Group,
disclosed above, and how the Group manages these
risks, include:
16
–
–
reduction in consumer demand – given our reliance
on consumer discretionary spending, adverse changes to
the general economic landscape in Australia or consumer
sentiment for our products could impact our financial
results. We address this risk through keeping abreast of
economic and consumer data/research, innovative product
development, broadening of the menu offering (i.e. to
include grilled product offerings) and brand building;
supply chain disruption – disruption to the supply chain
could impact on our ability to operate restaurants. We
address this risk through use of multiple suppliers where
possible with a diverse geographic base with multiple
distribution routes;
–
– negative change to relationship with Yum! – given
our obligations to Yum! through our Master Franchise
Agreement and Facilities Action Deed, a negative change
in the relationship could impact significantly our ability to
open planned new stores, reduce the cost of new store
builds and refurbishments and implement other growth
and operational changes. We address this risk through
maintaining a close working relationship with Yum!, having
our team members sit on relevant KFC advisory groups and
committees and monitoring compliance with obligations;
safety – given we employ people to run and operate
restaurants providing food products to the public, a health
or safety incident in our operations or health incident of
a supplier or involving the input products we use could
impact our financial results. We address this risk through
robust internal food safety and sanitation practices and
occupational health and safety practices, audit programs,
customer complaint processes, supplier partner selection
protocols and communication policy and protocols;
failure of growth drivers – given that a number of
growth drivers continue to be at development stage,
failure of these drivers to produce expected results could
impact our financial results. We address this risk through
having an experienced management team, robust project
management processes involving trials and staged rollouts
and regular strategic reviews; and
–
– margin risk – given the highly competitive environment of
the industry and high reliance on labour, produce, food and
energy inputs, increases in the costs of these inputs could
impact our financial results. We address this risk through
brand building initiatives, keeping abreast of legislative
changes, maintaining long term supplier relationships,
group supply arrangements with Yum!, productivity and
service flow initiatives, flexibility of operations and open
communications with labour unions.
Collins Foods Limited Annual Report 2014 Dividends
Dividends paid to members during the financial period were as follows:
Final ordinary dividend for the financial period
ended 28 April 2013
Interim ordinary dividend for the financial period
ended 13 October 2013
Total
Cents
per share
Total amount
$000
Franked/
Unfranked
Date of payment
5.5
4.5
10.0
5,115
Franked
19 July 2013
4,185
9,300
Franked
20 December 2013
In addition to the above dividends, since the end of the financial period, the Directors of the Company have declared the
payment of a fully franked final dividend of 6.0 cents per ordinary share ($5.6 million) to be paid on 18 July 2014 (refer to Note
22 of the Financial Report).
Significant changes in the state of affairs
In the opinion of the Directors, the acquisition of Collins Restaurants West Pty Ltd represents a significant change in the state
of affairs of the Group. There were no other significant changes in the state of affairs of the Group that occurred during the
financial period under review.
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.
Additional comments on expected results of operations of the Group are included in the review of operations section of
this Report.
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.
17
Collins Foods Limited Annual Report 2014 Directors’
Report
Information on Directors
Director
Experience, qualifications and directorships
Russell Tate
B. Com (Econ.)
Kevin Perkins
Bronwyn Morris
B. Com, FCA, FAICD
Councillor –
Queensland division
of the Australian
Institute of
Company Directors
18
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. Russell has been the Chairman of Central Coast (Gosford) Stadium
since 2002 and One Big Switch Pty Ltd since 2012. He was also a director of
Waratahs Rugby Limited from 2009 to 2011.
Other listed entity Directorships – current or held within last
three years
– Macquarie Radio Network Limited (Chairman, since 2009)
STW Communications Group Limited (1994 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 30 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.
Kevin is the non-executive Chairman of Sizzler USA Acquisition, Inc. He holds
approximately 55% of the common stock in Sizzler USA Acquisition, Inc.
Sizzler USA Acquisition, Inc operates or franchises Sizzler restaurants across
the United States and Puerto Rico. The operations of Collins Foods and Sizzler
USA Acquisition, Inc are separate.
Other listed entity Directorships – current or held within last
three years
– None other than Collins Foods Limited
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 over 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,
Spotless Group Limited, QIC Limited, Gold Coast 2018 Commonwealth
Games Bid 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.
Bronwyn is a director of Royal Automobile Club of Queensland Limited (since
2008), RACQ Insurance Limited (since 2014), Queensland Local Government
Superannuation Board (LG Super) (since 2013), Fyfe Group Holdings Pty Ltd
(since 2013), Care Australia (since 2007) and Children’s Health Foundation
Queensland (since 2011).
Other listed entity Directorships – current or held within last
three years
–
Spotless Group Limited (2007 to 2012)
Special responsibilities
Independent
non-executive Chair
Audit and Risk
Committee Member
Remuneration and
Nomination Committee
Member
Managing Director/CEO
Remuneration and
Nomination Committee
Member
Independent
non-executive Director
Audit and Risk
Committee Chair
Remuneration and
Nomination Committee
Member
Collins Foods Limited Annual Report 2014 Director
Newman Manion
Stephen Copulos
Experience, qualifications and directorships
Newman has had over 30 years’ experience in the food franchise industry,
including various roles with Yum! (Franchisor of KFC) since 1982. 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).
Most recently Newman was Vice-President, Operations for Yum!’s Asian
franchise business (from 2004 until 2010). Newman has also been appointed
as a Director of each of the Snag Stand group entities.
Other listed entity Directorships – current or held within last
three years
– None other than Collins Foods Limited
Stephen is the Managing Director of The Copulos Group, a major shareholder
of Collins Foods. He is also the Chairman of QSR Pty Ltd, which is a major
KFC franchisee in New South Wales, and Chairman of ASX listed Crusader
Resources Ltd. Stephen has over 30 years’ of experience in a variety
of businesses and investments, in a wide range of industries including fast
food, hospitality, manufacturing, mining and property development.
Stephen has over 15 years’ of experience as a director of both listed and
unlisted companies, as well as currently serving as a founding board member
of a philanthropic organisation the Shepparton Art Museum Foundation Ltd.
Other listed entity Directorships – current or held within last
three years
– Crusader Resources Limited (Chairman, since 2013)
Special responsibilities
Independent
non-executive Director
Audit and Risk
Committee Member
Remuneration and
Nomination Committee
Chair
Non-executive Director
Audit and Risk
Committee Member
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
Stephen Copulos
Ordinary
shares
Performance
rights
20,001
–
7,340,833
103,859
20,001
5,001
12,000,000
–
–
–
Company Secretary
Frances Finucan LLB (Hons), BA (Modern Asian Studies), Grad Dip ACG, AGIA
The Company Secretary is Frances Finucan who was appointed to the role on 17 July 2013. Frances has over 12 years’ experience
in legal, commercial and corporate governance working in legal, regulatory and company secretarial roles in Australia.
Rebecca Wiley also held the position of Company Secretary during the financial period being appointed on 29 June 2012 and
resigning from the position on 17 July 2013.
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the period ended
27 April 2014, 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
Russell Tate
Kevin Perkins
Newman Manion
Bronwyn Morris
Stephen Copulos
12
12
12
12
12
12
12
11
11
11
5
*
5
5
5
5
*
5
5
5
4
4
4
4
*
1
*
Number of meetings represents the number of meetings held during the time the Director held office or membership of a Committee during the period.
Not a member of the relevant Committee.
4
4
4
4
*
19
Collins Foods Limited Annual Report 2014 Directors’
Report
Remuneration Report
This Remuneration Report sets out remuneration information for the Group’s non-executive Directors, executive Directors
and other Key Management Personnel 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.
At its 2013 Annual General Meeting, shareholders approved the introduction of the Collins Foods Limited Executive and
Employee Incentive Plan (LTIP).
This report contains the following sections:
A.
B.
Key Management Personnel disclosed in this report.
Remuneration governance.
C. Most recent AGM – Remuneration Report comments and voting.
D. Non-executive Director remuneration.
E.
F.
Executive remuneration principles and strategy.
Remuneration structure and performance/shareholder wealth creation.
G. Details of Key Management Personnel remuneration.
H.
Key Management Personnel service agreements.
I.
Details of Share based compensation.
A. 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 the Group, including any Director of the Group.
KMP of the Group for the financial period are as follows:
Name
Position
Russell Tate
Newman Manion
Bronwyn Morris
Stephen Copulos
Kevin Perkins
Graham Maxwell
Martin Clarke
Phillip Coleman
John Hands
Simon Perkins
Independent, Non-executive Director
Independent, Non-executive Director
Independent, Non-executive Director
Non-executive Director
Executive Director
Chief Operating Officer and Group Chief Financial Officer
Chief Executive Officer – KFC
Chief Executive Officer – Sizzler (from 30 April 2012 to 16 February 2014)
Chief Supply and Information Officer
Chief Financial Officer – Global (until 29 June 2012)
Details and disclosures relating to KMPs who held office in the prior financial period have been included in this report
as required.
20
Collins Foods Limited Annual Report 2014 B. Remuneration governance
The Board has charged its Remuneration and Nomination Committee with responsibility for reviewing and monitoring key
remuneration policies and practices of the Group and making recommendations to the Board.
More specifically, the Committee is responsible for making recommendations to the Board on:
–
–
–
–
the Group’s remunerations principles, framework and policy for senior executives and Directors;
remuneration levels of senior management executives and executive Directors;
the operation of incentives plans and other employee benefit programs which apply to senior executives; 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.
In carrying out its responsibilities, the Committee is authorised to obtain external professional advice as it determines necessary.
C. Most recent AGM – Remuneration Report comments and voting
At the most recent Annual General Meeting in 2013, no comments were made on the Remuneration Report with 97.17% of
votes cast at the meeting in favour of the adoption of the Remuneration Report.
D. Non-executive Director remuneration
The remuneration for non-executive Directors is set, taking into consideration factors including:
the level of fees paid to Board members of other publicly listed Australian companies of similar size;
–
– operational and regulatory complexity; and
–
the responsibilities and workload requirements of each Board member.
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.
An additional payment of $14,671 was made to Newman Manion in recognition of additional responsibilities performed in
relation for his oversight of the Group’s investment in the Snag Stand group entities. This additional payment made to Newman
Manion is not in relation to his role as a Director of the Company and as such, are not additional Director’s fees.
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 Note 26 to the financial statements.
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. There were no changes made during the year in relation
to non-executive Directors’ fees.
The following annual fees (excluding superannuation) have applied.
Position
Base fees
Chair (including all Committee memberships)
Other non-executive Directors
Additional fees
Audit and Risk Committee, Chair
Audit and Risk Committee, Member
Remuneration and Nomination Committee, Chair
Remuneration and Nomination Committee, Member
Period ended
27 April 2014
$180,000
$85,000
$15,000
$5,000
$10,000
$5,000
21
Collins Foods Limited Annual Report 2014 Directors’
Report
Remuneration Report (continued)
E. Executive remuneration principles and strategy
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 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.
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.
The executive remuneration framework components and their links to performance outcomes are outlined below:
Remuneration component
Vehicle
Purpose
Link to performance
Fixed Remuneration
Base pay and
benefits including
superannuation
Short Term Incentive
Plan (STIP)
Cash bonus payment
Long Term Incentive
Plan (LTIP) (approved
by shareholders at
the 2013 Annual
General Meeting)
Awards in the form of
performance rights
To provide competitive fixed
remuneration set with reference
to position and responsibilities in
the context of the market
Rewards executives for their
contribution to the achievement
of Group and/or divisional
outcomes
Rewards executives for their
contribution to the creation
of shareholder value over the
longer term
Group and individual performance
assessments are considered in
annual remuneration review
EBITDA targets must be met in
order for bonus to be paid
Earnings per share (EPS) targets
over three year period must be met
in order for rights to vest
The Group’s aim is to reward executives with an appropriate level and mix of remuneration to attract, retain and motivate them
to build long term value for the Group and its shareholders.
The introduction of the LTIP has changed the remuneration mix for KMP, increasing the proportion of an executive’s target pay
which is at risk.
