Collins Foods Limited
ANNUAL REPORT 2016
COLLINS FOODS LIMITED
ABN 13 151 420 781
2016 has delivered a strong
financial result, and we are
well-placed to continue
to maximise growth
opportunities.
Contents
1 Our financial performance
3 Our year in review
4
5
Chairman’s message
CEO’s report
8 Directors’ Report
29
Auditor’s Independence Declaration
30 Consolidated Income Statement
Key dates for 2015-2016
31
Consolidated Statement of Comprehensive Income
Tuesday, 28 June 2016
Full year results released
32 Consolidated Balance Sheet
Wednesday, 6 July 2016
Final dividend record date
33
Consolidated Statement of Cash Flows
Wednesday, 13 July 2016
Final dividend payment date
34
Consolidated Statement of Changes in Equity
Thursday, 1 September 2016 2016 Annual General Meeting
35
Notes to the Consolidated Financial Statements
Sunday, 16 October 2016
FY17 half-year end
69 Directors’ Declaration
70
Independent Auditor’s Report
72 Shareholder Information
73 Corporate Directory
Wednesday, 30 November 2016 Half-year results released
Thursday, 8 December 2016
Interim dividend record date
Thursday, 15 December 2016
Interim dividend payment date
Sunday, 30 April 2017
End of FY17
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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)
571.6
574.3
425.1
600
500
400
300
200
Underlying NPAT
Statuatory NPAT ($ million)
(A$ million)
30.1
24.6
17.9
25
20
15
10
0.5%
Revenue was up 0.5%
compared to the previous
corresponding period.(a)
100
0
FY14
FY15
FY16
3.1%
KFC Same Store Sales
Same store sales up, to 3.1%
(FY15: 4.8%).
10.7%
Underlying EBITDA
Underlying Earnings Before Interest,
Tax, Depreciation and Amortisation up,
to $74.6m (FY15: $67.4m).
1.1%
Net operating cashflow
Net operating cashflow up,
to $49.7m (FY15: $49.1m).
(a) Excluding the additional trading week in FY15, revenue up 2.4%.
22.3%
5
Underlying NPAT was up 22.3%
to $30.1m (FY15: $24.6m).
0
FY14
FY15
FY16
381.0%
Statutory NPAT
Statutory NPAT of $29.1m
(FY15: Statutory NPAT loss $10.4m).
21.7%
Dividends
Total FY16 fully franked dividends
paid up, to 14.0 cps (FY15: 11.5 cps).
2.0 points
ROCE
Return on Capital Employed up 2.0 points,
to 14.9% (FY15: 12.9%).
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Japan
Sizzler (9)
China
Sizzler (10)
Thailand
Sizzler (47)
Northern Territory
KFC (4)
Queensland
KFC (131)
Sizzler (15)
Snag Stand (3)
Western Australia
KFC (41)
Sizzler (4)
New South Wales
KFC (2)
Sizzler (2)
Snag Stand (2)
ACT
Snag Stand (1)
6 We are proud to have opened
six new KFC restaurants during
the year, bringing the total
number of all our restaurants
in Australia to 205.
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Our year in review
We have continued to build on the momentum of the previous
years, delivering good sales growth, increased margins and cash
flows and an improvement in our return on capital employed.
KFC
KFC achieved solid growth as
a result of good sales growth
underpinned by innovative products,
disciplined cost management and
the strong performance of recent
new restaurant acquisitions.
´ We invested in new restaurant developments and major
remodels to provide customers a contemporary restaurant
design for an enhanced dining experience
– Built six new restaurants
–
Ten major remodels in Queensland and ten
in Western Australia
–
Eight minor remodels across the network
´ Customers responded to a very successful summer
cricket marketing campaign
´ Product innovation was key in driving sales growth
across the KFC business
Sizzler
While Sizzler Australia continues to
be managed as non-core to Collins
Foods’ strategic growth, the Sizzler
Asia business has had a great year
with royalty revenues up 14.5% on
the prior year and a further six new
restaurants built.
Snag Stand
Snag Stand continues to establish itself
as a unique and innovative offering.
A new Stand at Pacific Fair on the
Gold Coast was opened late last year
reflecting the shift in position of the
Brand. This Stand has great customer
appeal and has performed well so far.
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Chairman’s message
Collins Foods Limited has continued to build on its strengths
in 2016, and as a result has delivered another solid financial
performance. As the largest KFC franchisee in Australia, it
is pleasing that the Group’s flagship business led the way in
achieving excellent results throughout the year. In March, the
Company also achieved a milestone when it was included in
the S&P ASX 300.
The 2016 performance has resulted from a focus on disciplined
management of our restaurants, together with an ongoing
implementation of measures designed to optimise efficiencies.
Overall, the Group reported a statutory Net Profit After Tax
of $29.1m; an increase of 381% on the previous year.
The Group’s revenue increased by 0.5% to $574.3m driven
by same store sales growth and new restaurant openings.
The performance of the Western Australia and Northern
Territory KFC restaurants acquired in 2014 continued to
improve during 2016 with profits from this business reinvested
into our restaurants to fund ongoing growth.
On the back of this pleasing financial performance, the
Company has paid shareholders a final dividend of 8 cents per
share, bringing the full year dividend to 14 cents per share. The
final dividend was paid on 13 July 2016. This 2016 dividend is
in line with the Board’s commitment to pay out 50% of the
full year profits, excluding those of KFC Western Australia and
Northern Territory.
The Group’s focus on delivering value and innovation to our
customers has been key to the success of our KFC business
in the face of stiff competition and evolving consumer tastes
and preferences.
Collins Foods will pursue growth opportunities in the current
year as evidenced by our agreement to acquire 13 KFC
restaurants around the New South Wales and Victorian border
after the end of the 2016 financial year. This acquisition
strengthens the Group’s national footprint and consolidates
our position as the largest KFC franchisee in Australia.
The Sizzler Australia business is managed as a non-core part
of the business with no further growth capital to be allocated.
Despite this, the business continues to deliver positive EBITDA
for the Group.
The Snag Stand business model continues to evolve and we
have taken the Brand under the guidance of Collins Foods’
management by buying the remaining 50% of Snag Stand.
Outlook
The Group is excited and optimistic about the opportunities
that will emerge during the coming financial year and will
continue to invest in the KFC business.
An ongoing focus on value and innovation which meets
the evolving demands of our customers will be critical
to our success. The Group’s growth will be secured by
a focus on disciplined operational management of our
restaurants, in addition to our commitment to continuously
improving efficiencies.
In closing, I would like to thank my fellow Directors for their
professionalism, experienced counsel and input throughout
the year. On behalf of the Board, thanks must also go to our
experienced management team led by Managing Director and
CEO Graham Maxwell for their dedicated pursuit of improved
performance across all of our businesses. Finally, I would also
like to thank our talented employees, whose numbers have
grown to more than 9,000 Australia wide throughout the
Collins Foods business, for their tremendous dedication and
effort to their respective brands in helping to deliver these
excellent results.
Robert Kaye SC
Independent Non-executive Chairman
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CEO’s report
Collins Foods Limited delivered another strong performance
in 2016. This performance builds upon the momentum of
previous years, delivering good sales growth, increased
margins and cashflow with improvement to our return on
capital employed.
Throughout the year, we continued to focus on maximising
operational performance, building a strong platform for
growth and strengthening resilience within the business.
Growth of the KFC business
Collins Foods continues to pursue growth opportunities across
Australia. The decision to acquire 13 KFC restaurants in the
New South Wales/Victorian border area underscores our
ambition and positions the Group for further growth in these
Australian states. At completion, our KFC restaurant count in
Australia will be 191.
Financial performance
The strong business performance, against a challenging
economic background, delivered Net Profit After Tax of
$29.1m. Underlying Net Profit After Tax increased by
22.3% to $30.1m compared to the prior year.
Revenue for the year increased 0.5% over the prior year
(the prior year was a 53 week year) with underlying EBITDA
for the Group increasing by 10.7% to $74.6m. Underlying
EBIT increased 16.0% to $52.4m.
Overall, the Group generated net operating cash flows of
$49.7m, an increase of $0.5m on the prior year. This enabled
net debt to be reduced by $10.3m to $112.5m, and improved
the Group’s net leverage ratio (net debt to EBITDA) from
1.83 to 1.52 at the end of the year. Return on capital
employed increased 2.0 percentage points to 14.9%.
During the past year, the Group refinanced its existing
syndicated debt facilities. The existing facilities of $165m were
extended to $200m, with $65m (fully drawn) having a term to
31 October 2018 and two facilities totalling $135m (drawn to
$100m) having a term to 31 October 2020. The debt facilities
will support the ongoing expansion of the business and assist
in achieving long term sustainable earnings growth.
Operational performance
KFC
KFC had a strong year, delivering overall revenue growth
of 3.8% to $501.6m (the prior year was a 53 week year)
and same store sales growth of 3.1%. Sales growth was
underpinned to a large extent through providing our
customers with craveable and innovative products while
at the same time offering great value.
Overall EBITDA increased by 10.1% to $81.9m. This
improvement of EBITDA margin reflects our ongoing focus
on disciplined operational management.
During the financial period we continued to develop our
network of KFC restaurants with a further six new restaurants
being built – three in Queensland and three in Western
Australia. We are committed to investing in our existing
restaurants to ensure they meet the evolving needs of our
customers and as such undertook 20 major remodels across
the network (with an additional eight minor remodels).
We continued to focus on providing our customers with great
experiences and products, delivered in a contemporary and
welcoming environment. Ongoing focus on improving the
speed of the drive-through and the increasing use of digital
menu boards in our existing restaurants is also adding to the
overall customer experience.
The brand is increasing its presence on social media, using this
platform for engaging with our younger customers to ensure
that the brand remains relevant and in touch with their ever
changing and fast paced lives.
Sizzler
Sizzler Australia continues to be managed as a non-core
business. While sales were down on the prior year as a result
of same store sales decline and the closure of four restaurants,
EBITDA was maintained compared to the prior year.
Sizzler Asia had a strong year with royalty growth increasing
14.5% over the prior year. A further six new restaurants
were built, with five in Thailand and one in Japan. The overall
number of Sizzler restaurants across Thailand, China and
Japan now stands at 65. There are plans to build a further six
new restaurants across Asia during the current financial year.
Snag Stand
Snag Stand is establishing itself as a unique and innovative
offering in the competitive fast casual environment. During
the year we opened a new Snag Stand at Pacific Fair on the
Gold Coast. This new Stand reflects the refined direction of
the brand, has high customer appeal and has performed well
to date. During the year we closed two Stands in Melbourne
that did not reflect this new brand positioning. The Group
now operates five Company owned Stands and one
franchised Stand across Australia.
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Health & Safety
Collins Foods is absolutely committed to providing a safe and
healthy workplace across all of our operations and operating
companies. We take our goal of zero harm to our employees,
contractors and third party providers seriously and are
committed to working with our employees to ensure that we
continuously improve operational safety. Furthermore, we are
equally committed to ensuring that our customers are never
placed in any harm.
Charitable support
As a Group, Collins Foods is committed to our continued
support of charitable and community organisations. In 2016,
through our Workplace Giving program we were able to
donate almost $500,000 to the five charities we support. Of
this figure employee donations totalled more than $290,000
with the remainder comprising customer donations of
approximately $100,000 which was matched by Collins Foods.
During the same period, Collins Foods also contributed more
than $80,000 to World Hunger, raised through in restaurant
customer donations and staff fundraising initiatives. As a
Group, we also supported other sporting and community
groups, such as Queensland Cricket, the Hear & Say Centre
and Child Protection Week.
Conclusion
Collins Foods will continue to pursue growth opportunities
across Australia. The decision to acquire 13 KFC restaurants
in New South Wales/Victoria reflects this intent. In addition,
we will grow the KFC business organically through existing
store sales growth and building new restaurants. We will also
explore any further acquisition opportunities that meet Collins
Foods’ strategic criteria.
We will remain focused on maximising operational
performance, building a strong platform for growth and
strengthening resilience within the business.
In closing, a big thank you to all of our employees across
our restaurants and Support Centre for their dedication and
commitment to making Collins Foods a great company. I look
forward to another exciting year ahead as we focus on our
key business priorities.
