Yesterday,
today,
tomorrow…
Annual Report 2008
Contents
2
3
4
6
8
2008 Performance Highlights
Chairman’s Message
Yesterday…
Key Strategies of 2008
CEO Review
Organisational and Management
13
Structure
Today…
14
Community, People, Environment 16
18
Tomorrow…
A “Personal Details” guide
has been included in the
back of this document
to assist our stakeholders.
Group Financial and
Operational Review
Directors’ Report
Board of Directors
Corporate Governance Statement
Remuneration Report
Auditor’s Independence
Declaration
Financial Report
Independent Audit Report
Shareholder Information
InvoCare Locations
Glossary
Directory
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InvoCare LImIted ABN 42 096 437 393
Contents
2
3
4
6
8
2008 Performance Highlights
Chairman’s Message
Yesterday…
Key Strategies of 2008
CEO Review
Organisational and Management
13
Structure
Today…
14
Community, People, Environment 16
18
Tomorrow…
A “Personal Details” guide
has been included in the
back of this document
to assist our stakeholders.
Group Financial and
Operational Review
Directors’ Report
Board of Directors
Corporate Governance Statement
Remuneration Report
Auditor’s Independence
Declaration
Financial Report
Independent Audit Report
Shareholder Information
InvoCare Locations
Glossary
Directory
20
28
30
33
38
47
48
100
102
104
106
IBC
InvoCare LImIted ABN 42 096 437 393
InvoCare’s dedicated and professional
staff service families in Australia and
Singapore through a growing network
of locations.
NatioNal braNds
AustrAliA
singApore
White Lady Funerals is a dedicated team
of women offering a unique service for
our client families. The life of the loved
one is honoured with special nurturing,
sensitivity, warmth and care, with a woman’s
understanding.
There are 37 White Lady locations
throughout Australia.
Flexible and less traditional, Simplicity
Funerals offers practical, dignified,
respectful and affordable funeral services.
Steadily expanding, there are 42 Simplicity
Funeral locations throughout Australia.
Singapore Casket Company has been
offering caring and professional services
to client families, of all denominations,
since 1920. Its current facilities include nine
refurbished air-conditioned parlours offering
a bright, clean and tranquil environment for
the comfort of families.
siNGaPore
1 Funeral location
WesterN australia
18 Funeral locations
south australia
13 Funeral locations
QueeNslaNd
24 Funeral locations
3 Cemeteries and Crematoria
NsW aNd aCt
74 Funeral locations
9 Cemeteries and Crematoria
ViCtoria
33 Funeral locations
Traditional and Heritage Funerals
Cemeteries and
Crematoria
InvoCare’s traditional-style brands of funeral
homes maintain the service approach
respected by families over many generations.
The service is personal and professional,
gently guiding families through the
arrangement process.
With one major brand in each state and a
number of smaller heritage brands serving
local communities, there are 89 InvoCare
traditional-style and heritage brands of
funeral homes in Australia.
Christian Funerals in Perth and Southern
Cross Funerals in Melbourne were acquired
in 2008, further expanding our ability to
service families in need.
InvoCare operates 12 cemeteries and
crematoria in New South Wales and
Queensland. Many have a fine heritage and
have been places of memories and tranquillity
for generations of families.
The multicultural nature of Australia is
recognised with burial, cremation and
memorial options, including Asian sections
designed by Feng Shui advisers, and the
availability of architecturally designed crypts,
vaults and family mausoleums preferred by
many European communities.
Yesterday, we were there, assisting families and
providing quality funeral services
throughout Australia.
Today, we are Australia’s largest provider
of funeral services; operating
multi-branded funeral homes,
cemeteries and crematoria across
Australia and in Singapore.
Tomorrow, we intend to still be at the forefront
of our industry, with innovative
preneed and memorialisation
products supporting our traditional
funeral brands.
InvoCare. Growing investor value
through the preservation of everlasting
family memories.
InvoCare is an Australian company that owns
and operates funeral homes, cemeteries and
crematoria across Australia and in Singapore.
the Company was floated on the ASX in 2003
and owns key national brands Simplicity Funerals,
White lady Funerals and Singapore Casket, as
well as leading brands in each Australian state
in which it operates.
InvoCare places great value on understanding
and professionally servicing its client family
needs. InvoCare exercises responsibility as an
industry leader. It encourages supporting local
communities and also actively works with industry
and other stakeholder groups.
our mission to shareholders is to improve
investor value. the development of our people,
our brands and our facilities are the keys to
achieving this objective.
InvoCare’s business model operates with multi-
branded “front-end” businesses, supported by
“back office” shared service functions including
marketing, preneed administration, human
resources, information technology, finance,
property and facilities.
InvoCare AnnuAl RepoRt 2008
1
2008 performance
highlights
Death rate above trenD
market share increaseD
two businesses acquireD
9 new funeral homes
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Results at a glance
Sales revenue
normalised operating eBItDA
normalised operating eBItDA operating margin
normalised profit after tax
normalised basic earnings per share (epS)
Reported profit after tax
Basic epS (cents per share)
prepaid funeral funds under management
Funeral homes (number)
Cemeteries and crematoria (number)
employees (full-time equivalents)
2
InvoCare AnnuAl RepoRt 2008
$ million unless otherwise stated
2008
2007
% change
244.2
61.9
25.3%
28.3
28.3 cents
28.0
28.0 cents
237.0
163
12
993
223.9
58.9
26.3%
27.1
27.2 cents
27.6
27.6 cents
272.0
152
12
923
9.1
5.0
-1.0
4.7
4.0
1.7
1.4
-13.0
Chairman’s message
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In a year when economic conditions
worsened and global financial markets
experienced major upheaval, InvoCare
once again demonstrated the robustness
of its business model by reporting a profit
after tax of $28.0 million, being 1.7% or
$0.5 million higher than 2007.
InvoCare’s dedicated employees continue
to deliver outstanding service to their family
and funeral director customers across
Australia and in Singapore. Increased
service volumes and strong average sale
price growth contributed to the solid
result. Market share gains were achieved
through both acquisitions and opening new
locations and the above trend number of
deaths continued during the year.
the downturn in equity markets, however,
did reduce the surplus contribution from
redeemed prepaid funeral funds. Also, the
prevailing economic conditions resulted
in lower sales of discretionary preneed
memorials by InvoCare’s cemeteries
and crematoria, especially in the second
half of 2008. this was mitigated by
construction and delivery of previously sold
memorials enabling recognition of past
deferred revenue.
the Board and management are closely
monitoring and responding to the impacts of
the economic climate caused by the global
financial crisis. However, the funeral industry
in general and InvoCare in particular are
not as significantly affected as others. In
InvoCare’s case, it has strong cash flows
and is in a healthy financial position, with
debt facilities in place until January 2011.
the Company will continue to influence,
where possible, the investment strategies
of prepaid funeral trusts to improve returns
and is continuing its memorial construction
activity to mitigate any ongoing memorial
sale contract shortfalls.
InvoCare’s robust busIness model
delIvers another solId result In an
unCertaIn envIronment.
two funeral business acquisitions were completed in 2008,
in perth and Melbourne, taking to seven the number of
acquisitions since December 2005. In addition to the 2008
acquisitions, InvoCare’s penetration of the Australian funeral
market was further assisted by opening nine new funeral homes
in strategic locations, taking the number of funeral homes in
Australia at the end of the year to 162.
Following the strong overall financial performance, the Board
declared a fully franked final dividend of 13.0 cents per share.
the total fully franked ordinary dividends for the year increased
4.4% to 23.5 cents per share. total shareholder returns (price
movement plus cash dividends) since the initial public offering
in late 2003 amount to 230%. InvoCare’s share price, although
reduced during the equity market declines, has traded above
the ASX 200 index, highlighting the Company’s strength.
the appointment of Andrew Smith as Chief executive officer from
1 January 2009 is evidence of the Board’s focus on management
succession and engaging quality senior management. Andrew
joined the Company in January 2006 and since becoming Chief
operating officer in March 2007 has been driving the recent
strategic and operational direction of InvoCare’s business.
Richard Davis, the departing Chief executive officer, must
be given credit for almost 20 years building and managing
InvoCare to its present scale and success. the Board, staff
and other stakeholders are sincerely indebted to Richard for his
successful leadership and for providing a very solid foundation
for InvoCare’s future.
on behalf of the Board and all its shareholders, I commend
management and employees across Australia and Singapore
on the excellent results achieved and I thank them for all their
hard efforts. once again, their commitment, dedication and high
service ethics have contributed to InvoCare’s 2008 performance.
the Board is confident that the Company is extremely well
positioned to deliver sustainable growth into the future.
Ian Ferrier chairman
InvoCare AnnuAl RepoRt 2008
3
Allan Drew
Allan Drew Funerals,
Castle Hill and Rouse Hill NSW
Yesterday…
4
InvoCare AnnuAl RepoRt 2008
Chipper Funerals,
operated by Don Chipper,
is a proud supporter of
veteran associations
and related bodies.
Whether for Anzac Day,
sponsoring RSL activities
and conventions or
arranging funerals for
current serving personnel,
Don Chipper and Chipper
Funerals are committed
to remembering their
sacrifice.
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Le Pine Funerals
provides the
highest standards
in traditional funeral
services. From its
humble beginnings in
a cabinetmaker’s shop
to 20 locations today,
every lesson learnt in
service ensures client
families receive the
full benefit of Le Pine’s
experience and its
attention to detail.
Only a trusted and
reputable provider of
funeral services can
provide this level of
satisfaction.
InvoCare is proud of its
roots stretching back to
the 1880s. We own and
maintain many heritage
listed buildings and
other items including
this horse drawn hearse,
dating from 1891, seen
here taking part in 150th
anniversary celebrations
commemorating the
first funeral at the Kew
Cemetery in Melbourne.
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Allan Drew of Allan Drew Funerals in Sydney’s Castle Hill is one
of many long serving funeral directors InvoCare is proud to have
as part of its team. Allan has been providing funeral services
since 1970 and his name is synonymous with care, compassion
and respect.
Men and women like Allan have created successful funeral
businesses across Australia and Singapore that have stood the
test of time. these proud ambassadors of the funeral industry
are integral to InvoCare’s success. they provide positive role
models to their colleagues, are proof of InvoCare’s respect for
the continuity of acquired businesses and are key to ensuring
the highest standards for care and respect are passed on from
yesterday to be applied both today and tomorrow.
on Australia Day 2009, Allan Drew was awarded an
order of Australia medal for his services to the funeral industry
and for service to the community through a range of charity
and service organisations.
InvoCare AnnuAl RepoRt 2008
5
Key strategies of 2008
With no shift in our strategic direction,
InvoCare’s long-term growth will be
delivered by anticipated volume increases,
business acquisitions, location, brand,
staff investment and solid capital
management.
increasing branD
awareness anD alignment
to consumer neeDs
oPening new locations
anD acquiring
successful businesses
investment in
our PeoPle
InvoCare aims to sustain and improve
brand awareness by undertaking strategic
marketing initiatives, such as main media
campaigns, combined with more tactical
and localised marketing strategies.
Brand awareness is also enhanced by
our staff who dedicate many hours to
community and social organisations, and
most importantly by service excellence
with a very personal touch. InvoCare’s two
Australian national brands, White lady
and Simplicity, along with the primary
brands in individual markets enjoy strong
awareness levels.
InvoCare’s robust business model is
based on personal service supported by
highly efficient back end processes to
ensure client families receive the most
professional service possible. We continue
to seek new locations and acquisitions
within the foot print of established
shared service functions. to build on
InvoCare’s existing successful operations
in highly populated centres or regions
across Australia and in Singapore, more
geographically dispersed opportunities
and models are being examined.
the professionalism of our staff is
constantly being enhanced by investment
in training and other learning opportunities
presented by InvoCare’s learning
and development team. In addition
to the investment in core operational
programmes, including various induction,
customer service and occupational
health and safety modules, the Future
leaders programme aims to identify and
develop the next generation of InvoCare’s
service team. this major initiative has
been well received and supported across
the Company with six of the 21 initial
participants securing location manager
roles to date. We are able to offer our
staff a career in the industry, as well
as an opportunity to own shares in
the Company, unlike most of the other
family owned and operated business
competitors.
6
InvoCare AnnuAl RepoRt 2008
imProving our facilities
anD exPanDing
memorialisation
We continue to invest $15-20 million
annually enhancing and improving the
facilities available. this ensures that the
ambience of our locations continues to
meet client expectations and that the
most modern facilities, such as audio
visual systems, are available for those
who choose them. We also continue to
expend substantial sums maintaining our
many heritage listed assets, especially in
our locations where many generations of
individual families are memorialised.
valuable future
income streams
soliD caPital anD
financial management
InvoCare continues to grow the number
and value of prepaid contracts by
emphasising the peace of mind our clients
experience from knowing that when the
time comes their families are protected
from unexpected burdens. We also work
with our investment managers to ensure
that investment strategies are put in place
that will continue to ensure surpluses
are delivered.
our capital management initiatives are
designed to ensure that an appropriate
mix of debt and equity is maintained to
maximise returns to shareholders while
ensuring adequate funds are available
to support growth and expansion.
the Company is in a healthy financial
position and its strong operating cash
flows provide necessary funds to
pay at least 75% of annual profits to
shareholders as dividends, meet debt
servicing obligations, invest in property,
plant and equipment, as well as fund
smaller new business acquisitions.
the Company’s DRp has been supported
by approximately 25% of shareholders to
provide additional funds for the business.
In the event opportunities become limited
for investing in the growth of the business,
the Company will consider making
alternative returns to shareholders.
InvoCare AnnuAl RepoRt 2008
7
Ceo review
InvoCare’s robust busIness model,
a hIgher number oF deaths, strong
average sales perFormanCe and
the posItIve ContrIbutIon From
aCquIsItIons and new loCatIons
resulted In another solId year
In 2008.
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InvoCare AnnuAl RepoRt 2008
In delivering my first report as Ceo I would like to thank
Richard Davis for his outstanding contribution to InvoCare over
nearly 20 years. the support and encouragement Richard has
provided me personally over the last three years and particularly
during the transition phase has been invaluable. the transition
has progressed well and, I believe, has been well received by key
stakeholders, including staff and shareholders.
In terms of 2008 InvoCare delivered a solid profit after tax of
$28.0 million, an increase of 1.7% on the prior year. this was
achieved by our continued focus on the five pillars of growth
and a stable, committed team dedicated to providing service
excellence to our client families.
the solid result was underpinned by:
–
–
–
–
the continuation of the above trend death rate;
acquisitions;
new location openings; and
pricing increases.
these more than offset the effects, most notable in the second
half, of the reduction in prepaid funeral surpluses caused by the
global financial crisis’ effects on equity markets.
Dividends of 23.5 cents per share, up 1 cent per share from 2007,
have been declared for 2008.
Funeral homes
Sales revenues from InvoCare’s 162 Australian funeral homes was
up a pleasing 11%, continuing the growth of InvoCare’s funeral
operations.
Historical revenue Growth Contributors – australian Funerals
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$
22
20
18
16
14
12
10
8
6
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(2)
(4)
(6)
(8)
$4.4m
$2.2m
$6.5m
$8.1m
$5.0m
$7.9m
$7.6m
($2.6m)
$4.9m
$1.5m
$2.7m
$3.9m
$0.6m
$0.9m
$5.0m
$1.8m
$4.3m
($6.7m)
2004
2005
2006
2007
2008
■ Australian Acquisitions (since 2003)
■ Prepaid Funeral Surplus
■ Australian Funerals Pricing (Comparable Business)
■ Australian Funerals Volume (Comparable Business)
As the table demonstrates, the impact
of the death rate running at higher than
recent ABS trend levels has contributed
favourably to this outcome. InvoCare
estimates that the death rate within its
Australian market areas increased by 2.1%
during the year.
the Group, in line with its unaltered
strategic direction, opened a total of nine
new Australian funeral homes in 2008.
these homes were opened in positions
that InvoCare believes will contribute
to the long-term health of the business
by focusing on new locations where
the demographics suggest growth
will continue. At the same time, these
locations must be within acceptable
distances of our shared service centres
to ensure the robustness of the business
model is maintained. Furthermore, many
of the openings support the growth in
our national brands, White lady and
Simplicity, as well as an acknowledgement
that some of our traditional brands in
major metropolitan markets were under
represented.
Market surveys revealed that 97% of
clients would definitely or probably
recommend an InvoCare provider to
a third party and 99% of clients believe
InvoCare meets or exceeds their
expectations. this is a great tribute to the
dedicated people on the InvoCare team.
In constant dollars, Singapore Casket
Company grew by 7% due to an 11.8%
increase in average sales value as a result
of favourable sales mix and increased
parlour occupancy.
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During the year, Butler Funerals, part of the Guardian Funerals
network, celebrated 80 years service to its local community.
Many of our traditional brands have been providing support
to their local communities for many generations. For example,
Chipper & Son has been in continuous operation since 1889,
providing service to many generations of families in the
perth region.
CemeterIes and CrematorIa
Sales of memorial contracts from InvoCare’s 12 cemeteries and
crematoria declined $0.3 million due to a reduction in the number
and average value of sales. the decline was particularly noticeable
in the second half and given the discretionary nature of this part
of the business was mainly due to the decline in the economy
brought about by the global financial crisis. this decline was offset
by an increase of $1.5 million in revenue from previously deferred
sales achieved by an aggressive building programme undertaken
during the year.
the chapels at Mt thompson, pinegrove and Castlebrook were
extensively upgraded to improve the ambience of these locations
for our client families.
InvoCare AnnuAl RepoRt 2008
9
Ceo review continued
aCquIsItIons
the Chipper Funerals business acquired
at the end of 2007 was fully integrated
into InvoCare’s perth operations during
2008. this business contributed around
900 cases in this market and helps to
capitalise on InvoCare’s robust business
model of centralising back office functions
while ensuring that our client families
receive a professionally delivered,
compassionate and caring service.
Christian Funerals, also in the perth
market, was acquired in August 2008,
followed by Southern Cross Funerals in
the Melbourne market in october. Both
these businesses have made positive
contributions to the results for their
respective states.
Strategically, InvoCare is committed to
continuing to grow through the acquisition
of well placed funeral homes that can be
integrated into the business.
A major fire at Rookwood impacted the second half of the year
unfavourably. Rectification and enhancements on this site have
begun and are expected to be completed in the first half of 2009,
including the installation of state of the art, emission efficient
cremators. the cremator replacement programme, which began
with the commissioning of new cremators at Allambe Gardens
Memorial park in the middle of 2007, continued and it is expected
all 12 crematoria will be fully upgraded by the middle of 2010.
InvoCare estimates that the death rate in the Australian markets
served by our cemeteries and crematoria increased by 2.6%
during the year.
Market surveys show that 93% of client families would definitely or
probably recommend an InvoCare location to a third party if the
need arose.
prepaId Funeral Funds
Consistent with prior years, 13% of InvoCare’s Australian funerals
were prepaid. the number of new prepaid contracts sold during
the year was 18.8% higher than 2007, reflecting the effort this
aspect of the business has received. new sales exceeded
redemptions by 6.9%, ensuring that future revenue will continue
to grow as these prepaid arrangements are delivered.
At the end of the period, total funds in independently managed
trust funds were $237 million, down from $272 million in the
previous year. the global financial crisis, particularly in the second
half of 2008, resulted in substantial revaluation downwards of
these funds. the long-term bias to equities in the investment
strategies used by the trustees have been altered in the short
term to ensure that capital is preserved. As a result, 85% of
investments are now in fixed term deposits until Australian equity
markets become more stable and provide a greater certainty
of returns.
Management estimates that at 31 December 2008 the funds
invested were $7 million above the standard prices for the
provision of those prepaid services. Following price increases
applied from 1 January 2009, it is estimated the funds fall
$3 million short of the standard price value of delivery of those
services on that date.
10
InvoCare AnnuAl RepoRt 2008
overvIew oF operatIons
InvoCare continues to focus on ensuring positive returns from
all its locations and ensuring these are professionally presented
for the highest possible level of service. During the year, capital
expenditure exceeded $16 million with more than $5.5 million
spent on upgrading and improving facilities, including the start of
construction of a major new operations centre at Glen Waverley in
Melbourne, extensive refurbishments of Ferntree Gully in Victoria
and Granville in Sydney and the enhancement of chapels at
cemetery and crematorium locations.
no major property sales or purchases occurred during the year.
InvoCare continues to work with industry and other stakeholder
groups to ensure our industry meets the highest ethical standards
through the implementation of practical consumer protection
measures either by legislation or via industry codes of practice.
local community support continued throughout the year with both
the Company and its staff actively participating. Support included
financial assistance, provision of facilities and equipment, as well
as staff volunteering their valuable personal time.
InvoCare continues to be committed to training and developing
its employees with extensive “learning and development”
programmes focusing on the key areas of the business.
During 2008, the “Future leaders” programme was launched
with around 20 aspiring leaders identified for more extensive
training and development.
Key managers were again offered the opportunity to participate
in the Company’s Deferred employee Share plan, an important
initiative aimed at aligning management interests to those of
shareholders and the retention of key personnel. the offer was
made to all regional managers and above. this initiative, together
with the exempt Share plan replicated again in 2008, has enabled
over 25% of InvoCare’s personnel to have equity in the business.
InvoCare AnnuAl RepoRt 2008
11
Ceo review continued
12
InvoCare AnnuAl RepoRt 2008
lookIng ahead
the Group’s ongoing commitment to
service, its strong brands, its network
of locations, its valuable prepaid
funeral fund and its operating leverage
position the Group well for sustainable
long-term growth.
InvoCare’s strategic direction is
unchanged and continues to focus on the
five pillars of growth – pricing, favourable
demographics, prepaid funeral funds,
acquisitions and new locations.
Whilst InvoCare’s results will continue to
be affected by the number of deaths in
any given period, InvoCare’s positioning
in the markets where it operates together
with its strategic initiatives place the
Company well for the future.
Richard Davis retired at the end of last
year after 19 years with the Group but
he continues to provide his valuable
insights in a consulting capacity. Richard’s
continued commitment to InvoCare is very
much appreciated.
Finally, I would like to take this opportunity
to thank my management team and all
the dedicated employees of InvoCare who
have worked so hard to achieve this result.
Andrew Smith chief executive officer
Organisational and
management structure
Board of Directors
The management team at InvoCare have more
than 120 years relevant industry experience and
many have held senior executive roles in other
industries.
Chief executive
officer
Andrew Smith
Industry experience
3 years
Chief Financial
officer and Company
Secretary
Phillip Friery
Industry experience
14 years
Chief executive
officer – Singapore
Casket Company
Wee Leng Goh
Industry experience
1 year
national Funerals
General Manager
and General
Manager nSW
Funerals
Greg Bisset
Industry experience
1 year
General Manager
Cemeteries and
Crematoria
Armen Mikaelian
Industry experience
19 years
General Manager
Queensland
Funerals
General Manager
victorian Funerals
General Manager
South australian
Funerals
General Manager
Western australian
Funerals
Doris Zagdanski
Industry experience
25 years
John Fowler
Industry experience
33 years
Jason Maher
Industry experience
13 years
Andrew Hogan
Industry experience
15 years
each operational
area is supported
by a network of
regional managers
and other specialist
staff.
all operations are
supported by the
following back office
management:
– Marketing &
Communications;
Ian McKenzie
– Prepaid Funeral
Administration;
Sasha
Moore‑Shupick
– Human Resources
– Information &
Technology;
John Brennan
– Property & Facilities;
Damien Fitzpatrick
– Finance;
Nailesh Shah and
Chris Mooney
– Internal Audit;
Chris Bennecke
InvoCare AnnuAl RepoRt 2008
13
Kay Toovey
White Lady, Roseville NSW
14
InvoCare AnnuAl RepoRt 2008
y
a
D
o
t
–
s
D
n
a
r
b
r
u
o
All things change, funeral
traditions included.
When Australia’s way
of life began to change
in the 1970s, a new
approach to funerals
arose that gave families
permission to say
farewell to departed
loved ones in a personal
way. Simplicity Funerals
is a modern funeral
provider that arose
in the midst of those
heady times. Right up
to today it provides a
modern approach to suit
the times.
y
a
D
o
t
–
s
t
e
s
s
a
r
u
o
The heritage listed West
Chapel at Mt Thompson
Memorial Garden in
Brisbane following an
extensive refurbishment
in 2008. The chapel
which includes many Art
Deco features has been
significantly upgraded
to meet current safety
standards and to provide
state of the art audio
visual facilities while
maintaining its sense of
tranquillity.
Some InvoCare staff
with the relics of Saints
Gabriel Possentu, Gemma
Galgani and Maria Goretti
and the Blessed Pier
Giorgio Frassati which
were brought to Australia
as part of the World
Youth Day celebrations.
InvoCare was proud to
provide transportation for
these priceless objects
which formed an integral
part of the World Youth
Day celebrations.
y
t
i
n
u
m
m
o
c
e
h
t
n
i
–
y
a
D
o
t
InvoCare has a diverse and experienced work force, a real
asset in today’s competitive marketplace.
Kay toovey from White lady Funerals at Roseville in Sydney
understands that traditional funeral service roles, such as
arranging, conducting, attending, pall bearing, hearse driving
and embalming, must be performed by capable staff with
empathy and maturity. At cemeteries and crematoria, teams
of qualified ground staff prepare and maintain the tranquil
surroundings while caring personnel guide and assist families
and friends in the choice of a suitable permanent memorial for
a life lived. Supporting the operational front end of the business
are other experienced teams such as human resources, training,
marketing, finance and property management.
InvoCare’s integrated approach to its operations provides
benefit to people like Kay through continuity of experience
and career development. this doesn’t just happen.
It involves good human resource planning and training and
the result is retained, experienced staff with good skills
and whole-of-business understanding.
InvoCare AnnuAl RepoRt 2008
15
Today…
Community, people,
environment
In 2008 InvoCare has maIntaIned Its
strong CommItment to reCognIsIng
the ImportanCe oF Its oblIgatIons
to the CommunIty, Its people and
the envIronment, whIle aChIevIng
the group’s strategIC objeCtIve oF
sustaInIng busIness perFormanCe.
CommunIty
During the year, InvoCare maintained
its commitment to the community by
participating in 290 individual events at
both local and national levels. our people
arranged and participated in events
including remembrance services,
community presentations, tours of
facilities and memorial parks (participants
including school and scouting groups),
grief seminars and education sessions
on coping with grief and death for
nursing staff from local hospitals and
nursing homes.
A highlight of the year was managing
the transportation of the relics of Saints
Gabriel possentu, Gemma Galgani and
Maria Goretti and the Blessed pier Giorgio
Frassati, which were brought to Australia
as part of World Youth Day celebrations.
Staff from 21 locations across three states
ensured that this delicate transportation
task went smoothly.
16
InvoCare AnnuAl RepoRt 2008
Charities such as the Cancer Council were supported
with organised events for Australia’s Biggest Morning tea.
Support was provided for other fund raising events for a range
of charity and community service groups including the lions
Club, Rotary, Movember and various seniors’ and church
groups. In addition, the Company made a donation to ARS
Musica Australis, which manages scholarships and music-based
educational programmes. Various other charities were supported
with small direct donations.
employees/health and saFety
InvoCare has 1,224 employees at 175 locations in Australia and
Singapore. our people represent a diverse cross section of
the communities in which we operate and 53% (2007: 54%) of
them are women. there is a comprehensive in-house learning
and development programme in place to constantly improve
the professionalism of our people. this includes programmes
delivered by our specialist training team and electronic self-paced
learning. It is supplemented by external training activities
where necessary.
training includes occupational health and safety best practices,
human rights and equal opportunity requirements, as well as
skill-based training. over 850 training programmes were delivered
in 2008, covered more than 4,350 employee sessions. 65% of
these sessions related to customer service and the majority of
the balance focused on occupational health and safety issues.
Where appropriate, staff are supported both financially and
through paid leave to pursue higher educational and professional
qualifications relevant to their current or future career paths.
the “Future leaders” programme, introduced in 2008, was
undertaken by 21 employees, six of whom have already received
management promotional opportunities.
During the year, enhancement of fire evacuation training was a
key focus of occupational health and safety. Following the fire at
the Rookwood Crematorium, a professional review of fire risks at
all major locations was undertaken. Remedial actions are now in
progress where this was recommended.
occupational health and safety audits were completed in all
locations during the year. this review process has been enhanced
by the development of an automated self-assessment tool
available to staff responsible for the management of risks at each
of the Group’s locations.
the employee Assistance programme continued during 2008,
offering confidential counselling to employees who may be
suffering stress, trauma or conflict.
l
a
i
r
o
m
e
M
e
d
s
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k
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r
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s
a
m
a
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p
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s
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t
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l
a
r
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t
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c
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t
l
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e
h
T
:
e
v
o
b
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s
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n
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t
t
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g
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l
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t
n
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g
n
u
e
h
C
r
e
t
s
a
M
i
u
h
S
g
n
e
F
envIronment
InvoCare is focused on minimising any
adverse environmental impact related to
its business activities, whilst continuing
to maintain quality and service excellence
and providing a safe working environment
for employees.
employees are encouraged to identify
and act on opportunities to reduce
any adverse environmental impact.
A programme is in place to identify
and implement improvements in use of
resources, to reduce waste and maximise
recycling wherever practical. We are also
in dialogue with key suppliers regarding
production of their products and services
in the most environmentally responsible
manner.
As reported last year, the cremator
replacement programme continues, with
new energy efficient cremators being
installed, which will provide energy savings
and a reduction in carbon emissions
compared to the previous equipment.
Gas consumption has already been
effectively reduced by 4.5% compared
to 2007.
the Company maintained its holding
of over 660 acres of open space for its
memorial parks and gardens in urban
locations. these provide a tranquil
environment for client families or visitors
to reflect on memories of their family
and friends.
the Company has voluntarily participated in the international
Carbon Disclosure project (CDp) reporting. this is an independent
organisation which holds the world’s largest database of
corporate climate change information on behalf of institutional
investors, purchasing organisations and government bodies.
InvoCare’s response outlined the key issues and challenges that
InvoCare may face as a result of climate change. It also provides
a transparent, quantified reporting of the Company’s energy
usage and greenhouse gas emissions. A base year of 2007 has
been established from which to measure future performance in
relation to greenhouse gas emissions. Currently the 2008 year
data is being collected and will be reported on in the CDp 2009
Questionnaire due for submission in May 2009.
the National Greenhouse and Energy Reporting Act 2007 came
into effect on 1 July 2008; however, InvoCare’s emissions for the
2007 year are well below any reporting requirement threshold
of this Act. Despite being below the reporting threshold, the
Company is developing a Greenhouse Gas emissions plan for
the purpose of identifying measures to reduce energy intensity
in addition to the measures already taken, and also to establish
emission reduction targets.
InvoCare AnnuAl RepoRt 2008
17
Tomorrow…
Joe Griffin
Newcastle Memorial Park
18
InvoCare AnnuAl RepoRt 2008
White Lady Funerals
is launching on the
Sunshine Coast.
South East Queensland
is one of Australia’s
fastest growing
regions, attracting new
residents from areas
where White Lady
Funerals is well known.
Sunshine Coast
residents can now
also arrange funerals
with all of the elegance
White Lady can
provide.
w
o
r
r
o
m
o
t
-
s
D
n
a
r
b
r
u
o
Touched by the stories of
people who had lost loved
ones to suicide, Genean
Beetson of Simplicity
Funerals ran her own
suicide prevention and
awareness seminar.
The result was a support
group which meets
regularly and continues
to assist these families.
y
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t
The cremators at the
Northern Suburbs
Memorial Gardens
and Crematorium are
scheduled to be part of
the $9 million upgrade
of all InvoCare’s cremator
facilities. This involves
the replacement of the
existing equipment with
modern fuel efficient
cremators designed
with the latest safety
features and producing
significantly lower carbon
emissions.
w
o
r
r
o
m
o
t
–
s
t
e
s
s
a
r
u
o
Initiatives like the “Future leaders” programme allow InvoCare
to look to its long-term success by taking the experience of
yesterday, the lessons of today and turning both into a plan
for tomorrow.
Joe Griffin from newcastle Memorial park has been identified as
someone able to progress within the Company and in possession
of a desire to take on more senior roles. the “Future leaders”
programme provides a forum where Joe’s enthusiasm and drive
can be developed for tomorrow.
Families trust that the park or garden where their loved one
is memorialised will always be a beautiful place to reflect on
their departed. Client families also trust that the excellent
service they received from their local funeral home in the
past will remain available to them when needed in the future.
InvoCare’s approach to talent identification and career
development ensures tomorrow’s services will be every bit
as good as today’s.