22
Collins Foods Limited Annual Report 2014 The following diagrams show the anticipated range of remuneration mix for the current KMP by year three of the LTIP (assuming
annual grants under the LTIP). The effect of the introduction of the LTIP is that an increasing percentage of the executive’s
remuneration is ‘at risk’ and directly linked to Group performance in both the short and longer term.
CEO
59% Fixed
Other KMP executives
60% Fixed
39% STI
28% STI
2% LTI
11% LTI
Fixed remuneration
Fixed remuneration consists of base salary, superannuation contributions and other benefits. Other benefits include non-cash
benefits such as employee health insurance costs paid by the Group and car and other allowances. The Group pays fringe
benefits tax on these benefits where required.
Fixed remuneration for executives is reviewed annually and on promotion and is benchmarked against market data for
comparable roles in the market. There is no guaranteed increase to base pay included in any executive’s contract.
Variable remuneration
Short term incentives
Incentives under the Group’s STIP are at risk components of remuneration for executives provided in the form of cash.
The STIP entitles executives to earn an annual cash reward payment 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 STI opportunity percentage is 70% of base salary. For other executive KMPs, the
average target STI opportunity percentage is approximately 50% of base salary.
For the period covered by this report, the primary key performance indicator common to all participants was EBITDA. The
benchmark EBITDA level at which the target STI opportunity would become payable was 101% of the annual Group budgeted
EBITDA (prior to allowing for any payments under the STIP). A proportion of target incentives would become payable on
a sliding scale for achievement above a minimum EBITDA level up to a maximum EBITDA level. At the minimum EBITDA
level of 101% of the annual Group Budgeted EBITDA, 15% of target STI opportunity would be payable. At the maximum
EBITDA level of 110% of the annual Group Budgeted EBITDA, 150% of target STI opportunity would be payable.
For the Managing Director/CEO, the EBITDA benchmarks were set with reference to the annual Group Budgeted EBITDA for
the year ended 27 April 2014. The CEO EBITDA benchmarks were at higher levels than the benchmarks applying to other
KMP executives.
The Group’s financial performance for the financial period ended 27 April 2014 resulted in one KMP being eligible for
a STIP payment, refer details of KMP remuneration below.
Incentive levels and performance targets are reviewed and determined annually by the Board on the advice of the Remuneration
and Nomination Committee.
23
Collins Foods Limited Annual Report 2014 Directors’
Report
Remuneration Report (continued)
Long term incentives
At the Company’s 2013 Annual General Meeting, shareholders approved the introduction of the LTIP. A summary of the LTIP
approved by shareholders appears below.
LTIP summary
Why was the LTIP
introduced?
Who participates in
the LTIP?
What form are the
LTIP awards?
To ensure the Group’s remuneration framework is aligned with both the Group’s business strategy
and the long term interests of shareholders.
The initial participants in the plan are KMP executives and other select senior executives.
Awards will be granted in the form of performance rights, which comprise rights to acquire
ordinary shares in the Company for nil consideration, subject to achievement of predetermined
vesting conditions.
What quantum of awards
will participants receive
under the LTIP?
A guiding principle for the initial grant is for awards to generally equate to 30% to 40% of a
participant’s target STI opportunity, with the exception of the initial grant to Graham Maxwell.
Under his contract of employment, Graham Maxwell was awarded an initial issue equivalent to
1.5 times his base salary.
When are the grants
made?
Performance rights are granted annually at the sole discretion of the Board, with grants of awards
made as soon as practicable following the Company’s AGM.
When do the
performance rights vest?
How is EPS measured?
What EPS targets are
required for vesting of
performance rights?
What happens if the
performance rights
do not vest?
LTIP performance rights vest three years following the date of grant, subject to achievement of
EPS targets. For the initial grant, performance will be tested following determination of the basic
EPS for the financial period ending 1 May 2016, compared to the basic EPS for the financial period
ended 28 April 2013.
EPS will be measured on an absolute basis, calculating the compound growth in the Company’s
basic EPS attributable to ordinary equity holders of the Company over the performance period,
with reference to the disclosed EPS in the Company’s annual audited financial reports. The Board
retains a discretion to adjust the EPS performance condition to ensure that participants are not
penalised nor provided with a windfall benefit arising from matters outside of management’s
control that affect EPS (for example, excluding one-off non-recurrent items or the impact of
significant acquisitions or disposals).
Performance rights will vest on a proportionate basis ranging from 20% to 100% of rights granted
for achievement of a minimum EPS target up to a maximum EPS target. For the first grant of
awards, the minimum EPS target is 6% compound annual growth rate (CAGR) and the maximum
EPS target is 10% CAGR.
To the extent that performance hurdles are not met at the end of the three year performance
period, performance will not be re-tested and the rights will lapse.
The Remuneration and Nomination Committee considered alternative performance measures, including market based measures,
but after consideration of a variety of factors including the Group’s business objectives, the fact the Group is not a capital
intensive business and the lack of a meaningful comparator group, determined that EPS was an appropriate measure. EPS aligns
with the Group’s business objectives and shareholder interests, is straightforward, simple to communicate and a commonly used
measure by other ASX listed companies.
In relation to the setting of performance target levels, the Remuneration and Nomination Committee took into account the
current structure and operation of the STIP under which target performance levels are set at stretch levels.
24
Collins Foods Limited Annual Report 2014 F. Remuneration structure and performance/shareholder wealth creation
The Group’s annual financial performance and indicators of shareholder wealth for the current financial period are listed below.
EBITDA ($m)1
NPAT ($m)1
Dividends paid/payable in relation to financial period (cents per share)2
EPS basic (cents)1
EPS basic (cents) – compound growth3
Change in share price ($)
Short term incentive payments as % of target payments
2013/14
2012/13
49.0
17.9
10.5
19.2
9.3%
0.13
8%
47.2
16.4
9.5
17.6
0.74
0%
1
2
3
Represents underlying measures after adjustment for the KFC WA/NT acquisition and other significant items disclosed in the Group financial performance above.
Dividends paid/payable is inclusive of dividends declared since the end of the relevant reporting period.
EPS compound growth is calculated using 2013 as a base.
Both the STIP and LTIP are subject to achievement of pre-determined performance measures linked to the above
financial metrics.
G. Details of Key Management Personnel remuneration
Details of remuneration received by the Directors and other KMP of the Group for the current financial period are set out
in the following table.
Short term
employee benefits
Post-
employment
benefits
Long term
benefits
Cash salary
and fees
$
Cash
bonus
Non-monetary
benefits
$
Other2
$
Super-
annuation
$
Long service
leave
$
Performance
rights
Total
$
–
–
–
–
–
–
14,671
–
–
14,671
–
–
9,672
–
9,672
–
–
–
–
–
–
–
–
–
–
180,000
114,671
114,672
90,000
499,343
33,572
16,868
21,297
11,568
8,771
58,504
92,076
–
–
–
–
–
–
68,787
12,446
31,212
874,540
36,835
27,178
23,682
14,405
102,100
6,665
7,955
6,505
3,624
24,749
37,195
107,012
10,701
7,134
–
601,410
385,631
300,297
202,370
124,847
1,489,708
156,059
2,863,591
1,096,910
2,300,433
82,598
82,598
14,671
180,559
Resigned with effect from 16 February 2014.
1
2 Other short term employee benefits relate to consulting fees paid in relation to oversight of the Group’s investment in the Snag Stand group entities.
3
Remuneration is paid to a corporate entity under a Consulting Agreement with the Company for the provision of his services as a non-executive Director.
25
2014
Name
Non-executive
directors
Russell Tate3
Newman Manion3
Bronwyn Morris
Stephen Copulos3
Other
executive KMP
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman1
Total Group
Executive
director
Kevin Perkins
728,523
180,000
100,000
105,000
90,000
475,000
434,030
235,902
251,408
175,570
–
–
–
–
–
–
–
82,598
–
–
Collins Foods Limited Annual Report 2014 Directors’
Report
Remuneration Report (continued)
Details of remuneration received by the Directors and other KMP of the Group for the previous financial period are set out in the
following table.
Short term
employee benefits
Cash salary
and fees
$
Non-monetary
benefits
$
Post-
employment
benefits
Super-
annuation
$
Long term
benefits
Long service
leave
$
Other4
$
2013
Name
Non-executive
directors
Russell Tate
Newman Manion
Bronwyn Morris
Stephen Copulos1
Executive director
Kevin Perkins
Other executive KMP
Graham Maxwell2
Martin Clarke
John Hands
Phillip Coleman
Simon Perkins3
180,000
95,961
105,000
3,808
384,769
–
–
–
–
–
700,411
34,151
70,562
217,356
262,097
216,518
77,891
844,424
6,783
9,580
5,979
9,573
1,657
33,572
67,723
–
–
–
–
–
–
32,914
–
–
–
–
32,914
32,914
Total
$
196,200
104,598
114,450
3,808
419,056
16,200
8,637
9,450
–
34,287
–
–
–
–
–
67,208
11,967
813,737
8,501
18,180
22,248
17,100
6,106
72,135
173,630
1,026
6,136
5,878
14,850
1,131
29,021
40,988
119,786
251,252
296,202
258,041
86,785
1,012,066
2,244,859
Total Group
1,929,604
1
Appointed 12 April 2013. Mr Copulos’ remuneration is paid to a corporate entity under a Consulting Agreement with the Company for the provision of his services as
a non-executive Director.
Appointed 4 March 2013.
For period from 29 April 2012 to 29 June 2012 whilst Simon Perkins was a KMP of the Group.
2
3
4 Other short term employee benefits relate to a sign on payment received on commencement of employment with the Group.
26
Collins Foods Limited Annual Report 2014 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows.
Name
2014
2013
2014
2013
2014
2013
Fixed remuneration
At risk – STI
At risk – LTI1
Executive directors
Kevin Perkins
Other executive KMP
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman2
96%
100%
82%
76%
98%
100%
100%
100%
100%
100%
–
–
21%
–
–
–
–
–
–
–
4%
18%
3%
2%
–
–
–
–
–
–
1
2
Since LTI are provided exclusively by way of performance rights, the percentages disclosed also reflect the value of remuneration consisting of performance rights, based
on the value of performance rights expensed during the reporting period. Where applicable, the expenses include negative amounts for expenses reversed during the
reporting period due to failure to satisfy the vesting conditions.
Resigned with effect from 16 February 2014.
H. Key Management Personnel service agreements
Key details of the service agreements of Kevin Perkins, Managing Director/CEO and Graham Maxwell, COO and Group CFO are
as follows:
–
–
–
contract with an initial term of three years commencing 4 August 2011 and 4 March 2013 respectively;
agreement has effect and executive’s employment under their respective service agreement will continue until terminated in
accordance with the agreement (6 months’ notice is required by either party); and
includes a restraint of trade period of 12 months.
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
Position
Martin Clarke
John Hands
Chief Executive Officer – KFC
Chief Supply and Information Officer
Phillip Coleman
Chief Executive Officer – Sizzler (until 16 February 2014)
Simon Perkins
Chief Financial Officer – Global (until 29 June 2012)
Contract
duration
Ongoing
Ongoing
Expired
Expired
Minimum notice period (months)
Termination
by Executive
Termination
by Group1
1
2
2
3
3
12
12
12
1
Provision is also made for the Group to be able to terminate these agreements on three months’ notice in certain circumstances of serious ill health or incapacity of
the executive.
27
Collins Foods Limited Annual Report 2014 Directors’
Report
Remuneration Report (continued)
I. Details of share based compensation
Performance rights
For each performance right included in the tables on pages 25 and 26, the percentage of the available performance right
that was paid, or that vested, the reporting period, and the percentage that was forfeited because the person did not meet
the service and performance criteria is set out below. The minimum value of the performance rights yet to vest is nil, as
the performance rights will be forfeited if the key management persons fail to satisfy the vesting conditions (see page 24).
The maximum value of the performance rights yet to vest has been determined as the amount of the grant date fair value of
the performance rights that is yet to be expensed.