Graham Maxwell
Managing Director & CEO
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Collins Foods Limited
ACN 151 420 781
Financial report
For the reporting period ended 1 May 2016
Contents
08 Directors’ Report
15 Letter to Shareholders
16 Remuneration Report
29 Auditor’s Independence Declaration
30 Consolidated Income Statement
31 Consolidated Statement of Comprehensive Income
32 Consolidated Balance Sheet
33 Consolidated Statement of Cash Flows
34 Consolidated Statement of Changes in Equity
35 Notes to the Consolidated Financial Statements
35 A/ Financial overview
35
A1/ Segment information
50 F/ Other information
50
51
51
52
54
57
57
58
59
61
61
F1/ Commitments for expenditure
F2/ Earnings per share
F3/ Receivables
F4/ Property, plant and equipment
F5/ Intangible assets
F6/ Trade and other payables
F7/ Provisions
F8/ Reserves
F9/ Tax
F10/ Auditors remuneration
F11/ Contingencies
36
A2/ Revenue and other income
62 G/ Group structure
37
A3/ Expenses
38 B/ Cash management
62
G1/ Subsidiaries and Deed of Cross Guarantee
65
G2/ Parent entity financial information
B1/ Cash and cash equivalents
66 H/ Basis of preparation and other accounting policies
38
39
39
40
B2/ Borrowings
B3/ Ratios
B4/ Dividends
41 C/ Financial Risk Management
41
C1/ Financial risk management
66
H1/ Basis of preparation
67
H2/ Other Accounting policies
68
I/ Subsequent events
68
68
I1/ Acquisition of 13 KFC restaurants
I2/ Acquisition of Snag Stand
44
C2/ Recognised fair value measurements
69 Director’s Declaration
45
C3/ Derivative Financial Instruments
70
Independent Auditor’s Report
47 D/ Reward and Recognition
72 Shareholder Information
47
D1/ Key management personnel
73 Corporate Directory
47
D2/ Share based payments
48
D3/ Contributed equity
49 E/ Related parties
49
49
E1/ Investments accounted for using the equity method
E2/ Related party transactions
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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 1 May 2016.
Directors
The names of the Directors of the Company during or since the end of the financial period are as follows:
Name
Robert Kaye SC
Graham Maxwell
Kevin William Joseph Perkins
Bronwyn Kay Morris
Newman Gerard Manion
Russell Keith Tate
Date of appointment
7 October 2014
25 March 2015
15 July 2011
10 June 2011
10 June 2011
10 June 2011
Principal activities
During the period, the principal 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.
At the end of the period, the Group operated 177 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
22 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 65 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.
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, amortisation and impairment
(EBITDA) ($m)
Earnings before interest and tax (EBIT) ($m)
Profit/(loss) before related income tax expense ($m)
Income tax (expense) ($m)
Net profit/(loss) attributable to members (NPAT) ($m)
Earnings per share (EPS) basic (cents per share)
Total dividends paid/payable in relation to financial period (cents per share) (2)
Net assets ($m)
Net operating cash flow ($m)
2016 (1)
574.3
74.3
50.8
42.2
(13.1)
29.1
31.31
14.0
189.7
49.7
2015 (1)
571.6
67.4
6.8
(2.5)
(7.9)
(10.4)
(11.14)
11.5
171.3
49.1
Change
0.5%
10.2%
642%
1788%
65%
381%
381%
21.7%
10.7%
1.1%
(1) The financial period ended 1 May 2016 was a 52 week period whilst the financial period ended 3 May 2015 was a 53 week period.
(2) Dividends paid/payable is inclusive of dividends declared since the end of the relevant reporting period.
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The Group’s total revenues increased by 0.5% to $574.3m mainly due to strong like-for-like sales growth and new restaurant
openings across the KFC business. Excluding the additional trading week in the prior year (2015 was a 53 week year), total
revenues were up by 2.4%.
This increase in total revenues combined with the continued good business controls flowed through to significantly increased
EBITDA for the year of $74.6m, up 10.7% on prior year and improved net operating cash flow of $49.7m, up 1.1%.
Statutory EBITDA, EBIT, NPAT and EPS were impacted by significant items relating to Sizzler Australia totalling $1.6m pre-tax.
Of these items, there were non-cash pre-tax impairment charges of $2.0m and a non-cash onerous lease provision of $1.3m
mitigated by a cash gain on the sale of property of $1.7m.
Net assets at the Balance Sheet date were $189.7m, up from $171.3m as at 3 May 2015. Net debt was $112.5m at the
Balance Sheet date, down from $122.8m as at 3 May 2015.
Underlying financial metrics excluding significant items which occurred in the current period are summarised as follows:
Underlying financial metrics
Total revenue ($m)
Earnings before interest, tax, depreciation, amortisation and impairment
(adjusted EBITDA) ($m)
Net profit attributable to members (NPAT) ($m)
Earnings per share (EPS) basic (cents)
2016
574.3
74.6
30.1
32.3
2015
571.6
67.4
24.6
26.4
Change
0.5%
10.7%
22.3%
22.3%
The notable increase in the underlying financial metrics shown above is a reflection of the strong sales growth and good cost
controls referred to above. These are discussed further in the review of underlying operations below.
Review of underlying operations
KFC RESTAURANTS
There has been a good overall performance across the KFC business.
Revenues in KFC were up 3.8% on the prior corresponding period to $501.6m, driven by increased restaurant numbers as well
as good same store sales growth.
Strong product promotions including another successful summer cricket campaign, great value offers and innovative new
products and packaging all combined to drive increased traffic into our stores. More sophisticated use of social and digital media
channels are keeping brand awareness and customer engagement high, and will also deliver increased value over time.
KFC adjusted EBITDA was up $7.5m (+10.1%) on the previous corresponding period. Higher profit margins (+92bps) were
achieved due to continued improvements in labour productivity and other efficiency measures which mitigated the impact of
increases in key input costs, principally labour rates, and the ongoing challenge of a very competitive trading environment.
In order to keep the brand awareness and perception high, KFC invested circa $30m in new restaurants, refurbishment and
systems capital. This supports ongoing growth as it keeps the restaurants looking contemporary and inviting for our customers
and enables KFC to meet its restaurant refurbishment obligations with Yum!
SIZZLER RESTAURANTS
Revenues in Sizzler were down 17.9% on the prior corresponding period to $72.6m, with same store sales in Australia
declining 11.4%.
The retail conditions in the casual dining space remain highly competitive. With the brand no longer considered core to strategic
growth of the Group, no growth capital was allocated to this part of the business. During the year, four restaurants were closed
in Australia. On an underlying basis, Sizzler EBITDA was up $0.8m (18.8%) on the previous corresponding period, due in part to
excellent ongoing focus on cost management, enabling margins to be held despite the declining sales.
Sizzler franchise operations in Asia contributed an increase of $0.4m to this result over the prior corresponding period driven by
increased royalty revenue. During the period, there was one restaurant closed in Japan. There were six new restaurant openings
in the period, five of which were in Thailand and one in Japan.
SNAG STAND
The focus of the joint venture management team has been on continuing the development and refinement of the Snag Stand
concept. During the period, a new Snag Stand was opened at Pacific Fair, Gold Coast that incorporated new brand elements
which reflect the latest thinking on the revised brand positioning. The Stand opened well and has been trading well since
its opening.
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Directors’ Report
Strategy and future performance
GROUP
The medium term strategy is to consolidate the KFC
New South Wales and Victoria acquisition announced on
19 May 2016, continue to further build economies of scale
and grow the Group’s returns to enhance shareholder value.
This could be through further KFC expansion opportunities in
other states and territories or the acquisition or development
of other operations in the retail food and restaurant
industry sector.
KFC RESTAURANTS
KFC expects the retail environment to remain competitive
with more moderate sales growth and upward pressure on
input costs continuing, making it challenging to maintain
existing margins. Future focus will be top line growth through
strong product offerings and enhanced in-store customer
experience, and opening of new stores in conjunction with
disciplined cost control driving improved returns.
SIZZLER RESTAURANTS
Sales trends in Sizzler Australia are expected to remain
challenging, with same store sales growth in negative
territory. However with disciplined cost control we expect to
mitigate the impact of this decline on profitability. The Sizzler
Australia business continues to be managed as no longer core
to strategic growth in Australia. No further growth capital
was invested in this business. The ongoing performance
of the business continues to be closely monitored and
appropriate action will be taken as and when necessary.
In relation to its Asian operations, Sizzler’s strategy is to
continue to expand the number of franchised site locations
with up to six new restaurants anticipated to be opened
during the next financial year.
SNAG STAND
Our investment in the start-up company Snag Stand provides
an opportunity to invest in an innovative concept in the
fast casual dining sector. The Snag Stand Group has been
focused on improving operational performance in existing
outlets as well as developing a pipeline for growth. The
business operating model is being further refined with
a focus on brand development, new store growth and
operations efficiency.
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:
´ 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, manage 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 that provide 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 performance. 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 communication with labour unions.
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DIVIDENDS
Dividends paid to members during the financial period were as follows:
Final ordinary dividend for the financial period
ended 3 May 2015
Interim ordinary dividend for the financial period
ended 18 October 2015
Total
Cents
per share
Total amount
$000
Franked/
Unfranked
Date of
payment
6.5
6.0
12.5
6,045
Franked
23 July 2015
Franked
23 December
2015
5,580
11,625
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 8.0 cents per ordinary share ($7.4m) to be paid on 13 July 2016
(refer to Note B4 of the Financial Report).
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no 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
On 19 May 2016 the Group entered into a binding agreement to acquire 13 KFC restaurants located around the New South
Wales and Victorian border. The details of this agreement are referred to in Note I1 Subsequent Events, of the Consolidated
Financial Statements.
On 15 June 2016 the Group acquired the remaining 50% share of Snag Holdings Pty Ltd for a nominal sum to take
full ownership.
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.
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Directors’ Report
Information on Directors
Director
Experience, qualifications and directorships
Robert Kaye SC
Robert is the Independent, Non-executive Chairman. He is also Chairman
of ASX listed Spicers Limited and a Non-executive Director of ASX listed
Magontec Limited and UGL Limited.
Graham Maxwell
Kevin Perkins
In 1978, Robert was admitted to legal practice and prior to this, was employed
as a solicitor at Allen Allen & Hemsley Solicitors. Thereafter, he pursued his
legal career at the NSW Bar and was appointed Senior Counsel in 2003,
practising in commercial law. He has been extensively involved in an array
of commercial matters both advisory and litigious in nature and served on
a number of NSW Bar Association committees including the Professional
Conduct Committee.
Other listed entity directorships – current or held within last three years
Spicers Limited (2012 – current)
Magontec Limited (2013 – current)
UGL Limited (2015 – current)
Graham is an experienced senior executive of corporate and franchise
businesses, predominantly in fast moving consumer goods and fast foods,
both in Australia and internationally. He is a commercially astute management
professional with proven success in leveraging and growing businesses
through their brands. Prior to his current role, Graham spent over six years
working for Yum! Brands in a number of capacities. His last position with
Yum! Brands was as Managing Director for KFC Southern Africa.
Other listed entity directorships – current or held within last three years
None other than Collins Foods Limited.
Kevin is a highly experienced executive in the Quick Service Restaurant (QSR)
and casual dining segments of the Australian restaurant industry. He has had
more than 31 years’ experience with the Collins Foods Group, having overseen
its growth both domestically and overseas over that time.
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.
Special responsibilities
Independent
Non-executive Chair
Audit and Risk
Committee Member
Remuneration
and Nomination
Committee Member
Managing Director
& CEO
Executive Director
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Director
Newman Manion
Bronwyn Morris
B. Com, FCA, FAICD
Russell Tate
B. Com (Econ.)
Experience, qualifications and directorships
Newman has over 31 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 was previously appointed
as a Director of each of the Snag Stand group entities, however, since this
business became 100% owned by Collins Foods Group, his oversight role is
no longer required. Accordingly, Newman has resigned 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.
Bronwyn is a Chartered Accountant with over 21 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 nearly 20 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 Chair of, or a member of, the Audit and Risk
Committees with respect to a number of her Board roles. Bronwyn is a
Director of ASX listed Watpac Limited, Royal Automobile Club of Queensland
Limited (since 2008), RACQ Insurance Limited (since 2014), LGIA Super
(since 2013, Chair since 2014) and Care Australia (since 2007).
Other listed entity directorships – current or held within last three years
Spotless Group Limited (2007 to 2012)
Watpac Limited (2015 – current)
Special responsibilities
Independent
Non-executive
Director
Remuneration
and Nomination
Committee Chair
Audit and Risk
Committee Member
Independent
Non-executive
Director
Audit and Risk
Committee Chair
Remuneration
and Nomination
Committee Member
Russell has over 35 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 was Chairman (Non-executive)
of Collins Foods Limited from its listing in 2011 until March 2015, and has
remained Executive Chairman of ASX listed Macquarie Radio Network Limited,
now Macquarie Media Limited, since 2009. He is currently a Director of
One Big Switch Pty Ltd (since 2012), and a Director of digital marketing
company ROKT Pty Ltd (since 2016).