InvoCare AnnuAl RepoRt 2008
19
Group financial and
operational review
FInanCIal hIghlIghts
1st Half 1st Half
2nd Half 2nd Half
Full Year Full Year
2008
$m
2007 Change Change
%
$m
$m
2008
$m
2007 Change Change
%
$m
$m
2008
$m
2007 Change Change
%
$m
$m
Funerals
– Comparable Australia
– Comparable Singapore
– Australian acquisitions
total funerals
Cemeteries and crematoria
elimination of intra-group sales
Sales revenues
other revenue
operating expenses
normalised operating eBITDa
Normalised Operating
EBITDA Margin
Depreciation and amortisation
Finance costs
Interest income
Income tax expense
Effective tax rate
normalised Profit after Tax
Normalised Basic Earnings
per Share
79.6
3.9
4.0
87.5
28.2
(3.0)
75.9
3.9
0.9
80.7
27.7
(3.0)
112.7 105.4
1.7
80.4
26.7
2.1
87.6
27.2
6.8
0.4
0.1
7.3
0.4
7.2
0.4
3.7
–
4.8
(0.6)
3.2 365.1
94.6
4.5
5.7
8.4
1.5
(2.2)
104.8
30.3
(3.6)
87.4
3.5
1.6
92.5
29.6
(3.6)
8.2
7.2
1.0
29
4.1 255.9
174.2 163.4
7.4
2.5
8.4
9.8
12.3
0.7
–
13.3
2.5
0.3
192.3 173.2
57.3
(6.6)
58.5
(6.6)
6.9
21.3
9.0
1.6
131.5 118.5
1.9
88.3
32.2
2.1
98.9
34.7
13.0
0.1
10.7
2.5
11.0
7.6
12.1
7.8
4.1
244.2 223.9
3.6
186.5 168.6
58.9
61.9
(4.6)
(5.5)
0.3
(5.1)
24.1% 25.4%
(4.3)
(6.1)
0.3
(5.3)
29.3% 31.7%
11.4
12.3
(1.3%)
(0.3)
0.6
–
0.2
(2.4%)
0.9
(1.3) 26.4% 27.2%
(4.7)
(5.1)
6.4
(6.0)
(8.2)
(9.9)
–
0.3
0.3
(6.2)
(5.7)
(3.2)
(7.5) 26.1% 28.3%
15.7
16.0
8.3
(0.8%)
(0.5)
(2.2)
–
0.5
(2.2%)
0.3
(0.8) 25.3% 26.3%
(8.9)
(9.7)
10.3
(12.1)
(13.7)
36.8
–
0.7
0.6
(11.5)
(10.8)
8.5
(7.7) 27.5% 29.8%
27.1
28.3
2.1
(1.0%)
(0.8)
(1.6)
–
0.7
(2.2%)
1.3
0.9
11.4
12.3
cents cents cents
7.9
0.3
15.7
16.0
cents cents cents
1.9
1.1
27.2
28.3
cents cents cents
10.8
1.0
7.3
19.1
1.2
0.1
20.3
0.5
17.9
2.9
6.6
13.4
294
11.0
2.0
(0.8)
9.1
14.0
10.6
5.0
(1.0)
8.5
13.2
(1.7)
(6.1)
(7.5)
4.7
4.0
profit After tax on Sale of Assets
Minority interest
Profit after Tax
Basic Earnings per Share
(0.1)
0.1
–
–
–
–
0.8
11.5
12.3
12.3
0.7
11.6
cents cents cents
(96.6)
–
6.9
6.0
0.4
(0.3)
–
(0.1)
–
(0.3)
16.1
15.7
(0.4)
16.1
15.7
cents cents cents
(0.7) (158.7)
(51.6)
(2.0)
(2.5)
(0.8)
0.6
(0.2)
–
(0.1)
(0.1)
0.5
27.6
28.0
28.0
0.4
27.6
cents cents cents
(143.1)
(29.9)
1.7
1.4
Summary of financial performance
the Company increased normalised profit after tax for the year
ended 31 December 2008 by 4.7% to $28.3 million. normalised
basic epS increased 4.0% to 28.3 cents per share. these results
were underpinned by:
InvoCare’s business model involves pursuit of organic and
acquisition growth, improving service levels, increasing operational
efficiencies, positioning for favourable demographic changes
and prudent capital management. the model was again proven
in 2008.
Sales revenue
Sales revenue for the full year increased by $20.3 million,
or 9.1%, to $244.2 million. Funeral sales increased by 11.0% to
$192.3 million and contributed $19.1 million of the overall increase.
Comparable Australian funeral operations, which include
new locations, generated an additional $10.8 million or 6.6%,
increasing comparable sales revenue to $174.2 million for the year.
the number of funeral services performed increased by 3.6%,
contributing $5.7 million to the sales increase. the number of
deaths in InvoCare’s Australian markets increased by an estimated
2.1% in 2008 (2007: 4.4%) and InvoCare’s overall market share
increased by 1.7%.
–
–
–
a higher number of deaths in InvoCare’s Australian markets;
the contribution from funeral business acquisitions and new
funeral home locations;
average selling price improvements, offset by reduced
contribution from redeemed prepaid funeral funds; and
–
continued focus on managing costs.
operating cash flows remained strong at $36.5 million, although
$2.1 million lower than the previous year due to the reduced
prepaid funeral fund contribution. Cash conversion was a healthy
98% of eBItDA, enabling further reinvestment in the business and
continuation of a high dividend payout ratio of 84.3% (2007: 81.8%).
With the solid 2008 results, a final fully franked dividend of
13.0 cents per share was declared, taking the full year dividends
to 23.5 cents, 4.4% or 1.0 cent higher than 2007.
20
InvoCare AnnuAl RepoRt 2008
At the time of announcing InvoCare’s full year results on
19 February 2009, mention was made of estimates released by
the Australian Bureau of Statistics (ABS) up to the end of the
second quarter of 2008 and differences to InvoCare’s own market
estimates. on 18 March 2009, ABS released preliminary Australian
death numbers for the third quarter of 2008, including updating
some past estimates. the latest data released by ABS is not in
sufficient detail to determine deaths in each InvoCare market.
However, the revised ABS numbers now more closely align to
InvoCare’s own market estimates as set out in the following table
showing percentage increases in the number of deaths compared
to the prior corresponding year or half year.
ABS
national
estimates
released on
ABS
national
estimates
released on
18 March 2 December
2008
%
2009
%
IVC
estimates
for its
markets
%
Year ended 31 December 2007
4.4
Six months ended 30 June 2008 1.9
Year ended 30 June 2008
4.3
Year ended 30 September 2008 2.4
2.1
Year ended 31 December 2008
3.3
4.7
4.5
1.4
n/a
2.5
6.4
5.3
n/a
n/a
Despite the differences between ABS and InvoCare estimates,
importantly there is a consistent demographic trend of increasing
numbers of deaths as shown in the graph below of actual and
projected numbers based on ABS data.
In 2008, InvoCare’s average Australian funeral selling prices rose
by 4.6%, contributing $7.7 million to the sales revenue increase.
the surplus from prepaid funeral fund redemptions contributed
$0.5 million to sales revenue, a drop of $2.6 million on the
previous year as investment returns declined due to the global
financial crisis.
actual and Projected Deaths – australia
nine new funeral homes were opened in 2008, taking the total
opened in the last three years to 26 and the total across Australia
to 162. It can take several years for a new location to achieve
InvoCare’s operating margin. In addition, as more new locations
are opened, including by expansion of InvoCare’s funeral brands
into pre-existing markets, the contribution made by these new
locations may not be as high as in new markets. However, this new
location and branding strategy is expected to create economies
of scale in supporting and promoting the brands, increase brand
awareness in the communities and generate increased sales by
those brands.
Australian funeral businesses acquired since 1 January 2007
generated $9.8 million sales revenue in 2008, contributing
$7.3 million to the funeral sales increase. the businesses acquired
were liberty Funerals (Sydney, March 2007), Chipper Funerals
(perth and surrounds, December 2007), Christian Funerals
(perth, August 2008) and Southern Cross Funerals (Melbourne,
october 2008). All business acquisitions made since ASX listing
in December 2003, including Ann Wilson Funerals (Sydney,
December 2005), Drysdale Funerals (Sunshine Coast, July 2006)
and Singapore Casket Company (october 2006), have performed
well and according to plan.
Approximately 13% (2007: 13%) of InvoCare’s Australian funerals
performed had been prepaid. During 2008, the number of new
prepaid funeral contracts sold for future service delivery exceeded
prepaid funeral contracts performed by 6.9% and average new
contract prices increased by 7.2% on 2007.
InvoCare’s Singapore funeral business contributed A$8.4 million to
the Group’s sales revenue, an increase of 13.4% or A$1.0 million
on 2007. In local Singapore currency, Singapore’s sales
increased by 7.0%. Case volume was down by 4.1% due to
increased competition, but this was more than offset by an 11.8%
improvement in average price per case in local Singapore currency.
the Australian dollar weakened by more than 21% against the
Singapore dollar during the year which contributed to the above
sales growth expressed in Australian currency.
155
150
145
140
135
130
125
120
115
)
0
0
0
’
(
r
e
b
m
u
N
0
9
9
1
2
9
9
1
4
9
9
1
6
9
9
1
8
9
9
1
0
0
0
2
2
0
0
2
4
0
0
2
Years to 30 June
6
0
0
2
8
0
0
2
0
1
0
2
2
1
0
2
4
1
0
2
6
1
0
2
Historic Deaths (ABS) 5 Year Central Moving Average 95% Prediction Bands Trend Projected Deaths ABS 2006 Series B
InvoCare AnnuAl RepoRt 2008
21
Group financial and operational review continued
InvoCare’s cemeteries and crematoria, which only operate in
new South Wales and Queensland, increased sales revenue by
$1.2 million, or 2.0%, to $58.5 million. the number of deaths in
InvoCare’s markets was estimated to have increased by 2.6%
(2007: 3.8%) but a small market share erosion was experienced
in Sydney due to Rookwood crematorium not operating at full
capacity following a fire in late July 2008. there was also a
reduction in the number and average value of prepaid memorial
contracts, particularly higher value sales in the second half of the
year, as some customers chose to defer or limit purchases in the
prevailing economic climate. this impact was partly mitigated
by stepped up activity to construct and deliver previously sold
memorials enabling recognition of previously deferred revenue.
Normalised operating EBITDA
normalised operating eBItDA increased by $2.9 million, or 5.0%,
to $61.9 million. normalised operating eBItDA margins were
25.3% compared to 26.3% in the previous year. of this 1.0%
decline, 0.9% was due to the lower contribution from prepaid
funeral fund redemptions and the balance arose from lower margin
acquisitions and new locations.
operating costs were generally consistent with, or contributed
to, business growth. Margins are expected to improve over time
from operating leverage and efficiencies as new businesses are
integrated and new funeral home locations mature.
employee related costs, which represent approximately 40% of
all operating costs, increased 9.1% to $72.8 million. the ratio of
these costs to sales was 29.8%, the same as 2007. Comparable
employment costs (that is, excluding the impact of acquisitions)
increased 6.6% to $70.7 million. the ratio of comparable
employment costs to sales revenue remained fairly constant with
a small increase to 30.1%, from 29.9% in 2007.
Finished goods, consumables used and funeral disbursements
represent approximately 39% of all operating costs and increased
13.1% to $73.1 million. the ratio of these expenses to sales was
29.9% compared to 28.9% in 2007. on a comparable business
basis, the ratio was 29.6%, compared to 28.7% in 2007. the ratio
movements are mainly sales mix related.
occupancy costs, which represent approximately 8% of operating
costs, increased 14.4% to $15.2 million in 2008. the ratio of
occupancy costs to sales increased to 6.2% from 5.9% in 2007.
the increases were primarily due to acquisitions and the opening
of new leased funeral locations. Comparable business occupancy
costs increased 9.0% to $14.3 million.
Advertising and promotion expenses represent approximately
4% of all operating costs and increased $1.0 million, or 13.9%,
to $7.9 million in 2008. Comparable business advertising
and promotion expenses increased $0.8 million, or 11.7%, to
$7.7 million. of the overall increase, $0.8 million arose in the first
half of 2008, following a planned acceleration of spending in that
half to promote brand development and prepaid funerals. the
second half expenses increased by $0.2 million or 5.1% on the
corresponding second half of 2007.
Motor vehicle costs, representing about 3% of all operating costs,
increased by $0.5 million or 9.5% to $5.5 million primarily due to
business acquisitions ($0.2 million of the increase) and higher fuel
prices ($0.3 million).
other operating expenses for 2007, which represent approximately
7% of all operating costs, increased 9.0% overall and 4.6% in
comparable operations.
Depreciation and amortisation
Depreciation expense increased by $0.8 million to $9.7 million
in 2008. this increase was mainly attributed to the impact of
business acquisitions ($0.2 million), new capital expenditure
($0.4 million) and accelerated depreciation on certain plant and
equipment following reassessment of useful lives ($0.4 million).
Financing costs
Finance costs increased by $1.6 million to $13.7 million. the main
components of the increase were unfavourable, non-cash fair value
movements in derivative financial instruments ($1.2 million), interest
paid on debt, which was on average $3 million higher than in 2007
($0.2 million), and foreign exchange losses ($0.1 million).
Taxation
InvoCare’s 2008 income tax expense was $10.7 million (2007:
$11.7 million). excluding the impact of $0.6 million in prior period
adjustments, the overall effective tax rate was 29.2%, compared to
29.8% for 2007.
the Company has $15.1 million in available franking credits
(2007: $13.4 million).
22
InvoCare AnnuAl RepoRt 2008
CapItal management
InvoCare’s capital management objectives and strategies seek to
maximise total shareholder returns, in terms of earnings per share,
distributions and share price, while maintaining a capital structure
with acceptable debt and financial risk.
Basic earnings per share since listing has increased from
18.1 cents in 2004, the first full year as a listed company, to
28.0 cents in 2008. this represents a compound annual growth
rate of 11.5%.
An investment of $1.00 in InvoCare at 31 December 2003 would
have increased in value, excluding dividends, against the S&p/
Index as shown in the graph below. In particular, the graph shows
how InvoCare’s share price has held its value far better than the
underlying market since the start of the financial crisis in late 2007
which reflects market confidence in InvoCare.
Since InvoCare’s initial public offering in late 2003, the total
shareholder return to 31 December 2008 was 230%, comprising
share price growth of $3.30, from the application price of $1.85,
and fully franked dividends paid amounting to 94.9 cents per
share, excluding the final 2008 dividend of 13.0 cents payable on
9 April 2009.
During the 2008 year, InvoCare continued active capital
management, which allowed it to again reward shareholders
with an increased dividend. Basic earnings per share increased
1.4% to 28.0 cents per share. total ordinary dividends for the 2008
year increased by 4.4% to 23.5 cents per share (2007: 22.5 cents
per share) with the directors declaring a final, fully franked, dividend
of 13.0 cents per share (2007: 12.5 cents per share). the 2008
dividend payout ratio was 84.3% (2007: 81.8%), exceeding the
minimum 75% target ratio.
InvoCare’s Dividend Reinvestment plan (DRp), which was first
activated for the 2006 interim dividend paid in october 2006,
remains active for the 2008 final dividend. Approximately 25% of
InvoCare investors have elected to participate in the DRp.
Maintaining an optimal leverage ratio is a key capital management
objective. the optimal capital structure, which has the lowest
cost of capital, is indicatively at a leverage ratio (i.e. net Debt/
eBItDA) of between 3:1 and 5:1. the Group can sustain and
service higher levels of debt than the amount at balance date
and, before the onset of the global financial crisis, had a longer
term net debt target of 3.5x eBItDA. Financiers may be unwilling
to lend at this ratio in the current markets. Where the capacity
exists, debt financing will be used for small acquisitions and capital
expenditure. In the absence of opportunities to invest in growing
the business, the Group will consider applying excess debt
capacity to make returns to shareholders (e.g. special dividends,
share buy-backs, etc). no major capital management initiatives
involving a return to shareholders in excess of normal dividends are
anticipated during 2009.
the Group’s existing bi-lateral debt facilities with two of Australia’s
big four banks (Australia and new Zealand Banking Group limited
and national Australia Bank limited) expire in January 2011
when all the debt becomes due and payable. these unsecured
facilities provide up to $180 million in debt finance, plus $5 million
in working capital. At 31 December 2008, borrowings drawn
on the debt facilities amounted to $158.9 million, an increase
of $4.0 million from the previous year end. the Group has
commenced work in preparation for the debt refinancing well in
advance of the maturity of the existing bank debt facilities.
InvoCare has complied with its debt covenants for the above
facilities. the covenant ratios, as defined in the debt facility
agreements, were as follows:
–
–
Interest cover (eBItDA/net Interest expense) must be greater
than 3.00:1. At 31 December 2008 this ratio was 5.97:1
(2007: 5.40:1).
leverage ratio (net Debt/Adjusted eBItDA) must not be
greater than 3.75:1. At 31 December 2008 this ratio was 2.49:1
(2007: 2.47:1).
Another important capital management objective is to avoid
excessive exposure to interest rate fluctuations. InvoCare’s policy
to maintain floating to fixed base interest rate swaps for at least
75% of debt principal was again achieved in 2008. At 31 December
2008 the proportion of debt hedged was 96% (2007: 99%).
the hedge contracts extend to the end of 2010. As a result of
these contracts, InvoCare’s effective interest rate, including margin,
on borrowings at 31 December 2008 was 6.4% (2007: 6.6%).
Return on $1 – InvoCare Limited against S&P/ASX 200 Index
1
$
n
o
n
r
u
t
e
R
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.25
$0.00
3
0
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e
D
4
0
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4
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4
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4
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D
5
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M
5
0
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5
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S
5
0
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D
6
0
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M
6
0
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6
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6
0
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7
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7
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7
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8
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8
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8
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9
0
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a
M
InvoCare Limited Share Price S&P/ASX200 (XJO)
InvoCare AnnuAl RepoRt 2008
23
Group financial and operational review continued
Cash Flow
net cash provided by operating activities
proceeds from sale of property, plant and equipment
purchase of subsidiaries and other businesses, net of cash acquired
purchase of property, plant and equipment
net cash used in investing activities
proceeds from issue of ordinary shares
Shares acquired by InvoCare Deferred employee Share plan trust
net increase in borrowings
payment of dividends – InvoCare limited shareholders
other
net cash used in financing activities
net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the year
effect of exchange rate change
Cash and cash equivalents at the end of the year
2008
$m
36.5
0.6
(6.1)
(16.4)
(21.9)
–
(0.8)
4.0
(20.4)
–
(17.2)
(2.6)
9.0
–
6.4
2007
$m
38.6
4.6
(8.5)
(17.4)
(21.3)
0.3
(0.8)
2.4
(15.7)
(0.1)
(13.9)
3.4
5.7
(0.1)
9.0
operating cash flows were $2.1 million lower than the corresponding year, primarily due to the decline in prepaid surplus.
Consistent with previous years, for the full year there was strong conversion of operating eBItDA to cash. In the first half the conversion
rate was 88%, but this shortfall was arrested as expected with a strong second half conversion at 106%, resulting in 98% for the full year.
operating eBITDa
Cash flow
Cash provided by operating activities
Add/(less):
Finance costs
Income tax paid
Interest received
Ungeared, tax free operating cash flow
Proportion of eBITDa converted to cash
2008
$m
2007
$m
61.9
58.9
36.5
11.3
12.9
(0.2)
60.5
98%
38.6
11.1
12.6
(0.3)
62.0
105%
payments for the purchase of businesses included the acquisition of Christian Funerals ($1.6 million) and Southern Cross Funerals
($0.5 million) plus payments of deferred consideration for Singapore Casket Company ($0.9 million), liberty Funerals ($0.7 million) and
Chipper/oakwood Funerals ($2.4 million).
payments for property, plant and equipment comprise:
property purchases
Refurbishments and facility upgrades
Motor vehicles
Cremators
other assets
Total capital expenditure
2008
$m
0.4
5.7
3.2
2.2
4.9
16.4
2007
$m
3.4
4.1
3.9
1.8
4.2
17.4
Dividend payments were higher this year due to the increase in cents per share on previous interim and final dividends and the on market
purchase of required DRp shares for the 2007 final dividend paid in April 2008.
24
InvoCare AnnuAl RepoRt 2008
prepaId Funerals
At 31 December 2008, prepaid funeral funds under management, including customer instalment amounts receivable, not controlled
by InvoCare and not recorded as an asset on InvoCare’s balance sheet, amounted to $237 million (31 December 2007: $272 million).
the prepaid funds will be recognised in sales and operating profit in future years when the prepaid funeral services are performed and
monies are redeemed from the prepaid trusts. An estimated 50% is expected to be recognised over the next 10 years and 90% over
about 25 years. As mentioned above, in any one year approximately 13% of all Australian funeral services performed by InvoCare have
been prepaid.
the estimated surplus, or additional margin, included in the prepaid funds to be recognised in future years reduced during the year by
$49 million to an estimated $7 million at 31 December 2008. this surplus is the excess of funds invested over the retail price of funerals
if all the prepaid services had been performed on 31 December 2008. However, funeral service selling price increases in the order of
4.0% to 4.5% applied from 1 January 2009 and will have resulted in the surplus declining by an estimated $10 million (that is, to negative
$3 million). Consequently, sales and operating margins after 31 December 2008 will be negatively impacted as the contracts on hand at
the end of 2008 are redeemed, unless future net investment returns exceed the impact of selling price increases.
InvoCare monitors the asset allocations and investment performance at least quarterly and makes representations where possible
to those in control of the trusts to mitigate price risks and enhance the returns which will ultimately impact InvoCare’s future results.
Despite the number of new funeral contracts exceeding redemptions, the volatile capital and financial markets have resulted in negative
returns over the last year, as shown below. pleasingly, the returns have remained above benchmark.
31 December
2008
31 December
2007
Change
$ or %
prepaid funds under management
$237m
$272m
($35m)
asset allocation
Australian equities
International equities
property
Fixed interest
Cash
Gross annual returns for all fund assets *
one year ended
three years ended
Five years ended
Seven years ended
28.4%
1.6%
1.1%
10.1%
58.8%
(14.1%)
4.0%
8.6%
6.8%
56.9%
1.8%
4.7%
20.5%
16.1%
11.9%
14.4%
13.5%
10.2%
(28.5%)
(0.2%)
(3.6%)
(10.4%)
42.7%
(26.0%)
(10.4%)
(4.9%)
(3.4%)
* Excludes investment management and administration fees (currently 1.6%)
With the funds held in trust for relatively long periods (because contracts are redeemed over approximately 15 years), investment
strategies take a long-term view for those trusts not restricted to more conservative, capital guaranteed assets. Historically, equities have
provided the best long-term returns and consequently, until recently, there has been an asset allocation bias to equities. However, over
the last 18 months, the unprecedented global financial crisis has seen significant declines in equity market values, as well as falling cash
interest rates.
to mitigate and lessen exposure to further value erosion of the invested funds, in August 2008 the fund manager of the largest portion
(approximately 75%) of prepaid funeral fund assets shifted $58 million from equities and property into cash and fixed term deposits.
With the benefit of hindsight, it is estimated that this tactical tilt from equities saved approximately $15 million in further value declines
over the period to 31 December 2008. Since 31 December 2008, a further $23 million was shifted from equities into term deposits.
After the above asset reallocations, InvoCare estimates Australian equity investments had reduced to approximately 17% of total prepaid
funds under management. the long-term investment strategies remain unchanged. the tactical short-term asset reallocations from
equities to fixed term deposits provide certainty of positive returns for the near future, as opposed to volatile and generally negative equity
returns, and protect InvoCare’s future sales and operating margin when the prepaid services are performed. With varying maturity dates
during 2009, the maturing term deposits may be redirected into equity markets when there is an observed and sustained recovery in
those markets.
InvoCare AnnuAl RepoRt 2008
25
Group financial and operational review continued
other ratIo analysIs For
InFormatIon
InvoCare’s management across all operations uses various
financial and non-financial key performance indicators in
monitoring the results and position of the Group and its various
businesses. these measures may include, but are not limited to,
areas such as the following:
– Customer surveys
– numbers of services performed
– Market share
– Average selling prices
– Delivery timeframes of preneed memorials
– Ratio of prepaid contracts sold to contracts redeemed
– prepaid fund asset allocations and investment returns
– Brand awareness surveys
– Days sales in receivable
– Cash flows
– Debt service costs and covenant ratios
– operating margin percentages
–
–
effective income tax rates
employee learning and development
– Workers’s compensation claims and costs
–
lost time injury rates and return to work statistics.
Several key financial ratios relating to the Group as a whole which may be useful to investors are presented in the table below.
the adoption of AIFRS resulted in some transitional accounting adjustments which precludes meaningful calculations for some of
these ratios for the 2004 year.
Ratio
operating margin on sales
Income tax rate
Dividend payout ratios:
– ordinary dividends
– Special dividend
– total dividend payout ratio
Return on equity
Return on assets
Gearing
leverage
net interest cover
Asset replacement
Calculation
eBItDA/Sales
tax expense/pBt
Dividend/pAt
pAt/Average equity
eBIt/Average total assets
net debt/equity
net debt/eBItDA
eBIt/net interest
Capital expenditure/
Depreciation and amortisation
%
%
%
%
%
%
%
%
x
x
x
2008
25.3
27.5
84.3
–
84.3
45.5
15.4
241.7
2.5
4.0
2007
26.3
29.8
81.8
–
81.8
51.8
15.8
240.7
2.5
4.4
2006
25.6
30.2
79.8
–
79.8
65.4
15.4
315.7
3.0
4.4
2005
25.7
30.4
79.4
50.5
129.9
68.1
15.3
493.4
3.0
3.4
2004
24.8
31.2
76.0
–
76.0
n/a
n/a
410.3
3.0
3.5
1.7
1.9
1.2
1.1
0.6
26
InvoCare AnnuAl RepoRt 2008
2009 outlook and beyond
preliminary sales for the first quarter of 2009 were $58.5 million,
7.7% above the corresponding first quarter of 2008. the number
of funerals performed in Australia was 4.4% higher than 2008,
and on a comparable basis 2.7% higher. prepaid funeral fund
contributions, as expected, have remained lower than 2008
and reduced sales and margins for the quarter by $0.3 million
compared to $0.3 million increase in the first quarter of 2008.
After net deferred revenue adjustments, overall cemeteries and
crematoria sales were 0.5% lower in the quarter.
the Group’s performance is significantly dependent upon the
number of deaths. long-term actuarial trend predictions indicate
the number of deaths will increase as the population ages, but
in any one year the actual number may vary above or below
the trend.
InvoCare’s results are also impacted by monies received from
off balance sheet trusts upon delivery of prepaid services.
the long-term investment strategy for these prepaid funds includes
an asset allocation bias to equities, which historically has given
the best long-term investment returns. However, equity values
have declined significantly in the global financial crisis, impacting
InvoCare’s results. A tactical tilt away from equities has been made
to mitigate the short-term impacts.
Furthermore, another factor impacting results notably in the
second half of 2008 was discretionary cemeteries and crematoria
memorial purchases by family customers appeared to have been
delayed or scaled down in the weaker economic conditions.
this trend is expected to continue into 2009 but can be partly
mitigated by acceleration of delivery of prepaid memorials to
enable recognition of previously deferred revenue.
InvoCare remains well positioned as the market leader in Australia
and Singapore. With a solid and proven business model and sound
financial fundamentals supporting it, InvoCare can continue to
grow from its profit drivers:
1. Organically:
–
investing in our people and their development;
–
–
–
–
enhancing service offerings to our client families;
annually increasing prices at least equal to CpI;
benefiting from an increasing number of deaths, which the
ABS has estimated to rise beyond 1.5% p.a. from 2011,
growing progressively to a rate of 2.7% around 2030 before
steadily declining to around 1.0% again in the mid 2050s;
opening new locations and leveraging brands to grow
market share;
– monitoring asset performance, including investing in facility
upgrades and refurbishments or divesting non-performing/
non-strategic assets;
–
–
increasing the memorialisation rate in the cemeteries and
crematoria by focusing on service and product offerings; and
continued capital management, which is dependent upon
trading and economic conditions, as well as acquisition/
expansion opportunities and capital expenditure.
2. Acquisitions:
–
pursuing acquisition opportunities to improve existing market
share; and
–
entering new domestic or international markets; for example,
by acquisition, joint venture or greenfield operations, subject to
sound business cases and not materially affecting our overall
low risk profile.
3. Prepaid funds:
–
growing the value of prepaid funds under management;
– writing more new prepaid contracts than contracts performed;
–
–
optimising fund asset allocations and returns; and
ensuring that the annual net return on invested funds is greater
than annual price increases to deliver incremental margin
expansion.
4. Operating leverage:
– maintaining suitable, but not excessive, operating capacity to
absorb the immediate demands from increased volumes;
–
–
continuing to contain and manage operating expenses,
in particular payroll related costs; and
achieving efficiencies through the pooling of labour,
vehicles and back office functions, in particular as new
business acquisitions are integrated and new funeral home
locations mature.
InvoCare AnnuAl RepoRt 2008
27
F inancial Report
invocare limited and
controlled entities
Financial report
For the financial year ended
31 december 2008
the financial report covers both the separate financial statements of
InvoCare limited as an individual entity and the consolidated financial
statements for the consolidated entity consisting of InvoCare limited and its
subsidiaries. the financial report is presented in the Australian currency.
InvoCare limited (ABn 42 096 437 393) is a company limited by shares,
incorporated and domiciled in Australia. Its registered office and principal
place of business is:
level 4, 153 Walker Street
north Sydney nSW 2060
A description of the nature of the consolidated entity’s operations and its
principal activities is included in the Directors’ Report.
the financial report was authorised for issue by the directors on 27 March
2009. the Company has power to amend and reissue the financial report.
through the use of the internet, InvoCare ensures corporate reporting is
timely, complete, and available globally at minimum cost to the Company.
All press releases, financial reports and other information are available on
the Company’s website: www.invocare.com.au.
28
InvoCare AnnuAl RepoRt 2008
Directors’ report
Corporate Governance Statement
remuneration report
auditor’s Independence
Declaration
Financial report
Income Statements
Balance Sheets
Statement of Recognised
Income and expense
Cash Flow Statements
notes to the Financial Statements
Directors’ Declaration
Independent audit report
Shareholder Information
Corporate Information
30
34
40
48
49
50
51
52
53
95
96
98
IBC
Income tax expense
notes to the Financial Statements
note 1 Summary of Significant Accounting policies
note 2 Financial Risk Management
note 3 Revenue from Continuing operations
note 4 expenses
note 5
note 6 Key Management personnel Disclosures
note 7 Share-based payments
note 8 Remuneration of Auditors
note 9 Dividends
note 10 earnings per Share
note 11 Cash and Cash equivalents
note 12 trade and other Receivables
note 13 Inventories
note 14 Subsidiaries
note 15 property, plant and equipment
note 16 Intangible Assets
note 17 Derivative Financial Instruments
note 18 trade and other payables
note 19 Borrowings
note 20 provisions for employee Benefits
note 21 Deferred tax Assets and liabilities
note 22 Contributed equity
note 23 Reserves and Retained profits
note 24 Minority Interest
note 25 Capital and leasing Commitments
note 26 Business Combinations
note 27 Contingent liabilities and Contingent Assets
note 28 Segment Reporting
note 29 Cash Flow Information
note 30 Deed of Cross Guarantee
note 31 events After the Balance Sheet Date
note 32 Related party transactions
note 33 economic Dependence
note 34 Critical Accounting estimates and Judgements
note 35 Company Details
note 36 Authorisation of the Financial Report
53
59
66
67
68
69
70
72
73
73
74
74
75
75
76
78
79
79
80
80
81
82
83
84
85
85
89
89
90
91
93
93
93
94
94
94
InvoCare AnnuAl RepoRt 2008
29
Directors’ Report
the directors submit their report on the consolidated entity
consisting of InvoCare limited (the “Company”) and the entities it
controlled for the year ended 31 December 2008. InvoCare limited
and its controlled entities together are referred to as “InvoCare”, the
“Group” or the “consolidated entity” in this Directors’ Report.
Directors
unless indicated otherwise, the following persons were directors of
InvoCare limited during the whole of the financial year and until the
date of this report:
Ian Ferrier
Richard Davis (resigned 31 December 2008)
Andrew Smith (appointed 1 January 2009)
Christine Clifton
Roger penman
Benjamin Chow
Richard Fisher
Principal activities
the Group is a leading private provider of services to the funeral
industry in Australia and Singapore. there were no significant
changes in the nature of these activities during the year.
Significant changes in the state of affairs
there have been no significant changes in the state of the Group’s
affairs during the financial year.
Operating results
the consolidated profit of the consolidated entity after providing
for income tax and eliminating minority interest was $28,026,000
(2007: $27,554,000).
Dividends
Dividends to ordinary shareholders of the Company have been paid or declared as follows:
Interim ordinary dividend of 10.5 cents
(2007: 10.0 cents) per fully paid share paid on 10 october 2008
Final ordinary dividend of 13.0 cents (2007: 12.5 cents) per fully paid share
declared by directors on 19 February 2009 to be paid on 9 April 2009
total ordinary dividends of 23.5 cents (2007: 22.5 cents)
All dividends are fully franked at the company tax rate of 30%.
2008
$’000
2007
$’000
10,530
9,991
13,104
23,634
12,536
22,527
the Dividend Reinvestment plan (DRp), first activated for the 2006 interim dividend, was available for the 2008 interim dividend and
$7,846,540 (2007: $7,535,955) was paid in cash and $2,683,636 (2007: $2,454,864) through the issue of 512,114 (2007: 379,139) shares
at $5.24 (2007: $6.47) per share via the DRp. the shortfall in the DRp take-up was not underwritten nor were DRp shares issued at a
discount to the market price for dividends paid in 2008 and 2007.
the Dividend Reinvestment plan will apply to the final 2008 dividend which is not being underwritten and no discount to the market price
will apply.
Review of operations
Results highlights:
Sales revenue
Funerals
Comparable Australian
Comparable Singapore
Acquired Australian business
total funerals
Cemeteries and crematoria
elimination of intra-group sales
Total sales to external customers
2008
$’000
2007
$’000
Change
$’000
%
174,178
8,373
9,767
163,373
7,383
2,479
192,318
173,235
58,453
(6,556)
57,295
(6,612)
10,805
990
7,288
19,083
1,158
56
244,215
223,918
20,297
6.6%
13.4%
294.0%
11.0%
2.0%
-0.8%
9.1%
5.0%
-1.0%
1.7%
operating eBITDa
(excluding net asset sale gains and net impairment of non-current assets)
operating margin
net profit after tax attributable to InvoCare Limited shareholders
61,875
58,935
2,940
25.3%
28,026
26.3%
27,554
472
ePS
Basic earnings per share
30
InvoCare AnnuAl RepoRt 2008
28.0 cents
27.6 cents
0.4 cents
1.4%
Sales revenue grew 9.1% or $20.3 million to $244.2 million, driven
by volume and price. Service volumes were higher, with the
number of Australian deaths remaining above the long-term growth
trend, and acquired businesses and new locations contributing
to increased market share. the continued downturn in equity
markets reduced the surplus contribution from redeemed prepaid
funeral funds by $2.6 million which negatively impacted sales and
operating margins.
the number of deaths in the Australian funeral markets in which
InvoCare operates increased by an estimated 2.1% in 2008,
compared to the 4.4% estimated for the year to 31 December
2007. Whilst the increase is lower than the previous year, the
estimated number of deaths was above the trend of approximately
1% increase per year over the last 20 years. the average selling
price per funeral service in comparable Australian funeral homes
increased by 4.6%, a reduction from the previous year’s 5.3%
increase due to the mix of where the deaths occurred.