Current year
LTI entitlement
Name
Awarded
Forfeited
Year
granted
No.
granted
Value
per share
Vested
%
Vested
number
Forfeited
Performance rights
Financial
years in
which rights
may vest
Max value
yet to vest
$
Kevin Perkins
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman1
100%
100%
100%
100%
100%
–
–
–
–
100%
2014
103,859
2014 356,088
2014
2014
2014
35,608
23,739
22,552
$1.50
$1.50
$1.50
$1.50
$1.50
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
2017
2017
2017
2017
–
62,423
214,024
21,402
14,268
–
1
Resigned with effect from 16 February 2014. Minimum continuous employment conditions were not met and accordingly the performance rights granted were cancelled.
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, COO and Group CFO and Company Secretary.
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.
28
Collins Foods Limited Annual Report 2014 Non-audit services
During the period, the Company’s auditor (PricewaterhouseCoopers) 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
Network firms of PricewaterhouseCoopers Australia
Agreed upon procedures in respect of franchisee sales
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review of company tax returns
Tax advice and consulting
Network firms of PricewaterhouseCoopers Australia
Tax compliance services, including review of company tax returns
Total remuneration for taxation services
Transaction services
PricewaterhouseCoopers Australian firm
Transaction compliance services
Total remuneration for transaction services
Total remuneration for non-audit services
2014
$
2013
$
10,300
20,216
–
30,516
25,000
6,000
4,348
35,348
10,300
18,800
9,700
38,800
25,000
11,000
3,654
39,654
–
–
–
–
65,864
78,454
29
Collins Foods Limited Annual Report 2014 Directors’
Report
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 31.
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
PricewaterhouseCoopers 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
Chairman
Brisbane
25 June 2014
30
Collins Foods Limited Annual Report 2014 Auditor’s
Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Collins Foods Limited for the year ended 27 April 2014, I
declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Collins Foods Limited and the entities it controlled during
the period.
Steven Bosiljevac
Partner
PricewaterhouseCoopers
Brisbane
25 June 2014
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
DX 77 Brisbane, Australia
T: +61 7 3257 5000, F: +6
1 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
31
Collins Foods Limited Annual Report 2014 Consolidated
Balance Sheet
As at 27 April 2014
Current assets
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets, net
Deferred tax assets, net
Receivables
Investments accounted for using the equity method
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Derivative financial instruments
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 earnings
Total equity
Note
2014
$000
2013
$000
7
8
9
10
11
12
13
14
15
16
17
18
16
19
20
21
22
36,983
2,812
4,914
44,709
72,518
280,692
19,858
438
2,481
375,987
420,696
51,015
5,045
1,070
4,012
61,142
23,556
3,829
4,406
31,791
59,149
234,506
14,717
30
593
308,995
340,786
39,813
4,157
743
3,750
48,463
164,381
104,710
401
3,400
168,182
229,324
191,372
254
1,864
106,828
155,291
185,495
182,098
182,098
939
8,335
(213)
3,610
191,372
185,495
The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.
32
Collins Foods Limited Annual Report 2014 Consolidated
Income Statement
For the reporting period ended 27 April 2014
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 joint ventures accounted for using the equity method
Profit from continuing operations before income tax
Income tax 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
Note
4
5
4
5
5
14
6
36
36
36
36
2014
$000
2013
$000
440,557
(209,968)
230,589
(92,305)
(36,506)
(43,500)
(29,680)
(2,518)
848
26,928
422
(6,444)
38
20,944
(6,919)
14,025
14,025
423,885
(201,711)
222,174
(89,514)
(33,327)
(42,830)
(25,488)
(2,096)
858
29,777
204
(6,386)
92
23,687
(7,319)
16,368
16,368
15.08cps
15.03cps
17.60cps
17.60cps
93,000,003
93,000,003
93,320,121
93,000,003
The above Consolidated Income Statement should be read in conjunction with the accompanying Notes.
33
Collins Foods Limited Annual Report 2014 Consolidated Statement
of Comprehensive Income
For the reporting period ended 27 April 2014
Note
2014
$000
2013
$000
Net profit attributable to members of Collins Foods Limited
14,025
16,368
Items that may be reclassified to profit or loss
Other comprehensive income/(expense):
Exchange difference upon translation of foreign operations
Cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income/(expense) for the reporting period, net of tax
21
21
6
1,288
(423)
127
992
201
(824)
247
(376)
Total comprehensive income for the reporting period
15,017
15,992
Total comprehensive income for the reporting period is attributable to:
Owners of the parent
15,017
15,992
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
34
Collins Foods Limited Annual Report 2014 Consolidated Statement
of Changes in Equity
For the reporting period ended 27 April 2014
Contributed
Equity
$000
Note
(Accumulated
losses)/retained
earnings
$000
Reserves
$000
Total
Equity
$000
2013
Beginning of the reporting period
182,098
Profit for the reporting period
Other comprehensive expense
Total comprehensive income/(expense) for
the reporting period
Transactions with owners in their capacity as owners:
Dividends provided for or paid
22
End of the reporting period
2014
Beginning of the reporting period
Profit for the reporting period
Other comprehensive income
Total comprehensive income for the reporting period
Transactions with owners in their capacity as owners:
Share-based payments
Dividends provided for or paid
End of the reporting period
22
–
–
–
–
182,098
182,098
–
–
–
–
–
182,098
163
–
(376)
(2,993)
16,368
–
179,268
16,368
(376)
(376)
16,368
15,992
–
(213)
(213)
–
992
992
160
–
939
(9,765)
3,610
(9,765)
185,495
3,610
14,025
–
14,025
–
(9,300)
8,335
185,495
14,025
992
15,017
160
(9,300)
191,372
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
35
Collins Foods Limited Annual Report 2014 Consolidated Statement
of Cash Flows
For the reporting period ended 27 April 2014
Cash flows from operating activities:
Receipts from customers
Payments to suppliers and employees
GST paid
Interest received – external parties
Interest and other borrowing costs paid
Income tax paid
Net operating cash flows
Cash flows from investing activities:
Payment for acquisition of subsidiary, net of cash acquired
Payment for acquisition of share in joint venture
Purchase of franchise rights
Payments for plant and equipment
Payments for acquisition costs
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
Repayment of lending – related parties
Refinance fees paid
Dividends paid
Repurchase of shares
Net financing cash flows
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the reporting period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the reporting period
Non-cash financing and investing activities
Note
2014
$000
2013
$000
483,673
(400,567)
(25,636)
389
(6,081)
(6,928)
44,850
465,598
(388,856)
(26,629)
231
(6,202)
(2,922)
41,220
(55,453)
(1,850)
(1,241)
(20,575)
(2,187)
(81,306)
60,000
–
(400)
–
(496)
(9,300)
–
49,804
13,348
23,556
79
36,983
–
–
–
(90)
(17,918)
–
(18,008)
–
(64)
–
281
–
(9,765)
(9,377)
(18,925)
4,287
19,243
26
23,556
–
31
35
22
7
32
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.
36
Collins Foods Limited Annual Report 2014 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 and was
incorporated on 10 June 2011.
The Group utilises a fifty-two, fifty-three week reporting
period ending on the Sunday nearest to 30 April. The 2014
reporting period comprised the fifty-two weeks which ended
on 27 April 2014 (2013 was a fifty-two week reporting
period which ended on 28 April 2013).
The financial statements have also been prepared under the
historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative instruments)
and available-for-sale financial assets 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 unused credit facilities with its
banking syndicate.
Compliance with IFRS
The Consolidated Financial Statements of the Group
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 23 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. 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.
Joint ventures
Under AASB 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or
joint ventures. The classification depends on the contractual
rights and obligations of each investor, rather than the legal
structure of the joint arrangement. The Group has two joint
ventures. Investments in joint ventures are accounted for
using the equity method of accounting, after initially being
recognised at cost in the Consolidated Balance Sheet.
Under the equity method of accounting, the investments
are initially recognised at cost and adjusted thereafter to
recognise the Group’s share of the post-acquisition profits or
losses of the investee in profit or loss, and the Group’s share
of movements in other comprehensive income of the investee
in other comprehensive income. Dividends received or
receivable from joint ventures are recognised as a reduction in
the carrying amount of the investment.
When the Group’s share of losses in an equity accounted
investment equals or exceeds its interest in the entity,
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 other entity.
Unrealised gains on transactions between the Group and
its joint ventures are eliminated to the extent of the Group’s
interest in the entities. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of
the asset transferred. Accounting policies of equity accounted
investees have been changed where necessary to ensure
consistency with the policies adopted by the Group.
37
Collins Foods Limited Annual Report 2014 Note 1: Statement of significant
accounting policies (continued)
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 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 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.
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.
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.
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.
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.
38
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements The results and financial position of foreign operations
(none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the
presentation currency are translated into the presentation
currency as follows:
–
–
–
assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
income and expenses for each income statement and
statement of comprehensive income are translated at
average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the
transactions); and
all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or
any borrowings forming part of the net investment are repaid,
the associated exchange differences are reclassified to profit
or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
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 incentives. 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 and incentive provisions that are
expected to be settled wholly within twelve months after the
end of the reporting period 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, annual leave and incentive provisions that are
not expected to be settled wholly within twelve months after
the end of the reporting period 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.
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 (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, 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.
39
Collins Foods Limited Annual Report 2014 Note 1: Statement of significant
accounting policies (continued)
Derivatives (continued)
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.
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 transaction 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 is 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.
40
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
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.
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements 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.
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 licences which provide a
benefit for more than one reporting period are deferred
and amortised over the remaining term of the franchise
licence. 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.
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.
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
in the Consolidated Income Statement 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:
Method
Life
Buildings
Straight line 20 years
Leasehold improvements Straight line
Primary term of lease
Plant and equipment
Straight line 8 years
Software
Straight line 3 years
Leasehold improvements are depreciated over the unexpired
period of the primary lease or the estimated life of the
improvement, whichever is the shorter.
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 reporting period of disposal.
41
Collins Foods Limited Annual Report 2014 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.
Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST) except:
– 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
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 15).
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
Share-based compensation benefits are provided to certain
employees via the Collins Foods Limited Executive and
Employee Long Term Incentive Plan. Information relating to
this plan is set out in Note 27.
The fair value of performance rights granted under the
Collins Foods Limited Executive and Employee Long Term
Incentive Plan is recognised as an employee benefit expense
with a corresponding increase in equity. The total amount to
be expensed is determined by reference to the fair value of
the performance rights granted, which includes any market
performance conditions and the impact of any non-vesting
conditions but excludes the impact of any service and
non-market performance vesting conditions.
Note 1: Statement of significant
accounting policies (continued)
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 13) in the
Consolidated Balance Sheet.
Available-for-sale financial assets 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.
42
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Non-market vesting conditions are included in assumptions
about the number of performance rights that are expected
to vest. The total expense is recognised over the vesting
period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each
period, the entity revises its estimates of the number of
performance rights that are expected to vest based on the
non-market vesting conditions. It recognises the impact of the
revision to original estimates, if any, in profit and loss, with a
corresponding adjustment to equity.
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 coordinated 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.
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.
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.
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 reporting 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.
Rounding of amounts
The Company is of a kind referred to in Class Order
98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’ of amounts in
the financial report. Amounts in the financial report have
been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, the
nearest dollar.
New and amended standards adopted by the Group
The Group applied the following standards and amendments
for first time for their annual reporting period commencing
29 April 2013:
– AASB 10 Consolidated Financial Statements;
– AASB 11 Joint Arrangements;
– AASB 12 Disclosure of Interests in Other Entities;
– AASB 13 Fair Value Measurement and AASB 2011-8
Amendments to Australian Accounting Standards arising
from AASB 13; and
– AASB 119 Employee Benefits (September 2011) and AASB
2011-10 Amendments to Australian Accounting Standards
arising from AASB 119 (September 2011).