Independent
Non-executive
Director
Audit and Risk
Committee Member
Remuneration
and Nomination
Committee Member
Other listed entity directorships – current or held within last three years
Macquarie Media Limited (Executive Chairman, since 2009)
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Directors’ Report
The relevant interest of each Director in the share capital issued by the Company, at the date of this report is as follows:
Name
Robert Kaye SC
Graham Maxwell
Kevin Perkins
Newman Manion
Bronwyn Morris
Russell Tate
Ordinary
shares
10,000
–
7,340,833
20,001
5,001
20,001
Performance
Rights
–
448,389
103,859
–
–
–
COMPANY SECRETARY
Frances Finucan LLB (Hons), BA (Modern Asian Studies), Grad Dip ACG, AGIA, MQLS, GAICD
The Company Secretary is Frances Finucan who was appointed to the role on 17 July 2013. Frances has over 14 years’ experience
in legal, commercial and corporate governance working in legal, regulatory and company secretarial roles in Australia.
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors and of each Board Committee held during the period ended
1 May 2016, and the number of meetings attended by each Director, were:
FULL MEETINGS OF DIRECTORS
AUDIT AND RISK COMMITTEE
REMUNERATION AND
NOMINATION COMMITTEE
Number of
meetings (1) Meetings attended
Number of
meetings (1) Meetings attended
Number of
meetings (1) Meetings attended
Robert Kaye SC
Graham
Maxwell
Kevin Perkins
Newman
Manion
Bronwyn Morris
Russell Tate
10
10
10
10
10
10
10
9**
10
10
9
9
7
*
*
7
7
7
7
*
*
7
7
4
5
*
*
5
5
5
5
*
*
5
4
5
(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.
** Did not attend or participate due to conflict of interest.
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Most recent AGM – remuneration report comments
and voting.
Newman
Manion
Independent Non-executive Director
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 (KMP) 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:
Key Management Personnel disclosed in this report.
Remuneration governance.
1
2
3
4
5
6
7
8
9
10
11
Non-executive Director remuneration.
Executive remuneration principles and strategy.
Remuneration structure and performance/shareholder
wealth creation.
Details of Key Management Personnel remuneration.
Key Management Personnel service agreements.
Details of share based compensation.
Equity instruments held by Key Management Personnel.
Loans to Key Management Personnel.
12 Other transactions with Key Management Personnel.
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1
Key Management Personnel
disclosed in this report
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
Robert Kaye SC
Independent Non-executive Chairman
(appointed as Director on 7 October
2014)
Graham Maxwell Managing Director & CEO (appointed as
a Director on 25 March 2015)
Kevin Perkins
Executive Director
Bronwyn Morris
Independent Non-executive Director
Russell Tate
Independent Non-executive Director
Martin Clarke
CEO – KFC
Nigel Williams
Group Chief Financial Officer
Details and disclosures relating to KMPs who held office in
the prior financial period have been included in this report
as required.
2 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.
The following annual fees (excluding superannuation)
have applied.
3
Most recent AGM – Remuneration
Report comments and voting
At the most recent Annual General Meeting in 2015, 96.96%
of votes cast at the meeting in favour of the adoption of the
Remuneration Report.
4
Non-executive Director
remuneration
The remuneration for Non-executive Directors is set, taking
into consideration factors including:
Position
Base fees
Chair (including all Committee
memberships)
Other Non-executive Directors
Additional fees
Audit and Risk Committee, Chair
´ the level of fees paid to Board members of other publicly
Audit and Risk Committee, Member
listed Australian companies of similar size;
´ operational and regulatory complexity; and
´ the responsibilities and workload requirements of each
Board member.
Remuneration and Nomination
Committee, Chair
Remuneration and Nomination
Committee, Member
2016
$
180,000
85,000
15,000
5,000
10,000
5,000
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 $30,000 was made to
Newman Manion by the Group in recognition of additional
responsibilities performed in relation to overseeing 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, is not additional
Director’s fees. Following the end of the reporting period, the
Company has increased its investment in Snag Stand to 100%.
As a result of the Snag Stand group entities becoming wholly
owned subsidiaries of the Company, the ongoing additional
responsibilities previously held by Newman Manion in relation
to overseeing the Group’s investment in the Snag Stand group
entities have ceased.
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 that are
purchased on marked and of their own accord.
Directors’ shareholdings in the Company are outlined in
Section 10 of this report.
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
reporting period in relation to Non-executive Directors’ fees.
5
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.
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Directors’ Report
Remuneration Report (continued)
The executive remuneration framework components and their links to performance outcomes are outlined below:
Remuneration component
Vehicle
Purpose
Fixed remuneration
Base pay and benefits
including superannuation
Short Term Incentive Plan
(STIP)
Cash bonus payment
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
Link to performance
Group and individual
performance assessments
are considered in an annual
remuneration review
EBITDA targets must be met in
order for bonus to be paid
Long Term Incentive
Plan (LTIP) (approved by
shareholders at the 2013
Annual General Meeting)
Awards in the form of
performance rights
Rewards executives for their
contribution to the creation
of shareholder value over the
longer term
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, resulting in a proportion of an executive’s target pay
being at risk.
The effect of the introduction of the LTIP is that a percentage of the executive’s remuneration is ‘at risk’ and directly linked to
Group performance in both the short and longer term.
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 Short Term Incentive (STI) opportunity percentage is 50% of base salary. For other
executive KMP, 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.
The EBITDA benchmarks were set with reference to the annual Group Budgeted EBITDA for the year ended 1 May 2016.
The Group’s financial performance for the financial period ended 1 May 2016 resulted in all Executive Directors and KMP being
eligible for a STI 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.
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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?
What quantum of awards will participants receive
under the LTIP?
When are the grants made?
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?
Change of Control
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 and other select
senior executives.
Awards are 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.
A guiding principle for the initial grant is for awards to
generally equate to 30% to 40% of a participant’s target
STI opportunity.
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 Annual
General Meeting.
LTIP performance rights vest three years following the
date of grant, subject to achievement of EPS targets. For
the FY16 grant, performance will be tested following
determination of the basic EPS for the financial period
ending 28 April 2019, compared to the basic EPS for the
financial period ended 1 May 2016.
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
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.
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.
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Directors’ Report
Remuneration Report (continued)
LTIP SUMMARY
Rights and restrictions of Performance Rights
Performance Rights are not entitled to receive a dividend.
Any Shares issued or transferred to a Participant upon
vesting of Performance Rights are only entitled to dividends
if they were issued on or before the relevant dividend
entitlement date.
The Company may impose a mandatory holding lock on
the Shares or a Participant may request they be subject to a
voluntary holding lock.
Shares issued or transferred under the LTIP rank equally in
all respects with other Shares on issue.
In the event of a reconstruction of the Company
(consolidation, subdivision, reduction, cancellation or
return), the terms of any outstanding Performance Rights
will be amended by the Board to the extent necessary to
comply with the Listing Rules at the time of reconstruction.
Any bonus issue of securities by way of capitalisation of
profits, reserves or share capital account will confer on each
Performance Right, the right:
´ to receive on exercise or vesting of those Performance
Rights, not only an allotment of one Share for each of
the Performance Rights exercised or vested but also
an allotment of the additional Shares and/or other
securities the Employee would have received had the
Employee participated in that bonus issue as a holder
of Shares of a number equal to the Shares that would
have been allotted to the Employee had they exercised
those Incentives or the Performance Rights had vested
immediately before the date of the bonus issue; and
´ to have profits, reserves or share premium account,
as the case may be, applied in paying up in full those
additional Shares and/or other securities.
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.
Performance Rights will not be quoted on ASX. The
Company will apply for quotation of any Shares issued
under the LTIP.
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. The appropriateness of LTI performance targets and vesting conditions will continue to
be regularly reviewed by the Remuneration and Nomination Committee.
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.
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6 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 ($m) (1)
Dividends paid/payable in relation to financial period (cents per share) (2)
EPS basic (cents) (1)
EPS basic (cents) (1) – compound growth on 2014 base
EPS basic (cents) (1) – growth on 2015 base
Change in share price ($)
Short term incentive payments as % of target payments (3)
2016
74.6
30.1
14.0
32.31
29.62%
22.2%
1.63
145%
2015
67.4
24.6
11.5
26.3
22.5%
–
0.40
150%
(1) Represents underlying measures after adjustment for other significant items disclosed in the Group financial performance above.
(2) Dividends paid/payable is inclusive of dividends declared since the end of the relevant reporting period.
(3) Represents only KMP participants receiving short term incentive payments.
Both the STIP and LTIP are subject to achievement of pre-determined performance measures linked to the above
financial metrics.
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Directors’ Report
Remuneration Report (continued)
7 Details of Key Management Personnel remuneration
Details of remuneration received or receivable by the Directors and other KMP of the Group for the current financial period are
set out in the following table.
2016*
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG TERM BENEFITS
Cash salary
and fees
$
Cash bonus
$
Non-monetary
benefits
$
Other (1)
$
Super-
annuation
$
Long service
leave
$
Performance
Rights
$
Total
$
Name
Non-
executive
Directors
Robert
Kaye SC
Russell
Tate (2)
Newman
Manion (1)
Bronwyn
Morris
Executive
Directors
Graham
Maxwell
Kevin
Perkins (3)
Other
executive
KMP
Martin
Clarke
Nigel
Williams
180,000
95,000
100,000
105,000
480,000
–
–
–
–
–
–
–
–
–
–
–
–
30,000
–
30,000
638,466
487,500
12,541
253,619
892,085
–
487,500
14,244
26,785
297,611
238,289
14,518
344,846
642,457
252,404
490,693
978,193
15,182
29,700
56,485
–
–
–
–
–
–
17,100
–
–
9,975
27,075
29,167
16,001
45,168
–
–
–
–
–
–
–
–
–
–
–
197,100
95,000
130,000
114,975
537,075
344,064
1,511,738
7,357
7,357
78,029
369,250
422,093
1,880,988
26,162
8,199
60,736
645,515
18,016
44,178
–
33,113
663,561
8,199
15,556
93,849
1,309,076
515,942
3,727,139
Total Group
2,014,542
30,000
116,421
*
The reporting period of 3 May 2015 to 1 May 2016 is a period representing 52 weeks, compared to the comparative reporting period 28 April 2014 to
1 May 2015 representing 53 weeks.
(1) Other short term employee benefits relate to consulting fees paid in relation to overseeing the Group’s investment in the Snag Stand group entities.
Following the end of the reporting period, the Company has increased its investment in Snag Stand to 100%. As a result of the Snag Stand group entities
becoming wholly owned subsidiaries of the Company, the ongoing additional responsibilities previously held by Newman Manion in relation to his oversight
of the Group’s investment in the Snag Stand group entities have ceased.
(2) Remuneration is/was paid to a corporate entity under a Consulting Agreement with the Company for the provision of his services as a Non-executive Director.
(3) Kevin Perkins remains actively involved as an Executive Director overseeing the Sizzler Asia business.
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Details of remuneration received or receivable by the Directors and other KMP of the Group for the previous financial period are
set out in the following table.
2015*
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG TERM BENEFITS
Cash salary
and fees
$
Cash bonus
$
Non-monetary
benefits
$
Other (1)
$
Super-
annuation
$
Long service
leave
$
Performance
Rights
$
Total
$
Name
Non-
executive
Directors
Robert
Kaye SC (2)
Russell
Tate (2) (3)
Newman
Manion (1) (3)
Bronwyn
Morris
Stephen
Copulos (3) (6)
Executive
Directors
Graham
Maxwell (4)
Kevin Perkins
(5)
Other
executive
KMP
Martin
Clarke
John Hands
63,692
166,154
100,000
107,019
38,571
475,436
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,000
–
–
5,722
–
–
9,935
–
30,000
15,657
592,032
483,904
12,510
427,339
1,019,371
362,414
846,318
13,200
25,710
292,674
303,601
596,275
274,592
156,303
430,895
12,951
9,690
22,641
48,351
Total Group
2,091,082
1,277,213
–
–
–
–
–
–
36,111
72,276
108,387
33,191
24,732
57,923
30,000
181,967
–
–
–
–
–
–
–
–
–
–
–
–
–
69,414
166,154
130,000
116,954
38,571
521,093
195,374
1,319,931
12,685
12,685
46,818
934,732
242,192
2,254,663
32,777
5,975
38,752
51,437
26,507
16,728
43,235
672,692
517,029
1,189,721
285,427
3,965,477
*
The reporting period of 28 April 2014 to 3 May 2015 is a period representing 53 weeks, compared to the comparative reporting period 29 April 2013 to
27 April 2014 representing 52 weeks.
(1) Other short term employee benefits relate to consulting fees paid in relation to overseeing the Group’s investment in the Snag Stand group entities.
(2) Russell Tate retired as Chairman and Robert Kaye SC assumed the role of Independent Non-executive Chairman with effect from 25 March 2015. Mr Tate
continues as an Independent Non-executive Director and member of the Audit and Risk Committee, and Remuneration and Nomination Committee.
