Village Roadshow Limited
2019 Annual Report
Village Roadshow was
founded by Roc Kirby in
Melbourne, Australia in
1954 and has been listed
on the Australian Securities
Exchange since 1988 (ASX:
VRL). Since these humble
beginnings, VRL has
become a leading
entertainment company
with well recognised
brands. Village Roadshow
holds a diversified portfolio
of assets including Theme
Parks, Cinema Exhibition,
Film Distribution and
Marketing Solutions,
entertaining millions of
people annually.
THEME PARKS
Village Roadshow has been involved in
theme parks since 1989, is Australia’s
leading theme park developer and owner,
and is one of the pre-eminent theme park
operators in the world. In Australia, this
includes Warner Bros. Movie World, Sea
World, Wet’n’Wild Gold Coast, Paradise
Country, Australian Outback Spectacular,
Topgolf Gold Coast and Sea World
Resort, all on Queensland’s Gold Coast.
Village Roadshow Theme Parks (“VRTP”)
also operates and has majority ownership
in Wet’n’Wild Las Vegas. VRTP also has a
program of development for theme park
management opportunities in Asia
including operating China’s first
International water park with Wet’n’Wild
Haikou and Asia’s first movie themed
indoor interactive experience, Lionsgate
Entertainment World, in Novotown,
Hengquin, China.
MARKETING SOLUTIONS
VRL’s Marketing Solutions division delivers
consumer incentive programs for many of
the world’s leading brands. With head
offices in Australia and the UK, the division
delivers customer acquisition and
retention programs across Australasia,
Europe and North America. The business
brings a sophisticated suite of digital
platforms and rewards to market, to create
compelling customer experiences.
CINEMA EXHIBITION
Cinema Exhibition is where Village
Roadshow started, with its first drive-in
cinema opening in 1954. Today Village
Roadshow jointly owns and operates a
combined 577 screens at 57 sites across
Australia. VRL continues to drive and
embrace innovation, with premium
cinema concepts including Gold Class,
max, premium and
Junior. VRL is
continuing to invest in the expansion of
premium cinema concepts and new
entertainment and social offerings and
developments in new population
growth areas.
FILM DISTRIBUTION
Started by Village Roadshow in the late
1960’s, VRL’s Film Distribution division
(“Roadshow”) is Australasia’s largest
independent distributor of theatrical
films to cinemas. The business also
distributes movies and television series
to broadcasters and home
entertainment platforms in Australia and
New Zealand. An active supporter of
Australian film and television,
Roadshow’s strategy includes investing
in original content creation through
Roadshow Rough Diamond, BlinkTV, and
a 31% interest in FilmNation.
ANNUAL REPORT 2019
VILLAGE ROADSHOW LIMITED
ABN 43 010 672 054
Contents
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Directors’ Report
Reconciliation of Results
Auditor’s Independence Declaration
Remuneration Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
1 Corporate Information and Summary of
Significant Accounting Policies
2 Revenue and Other Income
3 Expenses from Continuing Operations
4 (Loss) Earnings Per Share
5 Income Tax
6 Dividends Declared
7 Cash and Cash Equivalents / Financing Facilities
8 Trade and Other Receivables
9 Inventories
10 Goodwill and Other Intangible Assets
11 Other Assets and Film Distribution Royalties
12 Investments – Equity-Accounted
13 Interests in Joint Operations
14 Subsidiaries
15 Property, Plant & Equipment
16 Trade and Other Payables
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17 Interest Bearing Loans and Borrowings
18 Provisions
19 Unearned Revenue and Other Liabilities
20 Contributed Equity
21 Reserves and Retained Earnings
22 Non-Controlling Interest
23 Contingencies
24 Commitments
25 Key Management Personnel Disclosures
26 Share-Based Payment Plans
27 Remuneration of Auditors
28 Events Subsequent to Reporting Date
29 Parent Entity Disclosures
30 Segment Reporting
31 Financial Risk Management Objectives and
Policies
32 Non-Key Management Personnel Related Party
Transactions
33 Finance Lease Resulting from Sale and
Long-Term Leaseback
34 Business Combination
35 Deed of Cross Guarantee
Directors’ Declaration
Independent Auditor’s Report
Additional Information
1 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT
Your Directors submit their report for the year ended 30 June 2019.
CORPORATE INFORMATION
Village Roadshow Limited (“the Company” or “VRL”) is a company limited by shares that is incorporated and domiciled in Australia.
The registered office and principal administrative office of the Company is located at Level 1, 500 Chapel Street, South Yarra,
Victoria 3141.