43
Collins Foods Limited Annual Report 2014 Application date
of standard
Application date
for the Group
1 July 2013
28 April 2014
1 July 2014
4 May 2015
1 July 2014
4 May 2015
1 July 2014
4 May 2015
1 July 2014
4 May 2015
1 January 2015
4 May 2015
Note 1: Statement of significant accounting policies (continued)
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 27 April 2014, are as follows:
Disclosures – Offsetting Financial Assets and Financial Liabilities
1 July 2013
28 April 2014
AASB amendment
Affected standards
AASB 2011-4
AASB 2012-2
AASB 2012-3
AASB 136
AASB 2011-4 Amendments to Australian Accounting
Standards to Remove Individual Key Management Personnel
Disclosure Requirements
Offsetting Financial Assets and Financial Liabilities
Impairment of Assets
Annual improvements
project –
2010 – 2012 cycle
AASB 2 Share-based payment, AASB 3 Business combinations,
AASB 8 Operating segments, AASB 13 Fair value measurement,
AASB 116 + 138 Property plant and equipment + intangible assets
and AASB 124 Related party disclosures
Annual improvements
project –
2011 – 2013 cycle
AASB 1 Presentation of financial statements, AASB 3 Business
combinations, AASB 13 Fair value measurement and AASB 140
Investment property
AASB 2009-11 AASB
2010-7 AASB 2012-6
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) and AASB 2012-6
Amendments to Australian Accounting Standards –
Mandatory Effective Date of AASB 9 and Transition Disclosures
44
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements
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:
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.
Review for impairment triggers of the 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 Note 11).
Note 3: Segment information
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 four reportable segments: KFC Restaurants
Queensland/New South Wales, KFC Restaurants Western Australia/Northern Territory (both 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.
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:
KFC
Restaurants
QLD/NSW
$000
KFC
Restaurants
WA/NT
$000
Sizzler
Restaurants
$000
Shared
Services
$000
All other
segments
$000
Total
$000
2014
Total segment revenue
Adjusted EBITDA1
Depreciation, amortisation and impairment
Finance costs – net2
Income tax expense
2013
Total segment revenue
Adjusted EBITDA1
Depreciation, amortisation and impairment
Finance costs – net2
Income tax expense
329,343
15,408
95,806
50,166
12,804
–
1,523
437
(1)
7,801
5,845
(1)
318,245
44,700
11,419
–
–
–
–
–
105,640
10,090
4,186
(1)
–
(9,473)
1,610
6,031
–
(8,062)
1,836
6,188
–
507
13
(7)
–
494
4
(5)
440,557
50,524
20,709
6,022
6,919
423,885
47,222
17,445
6,182
7,319
1
2
Refer below for a description and reconciliation of Adjusted EBITDA.
Refer Note 5 for a detailed breakdown.
45
Collins Foods Limited Annual Report 2014 Note 3: Segment information (continued)
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.
KFC
Restaurants
QLD/NSW
$000
KFC
Restaurants
WA/NT
$000
Sizzler
Restaurants
$000
Shared
Services
$000
All other
segments
$000
Total
$000
2014
Assets
Inter-segment eliminations
Liabilities
Inter-segment eliminations
2013
Assets
Inter-segment eliminations
Liabilities
Inter-segment eliminations
393,459
(145,368)
63,962
–
248,091
63,962
4,790
–
4,790
8,073
(3,713)
4,360
384,208
(143,572)
240,636
4,729
–
4,729
–
–
–
–
–
–
73,263
(14,681)
58,582
1,322
45,686
375,417
–
(156,569)
1,322
218,848
45,686
4,608
580,978
–
(233)
(160,282)
4,375
4
–
4
420,696
389,606
(160,282)
229,324
72,010
(11,480)
60,530
35,006
4,614
495,838
–
–
(155,052)
35,006
4,614
1,755
303,499
(111)
(154,487)
1,644
149,012
360
(454)
(94)
340,786
310,343
(155,052)
155,291
Other segment information
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.
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 costs associated with the acquisition of Collins Restaurants West Pty Ltd and the investment in
the Snag Stand Group. Impairment of property, plant, equipment and franchise rights are also excluded to the extent they are
isolated non-recurring events relating to individual restaurants. Net finance costs (including the impact of derivative financial
instruments) are not allocated to segments as financing activities are driven by the central treasury function, which manages the
cash position of the Group.
46
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements A reconciliation of adjusted EBITDA to profit from continuing operations before income tax is provided as follows:
Adjusted EBITDA
Finance costs – net
Long term incentive provision
Performance rights
Costs of acquisitions expensed
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of KFC franchise rights
Share of net profit of joint ventures accounted for using the equity method
2014
$000
50,524
(6,022)
(474)
(160)
(2,253)
(16,924)
(1,682)
(2,103)
–
38
2013
$000
47,222
(6,182)
–
–
–
(15,672)
(1,572)
(162)
(39)
92
Profit from continuing operations before income tax
20,944
23,687
Note 4: Revenue and other income
Revenue from continuing operations
Sales revenue:
Sale of goods
Other revenue:
Franchise revenue from external parties
Total revenue
Other income
Traineeship income
Other
Total other income
Note 5: Expenses
Operating lease rentals
Minimum lease payments
Contingent rentals
Total rent expense relating to operating leases
Inventory write-downs
Costs of acquisitions expensed1
Long term incentive provision
Performance rights
Other expenses
Net loss on disposal of property, plant and equipment
Bank transaction fees
Other miscellaneous expenses
2014
$000
2013
$000
437,808
421,385
2,749
2,500
440,557
423,885
329
519
848
2014
$000
23,006
1,429
24,435
103
2,253
474
160
130
1,198
1,190
2,518
332
526
858
2013
$000
21,485
1,634
23,119
55
–
–
–
209
842
1,045
2,096
1
These items of expenditures were incurred as part of the acquisition of Collins Restaurants West Pty Ltd and the investment in the Snag Stand Group. They include stamp
duty, legal costs and other costs directly attributable to these transactions.
47
Collins Foods Limited Annual Report 2014 Note 6: Income tax
Income tax expense/(benefit)
Current tax
Deferred tax
Under provided in prior reporting periods
Income tax expense is attributable to:
Profit from continuing operations
Aggregate income tax expense
Deferred income tax expense/(benefit) included in income tax expense comprises:
(Increase)/decrease in deferred tax assets (Note 12)
Increase/(decrease) in deferred tax liabilities (Note 12)
2014
$000
7,578
(687)
28
6,919
6,919
6,919
(977)
290
(687)
2013
$000
7,042
271
6
7,319
7,319
7,319
612
(341)
271
Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30%
20,944
6,283
23,687
7,106
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-deductible entertainment
Other non-deductible expenses
Withholding tax credits not brought to account
Non-assessable income received
Amounts under provided in prior reporting periods
Income tax expense
Tax expense/(income) relating to items of other comprehensive income
Cash flow hedges (Note 12)
Tax losses
9
663
424
(488)
6,891
28
6,919
(127)
(127)
11
251
387
(442)
7,313
6
7,319
(247)
(247)
Unused capital tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
All unused tax losses were incurred by Australian entities.
61,276
18,383
61,276
18,383
48
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Tax consolidation
The Company and its wholly-owned Australian controlled entities implemented the tax consolidation legislation on
23 June 2011. Additional controlled entities were added to the tax consolidated group on 4 August 2011 upon them becoming
wholly-owned Australian controlled entities (Tax Consolidated Group). On 7 March 2014, following the acquisition of Collins
Restaurants West Pty Ltd further controlled entities were added to the 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 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 Tax
Consolidated Group in the case of a default by the Company.
The entities in the Tax Consolidated Group have also entered into a 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 amounts receivable/payable under the 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 Company may also require payment
of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current
intercompany 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 2.4% (2013: 2.8%).
Note 8: Current assets – receivables
Trade receivables
Interest receivable
Prepayments
2014
$000
36,983
36,983
2014
$000
648
32
2,132
2,812
2013
$000
23,556
23,556
2013
$000
2,002
–
1,827
3,829
Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in the
non-current receivables note (Note 13).
Note 9: Current assets – inventories
Raw materials and stores, at cost
Provision for diminution in value
2014
$000
4,922
(8)
4,914
2013
$000
4,416
(10)
4,406
Inventories recognised as an expense during the reporting period ended 27 April 2014 amounted to $145,108,000
(2013: $139,698,000).
49
Collins Foods Limited Annual Report 2014 Note 10: Non-current assets – property, plant and equipment
2014
$000
2013
$000
Freehold land
Cost
Opening balance
Additions
Transfers from construction in progress
Closing balance
Buildings
Cost
Opening balance
Additions
Transfers from construction in progress
Closing balance
Accumulated depreciation
Opening balance
Depreciation
Closing balance
Net book value
Leasehold improvements
Cost
Opening balance
Acquisition through controlled entity purchased
Additions
Transfers from construction in progress
Disposals
Closing balance
Accumulated depreciation and impairment
Opening balance
Depreciation
Impairment charge
Disposals
Closing balance
Net book value
50
4,905
–
–
4,905
1,845
27
–
1,872
(676)
(88)
(764)
1,108
78,123
5,414
1,515
10,613
(1,163)
94,502
(51,228)
(8,877)
(1,373)
1,125
(60,353)
34,149
3,534
1,299
72
4,905
1,573
261
11
1,845
(603)
(73)
(676)
1,169
71,353
–
2,362
5,396
(988)
78,123
(43,671)
(8,363)
(96)
902
(51,228)
26,895
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Plant and equipment
Cost
Opening balance
Acquisition through controlled entity purchased
Additions
Transfers from construction in progress
Disposals
Closing balance
Accumulated depreciation and impairment
Opening balance
Depreciation
Impairment charge
Disposals
Closing balance
Net book value
Construction in progress
Cost
Opening balance
Acquisition through controlled entity purchased
Additions
Transfers to leasehold improvements and plant and equipment
Disposals
Closing balance
Total property, plant and equipment, net
2014
$000
2013
$000
60,596
4,935
4,427
4,683
(2,425)
72,216
(38,115)
(7,959)
(730)
2,353
(44,451)
27,765
3,699
4
16,204
(15,296)
(20)
4,591
72,518
56,295
–
3,529
2,255
(1,483)
60,596
(32,203)
(7,236)
(66)
1,390
(38,115)
22,481
1,271
–
10,192
(7,734)
(30)
3,699
59,149
51
Collins Foods Limited Annual Report 2014 2014
$000
2013
$000
211,580
45,199
97
256,876
256,876
211,565
–
15
211,580
211,580
5,322
98
1,241
6,661
(909)
(419)
–
(1,328)
5,333
11,261
11,261
(4,157)
(563)
(4,720)
6,541
5,232
–
90
5,322
(485)
(385)
(39)
(909)
4,413
11,261
11,261
(3,594)
(563)
(4,157)
7,104
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
Purchase of controlled entities
Additions
Closing balance
Accumulated amortisation and impairment
Opening balance
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
52
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Sizzler brand – Asia
Cost
Opening balance
Foreign currency translation
Closing balance
Accumulated amortisation
Opening balance
Foreign currency translation
Amortisation
Closing balance
Net book value
Total intangible assets, net
Impairment test for indefinite life intangibles
Allocation of Goodwill
Segment
2014
$000
2013
$000
2014
$000
Carrying value
183,529
183,529
45,199
2013
$000
–
KFC Restaurants
QLD/NSW
KFC Restaurants
WA/NT
2014
$000
2013
$000
12,519
1,346
13,865
(1,110)
(113)
(700)
(1,923)
11,942
12,315
204
12,519
(476)
(10)
(624)
(1,110)
11,409
280,692
234,506
Sizzler
Restaurants
2013
$000
2014
$000
28,148
28,051
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 the KFC cash generating units, there are no reasonable and likely changes in assumptions which
would result in an impairment.
Key assumptions used for value-in-use calculations
KFC Restaurants
The cash flows by restaurant have been estimated after applying growth rates from the commencement of 2015 through to the
end of the 2019 reporting period which average 2.9%. The year one projections have been aligned to the division’s specific cash
flows reflected in the 2015 budget.
Management believe that these growth percentages are reasonable considering the growth that has been seen in this operating
segment during the 2014 and prior reporting periods. A pre-tax discount rate of 12.0% 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 2.75% has been used in determining the terminal value, which does not exceed the long term average
growth rate for the industry segment in which the restaurants operate.