(3) Remuneration is/was paid to a corporate entity under a Consulting Agreement with the Company for the provision of his services as a Non-executive Director.
(4) Remuneration paid to Graham Maxwell reflects his role as Group CFO and Chief Operating Officer for the period 28 April 2014 to 28 September 2014 and his
role as Managing Director & CEO for the period 29 September 2014 to 3 May 2015.
(5) Remuneration paid to Kevin Perkins reflects his role as Managing Director & CEO for the period 28 April 2014 to 28 September 2014 and his role as
Executive Director for the period 29 September 2014 to 3 May 2015.
(6) Remuneration was paid to Stephen Copulos until the date of his resignation as a Director of the Company on 1 October 2014.
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Directors’ Report
Remuneration Report (continued)
8 Key Management Personnel service agreements
Key details of the service agreements of Graham Maxwell, Managing Director & CEO, and Kevin Perkins, Executive Director are
as follows:
´ agreement has effect and executive’s employment under their respective service agreement will continue until terminated
in accordance with the agreement (12 months’ notice is required by either party or payment in lieu of notice in the case of
the Company for Graham Maxwell, and three months’ notice is required by either party or payment in lieu of notice in the
case of the Company for Kevin Perkins); and
´ includes a restraint of trade period of 12 months for both Graham Maxwell and Kevin Perkins, excluding Sizzler, USA in the
case of Kevin Perkins.
Key details of service agreements of any other person who was a KMP 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
Chief Executive Officer – KFC
Nigel Williams
Group Chief Financial Officer
Contract duration
Ongoing
Ongoing
MINIMUM NOTICE PERIOD
(MONTHS)
Termination by
Executive
Termination by
Group (1)
1
3
3
3
(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.
9 Details of share based compensation
PERFORMANCE RIGHTS
For each Performance Right included in the tables on pages 22 and 23, 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 KMP fail to satisfy the vesting conditions (see pages 19 and 20). 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.
NAME
CURRENT YEAR LTI
ENTITLEMENT
Awarded
Forfeited
Financial
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
Nigel
Williams
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
2014
103,859
1.50
2014
2015
2016
2014
2015
2016
356,088
92,301
33,316
35,608
27,690
20,009
1.50
1.89
2.77
1.50
1.89
4.14
–
–
–
–
–
–
–
2016
40,019
4.14
-–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
2017
2018
2019
2017
2018
2019
–
–
46,473
36,884
–
13,942
33,112
2019
66,226
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10 Equity instruments held by Key Management Personnel
SHAREHOLDINGS
The numbers of shares in the Company held during the financial period by the Directors of the Company and the KMP 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
2016
Directors
Robert Kaye SC
Graham Maxwell
Kevin Perkins
Newman Manion
Bronwyn Morris
Russell Tate
Other KMP
Martin Clarke
Nigel Williams
2015
Directors
Robert Kaye SC
Graham Maxwell
Kevin Perkins
Newman Manion
Bronwyn Morris
Russell Tate
Other KMP
Martin Clarke
John Hands
PERFORMANCE RIGHTS
2016
Graham Maxwell
Kevin Perkins
Martin Clarke
Nigel Williams (1)
2015
Graham Maxwell
Kevin Perkins
Martin Clarke
John Hands
BALANCE
AT START OF
PERIOD
CHANGES
DURING THE
PERIOD
BALANCE
AT END OF
PERIOD
–
–
7,340,833
20,001
5,001
20,001
126,262
–
–
–
7,340,833
20,001
5,001
20,001
126,262
210,409
10,000
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,340,833
20,001
5,001
20,001
126,262
–
–
–
7,340,833
20,001
5,001
20,001
126,262
210,409
BALANCE
AT START OF
REPORTING
PERIOD
GRANTED AS
COMPENSATION
BALANCE
AT END OF
REPORTING
PERIOD
VESTED
UNVESTED
448,389
103,859
63,298
–
356,088
103,859
35,608
23,739
33,316
–
20,009
40,019
92,301
–
27,690
15,961
481,705
103,859
83,307
40,019
448,389
103,859
63,298
39,700
–
–
–
–
–
–
–
–
481,705
103,859
83,307
40,019
448,389
103,859
63,298
39,700
(1) Nigel Williams commenced employment with the Company on 18 May 2015.
For further information on Performance Rights refer Note D2.
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Directors’ Report
Remuneration Report (continued)
PERFORMANCE RIGHTS
Performance Rights of Collins Foods Limited issued at the date of this report are as follows:
Date performance rights granted
18 September 2013 (1)
1 October 2013 (1)
13 November 2014 (1)
1 October 2015 (1)
22 December 2015 (1)
Expiry date
25 July 2016
25 July 2016
26 July 2017
24 July 2018
24 July 2018
Exercise price
of Performance
Rights
Nil
Nil
Nil
Nil
Nil
Number of
Performance
Rights granted
103,859
427,304
149,797
33,316
89,272
803,548
(1)
Included in these Performance Rights were Performance Rights granted as remuneration to the Executive Directors and the five most highly remunerated
officers during the reporting period. Details of Performance Rights granted to KMP are disclosed on page 15.
In addition, the following Performance Rights were granted to officers who were among the five highest remunerated officers of
the company and the Group, but are not KMP and hence not disclosed in the Remuneration Report:
Name of officer
David Nash
John Hands
Date granted
1 October 2013
13 November 2014
22 December 2015
1 October 2013
13 November 2014
22 December 2015
Exercise price
of Performance
Rights
Nil
Nil
Nil
Nil
Nil
Nil
Number of
Performance
Rights granted
11,869
13,845
9,235
23,739
15,961
10,774
No Performance Rights were granted to the Directors or any of the five highest remunerated officers of the Company since the
end of the financial year.
11 Loans to Key Management Personnel
As of the end of the reporting period, there were no loans with Directors, Director-related entities or other KMP. As of the end
of the prior reporting period, there were no loans with Directors, Director-related entities or other KMP.
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12 Other transactions with Key Management Personnel
Directors and other KMP 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.
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. During the period, the Company has entered into a Deed of Indemnity,
Insurance and Access with each of the Company’s Directors, Group CFO, CFO Australia 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.
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 external 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
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 non-audit services
2016
$
2015
$
10,716
21,032
10,506
20,620
31,748
31,126
36,000
–
4,378
40,378
72,126
31,000
24,750
4,793
60,543
91,669
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Directors’ Report
Remuneration Report (continued)
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 29.
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.
Robert Kaye SC
Chairman
Brisbane
28 June 2016
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Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Collins Foods Limited for the period ended 1 May 2016, I declare that
to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
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.
Kim Challenor
Partner
PricewaterhouseCoopers
Brisbane
28 June 2016
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Consolidated Income Statement
For the reporting period ended 1 May 2016
Revenue
Cost of sales
Gross profit
Selling, marketing and royalty expenses (1)
Occupancy expenses (1)
Restaurant related expenses (1)
Administration expenses (1)
Other expenses (1) (2)
Other income (3)
Profit from continuing operations before finance income, finance costs and
income tax (EBIT)
Finance income
Finance costs
Share of net loss of joint ventures accounted for using the equity method
Profit/(loss) from continuing operations before income tax
Income tax expense
Profit/(loss) from continuing operations
Net profit/(loss) 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
A2
2016
$000
2015
$000
574,284
571,593
(270,943)
(272,955)
303,341
(118,217)
(45,264)
(53,721)
(33,115)
(5,323)
3,111
50,812
746
(8,949)
(381)
42,228
(13,113)
29,115
29,115
298,638
(117,937)
(47,171)
(56,170)
(39,701)
(31,753)
943
6,849
602
(9,081)
(868)
(2,498)
(7,862)
(10,360)
(10,360)
A2
A3
A3
F9(a)
F2
F2
F2
F2
31.31 cps
(11.14) cps
31.06 cps
(11.14) cps
93,000,003
93,000,003
93,732,586
93,000,003 (4)
(1)
Impairment charges included in expenses are as follows: selling marketing expenses $21,000, occupancy expenses $537,000, restaurant related expenses
$750,000 (2015: selling marketing expenses $140,000, occupancy expenses $2,472,000, restaurant related expenses $2,236,000, administration expenses
$6,279,000 and other expenses $27,146,000).
(2) Other expenses in the 2016 reporting period include a charge for an onerous lease of $1,250,000 and restaurant smallwares write-off of $740,000.
(3) Other income in the 2016 reporting period includes a gain on disposal of land and building of $1,746,000.
(4) Shares attached to performance rights granted to employees are not considered to be potential ordinary shares, as including such securities in the calculation
would result in a decreased loss per share therefore being anti-dilutive. Hence the diluted earnings per share is equal to the basic earnings per share.
The above Consolidated Income Statement should be read in conjunction with the accompanying Notes.
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N
N
A
D
E
T
I
M
I
L
S
D
O
O
F
S
N
I
L
L
O
C
|
0
3
Consolidated Statement
of Comprehensive Income
For the reporting period ended 1 May 2016
Net profit/(loss) attributable to members of Collins Foods Limited
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 for the reporting period, net of tax
Note
F8
F8
F9
2016
$000
29,115
2015
$000
(10,360)
185
211
(64)
332
2,404
(3,132)
939
211
Total comprehensive income/(expense) for the reporting period
29,447
(10,149)
Total comprehensive income/(expense) for the reporting period is
attributable to:
Owners of the parent
29,447
(10,149)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
6
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E
R
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A
U
N
N
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I
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3
Consolidated Balance Sheet
As at 1 May 2016
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/(Accumulated losses)
Total equity
Note
B1
F3
F4
F5
F9(b)
F3
F6
C3
F7
C2
C3
F7
D3
F8
2016
$000
2015
$000
52,464
9,008
4,398
65,870
88,000
247,952
25,234
11
1,243
362,440
428,310
42,234
6,232
4,657
53,123
79,477
248,400
24,840
1,493
1,613
355,823
408,946
58,035
56,466
4,131
1,726
4,541
3,638
1,873
4,613
68,433
66,590
164,240
164,551
2,705
3,235
170,180
238,613
189,697
182,098
2,364
5,235
189,697
2,762
3,754
171,067
237,657
171,289
182,098
1,446
(12,255)
171,289
The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.
6
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R
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E
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A
U
N
N
A
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I
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2
3
Consolidated Statement of Cash Flows
For the reporting period ended 1 May 2016
Cash flows from operating activities:
Receipts from customers
Payments to suppliers and employees
GST paid
Interest received
Interest and other borrowing costs paid
Income tax paid
Net operating cash flows
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Purchase of franchise rights
Payments for plant and equipment
Net investing cash flows
Cash flow from financing activities:
Loans advanced – related parties
Refinance fees paid
Dividends paid
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
Note
2016
$000
2015
$000
630,571
(524,205)
(35,886)
749
(8,404)
(13,137)
49,688
3,173
(639)
(27,642)
(25,108)
(1,840)
(839)
(11,625)
(14,304)
10,276
42,234
(46)
52,464
627,516
(523,203)
(33,279)
629
(8,834)
(13,685)
49,144
–
(489)
(32,488)
(32,977)
(1,060)
–
(10,230)
(11,290)
4,877
36,983
374
42,234
B1
B4
B1
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.
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Consolidated Statement of Changes In Equity
For the reporting period ended 1 May 2016
NOTE
CONTRIBUTED
EQUITY
RESERVES
2015
Beginning of the reporting period
Loss for the reporting period
Other comprehensive income
Total comprehensive income/(expense) for
the reporting period
Transactions with owners in their capacity
as owners:
Share-based payments
Dividends provided for or paid
B4
End of the reporting period
2016
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
B4
$000
182,098
–
–
–
–
–
182,098
$000
182,098
–
–
–
–
–
End of the reporting period
182,098
$000
939
–
211
211
296
–
1,446
$000
1,446
–
332
332
586
–
2,364
(ACCUMULATED
LOSSES)/
RETAINED
EARNINGS
$000
8,335
(10,360)
–
TOTAL EQUITY
$000
191,372
(10,360)
211
(10,360)
(10,149)
–
(10,230)
(12,255)
$000
(12,255)
29,115
–
296
(10,230)
171,289
$000
171,289
29,115
332
29,115
29,447
–
(11,625)
5,235
586
(11,625)
189,697
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
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3
Notes to the Consolidated
Financial Statements
A/ FINANCIAL OVERVIEW
This section provides information that is most relevant to explaining the Group’s performance during the year, and where
relevant, the accounting policies that have been applied and significant estimates and judgments made.
A1/ Segment information
A2/ Revenue and other income
A3/ Expenses
A1/ Segment information
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 & CEO.