Australian funeral business acquisitions since 1 January 2007,
being liberty Funerals (Sydney nSW, March 2007), Chippers
(WA, December 2007), Christian Funerals (perth WA, August 2008)
and Southern Cross Funerals (Melbourne VIC, october 2008)
contributed $7.3 million to the growth in funeral sales revenue.
All acquisitions are performing well and meeting expectations.
nine new funeral home locations were opened in 2008, taking the
total number of InvoCare funeral home locations across Australia
to 162. the new location strategy continues to improve the
penetration of InvoCare’s key brands in existing and new markets.
InvoCare’s overall share of the Australian funeral markets in which it
operates has increased by an estimated 1.7% since 31 December
2007, due primarily to the impact of new acquisitions, in particular
Chippers and Christian Funerals in Western Australia. excluding
the acquisitions, InvoCare estimates its share of comparable
markets increased by 0.4%.
Cemeteries and crematoria sales revenue was adversely impacted
by reduced memorial contract numbers and average prices,
particularly in the second half of the year as economic conditions
worsened, and by a small market share loss in the Sydney region,
due to Rookwood Crematorium operating at less than full capacity
following a fire in July 2008. these impacts were mitigated by
increased numbers and average prices of burials and cremations
and stepped up memorial construction activity to deliver previously
deferred memorial revenue.
operating costs generally increased slightly more than the growth
in revenues.
operating eBItDA (i.e. earnings before interest, tax, depreciation,
amortisation and net gains or losses on asset sales and
impairment) improved by $2.9 million or 5.0% to $61.9 million.
excluding the impact of the prepaid surplus from both years,
operating eBItDA would have improved by $5.6 million or 10.0%.
Comparable (i.e. excluding new acquisitions) operating eBItDA
increased by $1.3 million or 2.3% to $59.8 million. excluding the
prepaid surplus, operating eBItDA would have improved by
$4.0 million or 7.2%.
operating cash flows were $2.1 million lower than the
corresponding year, primarily due to the decline in prepaid surplus.
Consistent with previous years there was strong conversion of
operating eBItDA to cash.
Following the good result, a fully franked final dividend of 13.0
cents per share (2007: 12.5 cents per share) has been declared,
taking the total ordinary dividends for 2008 to 23.5 cents, a 4.4%
increase on 2007 (22.5 cents). the dividend payout ratio for the
year was 84.3% (2007: 81.8%).
Significant events after the balance date
there have been no significant events occurring after balance
date which have significantly affected or may significantly affect
either InvoCare’s operations or the results of those operations or
InvoCare’s state of affairs in future financial years.
Future developments and results
InvoCare continues to pursue growth through acquisitions, new
locations, investing in existing locations, ongoing operational
improvements and favourable demographic changes.
the Group’s performance is significantly dependent upon the
number of deaths increasing in line with actuarial trend predictions
in the markets in which InvoCare operates. In addition, results are
impacted when monies are received from off balance sheet trusts
upon delivery of prepaid services, in particular where the values
of the assets in those trusts fluctuate depending on the asset
allocations and investment earnings. Although there is a long-
term investment strategy bias to equities, in the current global
financial crisis the short-term bias strongly favours cash and fixed
interest securities.
With the prevailing economic climate, plans for continued capital
expenditure and the potential opportunities for further business
acquisitions, no major capital management initiatives are planned
for 2009. InvoCare is well positioned with its total $180 million
existing bi-lateral, unsecured bank borrowing facilities in place until
January 2011. Drawings on these facilities at the end of 2008
were $158.9 million, leaving $21.1 million headroom, and banking
covenants were comfortably satisfied. Capital management is
a constant focus and preparations for debt refinancing have
commenced with negotiations expected in late 2009 or early 2010.
Further information on likely developments in the operations of
the consolidated entity and the expected results of operations
have not been included in this report because the directors
believe it would be likely to result in unreasonable prejudice to the
consolidated entity.
Environmental regulation and performance
InvoCare is committed to the protection of the environment, the
health and safety of its employees, customers and the general
public, as well as compliance with all applicable environmental
laws, rules and regulations in the jurisdictions in which the
consolidated entity operates its business. the consolidated entity
is subject to environmental regulation in respect of its operations,
including some regulations covering the disposal of mortuary
and pathological waste and the storage of hazardous materials.
InvoCare has appropriate risk management systems in place at
its locations.
there have been no claims during the year and the directors
believe InvoCare has complied with all relevant environmental
regulations and holds all relevant licences.
Information on directors
Details of the directors’ qualifications and experience are set out on
the following pages.
InvoCare AnnuAl RepoRt 2008
31
Directors’ Report continued
Board of Directors
mr ian ferrier am fca
Chairman of the Board
Chairman of remuneration Committee
Chairman of nomination Committee
Member of risk Committee
Ian has held the position of Chairman of InvoCare limited since
2001. He is a Fellow of the Institute of Chartered Accountants in
Australia. Ian has had over 45 years of experience in company
corporate recovery and turnaround practice. He is also a director
of a number of private and public companies. Ian is currently
Chairman of InvoCare limited, Goodman limited and Australian
Vintage limited and a director of energy one limited and Reckon
Group limited. He has significant experience in turnaround
management, property and development, tourism, manufacturing,
retail, hospitality and hotels, infrastructure and aviation and
service industries.
Other Public Company Directorships held in the last three years
Australian oil Company limited (appointed May, 2005: retired
December, 2008)
Australian Vintage limited (appointed november, 1991)
energy one limited (appointed november, 1996)
Goodman Group (appointed September, 2003)
Reckon limited (appointed August, 2004)
mr richard Davis bec
Chief executive officer (until 31 December 2008)
Richard has worked in the funeral industry since 1989, initially
as Chief Financial officer and then Chief executive officer of
businesses which are now part of the InvoCare Group. He held
the position of Chief executive officer of InvoCare limited from
1995 to 31 December 2008 when he resigned as director and
Chief executive officer. For the immediate future and to provide
transitional assistance, he has retained directorships on a number
of InvoCare controlled subsidiaries including Singapore Casket
Company (private) limited. Richard resigned as a director of
over Fifty Guardian Friendly Society limited on 24 March 2009.
prior to joining the funeral industry, Richard worked in venture
capital and as an accounting partner of Bird Cameron. Richard
holds a Bachelor of economics from the university of Sydney.
mr andrew smith bcom mba ca
Chief executive officer (from 1 January 2009)
Andrew joined InvoCare in January 2006 as Chief Financial officer
and was promoted to Chief operating officer in March 2007.
on 1 January 2009, Andrew was promoted to Chief executive
officer and Managing Director. prior to joining InvoCare Andrew
held the position of Chief Financial officer with Brazin limited
and previously orotonGroup limited. Andrew was also Financial
Controller for Sales & Marketing at a major international fast
moving consumer goods company, an Internal Audit Manager
for a global insurance company and an Audit Senior at KpMG.
Andrew was appointed as a director of over Fifty Guardian
Friendly Society limited on 24 March 2009. He holds a Bachelor
of Commerce from the university of Queensland, a Master of
Business Administration from the university of new england and
is a member of the Institute of Chartered Accountants in Australia.
Dr christine (tina) clifton mb bs (hons) bha
non-executive Director
Chairman of risk Committee
Member of audit Committee
Member of nomination Committee
tina Clifton is a registered medical practitioner. tina has been a
director of InvoCare limited since october 2003 and her other
current directorships include the Hospitals Contribution Fund of
Australia limited (HCF) and Healthcare Australia. She is also a
Councillor of the university of new South Wales. prior to 2001,
tina held various positions in the public and private healthcare
sectors including Chief executive officer of the Sisters of Charity
Health Service in new South Wales and deputy Chief executive
officer of the northern Sydney Area Health Service. From 1980
to 1988 tina was a general practitioner. tina holds degrees in
medicine and health administration and obtained a specialist
qualification in medical administration.
Other Public Company Directorships held in the last three years
Diversa limited (formerly Ambri limited) (appointed August, 2001:
resigned December, 2006)
32
InvoCare AnnuAl RepoRt 2008
Top to bottom, left to right: Ian Ferrier,
Richard Davis, Andrew Smith,
Tina Clifton, Roger Penman,
Benjamin Chow and Richard Fisher.
mr roger Penman bec fca ftia
non-executive Director
Chairman of audit Committee
Member of remuneration Committee
Member of nomination Committee
Roger penman was appointed as a director of InvoCare limited in
January 2005 and commenced his roles on the Audit Committee
and Remuneration Committee in February 2005. Roger has been
a principal of WHK Horwath Sydney since 1986. He is a Fellow of
the Institute of Chartered Accountants and the taxation Institute of
Australia with over 30 years tax consulting and general business
experience. Roger has extensive experience with mergers,
acquisitions, complex taxation and other tax issues. He is also
a specialist adviser to many professional practices on tax,
accounting and general business matters.
mr benjamin chow ao be
non-executive Director
Member of risk Committee
Member of nomination Committee
Benjamin Chow was appointed as a director of InvoCare limited
in February 2007 and became a member of the Risk Committee
and the nomination Committee at the same time. Benjamin has
worked continuously in the land development industry both in
Australia and South east Asia since 1968, having emmigrated
to Australia in 1962. He chaired the Council for Multicultural
Australia which assists the Australian Government implement its
multicultural policies. He has previously served as president of
Australian Chinese Community Association of nSW, president
of Chinese Australian Forum of nSW and Vice-president of the
ethnic Communities Council of nSW. He is a member of the
Council of national Museum of Australia, a member of the Bond
university Council, president of Sydney university nerve Research
Foundation, a trustee of Australian Chinese Charity Foundation
and a Director of Chain Reaction Foundation ltd.
mr richard fisher am mec llb
non-executive Director
Member of risk Committee
Member of audit Committee
Member of nomination Committee
Richard Fisher is General Counsel to the university of Sydney and
is an Adjunct professor in its Graduate School of Government.
Richard is the immediate past Chairman of partners at Blake
Dawson and specialised in corporate law. He has been a director
of InvoCare limited since october 2003. Richard is a former part-
time Commissioner at the Australian law Reform Commission and
is a current International Consultant for the Asian Development
Bank and Member of the library Council of nSW. Richard holds
a Master of economics from the university of new england and a
Bachelor of laws from the university of Sydney.
InvoCare AnnuAl RepoRt 2008
33
Directors’ Report continued
Company Secretary
mr Phillip friery bbus ca
phillip Friery was appointed Company Secretary in January
2007 and Chief Financial officer in March 2007. He joined the
consolidated entity in 1994 as Accounting Manager initially
responsible for financial reporting and taxation, and over
subsequent years assumed responsibility for information systems,
treasury, management accounting, internal audit and capital
management. prior to joining the consolidated entity, phillip spent
approximately 19 years with Coopers & lybrand (before its merger
with price Waterhouse) in external audit, technical advisory and
financial management consulting roles. phillip joined the board of
over Fifty Guardian Friendly Society limited on 24 March 2009.
He holds a Bachelor of Business from the new South Wales
Institute of technology (now university of technology Sydney) and
is a member of the Institute of Chartered Accountants in Australia.
Meetings of directors
Details of the meetings attended by each director during the
year ended 31 December 2008 are set out in the Corporate
Governance Statement on page 36.
Retirement, election and continuation in office of directors
In accordance with the Constitution of InvoCare limited, at
each Annual General Meeting the following directors must retire
from office:
–
–
–
one-third (or a number nearest one-third) of the number
of directors, excluding from the number of directors the
Managing Director (i.e. the Chief executive officer), who is
exempt from retirement by rotation, and any other director
appointed by the directors either to fill a casual vacancy or
as an addition to the existing directors; and
any other director who has held office for three years or more
since last being elected; and
any other director appointed to fill a casual vacancy or as an
addition to the existing directors.
Ian Ferrier and Richard Fisher will retire by rotation as directors at
the Annual General Meeting and, being eligible, offer themselves
for re-election.
Corporate governance
the Directors’ Report continues on this page with the start of the
Corporate Governance Statement.
34
InvoCare AnnuAl RepoRt 2008
Corporate Governance
Statement
InvoCare limited (the “Company”) and the Board of Directors
(the “Board”) are committed to achieving and demonstrating the
highest standards of corporate governance. the Company and
its controlled entities together are referred to as “InvoCare” or the
“Group” in this statement.
this statement outlines the main corporate governance practices
in place throughout the financial year, which comply with the ASX
Corporate Governance Council’s principles and recommendations
as issued in August 2007, unless otherwise stated. effective from
the end of the financial year, Richard Davis ceased to be Chief
executive officer and was replaced by Andrew Smith who was
Chief operating officer for the duration of the financial year. As at
the date of this report the position of Chief operating officer is
vacant with the role currently being shared among a number of
senior executives.
For further information on the corporate governance policies
adopted by InvoCare limited, refer to the Company’s website:
www.invocare.com.au
PrinciPle 1 - lay solId
FoundatIons For management
and oversIght
Functions of the Board and senior executives
the Board of InvoCare limited is responsible for guiding and
monitoring the Group on behalf of the shareholders by whom they
are elected and to whom they are accountable.
the Board seeks to identify the expectations of the shareholders,
as well as other regulatory and ethical expectations and
obligations. In addition, the Board is responsible for identifying
areas of significant business risk and ensuring arrangements are in
place to adequately manage those risks.
the responsibility for the operation and administration of the
Group, including day to day management of the Group’s affairs
and the implementation of the corporate strategy and policy
initiatives, is delegated by the Board to the Chief executive officer
(the “Ceo”) and senior executives, being the Chief operating
officer (the “Coo”) and the Chief Financial officer (the “CFo”),
and other management. Delegations are set out in the Group’s
delegations policy and are reviewed regularly. Delegations, within
defined authority limits, relate to various operational functions
including areas such as expenditure and commitments, employee
matters (e.g. recruitment, termination, remuneration, discipline,
training, development, health and safety, etc), pricing, branding,
investor and media communications. the Board ensures that the
senior executives and the management team are appropriately
qualified and experienced to discharge their responsibilities and
has in place procedures to assess the performance of the Ceo
and the senior executives.
PrinciPle 2 – struCture the
board to add value
Board composition
the Board currently comprises six directors, being five non-
executive directors (including the Chairman) and one executive
director, being the Ceo. Any director appointed to fill a casual
vacancy, except for the Ceo, must stand for election by
shareholders at the next Annual General Meeting. In addition,
one-third of the non-executive directors, and any other director
who has held office for three years or more since last being
elected, must retire from office and, if eligible, may stand for
re-election. the Ceo is exempt from retirement by rotation and
is not counted in determining the number of directors to retire
by rotation.
the majority of the Board must be independent directors, one of
whom is the Chairman. A director is deemed to be “independent”
if independent of management and free of any business or other
relationship that could materially interfere with, or could reasonably
be perceived to materially interfere with, the exercise of unfettered
and independent judgement.
the Board has assessed, using the criteria set out in the ASX
Corporate Governance principles and Recommendations, the
independence of non-executive directors in light of their interests
and relationships and considers them all to be independent.
the Company will provide immediate notification to the market
where the independence status of a director changes.
the skills, experience and expertise relevant to the position of each
director and their term of office are set out starting on page 32 of
the Directors’ Report.
In deciding which functions and activities the Board reserves to
itself it is guided by the overarching principle that the Board is
charged with strategic responsibility, along with a management
oversight function, and that the executive management have an
implementation function. In fulfilling these functions, the directors
seek to enhance shareholder value and protect the interests
of stakeholders.
All Board members have formal letters of appointment which
clearly articulate the roles, responsibilities, expectations and
remuneration of directors.
All employees, including the Ceo and senior executives, have
formal job descriptions. the level of seniority of the role determines
whether a formally drafted contract of employment or a less
complex letter of appointment is used to confirm employment.
Regardless of type all employment agreements clearly articulate
duties and responsibilities but also rights and expectations.
Standard letters of appointment were last reviewed and updated
in 2007 and used for all appointments since that time.
the Board Charter is available on the Company’s website:
www.invocare.com.au
Senior executive evaluation
After the conclusion of each financial year the Ceo evaluates
and documents the performance of his direct reports, being the
Coo and CFo. the results of this evaluation are reviewed by the
Remuneration Committee with specific focus on achievements
against targeted key performance indicators. Also at this time, key
performance indicator targets for the ensuing year are established.
the Remuneration Committee and the Board also review and
determine the Coo and CFo remuneration for the ensuing year.
the Remuneration Committee evaluates the performance of the
Ceo against annual key performance indicators and reports to
the Board its recommendations on performance appraisal and
remuneration.
In addition to a review of monthly financial results, at least
quarterly the Board monitors the key performance indicators
for the Group which provides the opportunity to more regularly
evaluate the performance of senior executives outside the annual
review process.
When appointed, all new senior executives receive an induction
appropriate to their experience, which is designed to ensure
they can quickly and effectively participate in decision making.
the programme is also designed to ensure that the executive
gains a good working knowledge of both the industry and the
Group covering the financial position, strategies and operations.
this induction programme also focuses on the internal policies
and procedures with a particular emphasis on the respective roles
of the Board and its committees and those functions delegated
to management.
InvoCare AnnuAl RepoRt 2008
35
Directors’ Report continued
Corporate Governance Statement
continued
Meetings of directors
During the year ended 31 December 2008, the number of meetings of the Board of Directors and of each Board Committee and
the number of meetings attended by each of the directors are as follows:
Board
Audit
Committee
Remuneration
Committee
Risk
Committee
nomination
Committee
A
9
9
9
9
9
9
Chair
B
9
9
9
9
9
9
A
B
A
2*
5
5
Member
Chair
3*
5
Member
5*
–
5
5
–
5
–
Chair
7
5*
Member
7
5*
5*
3*
B
7
–
7
–
-
-
A
4
Member
Chair
4
2*
4
4
Member
Member
4*
B
4
4
–
4
4
–
A
1
1
1
1
1
Chair
Member
Member
Member
Member
1*
B
1
1
1
1
1
–
Independent
Ian Ferrier
Christine Clifton
Roger penman
Benjamin Chow
Richard Fisher
executive
Richard Davis
A = number of meetings attended.
B = number of meetings held during the time the director held office or was a member of the committee during the year.
* = includes meetings attended as an invited guest of the committee where the director was not a member of the relevant committee.
the quorum for the Board and Board Committees is two, both of
whom must be independent directors. Board Committees consist
entirely of independent non-executive directors. the Ceo may
attend all Board Committee meetings by invitation and the Coo
and CFo attend Board and Committee meetings by invitation.
Directors’ performance evaluation
the Board, through its nomination Committee, undertakes an
annual performance review of the full Board, its Committees and
of the Chairman. the Chairman performs individual appraisals of
each director.
Nomination committee
the nomination Committee critically reviews on an annual basis
the corporate governance procedures of the Group and the
composition and effectiveness of the Board.
the Committee currently consists of the five independent non-
executive directors of the Board whose skills and experience
cover finance and accounting, taxation, law, medicine and health
administration, property development and community service with
an emphasis on multiculturalism. the Committee is chaired by
Ian Ferrier. the Committee believes that the Board has a healthy
mix of skills to ensure the ongoing development and growth of
the Group.
In addition to its role in proposing candidates for director
appointment for consideration by the Board, the nomination
Committee reviews and advises the Board in relation to Chief
executive officer and Board succession planning and advises
on Board and Committees’ performance.
the Committee Charter is available on the Company’s website:
www.invocare.com.au
the evaluation process involves an assessment of Board and
Committee performance by each director completing a confidential
questionnaire. the questionnaire covers such matters as the
role of the Board, the composition and structure of the Board
and Committees, operation of the Board, Group behaviours and
protocols and performance of the Board and Committees, and
invites comments from each director.
the results of the questionnaire are aggregated and discussed
by the Board as a basis for collegiate consideration of Board
performance and opportunities for enhancement.
the individual appraisals between each director and the Chairman
provide an opportunity for consideration of individual contributions,
development plans and issues specific to the director.
performance evaluation reviews were undertaken during 2008.
Directors’ access to independent professional advice and
company information
to assist in the effective discharge of their duties, directors may,
in consultation with the Chairman, seek independent legal or
financial advice on their duties and responsibilities at the expense
of the Company and, in due course, make all Board members
aware of both instructions to advisers and the advice obtained.
36
InvoCare AnnuAl RepoRt 2008
All directors have the right of access to all relevant Company
information and to seek information from the Company Secretary
and other senior executives. they also have a right to other
records of the Company subject to these not being sought for
personal purposes.
All directors and former directors are entitled to inspect and copy
the books of the Company for the purposes of legal proceedings
including situations where the director is a party to proceedings,
where the director proposes in good faith to bring proceedings
and where a director has reason to believe proceedings will be
brought against him or her. In the case of former directors,
this right of access continues for a period of seven years after
the person ceases to be a director.
prior to each Board meeting, the Board is provided with
management reports and information in a form, timeframe and
quality that enables them to discharge their duties. If it considers
this information to be insufficient to support informed decision
making, then they are entitled to request additional information
prior to or at Board meetings.
Directors’ induction
When appointed to the Board, all new directors receive an
induction appropriate to their experience, which is designed to
quickly allow them to participate fully and productively in Board
decision making.
the induction programme covers the Group’s structure and goals,
financial, strategic, operational and risk management positions,
the rights and duties of a director and the role and operation of the
Board Committees. the nomination Committee is responsible for
reviewing the effectiveness of the director induction programme.
new directors are given an orientation regarding the business
including corporate governance policies, all other corporate
policies and procedures, Committee structures and responsibilities
and reporting procedures.
Directors’ continuing education
Directors are expected to undertake continuing education both
as regards the normal discharge of their formal director duties, as
well as ongoing developments within the Group and its operating
environment. Directors typically attend courses and seminars
relevant to the effective discharge of their duties.
PrinciPle 3 – Promote ethical
and resPonsible decision
making
Code of conduct
the Board, in recognition of the importance of ethical and
responsible decision making, has adopted a Code of Conduct for
all employees and directors which outlines the standards of ethical
behaviour and is essential to maintain the trust of all stakeholders
and the wider community. this code also mandates the avoidance
of conflicts of interest and requires high standards of personal
integrity, objectivity and honesty in the dealings of all directors,
executives and staff, providing detailed guidelines to ensure the
highest standards are maintained.
InvoCare recognises that its clients may be vulnerable due
to a recent bereavement and it requires all employees to be
aware of their ethical and legal responsibilities. Accordingly,
InvoCare requires all employees to behave according to this
code, to maintain its reputation as a good corporate citizen.
Such behaviours extend to areas such as confidentiality, privacy
Act obligations, communications with the media, occupational
health and safety and drugs and alcohol.
this code is provided to all directors and employees as part of their
induction process. It is subject to ongoing review and assessment
to ensure it continues to be relevant to contemporary conditions.
the code is available on the Company’s website:
www.invocare.com.au
Share trading policy
the Company’s share trading policy is designed to minimise the
risk that InvoCare, its directors and its employees will breach the
insider trading provisions of the Corporations Act or compromise
confidence in InvoCare’s practices in relation to securities trading.
the policy prohibits directors and employees from trading in
InvoCare securities when they are in possession of information not
generally available to the investment community, and otherwise
confines the opportunity for directors and employees to trade in
InvoCare securities to certain limited periods.
this policy applies to all senior staff particularly those, such as
finance team members, who have access to information which is
not generally available. In addition, it applies to all the associates
of these individuals. the policy prohibits trading in the Company’s
shares except within narrow and specific windows when the Group
believes the market is fully informed. there are limited procedural
exceptions to the policy and in certain circumstances the Chairman
has the ability to approve trading outside the policy prescriptions.
the share trading policy is available on the Company’s website:
www.invocare.com.au
PrinciPle 4 – safeguard integrity
in financial rePorting
Audit committee
the Audit Committee provides assistance to the Board in fulfilling
its corporate governance, risk management and oversight
responsibilities in relation to the Group’s financial reporting,
internal control structure, information management systems,
interest rate and foreign currency risks and the internal and
external audit functions.
It is the responsibility of the Committee to maintain free and open
communication between the Committee, the external auditor, the
internal auditor and management of the Group. Both the internal
and external auditors have a direct line of communication to the
Chairman of the Audit Committee.
the Audit Committee comprises three independent non-executive
directors and is currently chaired by Roger penman. Mr penman
is an FCA and brings a wealth of financial and taxation experience
to the Committee. other members are Christine Clifton and
Richard Fisher.
the external auditor met with the Audit Committee and the
Board of Directors twice during the year without management
being present.
the Committee Charter is available on the Company’s website:
www.invocare.com.au
InvoCare AnnuAl RepoRt 2008
37
Directors’ Report continued
Corporate Governance Statement
continued
PrinciPle 5 – make timely and
balanced disclosure
the Company has appropriate mechanisms in place to ensure all
investors are provided with material, timely, complete and accurate
information affecting the Group’s financial position, performance,
ownership and governance.
the Chairman, Ceo, CFo or Company Secretary are responsible,
as appropriate, for communication with shareholders and
Australian Securities exchange (ASX). this includes responsibility
for ensuring compliance with the continuous disclosure
requirements in the ASX listing rules and overseeing and
co-ordinating information disclosure to the ASX, analysts,
brokers, shareholders, the media and the public. Continuous
disclosure obligations are well understood and upheld by the
Board and senior executives. Formal and informal discussion
and consideration of these obligations occur as and when the
need arises.
the Group’s shareholder communication strategy is designed to
ensure that all relevant information, especially market sensitive
information, is made available to all shareholders and other
stakeholders as soon as possible. InvoCare’s website is structured
to ensure information is easily located and logically grouped.
those shareholders who have made the appropriate election
receive email notification of all announcements.
the Continuous Disclosure policy and Shareholder Communication
Strategy are available on the Company’s website:
www.invocare.com.au
PrinciPle 6 - resPect the rights of
shareholders
the Board of Directors aims to ensure that the shareholders are
informed of all major developments affecting the Group’s state
of affairs.
the Company uses its website to complement the official release
of material information to the market. Shareholders may elect to
receive email alerts when Company announcements are made.
notice of Annual General Meeting, half year and annual results
announcements and financial reports, investor presentations,
press releases and other ASX announcements can be found on the
Company’s website: www.invocare.com.au
the Board encourages full participation of shareholders at the
Annual General Meeting. the Company’s external auditor attends
the Annual General Meeting and is available to answer shareholder
questions about the conduct of the audit and the preparation
and content of the auditor’s report. the Chairman of the meeting
encourages shareholders to ask reasonable questions of the
auditor regarding the audit and auditor’s report. Questions for the
auditor can be submitted prior to the Annual General Meeting by
contacting the Company’s registered office.
the next Annual General Meeting is scheduled to be held at
11.00am on Friday, 22 May 2009 at the Radisson plaza Hotel,
27 o’Connell Street, Sydney.
Shareholders are also able to direct any questions relating to the
Company’s securities to the share registry, link Market Services
limited.
the Shareholder Communication Strategy is available on the
Company’s website: www.invocare.com.au
PrinciPle 7 – recognise and
manage risk
the Board, through the Risk Committee and Audit Committee,
reviews and oversees the Group’s risk management systems.
Risk committee
the Risk Committee determines the Group’s risk profile and
is responsible for overseeing and approving risk management
strategy and policies, internal compliance and internal control.
the Risk Committee does not have responsibility for strategic
or financial (including information technology) risk management,
which is the focus of InvoCare’s Audit Committee.
the Company’s approach to managing risk draws from the
Australian/new Zealand Standard, and the Committee of
Sponsoring organisations of the treadway Commission’s
integrated framework for enterprise Risk Management.
each senior executive, with input and assistance from their direct
reports, identifies key risks for their areas of responsibility and
function which are in turn aggregated into an overall corporate
risk register. Detailed work on this task is delegated to the Group
Internal Audit Manager. each risk is assessed and assigned an
inherent risk rating. After considering the impact of management
controls, a residual risk rating is determined for each risk. the risk
register is continuously reviewed and maintained as new identified
risks or incidents occur, or mitigating controls change which
warrant a reassessment of risk ratings.
extracts of the risk register focusing on the risks with high and very
high residual ratings are provided to the Risk Committee at each of
its meetings, together with specific commentary or information on
significant changes to the risks or the ratings. Specific major risks
or incidents are reported as and when they occur with the Ceo
and Coo responsible for escalating these to the Risk Committee
and Board, where necessary, if the event occurs outside the
regular cycle of Committee meetings. the Committee is informed
of the effectiveness of actions to mitigate the impact of risk events.
By way of example, during 2008 a fire occurred at the Group’s
Rookwood Crematorium following which the Risk Committee
obtained management’s assessment of fire risks and controls at
all the Group’s crematoria. In addition, the Committee considers
developments or improvements in risk management and controls,
including the adequacy of insurance programmes. In particular, the
Committee reviews and monitors the Group’s rolling three-year risk
management plan which includes targets, timelines and status for
the management of risks.
Separate records and registers are maintained for other more
common or recurring risks; for example, arising from customer
complaints and occupational health and safety issues. these are
managed and reported to the Committee by relevant in-house
specialists, including the Group Internal Audit Manager. In this
context, the Committee monitors complaints handling and also
has a strong focus on ensuring suitable work practices and
employee learning and development programmes are developed
and delivered.
38
InvoCare AnnuAl RepoRt 2008
the Group is finalising a Greenhouse emissions plan for Board
review which will include any risks and opportunities associated
with climate change and identify emission reduction targets.
In the interim, the Company has taken steps to reduce or minimise
carbon emissions; for example, by progressively replacing its
older less fuel efficient cremators. Based on measures of carbon
emissions in 2007, as a base year, InvoCare is well below the
threshold reporting levels under the National Greenhouse and
Energy Reporting Act 2007 which is effective from 1 July 2008.
the Risk Committee comprises four independent non-executive
directors and is currently chaired by Christine Clifton. the other
members are Ian Ferrier, Richard Fisher and Benjamin Chow.
the Risk Committee Charter is available on the Company’s
website: www.invocare.com.au
Internal control
the Group maintains a register of delegated authorities which
are designed to ensure that all transactions are approved at the
appropriate level of management and by individuals who have no
conflicts of interest in relation to the transaction.
An internal audit function is established and conducts a series
of risk-based and routine reviews in accordance with three-
year strategic, and more detailed annual, internal audit plans.
these plans are based on the existing risk environment and the
level of inherent risk, i.e. the level of risk before the application of
controls, in order to effectively identify and prioritise internal audit
projects. Within the three-year period all key business systems
and processes are regularly reviewed, either using in-house or
outsourced resources, to ensure that adequate levels of checks
and balances exist to safeguard the assets of the Company and
ensure that all transactions are correctly and promptly recorded.
Internal audit has developed a self-assessment questionnaire
which is distributed to operational management. this questionnaire
serves to build higher awareness and understanding of business
risks and how to manage and control them. In addition, internal
audit reviews all systems improvements and enhancements prior
to live implementation to ensure an adequate level of internal
control and accountability are maintained.
the Group Internal Audit Manager meets privately with the Chair
of the Risk and Audit Committees without management present on
a regular basis.
Assurance
prior to finalising the release of half-year and full-year results and
reports the Board receives assurance from the Ceo and CFo
in accordance with s295A of the Corporations Act 2001 and
Recommendation 7.3 of the ASX Corporate Governance principles
and Recommendations. these assurances also provide the Board
with information in relation to internal control and other areas of risk
management. these officers receive similar assurance from the
key financial and operational staff reporting to them in relation to
these matters.
PrinciPle 8 – remunerate fairly
and resPonsibly
Remuneration committee
InvoCare’s remuneration policy ensures that remuneration
packages properly reflect the person’s duties and responsibilities,
and that remuneration is competitive in attracting, retaining and
motivating people of the highest quality.
the Remuneration Committee reviews and makes
recommendations to the Board on senior executive remuneration
and appointment and on overall staff remuneration and
compensation policies.
When making recommendations, the Committee aims to design
policies that attract and retain the executives needed to run
InvoCare successfully and to motivate executives to pursue
appropriate growth strategies while marrying performance
with remuneration.
the Remuneration Committee comprises two independent
non-executive directors, Ian Ferrier who chairs the committee
and Roger penman.
the Remuneration Committee Charter is available on the
Company’s website: www.invocare.com.au
Remuneration structure
Remuneration for senior executives typically comprises a package
of fixed and performance-based components. the Committee
may, from time to time, seek advice from special remuneration
consulting groups so as to ensure that the Board remains informed
of market trends and practices.
non-executive directors are remunerated by way of directors’
fees, which may be sacrificed by payment into superannuation
plans or by allocation of ordinary shares. they do not participate in
schemes designed for the remuneration of executives, and do not
receive retirement benefits, bonus payments or incentive shares.
executive remuneration and other terms of employment are
reviewed annually by the Committee having regard to personal and
corporate performance, contribution to long-term growth, relevant
comparative information and independent expert advice. As well
as a base salary, remuneration packages include superannuation,
performance-related bonuses, access by invitation to the Deferred
employee Share plan and fringe benefits.
the Remuneration Report is set out on pages 40 to 46.
the Directors’ Report continues on the next page with the start of
the Remuneration Report
InvoCare AnnuAl RepoRt 2008
39
Directors’ Report continued
Remuneration Report
the Remuneration Report summarises the key compensation
policies for the year ended 31 December 2008, highlights the link
between remuneration and corporate performance and provides
detailed information on the compensation for directors and other
key management personnel.
the Remuneration Report is set out under the following main
headings:
A. principles used to Determine the nature and Amount of
Remuneration
B. Details of Remuneration
C. Service Agreements
D. Share-based Compensation
e. Additional Information.
the information provided in this Remuneration Report has been
audited as required by section 308(3C) of the Corporations
Act 2001.
A. PrinciPles used to determine
the nature and amount of
remuneration
Non-executive directors
Policy
the Board’s primary focus is on the long-term strategic direction
and overall performance of the Group. Accordingly, non-executive
director remuneration is not targeted to short-term results.