Sizzler Restaurants
The cash flows by restaurant have been estimated after applying growth rates from the commencement of 2015 through to the
end of the 2019 reporting period which average 6.8% p.a.
While the growth rate assumed is higher than the industry average growth rate of 3%, Management believe it to be reasonable
considering that the forecasted growth rate reflects expectations about the performance of the business incorporating the
positive contribution from the ‘Get Refreshed’ initiative and other operational and work force productivity improvements. The
growth rate has also been achieved in this operating segment during prior reporting periods. A pre-tax discount rate of 12.5%
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 2.5% has been used in determining the terminal value, which
does not exceed the long term average growth rate for the industry segment in which the restaurants operate.
53
Collins Foods Limited Annual Report 2014 Note 11: Non-current assets – intangible assets (continued)
Sensitivity
The estimates and judgments included in the value-in-use calculations are based on historical experience and other factors,
including management’s and the Directors’ expectations of future events that are believed to be reasonable under the
current circumstances.
There has been no impairment recognised for the Sizzler Restaurants CGUs in the impairment assessment performed at 27 April
2014. Based on management’s current assessment, the recoverable amount of the Sizzler Restaurants CGU exceeds the carrying
amount by $4.9 million.
The Sizzler Restaurants CGU’s recoverable amount is particularly sensitive to reasonably possible movements in key assumptions
including sales growth, EBITDA margins and the pre-tax discount rate utilised in determining the present value of cash flows. As
a result, management has modelled below a range of sensitivities on the key assumptions that in isolation would result in the
carrying amount of non-current assets exceeding their recoverable amount, thereby triggering a possible impairment charge:
–
–
–
if the discount rate was to increase from 12.5% to 14%, an impairment charge of $1.6 million would be recorded;
if the average sales growth achieved over the forecast period were to decrease from 3.0% p.a. to 1.7% p.a., an impairment
charge of $4.5 million would be recorded; or
if the average EBITDA margin (pre-overheads) of 10% in the 5 year discounted cash flow model were to decrease to 9.5%, an
impairment charge of $2.2 million would be recorded.
Management and the Directors believe that other reasonable changes in key assumptions on which the recoverable amount
has been calculated, would not cause the Sizzler Restaurants CGU carrying amounts for goodwill and brand to exceed their
recoverable amounts.
The Group has and continues to undertake a range of strategic reviews to deliver the EBITDA growth included in the five
year forecasts.
54
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 12: 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
Receivables
Capitalised costs
Amounts recognised in other comprehensive income:
Cash flow hedges
Deferred tax assets
Movements:
Opening balance
Acquisition of subsidiary (Note 35)
(Charged)/credited to the Consolidated Income Statement (Note 6)
Credited 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
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Inventories
Intangibles
Prepayments
Deferred tax liabilities
Movements:
Opening balance
Charged/(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
2014
$000
2013
$000
19,121
4,106
1,504
175
1,526
26,432
416
26,848
21,417
4,327
977
127
26,848
7,690
19,158
26,848
680
6,233
77
6,990
6,700
290
6,990
1,293
5,697
6,990
26,848
(6,990)
19,858
14,308
3,135
1,290
86
2,309
21,128
289
21,417
21,782
–
(612)
247
21,417
5,912
15,505
21,417
644
6,035
21
6,700
7,041
(341)
6,700
1,140
5,560
6,700
21,417
(6,700)
14,717
55
Collins Foods Limited Annual Report 2014 Note 13: Non-current assets – receivables
Loan to related party – joint venture
Provision for impairment of loans to related parties
Security deposits
2014
$000
400
–
400
38
438
2013
$000
5
(5)
–
30
30
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:
Floating
interest
rate
$000
Notes
Fixed interest
maturing in:
5 years
or less
$000
More than
5 years
$000
8
13
13
8
13
–
400
–
400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Non-
interest
bearing
$000
680
–
38
718
2,002
30
2,032
Total
$000
680
400
38
1,118
2,002
30
2,032
Average interest rate
Floating
Fixed
8.2%
2014
Trade and interest receivables
Related party receivables
Other receivables
2013
Trade and interest receivables
Other receivables
Credit risk
There is no concentration of credit risk with respect to external current and non-current receivables.
56
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 14: Non-current assets – investments accounted for using the equity method
Interests in individually immaterial joint ventures
Name of entity
Place of incorporation
Acronym
Sizzler China Pte Ltd
Snag Holdings Pty Ltd
Singapore
Australia
SCP
SNG
% of ownership interest
2014
50
50
2013
50
–
Sizzler China Pte Ltd
Snag Holdings Pty Ltd
Total joint ventures
Interest in individually immaterial joint ventures
Interests in individually immaterial
joint ventures
2014
$000
800
2013
$000
593
2014
$000
1,681
Opening balance
593
501
–
Acquisition of investment accounted for using the
equity method
Share of net profit of joint venture accounted for
using the equity method
Closing balance
Summarised financial information
of individually immaterial joint ventures
–
207
800
–
1,850
92
593
(169)
1,681
ASSETS:
Current assets:
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets:
Cash and cash equivalents
Property, plant and equipment
Intangible assets, net
Total non-current assets
Total assets
LIABILITIES:
Current liabilities:
Trade and other payables
Provisions
Borrowings
Total current liabilities
Non-current liabilities:
Borrowings
Total non-current liabilities
Total liabilities
Net assets
EQUITY:
Contributed equity
Retained earnings
Total Equity
Group’s share in %
Group’s share in $
Goodwill
Carrying amount
1,503
1,074
154
–
152
–
1,657
1,226
–
–
–
–
–
–
–
–
1,657
1,226
57
–
–
57
–
–
57
40
–
–
40
–
–
40
1,600
1,186
–
1,600
1,600
50%
800
–
800
–
1,186
1,186
50%
593
–
593
844
89
54
987
168
1,098
49
1,315
2,302
419
109
200
728
400
400
1,128
1,174
2,402
(1,228)
1,174
50%
587
1,094
1,681
2013
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014
$000
2,481
2013
$000
593
593
501
1,850
38
2,481
–
92
593
2,347
1,074
243
54
152
–
2,644
1,226
168
1,098
49
1,315
3,959
476
109
200
785
400
400
1,185
2,774
2,402
372
2,774
1,387
1,094
2,481
–
–
–
–
1,226
40
–
–
40
–
–
40
1,186
–
1,186
1,186
593
–
593
57
Collins Foods Limited Annual Report 2014 Note 15: Current liabilities – trade and other payables
Trade payables and accruals – unsecured
Other payables
Total payables
Note 16: Derivative financial instruments
Current liabilities
Interest rate swap contracts – cash flow hedges
Non-current liabilities
Interest rate swap contracts – cash flow hedges
2014
$000
39,281
11,734
51,015
2014
$000
1,070
401
2013
$000
30,952
8,861
39,813
2013
$000
743
254
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 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 31 July 2013 the terms of the Syndicated Facility were modified so that $65 million was available to 31 October 2016 and
$70 million was available to 31 October 2018. The total amount drawn remained unchanged at $105 million.
On 17 February 2014, the Syndicated Facility was further modified so as to increase the funds available until 31 October 2018
from $70 million to $100 million.
On 7 March 2014, the amount drawn down under the Syndicated Facility was increased from $105 million to $165 million in
order to fund the acquisition of Collins Restaurants West Pty Ltd.
On 10 November 2011, the Group entered into an $80 million interest rate swap contract (Swap Contract), with a maturity date
of 5 August 2014, to hedge a designated portion of the interest rate exposure of the Syndicated Facility drawn at that time. Due
to the modifications to the Syndicated Facility during the year, the Group entered into the following Swap Contracts to hedge a
designated portion of the interest rate exposure of the amended Syndicated Facility:
– on 7 August 2013 a $45.5 million Swap Contract, commencing on 5 August 2014, with a maturity date of 31 October 2016;
– on 7 August 2013 a $28 million Swap Contract, commencing on 5 August 2014, with a maturity date of 31 October 2018; and
– on 13 March 2014 a $48 million Swap Contract, commencing on 4 April 2014, with a maturity date of 31 October 2018.
Bank loans of the Group currently bear variable interest at BBSY which at balance date was 2.69% (2013: 3.1%) plus margins
which vary with the gearing of the Group. At balance date, the weighted average margin was 1.73% (2013: 1.9%).
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 Swap Contracts under which it is obliged to receive interest at variable rates and to pay interest at
fixed rates.
58
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Swaps currently in place cover approximately 78% (2013: 76%) of the loan principal outstanding and are timed to expire as each
loan repayment falls due. The variable rates are BBSY which at balance date was 2.69% (2013: 3.1%). The fixed interest rates are
as follows:
– $80 million Swap Contract: 3.71% (2013: 3.71%);
– $45.5 million Swap Contract: 3.18%;
– $28 million Swap Contract: 3.68%; and
– $48 million Swap Contract: 3.70%.
The notional principal amounts and periods of expiry of the Swap Contracts are as follows:
Less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
Notional Principal Amount
2014
$000
80,000
2013
$000
–
–
80,000
45,500
–
76,000
–
–
–
The Swap Contracts require settlement of net interest receivable or payable each month. The settlement dates coincide with the
dates on which interest is payable on the underlying debt. The Swap Contracts are settled on a net basis.
The derivative financial instruments entered into on 10 November 2011, 7 August 2013 and 13 March 2014 were designated as
cash flow hedges at inception, as such, the gain or loss from remeasuring the hedging instruments at fair value is recognised in
other comprehensive income and deferred in equity in the hedging reserve, to the extent that the hedges were effective. The
fair value amounts deferred in equity are subsequently reclassified into the profit and loss when the hedged interest expense is
recognised. At balance date these contracts were payables with a fair value of $1.5 million (2013: payables totalling $1.0 million).
Credit risk exposures
At 27 April 2014, the Swap Contracts gave rise to payables for unrealised losses on derivative instruments of $1.5 million
(2013: $1.0 million) for the Group. Management has undertaken these Swap Contracts with the Australia and New Zealand
Banking Group Limited which is an AA rated financial institution.
Interest rate risk exposures
Refer to Note 18 and Note 33 for the Group’s exposure to interest rate risk on Swap Contracts.
Note 17: Current liabilities – provisions
Employee entitlements
Make good provision
Total current liabilities – provisions
2014
$000
3,934
78
4,012
2013
$000
3,633
117
3,750
59
Collins Foods Limited Annual Report 2014 Note 18: Non-current liabilities – borrowings
Bank loan – unsecured
Fees on bank loan – capitalised
Total non-current liabilities – borrowings
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 A1
Revolving cash advance facility – Facility A2
Revolving cash advance facility – Facility B
Used at balance date
Working capital facility
Revolving cash advance facility – Facility A
Revolving cash advance facility – Facility A1
Revolving cash advance facility – Facility A2
Revolving cash advance facility – Facility B
Unused at balance date
Working capital facility
Revolving cash advance facility – Facility A
Revolving cash advance facility – Facility A1
Revolving cash advance facility – Facility A2
Revolving cash advance facility – Facility B
Bank loan facilities excluding credit standby arrangements:
Total facilities less mandatory scheduled or prepaid repayments made
Used at balance date
Unused at balance date
2014
$000
2013
$000
165,000
105,000
(619)
(290)
164,381
104,710
10,000
–
–
–
–
10,000
10,000
5,000
–
–
25,000
40,000
319
179
–
–
–
–
–
–
–
–
319
179
9,681
–
–
–
–
9,681
165,000
165,000
–
9,821
5,000
–
–
25,000
39,821
105,000
105,000
–
On 4 August 2011, 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.
60
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements –
–
–
On 31 July 2013, the terms of the Syndicated Facility were modified so that $65 million was available to 31 October 2016 and
$70 million was available to 31 October 2018. The total amount drawn remained unchanged at $105 million.
On 17 February 2014, the Syndicated Facility was further modified so as to increase the funds available until 31 October 2018
from $70 million to $100 million.
On 7 March 2014, the amount drawn down under the Syndicated Facility was increased from $105 million to $165 million in
order to fund the acquisition of Collins Restaurants West Pty Ltd.