DESCRIPTION OF SEGMENTS
Management has determined, following the integration of the KFC Western Australia and Northern Territory restaurants,
the operating segments based on the reports reviewed by the Managing Director & CEO that are used to make strategic
decisions. Hence three reportable segments have been identified: KFC Restaurants (competing in the quick service restaurant
market), Sizzler Restaurants (competing in the full service restaurant market) and Shared Services which performs a number of
administrative and management functions for the Group’s KFC and Sizzler Restaurants.
SEGMENT INFORMATION PROVIDED TO THE MANAGING DIRECTOR & CEO
The following is an analysis of the revenue and results by reportable operating segment for the periods under review:
2016
Total segment revenue
Adjusted EBITDA (1)
Depreciation, amortisation
and impairment
Finance costs – net
Income tax expense
2015
Total segment revenue
Adjusted EBITDA (1)
Depreciation, amortisation
and impairment
Finance costs – net
Income tax expense
KFC
RESTAURANTS
SIZZLER
RESTAURANTS
SHARED
SERVICES
ALL OTHER
SEGMENTS
$000
501,638
81,898
18,398
(1)
16,330
$000
483,112
74,396
17,948
(12)
14,397
$000
72,646
5,323
3,218
(3)
(507)
$000
88,481
4,479
39,557
(2)
(3,568)
$000
–
(13,045)
1,419
8,208
(3,448)
$000
–
(12,004)
2,667
8,495
(3,525)
$000
–
407
11
(1)
738
$000
–
522
14
(2)
558
TOTAL
$000
574,284
74,583
23,046
8,203
13,113
$000
571,593
67,393
60,186
8,479
7,862
(1) Refer below for a description and reconciliation of Adjusted EBITDA.
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.
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A1/ Segment information (continued)
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, franchise rights, brand assets and goodwill are also excluded to
the extent they are isolated non-recurring events. Net finance costs (including the impact of derivative financial instruments) are
not allocated to segments as this type of activity is driven by the central treasury function, which manages the cash position of
the Group.
A reconciliation of Adjusted EBITDA to profit/(loss) from continuing operations before income tax is provided as follows:
Adjusted EBITDA
Finance costs – net
Long term incentive provision
Performance rights
Depreciation
Amortisation
Impairment of property, plant and equipment
Impairment of KFC franchise rights
Impairment of Sizzler brand – Australia
Impairment of Sizzler goodwill
Write off of restaurant smallwares
Provision for onerous lease
Gain on disposal of land and building
Share of net loss of joint ventures accounted for using the equity method
Profit/(loss) from continuing operations before income tax
A2/ Revenue and other income
Revenue from continuing operations
Sales revenue:
Sale of goods
Other revenue:
Franchise revenue from external parties
Total revenue
Other income
Net gain on disposal of property, plant and equipment
Traineeship income
Other
Total other income
2016
$000
74,583
(8,203)
105
(586)
(20,304)
(1,434)
(1,308)
–
–
–
(740)
(1,250)
1,746
(381)
42,228
2015
$000
67,393
(8,479)
(63)
(296)
(20,350)
(1,563)
(4,720)
(128)
(6,279)
(27,146)
–
–
–
(868)
(2,498)
2016
$000
2015
$000
570,639
568,494
3,645
574,284
3,099
571,593
1,485
411
1,215
3,111
–
282
661
943
ACCOUNTING POLICY
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.
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A
U
N
N
A
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Notes to the Consolidated Financial Statements
A3/ Expenses
Profit/(loss) from continuing operations before income tax includes the following specific expenses:
Depreciation, amortisation and impairment
Depreciation
Amortisation
Impairment
Total depreciation, amortisation and impairment
Finance income and costs
Finance income
Finance costs
Net finance costs
Employee benefits expense
Wages and salaries
Defined contribution superannuation expense
Employee entitlements
Total employee benefits expense
Operating lease rentals
Inventories recognised as an expense
Long term incentive provision
Performance rights
Write off of restaurant smallwares
Provision for onerous lease
Net loss on disposal of property, plant and equipment
Bank transaction fees
2016
$000
2015
$000
20,304
1,434
1,308
23,046
(746)
8,949
8,203
139,707
10,542
9,794
160,043
31,400
187,818
(105)
586
740
1,250
–
2,079
20,350
1,563
38,273
60,186
(602)
9,081
8,479
139,973
10,852
10,357
161,182
31,341
188,851
63
296
–
–
411
1,767
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B/ CASH MANAGEMENT
Collins Foods Limited has a focus on maintaining a strong balance sheet with the strategy incorporating the Group’s
expenditure, growth and acquisition requirements, and the desire to return dividends to shareholders.
B1/ Cash and cash equivalents
B2/ Borrowings
B3/ Ratios
B4/ Dividends
B1/ Cash and cash equivalents
Cash at bank and on hand
2016
$000
52,464
2015
$000
42,234
Reconciliation of profit/(loss) from continuing operations to net cash inflow from operating activities
Profit/(loss) from continuing operations
Adjustments for non-cash income and expense items:
Depreciation, amortisation and impairment
(Gain)/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
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
Net operating cash flows
2016
$000
29,115
23,046
(1,587)
529
586
(103)
(1,280)
493
(512)
55
(1,078)
816
363
(281)
381
(855)
49,688
2015
$000
(10,360)
60,186
411
170
296
107
(201)
(1,407)
(4,410)
(55)
732
(1,218)
150
(2,197)
868
6,072
49,144
ACCOUNTING POLICY
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.
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A
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A
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Notes to the Consolidated Financial Statements
B2/ Borrowings
AVAILABLE FINANCING FACILITIES
Used
Unused
Total
Working Capital
Facility
$000
910
14,090
15,000
2016
Revolving Bank
Loans
$000
165,000
Working Capital
Facility
$000
876
35,000
200,000
9,124
10,000
2015
Revolving Bank
Loans
$000
165,000
–
165,000
A subsidiary of the Company, CFG Finance Pty Limited, is the primary borrower under a Syndicated Facility Agreement
(Syndicated Facility) and a Working Capital Facility Agreement (Working Capital Facility). On 15 December 2015 the Group
completed an amendment to these existing facilities including an increase in the syndicated facility to $200m and an increase
to the working capital facility to $15m. The Syndicated Facility includes a $65m tranche which expires 31 October 2018.
All other borrowing facilities expire on 31 October 2020.
Facilities
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. During
the reporting period ended 1 May 2016, the Group maintained compliance with the financial covenants and restrictions of these
facilities. 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.
ACCOUNTING POLICY
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 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.
B3/ Ratios
CAPITAL MANAGEMENT
The Group manages its capital by maintaining a strong capital base. The Group assesses its capital base by reference to its
gearing ratio, which it defines as net debt divided by total capital. Net debt is calculated as borrowings (excluding capitalised
fees) less cash and cash equivalents. Total capital is calculated as total equity as shown in the balance sheet plus net debt.
At balance date, the gearing ratio was 37% (2015: 42%).
NET DEBT
General cash at bank and on hand
Borrowings – non-current
Net debt
NET LEVERAGE
Net debt
EBITDA per Syndicated Facility Agreement
Net leverage
Note
B1
2016
$000
52,464
165,000
112,536
2016
$000
112,536
74,102
1.52
2015
$000
42,234
165,000
122,766
2015
$000
122,766
67,034
1.83
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B4/ Dividends
DIVIDENDS
Dividends paid of $0.125 (2015: $0.11) per fully paid share
FRANKING CREDITS
Franking credits available for the subsequent reporting period based on a tax rate of 30%
2016
$000
11,625
2016
$000
65,129
2015
$000
10,230
2015
$000
54,316
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 8.0 cents per ordinary share ($7.4m) to be paid on 13 July 2016. 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 $7,440,000.
ACCOUNTING POLICY
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.
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4
Notes to the Consolidated Financial Statements
C/ FINANCIAL RISK MANAGEMENT
This section provides information relating to the Group’s exposure to financial risks, how they affect the financial position
and performance, and how the risks are managed.
C1/ Financial risk management
C2/ Recognised fair value measurements
C3/ Derivative financial instruments
C1/ Financial risk management
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.
The Group’s activities expose it to a variety of financial
risks: market risk (including currency risk, interest risk and
price risk), credit risk and liquidity risk. In addition, the
Group manages its capital base. 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 2016 and 2015, 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.
It is the policy of the Group to protect a designated portion
of the loans from exposure to increasing interest rates.
Accordingly, the Group has entered into interest rate swap
contracts (Swap Contract) under which it is obliged to receive
interest at variable rates and to pay interest at fixed rates.
Information about the Group’s variable rate borrowings,
outstanding Swap Contracts and an analysis of maturities at
the reporting date is disclosed in Notes C1 and C3.
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
F3) is not past due, nor impaired (2015: 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 B2 and G1 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 B2. Non-interest bearing liabilities are due within six
months. For maturities of interest bearing liabilities and Swap
Contracts of the Group, refer to Notes C1 and C3.
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C1/ Financial risk management (continued)
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.
CONTRACTUAL
MATURITIES OF
FINANCIAL LIABILITIES
2016
Non-derivatives
Trade and other
payables
Borrowings
Total non-derivatives
Derivatives
Net settled
(Swap Contracts)
2015
Non-derivatives
Trade and other
payables
Borrowings
Total non-derivatives
Derivatives
Net settled
(Swap Contracts)
NOTE
LESS THAN
1 YEAR
BETWEEN 1
AND 2 YEARS
BETWEEN 2
AND 5 YEARS
OVER
5 YEARS
TOTAL
CONTRACTUAL
CASH FLOWS
CARRYING
AMOUNT
$000
$000
$000
$000
$000
$000
F6
C2
C3
F6
C2
58,035
8,183
66,218
1,748
$000
56,466
8,638
65,104
–
7,951
7,951
1,509
$000
–
178,502
178,502
1,463
$000
–
72,078
72,078
–
108,282
108,282
C3
1,959
1,457
1,845
–
–
–
–
$000
–
–
–
–
58,035
194,636
252,671
58,035
164,240
222,275
4,720
$000
4,431
$000
56,466
188,998
245,464
56,466
164,551
221,017
5,261
4,635
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 and Foreign Exchange Risk
2016
Financial assets
CARRYING
AMOUNT
$000
56,836
Financial liabilities
231,597
Total increase/
(decrease)
2015
Financial assets
$000
45,592
Financial liabilities
229,739
Total increase/
(decrease)
INTEREST RATE RISK
FOREIGN EXCHANGE RISK
–1%
+1%
–20%
+20%
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
PROFIT
EQUITY
$000
(390)
305
(85)
$000
(306)
305
$000
–
(3,144)
(3,144)
$000
–
$000
390
(305)
85
$000
306
$000
–
3,144
3,144
$000
–
(2,317)
(305)
2,317
$000
1,192
(13)
1,179
$000
720
(9)
(1)
(2,317)
1
2,317
711
$000
–
–
–
$000
–
–
–
$000
(1,192)
13
(1,179)
$000
(720)
9
(711)
$000
–
–
–
$000
–
–
–
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Notes to the Consolidated Financial Statements
Interest rate risk exposures – non-current liabilities
The following table summarises interest rate risk for the Group, together with effective interest rates as at the end of the
reporting period.
FIXED INTEREST MATURING IN:
FLOATING
INTEREST
RATE
NOTES
5 YEARS
OR LESS
MORE THAN
5 YEARS
NON-INTEREST
BEARING
$000
$000
$000
$000
WEIGHTED
AVERAGE
EFFECTIVE
RATE
TOTAL
$000
F6
C3
C3
F6
C3
C3
–
43,500
–
43,500
$000
–
43,500
–
43,500
–
–
121,500
121,500
$000
–
–
121,500
121,500
–
–
–
–
$000
–
–
–
–
58,035
58,035
–
–
58,035
$000
43,500
3.9%
5.3%
121,500
223,035
$000
56,466
56,466
–
–
56,466
43,500
4.2%
121,500
221,466
5.4%
2016
Trade and other
payables
Borrowings
– unhedged
Borrowings –
hedged (1)
2015
Trade and other
payables
Borrowings
– unhedged
Borrowings –
hedged (1)
(1) Refer Note C3 for details of derivative financial instruments.
Interest rate risk exposures – current assets receivables
The Group’s exposure to interest rate risk and the average interest rate by maturity period is set out in the following table:
FIXED INTEREST MATURING IN:
FLOATING
INTEREST
RATE
NOTES
5 YEARS
OR LESS
MORE THAN
5 YEARS
NON-INTEREST
BEARING
$000
$000
$000
$000
WEIGHTED
AVERAGE
EFFECTIVE
RATE
TOTAL
$000
F3
F3
F3
F3
–
3,289
3,289
$000
–
1,460
1,460
–
–
–
–
–
–
$000
$000
–
–
–
–
–
–
1,094
1,094
–
1,094
$000
3,289
4,383
$000
1,931
1,931
7.6%
–
1,931
1,460
3,391
7.7%
2016
Trade and other
receivables
Related party
receivables
2015
Trade and other
receivables
Related party
receivables
CREDIT RISK
There is no concentration of credit risk with respect to external current and non-current receivables.