Fees paid to non-executive directors are determined with the
assistance of independent external advisers.
the remuneration policy is designed to:
−
attract and retain competent and suitably qualified
non-executive directors;
− motivate non-executive directors to achieve InvoCare’s
long-term strategic objectives; and
−
align the interests of non-executive directors with the
long-term interests of shareholders.
Fee pool and other fees
non-executive directors’ base fees for services as directors are
determined within an aggregate directors’ fee pool limit, which
is periodically approved by shareholders. At the date of this
report, the pool limit is $575,000, being the amount approved by
shareholders at the Annual General Meeting held on 23 May 2008.
this remuneration is to be divided among the non-executive
directors in such proportion as the Board determines. During
the 2008 financial year, annual fees for non-executive directors
were $150,000 for the Chairman of the Board and $87,500 for
each of the other four non-executive directors. For the 2009
financial year, based upon an external review of non-executive
director compensation which was commissioned by the Board
Remuneration Committee, the fees are $157,500, for the Chairman
and $91,875 for each of the other four non-executive directors.
40
InvoCare AnnuAl RepoRt 2008
the base fees exclude any remuneration determined by the
directors where a director performs additional or special duties
for the Company. If a director performs additional or special
duties for the Company, they may be remunerated as determined
by the directors and that remuneration can be in addition to the
limit mentioned above. no fees for additional or special duties
were paid to non-executive directors during the years ended
31 December 2008 and 31 December 2007.
Directors are entitled to be reimbursed for all reasonable costs
and expenses incurred by them in the performance of their duties
as directors.
Equity participation
non-executive directors may receive options as part of their
remuneration, subject only to shareholder approval. no options are
held by any non-executive director at the date of this report.
non-executive directors may participate in the Company’s Deferred
employee Share plan on a fee sacrifice basis. no shares have been
issued or allocated to non-executive directors under the Deferred
employee Share plan.
During 2008, the Board resolved that with effect from 1 January
2009, non-executive directors of InvoCare limited be required
to acquire a minimum equity interest in the Company equivalent
in value to 50% of their annual director’s fee applying at the
time of their appointment as a director of the Company and
that directors be allowed up to three years to accumulate the
required shareholding. Since the end of the year Benjamin Chow,
the only non-executive director not holding shares at 31 December
2008, acquired a parcel of 10,000 shares. Accordingly, at the date
of this report all non-executive directors have an equity interest in
the Company.
Retiring allowances
no retiring allowances are paid to non-executive directors.
Superannuation
Where relevant, fees paid to non-executive directors are
inclusive of any superannuation guarantee charge and, at the
discretion of each non-executive director, may be paid into
superannuation funds.
Executive directors and management
Policy
the guiding principle underlying InvoCare’s executive remuneration
philosophy is to ensure rewards are fair and reasonable, having
regard to both internal and external relativities, and appropriately
balanced between fixed and variable components and that all
variable components are commensurate with performance and
results delivered.
InvoCare’s remuneration policy is that:
−
−
−
for each role, the balance between fixed and variable
components should reflect market conditions;
individual objectives should reflect the need for sustainable
outcomes;
all variable pay should be tightly linked to measurable personal
and business group performance; and
−
total compensation should be market competitive.
effective from the end of the financial year, Richard Davis ceased to
be Chief executive officer and was replaced by Andrew Smith who
was Chief operating officer for the duration of the financial year.
As at the date of this report the position of Chief operating officer
is vacant with the role currently being shared among a number
of senior executives. Despite this current situation, the executive
directors and management remuneration principles and processes
outlined in this report were applied during the financial year and
are expected to generally apply in 2009, albeit the role of Chief
operating officer may be shared during the remainder of 2009.
Approval
the Board Remuneration Committee makes recommendations to
the Board of Directors in relation to the remuneration of the Chief
executive officer (Ceo).
the Ceo recommends, and the Remuneration Committee reviews
for the approval of the Board of Directors, remuneration of all other
key management personnel within a defined budget, approved by
the Board of Directors.
the key management personnel determine the remuneration of
other senior management, within a defined budget approved by
the Board of Directors.
Remuneration structure
InvoCare’s compensation structure aims to provide a balance of
fixed and variable remuneration components. Variable components
are tied to the performance of the Group and the individual and are
entirely at risk.
the compensation of the Chief executive officer and other key
management personnel and other staff members is comprised of
payments and/or allocations under the following categories:
−
short-term employee benefits which include cash salary
(fixed), short-term cash bonuses (variable), annual leave (fixed),
non-monetary benefits (fixed) and other incidental benefits
(fixed);
− post employment benefits comprising superannuation
contributions (fixed);
−
−
long-term employee benefits including incentives (variable) and
long service leave (fixed); and
termination benefits as defined in individual employment
contracts and as required by law (fixed).
Short-term employee benefits
Short-term employee benefits comprise:
Cash salary – executives are offered a market competitive base
cash salary. the cash salary is reviewed on a regular basis
against market data for comparable positions provided by
independent remuneration consultants and selected survey data.
Adjustments to base salary are made based on increases in role
scope or responsibility, pay position relative to market and relative
performance in the role.
Short-term bonuses – short-term incentives (StI) are awarded
for achievement of pre-determined financial and non-financial
objectives. For key management personnel, the target criteria and
possible bonus levels are defined each year by the non-executive
directors and the Remuneration Committee. For other executives,
the key management personnel determine the objectives and
reward levels within the constraints of a Board approved budget.
–
each executive has a target StI opportunity depending on
the accountabilities of the role and impact on performance.
For example, amongst the range of mainly quantitative
financial performance measures are eBItDA targets, income
accretion targets, operating cost control targets, debt
cost reduction targets, qualitative measures of customer
satisfaction, debtor days outstanding targets and other
key strategic non-financial measures linked to drivers of
performance in future reporting periods.
–
–
–
the target criteria for key management personnel are more
heavily weighted to overall Group financial performance
(e.g. eBItDA). thus, the variable reward is only available when
value has been created for shareholders and when profit is
consistent with the business plan.
the base target StI opportunity varies for each executive, but
is generally no higher than 50% of base cash salary, except
for certain sales related staff where a greater portion of their
compensation is at risk, being more weighted to achievement
of sales targets.
the bonuses are generally payable in the first quarter of each
year, based on performance for the previous year ended
31 December.
Non-monetary benefits – include provision of fully maintained cars
and car parking spaces.
Other incidental benefits:
–
payment of death and total and permanent disablement and
salary continuance insurance premiums for senior executive
staff; and
–
nominal discounts for funerals of immediate family members.
Post employment benefits
InvoCare provides retirement and superannuation benefits for its
employees, including senior executives, through the InvoCare
Australia pty limited Superannuation Fund or a complying
superannuation plan at the choice of the employee. the InvoCare
Australia pty limited Superannuation Fund provides accumulation
benefits based on employer and employee contributions and plan
earnings.
Long-term employee benefits
InvoCare’s long-term incentive policy aims to create a balance
between corporate performance and retention of key executives.
prior to the Initial public offering of InvoCare, equity compensation
in the form of share options had been provided to selected
executives. no further options have been issued. Details are set
out on page 45 under “Share-based Compensation – options”.
During 2007, a share-based compensation scheme, the InvoCare
Deferred employee Share plan, was introduced under which the
Board may offer selected senior executives and other managers
incentive shares (“ltI shares”) for no consideration but subject to
performance and/or continuous service conditions. If employment
is terminated, for any reason, prior to the vesting date, or if the
performance and service conditions are not met, any unvested ltI
shares will be forfeited.
For the offers made in 2007 and 2008, all ltI shares will vest in
three equal tranches in February of each of the second, third and
fourth subsequent years. the ltI shares are held in trust until
vesting and the employees will be entitled to any dividends paid
in respect of unforfeited shares. upon vesting, the employee has
the discretion to leave the shares in the plan, withdraw or sell any
number of them.
performance conditions apply to senior managers who have an
important strategic role impacting InvoCare’s financial performance
and relate to compound normalised earnings per share growth.
normalised means adjusted to remove the impacts of any gains or
losses arising from the sale, disposal or impairment of non-current
assets. ltI shares will vest in accordance with the following table:
InvoCare AnnuAl RepoRt 2008
41
Directors’ Report continued
Remuneration Report continued
normalised earnings per share (epS) compound growth
per annum from 1 January in the year of offer
proportion of each one third tranche of
ltI shares that will vest
12% or more
11% or more but less than 12%
10% or more but less than 11%
9% or more but less than 10%
8% or more but less than 9%
less than 8%
100%
80% plus 2% for each 0.1% growth in epS over 11%
65% plus 1.5% for each 0.1% growth in epS over 10%
55% plus 1% for each 0.1% growth in epS over 9%
50% plus 0.5% for each 0.1% growth in epS over 8%
nil
In February 2009, the Board has made further offers to selected senior executives and other managers. the 2009 ltI shares will vest in
three equal tranches in February of each of 2011, 2012 and 2013 subject to normalised compound epS growth from 1 January 2009 as
set out below:
normalised earnings per share compound growth
per annum from 1 January in the year of offer
proportion of each one third tranche of
ltI shares that will vest
10% or more
9% or more but less than 10%
8% or more but less than 9%
7% or more but less than 8%
less than 7%
100%
77% plus 2.3% for each 0.1% growth in epS over 9%
53% plus 2.4% for each 0.1% growth in epS over 8%
30% plus 2.3% for each 0.1% growth in epS over 7%
nil
the performance conditions for ltI shares were selected following
independent advice and analysis of:
–
–
–
broker analysis and forecasts for InvoCare;
historic and forecast epS growth in the ASX/S&p 200; and
InvoCare’s own earnings forecasts.
Ceo (Richard Davis for 2008, Andrew Smith from 1 January 2009),
the Coo (Andrew Smith for 2008, a shared role from 1 January
2009 to the present time) and the CFo (phillip Friery).
other executives who are also included in the category of the
five highest paid executives but who are not considered key
management personnel are:
If the epS performance conditions are not met at the vesting date,
the ltI shares remain available until February in the fifth year after
grant and may vest based on the compound growth from the date
of grant to 31 December of the previous year.
to receive 100% of the ltI shares, the senior executive or manager
must remain employed for four years after grant date, and if subject
to performance conditions, InvoCare’s compound epS growth
must equal or exceed the maximum target growth percentage.
Future offers of ltI shares may be made at the discretion of the
Board and the service and performance conditions for any future
offers may vary from previous ltI share offers.
Further details of ltI shares are set out on page 44 under
“Share-based Compensation – Shares”.
All employees are entitled to statutory long service leave.
Termination benefits
termination benefits are provided in the respective individual
contracts of employment, details of which for key management
personnel are set out in Section C Service Agreements.
B. details of remuneration
Details of the remuneration of the directors, the key management
personnel of the Group and specified executives are set out in the
following tables.
the key management personnel of the Group are the non-
executive directors of InvoCare limited (see pages 32 to 33), the
42
InvoCare AnnuAl RepoRt 2008
− Armen Mikaelian – General Manager,
Cemeteries and Crematoria;
−
John Fowler – General Manager Victoria, Funerals Division;
− Greg Bisset – General Manager nSW, Funeral Division; and
− Wee leng Goh – Chief executive officer,
Singapore Casket Company.
Armen Mikaelian was promoted to the above position on 1 January
2005, having been with InvoCare since 1990 in various capacities.
John Fowler has held general manager positions with InvoCare
since May 1995, having been employed in the industry for over
33 years and by InvoCare since 1994 when it acquired the le pine
funeral businesses in Victoria.
Greg Bisset joined the Group on 15 January 2008, after holding
general management and other senior retail positions in South
Africa, the Middle east and Australia. on 1 March 2009, Greg was
promoted to national Funerals General Manager.
Wee leng Goh joined the Group on 2 January 2008, after holding
senior management positions in insurance and direct marketing
industries.
All key management personnel (other than non-executive
directors), other Australian executives and staff are employed by
InvoCare Australia pty limited, a wholly-owned controlled entity
of InvoCare limited. Singapore executives and staff are employed
by Singapore Casket Company (private) limited, whose ultimate
parent entity is InvoCare limited.
Remuneration details are as follows.
2008
Short-term
employee benefits
post
employment
benefits
Share-based
payments
Cash
salary or
fee
$
Short-
term cash
bonus
$
non-
monetary
benefits
$
Super-
annuation
$
termination
benefits
$
Shares
$
total
$
non-executive directors
Ian Ferrier
Christine Clifton
Roger penman
Benjamin Chow
Richard Fisher
executive directors
Richard Davis 4
Andrew Smith
137,615
80,275
87,500
80,275
80,275
–
–
–
–
–
–
–
–
–
–
12,385
7,225
–
7,225
7,225
–
–
–
–
–
–
–
–
–
–
150,000
87,500
87,500
87,500
87,500
475,001
372,800
128,250
188,326
14,317
23,822
46,350
33,552
477,884
–
–
116,026
1,141,802
734,526
other key management personnel
phillip Friery
300,000
82,620
16,318
27,000
–
69,915
495,853
totals for each component
1,613,741
399,196
54,457
140,962
477,884
185,941
2,872,181
totals by category
2,067,394
140,962
477,884
185,941
2,872,181
other executives in the category of the five highest paid
executives but who are not key management personnel
Armen Mikaelian
John Fowler
Wee leng Goh
Greg Bisset
163,462
203,491
198,655
147,661
172,123
25,000
45,149
46,328
15,127
50,570
18,367
12,150
33,653
18,314
6,005
13,290
–
–
–
–
50,936
35,993
–
25,433
435,301
333,368
268,176
244,862
2007
Short-term
employee benefits
post
employment
benefits
Share-based
payments
Cash
salary or
fee
$
Short-
term cash
bonus
$
non-
monetary
benefits
$
non-executive directors
Ian Ferrier
Christine Clifton
Roger penman
Benjamin Chow
Richard Fisher
executive directors
Richard Davis
Michael Grehan 2
–
71,560
78,000
61,123
71,560
–
–
–
–
–
440,000
40,028
432,221
–
other key management personnel
Andrew Smith
phillip Friery
355,045
250,000
174,150
147,500
–
–
–
–
–
14,090
42,096
22,864
17,515
Super-
annuation
$
145,000
6,440
–
5,501
6,440
termination
benefits options 1 Shares
$
$
$
total
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
145,000
78,000
78,000
66,624
78,000
925,911
510,142
39,600
30,602
–
389,192
–
8,224
31,953
22,500
–
–
– 85,732
1,495 33,911
669,744
472,921
totals for each component
1,367,316
753,871
96,565
288,036
389,192
9,719 119,643 3,024,342
totals by category
2,217,752
288,036
389,192
129,362
3,024,342
other executives in the category of the five highest paid
executives but who are not key management personnel
Armen Mikaelian
John Fowler
Damian Hiser 3
170,000
139,828
153,128
186,430
70,000
–
11,484
46,155
20,287
31,078
45,320
12,620
–
–
–
2,392 25,433
748 17,140
–
–
426,817
319,191
186,035
1.
In accordance with Australian equivalents to International Financial Reporting Standards, only the fair value of options issued after 7 November 2002
has been recognised in the income statement and the balance sheet, whilst the amounts disclosed above relate to all options granted to key
management personnel.
2. Michael Grehan resigned as a Director and Chief Operating Officer on 15 February 2007.
3. Damian Hiser resigned effective 27 September 2007 and the information disclosed above relates to the period from 1 January 2007 to 27 September 2007.
4. Richard Davis received only statutory leave entitlements upon cessation of employment.
InvoCare AnnuAl RepoRt 2008
43
Directors’ Report continued
Remuneration Report continued
c. service agreements
on appointment to the Board, all non-executive directors receive
a letter of appointment which summarises the Board policies and
terms, including compensation, relevant to the office of director.
the Remuneration Committee reviews the Ceo base salary and
bonus incentives annually.
the remuneration and other terms of employment for the previous
Chief executive officer, Richard Davis, who resigned effective
31 December 2008, were formalised in a service agreement dated
8 May 2001 with an initial term of two years, renewable each year
for a further 12 months at the discretion of the Board of Directors.
the agreement provided for the provision of salary, short-term
performance related cash bonuses, superannuation and other
benefits. Mr Davis received only statutory leave entitlements upon
his cessation of employment but has agreed to remain a consultant
to the Group until 30 June 2009.
Remuneration and other terms of employment from 1 January
2009 for the new Chief executive officer, Andrew Smith, were
formalised in a service agreement executed on 17 December
2008 which replaces agreements executed in March 2007 (upon
promotion to Chief operating officer) and December 2005 (for
employment commencing January 2006 as Chief Financial
officer). the agreements provide for provision of salary, short-
term performance related cash bonuses, long-term performance
related share-based bonuses, superannuation and other benefits.
the current term of employment is for three years and four months
commencing on 1 January 2009 with a starting base salary of
$458,716, short-term incentive bonus up to 45% of base salary and
superannuation ($225,000 in the first year) and ltI shares of up to
35% of base salary and superannuation ($175,000 in the first year).
the ltI shares are subject to the same performance conditions
as set out in Section A above for senior InvoCare management.
the performance conditions for the 2008 ltI share-based bonus
under the previous March 2007 service agreement ($135,450)
were not achieved but under the terms of the latest agreement
this bonus may still be payable subject to the achievement in
subsequent years of compound annual profit growth of 7.5% or
more. except in the case of misconduct, termination may generally
be effected, by either party, with either six months’ notice or by
payment of six months’ remuneration. Details of the share-based
remuneration are set out in Section D Share-based Compensation.
Remuneration and other terms of employment for each of the
other key management personnel and other senior managers
are formalised in service agreements or letters of appointment as
varied from time to time, including through annual review of the
base salary, short and long -term incentives. each contract is for
an indefinite term. up to six months’ notice or payment in lieu of
notice is generally required in the event of resignation. termination
benefits are limited to statutory leave entitlements, unless
determined otherwise by the Remuneration Committee. During
2007 and 2008, the other key management personnel and certain
other senior managers participated in the InvoCare Deferred
employee Share plan. Details of this plan are set out in Section
D Share-based Compensation. the other key management
personnel and certain other senior executives also participated
in the Company’s employee Share option plan and options were
granted to them in September 2003. Since that date, no further
options have been granted. Details of these options are set out in
Section D Share-based Compensation.
D. share-based comPensation
Shares
under service agreements, Andrew Smith may receive long-term
incentive bonus remuneration in the form of ordinary shares in
InvoCare limited. the maximum annual bonus is up to 35% of
his combined base salary and superannuation and is linked to
the profit performance of InvoCare. Shares to the value of the
bonus will be purchased on behalf of the employee and one
third will vest on subsequent anniversaries of their purchase.
the employee will be entitled to any dividends paid in respect
of the shares. Any unvested shares granted before appointment
as Chief executive officer on 1 January 2009 will be forfeited
upon termination of employment for any reason. unvested ltI
shares granted after 1 January 2009 will be forfeited if Mr Smith
terminates his employment or if the Company terminates his
employment for reasons including serious misconduct, otherwise
unvested shares will automatically vest upon termination.
Mr Smith’s long-term incentive bonus is determined by the
Remuneration Committee.
Key management personnel and other executives in the category
of the five highest paid executives but who are not other key
management personnel received shares under the terms of
the InvoCare Deferred employee Share plan. the shares were
purchased on market and granted for no consideration. Details of
the grants are set out below.
executive directors
Andrew Smith 1
other key management personnel
phillip Friery
other executives in the category of the five highest paid
executives but who are not other key management personnel
Armen Mikaelian
John Fowler
Greg Bisset
Grant value
$
expensed
$
2008
2007
2008
2007
–
129,000
116,026
85,732
100,000
100,000
67,915
33,911
75,000
55,000
75,000
75,000
51,000
–
50,936
35,993
25,433 –
25,433
17,295
1. Under the terms of Mr Smith’s service agreement the LTI share offer performance hurdle for 2008 was not achieved but shares to the value
of $135,450 will be granted if compound annual profit growth of 7.5% or more is achieved in a subsequent year.
44
InvoCare AnnuAl RepoRt 2008
the numbers of ordinary shares in the Company held during the year by each director of InvoCare limited and other key management
personnel are summarised in note 6 on page 69.
Options
options were granted to certain senior executives of the consolidated entity for no consideration under the employee Share option
plan, which was established prior to the Initial public offering of InvoCare limited. the option grants made were at the discretion of,
and determined by, the directors of the Company at that time.
there have been no options granted under the plan since 22 September 2003.
e. additional information
Principles used to determine the nature and amount of remuneration: relationship between remuneration and Company performance
the overall level of executive reward takes into account the performance of the Group over a number of years, with greater emphasis
given to the current and prior year. the results of the Company and returns to shareholders over the last five years are summarised below.
earnings per share
Dividends paid in year (cents per share):
Interim for current year
Final for previous year
Special
total dividends paid in the year
Share price – 1 January
Share price – 31 December
total shareholder return (price movement plus cash dividends)
total shareholder return as percentage of opening share price
2008
2007
2006
2005
2004
28.0
10.5
12.5
–
23.0
$7.01
$5.15
($1.63)
(23%)
27.6
10.0
11.5
–
21.5
$5.57
$7.01
$1.66
30%
24.7
8.0
9.5
–
17.5
$4.19
$5.57
$1.56
37%
21.0
7.0
9.0
10.5
26.5
$3.35
$4.19
$1.11
33%
20.4
6.4
–
–
6.4
$2.14
$3.35
$1.27
59%
under the InvoCare Deferred employee Share plan, the ltI share remuneration is linked to the compound annual growth in normalised
earnings per share over the vesting periods. the following table summarises the performance to date for the grants made in 2007 and 2008:
ltI share grant year
target annual compound
normalised epS growth
from 1 January of grant year
normalised epS on
1 January of grant year
performance condition testing
2007
2008
8 to 12%
22.2 cents
8 to 12%
27.2 cents
February 2009 – satisfied and 1/3rd fully vested
February 2010
February 2011
February 2012 (if required)
February 2010
February 2011
February 2012
February 2013 (if required)
the first one-third tranche of the 2007 share grant fully vested in February 2009 based upon achievement of more than 12% annual
compound growth in normalised epS to 31 December 2008. For the next one-third tranche of the 2007 grant to fully vest in February
2010, normalised epS for 2009 must exceed 28.5 cents. For the first one-third tranche of the 2008 grants to fully vest in February 2010
normalised epS for 2009 must exceed 36.3 cents.
InvoCare AnnuAl RepoRt 2008
45
Directors’ Report continued
Remuneration Report continued
Cash and share-based bonuses
For each cash bonus and share-based bonus included in the above remuneration tables, the percentage of the available bonus that
was payable for the financial year and the percentage that was forfeited because the person or the consolidated entity did not meet the
service and performance criteria is set out below. no part of the cash bonuses is payable in future years.
Cash bonus
Share-based bonus
name
payable
%
Forfeited
%
Richard Davis
Andrew Smith
25
84
75
16
Grant
year
n/A
2006
2007
phillip Friery
54
46
2007
2008
Armen Mikaelian
99
1
2007
John Fowler
54
46
2007
2008
Wee leng Goh
Greg Bisset
100
100
0
0
2008
n/A
2008
Vested
%
Forfeited
%
Minimum
yet to
vest (note 2)
$
Maximum
yet to
vest
$
n/A
33
n/A
–
n/A
nil
n/A
82,543
–
–
–
–
–
–
–
–
–
–
–
–
–
–
nil
129,000
nil
100,000
nil
100,000
nil
75,000
nil
75,000
nil
51,000
nil
55,000
n/A
–
n/A
–
n/A
nil
n/A
75,000
Financial
years in
which
shares
may vest
(note 3)
$
n/A
2009
2010
2009
2010
2011
2009
2010
2011
2010
2011
2012
2009
2010
2011
2010
2011
2012
2009
2010
2011
2010
2011
2012
n/A
2010
2011
2012
1. N/A = Not applicable
2. Performance conditions must be met before vesting and, if not, the minimum that will vest could be nil.
3. Under the terms of the grants, an additional year beyond the last shown may be allowed for vesting if the performance hurdles have not been achieved.
Loans to directors and executives
there are no loans to directors and executives.
Share options granted to directors and the most highly remunerated officers
there were no options over unissued ordinary shares of InvoCare limited at 31 December 2008 nor were any options granted during
or since the end of the financial year.
the Directors’ Report concludes on the following page.
46
InvoCare AnnuAl RepoRt 2008
Directors’ Report continued
Indemnifying officers or auditor
During the financial year, InvoCare paid a premium to insure
directors and officers of the consolidated entity. the insurance
policy specifically prohibits disclosure of the nature and liability
covered and the amount of the premium paid.
Proceedings on behalf of the company
no person has applied for leave of Court to bring proceedings on
behalf of the Company or intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or any part of those proceedings.
the Company was not a party to any such proceedings during
the year.
Non-audit services
the directors are satisfied that the provision of non-audit services
during the year is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
the nature and scope of each type of non-audit service provided
means that auditor independence was not compromised.
the following fees for non-audit services were paid/payable to the
external auditor (pricewaterhouseCoopers) during the year ended
31 December 2008:
Auditor’s independence declaration
the copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 48.
Rounding of amounts
the Company is of a kind referred to in Class order 98/0100
issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the Directors’ Report
and financial report. Amounts in the Directors’ Report and financial
report have been rounded off to the nearest thousand dollars
(where rounding is applicable) in accordance with that Class order.
Signed in accordance with a resolution of the Board of Directors.
Ian Ferrier
Director
Assurance services
taxation services
Advisory services
total
$
15,450
79,815
12,730
107,995
andrew Smith
Director
Dated this 27th day of March 2009.
InvoCare AnnuAl RepoRt 2008
47
Auditor’s Independence Declaration
As lead auditor for the audit of InvoCare limited for the year ended 31 December 2008,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
this declaration is in respect of InvoCare limited and the entities it controlled during the period.
John Feely
partner
pricewaterhouseCoopers
Sydney
27 March 2009
Liability limited by a scheme approved under Professional Standards Legislation
48
InvoCare AnnuAl RepoRt 2008
Income Statements
For the year ended 31 december 2008
Consolidated entity
parent entity
notes
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Revenue from continuing operations
3
248,992
Finished goods, consumables and funeral disbursements
employee benefits expense
employee related and on-cost expenses
Advertising and public relations expenses
Depreciation, amortisation and impairment expenses
occupancy and facilities expenses
Finance costs
Motor vehicle expenses
other expenses
net gain/(loss) on disposal of non-current assets
Profit before income tax
Income tax expense
profit from continuing activities
Profit for the year
profit is attributable to:
equity holders of InvoCare limited
Minority interest
(73,108)
(59,632)
(13,149)
(7,905)
(9,703)
(15,198)
(13,696)
(5,527)
(11,957)
(355)
38,762
(10,668)
28,094
28,094
4
4
5
228,197
(64,635)
(53,111)
(13,599)
(6,939)
(8,945)
(13,287)
(12,095)
(5,049)
(11,989)
818
39,366
(11,715)
27,651
27,651
50,872
44,663
(457)
(10)
– –
(500)
(2)
– –
– –
– –
(11,384)
(9,966)
– –
(450)
– –
38,536
(2,405)
36,131
36,131
(529)
33,701
(1,728)
31,973
31,973
28,026
27,554
36,131
31,973
68
97
– –
28,094
27,651
36,131
31,973
earnings per share for profit attributable to the
ordinary equity holders of the Company
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
10
10
28.0
28.0
27.6
27.6
The above income statements should be read in conjunction with the accompanying notes.
InvoCare AnnuAl RepoRt 2008
49
Balance Sheets
as at 31 december 2008
aSSeTS
Current assets
Cash and cash equivalents
trade and other receivables
Inventories
Deferred selling costs
Total current assets
non-current assets
trade and other receivables
Shares in subsidiaries
property, plant and equipment
Intangible assets
Derivative financial instruments
Deferred tax assets
Deferred selling costs
Total non-current assets
Total assets
LIaBILITIeS
Current liabilities
trade and other payables
Borrowings
Current tax liabilities
Deferred revenue
provisions
Total current liabilities
non-current liabilities
trade and other payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Deferred revenue
provisions
Total non-current liabilities
Total liabilities
net assets
eQUITY
Contributed equity
Reserves
Retained profits/(Accumulated losses)
parent entity interest
Minority interest
Total equity
Consolidated entity
parent entity
notes
2008
$’000
2007
$’000
2008
$’000
2007
$’000
11
12
13
12
14
15
16
17
21
18
19
20
18
19
17
21
20
22
23
23
24
6,414
18,410
13,691
544
39,059
9,488
–
222,229
61,991
–
–
7,613
8,981
18,567
13,170
543
41,261
9,072
–
212,715
56,457
5,257
–
7,607
1,056 –
19
– –
– –
1,075
238,538
16,473
– –
– –
–
1,683 –
– –
18
18
220,781
15,957
4,360
301,321
291,108
256,694
241,098
340,380
332,369
257,769
241,116
21,017
–
4,696
2,885
8,538
37,136
577
158,655
12,500
26,855
40,389
1,289
25,557
–
4,661
2,956
8,079
41,253
251
154,547
–
33,390
41,382
1,067
168
929
4,150
5,247
131,701
1,509
178
–
3,429
– –
– –
3,607
– –
135,799
7,036 –
–
– –
– –
240,265
230,637
142,835
133,210
277,401
271,890
146,442
138,457
62,979
60,479
111,327
102,659
71,806
(649)
(9,215)
61,942
1,037
62,979
70,125
3,504
(14,175)
59,454
1,025
60,479
71,806
(2,330)
41,851
111,327
– –
70,125
3,748
28,786
102,659
111,327
102,659
The above balance sheets should be read in conjunction with the accompanying notes.
50
InvoCare AnnuAl RepoRt 2008
Statements of Recognised Income and Expense
For the year ended 31 december 2008
Share-based payment reserve
Cash flow hedges, net of tax
exchange difference on translation of foreign operations
net income recognised directly in equity
profit after tax
total recognised income and expense for the year
total recognised income and expense for the year is attributable to:
Members of InvoCare limited
Minority interest
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
742
(6,820)
1,925
(4,153)
28,094
(25)
2,565
(207)
2,333
27,651
742
(6,820)
– –
(6,078)
36,131
2007
$’000
(25)
2,565
2,540
31,973
23,941
29,984
30,053
34,513
23,873
68
23,941
29,887
97
29,984
30,053
–
30,053
34,513
–
34,513
The above statements of recognised income and expense should be read in conjunction with the accompanying notes.
InvoCare AnnuAl RepoRt 2008
51
Cash F low Statements
For the year ended 31 december 2008
Cash flow from operating activities
Receipts from customers
payments to suppliers and employees
other revenue
Interest received
Finance costs
Income taxes paid
Consolidated entity
parent entity
notes
2008
$’000
2007
$’000
2008
$’000
2007
$’000
267,306
(210,877)
4,066
60,495
214
(11,272)
(12,964)
245,629
(187,062)
3,456
62,023
273
(11,092)
(12,609)
– –
(944)
– –
(944)
– 1
(9,633)
– –
(799)
(799)
(9,600)
net cash provided by/(used in) operating activities
29
36,473
38,595
(10,577)
(10,398)
Cash flow from investing activities
proceeds from sale of property, plant and equipment
purchase of subsidiaries and other businesses net of cash acquired
purchase of property, plant and equipment
net cash used in investing activities
Cash flow from financing activities
proceeds from issue of ordinary shares
payment for shares acquired by InvoCare Deferred employee
Share plan trust
proceeds from borrowings
Repayment of borrowings
payment of dividends – InvoCare limited shareholders
(net of Dividend Reinvestment plan $2,683,000 (2007: $5,687,000))
payment of dividends – minority interests
proceeds from repayments by controlled entities
555
(6,126)
(16,359)
4,571
(8,526)
(17,366)
(21,930)
(21,321)
–
(786)
17,000
(13,000)
(20,381)
(56)
–
335
(816)
18,362
(16,000)
(15,708)
(122)
–
– –
– –
– –
– –
–
(786)
17,000
(13,000)
(20,381)
– –
29,729
net cash provided by/(used in) financing activities
(17,223)
(13,949)
12,562
net increase/(decrease) in cash held
(2,680)
3,325
1,985
335
(816)
16,000
(16,000)
(15,708)
25,684
9,495
(903)
(26)
(929)
– –
1,056
(929)
Cash and cash equivalents at the beginning of the year
effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
11
8,981
113
6,414
5,717
(61)
8,981
The above cash flow statements should be read in conjunction with the accompanying notes.
52
InvoCare AnnuAl RepoRt 2008
Notes to the F inancial Statements
For the year ended 31 december 2008
note 1: Summary of Significant
accounting PolicieS
the principal accounting policies adopted in the preparation of
the financial report are set out below. these policies have been
consistently applied to all the years presented, unless otherwise
stated. the financial report includes separate financial statements
for InvoCare limited as an individual entity and the consolidated
entity consisting of InvoCare limited and its subsidiaries.
that control ceases. the purchase method of accounting is used
to account for the acquisition of subsidiaries by the Group (refer to
note 1(i)).
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated. unrealised
losses are also eliminated unless the transaction provides evidence
of the impairment of the asset transferred. Accounting policies
of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
(a) Basis of preparation
this general purpose financial report has been prepared in
accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting
Standards Board, urgent Issues Group Interpretations and the
Corporations Act 2001.
(i) Compliance with IFRS
Australian Accounting Standards include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance
with AIFRS ensures that the consolidated financial statements
and notes of InvoCare limited comply with International Financial
Reporting Standards (IFRS).
AASB 8 Operating Segments is applicable to annual reporting
periods beginning on or after 1 January 2009. However, the Group
elected to adopt this standard early, although this resulted in only
minor changes to the reporting of operating segments and brought
them into line with the segments used for internal management
reporting.
(ii) Historical cost convention
these financial statements have been prepared on an accruals
basis under the historical cost convention, as modified by the
revaluation to fair value of financial assets and liabilities (including
derivative instruments).