Facilities
Facility A1, Facility A2 and Facility B (2013: Facility A and Facility B)
–
The Syndicated Facility comprises Facility A1, Facility A2 and Facility B for $65 million, $40 million and $60 million respectively
(2013: Facility A $110 million and Facility B $25 million). Facility A1 expires on 31 October 2016, Facility A2 and Facility B expire
on 31 October 2018. There are no scheduled repayments for Facility A1, Facility A2 or Facility B. Conditions exist regarding the
voluntary repayment of debt. As at the end of the reporting period Facility A1, Facility A2 and Facility B were fully drawn (2013:
Facility A drawn to $105 million, Facility B was undrawn).
The rate of interest under Facility A1, Facility A2 and Facility B was BBSY which at balance date was 2.69% (2013: Facility A and
Facility B, BBSY 3.1%) plus, depending upon the gearing ratio of the Company, the applicable margin for Facility A1 of between
1.35% and 1.85%, and Facility A2 and Facility B of between 1.65% and 2.15% (2013: Facility A and Facility B between 1.5%
and 2.2%). At balance date, the margin applicable for Facility A1 was 1.55% and for Facility A2 and Facility B was 1.85% (2013:
Facility A and Facility B 1.9%). There is a commitment fee calculated daily and payable on the undrawn commitment of between
0.65% and 0.92% in respect of Facility A1 and 0.83% and 1.08% in respect of Facility A2 and Facility B depending upon the
gearing ratio of the Company (2013: Facility A and Facility B 0.75% and 1.1%). At balance date, this commitment fee rate was
0.78% for Facility A1 and 0.93% for Facility A2 and Facility B (2013: Facility A and Facility B 0.95%) and was payable quarterly
in arrears.
Working capital
–
The Working Capital Facility was modified on 31 July 2013, so that it provided for the same term as Facility A2 and Facility
B of the Syndicated Facility, expiring on 31 October 2018. It was initially allocated to a $9.7 million overdraft 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 5 March 2014 the allocation was amended to a $9.6 million overdraft facility and a
$0.4 million letter of credit facility.
Letters of credit of $0.3 million (2013: $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 0.83% and 1.08% depending upon the gearing ratio of the Company
(2013: 0.75% and 1.1%). At balance date, this commitment fee rate was 0.93% (2013: 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 2.7% (2013: 3.4%) 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 1.65% and 2.15% depending upon the gearing ratio of the Company
(2013: 1.5% and 2.2%). At balance date, the applicable margin was 1.85% (2013: 1.9%).
The Syndicated Facility and Working Capital Facility 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.
61
Collins Foods Limited Annual Report 2014 Note 18: Non-current liabilities – borrowings (continued)
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 33.
Floating
interest
rate
$000
Notes
Fixed interest
maturing in:
5 years
or less
$000
More than
5 years
$000
Non-
interest
bearing
$000
Average interest
rate excluding margin
Total
$000
Floating
Fixed
2014
Trade and other payables
Borrowings
Derivative financial instruments1
Derivative financial instruments2
Derivatives with
future commencement dates:
Derivative financial instruments3
Derivative financial instruments4
2013
Trade and other payables
Borrowings
–
165,000
(80,000)
(48,000)
–
–
80,000
48,000
37,000
128,000
(45,500)
(28,000)
45,500
28,000
15
18
16
16
16
16
15
–
18 105,000
–
–
Derivative financial instruments5
16
(80,000)
80,000
25,000
80,000
1
2
3
4
5
Notional principal amount maturing 5 August 2014.
Notional principal amount commencing 4 April 2014, maturing 31 October 2018.
Notional principal amount commencing 5 August 2014, maturing 31 October 2016.
Notional principal amount commencing 5 August 2014, maturing 31 October 2018.
Notional principal amount.
–
–
–
–
–
–
–
–
–
–
–
51,015
51,015
–
–
–
165,000
–
–
2.7%
2.7%
2.7%
3.7%
3.7%
51,015
216,015
–
–
–
–
2.7%
2.7%
3.2%
3.7%
39,813
39,813
–
–
105,000
–
3.1%
3.1%
3.7%
39,813
144,813
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual
maturities for:
all non-derivative financial liabilities; and
–
– 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 Swap Contracts the cash flows have been estimated using
forward interest rates applicable at the end of each reporting period.
62
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Less than
1 year
$000
Between
1 and 2 years
$000
Between
2 and 5 years
$000
Over
5 years
$000
Total contractual
cash flows
$000
Carrying amount
(assets)/liabilities
$000
Contractual maturities
of financial liabilities
At 27 April 2014
Non-derivatives
Trade and other payables
Borrowings
Total non-derivatives
Derivatives
51,015
8,365
59,380
–
8,277
8,277
–
181,239
181,239
Net settled (Swap Contracts)
(1,097)
(620)
216
At 28 April 2013
Non-derivatives
Trade and other payables
Borrowings
Total non-derivatives
Derivatives
39,813
5,863
45,676
–
106,574
106,574
Net settled (Swap Contracts)
(757)
(263)
Note 19: Non-current liabilities – provisions
–
–
–
–
Employee entitlements
Make good provision
–
–
–
–
–
–
–
–
51,015
197,881
248,896
51,015
164,381
215,396
(1,501)
(1,471)
39,813
112,437
152,250
39,813
104,710
144,523
(1,020)
(997)
2014
$000
3,265
135
3,400
2013
$000
1,784
80
1,864
The non-current provision for employee entitlements in respect of long service leave includes all conditional entitlements 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.
63
Collins Foods Limited Annual Report 2014 Note 20: Contributed equity
Balance
Balance
Share capital
Ordinary shares – fully paid
Date
Parent entity
Share capital
$000
Total equity
$000
28 April 2013
27 April 2014
182,098
182,098
182,098
182,098
Parent entity
2014 Shares
2013 Shares
93,000,003
93,000,003
Equity of parent company
Movements in ordinary share capital during the reporting period were as follows:
Details
Ordinary shares – fully paid
Balance
Balance
Date
Number of shares
28 April 2013
27 April 2014
93,000,003
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.
Long Term Incentive Plan
Information relating to the Long Term Incentive Plan including details of shares issued under this plan is set out in Note 27.
64
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 21: Reserves
Hedging – cash flow hedges
Foreign currency translation
Share-based payments
Movements in hedging reserve – cash flow hedges:
Opening balance
Revaluation – gross
Deferred tax (Note 12)
Transfer to net profit – gross
Deferred tax (Note 12)
Closing balance
Movements in foreign currency translation reserve:
Opening balance
Exchange fluctuations arising on net assets of foreign operations
Closing balance
Movements in share-based payments reserve:
Opening balance
Valuation of performance rights
Closing balance
2014
$000
(970)
1,749
160
939
(674)
(475)
143
52
(16)
(970)
461
1,288
1,749
–
160
160
2013
$000
(674)
461
–
(213)
(97)
(894)
268
70
(21)
(674)
260
201
461
–
–
–
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.
Share-based payments reserve – performance shares
The share-based payments reserve is used to recognise the issuance date fair value of performance shares issued to employees
but not yet vested.
Foreign currency translation reserve
Exchange differences arising on translation are recognised in other comprehensive income and accumulated in a separate
reserve within equity.
65
Collins Foods Limited Annual Report 2014 Note 22: Retained earnings/(accumulated losses)
Retained earnings/(accumulated losses):
Opening balance
Net profit
Dividend provided for or paid
Closing balance
Dividends:
Dividends paid of $0.10 (2013: $0.105) per fully paid share
Franking credits available for the subsequent reporting period based on a tax rate of 30%
2014
$000
2013
$000
3,610
14,025
(9,300)
8,335
9,300
9,300
49,590
(2,993)
16,368
(9,765)
3,610
9,765
9,765
44,010
The above amount represents the balance of the franking account as at the end of the reporting period, adjusted for:
–
–
–
franking credits that will arise from the payment of income tax payable as at the end of the reporting period;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
franking credits that may be prevented from being distributed in the subsequent reporting period.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of
subsidiaries were paid as dividends.
Since the end of the reporting period, the Directors of the Company have declared the payment of a fully franked final dividend
of 6.0 cents per ordinary share ($5.6 million) to be paid on 18 July 2014. The aggregate amount of the dividend to be paid on
that date, but not recognised as a liability at the end of the reporting period is $5,580,000.
66
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 23: Subsidiaries and Deed of Cross Guarantee
The Consolidated Financial Statements at 27 April 2014 include the following subsidiaries. The reporting period end of all
subsidiaries is the same as that of the parent entity(a).
Name of controlled entity
Notes
Place of incorporation
Acronym
% of shares held
2014
2013
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.
Collins Restaurants West Pty. Ltd.
Fiscal Nominees Company 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
(b)
(b)
(b)
(b)
(b)
(b)
(b) (f)
(b) (g)
(b)
(b)
(b)
(b)
(b)
(b)
(c)
(d)
(d)
(d)
(d) (e)
(d) (e)
(d) (e)
Australia
Australia
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
CFGF
CFH
CFF
CFG
CRQ
CRN
CRW
FNC
SRG
CRM
CPD
CSP
CFA
CFM
SSP
SingCo
SIM
SAH
SSEA
SNZ
SRS
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes relating to the above table:
(a) Collins Foods Limited is domiciled in Brisbane, Australia. The Registered office is located at 16 Edmondstone Street, Newmarket Qld 4051.
(b) These companies have entered into or acceded to 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.
(c) 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.
(d) These companies are not Australian registered companies and are not covered by the Class Order 98/1418.
(e) Originally incorporated in Nevada, upon conversion to a LLC became registered in Delaware.
(f) Acquired on 7 March 2014.
(g)
Incorporated on 25 November 2013.
67
Collins Foods Limited Annual Report 2014 Note 23: Subsidiaries and Deed of Cross Guarantee (continued)
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
Share of net profit of joint ventures accounted for using the equity method
Other income
Finance income
Finance costs
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations
Statement of Consolidated Comprehensive Income
Profit from continuing operations
Other comprehensive income/(expense):
Cash flow hedges
Income tax relating to components of other comprehensive income
Other comprehensive income/(expense) for the reporting period, net of tax
Total comprehensive income for the reporting period
Total comprehensive income for the reporting period is attributable to:
Owners of the parent
Summary of Movements in Consolidated Retained Profits
Retained profits/(losses) at the beginning of the reporting period
Profit for the reporting period
Dividends provided for or paid
Retained earnings at the end of the reporting period
68
Closed Group
2014
$000
2013
$000
437,808
(209,968)
227,840
(92,305)
(36,506)
(43,500)
(28,319)
(2,425)
(169)
848
421
(6,444)
19,441
(6,561)
12,880
421,385
(201,711)
219,674
(89,514)
(33,327)
(42,830)
(24,281)
(2,070)
–
858
202
(6,386)
22,326
(6,992)
15,334
12,880
15,334
(423)
127
(296)
(824)
247
(577)
12,584
14,757
12,584
14,757
2,308
12,880
(9,300)
5,888
(3,261)
15,334
(9,765)
2,308
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements The Consolidated Balance Sheet of all entities in the Class Order 98/1418 ‘closed group’ as at the end of the reporting period is
as follows:
Current assets
Cash and cash equivalents
Receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets, net
Deferred tax assets, net
Receivables
Investments accounted for using the equity method
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Derivative financial instruments
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
Closed Group
2014
$000
2013
$000
36,341
2,614
4,914
43,869
72,518
267,172
21,985
438
1,681
9,827
373,621
417,490
52,005
5,045
1,070
4,012
62,132
23,223
3,748
4,406
31,377
59,149
221,839
16,717
30
–
9,827
307,562
338,939
39,729
4,157
743
3,750
48,379
164,381
104,710
401
3,400
168,182
230,314
187,176
254
1,864
106,828
155,207
183,732
182,098
182,098
(810)
5,888
(674)
2,308
187,176
183,732
69
Collins Foods Limited Annual Report 2014 Note 24: Commitments for expenditure
Capital commitments
Property, plant and equipment:
2014
$000
2013
$000
Aggregate capital expenditure contracted for at balance date but not recognised as
liabilities, payable
5,801
7,621
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 2033. 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 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Less recoverable Goods and Services Tax
Minimum lease payments
31,951
73,668
34,599
140,218
(12,745)
127,473
24,984
60,563
22,103
107,650
(9,783)
97,867
Note 25: Related parties
Parent entity
The parent entity and ultimate parent entity within the Group is Collins Foods Limited.