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C2/ 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.
The fair values of derivative instruments are determined as the estimated amount that the Group and the Company would
receive or pay to terminate the interest rate swap at the end of the reporting period, taking into account the current
interest rate.
The Directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements
approximate to their fair values.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels 1 to 3, based on
the degree to which the fair value is observable. The different levels have been identified as follows:
´ quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
´ inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices) (Level 2); and
´ inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
As at 1 May 2016, the Group has derivative financial instruments which are classified as Level 3 financial instruments.
There are no Level 1 or Level 2 financial instruments. As at 3 May 2015, the Group had derivative financial instruments
which were classified as Level 3 financial instruments. There were no Level 1 or Level 2 financial instruments.
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.
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:
Bank Loan (net of borrowing costs)
164,240
156,409
5.8
Carrying
amount
$000
Fair value
$000
Discount rate
%
Carrying
amount
$000
164,551
Fair value
$000
159,459
Discount rate
%
5.8
2016
2015
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 engages a third party expert valuation firm that performs the valuation of derivative
financial instruments that are required to be measured, recognised and disclosed in the financial statements, at fair value.
This includes Level 3 fair values. The finance department 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
finance department 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 finance department. As part of this discussion the finance department presents
a report that explains the reason for the fair value movements.
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Notes to the Consolidated Financial Statements
ACCOUNTING POLICY
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 F3) and non-current
receivables (Note F3) 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.
C3/ Derivative financial instruments
Current liabilities
Interest rate swap contracts – cash flow hedges
Non-current liabilities
Interest rate swap contracts – cash flow hedges
2016
$000
2015
$000
1,726
1,873
2,705
2,762
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.
INTEREST RATE SWAP CONTRACTS – CASH FLOW HEDGES
During the year ended 1 May 2016 the Group entered into the following Swap Contracts to hedge a designated portion of the
interest rate exposure of the facility:
´ $48.75m commencing on 31 October 2016, with a maturity date of 31 October 2018; and
´ $75m commencing on 31 October 2018, with a maturity date of 31 October 2020.
Swap Contracts currently in place cover approximately 74% (2015: 74%) 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 2.14% (2015: 2.18%). The
notional principal amounts, periods of expiry and fixed interest rates applicable to the Swap Contracts are as follows:
Less than 1 year
1–2 years
2–3 years
3–4 years
4–5 years
2016
Weighted
average fixed
interest rate
3.2%
3.1%
2.7%
2016
$000
45,500
–
124,750
–
75,000
245,250
2015
Weighted
average fixed
interest rate
3.2%
3.7%
2015
$000
–
45,500
–
76,000
–
121,500
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 were designated as cash flow hedges at inception.
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The Group utilises interest rate swap contracts which are
designated as cash flow hedges. The effective portion of
changes in the fair value of swap contracts is recognised in
other comprehensive income and accumulated in reserves
in equity. The gain or loss relating to the ineffective portion
is recognised immediately in the Consolidated Income
Statement. Changes in fair value of any derivative instrument
that does not qualify for hedge accounting are recognised
immediately in the Consolidated Income Statement. Amounts
accumulated in equity are recycled in the Consolidated
Income Statement in the periods when the hedged item will
affect profit or loss.
The Group will discontinue hedge accounting prospectively
only when the hedging relationship, or part of the hedging
relationship no longer qualifies for hedge accounting,
which includes where there has been a change to the risk
management objective and strategy for undertaking the
hedge and instances when the hedging instrument expires
or is sold, terminated or exercised. For this purpose, the
replacement or rollover of a hedging instrument into another
hedging instrument is not an expiration or termination if such
a replacement or rollover is consistent with our documented
risk management objective.
When hedge accounting is discontinued 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.
C3/ Derivative financial instruments (continued)
CREDIT RISK EXPOSURES
At 1 May 2016, the Swap Contracts gave rise to payables for
unrealised losses on derivative instruments of $4.4m (2015:
$4.6m) for the Group. Management has undertaken these
contracts with the Australia and New Zealand Banking Group
Limited which is an AA rated financial institution.
ACCOUNTING POLICY
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.
At the start of a hedge relationship, the Group formally
designates and documents the hedge relationship, including
the risk management strategy for undertaking the hedge. This
includes identification of the hedging instrument, the hedged
item or transaction, the nature of the risk being hedged
and how the entity will assess the hedging instrument’s
effectiveness. Hedge accounting is only applied where
effective tests are met on a prospective basis.
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Notes to the Consolidated Financial Statements
D/ REWARD AND RECOGNITION
These programs also result in changes to the Group’s contributed equity.
D1/ Key management personnel
D2/ Share based payments
D3/ Contributed Equity
D1/ Key management personnel
KMP COMPENSATION
Short term employee benefits
Post-employment benefits
Long term benefits
Share-based payments
WHOLE DOLLARS
2016
$
2015
$
3,079,220
3,446,646
116,421
15,556
515,942
181,967
51,437
285,427
3,727,139
3,965,477
Detailed remuneration disclosures are provided in the Remuneration Report included in the Directors’ Report.
D2/ Share based payments
LONG TERM INCENTIVE PLAN – PERFORMANCE RIGHTS
The Company has a Long Term Incentive Plan (LTIP) designed to provide long term incentives for certain employees, including
executive directors. Under the plan, participants are granted performance rights over shares. The number of performance rights
is calculated by dividing the dollar value of the participant’s long term incentive by the ASX volume weighted average price of
the shares for the five trading 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).
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. 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.
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.
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D2/ Share based payments (continued)
Set out below are summaries of performance rights issued under the LTIP:
Balance at the beginning of the financial year
Issued during the reporting period
Lapsed during the reporting period
Balance at the end of the financial year
Vested and exercisable
2016
680,960
122,588
–
2015
531,163
149,797
–
803,548
680,960
–
–
All performance rights issued during the reporting period ended 1 May 2016 have an expiry date of 24 July 2018 and were
issued with an exercise price of nil. All performance rights issued during the reporting period ended 3 May 2015 have an expiry
date of 26 July 2017 and were issued with an exercise price of nil.
FAIR VALUE OF PERFORMANCE RIGHTS ISSUED
There were two tranches of performance rights issued during the reporting period ended 1 May 2016.
The assessed fair value of performance rights issued on 1 October 2015 was an average of $2.77. The fair value at issuance date
was determined using a discounted cash flow model incorporating the share price at issuance date of $3.22, the term of the
right, the expected dividend yield of 4.88% and the risk free interest rate for the term of the rights of 2.06%.
The assessed fair value of performance rights issued on 22 December 2015 was an average of $4.14. The fair value at issuance
date was determined using a discounted cash flow model incorporating the share price at issuance date of $4.61, the term of
the right, the expected dividend yield of 3.65% and the risk free interest rate for the term of the rights of 2.02%.
Performance rights issued during the reporting period ended 3 May 2015 were at an average of $1.89 per right.
ACCOUNTING POLICY
Equity settled share based payments are measured at the fair value of the equity instrument at the date of grant.
The fair value of performance rights granted is recognised as an employee benefit expense with a corresponding increase in
equity. The determination of fair value includes consideration of 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.
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.
D3/ Contributed equity
EQUITY OF PARENT COMPANY
Balance
Balance
Date
3 May 2015
1 May 2016
PARENT ENTITY
Ordinary shares
– fully paid
Share capital
$000
93,000,003
93,000,003
182,098
182,098
Total equity
$000
182,098
182,098
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.
ACCOUNTING POLICY
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.
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Notes to the Consolidated Financial Statements
E/ RELATED PARTIES
This section provides information relating to the Group’s related parties and the extent of related party transactions within
the Group and the impact they had on the Group’s financial performance and position.
E1/ Investments accounted for using the equity method
E2/ Related party transactions
E1/ Investments accounted for using the equity method
INTERESTS IN INDIVIDUALLY IMMATERIAL JOINT VENTURES
Name of entity
Sizzler China Pte Ltd
Snag Holdings Pty Ltd
% OF OWNERSHIP INTEREST
Place of
incorporation
Singapore
Australia
Acronym
SCP
SNG
2016
50
50
2015
50
50
ACCOUNTING POLICY
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.
E2/ Related party transactions
PARENT ENTITY
The parent entity and ultimate parent entity within the Group is Collins Foods Limited.
KEY MANAGEMENT PERSONNEL
Disclosures relating to the compensation of KMP are included in Note D1 and in the Remuneration Report included in the
Directors’ Report.
SUBSIDIARIES
The ownership interests in subsidiaries are set out in Note G1.
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
Loans to related parties
Class of related party
WHOLE DOLLARS
2016
$
2015
$
Loan advanced to a related party
Related entity – joint venture
Interest received or receivable
Related entity – joint venture
3,300,000
1,460,000
189,000
75,000
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F/ OTHER INFORMATION
F1/ Commitments for expenditure
F2/ Earnings per share
F3/ Receivables
F4/ Property, plant and equipment
F5/ Intangible assets
F6/ Trade and other payables
F7/ Provisions
F8/ Reserves
F9/ Tax
F10/ Auditor’s Remuneration
F11/ Contingencies
F1/ Commitments for expenditure
Capital commitments
Property, plant and equipment:
2016
$000
2015
$000
Aggregate capital expenditure contracted for at balance date but not recognised as
liabilities, payable
3,116
1,323
Operating leases
Operating leases relate to land, buildings and equipment with lease terms ranging from
1 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
33,806
92,348
44,857
171,011
(15,545)
155,466
33,593
86,529
40,386
160,508
(14,590)
145,918
ACCOUNTING POLICY
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 commencement 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 current and non-current 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.
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5
Notes to the Consolidated Financial Statements
F2/ Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings used in the calculation of basic and diluted earnings
per share from continuing operations ($,000)
Weighted average number of ordinary shares for the purpose
of basic earnings per share (number)
Weighted average number of ordinary shares for the purpose
of diluted earnings per share (number)
2016
cents
31.31
31.06
2015
cents
(11.14)
(11.14) (1)
29,115
(10,360)
93,000,003
93,000,003
93,732,586
93,000,003 (1)
(1) Shares attached to performance rights granted to employees are not considered to be potential ordinary shares, as including such securities in the calculation
would result in a decreased loss per share therefore being anti-dilutive. Hence the diluted earnings per share is equal to the basic earnings per share.
ACCOUNTING POLICY
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 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.
F3/ Receivables
CURRENT ASSETS
Loan to related party – joint venture
Allowance for doubtful receivable
Trade receivables
Interest receivable
Prepayments
NON-CURRENT ASSETS
Loan to related party – joint venture
Security deposits
2016
$000
3,300
(11)
3,289
1,081
2
4,636
9,008
2016
$000
–
11
11
2015
$000
–
–
–
1,893
5
4,334
6,232
2015
$000
1,460
33
1,493
ACCOUNTING POLICY
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. 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.
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F4/ Property, plant and equipment
Net book amount at 28 April 2014
Cost
Accumulated depreciation
Net book amount at 28 April 2014
Additions
Transfers from construction in progress
Depreciation expense
Impairment charge
Disposals – cost
Disposals – accumulated depreciation
Net book amount at 3 May 2015
Opening balance at 4 May 2015
Cost
Accumulated depreciation
(including impairment)
Net book amount at 4 May 2015
Additions
Transfers from construction in progress
Depreciation expense
Impairment charge
Disposals – cost
Disposals – accumulated depreciation
Net book amount at 1 May 2016
At 1 May 2016
Cost
Accumulated depreciation
(including impairment)
Net book amount at 1 May 2016
LAND &
BUILDINGS
LEASEHOLD
IMPROVEMENTS
PLANT &
EQUIPMENT
CONSTRUCTION
IN PROGRESS
$000
$000
$000
$000
6,777
(764)
6,013
17
6
(120)
(830)
–
–
5,086
94,502
(60,353)
34,149
1,361
18,584
(10,958)
(1,642)
(1,110)
1,062
41,446
72,216
(44,451)
27,765
3,869
7,190
(9,272)
(2,248)
(1,183)
970
27,091
4,591
–
4,591
27,193
(25,780)
–
–
(150)
–
5,854
TOTAL
$000
178,086
(105,568)
72,518
32,440
–
(20,350)
(4,720)
(2,443)
2,032
79,477
6,800
113,337
82,092
5,854
208,083
(1,714)
5,086
24
–
(34)
–
(1,349)
38
3,765
(71,891)
41,446
1,424
15,945
(10,933)
(537)
(3,248)
3,197
47,294
(55,001)
27,091
–
(128,606)
5,854
79,477
3,450
6,548
(9,337)
(771)
(4,631)
4,435
26,823
(22,493)
–
–
(28)
–
26,785
10,156
31,721
–
(20,304)
(1,308)
(9,256)
7,670
88,000
5,475
127,458
87,459
10,156
230,548
(1,710)
3,765
(80,164)
47,294
(60,674)
26,785
–
10,156
(142,548)
88,000
6
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5
Notes to the Consolidated Financial Statements
ACCOUNTING POLICY
All property, plant and equipment is recorded at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably.