(iii) Critical accounting estimates
the preparation of financial statements in conformity with
AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the
process of applying the Group’s accounting policies. the areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements are disclosed at note 34.
(iv) Comparatives
Where necessary, comparatives have been reclassified and
repositioned for consistency with current year disclosures.
(b) Principles of consolidation
(i) Subsidiaries
the consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of InvoCare limited (“Company”
or “parent entity”) as at 31 December 2008 and the results of all
subsidiaries for the year then ended. InvoCare limited and its
subsidiaries are together referred to in this financial report as the
Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose
entities) over which the Group has the power to govern the financial
and operating policies, generally accompanying a shareholding of
more than one-half of the voting rights.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. they are deconsolidated from the date
Minority interests in the results and equity of subsidiaries are
shown separately in the consolidated income statement and
balance sheet, respectively.
(ii) Employee share trust
the Group has formed a trust to administer the InvoCare exempt
employee Share plan and the InvoCare Deferred employee
Share plan. this trust is consolidated, as the substance of the
relationship is that the trust is controlled by the Group. Shares held
by the InvoCare Deferred employee Share plan trust are disclosed
as treasury shares and deducted from contributed equity.
(c) Segment reporting
operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
the chief operating decision maker has been identified as the
Chief executive officer whose direct operational reports were in
2008 the Chief operating officer and Chief executive officer of
Singapore Casket Company.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional
currency”). the consolidated financial statements are presented
in Australian dollars, which is InvoCare limited’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement,
except when they are deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges or are attributable to
part of the net investment in a foreign operation.
(iii) Group companies
the results and financial positions of all the Group entities (none of
which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
−
−
assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are
translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
InvoCare AnnuAl RepoRt 2008
53
Notes to the F inancial Statements
For the year ended 31 december 2008
note 1: Summary of Significant
accounting PolicieS
continued
−
all resulting exchange differences are recognised as a
separate component of 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 taken to shareholders’ equity. When a foreign
operation is sold or any borrowings forming part of the net
investment are repaid, a proportionate share of such exchange
differences will be recognised in the income statement, as part
of the gain or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign
entities and translated at the closing rate.
(e) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the entity and the revenue can
be reliably measured. Revenue is measured at the fair value of
the consideration received or receivable. Amounts disclosed as
revenue are net of returns, allowances, duties and taxes paid.
Revenue is recognised as set out below:
(i) Funeral operations
Revenue is recognised when the funeral service is performed.
the Group enters into prepaid funeral contracts providing for
future funeral services at prices prevailing when agreements
are signed. payments under these contracts are placed in trust
(pursuant to the Group’s policy and, where relevant, state laws).
the monies held in trust for individual prepaid funeral contracts
are not controlled by the Group, because the Group does not
have the power to govern the financial and operating policies of
the trust or trustee entities nor does the Group have the legal right
or access to the trust funds until the contracted funeral services
are performed.
Accordingly, the monies held in trust are not recognised in the
financial statements. the Group recognises revenue on prepaid
funeral contracts when the prepaid funeral service is eventually
performed and the amount held in trust, including any investment
earnings, is receivable by the Group.
(ii) Cemeteries and crematoria operations
Sales of at-need and prepaid interment or inurnment rights
are recognised immediately as revenue. Sales of associated
memorials, other merchandise and burial and cremation services
are recognised as revenue when the memorial or merchandise is
determined as delivered or the service is performed. Revenues
relating to undelivered memorials and merchandise and
unperformed services are deferred. Contracted receivables and
cash received relating to recognised and deferred revenue on sale
of rights, memorials and merchandise are recorded in the financial
statements. However, similarly to prepaid funeral services, monies
for prepaid burial and cremation services are placed in trust until
the service is performed.
(f) Deferred selling costs
Selling costs applicable to prepaid funeral service contracts, net
of any administrative fees recovered, are expensed when incurred.
Direct selling costs applicable to deferred revenue on undelivered
memorials and merchandise and unperformed burial and
cremation services are deferred until the revenue is recognised.
(g) 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 for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences and unused tax losses.
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting, nor taxable,
profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses. Deferred tax liabilities and assets are
not recognised for temporary differences between the carrying
amount and tax bases of investments in 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 tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to
settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised in equity.
(i) Tax consolidation legislation
InvoCare limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation.
the head entity, InvoCare limited, and the controlled entities in the
tax consolidated group account for their own current and deferred
tax amounts. these tax amounts are measured as if each entity in
the tax consolidated group continues to be a stand alone taxpayer
in its own right.
In addition to its own current and deferred tax amounts, InvoCare
limited also recognises the current tax liabilities (or assets) and
the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the
tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group. Details about the tax
funding agreement are disclosed in note 5.
54
InvoCare AnnuAl RepoRt 2008
note 1: Summary of Significant
accounting PolicieS
continued
(h) Leases
leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases.
leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease.
lease income from operating leases is recognised in income on
a straight-line basis over the lease term.
(i) Business combinations and acquisitions of assets
the purchase method of accounting is used to account for all
acquisitions of assets (including business combinations) regardless
of whether equity instruments or other assets are acquired. Cost is
measured as the fair value of the assets given, shares issued or
liabilities incurred or assumed at the date of exchange plus costs
directly attributable to the acquisition. Where equity instruments
are issued in an acquisition, the value of the instruments is their
published market price as at the date of exchange. transaction
costs arising on the issue of equity instruments are recognised
directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of
any minority interest. the excess of the cost of acquisition over
the fair value of the Group’s share of the identifiable net assets
acquired is recorded as goodwill (refer to note 1(o)). If the cost of
acquisition is less than the fair value of the net identifiable assets
of the subsidiary acquired, the difference is recognised directly
in the income statement, but only after a reassessment of the
identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value
as at the date of acquisition. the discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
(j) Impairment of assets
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 the
carrying amount may not be recoverable. Assets that are subject
to amortisation are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount exceeds its
recoverable amount. the recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash generating units). non-financial assets other than goodwill
that suffered impairment are reviewed for possible reversals of the
impairment at each reporting date.
(k) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value, and bank
overdrafts. Any bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
(l) Receivables
trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful receivables.
trade receivables are usually due for settlement no more than
30 days from the date of recognition, except where extended
payment terms (up to a maximum of 60 months) have been
made available on cemetery or crematorium contracts for sale of
interment or inurnment rights and associated memorials and other
merchandise. Receivables arising from cemetery or crematorium
contracts which are initially expected to be collected over a period
exceeding 12 months are recognised as non-current receivables
and measured as the net present value of estimated future cash
receipts, discounted at an imputed effective interest rate. upon
initial recognition of the contract receivables, any undelivered
portion of the contracts is included in deferred revenue until
delivery.
the carrying amount of the asset is reduced through the use
of a provision for doubtful receivables account and the amount
of the loss is recognised in the income statement within “other
expenses”. When a trade receivable is uncollectible, it is written off
against the provision account for trade receivables. Subsequent
recoveries of amounts previously written off are credited against
“sundry revenue” in the income statement. Details of the impaired
receivables, provision account movements and other details are
included in notes 2 and 12.
(m) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and, where appropriate,
a proportion of variable and fixed overhead. Costs are assigned
to individual items of inventory predominantly on the basis of
weighted average cost. net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs
necessary to make the sale.
(n) Property, plant and equipment
property, plant and equipment are carried at historical cost less
depreciation or amortisation. 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. Repairs, maintenance and minor renewals are charged
to the income statement during the financial period in which they
are incurred.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (note 1(j)).
InvoCare AnnuAl RepoRt 2008
55
Notes to the F inancial Statements
For the year ended 31 december 2008
note 1: Summary of Significant
accounting PolicieS
continued
Borrowings are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Refer to notes 2 and 19 for further information on borrowings.
Cemetery land is carried at cost less accumulated amortisation
and impairment write-downs. the consolidated entity sells
interment and inurnment rights in perpetuity, while retaining title to
the property. Cemetery land is amortised, as the right to each plot
or space is sold, to write off the net cost of the land over the period
in which it is utilised and an economic benefit has been received.
other freehold land is not depreciated or amortised.
Depreciation of other assets is calculated using the straight-line
method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives, as follows:
– Buildings
40 years
– plant and equipment
3-10 years
the cost of improvements to or on leasehold properties is
amortised over the unexpired period of the lease or the estimated
useful life of the improvement to the consolidated entity, whichever
is shorter. the assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. Gains and losses are included
in the income statement.
(o) Intangible assets
(i) 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
on acquisitions of subsidiaries is included in intangible assets.
Goodwill acquired in business combinations 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 (note 16).
(ii) Trademarks and brand names
trademarks and brand names have a finite useful life and are
carried at cost less accumulated amortisation and impairment
losses. Amortisation is calculated using the straight-line method
to allocate the cost of trademarks and brand names over their
estimated useful lives of 10 years.
(p) Trade and other payables
trade and other payables represent liabilities for goods and
services provided to the Group prior to the end of the financial
year which had not been settled at balance date. the amounts are
unsecured and are usually paid within 60 days of recognition.
(q) Borrowings
Borrowings 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 income statement over the period of the borrowings using the
effective interest rate method.
(r) Derivative financial instruments
the Group uses derivative financial instruments such as cross
currency and interest rate swaps to hedge its risks associated
with foreign currency and interest rate fluctuations. Derivatives are
initially recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value
at each reporting date. the accounting for subsequent changes
in fair value depends on whether the derivative is designated as a
hedging instrument, and if so, the nature of the item being hedged.
the Group designates certain derivatives as either:
–
hedges of the cash flows of recognised assets and liabilities
and highly probable forecast transactions (cash flow hedges);
or
–
hedges of a net investment in a foreign operation.
the Group documents at inception the relationship between
hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various
hedge transactions. the Group also documents its assessment of
whether the derivatives that are used in hedging transactions have
been, and will continue to be, highly effective in offsetting changes
in fair values or cash flows or hedged items.
the fair value of interest rate swap contracts is calculated as the
present value of the estimated future cash flows. the fair value of
forward exchange contracts is determined using forward exchange
market rates at the balance sheet date. the fair values of derivative
financial instruments used for hedging purposes are disclosed in
note 17. Movements in the hedging reserve in shareholders’ equity
are shown in note 23. the full fair value of a hedging derivative is
classified as a non-current asset or liability when the remaining
maturity of the hedged item is more than 12 months; it is classified
as a current asset or liability when the remaining maturity of
the hedged item is less than 12 months. trading derivatives are
classified as a current asset or liability.
Hedges that meet the strict criteria for hedge accounting are
accounted for as follows:
(i) Cash flow hedges
the effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised
in equity in the hedging reserve. the gain or loss relating to
the ineffective portion is recognised immediately in the income
statement within finance costs.
Amounts accumulated in equity are recycled in the income
statement within finance costs in the periods when the hedged
item affects profit or loss (for instance when the forecast sale that
is hedged takes place).
When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in
equity and is recognised when the forecast transaction is ultimately
recognised in the 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 income statement.
56
InvoCare AnnuAl RepoRt 2008
note 1: Summary of Significant
accounting PolicieS
continued
(ii) Hedges of a net investment
Hedges of a net investment in a foreign operation, including a
hedge of a monetary item that is accounted for as part of the net
investment, are accounted for in a similar way to cash flow hedges.
Gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised directly in equity while any
gains or losses relating to the ineffective portion are recognised
in the income statement. on disposal of the foreign operation, the
cumulative value of any such gains or losses recognised directly in
equity is transferred to the income statement.
(s) Employee benefits
(i) Wages and salaries, annual leave and sick leave
liabilities for wages and salaries, including non-monetary benefits,
annual leave and accumulating sick leave expected to be settled
within 12 months of the reporting date are recognised in other
payables and provision for employee benefits in respect of
employees’ services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled,
including appropriate on-costs. liabilities for non-accumulating
sick leave are recognised when the leave is taken and measured
at the rates paid or payable.
(ii) Long service leave
the liability for long service leave is recognised in the provision
for employee benefits and is measured as the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date, including
appropriate on-costs. Consideration is given to expected future
wage and salary levels, experience of employee departures and
periods of service. expected future payments are discounted using
market yields at the reporting date on national government bonds
with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
(iii) Bonus plans
the Group recognises a liability in other payables and an expense
for bonus plans when there is no realistic alternative but to settle
the liability and at least one of the following conditions is met:
−
−
there are formal terms in the plan for determining the amount
of the benefit;
the amounts to be paid are determined before the time of
completion of the financial report; or
− past practices give clear evidence of a constructive obligation.
(iv) Retirement benefits
employees of the Group are entitled to benefits on retirement,
disability or death from the Group sponsored defined contribution
superannuation plans. Fixed statutory contributions are made
by the Group to these plans and are recognised as an expense
as they become payable. the Group’s liability is limited to these
contributions.
(v) Share-based payments
the Group provides benefits to certain employees, including key
management personnel, in the form of share-based payments,
whereby employees render services in exchange for shares or
options over shares. Details of the employee share or option plans
are set out in note 7.
the cost of equity-settled transactions with employees is
measured by reference to the fair value of the equity instruments at
the date granted. the cost is recognised as an employee benefit
expense in the income statement, with a corresponding increase
in equity, over the period during which the performance and/or
service conditions are fulfilled (the vesting period), ending on the
date on which the relevant employees become unconditionally
entitled to the award (the vesting date).
At each balance sheet date, the Group revises its estimate of the
number of awards that are expected to vest. the employee benefit
expense recognised each period takes into account the most
recent estimate. the impact of the revision to original estimates,
if any, is recognised in the income statement with a corresponding
adjustment to equity.
(t) Contributed equity
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 the proceeds. Incremental
costs directly attributable to the issue of new shares or options
for the acquisition of a business are included in the cost of the
acquisition as part of the purchase consideration.
(u) Dividends
provision is made for the amount of any dividend declared being
appropriately authorised and no longer at the discretion of the
Company on or before the end of the financial year but not
distributed at balance date.
(v) Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company, excluding any costs
of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the
financial year.
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 shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
(w) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount
of the GSt, except where the amount of the GSt incurred is not
recoverable from the taxing authority. In these circumstances, the
GSt is recognised as part of the cost of acquisition of asset or as
part of an item of the expense. Receivables and payables in the
balance sheet are shown inclusive of GSt.
Cash flows are included in the cash flow statement on a gross
basis and the GSt component of cash flows arising from investing
and financing activities, which is recoverable from or payable to the
taxing authority, is classified as operating cash flows.
(x) Rounding of amounts
the Company is of a kind referred to in Class order 98/0100,
issued by the Australian Securities and Investments Commission,
relating to rounding 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.
InvoCare AnnuAl RepoRt 2008
57
Notes to the F inancial Statements
For the year ended 31 december 2008
note 1: Summary of Significant
accounting PolicieS
continued
(y) New accounting standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2008 reporting
periods. the Group’s and parent entity’s assessment of the impact
of these new standards and interpretations is set out below.
(i) AASB 3 Business Combinations, AASB 127 Consolidated and
Separate Financial Statements and AASB 2008-3 Amendments
to Australian Accounting Standards arising from AASB 3 and
AASB 127 (effective 1 July 2009)
the Australian Accounting Standards Board has announced that
the revisions to the equivalent international accounting standard
will be adopted in Australia for business combinations with an
acquisition date on or after reporting periods beginning on or after
1 July 2009. the main impact of this standard is that the costs
associated with the completion of an acquisition will no longer be
regarded as part of the cost of the acquisition and these costs
must be written off in the income statement. this will result in
an immediate impact on the income statement in the year an
acquisition is made; however, the quantum of the impact cannot
be forecast due to the inherently uncertain nature of the timing
and costs of completing acquisitions. the Group will apply the
revised standards prospectively to all business combinations from
1 January 2010.
(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6
Amendments to Australian Accounting Standards arising from
AASB 123 (effective from 1 January 2009)
the revised AASB 123 has removed the option to expense all
borrowing costs and, on adoption, will require the capitalisation
of all borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset. Qualifying assets
are those assets which take a substantial time to construct or
develop and generally exclude assets acquired through business
combinations. the Group undertakes certain property related
developments and improvement projects and constructs crypts
and other memorials for resale. the length of time taken for these
developments is generally less than 12 months. Accordingly, the
impact on the Group, except in the case of a major unforecast
transaction, will be minimal as it is unlikely any qualifying assets
will be constructed. Most acquisitions of non-current assets are
funded through the use of operating cash flows.
(iii) Revised AASB 101 Presentation of Financial Statements and
AASB 2007-8 Amendments to Australian Accounting Standards
arising from AASB 101 (effective from 1 January 2009)
the September 2007 revised AASB 101 requires the presentation
of a statement of comprehensive income and makes changes
to the statement of recognised income and expense, but will not
affect the amounts recognised in the financial statements. If an
entity has made a prior period adjustment or has reclassified items
in the financial statements, it will need to disclose a third balance
sheet (statement of financial position), this one being as at the
beginning of the comparative period. the Group will apply the
revised standard from 1 January 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting
Standards – Share-based Payments: Vesting Conditions and
Cancellations (effective from 1 January 2009)
AASB 2008-1 clarifies that vesting conditions are service
conditions and performance conditions only and that other
features of a share-based payment are not vesting conditions.
It also specifies that all cancellations, whether by the entity or other
parties, should receive the same accounting treatment. the Group
will apply the revised standard from 1 January 2009, but it is
not expected to affect the accounting for the Group’s share-
based payments.
(v) AASB 2008-7 Amendments to Australian Accounting
Standards – Costs of an Investment in a Subsidiary, Jointly
Controlled Entity of Associate (effective 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1 First-
time Adoption of International Financial Reporting Standards and
AASB 127 Consolidated and Separate Financial Statements.
the Group will apply the revised rules prospectively from 1 January
2010. After that date, all dividends received from investments
in subsidiaries, jointly controlled entities or associates will be
recognised as revenue, even if they are paid out of pre-acquisition
profits, but the investments may need to be tested for impairment
as a result of the dividend payment. under the Group’s current
policy, these dividends are deducted from the cost of the
investment.
(vi) AASB Interpretation 16 Hedges of a Net Investment in a
Foreign Operation (effective 1 October 2008)
AASB-I 16 clarifies which foreign currency risks qualify as hedged
risk in the hedge of a net investment in a foreign operation and
that hedging instruments may be held by any entity or entities
in the Group. It also provides guidance on how an entity should
determine the amount to be reclassified from equity to profit
and loss for both the hedging instrument and the hedged item.
the Group will apply the interpretation prospectively from
1 January 2009. there will be no changes to the accounting for
the existing hedge of the net investment in Singapore.
58
InvoCare AnnuAl RepoRt 2008
note 2: financial riSk management
the Group’s activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and price risk,
but not fair value interest rate risk), credit risk and liquidity risk. the Group’s overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
the Group uses derivative financial instruments such as interest rate swaps and cross currency swaps to hedge risk exposures.
the Group uses different methods to measure different types of risks to which it is exposed. these methods include sensitivity analysis
in the case of interest rate, foreign exchange and price risk and aging analysis for credit risk.
Risk management is carried out under policies approved by the Board of Directors on the recommendation of the Risk Committee.
these policies provide written principles for overall risk management, as well as policies covering specific areas such as interest rate risk
and currency risk.
the Group and the parent entity hold the following financial assets and liabilities:
Financial assets
Cash and cash equivalents
trade and other receivables
Derivative financial instruments
other financial assets
Financial liabilities
trade and other payables
Borrowings
Derivative financial instruments
(a) Market risk
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
6,414
27,898
–
–
34,312
21,594
158,655
12,500
8,981
27,639
5,257
–
41,877
25,808
154,547
–
1,056 –
238,557
–
16,473
220,799
4,360
15,957
256,086
241,116
178
135,799
7,036 –
168
132,630
192,749
180,355
143,013
132,798
(i) Cash flow interest rate risk
the Group’s main interest rate risk arises from long-term borrowings. All borrowings are initially at variable interest rates determined by
a margin over the reference rate. the margin over the reference rate is determined by the Group’s leverage ratio and may vary between
100 basis points and 55 basis points. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. It is the policy
of the Group to keep at least 75% of debt on fixed interest rates by entering into interest rate swap contracts. During 2008 and 2007 the
Group’s borrowings were all denominated at variable Australian rates in Australian dollars. the Group has entered into interest rate swap
contracts under which it receives interest at variable rates and pays interest at fixed rates. the bank loans of the Group currently bear an
effective average variable interest rate inclusive of swaps of 6.4% (2007: 6.6%).
At balance date 96%, (2007: 99%) of long-term borrowings were protected by interest rate swaps. of these interest rate swaps 15%
(2007: 15%) were denominated in Singapore dollar fixed interest instruments and the balance denominated in Australian dollars. As at
31 December 2008 the weighted average fixed interest rate payable on the interest rate swaps is 5.85% (2007: 5.85%) and the weighted
average variable rate receivable as at 31 December 2008 is 4.16% (2007: 6.89%). the weighted average fixed interest payable under
interest rate swaps on debt principal that has been swapped into Singapore dollars is 3.447% (2007: 3.455%).
the following variable rate borrowings and interest rate swap contracts are outstanding:
Bank loans
Interest rate swaps (notional principal)
net exposure to cash flow interest rate risk
31 December 2008
31 December 2007
Weighted
average
interest rate
4.86%
5.85%
Weighted
average
interest rate
7.64%
5.85%
Balance
$’000
158,867
152,867
6,000
Balance
$’000
154,867
152,867
2,000
InvoCare AnnuAl RepoRt 2008
59
Notes to the F inancial Statements
For the year ended 31 december 2008
note 2: financial riSk management continued
(a) Market risk continued
(i) Cash flow interest rate risk continued
the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
one – two years
two – three years
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
130,000
22,867
130,000
22,867
130,000
– –
130,000
152,867
152,867
130,000
130,000
the contracts require settlement of net interest receivable or payable each 90 days. the settlement dates coincide with the dates on
which interest is payable on the underlying debt.
As a consequence the Group is exposed to interest rate risks on that portion of total borrowings not swapped to fixed rates and to
potential movements in the margin due to changes in the Group’s leverage ratio. An increase of 100 basis points (2007: 100 basis points)
in the interest rate would result in additional interest expense after tax of $86,000 (2007: $82,000 loss). A decrease of 100 basis points
(2007: 50 basis points) would result in an after tax gain of $86,000 (2007: $68,000 gain). that portion of borrowings that have been
swapped to fixed rates denominated in Singapore dollars give rise to a currency risk on the interest payments. A 10% increase
(2007: 10%) in the Australian to Singapore dollar exchange rate would result in a reduction in interest expense after tax of $89,000
(2007: $43,000) and a decrease of 10% (2007: 10%) would result in an after tax loss of $73,000 (2007: $52,000).
Due to the use of floating to fixed interest rate swaps the Group has fixed interest commitments and the changes in the fair value of the
future cash flows of these derivatives are recognised in equity to the extent that the derivative remains effective in accordance with
AASB 139 Financial Instruments: Recognition and Measurement.
the major derivative is a $130 million interest rate swap initially entered into in october 2005 and designated as a cash flow hedge.
this instrument, which expires on 31 December 2010, blended earlier swaps with a new swap which resulted in the hedge having a
non-zero value on designation. During 2008 the very substantial movements in Australian interest rates resulted in this hedge moving
from a net asset position of $4,360,000 at 31 December 2007 to a net liability of $7,036,000 at 31 December 2008. Despite this
substantial change in value the derivative continues to meet the commercial objective of ensuring predictable and regular cash flows
over the life of the derivative.
the impact on parent entity profit and loss and equity of changes in market interest rates for the $130 million interest rate swap is
summarised below:
Year
2008
2007
Interest rate
change
Decrease by 100 basis points
Increase by 100 basis points
Decrease by 50 basis points
Increase by 100 basis points
effectiveness
test results
effective
Ineffective
effective
effective
profit
$’000
(836)
(5,858)
8
(15)
equity
$’000
(763)
(778)
(1,077)
2,104
All hedges were effective at 31 December 2008 and 31 December 2007. the impact of a loss of effectiveness is that the amount deferred
in equity is quarantined and amortised over the remaining life of the hedge and all other movements in fair value are recorded through
profit and loss.
the derivative financial instruments used to fund the acquisition payments for Singapore Casket Company made in 2006 and 2007
contain both a currency and interest rate portion. the currency portion of these instruments has been designated as a hedge of a net
investment and has been effective in both years and against the ranges of sensitivities used for measurement. the interest rate portion of
these swap arrangements has not been designated as a hedge and movements in fair value are recorded in profit and loss and included
in the Group’s finance costs.
the overall impact on the Group has been summarised on page 65.
60
InvoCare AnnuAl RepoRt 2008
note 2: financial riSk management continued
(a) Market risk continued
(i) Cash flow interest rate risk continued
the Group’s cash and cash equivalents held in Australia are interest bearing. At 31 December 2008 the weighted average interest rate
was 6.3% (2007: 6.5%). If interest rates increased by 100 basis points (2007: 100 basis points) the Group’s after tax result would increase
by $31,000 (2007: $30,000). A decrease of 100 basis points (2007: 50 basis points) would result in a decrease in the Group’s after tax
result of $31,000 (2007: $16,000).
(ii) Foreign exchange risk
the Group rarely undertakes commercial transactions in currencies other than in the functional currency of the operating entity.
Foreign exchange risks arise from recognised assets and liabilities that are denominated in a currency other than the Group’s functional
currency, the Australian dollar. the major foreign exchange risk relates to the investment in a controlled entity in Singapore. this exposes
the Group to foreign currency risk on the assets and liabilities. Where natural hedges do not exist, currency swap instruments are used to
hedge at least 75% of the net recognised assets and liabilities which are denominated in foreign currencies. At 31 December 2008 82.0%
(2007: 84.9%) of the Group’s exposure was hedged.
two cross currency basis swaps were executed in october 2006 to swap the currency of borrowings used to fund the Singapore
acquisition from $20,505,000 Australian dollars into $24,200,000 Singapore dollars and to swap the principal at the same exchange rate
of 0.8473 at maturity. A further two cross currency basis swaps were executed in March 2007 to swap $2,362,000 Australian dollars into
$2,892,000 Singapore dollars and to swap the principal at the same exchange rate of 0.8165 at maturity. these cross currency basis
swaps have been designated as hedges of the Group’s net investment in Singapore. Gains and losses on remeasuring these swaps are
transferred to equity (foreign currency translation reserve) to offset any gains or losses on translation of the net investment in Singapore
Casket Company (private) limited.
In March 2008, the only significant foreign currency exposure, the deferred cash settlement for business interests acquired, was settled.
Settlement of this liability resulted in a decrease of $11,000 in the value of the investment recognised and had no impact on profit and loss
or equity. the carrying amounts of the Group’s trade and other payables that are denominated in foreign currency are:
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Current
Singapore dollars
–
940
– –
(iii) Price risk
the Group does not hold any investments in equities or commodities and, therefore, is not subject to price risk for any recognised
financial assets or liabilities.
However, as described in note 1(e), monies received for prepaid services are held in trust and are not controlled by the Group and not
recorded as an asset on the balance sheet. these monies totalled $237 million at 31 December 2008 (2007: $272 million).
the Group recognises revenue on these prepaid services only when the services are performed and the monies held in trust, including
any investment earnings, are receivable by the Group. Accordingly, the Group’s future revenue and margins are sensitive to the price
risk relating to the investment returns of these funds under management. Future revenue and margins will be impacted positively if net
investment returns exceed the service selling price increases (generally 4% per annum), but adversely if the reverse applies. An estimated
50% of the funds are expected to be recognised over the next 10 years and 90% over about 25 years. In any one year approximately
13% of all Australian funeral services performed by InvoCare have been prepaid; a proportion that has been reasonably constant for
many years and is not expected to significantly change in the short term.
InvoCare monitors the asset allocations and investment performance at least quarterly and makes representations where possible
to those in control of the trusts to mitigate price risks and enhance the returns which will ultimately impact InvoCare’s future results.
the volatile capital and financial markets have resulted in negative returns over the last year, as shown below. pleasingly, the returns
have remained above benchmark.
InvoCare AnnuAl RepoRt 2008
61
Notes to the F inancial Statements
For the year ended 31 december 2008
note 2: financial riSk management continued
(a) Market risk continued
(iii) Price risk continued
Prepaid funds under management
$237m
$272m
($35m)
31 December
2008
31 December
2007
Change
$ or %
asset allocation
Australian equities
International equities
property
Fixed interest
Cash
Gross annual returns for all fund assets *
one year ended
three years ended
Five years ended
Seven years ended
28.4%
1.6%
1.1%
10.1%
58.8%
(14.1%)
4.0%
8.6%
6.8%
56.9%
1.8%
4.7%
20.5%
16.1%
11.9%
14.4%
13.5%
10.2%
(28.5%)
(0.2%)
(3.6%)
(10.4%)
42.7%
(26.0%)
(10.4%)
(4.9%)
(3.4%)
* Excludes investment management and administration fees (currently 1.6%).
With the funds held in trust for relatively long periods, investment strategies take a long term view for those trusts not restricted to more
conservative, capital guaranteed assets. Historically, equities have provided the best long-term returns and consequently, until recently,
there has been an asset allocation bias to equities. However, over the last 18 months, the unprecedented global financial crisis has seen
significant declines in equity market values, as well as falling cash interest rates.
to mitigate and lessen exposure to the continuing equity market declines the investment manager of the largest portion of the funds
under management made tactical shifts from equities and property into cash and fixed term deposits in August 2008 and more recently
in February 2009.
After the February 2009 asset reallocation, Australian equity investments have reduced to approximately 17% of total prepaid funds under
management. the long-term investment strategies remain unchanged. the tactical short-term asset reallocations from equities to fixed
term deposits provide certainty of positive returns for the near future, as opposed to volatile and generally negative equity returns, and
protect InvoCare’s future sales and operating margin when the prepaid services are performed. With varying maturity dates during 2009,
the maturing term deposits may be redirected into equity markets when there is an observed and sustained recovery in those markets.
other than disclosed above the Group does not hold any investments in equities or commodities and is therefore not subject to price risk.
(b) Credit risk
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to customers including outstanding receivables and committed
transactions. For banks and financial institutions, only independently rated parties with a minimum rating of AA- are accepted.
Credit risks in relation to customers are highly dispersed and without concentration on any particular region or sector. Funeral homes
attempt to collect deposits at the time the service is commissioned both as a sign of good faith and in order to cover out of pocket
expenses. Cemetery and crematorium products are generally not delivered prior to the receipt of all or substantially all of the
amounts due.
(i) Impaired receivables
the total amount of the provision for doubtful receivables was $1,688,000 (2007: $1,683,000). As at 31 December 2008, receivables with
a nominal value of $1,426,000 (2007: $1,168,000) had been referred to the Group’s independent debt collection agent and hence were
considered to be impaired. the amount of the provision for doubtful receivables was calculated by applying the historical debt collector’s
recovery ratio to all debtors over 90 days overdue. there are no impaired trade receivables in the parent company in 2008 or 2007.
the movement in the provision for impaired receivables is set out in note 12 trade and other receivables.
62
InvoCare AnnuAl RepoRt 2008
note 2: financial riSk management continued
(b) Credit risk continued
(ii) Receivables past due but not impaired
As of 31 December 2008, trade receivables of $4,357,000 (2007: $3,962,000) were past due but had not been referred to external debt
collection agents and hence were considered not to be impaired. these relate to customers where there is no current evidence of an
inability or unwillingness to settle the amount due but where payment has been delayed. the Group’s own collection activity, which varies
based on the nature and relative age of the debt, is routinely applied to all past due accounts. When these activities do not result in a
successful outcome, the debt is referred to external debt collection agencies.
the aging of receivables past due but not impaired follows:
one to three months overdue
over three months overdue
the parent company has no impaired receivables.
Consolidated entity
2008
$’000
2,243
2,114
2007
$’000
2,459
1,503
(iii) Other receivables
these amounts generally arise from transactions outside the normal operating activities of the Group. Interest is generally not charged on
the amounts involved although collateral is generally obtained for larger amounts receivable.
(iv) Interest rate risks
the Group has no exposure to interest rate risk in respect of receivables as they are non-interest bearing. Interest earned by the parent
entity on the fixed rate loan to controlled entity is set out in note 32.
(c) Liquidity risk
prudent liquidity management implies maintaining sufficient cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the ability to close out market positions. Due to the relative stable nature of the
Group’s business, management aims to maintain a large portion of committed credit lines on a long-term basis.
the Group’s borrowings are unsecured but subject to negative pledges and the Group has complied with these covenants throughout
and at the end of the year. Details of the Group and parent entity facilities are as follows.
Finance facilities available
unrestricted access was available at balance date
to the following lines of credit:
total facilities
– unsecured loan facility expiring in two to three years
– working capital facility expiring within one year
used at balance date
– unsecured loan facility
– working capital facility
unused at balance date
– unsecured loan facility
– working capital facility
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
180,000
5,000
180,000
5,000
180,000
5,000
180,000
5,000
185,000
185,000
185,000
185,000
158,867
438
154,867
398
158,867
438
154,867
398
159,305
155,265
159,305
155,265
21,133
4,562
25,695
25,133
4,602
29,735
21,133
4,562
25,695
25,133
4,602
29,735
InvoCare AnnuAl RepoRt 2008
63
Notes to the F inancial Statements
For the year ended 31 december 2008
− Monitoring participation in the Dividend Reinvestment plan.
Approximately 25% of the Company’s shareholders have
participated in the DRp since it was first activated in october
2006, indicating it is attractive to investors, especially
retail investors.
− Confirming compliance with the debt covenant ratios,
as defined in the facility agreements, through bi-annual
calculations. the Group has complied with its banking
covenants as follows:
−
−
Interest cover (eBItDA/net Interest expense) must be
greater than 3.00:1. At 31 December 2008 this ratio was
5.97:1 (2007: 5.40:1).
leverage ratio (net Debt/Adjusted eBItDA) must not be
greater than 3.75:1. At 31 December 2008 this ratio was
2.49:1 (2007: 2.47:1).