Key Management Personnel
Key Management Personnel include the directors for the parent entity and directors and executives for the Group. All disclosures
relating to Key Management Personnel are disclosed in Note 26.
Subsidiaries
The ownership interests in subsidiaries are set out in Note 23.
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.
Transactions with related parties
All transactions with related parties are conducted on commercial terms and conditions.
Transaction type
Class of related party
Whole Dollars
2014
$
2013
$
Loans to related parties
Loan advanced to a related party
Loan repayment from a related party
Provision for impairment of a related party receivable
Related entity – joint venture
70
Related entity – joint venture
400,000
Related entity – joint venture
–
(281,206)
(4,794)
–
–
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 26: Key Management Personnel compensation and equity instrument disclosures
Key Management Personnel compensation
Short term employee benefits
Post-employment benefits
Long term benefits
Share-based payments
2014
2013
2,489,778
180,559
37,195
156,059
2,863,591
2,030,241
173,630
40,988
–
2,244,859
Detailed remuneration disclosures are provided in the Remuneration Report included in the Directors’ Report.
Equity instrument disclosures relating to Key Management Personnel
Shareholdings
The numbers of shares in the Company held during the financial period by the Directors of the Company and the Key
Management Personnel of the Group, including their personally related parties, are set out below. There were no shares, other
than performance rights, granted during the reporting period as compensation or as a result of exercise of options or rights.
Ordinary shares
2014
Directors:
Russell Tate
Newman Manion
Bronwyn Morris
Kevin Perkins
Stephen Copulos
Other Key Management Personnel:
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman
2013
Directors:
Russell Tate
Newman Manion
Bronwyn Morris
Kevin Perkins
Stephen Copulos
Other Key Management Personnel
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman
Simon Perkins
Balance
at start
of period
Changes
during
the period1
Balance
at end
of period
20,001
20,001
5,001
7,340,833
12,000,000
–
126,262
210,409
11,571
–
–
–
–
20,001
20,001
5,001
7,340,833
12,000,000
–
–
–
(11,571)
–
126,262
210,409
–
20,001
20,001
5,001
7,340,833
–
–
–
–
–
12,000,000
20,001
20,001
5,001
7,340,833
12,000,000
–
126,262
210,409
11,571
168,402
–
–
–
–
(168,402)
–
126,262
210,409
11,571
–
1
Changes include recognition/de-recognition of shares held upon becoming/ceasing to be a Director or other KMP of the Group.
71
Collins Foods Limited Annual Report 2014 Note 26: Key Management Personnel compensation and equity instrument
disclosures (continued)
Performance rights
2014
Kevin Perkins
Graham Maxwell
Martin Clarke
John Hands
Phillip Coleman
Balance at
start of
reporting
period
Granted as
compensation
Vested
Other
changes1
–
–
–
–
–
103,859
356,088
35,608
23,739
22,552
–
–
–
–
–
–
–
–
–
(22,552)
Balance at
end of
reporting
period
103,859
356,088
35,608
23,739
–
Vested
Unvested
–
–
–
–
–
103,859
356,088
35,608
23,739
–
1
Changes include recognition/de-recognition of shares held upon becoming/ceasing to be a Director or other KMP of the Group.
There were no performance rights issued as at 28 April 2013. For further information on performance rights refer Note 27.
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 Directors and Director-related entities.
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.
72
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 27: Share-based payments
Long Term Incentive Plan – performance rights
The establishment of the Company’s Long Term Incentive Plan (LTIP) was approved by shareholders at the 2013 Annual General
Meeting. The LTIP is designed to provide long term incentives for employees, including executive directors to motivate them to
build long term value for the Company and its shareholders. Under the plan, participants are granted performance rights over
shares. Participation in the plan is at the Board’s discretion. The number of performance rights is calculated by dividing the dollar
value of the participant’s long term incentive by the volume weighted average price of the shares for the five days prior to the
date of offer of the performance rights.
Unless otherwise determined by the Board in its discretion, performance rights are issued for nil consideration. The amount of
performance rights that will vest depends upon the achievement of certain vesting conditions, including the satisfaction of a
minimum 12 month term of employment and the achievement of earnings per share (EPS) growth targets by the Company. The
EPS growth targets must be achieved over a three year performance period. Performance rights will automatically vest on the
business day after the Board determines the vesting conditions have all been satisfied (Vesting Determination Date).
If in the opinion of the Board a change of control event has occurred, or is likely to occur, the Board may declare a Performance
Right to be free of any vesting conditions and, if so, the Company must issue or transfer shares in accordance with the LTIP rules.
In exercising its discretion, the Board will consider whether measurement of the vesting conditions (on a pro-rata basis) up to the
date of the change of control event is appropriate in the circumstances.
The performance rights will automatically exercise on the Vesting Determination Date unless that date occurs outside a trading
window permitted under the Company’s Securities Trading Policy, in which case the performance rights will exercise upon the
first day of the next trading window following the Vesting Determination Date. Upon exercise of the performance rights, the
Company must issue or procure the transfer of one share for each Performance Right, or alternatively may in its discretion elect
to pay the cash equivalent value to the participant. In the event of a capital reconstruction or bonus issue of securities by the
Company, the number of shares issued for each Performance Right will be proportionately adjusted. Subject to a reconstruction
or bonus issue, performance rights do not carry the right to participate in any new issue of securities including pro-rata issues.
If the Company conducts a rights issue, the exercise price (if any) of the performance rights will be adjusted in accordance with
ASX Listing Rules as at the date the performance rights were issued.
Performance rights will lapse on the first to occur of:
the expiry date;
the vesting conditions not being satisfied by the Vesting Determination Date;
–
–
– unless the Board otherwise determines, by the cessation of the employment of the employee to whom the offer of
performance rights was made. The Board determination will depend upon the reason for employment ceasing (resignation,
dismissal for cause, death or illness).
Performance rights when issued under the LTIP are not entitled to receive a dividend and carry no voting rights.
73
Collins Foods Limited Annual Report 2014 Note 27: Share-based payments (continued)
Set out below are summaries of performance rights issued under the LTIP:
As at 28 April 2013
Issued during the year
Exercised during the year
Lapsed during the year
As at 27 April 2014
Vested and exercisable at 27 April 2014
Number of
performance
rights
–
553,715
–
22,552
531,163
–
All performance rights issued as at 27 April 2014 have an expiry date of 25 July 2016 and were issued with an exercise price
of nil.
Fair value of performance rights issued
The assessed fair value at issuance date of performance rights issued during the year ended 27 April 2014 was an average of
$1.50 per right. The fair value at issuance date has been determined using a Black-Scholes option pricing model that takes into
account the exercise price, the term of the right, the impact of dilution, the share price at issuance date, the expected price
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the rights.
The model inputs for rights issued during the year ended 27 April 2014 included:
–
–
–
–
–
–
–
rights are issued for no consideration and vest depending on the achievement of EPS growth targets for the three year
performance period;
exercise price: nil;
issuance dates 18 September 2013 and 1 October 2013;
share price: $1.70;
expected price volatility of the Company’s shares: 80%;
expected dividend yield: 4.12%;
risk-free interest rate: 3.5%.
The expected price volatility is based on the historic volatility (based on the remaining life of the rights), adjusted for any
expected changes to future volatility due to publicly available information.
Note 28: 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:
– 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.
74
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 29: Contingencies
Contingent liabilities
The parent entity and certain controlled entities indicated in Note 23 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 18, 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.
Note 30: 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:
Whole Dollars
2014
$
2013
$
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
306,973
32,176
280,090
20,300
Network firms of PricewaterhouseCoopers Australia
Audit and review of financial reports and other audit work for foreign subsidiary
23,061
20,600
Other assurance services:
PricewaterhouseCoopers Australian firm
Store sales certificates
Agreed upon procedures for covenant calculations
Network firms of PricewaterhouseCoopers Australia
Agreed upon procedures in respect of franchisee sales
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review of company tax returns
Tax advice and consulting
Network firms of PricewaterhouseCoopers Australia
Tax compliance services, including review of company tax returns
Total remuneration for taxation services
Total remuneration for services
362,210
320,990
10,300
20,216
–
30,516
392,726
25,000
6,000
4,348
35,348
10,300
18,800
9,700
38,800
359,790
25,000
11,000
3,654
39,654
428,074
399,444
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.
75
Collins Foods Limited Annual Report 2014 Note 31: Notes to the Consolidated Statement of Cash Flows
Reconciliation of profit from continuing operations to net cash inflow from operating activities
2014
$000
2013
$000
14,025
16,368
20,709
17,445
130
166
160
(2)
769
–
888
(897)
23
1,015
1,384
1,270
240
(38)
209
230
–
(5)
553
5
4,157
240
70
(82)
(806)
(129)
(1,200)
(92)
2,821
4,257
2,187
44,850
–
41,220
Profit from continuing operations
Adjustments for non-cash income and expense items:
Depreciation, amortisation and impairment
Loss on disposal of property, plant and equipment
Amortisation of borrowing costs
Non-cash employee benefits expense share-based payments
Transfer to/(from) provisions:
Reversal of provision for diminution in value of inventory
Provision for employee entitlements
Impairment of related party receivable
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
Share of profits of joint ventures
Increase in liabilities:
Trade payables and accruals
Investing activities included in profit from continuing operations:
Costs associated with acquisitions
Net operating cash flows
76
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 32: Non-cash financing and investing activities
Non-cash financing and investing activities
Total non-cash financing and investing activities
2014
$000
–
–
2013
$000
–
–
Note 33: Financial risk management
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 Swap Contracts 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.
Market risk
Foreign exchange risk
During 2014 and 2013, the financial instruments of the Group and the parent entity were denominated in Australian dollars
apart from certain bank accounts, trade receivables and trade payables in respect of the Group’s Asian operations 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 is disclosed in the tables below.
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 Swap Contracts and an analysis of maturities at the reporting date is
disclosed in Notes 16 and 18.
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.
Credit risk
Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits with banks, other trade receivables
and receivables from 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 Note 8) is not past due, nor impaired (2013: 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.
Credit risk further arises in relation to financial guarantees given to certain parties, refer to Notes 18 and 23 for details.
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 18. Non-interest bearing liabilities are due within six months. For
maturities of interest bearing liabilities and Swap Contracts of the Group, refer to Notes 16 and 18.
77
Collins Foods Limited Annual Report 2014 Note 33: Financial risk management (continued)
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
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
27 April 2014
Financial assets
Cash and cash equivalents
36,983
(259)
Trade and other receivables
Related party receivables
Financial liabilities
Trade and other payables
Current tax liabilities
680
400
51,015
5,045
–
(3)
–
–
Borrowings
165,000
259
–
–
–
–
–
–
259
–
3
–
–
(259)
–
–
–
–
–
–
Derivative financial instruments
1,471
Total increase/(decrease)
–
(3)
(2,881)
(2,881)
–
3
2,881
2,881
28 April 2013
Financial assets
Cash and cash equivalents
Trade and other receivables
23,556
2,002
Financial liabilities
Trade and other payables
Current tax liabilities
Borrowings
39,813
4,157
105,000
Derivative financial instruments
997
Total increase/(decrease)
(165)
–
–
–
175
–
10
–
–
–
–
–
(733)
(733)
165
–
–
–
(175)
–
(10)
–
–
–
–
–
733
733
128
40
–
(9)
–
–
–
159
67
38
(10)
–
–
–
95
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(128)
(40)
–
9
–
–
–
(159)
(67)
(38)
10
–
–
–
(95)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 34: Recognised fair value measurements
Fair value hierarchy
Judgements and estimates are made in determining the fair values of assets and liabilities that are recognised and measured
at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair
value, the Group has classified such assets and liabilities into the three levels prescribed under the accounting standards. An
explanation of each level follows underneath the table below.