Property, plant and equipment, excluding freehold land, is depreciated at rates based upon the expected useful economic life
as follows:
Buildings
Leasehold improvements
Plant and equipment
Method
Straight line
Average life
20 years
Straight line
Primary term of lease
Straight line
8 years
Leasehold improvements are depreciated over the unexpired period of the primary lease or the estimated life of the
improvement, whichever is the shorter.
The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
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 F5).
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.
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.
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F5/ Intangible assets
Opening balance at 28 April 2014
Cost
256,876
6,661
11,261
13,865
288,663
GOODWILL
FRANCHISE
RIGHTS
SIZZLER BRAND
AUSTRALIA
SIZZLER BRAND
ASIA
$000
$000
$000
$000
TOTAL
$000
Accumulated amortisation (including
accumulated impairment losses & foreign
currency translation)
Net book amount at 28 April 2014
Additions
Amortisation
Impairment charge
Foreign currency translation – cost
Foreign currency translation – accumulated
–
256,876
(1,328)
5,333
–
–
(27,146)
186
–
489
(551)
(128)
–
–
Net book amount at 3 May 2015
229,916
5,143
(4,720)
6,541
–
(262)
(6,279)
–
–
–
(1,923)
11,942
(7,971)
280,692
–
(750)
–
2,578
(429)
489
(1,563)
(33,553)
2,764
(429)
13,341
248,400
Opening balance at 4 May 2015
Cost
Accumulated amortisation (including
accumulated impairment losses & foreign
currency translation)
Net book amount at 4 May 2015
Additions
Amortisation
Impairment charge
Foreign currency translation – cost
Foreign currency translation – accumulated
257,062
7,150
11,261
16,443
291,916
(27,146)
229,916
(2,007)
5,143
–
–
–
25
–
639
(558)
–
–
–
(11,261)
–
–
–
–
–
–
–
(3,102)
13,341
(43,516)
248,400
–
(876)
–
352
(30)
639
(1,434)
–
377
(30)
12,787
247,952
Net book amount at 1 May 2016
229,941
5,224
Closing balance at 1 May 2016
Cost
Accumulated amortisation (including
accumulated impairment losses & foreign
currency translation)
Net book amount at 1 May 2016
257,087
7,789
11,261
16,795
292,932
(27,146)
229,941
(2,565)
5,224
(11,261)
–
(4,008)
12,787
(44,980)
247,952
6
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Notes to the Consolidated Financial Statements
IMPAIRMENT TEST FOR GOODWILL
Allocation of goodwill
CASH
GENERATING
UNIT KFC RESTAURANTS QLD/NSW
KFC RESTAURANTS WA/NT
2016
$000
2015
$000
2016
$000
2015
$000
Carrying
value
183,529
183,529
45,199
45,199
SIZZLER AUSTRALIA
RESTAURANTS
SIZZLER ASIA
2016
$000
–
2015
$000
2016
$000
2015
$000
–
1,213
1,188
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 cash generating units, there are no reasonable and likely changes in assumptions which
would result in an impairment.
During the reporting period ended 1 May 2016, the above cash generating units were tested for impairment in accordance with
AASB 136. No impairment was identified for these intangible assets. During the reporting period ended 1 May 2016 individual
restaurant assets were also tested for impairment in accordance with AASB 136. In the event that the carrying value of these
assets was higher than the recoverable amount (measured as the higher of fair value less costs to sell and value in use) an
impairment charge was recognised in the Consolidated Income Statement as set out in the table below.
Impairment of assets recognised during the reporting period
Goodwill allocated to Sizzler Australia
KFC franchise rights
Sizzler brand – Australia
Sizzler Australia Restaurants
Buildings
Leasehold improvements
Plant and equipment
KFC Restaurants
Leasehold improvements
Plant and equipment
2016
$000
–
–
–
–
537
771
–
–
2015
$000
27,146
128
6,279
830
1,442
1,800
200
448
1,308
38,273
6
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ACCOUNTING POLICY
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.
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.
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.
F5/ Intangible assets (continued)
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 2017
through to the end of the 2021 reporting period which
average 2.9%. The year one projections have been aligned to
the division’s specific cash flows reflected in the 2017 budget.
Management believe that these growth percentages are
reasonable considering the growth that has been seen in
this operating segment during the 2016 and prior reporting
periods. A pre-tax discount rate of 12.0% has been applied
to the cash flows. An indefinite terminal cash flow calculation
has been applied for cash flows beyond 2021, using that
year’s 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 Australia Restaurants
The cash flows for the Sizzler Australia restaurants from the
beginning of 2018 to the end of the 2021 reporting period
have been estimated at an average decline of 7.7% reflecting
the recent trends experienced in this operating segment
together with initiatives intended to improve operating
margins. The projection for 2017 has been aligned to the
division’s specific cash flows reflected in the budget prepared
in May 2016.
A pre-tax discount rate of 20.0% (3 May 2015: 20.0%) has
been applied to the cash flows. An indefinite terminal cash
flow calculation has been applied for cash flows beyond
2021, using that year’s cash flow as a base. No growth has
been used in determining the terminal value, which is less
than the long term average growth rate for the industry.
Sizzler Asia
The cash flows for the Sizzler Asia cash generating unit
have been estimated after applying growth rates from
the commencement of 2017 through to the end of the
2021 reporting period which average 3.5%. The year one
projections have been aligned to the cash flows reflected in
the 2017 budget.
Management believe that these growth percentages are
reasonable considering the growth that has been seen in
this cash generating unit during the 2016 and prior reporting
periods. A pre-tax discount rate of 14.4% has been applied
to the cash flows. An indefinite terminal cash flow calculation
has been applied for cash flows beyond 2021, using that
year’s cash flow as a base. The growth rate of 3.5% has been
used in determining the terminal rate which does not exceed
the long term average growth rate for the casual dining
industry segment.
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Notes to the Consolidated Financial Statements
F6/ Trade and other payables
Trade payables and accruals – unsecured
Other payables
Total payables
2016
$000
46,015
12,020
58,035
2015
$000
43,382
13,084
56,466
ACCOUNTING POLICY
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.
F7/ Provisions
CURRENT
Employee entitlements
Make good provision
Total current liabilities
NON-CURRENT
Employee entitlements
Make good provision
Total non-current liabilities
2016
$000
4,006
535
4,541
2016
$000
3,080
155
3,235
2015
$000
3,853
760
4,613
2015
$000
3,359
395
3,754
ACCOUNTING POLICY
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. Annual leave and incentive provisions that are expected to be settled wholly within 12 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 12 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.
Long service leave provisions relating to employees who have not yet completed the required period of service are classified as
non-current. All other employee provisions are classified as a current liability.
All on-costs, including superannuation, payroll tax and workers’ compensation premiums are included in the determination
of provisions.
Make good provision
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.
The Group is required to restore the leased premises of certain retail stores to their original condition upon exit. 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. An annual review of leased sites is conducted to determine the present value of the estimated
expenditure required to remove any leasehold improvements and decommission the restaurant.
6
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F8/ Reserves
Hedging – cash flow hedges
Foreign currency translation
Share-based payments
Closing balance
Movements in hedging reserve – cash flow hedges:
Opening balance
Revaluation – gross
Deferred tax (Note F9)
Transfer to net profit – gross
Deferred tax (Note F9)
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
2016
$000
(3,016)
4,338
1,042
2,364
(3,163)
203
(61)
8
(3)
2015
$000
(3,163)
4,153
456
1,446
(970)
(3,165)
950
33
(11)
(3,016)
(3,163)
4,153
185
4,338
456
586
1,042
1,749
2,404
4,153
160
296
456
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. Amounts are recognised in profit and loss when the associated hedged transaction affects profit
and loss.
Share-based payments reserve – performance rights
The share-based payments reserve is used to recognise the issuance date fair value of performance rights issued to employees
under the Long Term Incentive Plan 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.
6
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5
Notes to the Consolidated Financial Statements
F9/ Tax
A) INCOME TAX EXPENSE
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
Increase/(decrease) in deferred tax liabilities
Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit/(loss) from continuing operations before income tax expense
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Other non-deductible expenses
Non-deductible accounting loss on impairment of goodwill
Withholding tax credits not brought to account
Non-assessable income received
Carried forward capital losses
Amounts under provided in prior reporting periods
Income tax expense
2016
$000
13,572
(514)
55
13,113
13,113
13,113
(71)
(443)
(514)
42,228
12,668
756
–
562
(722)
(206)
13,058
55
13,113
2015
$000
12,271
(4,409)
–
7,862
7,862
7,862
(2,479)
(1,930)
(4,409)
(2,498)
(749)
585
8,143
463
(580)
–
7,862
–
7,862
Tax expense/(income) relating to items of other comprehensive income
Cash flow hedges (Note F8)
Tax losses
64
(939)
Unused capital tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
60,591
18,177
61,276
18,383
All unused tax losses were incurred by Australian entities.
6
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F9/ Tax (continued)
B) DEFERRED TAX BALANCES
Deferred tax assets (DTA)
The balance comprises temporary differences attributable to:
Depreciation
Employee benefits
Provisions
Capitalised costs
Cash flow hedges
Deferred tax assets
All movements in DTA were recognised in the statement of profit or loss and other
comprehensive income
Deferred tax liabilities (DTL)
The balance comprises temporary differences attributable to:
Inventories
Intangibles
Prepayments
Deferred tax liabilities
All movements in DTL were recognised in the statement of profit or loss
Deferred tax assets
Deferred tax liabilities
Deferred tax assets, net
2016
$000
2015
$000
22,249
4,487
2,088
157
1,291
30,272
579
4,382
77
5,038
30,272
(5,038)
25,234
21,593
4,448
2,109
761
1,355
30,266
706
4,452
268
5,426
30,266
(5,426)
24,840
ACCOUNTING POLICY
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
national income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between
the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted in the
respective jurisdiction.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity
has a legally enforceable right to offset and intends to settle on a net basis.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation
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.
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Notes to the Consolidated Financial Statements
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.
F10/ Auditor’s remuneration
During the reporting period the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
Assurance services
Audit services:
PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other audit work under the
Corporations Act 2001
Audit and review of financial reports and other audit work for foreign subsidiary
Network firms of PricewaterhouseCoopers Australia
Audit and review of financial reports and other audit work for foreign subsidiary
Other assurance services:
PricewaterhouseCoopers Australian firm
Store sales certificates
Agreed upon procedures for covenant calculations
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm
Tax compliance services, including review of company tax returns
Tax advice and consulting
Network firms of PricewaterhouseCoopers Australia
Tax compliance services, including review of company tax returns
Total remuneration for taxation services
Total remuneration for services
WHOLE DOLLARS
2016
$
2015
$
311,567
33,476
26,845
371,888
10,716
21,032
31,748
292,712
32,820
25,930
351,462
10,506
20,620
31,126
403,636
382,588
36,000
–
4,378
40,378
444,014
31,000
24,750
4,793
60,543
443,131
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.
F11/ Contingencies
The parent entity and certain controlled entities indicated in Note G1 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 B2, 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.
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G/ GROUP STRUCTURE
G1/ Subsidiaries and Deed of Cross Guarantee
G2/ Parent entity financial information
G1/ Subsidiaries and Deed of Cross Guarantee
The Consolidated Financial Statements at 1 May 2016 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
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 Restaurants South Pty. Ltd.
Collins Property Development Pty. Ltd.
Club Sizzler Pty. Ltd.
Collins Foods Australia Pty. Ltd.
Collins Finance and Management Pty. Ltd.
Sizzler South Pacific Pty. Ltd.
SingCo Trading Pte Ltd
Sizzler International Marks LLC
Sizzler Asia Holdings LLC
Sizzler South East Asia LLC
Sizzler New Zealand LLC
Sizzler Restaurant Services LLC
Notes relating to the above table:
Notes
Place of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Nevada, USA
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(f)
(b)
(b)
(b)
(b)
(c)
(d)
Acronym
CFGF
CFH
CFF
CFG
CRQ
CRN
CRW
FNC
SRG
CRM
CRS
CPD
CSP
CFA
CFM
SSP
Singapore
SingCo
(d) Delaware, USA
(d) Delaware, USA
(d) (e) Delaware, USA
(d) (e) Delaware, USA
(d) (e) Delaware, USA
SIM
SAH
SSEA
SNZ
SRS
% OF SHARES HELD
2016
2015
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
100
100
100
(a) Collins Foods Limited is domiciled in Brisbane, Australia. The Registered office is located at Level 3, KSD1, 485 Kingsford Smith Drive, Hamilton Queensland 4007.