− Maintaining an optimal leverage ratio. the optimal capital
structure, which has the lowest cost of capital, is indicatively
at a leverage ratio (i.e. net Debt/eBItDA) of between 3:1 and
5:1. the Group can sustain and service higher levels of debt
than the amount at balance date and, before the onset of the
global financial crisis, had a longer term net debt target of 3.5x
eBItDA. Financiers may be unwilling to lend at this ratio in the
current markets. Where the capacity exists, debt financing will
be used for small acquisitions and capital expenditure. In the
absence of opportunities to invest in growing the business, the
Group will consider applying excess debt capacity to make
returns to shareholders (e.g. special dividends, share buy-
backs, etc). no major capital management initiatives involving
a return to shareholders are anticipated during 2009.
− Maintaining floating to fixed base interest rate swaps for
at least 75% of debt principal. At 31 December 2008 the
proportion of debt hedged was 96% (2007: 99%). the hedge
contracts extend to the end of 2010.
− Managing refinancing risk. the Group’s existing debt facilities
expire in January 2011 when all the debt becomes due
and payable. the Group is exposed to risks of refinancing
all the amounts drawn (up to $180 million) at the one time.
Accordingly, it is proposed future financing facilities will have a
staggered maturity profile to reduce the risk of refinancing on
one maturity date.
note 2: financial riSk
management continued
(c) Liquidity risk continued
the global financial crisis has put significant pressure on many
economies and entities, in particular, the availability of credit.
the Group’s borrowing facilities mature in January 2011 and are
expected to be sufficient for the Group’s anticipated needs up to
that time. Accordingly, currently there is neither intention nor need
to seek additional debt finance or refinance existing debt. However,
the Group is preparing for the refinancing discussions and expects
negotiations with financiers to commence in late 2009 or early
2010. these preparations include financial modelling for at least
five future years, continuing relationships with the two existing
major Australian bi-lateral bank facility providers, exploring other
possible financing options and developing relationships with other
possible financiers.
(d) Capital risk management
the Group’s capital management objectives and strategies seek to
maximise total shareholder returns, in terms of earnings per share,
distributions and share price, while maintaining a capital structure
with acceptable debt and financial risk.
the capital management goals can be broadly described as:
− manage the amount of equity and the expectation of returns
– including dividend distribution policy, dividend reinvestment
and share buy-back policies;
− maintain debt and gearing that is prudent, cost effective,
supports operational needs and provides flexibility for growth
and development; and
−
avoid excessive exposure to interest rate fluctuations and debt
refinancing risk.
the goals are actively managed by the use of quantifiable
measures. these measures and relevant comments are as follows:
− Maximising shareholder returns. earnings per share (epS)
is a key measure and for 2008 basic epS was 28.0 cents
(2007: 27.6 cents). Importantly, senior management of the
Group have long-term incentives linked to epS growth, thus
aligning employee and shareholder interests. total shareholder
return, being the sum of cash dividends and share price
growth, has exceeded 25% (2007: 30%) per annum since the
Company listed in December 2003. A shareholder investing
$1.00 in the initial public offering (Ipo) would have enjoyed
a total return of $2.30 or 230% (2007: $3.18 or 318%) up to
31 December 2008.
− Maintaining a minimum ordinary dividend payout ratio of
at least 75%. For each of the years since listing, the Group
has distributed ordinary dividends in excess of this payout
ratio. the aggregate of the interim and final 2008 dividends
represents a payout ratio of 84.3% (2007: 81.8%).
64
InvoCare AnnuAl RepoRt 2008
note 2: financial riSk management continued
(e) Summarised sensitivity analysis
the following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk and foreign
exchange risk net of applicable income tax.
Consolidated entity
31 December 2008
Interest rate risk
Foreign exchange risk
- 100 basis points
+ 100 basis points
- 10%
+ 10%
Carrying
amount
$’000
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
Financial assets
Cash and cash equivalents
Accounts receivable
Financial liabilities
trade and other payables
Borrowings
Derivative financial instruments
6,414
27,898
(31)
–
–
–
31
–
(21,594)
(158,655)
(12,500)
–
86
(1,019)
–
–
(763)
–
(86)
(5,650)
Total increase/(decrease)
(964)
(763)
(5,705)
–
–
–
–
(778)
(778)
–
–
–
(73)
–
–
–
–
–
(1,966)
(73)
(1,966)
–
–
–
89
–
89
–
–
–
–
1,993
1,993
Consolidated entity
31 December 2007
Financial assets
Cash and cash equivalents
Accounts receivable
Derivative financial instruments
Financial liabilities
trade and other payables
Borrowings
Carrying
amount
$’000
8,981
27,639
5,257
(25,808)
(154,547)
Interest rate risk
Foreign exchange risk
- 50 basis points
+ 100 basis points
- 10%
+ 10%
profit
$’000
equity
$’000
profit
$’000
equity
$’000
profit
$’000
equity
$’000
profit
$’000
equity
$’000
(16)
–
(210)
–
68
–
–
(1,077)
–
–
30
–
166
–
(82)
–
–
2,104
–
–
–
–
–
–
(52)
(52)
–
–
(1,465)
–
–
(1,465)
–
–
–
–
43
43
–
–
1,492
–
–
1,492
Total increase/(decrease)
(158)
(1,077)
114
2,104
Parent entity
31 December 2008
Financial assets
Cash and cash equivalents
Accounts receivable
other financial assets
Financial liabilities
trade and other payables
Borrowings
Derivative financial instruments
Total increase/(decrease)
Carrying
amount
$’000
1,056
238,557
16,473
(178)
(135,799)
(7,036)
Interest rate risk
Foreign exchange risk
- 100 basis points
+ 100 basis points
- 10%
+ 10%
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
Profit
$’000
equity
$’000
–
–
–
–
76
(836)
(760)
–
–
–
–
–
–
–
–
(763)
–
(76)
(5,858)
(763)
(5,934)
–
–
–
–
–
(778)
(778)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
InvoCare AnnuAl RepoRt 2008
65
Notes to the F inancial Statements
For the year ended 31 december 2008
note 2: financial riSk management continued
(e) Summarised sensitivity analysis continued
parent entity
31 December 2007
Financial assets
Accounts receivable
Derivative financial instruments
other financial assets
Financial liabilities
trade and other payables
Borrowings
Total increase/(decrease)
Carrying
amount
$’000
220,799
4,360
15,957
(168)
(132,630)
Interest rate risk
Foreign exchange risk
- 50 basis points
+ 100 basis points
- 10%
+ 10%
profit
$’000
equity
$’000
profit
$’000
equity
$’000
profit
$’000
equity
$’000
profit
$’000
equity
$’000
–
8
–
–
60
68
–
(1,077)
–
–
–
(1,077)
–
(15)
–
–
(74)
(89)
–
2,104
–
–
–
2,104
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
the sensitivity analysis has been completed by applying the range values to the actual balances that existed at all points throughout
the year.
(f) Fair value estimation
the fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
the fair value of derivatives, which are recorded on the balance sheet, are measured using the cumulative dollar offset method.
the Group does not hold any financial instruments or derivatives which are held for trading.
the carrying value less impairment provisions for trade receivables and payables is a reasonable approximation of their fair values due
to the short-term nature of trade receivables. non-current trade receivables are discounted to their fair value in accordance with the
accounting policy outlined in note 1(l).
except for the loan from the parent entity to its controlled entity, there is no concentration of credit risk with respect to current and
non-current receivables as the Group has a large number of customers dispersed across Australia and Singapore.
note 3: revenue from continuing oPerationS
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Sales revenue
Sale of goods
Services revenue
Management fees
other revenue
Rent
Administration fees
Sundry revenue
Dividend income:
Wholly owned group – controlled entities
Interest revenues
other persons/corporations
Wholly-owned group – controlled entities
total revenue from continuing operations
66
InvoCare AnnuAl RepoRt 2008
105,508
138,707
–
98,547
125,371
–
244,215
223,918
265
2,847
1,023
–
642
–
277
2,355
994
653
–
4,777
4,279
248,992
228,197
1,200
1,200
– –
– –
1,200
1,200
– –
– –
– –
– –
19,172
49,672
50,872
16,963
43,463
44,663
–
30,500
26,500
note 4: exPenSeS
Profit before income tax includes the following specific expenses:
Depreciation
Buildings
property, plant and equipment
total depreciation
Amortisation of non-current assets
Cemetery land
leasehold land and buildings
leasehold improvements
Brand names
total amortisation
total depreciation and amortisation
Finance costs
Interest paid and payable
Interest rate swap loss
other finance costs
total financing costs
Impairment losses – financial assets
trade receivables
Rental expense
operating lease rental – minimum lease payments
Defined contribution superannuation expense
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2,820
5,947
8,767
336
128
146
326
936
2,890
5,196
8,086
365
128
122
244
859
9,703
8,945
– –
– –
– –
– –
– –
– –
– –
– –
– –
10,584
2,101
1,011
13,696
10,425
862
808
12,095
9,633
1,652
99
11,384
9,549
319
98
9,966
180
500
6,068
4,395
4,657
3,858
– –
– –
– –
InvoCare AnnuAl RepoRt 2008
67
Notes to the F inancial Statements
For the year ended 31 december 2008
note 5: income tax exPenSe
(a) Income tax expense
Current tax
Deferred tax
Benefit arising from reversal of a previously recognised
deferred tax liability of a prior period
Impact of change of income tax rate in Singapore
under/(over) provided in prior years
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
13,075
(1,758)
12,316
(562)
2,665
(254)
2,159
(1)
(475)
–
(174)
–
(84)
45
– –
– –
(6)
(430)
1,728
Income tax expense attributable to continuing operations
10,668
11,715
2,405
(b) reconciliation of income tax expense to prima facie tax payable
prima facie tax at 30% (2007: 30%) on profit from ordinary activities
tax effect of amounts which are not deductible/(taxable)
in calculation of taxable income
Difference in overseas tax rates
Share-based payments expense
non-assessable dividend
under/(over) provision in prior years
Impact of previously unrecognised capital losses
offsetting gains in the prior year
other items (net)
Income tax expense
11,629
11,810
11,561
10,110
(446)
–
–
(174)
(92)
(249)
(365)
(15)
–
45
–
240
– –
– –
(9,150)
(6)
– –
–
(7,950)
(430)
(2)
10,668
11,715
2,405
1,728
(c) Tax consolidation legislation
InvoCare limited and its wholly-owned Australian controlled entities implemented the tax consolidation legislation from 1 January 2004.
the accounting policy in relation to this legislation is set out in note 1(g).
on adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing and funding
agreement which, in the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the case of a default by
the head entity InvoCare limited.
this agreement was updated on 5 June 2007 and provides that the wholly-owned entities will continue to fully compensate InvoCare
limited for any current tax payable assumed and be compensated by InvoCare limited for any current tax receivable and deferred tax
assets relating to unused tax losses or unused tax credits that are transferred to InvoCare limited under the tax consolidation legislation.
the amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. InvoCare Australia pty limited, as permitted by the tax funding
agreement acts on behalf of InvoCare limited for the purpose of meeting its obligations to make tax payments, or receive refunds, and
reimburses, or is compensated by, that entity through the intercompany loan account for amounts of tax paid, or received, except for the
tax allocated to that entity.
(d) Tax losses
the Group has unutilised Australian capital losses with a potential benefit of $717,000 (2007: nil) at a tax rate of 30%.
68
InvoCare AnnuAl RepoRt 2008
note 6: key management PerSonnel diScloSureS
(a) Key management personnel compensation
Short-term employee benefits
post-employment benefits
termination benefits
Share-based payments
Consolidated entity
parent entity
2008
$
2007
$
2008
$ $
2007
2,067,394
140,962
477,884
185,941
2,217,752
288,036
389,192
129,362
465,940
34,060
– –
– –
282,243
163,381
2,872,181
3,024,342
500,000
445,624
Detailed remuneration disclosures are provided in sections A to C of the Remuneration Report on pages 40 to 44.
(b) Equity instrument disclosures relating to key management personnel
(i) Shares and options provided as remuneration and shares issued on exercise of such options
Details of shares and options provided as remuneration and shares issued on the exercise of such options, together with terms and
conditions of the shares and options, can be found in section D of the Remuneration Report on pages 44 to 45.
(ii) Shareholdings
the numbers of ordinary shares in the Company held during the financial year by each director of InvoCare limited and other key
management personnel of the Group, including indirectly by their personally related parties or by the trustee of the InvoCare Deferred
employee Share plan, are set out below. During the year shares were granted to other key management personnel under the terms
of the InvoCare Deferred employee Share plan the details of which are outlined in note 7.
non-executive Directors
Ian Ferrier
Christine Clifton
Roger penman
Benjamin Chow
Richard Fisher
executive Directors
Richard Davis
Andrew Smith
other key management personnel
phillip Friery
Granted
Balance at during year as
start of year compensation
other
changes
during year
Balance at
end of year
102,401
110,526
–
–
5,263
–
–
–
–
–
(50,000)
964
8,000
–
206
1,299,733
20,100
–
20,908
(483,282)
–
52,401
111,490
8,000
–
5,469
816,451
41,008
52,385
15,789
–
68,174
(iii) Option holdings
At the end of the period all vested options had been exercised and there were no options over unissued shares. the numbers of
options over ordinary shares in the Company held during the previous financial year by each director of InvoCare limited and other key
management personnel of the Group, including their personally related parties, are set out below.
2007
Director
Michael Grehan
other key management
personnel
phillip Friery
Balance
at start
of year
Vested
at start
of year
Granted
during
year
Vested
during
year
total
exercised
during
year
Balance
at end of
year
Vested and
exercisable
at end of
year
140,060
25,466
–
–
–
–
140,060
140,060
25,466
25,466
–
–
–
–
(c) Loans to key management personnel
there were no loans to directors of the Company and other key management personnel.
InvoCare AnnuAl RepoRt 2008
69
Notes to the F inancial Statements
For the year ended 31 december 2008
note 6: key management PerSonnel diScloSureS continued
(d) Other transactions with key management personnel
the Chairman, Ian Ferrier, is also Chairman and a shareholder of Good Health Solutions pty limited, a company which provides
specialist medical services to the corporate sector. During the year, services were provided to the Group on normal terms and conditions
amounting to $2,830 (2007: $10,907).
A director, Richard Fisher, is a past Chairman of partners of Blake Dawson. During 2007, this firm undertook one legal assignment on
normal commercial terms and conditions amounting to $7,151.
the Chief Financial officer and Company Secretary, phillip Friery, is a director and shareholder of laurach pty limited (trading as Friery
Accounting Services) and has the capacity to significantly influence decision making of that company which has provided professional
accounting and taxation services to the consolidated entity for several years on normal commercial terms and conditions. the services
during the year amounted to $563 (2007: $12,550).
Aggregate amounts of each of the above types of other transactions with key management personnel of the consolidated entity, including
their personally related parties:
amounts recognised as expense
Accounting and tax advisory fees
other professional services
legal services
2008
$ $
2007
563
2,830
–
3,393
12,550
10,907
7,151
30,608
Aggregate amounts payable at balance date to key management personnel of the Group, including their personally related parties,
relating to the above types of other transactions:
Current liabilities
note 7: Share-baSed PaymentS
(a) Employee shares
2007
2008
$ $
935 –
(i) Exempt employee share plan
During october 2006, the Company established the InvoCare exempt employee Share plan, providing plan members the opportunity to
acquire ordinary shares in InvoCare limited to the tax free value of $1,000.
During 2008, more than 750 (2007: 650) eligible employees were invited to participate in the plan and pay the share purchase price by
regular deductions from pre-tax wage or salary over the 12 months to 30 June 2009. the criteria for eligibility included being employed
for a minimum six months as a full-time or permanent part-time employee. In June 2008 (2007: June), the trustee, IVC employee Share
plan Managers pty ltd, purchased on market 32,373 (2007: 31,288) shares on behalf of 206 (2007: 192) plan members. the plan rules
require members to leave the shares in the plan for a minimum three years after purchase, unless the member leaves the Group’s
employment earlier. Future offers of participation may be made at the discretion of, and subject to terms and conditions determined
by, the Board of Directors. At 31 December 2008, the balance owing by employee plan members for the purchase price of shares was
$103,784 (2007: $92,702).
(ii) Deferred employee share plan
In 2006, following a review of long-term incentive practices by the Remuneration Committee, the Board of Directors approved the
establishment of the InvoCare Deferred employee Share plan whereby selected key management personnel and other senior managers
are able to participate and benefit from a range of remuneration opportunities, including long-term equity incentives to align executive and
shareholder interests.
70
InvoCare AnnuAl RepoRt 2008
note 7: Share-baSed PaymentS continued
(a) Employee shares continued
(ii) Deferred employee share plan continued
under the terms of the plan, employees are offered a predetermined value of shares which the trustee, IVC employee Share plan
Managers pty ltd, purchases on market. During 2008, offers were made to and accepted by a total of 42 (2007: 40) employees and
a total of 118,578 (2007: 131,305) shares purchased on market for $750,994 (2007: $816,002) at an average price of $6.33 (2007: $6.21)
per share. Set out below is a summary of the grants under the plan:
Grant date
Vesting date
purchase
price per
share
$
Balance at
the start of
the year
$’000
Granted
during the
year
$’000
Vested
during the
year
$’000
Forfeited
during the
year
$’000
Balance at
the end of
the year
$’000
Consolidated and parent entity
1 January 2006
1 January 2007
1 January 2007
1 July 2007
1 January 2008
1 July 2008
22 February 2008
22 February 2009
22 February 2010
22 February 2009
22 February 2010
22 February 2011
25 February 2009
25 February 2010
25 February 2011
25 February 2009
25 February 2010
25 February 2011
25 February 2010
25 February 2011
25 February 2012
25 February 2010
25 February 2011
25 February 2012
6.21
6.21
6.21
6.33
6.33
6.33
6.21
6.21
6.21
6.21
6.21
6.21
6.33
6.33
6.33
6.33
6.33
6.33
41
41
41
–
–
–
144
144
144
60
60
60
–
–
–
–
–
–
735
–
–
–
43
43
43
–
–
–
–
–
–
192
192
192
61
61
61
888
(41)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(41)
–
–
–
–
–
–
–
–
–
(3)
(3)
(3)
–
–
–
–
–
–
(9)
–
41
41
43
43
43
144
144
144
57
57
57
192
192
192
61
61
61
1,573
performance hurdles apply to certain grants to senior managers. Generally, no shares vest in the event that compound earnings per
share growth is less than 8% and 100% of the shares vest when earnings per share compound growth is 12% or more. Shading in
provisions apply with partial vesting where compound earnings per share growth is greater than 8% but less than 12%.
(b) Expenses arising from share-based payment transactions
total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were
as follows:
options issued under employee option plan
long-term incentive bonus share expense
Consolidated entity
parent entity
2008
$
–
562
562
2007
$
(42)
313
271
2008
$
2007
$
– –
– –
– –
(c) Employee share options
InvoCare limited has no options over unissued shares granted to executive management outstanding at balance date. no options have
been granted since 22 September 2003. the last of the options vested on 1 May 2007 and have all since been exercised.
InvoCare AnnuAl RepoRt 2008
71
Notes to the F inancial Statements
For the year ended 31 december 2008
note 7: Share-baSed PaymentS continued
(d) Employee share options continued
Set out below is a summary of the movement in options during the previous year, including those held by directors and other key
management personnel. At 31 December 2007, no options were vested and exercisable and there are no options at 31 December 2008
over unissued shares.
Grant date
expiry date
exercise
price
Balance at
start of year
Issued
during year
exercised
during year
lapsed
during year
Balance at
end of year
2007 – consolidated and parent entity
1 May 08
22 Sept 2003 *
Weighted average exercise price
Weighted average share value at exercise
proceeds from shares issued
* Options issued under the Employee Share Option Plan.
$1.07
313,228
313,228
$1.07
–
–
313,228
313,228
$1.07
$5.90
$335,154
–
–
–
–
the weighted value of shares issued on the exercise of options is based upon Australian Securities exchange daily closing prices and
trading volumes of the Company’s shares on each of the five days up to and including the date of exercise.
note 8: remuneration of auditorS
Consolidated entity
parent entity
2008
$
2007
$
2008
$
2007
$
During the year, the following fees were paid or payable
for services provided by the auditor of the parent entity,
its related practices and non-related audit firms.
(a) Audit services
pricewaterhouseCoopers – Australian firm
Audit and review of financial reports
non-pricewaterhouseCoopers – Singaporean firm
Audit and review of financial reports
total remuneration for audit services
(b) Non-audit services
pricewaterhouseCoopers – Australian firm
Assurance services
Advisory services
taxation services
Related practices of pricewaterhouseCoopers – Australian firm
legal
non-pricewaterhouseCoopers – Singaporean firm
other services
total remuneration for non-audit services
215,000
189,000
17,921
16,875
232,921
205,875
15,450
12,730
79,815
21,163
13,900
129,975
–
6,000
10,967
3,367
118,962
174,405
– –
– –
– –
– –
– –
– –
– –
– –
– –
It is the Company’s policy to employ pricewaterhouseCoopers on assignments additional to their statutory audit duties where
pricewaterhouseCoopers’ expertise and experience with the consolidated entity are important and auditor independence is not
compromised. these assignments are principally tax advice and advisory services, or where pricewaterhouseCoopers is awarded
assignments on a competitive basis. It is the Company’s policy to seek competitive tenders for any major consulting projects.
72
InvoCare AnnuAl RepoRt 2008
note 9: dividendS
Dividends paid
Final ordinary dividend for the year ended 31 December 2007
of 12.5 cents (2006: 11.5 cents) per fully paid share paid on
11 April 2008 (2007: 12 April 2006), fully franked based on tax paid
at 30% (2006: 30%)
Interim ordinary dividend for the year ended 31 December 2008
of 10.5 cents (2007: 10.0 cents) per share paid on 10 october 2008
(2007: 12 october 2007), fully franked based on tax paid at 30% (2007: 30%)
Dividends paid to members of InvoCare limited
Dividends paid to minority interest of 7.0 cents (2007: 15.2 cents)
per fully paid share fully franked based on tax paid at 30% (2007: 30%)
Dividends not recognised at year end
In addition to the above dividends, since the year end, the directors
recommended the payment of a final dividend to InvoCare limited
shareholders of 13.0 cents (2007: 12.5 cents) per fully paid ordinary share,
fully franked based on tax paid at 30%. the aggregate amount of the
proposed dividend, expected to be paid on 9 April 2009 out of 2008 profits,
but not recognised as a liability at year end is:
Franking credit balance
the amounts of franking credits available for subsequent financial years are:
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
12,536
11,404
12,536
11,404
10,530
23,066
9,991
21,395
10,530
23,066
9,991
21,395
56
122
– –
23,122
21,517
23,066
21,395
13,104
12,536
13,104
12,536
Franking account balance at the end of the financial year
16,935
14,664
16,814
14,022
Franking credits that will arise from the payment of income tax payable
at the end of the financial year
Reduction in franking account resulting from payment of proposed
final dividend of 13.0 cents (2007: 12.5 cents)
3,813
4,064
3,429
3,790
(5,616)
(5,373)
15,132
13,355
(5,616)
14,627
(5,373)
12,439
note 10: earningS Per Share
reconciliation of earnings to Profit and Loss
profit from ordinary activities after income tax
less profit attributable to minority interests
profit used to calculate basic and diluted epS
Weighted average number of shares used as a denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
Weighted average number of ordinary shares used as the denominator
in calculating diluted earnings per share
Consolidated entity
2008
$’000
2007
$’000
28,094
(68)
28,026
27,651
(97)
27,554
2008
number
2007
number
100,215,660
99,657,830
100,215,660
99,657,830
InvoCare AnnuAl RepoRt 2008
73
Notes to the F inancial Statements
For the year ended 31 december 2008
note 11: caSh and caSh equivalentS
Cash on hand
Cash at bank
Cash at bank attracts floating interest rates between
3.9% and 7.0% (2007: 5.5% and 6.5%)
Reconciliation to cash at the end of the year:
the above figures are reconciled to cash at the end of the
financial year as shown in the cash flow statements as follows:
Balances as above
Bank overdraft (note 19)
Balances per cash flow statements
note 12: trade and other receivableS
Current
trade receivables
provision for doubtful receivables
prepayments
other receivables
non-current
trade receivables
provision for doubtful receivables
Security deposits
other receivables
loan to controlled entity
(a) Impaired receivables
Movements in the provision for impairment of receivables are as follows:
As at 1 January
provision for impairment recognised during the year
Receivables written off as uncollectible
effect of movements in exchange rates
As at 31 December
74
InvoCare AnnuAl RepoRt 2008
Consolidated entity
parent entity
2008
$’000
53
6,361
6,414
2007
$’000
60
8,921
8,981
2008
$’000
2007
$’000
– –
1,056 –
1,056 –
6,414
–
6,414
8,981
–
8,981
1,056 –
–
1,056
(929)
(929)
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
17,329
(1,531)
1,803
809
17,313
(1,371)
1,722
903
18,410
18,567
– –
– –
19
– –
19
18
18
8,987
(157)
251
407
–
9,488
8,763
(312)
180
441
–
9,072
– –
– –
– –
– –
238,538
220,781
238,538
220,781
Consolidated entity
2008
$’000
1,683
180
(177)
2 9
1,688
2007
$’000
1,495
500
(321)
1,683
note 13: inventorieS
Current
Work in progress – at cost
Finished goods – at cost
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
–
13,691
13,691
744
12,426
13,170
– –
– –
– –
note 14: SubSidiarieS
the consolidated financial statements incorporate the assets, liabilities and results of InvoCare limited and the following controlled
entities in accordance with the accounting policy in note 1(b).
name of entity
InvoCare Australia pty limited
new South Wales Cremation Company pty limited
Cremations (newcastle) Holdings pty limited
Cremations (newcastle) pty limited
Macquarie Memorial park pty limited
Macquarie Funeral Service pty limited
novocastrian Funerals pty limited
novocastrian Funerals unit trust
Catholic Funerals newcastle pty limited
Mead & purslowe pty limited
Mead & purslowe trading trust
oakwood Funerals pty limited
Dignity pre-Arranged Funerals pty limited
Memorial Guardian plan pty limited
pine Grove Forest lawn Funeral Benefit Company pty limited
Kitleaf pty limited
the Australian Cremation Society pty limited
Metropolitan Burial and Cremation Society Funeral Contribution Fund pty limited
labor Funerals Contribution Fund pty limited
purslowe Custodians pty limited
Beresfield Funerals pty limited
Restbind pty limited
D & J Drysdale pty ltd
liberty Funerals pty limited
IVC employee Share plan Managers pty ltd
InvoCare (Singapore) pty limited
Singapore Casket Company (private) limited
Casket palace pte ltd
InvoCare new Zealand limited
equity Holding
Country of
incorporation
2008
% %
2007
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
new Zealand
100
100
100
100
83
83
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
83
83
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Shares in subsidiaries are carried at cost and relate to InvoCare limited’s ownership interest in InvoCare Australia pty limited,
InvoCare (Singapore) pty limited, InvoCare new Zealand limited and IVC employee Share plan Managers pty ltd. All shares held
are ordinary shares.
InvoCare Australia pty limited and InvoCare (Singapore) pty limited have been granted relief from the necessity to prepare financial
reports in accordance with Class order 98/1418 issued by the Australian Securities and Investments Commission. For further information
refer to note 30.
InvoCare AnnuAl RepoRt 2008
75
Notes to the F inancial Statements
For the year ended 31 december 2008
note 15: ProPerty, Plant and equiPment
Consolidated entity
Cemetery
land
$’000
Freehold
land
$’000
Buildings
$’000
leasehold
land and
buildings
$’000
leasehold
improvements
$’000
plant and
equipment
$’000
total
$’000
106,278
44,825
81,584
4,466
1,690
59,574
298,417
at 1 January 2008
Cost
Accumulated
depreciation/amortisation
Impairment write-downs
(4,514)
(15,976)
–
–
(24,463)
–
net book amount
85,788
44,825
57,121
Year ended 31 December 2008
Additions
Business combinations
Disposals
Depreciation/amortisation charge
effect of movement in exchange rates
transfers/reclassifications
267
–
–
(336)
–
(1,335)
299
360
(1)
–
1,906
(92)
6,350
45
(454)
(2,820)
813
1,124
(1,838)
–
2,628
–
–
–
(128)
–
–
Closing net book amount
84,384
47,297
62,179
2,500
(914)
–
776
307
9
(9)
(146)
–
(31)
906
(37,997)
–
(69,726)
(15,976)
21,577
212,715
9,136
59
(353)
(5,947)
157
334
16,359
473
(817)
(9,377)
2,876
–
24,963
222,229
105,209
47,297
89,423
4,466
1,960
63,536
311,891
net book amount
84,384
47,297
62,179
(4,849)
(15,976)
–
–
(27,244)
–
(1,966)
–
2,500
(1,054)
–
(38,573)
–
(73,686)
(15,976)
906
24,963
222,229
106,334
41,438
76,227
4,466
1,516
55,895
285,876
(4,148)
(15,976)
–
–
(21,213)
–
net book amount
86,210
41,438
55,014
Year ended 31 December 2007
Additions
Business combinations
Disposals
Depreciation/amortisation charge
effect of movement in exchange rates
Assets no longer classified
as held for sale
transfers/Reclassifications
41
–
(49)
(365)
–
–
(49)
2,801
–
(121)
–
(339)
1,394
(348)
3,670
–
(88)
(2,890)
(133)
1,689
(142)
(1,709)
–
2,757
–
–
–
(128)
–
–
(1)
(991)
–
525
349
29
(4)
(122)
–
–
(1)
(40,042)
–
(68,103)
(15,976)
15,853
201,797
10,505
174
(269)
(5,196)
(31)
–
541
17,366
203
(531)
(8,701)
(503)
3,083
–
Closing net book amount
85,788
44,825
57,121
2,628
776
21,577
212,715
at 31 December 2007
Cost
Accumulated
depreciation/amortisation
Impairment write-downs
106,278
44,825
81,584
4,466
1,690
59,574
298,417
(4,514)
(15,976)
–
–
(24,463)
–
(1,838)
–
2,628
(914)
–
776
(37,997)
–
(69,726)
(15,976)
21,577
212,715
net book amount
85,788
44,825
57,121
76
InvoCare AnnuAl RepoRt 2008
at 31 December 2008
Cost
Accumulated
depreciation/amortisation
Impairment write-downs
at 1 January 2007
Cost
Accumulated
depreciation/amortisation
Impairment write downs
note 15: ProPerty, Plant and equiPment continued
(a) Parent entity
the parent entity does not have any property, plant and equipment.
(b) Assets in the course of construction
the carrying amounts of assets disclosed above include the following expenditure recognised in relation to property, plant and equipment
which is in the course of construction:
Cemetery land
Freehold buildings
leasehold improvements
plant and equipment
total assets in the course of construction
(c) Impairment
Consolidated entity
parent entity
2008
$’000
51
2,008
10
1,293
3,362
2007
$’000
–
1,806
5
940
2,751
2008
$’000
2007
$’000
– –
– –
– –
– –
– –
(i) 2008
All impaired cemetery and crematorium sites were reassessed at 31 December 2008 using the same methodology as previously applied
and no change to the impairment provision was considered necessary in 2008.
the impairment losses may be reversed in future years. the Group has no impairment at other cemetery and crematorium sites, or of
other property, plant and equipment assets. the total recoverable amount of the Group’s assets is well in excess of carrying value.
the recoverable amount of cash generating units is based on value-in-use calculations. these calculations use cash flow projections
based on financial estimates approved by management based on past performance and future expectations. the cash flows cover an
initial five-year period and are then extrapolated beyond five years using estimated growth rates in revenues and expenses which are not
inconsistent with historical trends and forecasts included in reports prepared by market analysts. the pre-tax discount rate used was
10.6% (2007: 12.3%), reflecting the risk estimates for the business as a whole.
(ii) 2007
All impaired cemetery and crematorium sites were reassessed at 31 December 2007 using the same methodology as previously applied
and no change to the impairment provision was considered necessary in 2007.
InvoCare AnnuAl RepoRt 2008
77
Notes to the F inancial Statements
For the year ended 31 december 2008
note 16: intangible aSSetS
at 1 January 2008
Cost
Accumulated amortisation
net book amount
Year ended 31 December 2008
Acquisition of subsidiary/businesses
effect of movement in exchange rates
Amortisation charge
net book amount
at 31 December 2008
Cost
Accumulated amortisation
net book amount
at 1 January 2007
Cost
Accumulated amortisation
net book amount
Year ended 31 December 2007
Acquisition of subsidiary/businesses
effect of movement in exchange rates
Amortisation charge
net book amount
at 31 December 2007
Cost
Accumulated amortisation
net book amount
Consolidated entity
Goodwill
$’000
Brand name
$’000
total
$’000
53,945
–
53,945
1,998
3,175
–
59,118
59,118
–
59,118
45,199
–
45,199
9,055
(309)
–
2,866
(354)
2,512
455
232
(326)
56,811
(354)
56,457
2,453
3,407
(326)
2,873
61,991
3,612
(739)
2,873
2,202
(113)
2,089
733
(69)
(241)
62,730
(739)
61,991
47,401
(113)
47,288
9,788
(378)
(241)
53,945
2,512
56,457
53,945
–
53,945
2,866
(354)
2,512
56,811
(354)
56,457
(a) Parent entity
the parent entity does not have any intangible assets.
(b) Impairment test for goodwill
For the Group’s Australian-based operations, goodwill cannot be allocated on a non-arbitrary basis to individual cash generating
units (CGus) due to the significant history of numerous acquisitions, especially during the years 1993 to 1999, and resulting post-
acquisition business integration activities and operational changes over many years. the Singapore operation is a separate CGu and
the associated goodwill arising from that acquisition has been allocated to that single Singaporean CGu. As a result, the lowest level
within the Group at which goodwill is monitored for management purposes comprises the grouping of all CGus within a country of
operation. the recoverable amounts of the total of Australian CGus and of the Singaporean CGu are based on value-in-use calculations.
these calculations use cash flow projections based on financial estimates approved by management covering a five-year period.