The following table presents the Group’s assets and liabilities measured and recognised at fair value.
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
At 27 April 2014
At 28 April 2013
Level 1
$000
Level 2
$000
Level 3
$000
Level 1
$000
Level 2
$000
Level 3
$000
–
–
–
1,471
–
–
–
–
–
997
–
–
There were no transfers between Levels 1 and 2 or Levels 2 and 3 during the year. The Group’s policy is to recognise transfers
into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Level 1
The fair value of assets and liabilities traded in active markets (such as publically traded derivatives, and trading and available-for-
sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used is the current
bid price. These assets and liabilities are included in Level 1.
Level 2
The fair value of assets and liabilities that are not traded in active markets (for example over the counter derivatives) is
determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value an asset or liability are observable, the asset or liability is included
in Level 2.
Level 3
If one or more of the significant inputs is not based on observable market data, the asset or liability is included in Level 3.
Valuation techniques used to determine fair values
Specific valuation techniques used to value assets and liabilities include:
–
–
the fair value of Swap Contracts is calculated as the present value of the estimated future cash flows based on observable yield
curves; and
the fair value of the remaining assets and liabilities is determined using discounted cash flow analysis.
Disclosed fair values
The Group also has assets and liabilities which are not measured at fair value, but for which fair values are disclosed in the notes
to the financial statements.
Receivables
Due to the short term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. For
the majority of non-current receivables, the fair values are not materially different to their carrying amounts, since the interest
on those receivables is close to current market rates.
The fair value was calculated based on cash flows discounted using market rates that approximate the rate applicable to these
non-current receivables. They are classified as Level 3 fair values in the fair value hierarchy due to the inclusion of unobservable
inputs including counterparty credit risk.
79
Collins Foods Limited Annual Report 2014 Note 34: Recognised fair value measurements (continued)
Trade and other payables
Due to the short term nature of the trade and other payables, their carrying amount is assumed to be the same as their
fair value.
Borrowings
The fair value of borrowings is as follows:
Carrying
amount
$000
2014
Fair
value
$000
Discount
rate
%
Carrying
amount
$000
2013
Fair
value
$000
Discount
rate
%
Bank Loan (net of borrowing costs)
164,381
159,081
6
104,710
100,844
7
The fair value of non-current borrowings is based on discounted cash flows using the rate disclosed in the table above. They
are classified as Level 3 values in the fair value hierarchy due to the use of unobservable inputs, including the credit risk of
the Group.
Valuation processes
The finance department of the Group includes a team that performs the valuation of assets and liabilities that are required
to be disclosed in the notes to the financial statements, at fair value. This includes Level 3 fair values. This Group employs the
services of independent advisors to value the derivative financial instruments that are measured and recognised in the financial
statements at fair value. The team reports directly to the Group Chief Financial Officer (CFO) and the Audit and Risk Committee
(ARC). Discussions of valuation processes and results are held between the CFO, ARC and the valuation team at least once every
six months, in line with the Group’s half-year reporting periods.
The main Level 3 inputs used by the Group are derived and evaluated as follows:
– discount rates for financial assets and financial liabilities are determined using a capital asset pricing model to calculate a pre-tax
rate that reflects current market assessments of the time value of money and the risk specific to the asset.
Changes in Level 2 and Level 3 fair values are analysed at the end of each reporting period during the half-year valuation
discussion between the CFO, ARC and the valuation team. As part of this discussion the team presents a report that explains
the reason for the fair value movements.
80
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 35: Business combinations
Summary of acquisition
On 7 March 2014, Fiscal Nominees Company Pty Ltd, a subsidiary of the Company, acquired 100% of the issued share capital
of Competitive Foods Pty Ltd for $55.6 million, a franchisee of KFC Restaurants in Western Australia and Northern Territory.
Subsequent to the acquisition the name of this Company was changed to Collins Restaurants West Pty Ltd. The primary reason
for the acquisition was to expand operations in the quick service restaurant market, and consolidate the Company’s position as
the largest KFC franchisee in Australia.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid
$000
55,605
The provisional fair values of the assets and liabilities of the business acquired as at the date of acquisition are as follows:
Cash
Receivables
Inventories
Property, plant and equipment
Intangible assets
Deferred tax asset, net
Trade and other payables
Provisions
Net identifiable assets acquired
Goodwill
Net assets acquired
Fair Value
$000
152
616
1,777
10,353
98
4,327
(6,102)
(815)
10,406
45,199
55,605
The goodwill is attributable to the workforce and the profitability of the acquired business. It will not be deductible for
tax purposes.
Acquisition related costs
Significant acquisition related costs amounting to $2.1 million were incurred in connection with the purchase of Collins
Restaurants West Pty Ltd and are included in administration expenses in the Consolidated Income Statement.
Purchase consideration – cash flow
2014
2013
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less balances acquired
Cash
Outflow of cash – investing activities
55,605
152
55,453
Revenue and profit contribution
The acquired business contributed revenues of $15.4 million and net profit of $0.4 million (excluding costs of acquisition
expensed) to the Group for the period 7 March 2014 to 27 April 2014. If the acquisition had occurred on 29 April 2013, the
contributed revenue for the year ended 27 April 2014 would have been $109.8 million with a corresponding net profit of
$3.0 million.
–
–
–
81
Collins Foods Limited Annual Report 2014 Note 36: Earnings per share
Basic earnings per share
From continuing operations
Diluted earnings per share
From continuing operations
2014
cents
2013
cents
15.08
17.60
15.03
17.60
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Profit for the reporting period
Earnings used in the calculation of basic earnings per share from continuing operations
2014
$000
14,025
14,025
2014
Number
of shares
2013
$000
16,368
16,368
2013
Number
of shares
Weighted average number of ordinary shares for the purpose of
basic earnings per share
93,000,003
93,000,003
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are
as follows:
Profit for the reporting period
Earnings used in the calculation of diluted earnings per share from continuing operations
Weighted average number of ordinary shares for the purpose
of diluted earnings per share
2014
$000
14,025
14,025
2014
Number
of shares
2013
$000
16,368
16,368
2013
Number
of shares
93,320,121
93,000,003
82
Collins Foods Limited Annual Report 2014Notes to the ConsolidatedFinancial Statements Note 37: Parent entity financial information
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 capital1
Reserves
Retained earnings
Profit for the reporting period
Total comprehensive income
2014
$000
2013
$000
108
241,424
241,532
5,626
6,485
12,111
89
242,144
242,233
4,906
8,787
13,693
229,421
228,540
228,426
228,426
160
835
–
114
229,421
228,540
10,021
10,021
14,001
14,001
1
Represents share capital of the parent entity. This differs from the share capital of the Group due to the capital reconstruction of the Group treated as a reverse
acquisition in the 2012 reporting period.
Guarantees entered into by the parent entity
The parent entity has provided unsecured financial guarantees in respect of bank loan facilities amounting to $165 million as
stated in Note 18. In addition, there are cross guarantees given by the parent entity as described in Note 23. 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.
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 27 April 2014.
83
Collins Foods Limited Annual Report 2014 Directors’
Declaration
In the Directors’ opinion:
–
–
–
the financial statements and notes set out on pages 32 to 83 are in accordance with the Corporations Act 2001, including:
–
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 27 April 2014 and of its performance for the
period ended on that date;
–
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 23 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 23.
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.
This report is made in accordance with a resolution of Directors.
Russell Tate
Chairman
Brisbane
25 June 2014
84
Collins Foods Limited Annual Report 2014
Independent
Auditor’s Report
Independent auditor’s report to the members of Collins Foods
Limited
Report on the financial report
We have audited the accompanying financial report of Collins Foods Limited (the company), which
comprises the balance sheet as at 27 April 2014, the income statement, statement of comprehensive
income, statement of changes in equity and statement of cash flows for the period ended on that date,
a summary of significant accounting policies, other explanatory notes and the directors’ declaration for
Collins Foods Limited (the consolidated entity). The consolidated entity comprises the company and
the entities it controlled at period’s end or from time to time during the financial period.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards, the Corporations Act 2001
and for such internal 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, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the financial report
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
DX 77 Brisbane, Australia
T: +61 7 3257 5000, F: +6
1 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
85
Collins Foods Limited Annual Report 2014 Independent
Auditor’s Report
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Collins Foods Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 27 April
2014 and of its performance for the period ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations), the Corporations Regulations 2001 and .
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 20 to 28 of the directors’ report for the
period ended 27 April 2014. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Collins Foods Limited for the period ended 27 April 2014
complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Steven Bosiljevac
Partner
Brisbane
25 June 2014
86
Collins Foods Limited Annual Report 2014 Shareholder
information
Shareholder information that has not been stated elsewhere in the Annual Report is set out below. The shareholder information
set out below was applicable as at 17 June 2014.
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
Total
Number of
shareholders
of ordinary shares
Number of
holders of
performance
rights
1,372
2,220
741
542
49
4,924
–
–
–
3
2
5
During the year 22,552 performance rights were cancelled.
There were 67 holders of less than a marketable parcel of ordinary shares.
B. Equity Security Holders
The names of the 20 largest holders of the only class of quoted equity securities are listed below:
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Mr Kevin Perkins
Aust Executor Trustees SA Ltd
National Nominees Limited
Spacetime Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Hooks Enterprises Pty Ltd
Sandhurst Trustees Ltd
Brispot Nominees Pty Ltd
Brazil Farming Pty Ltd
Mrs Heather Lynnette Grace
Plymouth Pty Ltd
Michael Kemp Pty Ltd
Adrian Mark Argent
UBS Nominees Pty Ltd
Sandhurst Trustees Ltd
Ordinary shares
Number held
10,830,626
10,678,000
8,826,843
8,673,164
8,160,492
7,000,833
4,336,897
4,137,082
1,322,000
866,036
660,000
600,587
586,596
555,000
527,801
400,000
360,327
350,014
321,040
311,799
Percentage of
issued shares
%
11.65
11.48
9.49
9.33
8.77
7.53
4.66
4.45
1.42
0.93
0.71
0.65
0.63
0.60
0.57
0.43
0.39
0.38
0.35
0.34
87
Collins Foods Limited Annual Report 2014 Shareholder
information
C. Substantial Holders
Substantial holders (including associate holdings) in the Company, based on the most recent substantial holder notices lodged
with the Company and ASX, are set out below:
Allan Gray Australia Pty Ltd
Copulos Group
Kevin Perkins
Ordinary shares
Number held
Percentage
17,455,661
11,500,000
7,000,833
18.77%
12.37%
7.53%
D. Restricted Securities and Share Buy-backs
There are no restricted fully paid shares on issue in the Company. A voluntary holding lock will be applied in relation to 35,608
fully paid ordinary shares, if they are issued, upon the vesting of 35,608 performance rights in accordance with the rules of
the LTIP.
The Company is not currently conducting an on-market share buy-back.
E. Voting Rights
Fully paid ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote. Upon a poll, each share shall
have one vote.
Performance rights
The performance rights do not have any voting rights. The fully paid ordinary shares to be allotted on the exercise of the
performance rights will have the voting rights noted above for fully paid ordinary shares.
88
Collins Foods Limited Annual Report 2014 Corporate
Directory
Directors
Russell Tate, Chairman
Kevin Perkins, Managing Director/CEO
Newman Manion
Bronwyn Morris
Stephen Copulos
Company Secretary
Frances Finucan
Principal Registered Office in Australia
16-20 Edmondstone Street
Newmarket QLD 4051
Share Register
Computershare Investor Services Pty Ltd
117 Victoria Street
West End QLD 4101 Australia
Telephone number: 1300 458 215
Outside Australia: +61 3 9415 4245
Auditor
PricewaterhouseCoopers
Riverside Centre, Level 15
123 Eagle Street
Brisbane QLD 4000
Stock Exchange Listings
Collins Foods Limited shares are listed on the Australian Securities Exchange.
Website Address
www.collinsfg.com.au
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