(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) On 19 May 2016, Collins Foods Limited resolved to commence the process for this company to accede 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. The Class Order 98/1418 issued by the Australian Securities and Investments Commission, will
relieve this company from the requirement to prepare financial statements subsequent to this date.
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Notes to the Consolidated Financial Statements
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/(loss) from continuing operations before income tax
Income tax expense
Profit/(loss) from continuing operations
INCOME
Profit/(loss) 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/(expense) for the reporting period
Total comprehensive income/(expense) for the reporting period is attributable to:
Owners of the parent
SUMMARY OF MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS/(ACCUMULATED LOSSES)
Retained earnings/(accumulated losses) at the beginning of the reporting period
Profit/(loss) for the reporting period
Dividends provided for or paid
Retained earnings/(accumulated losses) at the end of the reporting period
CLOSED GROUP
2016
$000
570,639
(270,943)
299,696
(118,217)
(45,264)
(53,721)
(31,492)
(5,345)
(583)
3,111
744
(8,949)
39,980
(12,635)
27,345
2015
$000
568,494
(272,955)
295,539
(117,937)
(47,171)
(83,316)
(38,215)
(4,549)
(1,110)
943
600
(9,081)
(4,297)
(7,457)
(11,754)
27,345
(11,754)
211
(64)
147
27,492
(3,132)
939
(2,193)
(13,947)
27,492
(13,947)
(16,096)
27,345
(11,625)
(376)
5,888
(11,754)
(10,230)
(16,096)
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G1/ Subsidiaries and Deed of Cross Guarantee (continued)
The Consolidated Balance Sheet of all entities in the Class Order 98/1418 ‘Closed Group’ as at the end of the reporting period is
as follows:
CLOSED GROUP
2016
$000
2015
$000
46,796
8,705
4,398
59,899
87,996
232,856
27,595
11
–
9,827
358,285
418,184
57,858
4,131
1,726
4,541
68,256
38,906
5,962
4,657
49,525
79,476
233,055
27,248
1,493
571
9,827
351,670
401,195
56,709
3,638
1,873
4,613
66,833
164,240
164,551
2,705
3,235
170,180
238,436
179,748
182,098
(1,974)
(376)
179,748
2,762
3,754
171,067
237,900
163,295
182,098
(2,707)
(16,096)
163,295
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
Accumulated losses
Total equity
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Notes to the Consolidated Financial Statements
G2/ 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 capital (1)
Reserves
Retained earnings/(accumulated loss)
Profit for the reporting period
Total comprehensive income
2016
$000
2015
$000
112
251,603
251,715
5,139
14,973
20,112
112
239,848
239,960
4 ,803
6,528
11,331
231,603
228,629
228,426
228,426
1,041
2,136
231,603
14,014
14,014
456
(253)
228,629
9,142
9,142
(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 $200m as stated
in Note B2. In addition, there are cross guarantees given by the parent entity as described in Note G1. 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 1 May 2016.
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H/ BASIS OF PREPARATION AND OTHER ACCOUNTING POLICIES
H1/ Basis of preparation
H2/ Other accounting policies
H1/ Basis of preparation
COMPLIANCE
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.
The Consolidated Financial Statements of the Group comply
with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
MEASUREMENT
Collins Foods Limited is a for profit entity for the purpose of
preparing the Consolidated Financial Statements. 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).
GOING CONCERN
The financial report has been prepared on a going concern
basis. The Directors are of the opinion that the Group will
be able to continue to operate as a going concern having
regard to available non-current debt facilities and the Group’s
internally generated cash resources.
CONSOLIDATION
The Consolidated Financial Statements include the financial
statements of the parent entity, Collins Foods Limited (the
Company) and its subsidiaries (together referred to as the
‘Group) (see Note G1 on subsidiaries). All transactions and
balances between companies in the Group are eliminated
on consolidation. Subsidiaries are all those entities over
which the Company has the power to govern the financial
and operating results and policies and often accompanies a
shareholding of more than one-half of the voting rights. The
results of subsidiaries acquired or disposed of during the year
are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to
the effective date of disposal, as appropriate. Consistent
accounting policies are employed in the preparation and
presentation of the consolidated financial statements.
REPORTING PERIOD
The Group utilises a fifty-two, fifty-three week reporting
period ending on the Sunday nearest to 30 April. The 2016
reporting period comprised the fifty-two weeks which ended
on 1 May 2016 (2015 was a fifty-three week reporting period
which ended on 3 May 2015).
FOREIGN CURRENCIES
Items included in the financial statements of each of the
Group entities are measured using the currency of the
primary economic environment in which the entity operates
(the functional currency). The Consolidated Financial
Statements are presented in Australian dollars, which is the
functional and presentation currency of the Company.
Transactions in foreign currencies are converted at the
exchange rates in effect at the dates of each transaction.
Amounts payable to or by the Group in foreign currencies
have been translated into Australian currency at the exchange
rates ruling on balance date. Gains and losses arising from
fluctuations in exchange rates on monetary assets and
liabilities are included in the Consolidated Income Statement
in the period in which the exchange rates change, except
when deferred in equity as qualifying cash flow hedges.
The foreign currency results and financial position of foreign
operations are translated into Australian dollars as follows:
´ assets and liabilities at the exchange rate at the end of
the reporting period;
´ income and expenses at the average exchange rates for
the reporting period; with
´ all resulting exchange differences recognised in other
comprehensive income and accumulated in equity.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other financial instruments designated
as hedges of such investments, are recognised in other
comprehensive income.
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 exchange rate at
the end of the reporting period.
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 included in the
following notes:
´ Note F4 Property, plant and equipment
´ Note F5 Non-Current Assets – Intangible Assets
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Notes to the Consolidated Financial Statements
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 the first time for the annual reporting period commencing
4 May 2015:
´ AASB 2011-4: Amendments to Australian
Accounting Standards to Remove Individual
Key Management Personnel Disclosure
Requirements; and
´ AASB 2013-3: Limited amendment of
impairment disclosures.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
Certain new accounting standards and interpretations have
been published that are not mandatory for 1 May 2016
reporting periods. Unless stated otherwise below, the Group
is currently in the process of assessing the impact of these
standards and amendments and is yet to decide whether to
early adopt any of the new and amended standards.
AASB 9 Financial Instruments (effective from
1 January 2018)
The new standard simplifies the model for classifying and
recognising financial instruments and aligns hedge accounting
more closely with common risk management practices.
Changes in own credit risk in respect of liabilities designated
at fair value through profit or loss shall now be presented
within OCI; this change can be adopted early without
adopting AASB 9. This new standard will be effective from
1 January 2018.
AASB 15 Revenue from contracts with customers
(effective from 1 January 2018)
The AASB has issued a new standard for the recognition of
revenue. This will replace AASB 118, which covers contracts
for goods and services, and AASB 111, which covers
construction contracts.
The new standard is based on the principle that revenue is
recognised when control of a good or service transfers to
a customer – so the notion of control replaces the existing
notion of risks and rewards.
AASB 16 Leases (effective from 1 January 2019)
AASB 16 will primarily affect the accounting by lessees
and will result in the recognition of almost all leases on the
balance sheet. The standard removes the current distinction
between operating and financing leases and requires
recognition of an asset (the right to use the leased item) and a
financial liability to pay rentals for almost all lease contracts.
AASB 2016-2 IASB issues narrow scope amendments
to IAS 7 Statement of cash flows (effective from
1 January 2017)
The amendment to AASB 107 introduces additional
disclosures that will enable users of financial statements to
evaluate changes in liabilities arising from financing activities.
The amendment requires disclosure of changes arising from:
´ cash flows, such as drawdowns and repayments of
borrowings; and
´ non-cash changes, such as acquisitions, disposals and
unrealised exchange differences.
H2/ Other Accounting policies
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 F6).
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.
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.
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.
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I2/ Acquisition of Snag Stand
On 15 June 2016, the Group acquired the remaining 50%
share of Snag Holdings Pty Ltd for a nominal sum to take
full ownership.
I/ SUBSEQUENT EVENTS
I1/ Acquisition of 13 KFC restaurants
I2/ Acquisition of Snag Stand
I1/ Acquisition of 13 KFC restaurants
On 19 May 2016 the Group entered into a binding agreement
to acquire 13 KFC restaurants located around the New South
Wales and Victorian border. These restaurants are being
purchased from Chrikim Pty Ltd, Skeeter Wright Pty Ltd and
Geoff Wright Corp Pty Ltd.
The Group will pay $25.46m for the acquisition plus
acquisition costs. The acquisition on a trailing basis is currently
delivering $4.3m EBITDA (pre-synergies). The acquisition
price will be adjusted up for inventory and adjusted down for
employee liabilities assumed as part of the acquisition. The
acquisition further strengthens the growth platform of the
Group as it provides a footprint from which to grow in New
South Wales and Victoria.
The acquisition consideration will comprise $10m in shares
of the Company (to be issued at a share price of $4.27 per
share) and the remainder funded from existing available funds.
Approval from the Franchisor has been received subject to
customary conditions. Completion is subject to a number of
standard conditions precedent and is expected to be achieved
in mid-July 2016.
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Notes to the Consolidated Financial Statements
Directors’ Declaration
In the Directors’ opinion:
´ the financial statements and notes set out on pages
30 to 68 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 1 May 2016 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 G 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 G.
Note A confirms that the financial statements also comply
with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The Directors have been given the declarations by the
Chief Executive Officer and 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.
Robert Kaye SC
Chairman
Brisbane
28 June 2016
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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 consolidated balance sheet as at 1 May 2016, the consolidated income statement and
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the period 4 May 2015 to 1 May 2016, 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 and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note H1, 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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Auditor’s Independence Declaration
As lead auditor for the audit of Collins Foods Limited for the period ended 1 May 2016, I declare that
to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
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.
Kim Challenor
Partner
PricewaterhouseCoopers
Brisbane
28 June 2016
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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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 the close of
trading on 16 June 2016.
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
1,722
2,561
722
495
43
5,543
–
–
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There were 97 holders of less than a marketable parcel of
ordinary shares.
Equity security holders
The names of the 20 largest holders of the only class of
quoted equity securities are listed below:
ORDINARY SHARES
Number held
Percentage of
issued shares
%
HSBC Custody Nominees
(Australia) Limited – A/C 3
HSBC Custody Nominees
(Australia) Limited – GSCO ECA
Mrs Heather Lynnette Grace
Adrian Mark Argent
Michael Kemp Pty Ltd
Brazil Farming Pty Ltd
Perkins Family Investment
Corporation Pty Ltd
585,930
544,661
514,801
350,014
315,000
313,085
300,000
0.63
0.59
0.55
0.38
0.34
0.34
0.32
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:
ORDINARY SHARES
Kevin Perkins
ORDINARY SHARES
Number held
Percentage
7,000,833
7.53%
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 44,843 fully paid ordinary shares, if they are issued, upon
the vesting of 44,843 performance rights in accordance with
the rules of the LTIP.
The Company is not currently conducting an on-market
share buy-back.
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.
HSBC Custody Nominees
(Australia) Limited
Number held
12,509,182
Citicorp Nominees Pty Limited
11,187,543
J P Morgan Nominees Australia
Limited
Mr Kevin Perkins
National Nominees Limited
11,052,096
7,000,833
6,928,084
BNP Paribas Noms Pty Ltd
5,231,399
Percentage of
issued shares
%
13.45
12.03
11.88
7.53
7.45
5.63
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia
Nominees Pty Limited
Hooks Enterprises Pty Ltd
TMPA Holdings Pty Ltd
CS Fourth Nominees Pty Limited
Aust Executor Trustees Ltd
Mr Leendert Hoeksema +
Mrs Aaltje Hoeksema
1,400,000
1.51
1,322,932
900,000
1.42
0.97
800,000
0.86
742,481
0.80
690,382
680,000
0.74
0.73
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Corporate directory
DIRECTORS
Robert Kaye SC, Chairman
Graham Maxwell, Managing Director & CEO
Kevin Perkins
Newman Manion
Bronwyn Morris
Russell Tate
COMPANY SECRETARY
Frances Finucan
PRINCIPAL REGISTERED OFFICE
IN AUSTRALIA
Level 3, KSD1, 485 Kingsford Smith Drive
Hamilton QLD 4007
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
SECURITIES EXCHANGE LISTING
Collins Foods Limited shares are listed on the Australian Securities Exchange
WEBSITE ADDRESS
www.collinsfg.com.au