Cash flows beyond the five-year period have been extrapolated using estimated growth rates.
(c) Key assumptions used for value-in-use calculations
Management determined budgeted cash flows based on past performance and its expectations for the future. the growth rates
used for revenue and expense projections are not inconsistent with historical trends and forecasts included in reports prepared by
market analysts. the pre-tax discount rate used was 10.6% (2007: 12.3%), reflecting the risk estimates for the business as a whole.
Sensitivity analysis indicates significant headroom exists in the value-in-use calculations for both Australia and Singapore compared
to the carrying value of goodwill.
78
InvoCare AnnuAl RepoRt 2008
note 17: derivative financial inStrumentS
non-current assets
Interest rate swap contracts – cash flow hedges
Cross currency basis swap contracts
non-current liabilities
Interest rate swap contracts – cash flow hedges
Cross currency basis swap contracts
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
–
–
–
3,712
1,545
5,257
–
– –
–
4,360
4,360
8,133
4,367
12,500
–
–
–
7,036 –
– –
7,036 –
Full details of the derivatives being used by the Group and the risks and aging of the existing derivatives are set out in note 2 – Financial
risk management.
note 18: trade and other PayableS
Current
trade payables
Sundry payables and accrued expenses
Deferred cash settlement for business interests acquired
non-current
Deferred cash settlement for business interests acquired
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
16,630
4,066
321
21,017
16,640
5,331
3,586
25,557
577
577
251
251
168
168
178
– –
– –
178
– –
– –
Full details of the risks and currency exposure of trade and other payments are set out in note 2 – Financial risk management.
InvoCare AnnuAl RepoRt 2008
79
Notes to the F inancial Statements
For the year ended 31 december 2008
note 19: borrowingS
Short-term borrowings
Bank overdraft
Long-term borrowings
Borrowings are represented by:
principal amount of bank loans – unsecured
loan establishment costs
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
–
–
–
–
–
–
929
929
158,867
(212)
154,867
(320)
136,000
(201)
132,000
(299)
158,655
154,547
135,799
131,701
Full details of the risks, aging and available facilities are set out in note 2 – Financial risk management.
note 20: ProviSionS for emPloyee benefitS
Current
employee benefits
non-current
liability for long service leave
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
8,538
8,079
1,289
1,067
– –
– –
Consolidated entity
parent entity
2008
number
2007
number
2008
number
2007
number
(a) Employee numbers
number of full-time equivalent employees
993
923
– –
(b) Superannuation plan
the Company contributes to accumulation-type employee superannuation plans in accordance with statutory requirements.
80
InvoCare AnnuAl RepoRt 2008
note 21: deferred tax aSSetS and liabilitieS
Deferred tax (asset)/liability
the deferred tax (asset)/liability balances comprised
temporary differences attributable to:
Amounts recognised in profit or loss:
Cemetery land
property, plant and equipment
leasehold land and buildings
Deferred selling costs
prepayment and other
Brand names
provisions
Receivables
Accruals and other
loan establishment costs
Derivatives
Amounts recognised directly in equity:
Foreign currency reserve
Cash flow hedges
Deferred employee share plan
the net movement in the deferred tax (asset)/liability is as follows:
Balance at the beginning of the year
net charge (credit) to income statement
Amounts recognised due to business combinations
Amounts recognised directly in equity
Impact of change of income tax rate in Singapore
Adjustment to previously recognised balances
effect of movements in exchange rates
Balance at the end of the year
Deferred tax liabilities/(assets) to be settled within 12 months
Deferred tax liabilities to be settled after more than 12 months
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
25,241
6,705
95
2,447
104
736
(3,539)
(115)
(1,271)
(20)
(959)
(1,379)
(1,412)
222
25,812
7,212
97
2,445
35
642
(3,295)
143
(1,476)
14
(401)
395
1,511
256
26,855
33,390
33,390
(1,758)
161
(4,919)
–
(206)
187
32,317
(562)
174
1,509
(84)
–
36
26,855
33,390
(2,945)
29,800
(2,659)
36,049
26,855
33,390
– –
– –
– –
– –
–
– –
– –
– –
(40)
(4) –
(699)
– –
(1,412)
472
(1,683)
1,509
(254)
– –
(3,145)
– –
207 –
– –
(1,683)
112
(1,795)
(1,683)
(5)
(49)
(204)
1,511
256
1,509
411
(1)
1,099
1,509
462
1,047
1,509
InvoCare AnnuAl RepoRt 2008
81
Notes to the F inancial Statements
For the year ended 31 december 2008
note 22: contributed equity
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Fully paid ordinary shares
71,806
70,125
71,806
70,125
2008
number
2008
$’000
2007
number
2007
$’000
ordinary shares
Balance at the beginning of the financial year
Issued pursuant to exercise of share options
Dividend reinvestment plan issues
transferred from share-based payment reserve
100,287,325
–
512,114
–
70,696
–
2,683
–
99,025,548
313,228
948,549
–
Total contributed equity – parent entity
100,799,439
73,379
100,287,325
64,473
335
5,687
201
70,696
treasury shares
(249,697)
(1,573)
(131,308)
(571)
Total consolidated contributed equity
100,549,742
71,806
100,156,017
70,125
(a) 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 and amounts paid on the shares held. on a show of hands every holder of ordinary shares present at a meeting in person or by proxy,
is entitled to one vote, and upon a poll each share is entitled to one vote.
(b) Treasury shares
treasury shares are shares in InvoCare limited that are held by the InvoCare Deferred employee Share plan trust for the purpose of
issuing shares under the InvoCare Deferred employee Share plan, as set out in note 7.
Date
Details
1 January 2007
6 to 25 July 2007
opening balance
Acquisition of shares by the trust
31 December 2007/1 January 2008
Closing/opening balance
11 February 2008
22 February 2008
11 March 2008
1 to 3 July 2008
31 December 2008
Forfeit of shares on termination of employment
Shares vested
Acquisition of shares by the trust and
reallocation of previously forfeited shares
Acquisition of shares by the trust
Balance
number of
shares
$’000
–
131,308
131,308
(14,397)
(6,700)
20,908
118,578
249,697
–
571
571
257
(41)
35
751
1,573
(c) Dividend reinvestment plan
During 2006, the Company activated its Dividend Reinvestment plan under which holders of ordinary shares may elect to have all or part
of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash.
82
InvoCare AnnuAl RepoRt 2008
note 23: reServeS and retained ProfitS
(a) Reserves
Share-based payment reserve
Hedging reserve – cash flow hedge reserve
Foreign currency translation reserve
Movements:
Share-based payments reserve
Balance at the beginning of the year
options/deferred employee share plan expense
transfer to share capital upon exercise of options
Vesting of deferred employee share plan shares
Deferred tax
Balance at the end of the year
Hedging reserve
Balance at the beginning of the year
Revaluation to fair value – gross
Deferred tax
Balance at the end of the year
Foreign currency translation reserve
Balance at the beginning of the year
Revaluation to fair value – gross
Deferred tax
Currency translation differences
Balance at the end of the year
(b) Retained profits/(accumulated losses)
Movements in retained profits/(accumulated losses) were as follows:
Balance at the beginning of the year
net profit for the year
Dividends paid during the year
Balance at the end of the year
(c) Nature and purpose of reserves
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
963
(3,293)
1,681
(649)
221
562
–
(42)
222
963
3,527
(9,743)
2,923
(3,293)
(244)
(5,913)
1,774
6,064
1,681
221
3,527
(244)
3,504
246
271
(201)
–
(95)
221
962
3,664
(1,099)
3,527
(37)
1,061
(410)
(858)
(244)
221
3,527
3,748
246
271
(201)
(95)
221
962
3,664
(1,099)
3,527
963
(3,293)
– –
(2,330)
221
562
–
(42) –
222
963
3,527
(9,743)
2,923
(3,293)
– –
– –
– –
– –
– –
(14,175)
28,026
(23,066)
(20,334)
27,554
(21,395)
28,786
36,131
(23,066)
18,208
31,973
(21,395)
(9,215)
(14,175)
41,851
28,786
(i) Share-based payments reserve
the share-based payments reserve is used to recognise the expensed portion of shares granted to employees under the terms of the
Deferred employee Share plan.
(ii) Hedging reserve – cash flow hedge reserve
the hedging reserve is used to record gains or losses on hedging instruments that are cash flow hedges which are recognised directly in
equity. Amounts are recognised in profit and loss when the associated hedged transaction affects the profit and loss.
(iii) Foreign currency translation reserve
exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve as set out
in note 1(d). the reserve is recognised in the profit and loss when the net investment is sold.
InvoCare AnnuAl RepoRt 2008
83
Notes to the F inancial Statements
For the year ended 31 december 2008
note 23: reServeS and retained ProfitS continued
(d) Transition to AIFRS
the transition to AIFRS resulted in $47,084,000 being charged against retained earnings of the consolidated entity at 1 January 2004.
these adjustments primarily related to the recognition of deferred tax liabilities and impairment losses on cemetery and crematorium land
and gave rise to consolidated net accumulated losses. there is a possibility the deferred tax liability may be reversed in a future reporting
period if a change to AIFRS currently under consideration by the standard setting authorities is adopted.
the AIFRS transitional adjustments will not materially adversely impact or restrict the Group’s current and future profitability, cash flows or
dividend capability. Since making the transition to AIFRS, the Group has distributed all available previous AGAAp profits as dividends and
continues to distribute dividends from AIFRS reported profits.
the following table shows the movements in the consolidated entity’s retained earnings/(accumulated losses) since transition to AIFRS on
1 January 2004, set out in separate sub-account components relating to: firstly, previously reported AGAAp retained earnings; secondly,
the AIFRS transitional adjustments to retained earnings; and finally, AIFRS determined profits. the amounts of retained earnings AIFRS
transitional adjustments which have since reversed into profits amount to $3,771,000 (2007: $2,575,000). these are shown as transfers in
the table below and comprise:
−
reversal of non-current asset impairment losses of $1,691,000 (net of tax) recognised on transition;
− AASB 132 and AASB 139 financial instruments adjustments $861,000 (net of tax); and
−
reversal of temporary differences relating to the deferred tax liability established at transition to AIFRS $2,941,000.
Balance of retained profits/(accumulated losses) as at 1 January 2004
profit after tax for the 2004 year
Dividends paid during 2004
transitional AIFRS adjustments on 1 January 2005
relating to adoption of AASB 132 and AASB 139
profit after tax for the 2005 year
Dividends paid during 2005
profit after tax for the 2006 year
Dividends paid during 2006
profit after tax for the 2007 year
Dividends paid during 2007
profit after tax for the 2008 year
Dividends paid during 2008
transfers between sub-accounts
previously
reported
AGAAp
earnings
$’000
transitional
AIFRS
adjustments
to retained
earnings
$’000
post AIFRS
adoption
reported
earnings
$’000
11,033
17,088
(6,080)
–
–
(22,041)
–
–
–
–
–
–
–
(47,084)
–
–
861
–
–
–
–
–
–
–
–
3,771
–
2,167
–
–
20,141
(3,462)
24,047
(17,004)
27,554
(21,395)
28,026
(23,066)
(3,771)
total
$’000
(36,051)
19,255
(6,080)
861
20,141
(25,503)
24,047
(17,004)
27,554
(21,395)
28,026
(23,066)
–
Balance of retained earnings/(accumulated losses) as at 31 December 2008
–
(42,452)
33,237
(9,215)
note 24: minority intereSt
Reconciliation of minority interests in controlled entities:
Share capital
Retained earnings
Balance at the beginning of the year
Add share of operating profit
less dividends paid
Closing balance of retained earnings
Reserves
Balance at the end of the year
84
InvoCare AnnuAl RepoRt 2008
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
800
800
126
68
(56)
138
99
151
97
(122)
126
99
1,037
1,025
– –
– –
– –
– –
– –
– –
– –
note 25: caPital and leaSing commitmentS
(a) Operating lease commitments
non-cancellable operating leases contracted for at the
reporting date but not capitalised in the financial statements:
payable – minimum lease payments
– not later than 12 months
– between 12 months and five years
– greater than five years
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
5,714
9,817
10,157
25,688
5,206
9,335
11,038
25,579
– –
– –
– –
– –
non-cancellable operating leases contracted for at the reporting date but not capitalised in the financial statements include the following:
not later than 12 months
Between 12 months and five years
Greater than five years
property
$’000
equipment Motor vehicles
$’000
$’000
total
$’000
4,993
9,083
10,157
24,233
147
458
–
605
574
276
–
850
5,714
9,817
10,157
25,688
the Group leases premises, motor vehicles and sundry office equipment under non-cancellable operating leases with terms generally
from one to five years. the Rookwood Crematorium lease expires in 2025.
(b) Capital expenditure commitments
Capital expenditure commitments contracted for at the
reporting date but not recognised as liabilities payable:
Building extensions and refurbishments
– within one year
plant and equipment purchases
– within one year
(c) Other expenditure commitments
Commitments for the construction of crypts, contracted for at the
reporting date but not recognised as liabilities payable:
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
1,237
1,422
335
1,364
– –
– –
– within one year
3,712
1,579
– –
note 26: buSineSS combinationS
During 2008, the Group acquired the funeral businesses of Christian Funerals, which operates in perth, Australia and Southern Cross
Funerals, which operates in Melbourne, Australia. the accounting for the December 2007 Chipper business combination which had
been completed on a provisional basis was finalised. pursuant to the purchase agreements in prior years, further payments were made in
2008 in relation to liberty Funerals which operates in Sydney, the Singapore Casket Company which operates in Singapore and Drysdale
Funerals which operates on the Sunshine Coast in Queensland. Further details of these acquisitions are set out below.
Christian Funerals
(a) Summary of the Christian Funerals acquisition
on 1 August 2008, a subsidiary, InvoCare Australia pty limited, acquired the Christian Funerals business assets. the business operates
from one location in perth, Western Australia.
InvoCare AnnuAl RepoRt 2008
85
Notes to the F inancial Statements
For the year ended 31 december 2008
note 26: buSineSS combinationS continued
(a) Summary of the Christian Funerals acquisition continued
During 2008, Christian Funerals contributed revenues of $1.0 million and an eBItDA of $0.2 million. Further integration of the business
with other InvoCare businesses in the perth region is underway.
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
purchase consideration (refer to (b) below):
Cash paid
Direct costs relating to the acquisition
Sub-total
Anticipated additional consideration
total purchase consideration
Fair value of net identifiable assets acquired (refer to (c) below):
Goodwill
(b) Christian Funerals purchase consideration
outflow of cash to acquire the business, net of cash acquired
Cash consideration for Christian’s business
outflow of cash
$’000
1,398
204
1,602
491
2,093
300
1,793
1,398
1,398
Additional consideration will be payable in cash in the future in respect of the business assets based on the achievement of
pre-determined revenue growth targets over a three-year period from July 2008. therefore, additional consideration has been brought
to account as a component of the goodwill arising on the acquisition.
the purchase price of the business of Christian Funerals was determined using expected future maintainable earnings. this has resulted
in the recognition of goodwill which relates to synergies expected to be achieved as a result of combining Christian Funerals with the rest
of the Group.
(c) Christian Funerals assets and liabilities acquired
the assets and liabilities arising from the acquisition are as follows:
Inventories
other current assets
property, plant and equipment
Intangible assets: Brand name
provisions
Deferred tax liabilities
net identifiable assets acquired
Acquiree’s
carrying
amount
$’000
16
32
161
–
(9)
–
200
Fair
value
$’000
16
32
161
143
(13)
(39)
300
the initial accounting for the business combination has been determined provisionally as at the acquisition date. the fair values assigned
to the identifiable assets, liabilities or contingent liabilities may require adjustment as at the acquisition date. under AASB 3 Business
Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within
12 months of the acquisition date.
Southern Cross Funerals
(a) Summary of the Southern Cross Funerals acquisition
on 15 october 2008, a subsidiary, InvoCare Australia pty limited, acquired the Southern Cross Funerals business assets including the
land and buildings used by the business. the business operates from a single location in the south east of Melbourne, Victoria.
During 2008, the Southern Cross Funerals business contributed revenues of less than $0.1 million and broke even on an eBItDA basis.
the business is in the process of being integrated into the InvoCare Melbourne operations.
86
InvoCare AnnuAl RepoRt 2008
note 26: buSineSS combinationS continued
(a) Summary of the Southern Cross Funerals acquisition continued
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
purchase consideration (refer to (b) below):
Cash paid
Direct costs relating to the acquisition
Sub-total
Anticipated additional consideration
total purchase consideration
Fair value of net identifiable assets acquired (refer to (c) below):
Goodwill
(b) Southern Cross Funerals purchase consideration
outflow of cash to acquire the business, net of cash acquired
Cash consideration for Southern Cross business
outflow of cash
$’000
463
55
518
125
643
446
197
463
463
Additional consideration will be payable in cash in the future in respect of the business assets based on the achievement of
pre-determined revenue growth targets in the 12 months from acquisition. therefore, additional consideration has been brought
to account as a component of the goodwill arising on the acquisition.
the purchase price of the business of Southern Cross Funerals was determined using expected future maintainable earnings. this has
resulted in the recognition of goodwill which relates to synergies expected to be achieved as a result of combining Southern Cross with
the rest of the Group.
(c) Southern Cross Funerals assets and liabilities acquired
the assets and liabilities arising from the acquisition are as follows:
Inventories
other current assets
property, plant and equipment
land and building
Intangible assets: Brand name
Deferred tax liabilities
net identifiable assets acquired
Acquiree’s
carrying
amount
$’000
1
13
14
350
–
–
378
Fair
Value
$’000
1
13
14
400
43
(25)
446
the initial accounting for the business combination has been determined provisionally as at the acquisition date. the fair values assigned
to the identifiable assets, liabilities or contingent liabilities may require adjustment as at the acquisition date. under AASB 3 Business
Combinations any adjustments to those provisional values as a result of completing the initial accounting may be recognised within
12 months of the acquisition date.
Chippers Funerals
(a) Summary of the Chippers acquisition
on 13 December 2007, oakwood Funerals pty limited, a subsidiary of InvoCare Australia pty limited, acquired the Chippers Funeral
business assets. the business operates from five locations in the Western Australian market.
During 2008, the Chippers business contributed revenues of $5.6 million. During the year, it was integrated into InvoCare’s existing
businesses in the perth region and it is estimated that it contributed around $1.0 million to eBItDA.
At 31 December 2007 the accounting for the business combination had only been determined provisionally. the final accounting for the
business combination resulted in an increase in the total consideration and costs of $367,000 and an increase in brand name valuation of
$269,000. this resulted in an increase of $64,000 in goodwill.
InvoCare AnnuAl RepoRt 2008
87
Notes to the F inancial Statements
For the year ended 31 december 2008
note 26: buSineSS combinationS continued
Chippers Funerals continued
(a) Summary of the Chippers acquisition continued
Details of the fair value of the assets and liabilities acquired and goodwill are as follows:
purchase consideration (refer to (b) below):
Cash paid
Direct costs relating to the acquisition
total purchase consideration
Fair value of net identifiable assets acquired (refer to (c) below):
Goodwill
(b) Chippers Funerals purchase consideration
outflow of cash to acquire the business, net of cash acquired
Cash consideration for Chippers business
Cash consideration for equity instruments
outflow of cash
(c) Chippers Funerals assets and liabilities acquired
the assets and liabilities arising from the acquisition are as follows:
Inventories
property, plant and equipment
Intangible assets: Brand name
provisions
Deferred tax liabilities
net identifiable assets acquired
$’000
4,753
518
5,271
791
4,480
2,597
2,156
4,753
Fair
value
$’000
84
300
715
(134)
(174)
791
Acquiree’s
carrying
amount
$’000
84
300
–
(134)
–
250
Liberty Funerals Pty Limited
on 1 March 2007, InvoCare Australia pty limited, a wholly-owned Australian subsidiary of InvoCare limited, acquired 100% of the issued
share capital of liberty Funerals pty limited. this company operates a funeral business in Sydney, Australia.
Additional purchase consideration of $700,000 was paid in February 2008 in accordance with the contract. the payment was in line with
expectations following the achievement of pre-determined eBItDA benchmarks established at the time of the initial acquisition.
Singapore Casket Company (Private) Limited
In 2006, InvoCare (Singapore) pty limited, a wholly-owned Australian subsidiary of InvoCare limited, acquired 100% of the issued share
capital of Singapore Casket Company (private) limited, incorporated in the Republic of Singapore. this company operates a funeral
business in Singapore.
Additional purchase consideration of $932,000 was paid during March 2008 in accordance with the contract. this amount was less than
originally anticipated by $11,000 due to the appreciation of the Australian dollar compared to the Singapore dollar. the contract provided
for additional purchase consideration in the event the pre-determined eBItDA target was achieved in 2007. the acquired entity met
these targets and consideration of $932,000 became due and payable. the difference between the final deferred payment and the initial
estimate was brought to account as a component of the goodwill arising on the acquisition.
Drysdale Funerals
In July 2006, the Group acquired 100% of the issued share capital of D & J Drysdale pty ltd together with business assets including
property, some of which were acquired in March 2006, from persons or entities related to the company. the business trades as Drysdale
Funerals on the Sunshine Coast in Queensland. the second additional payment of $100,000, which has already been brought to
account, in respect of restraint and retention amounts, was made during 2008.
88
InvoCare AnnuAl RepoRt 2008
note 27: contingent liabilitieS and contingent aSSetS
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
the parent entity and consolidated entity had contingent liabilities
at 31 December 2008 in respect of bank guarantees given for leased
premises of controlled entities to a maximum of:
438
398
438
398
For information about the deed of cross guarantees given by InvoCare limited, InvoCare Australia pty limited and InvoCare (Singapore)
pty limited, refer to note 30. no deficiencies of assets exist in any of these companies.
no liability was recognised by the parent entity or the consolidated entity in relation to the guarantees as the fair value of the guarantees is
immaterial.
note 28: Segment rePorting
(a) Description of segments
Management has determined that the operating segments should be based on the management reporting regularly reviewed by the Chief
executive officer. this reporting is based on the operational location of the business because different economic and cultural factors
impact the growth and profitability of the segment.
(b) Segment information provided to the Chief Executive Officer
the segment information provided to the Chief executive officer for reportable segments to 31 December 2008 is as follows:
Australian operations
Singapore operations
Consolidated entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Sales revenue
Funerals
Comparable
Acquired businesses
total funerals
Cemeteries and crematoria
elimination of intra-group sales
Revenue from external customers
other revenue (excluding interest income)
operating expenses
normalised operating eBItDA
Depreciation and amortisation
Finance costs
Interest income
Income tax expense
normalised profit after tax
profit/(loss) on sale of assets
Minority interest
net profit after tax attributable to equity
holders of InvoCare limited
Acquisition of property, plant and
equipment and intangibles
174,178
9,767
183,945
58,453
(6,556)
235,842
4,065
(182,353)
57,554
(9,088)
(12,098)
642
(10,522)
26,488
(250)
(68)
163,373
2,479
165,852
57,295
(6,612)
216,535
3,561
(164,919)
55,177
(8,336)
(10,605)
642
(11,334)
25,544
542
(97)
8,373
–
8,373
–
–
8,373
69
(4,121)
4,321
(615)
(1,598)
–
(253)
1,855
1
–
7,383
–
7,383
–
–
7,383
65
(3,690)
3,758
(609)
(1,490)
11
(141)
1,529
36
–
182,551
9,767
192,318
58,453
(6,556)
244,215
4,134
(186,474)
61,875
(9,703)
(13,696)
642
(10,775)
28,343
(249)
(68)
170,756
2,479
173,235
57,295
(6,612)
223,918
3,626
(168,609)
58,935
(8,945)
(12,095)
653
(11,475)
27,073
578
(97)
26,170
25,989
1,856
1,565
28,026
27,554
18,756
26,452
61
324
18,817
26,776
total assets
309,550
304,417
30,830
27,952
340,380
332,369
InvoCare AnnuAl RepoRt 2008
89
Notes to the F inancial Statements
For the year ended 31 december 2008
note 28: Segment rePorting continued
(c) Segment information – accounting policies
the consolidated entity operates in one industry, being the funeral industry, with operations in Australia and Singapore.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that
can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily
of operating cash, receivables, inventories, property, plant and equipment and goodwill and other intangible assets, net of related
provisions. Segment liabilities consist primarily of trade and other creditors and employee benefits and, in the case of Singapore, includes
an allocation of the long-term borrowings raised in Australia to fund the investment in Singapore.
note 29: caSh flow information
reconciliation of cash flow from operations with profit
from ordinary activities after income tax
profit from ordinary activities after income tax
non-cash flows in profit from ordinary activities
Depreciation and amortisation
Share-based payments expense
loan establishment costs
Interest rate swap expense
Imputed interest from deferred purchase consideration
Management fee received from related parties
Interest received from related parties
Dividends received from related parties
Income tax expense paid by a related party
net amount reclassified as an expense from property
plant and equipment and other non-current assets
net (gain)/loss on disposal of property, plant and equipment
effect of movement in exchange rates
Changes in assets and liabilities, net of the effects
of purchase and disposal of subsidiaries
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in deferred selling expenses
Increase/(decrease) in payables
Increase/(decrease) in deferred revenue
Increase/(decrease) in income taxes payable
Increase/(decrease) in deferred taxes liabilities
Increase/(decrease) in provisions
Consolidated entity
parent entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
28,094
27,651
36,131
31,973
9,703
607
107
2,101
38
–
–
–
–
(82)
355
(182)
(282)
(470)
(6)
(992)
(1,064)
35
(2,156)
667
8,945
270
101
954
–
–
–
–
–
–
(519)
–
(1,513)
(605)
–
3,059
222
(212)
(706)
948
– –
–
98
1,652
– –
(1,200)
(19,172)
(30,500)
3,140
– –
– –
– –
(1)
– –
– –
10
– –
(721)
(14)
– –
(8)
98
320
(1,200)
(16,963)
(26,500)
1,368
(2)
143
220
153
36,473
38,595
(10,577)
(10,398)
90
InvoCare AnnuAl RepoRt 2008
note 30: deed of croSS guarantee
InvoCare limited, InvoCare Australia pty limited and InvoCare (Singapore) pty limited entered into a Deed of Cross Guarantee on
11 December 2006 under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities
have been relieved from the requirement to prepare a financial report and directors’ report under Class order 98/1418 (as amended)
issued by the Australian Securities and Investments Commission.
the above companies represent a “Closed Group” for the purposes of the Class order, and as there are no other parties to the Deed of
Cross Guarantee that are controlled by InvoCare limited, they also represent the “extended Closed Group”.
Set out below is a consolidated income statement, summary of movements in consolidated retained profits and balance sheet for the
year ended 31 December 2008 of the Closed Group.
(a) Consolidated income statement and a summary of movements in consolidated retained profits of the Closed Group
Consolidated income statement of the Closed Group
Revenue from continuing operations
Finished goods and consumables used
employee benefits expense
employee related and on-cost expenses
Advertising and public relations expenses
Depreciation, impairment and amortisation expenses
occupancy and facilities expenses
Finance costs
Motor vehicle expenses
other expenses
net gain/(loss) on disposal of non-current assets
profit before income tax
Income tax expense
profit for the year
Summary of movements in consolidated retained profits of the Closed Group
Retained profits/(accumulated losses) at the beginning of the financial year
profit for the year
Dividends provided for or paid
Retained profits/(accumulated losses) at the end of the financial year
2008
$’000
2007
$’000
217,333
(63,030)
(50,916)
(11,544)
(7,143)
(7,979)
(11,836)
(13,640)
(4,867)
(10,191)
(376)
35,811
(7,901)
27,910
205,124
(57,344)
(46,652)
(12,142)
(6,252)
(7,401)
(10,392)
(12,078)
(4,638)
(10,565)
779
38,439
(10,017)
28,422
(17,340)
27,910
(23,066)
(24,367)
28,422
(21,395)
(12,496)
(17,340)
InvoCare AnnuAl RepoRt 2008
91
Notes to the F inancial Statements
For the year ended 31 december 2008
note 30: deed of croSS guarantee continued
(b) Balance sheet of the Closed Group
Current assets
Cash and cash equivalents
trade and other receivables
Inventories
Deferred selling costs
Total current assets
non-current assets
trade and other receivables
Shares in subsidiaries
property, plant and equipment
Derivative financial instruments
Intangible assets
Deferred selling costs
Total non-current assets
Total assets
Current liabilities
trade and other payables
Current tax liabilities
Deferred revenue
provisions for employee benefits
Total current liabilities
non-current liabilities
trade and other payables
long-term borrowings
Derivative financial instruments
Deferred tax liabilities
Deferred revenue
provisions for employee benefits
Total non-current liabilities
Total liabilities
net assets
equity
Contributed equity
Reserves
Retained profits/(Accumulated losses)
Total equity
92
InvoCare AnnuAl RepoRt 2008
2008
$’000
2007
$’000
3,840
16,719
12,473
490
33,522
5,598
52,384
190,008
–
30,634
6,863
5,887
17,135
12,089
491
35,602
9,052
52,102
182,720
5,257
28,465
6,877
285,487
284,473
319,009
320,075
20,184
3,429
2,585
8,510
34,708
577
158,655
12,500 –
21,327
36,191
1,289
24,620
3,790
3,274
7,854
39,538
2,906
154,547
27,898
36,665
1,067
230,539
223,083
265,247
262,621
53,762
57,454
71,806
(5,548)
(12,496)
53,762
70,125
4,669
(17,340)
57,454
note 31: eventS after the balance Sheet date
there have been no significant events that have occurred subsequent to 31 December 2008.
note 32: related Party tranSactionS
(a) Parent entity
the ultimate parent entity within and for the Group is InvoCare limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 14.
(c) Directors and key management personnel
Disclosures relating to directors and key management personnel are set out in note 6.
(d) Transactions with related parties
transactions between related parties are on normal commercial terms
and conditions no more favourable than those available to other parties
unless otherwise stated.
Transactions between InvoCare Limited and its controlled entities
Management fee charged by the parent entity
loans advanced by the parent entity
Interest charged by the parent entity
Dividend paid to the parent entity
amounts receivable by the parent entity from controlled entities
loan by parent entity to a subsidiary
the loan made by InvoCare limited to a controlled entity is unsecured
and has no fixed terms of repayment. Interest on the loan is charged
at 9% (2007: 9%).
Transactions with other related parties
Contributions to superannuation funds on behalf of employees
Consolidated entity
parent entity
2008
$
2007
$
2008
$
2007
$
–
–
–
–
–
–
–
–
–
1,200,000
17,756,902
19,172,135
30,500,000
1,200,000
17,608,240
16,963,403
26,500,000
–
238,537,437 220,780,535
4,394,856
3,857,653
– –
(e) Guarantees and other matters
under the terms of loan facility agreements executed on 16 December 2005 and amended in october 2006, June 2007 and november
2008, InvoCare limited and each of its wholly-owned Australian entities (the “Guarantors”) has individually guaranteed to the financiers
the due and punctual payment in full of any liabilities or obligations under the facilities. the Guarantors have also indemnified the
financiers against any loss or damage suffered by the financiers arising from any failure by a borrower or any Guarantor to satisfy
the obligations.
under income tax consolidation legislation, InvoCare limited assumes responsibility for the income tax payable by the consolidated
Australian tax group comprising InvoCare limited and its wholly-owned entities. A tax sharing and funding agreement (tSA) between
InvoCare limited and its wholly-owned Australian entities covers the funding, accounting and calculation of the tax liability for each
individual entity, and also caters for entities joining and exiting the group. In accordance with the terms of the tSA, InvoCare Australia
pty limited makes tax payments on behalf of InvoCare limited and receives reimbursement through the intercompany loan account for
amounts paid except for the tax allocated to that entity.
note 33: economic dePendence
the parent entity depends on dividend and interest income from, and management fees charged to, its controlled entities to source
the payment of future dividends and fund its operating costs and debt service obligations as borrower under the bank loan facility
agreements. the parent entity’s financial position is sound, notwithstanding a net current liability situation being shown in the balance
sheet and an operating net cash outflow. Adequate cash resources are available to enable it to meet its obligations as and when they fall
due, through either drawing on unused loan facilities, which at the reporting date amounted to $25,695,000 as outlined in note 2(c), or by
on-demand repayment of inter company advances.
InvoCare AnnuAl RepoRt 2008
93
Notes to the F inancial Statements
For the year ended 31 december 2008
note 34: critical accounting eStimateS and JudgementS
estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
the Group makes estimates and assumptions concerning the future. the resulting accounting estimates will, by definition, seldom equal
the related actual results. the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(i) Estimated impairment of goodwill
the Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(o).
the recoverable amounts of cash generating units have been determined based on value-in-use calculations. these calculations require
the use of assumptions. Refer to note 16 for details of these assumptions and the potential impact of changes to the assumptions.
(ii) Estimated impairment of other non-financial assets and cash generating units
the Group annually considers if events or changes in circumstances indicate that the carrying amount of other non-financial assets or
cash generating units may not be recoverable. Similarly, at each reporting date, assets or cash generating units that suffered a previous
impairment are reviewed for possible reversals of the impairment. the recoverable amounts are determined based on value-in-use
calculations which require the use of assumptions. Refer to note 15 for details of these assumptions.
(iii) Timing of recognition of deferred plaque and miscellaneous merchandise revenue
prepaid cemetery/crematorium plaque and miscellaneous merchandise sales are currently brought to account over an assumed 15-year
period. unredeemed merchandise sales (included within deferred revenue on the balance sheet) total $31.1 million at 31 December 2008
(2007: $30.2 million).
the 15-year period is based on the actuarially assessed average period between a customer entering into a prepaid funeral plan and the
contract becoming at-need. the actual history of a prepaid cemetery/crematorium contract may differ from the profile of a prepaid funeral
plan; however, in the absence of more specific data being available, the funeral data has been applied.
the average 15-year period is an assumption only and therefore subject to uncertainty. It is possible that there will remain unperformed
contracts at the end of the 15-year amortisation period, yet all revenue will have been recognised. offsetting this is the likelihood that
contracts performed during the 15-year period will have unrecognised revenue.
Management has been collating actual redemptions information for a sample of sites in order to determine a more accurate historical
pattern of cemetery/crematorium prepaid sale redemptions. the information supports the current recognition period. Management will
continue sampling to monitor redemption history and reassess the assumed 15-year period.
the impact of recognising revenue over 20 years instead of the current 15 years would be a reduction of approximately $1.0 million
(2007: $0.5 million) per annum in revenue.
note 35: comPany detailS
InvoCare limited is a company limited by shares, incorporated and domiciled in Australia.
the registered office and principal place of business of the company is:
level 4, 153 Walker Street
north Sydney nSW 2060
note 36: authoriSation of the financial rePort
this financial report was authorised for issue by the directors on 27 March 2009. the Company has the power to amend and reissue
this report.
94
InvoCare AnnuAl RepoRt 2008
Directors’ Declaration
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 49 to 94 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the Company’s and consolidated entity’s financial position as at 31 December 2008 and of their
performance for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended Closed Group identified
in note 30 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 30.
the directors have been given the declarations by the Chief executive officer and Chief Financial officer required by section 295A of the
Corporations Act 2001.
this declaration is made in accordance with a resolution of the directors.
Ian Ferrier
Director
andrew Smith
Director
Sydney
27 March 2009
InvoCare AnnuAl RepoRt 2008
95
Independent Audit Report
indePendent audit rePort to the memberS of
invocare limited
Report on the financial report
We have audited the accompanying financial report of InvoCare limited (the company), which comprises the balance sheet as at
31 December 2008, and the income statement, statement of recognised income and expense and cash flow statement for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both InvoCare limited
and the InvoCare Group (the consolidated entity). the consolidated entity comprises the company and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ responsibility for the financial report
the directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. this responsibility includes
establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances. In note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards
ensures that the consolidated financial statements and notes 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. these Auditing 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 and the
remuneration disclosures contained in the directors’ report. the procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report and the remuneration disclosures contained in the directors’ report,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies
with the financial report.
For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit.
our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Liability limited by a scheme approved under Professional Standards Legislation
96
InvoCare AnnuAl RepoRt 2008
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion on the financial report
In our opinion:
(a)
the financial report of InvoCare limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2008 and of their
performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001; and
(b)
the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1.
Report on the remuneration report
We have audited the remuneration report included in pages 40 to 46 of the directors’ report for the year ended 31 December 2008.
the directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section
300A of the Corporations Act 2001. our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of InvoCare limited for the year ended 31 December 2008 complies with section 300A of the
Corporations Act 2001.
PricewaterhouseCoopers
John Feely
partner
Sydney
27 March 2009
InvoCare AnnuAl RepoRt 2008
97
Shareholder Information
Shares and options as at 12 March 2009
Shares on issue
options on issue
Distribution of shareholdings as at 12 March 2009
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
number
100,799,439
nil
number of
shareholders
number of
shares
percentage
%
2,495
4,822
1,308
725
52
1,393,507
13,006,716
9,865,997
14,705,706
61,827,513
1.38%
12.90%
9.79%
14.59%
61.34%
9,402 100,799,439
100.00%
there were 211 holders of less than a marketable parcel of ordinary shares (being 104 based on a market price of $4.81 on 12 March
2009) who hold a total of 12,304 ordinary shares.
Equity security holders
Largest 20 holders of ordinary shares at 12 March 2009
1. national nominees limited
2. J p Morgan nominees Australia
3. AnZ nominees limited
4. Citicorp nominees pty limited
5. HSBC Custody nominees (Australia) limited
6. Cogent nominees pty limited
7. Bond Street Custodians limited
8. neweconomy Com Au nominees pty limited
9. Argo Investments limited
10. Queensland Investment Corporation
11. Milton Corporation limited
12. Richard Hugh Davis
13. uBS Wealth Management Australia nominees pty ltd
14. Huntley Investment Company limited
15. IVC Share plan Managers pty ltd
16. AMp life limited
17. Australian executor trustees limited
18. the university of Melbourne
19. Questor Financial Services limited
20. Mirrabooka Investments limited
number of
shares
percentage
%
18,268,757
10,543,924
7,344,977
5,424,260
3,042,350
2,856,611
2,338,599
1,412,418
1,176,358
1,150,649
965,254
816,451
755,750
650,000
520,612
507,607
479,479
437,268
428,326
415,000
18.12%
10.46%
7.29%
5.38%
3.02%
2.83%
2.32%
1.40%
1.17%
1.14%
0.96%
0.81%
0.75%
0.64%
0.52%
0.50%
0.48%
0.43%
0.42%
0.41%
total for top 20
59,534,650
59.06%
98
InvoCare AnnuAl RepoRt 2008
Substantial holders
Substantial holders in the Company as at 12 March 2009 are set out below:
J p Morgan Chase & Co. and its affiliates
national Australia Bank limited Group
Voting rights
the voting rights attaching to each class of security are set out below:
number of
shares held
percentage
%
11,763,441
6,851,452
11.67%
6.80%
Ordinary shares
on a show of hands, each member present in person and each other person present as a proxy of a member has one vote. on a poll,
each member present in person has one vote for each fully paid share held by the member and each person present as a proxy of a
member has one vote for each fully paid share held by the member that the proxy represents.
InvoCare AnnuAl RepoRt 2008
99
InvoCare Locations
NSW/ACT
Queensland
Victoria
South Australia
Western Australia
Traditional
Blackwell Funerals
(est 1940)
Purslowe Funerals
(est 1907)
Glenside
payneham
prospect
South Brighton
torrensville
other providers
Value Funerals
All areas
Midland
north perth
South Fremantle
Victoria park
Wangara
other providers
Oakwood Funerals
(est 1999)
Booragoon
Rockingham
Chipper & Son
(est1889)
Mandurah
Myaree
Rockingham
Subiaco
Victoria park
Christian Funerals
(est 1978)
Maylands
Value Funerals
All areas
George Hartnett
Funerals
(est 1947)
Albany Creek
Cleveland
Darra
Holland park
Redcliffe
Sandgate
Wynnum
other providers
Cannon & Cripps
(est 1886)
Kelvin Grove
Drysdale Funerals
(est 1983)
nambour
tewantin
Reed & Bottcher
(Reed est 1869 and
Bottcher 1887)
Ipswich
Sommerville Funerals
(est 1932)
nerang
Robina
Southport
Value Funerals
All areas
Le Pine including
Le Pine Heritage
(est 1891)
Box Hill
Camberwell
Croydon
Dandenong
eltham
Ferntree Gully
Footscray West
Glen Waverley
Greensborough
Healesville
Ivanhoe
Kew east
lilydale
Mordialloc
oakleigh
St Kilda
thornbury
other providers
Mulqueen Funerals
(est 1932)
Coburg
Provinciale Servzio
Funebre (est 1982)
Coburg
Southern Cross
(est 1998)
noble park
Value Funerals
All areas
Guardian Funeral
Providers
other Traditional
Providers
Allan Drew Funerals
(est 1985)
Castle Hill
Rouse Hill
Ann Wilson Funerals
(est 1995)
Dee Why
Mona Vale
David Lloyd Funerals
(est 1885)
Adamstown
Belmont
Beresfield
toronto
Byron District
Funerals (est 1978)
Byron Bay
Casino Funerals
(est 1930)
Casino
Economy Funerals
All areas
Kevin Geaghan
Funerals (est 1896)
Ballina
Liberty Funerals
(est 1994)
Chatswood
Granville
Twin Towns Funerals
(est 1913)
tweed Heads
Universal Chung Wah
(est 1955)
Fairfield
William Riley & Sons
(est 1882)
lismore
AF Anderson Funerals
(est 1917)
Merrylands
Allen Matthews
Funerals (est 1960)
Cremorne
north Ryde
Warrawee
Bruce Maurer
Funerals (est 1941)
Crows nest
Butler Funerals
(est 1928)
Campbelltown
Dignified Funerals
(est 1964)
Burwood
Guardian Funerals
(est 1960)
Blacktown
Hansen & Cole
Funerals (est 1936)
Bulli
Kembla Grange
Wollongong
J & C Hardy Funerals
(est 1928)
Hurstville
J W Chandler
Funerals (est 1885)
Richmond
Windsor
Macarthur District
Funerals (est 1979)
leppington
Metcalfe & Morris
Funerals (est 1890)
parramatta
Metropolitan Funerals
(est 1937)
Bankstown
Rockdale
Sydney Funerals
(est 1975)
Minchinbury
Tobin Brothers
Funerals (est 1946)
Belconnen (ACt)
Kingston (ACt)
Queanbeyan
100
InvoCare AnnuAl RepoRt 2008
Children’s Details
(list all children in order of date of birth, including legally adopted, deceased (D), still born (SB), or if no children write “none”.)
First name
First name
First name
First name
Date of birth
Date of birth
Date of birth
Date of birth
Female
Female
Female
Female
Male
Male
Male
Male
Financial Information (Information below may be required by the executor of your Will.)
Bank account details
Bank name
Account numbers
Bank branch
location of documents, books, statements
Building society/Financial institution
Building society/Financial institution name
Account numbers
Address
Income tax records
Tax File Number
location of records
NSW
Queensland
Victoria
South Australia
Western Australia
Simplicity (est 1979)
Balgowlah
Bankstown
Bateau Bay
Chatswood
Erina
Hornsby
liverpool
Mascot
Miranda
Newtown
Paddington
Penrith
Randwick
Ryde
Sans Souci
Smithfield
Toukley East
Tweed Heads
Woy Woy
Wyong
Buranda
Ipswich
Kedron
logan
Miami
Parkwood
Strathpine
Carnegie
Flemington
Frankston
Pascoe Vale
Reservoir
Sunshine
Werribee
Albert Park
Black Forest
Brahma lodge
Enfield
Morphett Vale
Victor Harbor
Joondalup
Kelmscott
Osborne Park
Spearwood
White Lady Funerals (est 1987)
Deeds of property
Property address(es)
NSW/ACT
Queensland
Victoria
South Australia
Western Australia
Copy of My Will
Date of Will
Deposited with (Name and Address)
Solicitor
Name
Address
Family Doctor
Name
Address
Personal Documents
Birth Certificate
location
Marriage Certificate
location
Telephone
Telephone
Postcode
Postcode
Medicare Card
Card number (to be returned to Medicare office)
Centrelink Pension
Number
Type of pension
Veterans’ Affairs
Number
Passport
Name shown on passport
(Passport should be returned to passport office in your area, details at local Post Office)
Passport number
Expiry date
Driver licence
Number
State of issue
Club or association memberships (Should be returned to appropriate organisation.
It may be that a claim can be made for unexpired memberships or mortality fund benefit.)
Family Details
Father’s surname
usual occupation
Mother’s maiden surname
usual occupation
Spouse surname
First names
First names
First names
location of records
Mortgage details
location of records
lender
Reference number
Address of lender
Life insurance policies
location of records
Superannuation
Details
Stocks and shares
location of records
Safe deposit box
Box location/number
location of keys
Marriage Details (Please tick appropriate box(es))
accountant
Name
Telephone
Married
Divorced
Separated
Widowed
Never married
De facto
Address
Postcode
Details of Marriage(s)
First marriage (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Second marriage (if applicable) (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Car details
Registration number and state
Registration document location
location of purchase receipt/H.P. details
Bankstown
Belconnen (ACT)
Bondi Junction
Camden
Charlestown
Charmhaven
Eastwood
Five Dock
Kingston (ACT)
Manly
Mayfield
Mosman
Narrabeen
Nelson Bay
Pennant Hills
Penrith
Queanbeyan
Rockdale
Roseville
Sutherland
Tweed Heads
Wyoming
Ashmore
Chelmer
Kelvin Grove
Morningside
Tanah Merah
Warana
Caulfield South
Doncaster
Epping
Heidelberg
Mornington
North Essendon
South Melbourne
Hillcrest
Plympton
Operating as
Mareena Purslowe &
Associates Funerals
Subiaco
Willetton
Cemeteries and Crematoria
NSW
Queensland
Albany Creek Memorial Park (est 1964)
Allambe Gardens Memorial Park (est 1968)
Mt Thompson Memorial Gardens (est 1934) Holland Park
Bridgeman Downs
Nerang
Castlebrook Memorial Park (est 1973)
Forest lawn Memorial Park (est 1962)
lake Macquarie Memorial Park (est 1994)
lakeside Memorial Park (est 1964)
Newcastle Memorial Park (est 1936)
Northern Suburbs Memorial Gardens and
Crematorium (est 1933)
Pinegrove Memorial Park (est 1962)
Rookwood Memorial Gardens and
Crematorium (est 1925)
Tweed Heads Memorial Gardens (est 1971)
Rouse Hill
leppington
Ryhope
Dapto
Beresfield
North Ryde
Eastern Creek
Rookwood
Tweed Heads
InvoCarE ANNuAl REPORT 2008
101
Glossary
AASB
ABS
AGAAP
AIFRS
ASX
ASX Corporate Governance Guidelines
Cemetery
CGU
Condolence Lounge
Constitution
Crematorium
Crypts
DRP
EBITDA
EEO
EPS
Funeral Arrangement
Funeral Home
Australian Accounting Standards Board
Australian Bureau of Statistics
Australian Generally Accepted Accounting Principles
The Australian equivalents to International Reporting Standards for annual reporting
periods beginning on or after 1 January 2005
Australian Securities Exchange which is the operating brand of ASX limited
The eight essential corporate governance principles and best practice
recommendations of the ASX Corporate Governance Council August 2007
A place for burials and memorialisation
A cash generating unit which is the smallest identifiable group of assets that
independently generates cash inflows
A facility for family and friends to gather at after the funeral service – usually offering
a catering service
The Constitution of the Company
A place for cremations and memorialisation
Above ground burial facilities
Dividend reinvestment plan
Earnings before interest, tax, depreciation and amortisation
Equal Employment Opportunity
Earnings per share
The process in which the funeral service is planned and necessary
documentation prepared
The InvoCare location where a funeral can be arranged and where some services
can be conducted
Memorial or Memorialisation
The physical marker or tribute to the life of the deceased
Memorial Park
OH&S
Operating EBITDA
An InvoCare location offering cremation, burial and memorialisation services
Occupational Health and Safety
EBITDA excluding asset sale and impairment gains or losses
Prepaid Cemetery and Crematorium Services
Cemetery and crematorium services that have been arranged and paid for in advance
Prepaid Funeral Fund
Volume
The fund where prepaid funeral monies are held in trust until the funeral
service is provided
A term that refers to the number of funeral services, burials and cremations
performed
102
InvoCarE ANNuAl REPORT 2008
Military Information (If applicable)
Branch of service
Date entered service
Date of discharge
Grade, rank or rating
Wars/Conflicts served
Service serial number
Place
Place
Additional Information
Historical information
Every individual is deserving of a meaningful obituary written in their memory. It is here that you may list those achievements and
accomplishments that have been of pride to you and your family that are not mentioned elsewhere in your “Personal details guide”.
Education
Name of primary school
Date attended from
Name of secondary school
Date attended from
Name of tertiary institution
Date attended from
Qualifications attained
to
to
to
Societies/Clubs
Memberships and positions held (include dates)
Other (including civic or public office held)
Special achievements (details of any special achievements or recognitions)
Medical History
This information is very important for your spouse, children and grandchildren. It is also suggested that
you keep an updated copy of your medical records for your family, as doctors often ask for it.
Special Instructions and Information
We suggest that you use these lines to keep our information current. We also recommend
that you always date these entries to avoid possible confusion later.
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Telephone
Telephone
Telephone
Personal details guide
For the benefit of our stakeholders, this guide is made available to enable you to record information
and arrangements in advance that will assist your family and funeral director to ensure everything is
conducted in accordance with your wishes.
Should you require assistance in completing it or require further copies of this guide for other family
members, please call Guardian Plan Toll Free 1800 151 158.
Personal Information
Family name
Address
Date of birth
Place of birth (Town/City/State/Country)
If born overseas, year arrived in Australia
Occupation during working life
Given names
Postcode
Female
Male
Name and Address of Person Who I Would Like to Make Any Arrangements
(For instance, registering the death and contacting the funeral director, e.g. executor, solicitor, family member)
Name
Address
Funeral Director
(Funeral director you would like to conduct your service)
Name
Address
Next of Kin
This information is needed when the death is registered.
Name
Address
Executor of My Will
Executor will need certain financial information when applying for grant of probate.
Name
Address
Telephone
Telephone
Telephone
Telephone
Postcode
Postcode
Postcode
Postcode
Glossary
AASB
ABS
AGAAP
AIFRS
ASX
ASX Corporate Governance Guidelines
Cemetery
CGU
Condolence Lounge
Constitution
Crematorium
Crypts
DRP
EBITDA
EEO
EPS
Funeral Arrangement
Funeral Home
Australian Accounting Standards Board
Australian Bureau of Statistics
Australian Generally Accepted Accounting Principles
The Australian equivalents to International Reporting Standards for annual reporting
periods beginning on or after 1 January 2005
Australian Securities Exchange which is the operating brand of ASX limited
The eight essential corporate governance principles and best practice
recommendations of the ASX Corporate Governance Council August 2007
A place for burials and memorialisation
A cash generating unit which is the smallest identifiable group of assets that
independently generates cash inflows
A facility for family and friends to gather at after the funeral service – usually offering
a catering service
The Constitution of the Company
A place for cremations and memorialisation
Above ground burial facilities
Dividend reinvestment plan
Earnings before interest, tax, depreciation and amortisation
Equal Employment Opportunity
Earnings per share
The process in which the funeral service is planned and necessary
documentation prepared
The InvoCare location where a funeral can be arranged and where some services
can be conducted
Memorial or Memorialisation
The physical marker or tribute to the life of the deceased
Memorial Park
OH&S
Operating EBITDA
An InvoCare location offering cremation, burial and memorialisation services
Occupational Health and Safety
EBITDA excluding asset sale and impairment gains or losses
Prepaid Cemetery and Crematorium Services
Cemetery and crematorium services that have been arranged and paid for in advance
Prepaid Funeral Fund
Volume
The fund where prepaid funeral monies are held in trust until the funeral
service is provided
A term that refers to the number of funeral services, burials and cremations
performed
102
InvoCarE ANNuAl REPORT 2008
Military Information (If applicable)
Branch of service
Date entered service
Date of discharge
Grade, rank or rating
Wars/Conflicts served
Service serial number
Place
Place
Additional Information
Historical information
Every individual is deserving of a meaningful obituary written in their memory. It is here that you may list those achievements and
accomplishments that have been of pride to you and your family that are not mentioned elsewhere in your “Personal details guide”.
Education
Name of primary school
Date attended from
Name of secondary school
Date attended from
Name of tertiary institution
Date attended from
Qualifications attained
to
to
to
Societies/Clubs
Memberships and positions held (include dates)
Other (including civic or public office held)
Special achievements (details of any special achievements or recognitions)
Medical History
This information is very important for your spouse, children and grandchildren. It is also suggested that
you keep an updated copy of your medical records for your family, as doctors often ask for it.
Special Instructions and Information
We suggest that you use these lines to keep our information current. We also recommend
that you always date these entries to avoid possible confusion later.
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Telephone
Telephone
Telephone
Personal details guide
For the benefit of our stakeholders, this guide is made available to enable you to record information
and arrangements in advance that will assist your family and funeral director to ensure everything is
conducted in accordance with your wishes.
Should you require assistance in completing it or require further copies of this guide for other family
members, please call Guardian Plan Toll Free 1800 151 158.
Personal Information
Family name
Address
Date of birth
Place of birth (Town/City/State/Country)
If born overseas, year arrived in Australia
Occupation during working life
Given names
Postcode
Female
Male
Name and Address of Person Who I Would Like to Make Any Arrangements
(For instance, registering the death and contacting the funeral director, e.g. executor, solicitor, family member)
Name
Address
Funeral Director
(Funeral director you would like to conduct your service)
Name
Address
Next of Kin
This information is needed when the death is registered.
Name
Address
Executor of My Will
Executor will need certain financial information when applying for grant of probate.
Name
Address
Telephone
Telephone
Telephone
Telephone
Postcode
Postcode
Postcode
Postcode
Children’s Details
(list all children in order of date of birth, including legally adopted, deceased (D), still born (SB), or if no children write “none”.)
First name
First name
First name
First name
Date of birth
Date of birth
Date of birth
Date of birth
Female
Female
Female
Female
Male
Male
Male
Male
Financial Information (Information below may be required by the executor of your Will.)
Bank account details
Bank name
Account numbers
Bank branch
location of documents, books, statements
Building society/Financial institution
Building society/Financial institution name
Account numbers
Address
Income tax records
Tax File Number
location of records
NSW
Queensland
Victoria
South Australia
Western Australia
Simplicity (est 1979)
Balgowlah
Bankstown
Bateau Bay
Chatswood
Erina
Hornsby
liverpool
Mascot
Miranda
Newtown
Paddington
Penrith
Randwick
Ryde
Sans Souci
Smithfield
Toukley East
Tweed Heads
Woy Woy
Wyong
Buranda
Ipswich
Kedron
logan
Miami
Parkwood
Strathpine
Carnegie
Flemington
Frankston
Pascoe Vale
Reservoir
Sunshine
Werribee
Albert Park
Black Forest
Brahma lodge
Enfield
Morphett Vale
Victor Harbor
Joondalup
Kelmscott
Osborne Park
Spearwood
White Lady Funerals (est 1987)
Deeds of property
Property address(es)
NSW/ACT
Queensland
Victoria
South Australia
Western Australia
Copy of My Will
Date of Will
Deposited with (Name and Address)
Solicitor
Name
Address
Family Doctor
Name
Address
Personal Documents
Birth Certificate
location
Marriage Certificate
location
Telephone
Telephone
Postcode
Postcode
Medicare Card
Card number (to be returned to Medicare office)
Centrelink Pension
Number
Type of pension
Veterans’ Affairs
Number
Passport
Name shown on passport
(Passport should be returned to passport office in your area, details at local Post Office)
Passport number
Expiry date
Driver licence
Number
State of issue
Club or association memberships (Should be returned to appropriate organisation.
It may be that a claim can be made for unexpired memberships or mortality fund benefit.)
Family Details
Father’s surname
usual occupation
Mother’s maiden surname
usual occupation
Spouse surname
First names
First names
First names
location of records
Mortgage details
location of records
lender
Reference number
Address of lender
Life insurance policies
location of records
Superannuation
Details
Stocks and shares
location of records
Safe deposit box
Box location/number
location of keys
Marriage Details (Please tick appropriate box(es))
accountant
Name
Telephone
Married
Divorced
Separated
Widowed
Never married
De facto
Address
Postcode
Details of Marriage(s)
First marriage (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Second marriage (if applicable) (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Car details
Registration number and state
Registration document location
location of purchase receipt/H.P. details
Bankstown
Belconnen (ACT)
Bondi Junction
Camden
Charlestown
Charmhaven
Eastwood
Five Dock
Kingston (ACT)
Manly
Mayfield
Mosman
Narrabeen
Nelson Bay
Pennant Hills
Penrith
Queanbeyan
Rockdale
Roseville
Sutherland
Tweed Heads
Wyoming
Ashmore
Chelmer
Kelvin Grove
Morningside
Tanah Merah
Warana
Caulfield South
Doncaster
Epping
Heidelberg
Mornington
North Essendon
South Melbourne
Hillcrest
Plympton
Operating as
Mareena Purslowe &
Associates Funerals
Subiaco
Willetton
Cemeteries and Crematoria
NSW
Queensland
Albany Creek Memorial Park (est 1964)
Allambe Gardens Memorial Park (est 1968)
Mt Thompson Memorial Gardens (est 1934) Holland Park
Bridgeman Downs
Nerang
Castlebrook Memorial Park (est 1973)
Forest lawn Memorial Park (est 1962)
lake Macquarie Memorial Park (est 1994)
lakeside Memorial Park (est 1964)
Newcastle Memorial Park (est 1936)
Northern Suburbs Memorial Gardens and
Crematorium (est 1933)
Pinegrove Memorial Park (est 1962)
Rookwood Memorial Gardens and
Crematorium (est 1925)
Tweed Heads Memorial Gardens (est 1971)
Rouse Hill
leppington
Ryhope
Dapto
Beresfield
North Ryde
Eastern Creek
Rookwood
Tweed Heads
InvoCarE ANNuAl REPORT 2008
101
Children’s Details
(list all children in order of date of birth, including legally adopted, deceased (D), still born (SB), or if no children write “none”.)
First name
First name
First name
First name
Date of birth
Date of birth
Date of birth
Date of birth
Female
Female
Female
Female
Male
Male
Male
Male
Financial Information (Information below may be required by the executor of your Will.)
Bank account details
Bank name
Account numbers
Bank branch
location of documents, books, statements
Building society/Financial institution
Building society/Financial institution name
Account numbers
Address
Income tax records
Tax File Number
location of records
NSW
Queensland
Victoria
South Australia
Western Australia
Simplicity (est 1979)
Balgowlah
Bankstown
Bateau Bay
Chatswood
Erina
Hornsby
liverpool
Mascot
Miranda
Newtown
Paddington
Penrith
Randwick
Ryde
Sans Souci
Smithfield
Toukley East
Tweed Heads
Woy Woy
Wyong
Buranda
Ipswich
Kedron
logan
Miami
Parkwood
Strathpine
Carnegie
Flemington
Frankston
Pascoe Vale
Reservoir
Sunshine
Werribee
Albert Park
Black Forest
Brahma lodge
Enfield
Morphett Vale
Victor Harbor
Joondalup
Kelmscott
Osborne Park
Spearwood
White Lady Funerals (est 1987)
Deeds of property
Property address(es)
NSW/ACT
Queensland
Victoria
South Australia
Western Australia
Copy of My Will
Date of Will
Deposited with (Name and Address)
Solicitor
Name
Address
Family Doctor
Name
Address
Personal Documents
Birth Certificate
location
Marriage Certificate
location
Telephone
Telephone
Postcode
Postcode
Medicare Card
Card number (to be returned to Medicare office)
Centrelink Pension
Number
Type of pension
Veterans’ Affairs
Number
Passport
Name shown on passport
(Passport should be returned to passport office in your area, details at local Post Office)
Passport number
Expiry date
Driver licence
Number
State of issue
Club or association memberships (Should be returned to appropriate organisation.
It may be that a claim can be made for unexpired memberships or mortality fund benefit.)
Family Details
Father’s surname
usual occupation
Mother’s maiden surname
usual occupation
Spouse surname
First names
First names
First names
location of records
Mortgage details
location of records
lender
Reference number
Address of lender
Life insurance policies
location of records
Superannuation
Details
Stocks and shares
location of records
Safe deposit box
Box location/number
location of keys
Marriage Details (Please tick appropriate box(es))
accountant
Name
Telephone
Married
Divorced
Separated
Widowed
Never married
De facto
Address
Postcode
Details of Marriage(s)
First marriage (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Second marriage (if applicable) (Place/City/Town/Country)
Age at date of marriage
Name of spouse (at date of marriage)
Car details
Registration number and state
Registration document location
location of purchase receipt/H.P. details
Bankstown
Belconnen (ACT)
Bondi Junction
Camden
Charlestown
Charmhaven
Eastwood
Five Dock
Kingston (ACT)
Manly
Mayfield
Mosman
Narrabeen
Nelson Bay
Pennant Hills
Penrith
Queanbeyan
Rockdale
Roseville
Sutherland
Tweed Heads
Wyoming
Ashmore
Chelmer
Kelvin Grove
Morningside
Tanah Merah
Warana
Caulfield South
Doncaster
Epping
Heidelberg
Mornington
North Essendon
South Melbourne
Hillcrest
Plympton
Operating as
Mareena Purslowe &
Associates Funerals
Subiaco
Willetton
Cemeteries and Crematoria
NSW
Queensland
Albany Creek Memorial Park (est 1964)
Allambe Gardens Memorial Park (est 1968)
Mt Thompson Memorial Gardens (est 1934) Holland Park
Bridgeman Downs
Nerang
Castlebrook Memorial Park (est 1973)
Forest lawn Memorial Park (est 1962)
lake Macquarie Memorial Park (est 1994)
lakeside Memorial Park (est 1964)
Newcastle Memorial Park (est 1936)
Northern Suburbs Memorial Gardens and
Crematorium (est 1933)
Pinegrove Memorial Park (est 1962)
Rookwood Memorial Gardens and
Crematorium (est 1925)
Tweed Heads Memorial Gardens (est 1971)
Rouse Hill
leppington
Ryhope
Dapto
Beresfield
North Ryde
Eastern Creek
Rookwood
Tweed Heads
InvoCarE ANNuAl REPORT 2008
101
Glossary
AASB
ABS
AGAAP
AIFRS
ASX
ASX Corporate Governance Guidelines
Cemetery
CGU
Condolence Lounge
Constitution
Crematorium
Crypts
DRP
EBITDA
EEO
EPS
Funeral Arrangement
Funeral Home
Australian Accounting Standards Board
Australian Bureau of Statistics
Australian Generally Accepted Accounting Principles
The Australian equivalents to International Reporting Standards for annual reporting
periods beginning on or after 1 January 2005
Australian Securities Exchange which is the operating brand of ASX limited
The eight essential corporate governance principles and best practice
recommendations of the ASX Corporate Governance Council August 2007
A place for burials and memorialisation
A cash generating unit which is the smallest identifiable group of assets that
independently generates cash inflows
A facility for family and friends to gather at after the funeral service – usually offering
a catering service
The Constitution of the Company
A place for cremations and memorialisation
Above ground burial facilities
Dividend reinvestment plan
Earnings before interest, tax, depreciation and amortisation
Equal Employment Opportunity
Earnings per share
The process in which the funeral service is planned and necessary
documentation prepared
The InvoCare location where a funeral can be arranged and where some services
can be conducted
Memorial or Memorialisation
The physical marker or tribute to the life of the deceased
Memorial Park
OH&S
Operating EBITDA
An InvoCare location offering cremation, burial and memorialisation services
Occupational Health and Safety
EBITDA excluding asset sale and impairment gains or losses
Prepaid Cemetery and Crematorium Services
Cemetery and crematorium services that have been arranged and paid for in advance
Prepaid Funeral Fund
Volume
The fund where prepaid funeral monies are held in trust until the funeral
service is provided
A term that refers to the number of funeral services, burials and cremations
performed
102
InvoCarE ANNuAl REPORT 2008
Military Information (If applicable)
Branch of service
Date entered service
Date of discharge
Grade, rank or rating
Wars/Conflicts served
Service serial number
Place
Place
Additional Information
Historical information
Every individual is deserving of a meaningful obituary written in their memory. It is here that you may list those achievements and
accomplishments that have been of pride to you and your family that are not mentioned elsewhere in your “Personal details guide”.
Education
Name of primary school
Date attended from
Name of secondary school
Date attended from
Name of tertiary institution
Date attended from
Qualifications attained
to
to
to
Societies/Clubs
Memberships and positions held (include dates)
Other (including civic or public office held)
Special achievements (details of any special achievements or recognitions)
Medical History
This information is very important for your spouse, children and grandchildren. It is also suggested that
you keep an updated copy of your medical records for your family, as doctors often ask for it.
Special Instructions and Information
We suggest that you use these lines to keep our information current. We also recommend
that you always date these entries to avoid possible confusion later.
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Person to be notified
Name
Relationship
Telephone
Telephone
Telephone
Personal details guide
For the benefit of our stakeholders, this guide is made available to enable you to record information
and arrangements in advance that will assist your family and funeral director to ensure everything is
conducted in accordance with your wishes.
Should you require assistance in completing it or require further copies of this guide for other family
members, please call Guardian Plan Toll Free 1800 151 158.
Personal Information
Family name
Address
Date of birth
Place of birth (Town/City/State/Country)
If born overseas, year arrived in Australia
Occupation during working life
Given names
Postcode
Female
Male
Name and Address of Person Who I Would Like to Make Any Arrangements
(For instance, registering the death and contacting the funeral director, e.g. executor, solicitor, family member)
Name
Address
Funeral Director
(Funeral director you would like to conduct your service)
Name
Address
Next of Kin
This information is needed when the death is registered.
Name
Address
Executor of My Will
Executor will need certain financial information when applying for grant of probate.
Name
Address
Telephone
Telephone
Telephone
Telephone
Postcode
Postcode
Postcode
Postcode
Corporate Information
InvoCare Limited
ABN 42 096 437 393
Directors
Ian Ferrier (Chairman)
Andrew Smith (Managing Director and Chief Executive officer)
Roger Penman (Non-executive Director)
Christine Clifton (Non-executive Director)
Richard Fisher (Non-executive Director)
Benjamin Chow (Non-executive Director)
Company Secretary
Phillip Friery
Annual General Meeting
The Annual General Meeting of InvoCare Limited
will be held at the Radisson Plaza Hotel,
27 o’Connell Street, Sydney on 22 May 2009.
Registered Office
Level 4, 153 Walker Street
North Sydney NSW 2060
Telephone: 02 9978 5200
Facsimile: 02 9978 5299
Website: www.invocare.com.au
Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Toll free: 1300 854 911
Facsimile: 02 9287 0303
Stock Exchange Listing
InvoCare Limited is a company limited by shares
that is incorporated and domiciled in Australia.
InvoCare Limited’s shares are listed on the
Australian Securities Exchange only.
ASX code is IVC
Auditors
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
Sydney NSW 1171
Solicitors
Addisons Lawyers
Level 12
60 Carrington Street
Sydney NSW 2000
Bankers
Australia and New Zealand
Banking Group Limited
20 Martin Place
Sydney NSW 2000
National Australia Bank Limited
255 George Street
Sydney NSW 2000
ENVI Coated is made from elemental chlorine free pulp derived
from sustainably managed forests and non controversial sources.
It is certified carbon neutral and Australian Paper is ISo 14001
certified which utilises energy resources.
ENVI – Australia’s Carbon Neutral Paper.
This product is printed on ENVI Carbon Neutral Paper.
Designed and produced by Ross Barr & Associates Pty Limited
InvoCare ANNuAL REPoRT 2008