DIRECTORS AND SECRETARIES
The names of the Directors and Secretaries of the Company in office during the financial year and until the date of this report are:
Directors
Robert G. Kirby
Graham W. Burke
John R. Kirby
David J. Evans (Retired 22 November 2018)
Robert Le Tet
Company Secretaries
Shaun L. Driscoll (Retired 22 February 2019)
Simon T. Phillipson (Appointed 22 February 2019)
Julie E. Raffe
Timothy M. Antonie
Jennifer Fox Gambrell
Peter C. Tonagh (Appointed 18 July 2019)
Julie E. Raffe (alternate for Messrs. R.G. Kirby and G.W. Burke)
The qualifications and experience of the Directors and Secretaries and the special responsibilities of the Directors are set out below.
Directors
Robert G. Kirby AO
Executive Chairman, Executive Director
First joined the Board on 12 August 1988, reappointed 5 July 2001. Holds a Bachelor of Commerce with over 40 years experience in
the entertainment and media industry. Chairman of Village Roadshow Limited 1994 to 1998, 2002 to 2006 and from June 2010 to
November 2013. Co-Executive Chairman and Co-Chief Executive Officer November 2013 to August 2018 when he became Executive
Chairman. Deputy Chairman Village Roadshow Limited 1990 to 1994, 1998 to 1999, 2001 to 2002, and 2006 to June 2010. Through
the launch of Roadshow Home Video, Mr. Kirby was the driving force behind the Australian video revolution of the 1980’s and
1990’s. He is a pioneer of new cinema concepts in both Australia and internationally and has been at the forefront of Village
Roadshow’s successful diversification into theme parks, radio and international film production. Director of Village Roadshow
Corporation Pty. Ltd., Former Board member and Deputy Chair of Peter MacCallum Cancer Foundation for 15 years, Member of
Patrons Council of Epilepsy Foundation and Patron of Arts Centre Melbourne.
Member Executive Committee
Other Listed Public Company Directorships in previous 3 years: Nil
Graham W. Burke AO
Chief Executive Officer, Executive Director
Member of the Board since 9 September 1988. Chief Executive Officer of Village Roadshow Limited from 1988 to 29 November
2013 and Co-Executive Chairman and Co-Chief Executive Officer from November 2013 to August 2018 when he became Chief
Executive Officer. With unrivalled experience in the entertainment and film industries, Mr. Burke has been one of the strategic and
creative forces behind Village Roadshow’s development and founded Roadshow Distributors with the late Mr. Roc Kirby. Mr. Burke
has been integral to strategically developing Warner Bros. Movie World and Village Roadshow’s involvement with Sea World as
well as ongoing Australian and international film production. Chairman of Creative Content Australia (formerly IP Australia
Foundation) from March 2016. Director Village Roadshow Corporation Pty. Ltd.
Chairman Executive Committee
Other Listed Public Company Directorships in previous 3 years: Nil
2 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
DIRECTORS AND SECRETARIES (continued)
Directors (continued)
John R. Kirby AM, D Univ
Non-Executive Director
Bachelor of Economics, University of Tasmania. Honorary Doctor, Griffith University. Member of the Australian Society of
Accountants. Chairman of Village Roadshow Corporation Pty. Ltd. Mr. Kirby has held a wide number of executive positions in
cinema exhibition, film distribution, radio, theme parks, construction and strategy over his 45 years within Village Roadshow, and
has been at the forefront of many of the Group’s successful growth outcomes today. Currently Chairman of the Sony Foundation
Australia, and Victoria University Confucius Institute, Director Asia Pacific Screen Academy and Queensland College of Arts.
Previously Chairman, Village Roadshow Limited and Austereo Limited. He was Chairman of The Salvation Army Advisory Board and
Red Shield Appeal, Deputy Chairman of The Conversation Media Group, former Director of IMNIS and former Director of Jigsaw
Foundation at the Royal Children’s Hospital, Surf Life Saving Australia Foundation, Griffith University Advisory for CILECT Congress.
Former Chairman of Sponsors Appeal Committee of the Victorian College of the Arts, and former Deputy Chairman of the Interim
Council of the National Film and Sound Archive. Former member of the Victorian Premier’s Multi Media Task Force, Victorian
Advisory Council of the Australian Opera, and Progressive Business Victoria and former advisor, Commando Welfare Trust.
Other Listed Public Company Directorships in previous 3 years: Nil
Robert Le Tet
Independent Non-Executive Director
Member of the Board since 2 April 2007. Holds a Bachelor of Economics Degree from Monash University and is a qualified
accountant. Founded and currently Executive Chairman of venture capital company, Questco Pty. Ltd. Over 35 years’ experience in
broadcasting, film and entertainment industries, including Director of television production company Crawford Productions.
Formerly Deputy Chairman of radio station EONFM and 20 years as Chairman and CEO of Australia’s largest film and advertising
production company, The Filmhouse Group. Previously Chairman of radio stations 3UZ and 3CV, WSA Communications Pty. Ltd. and
Entertainment Media Pty. Ltd. and Chairman of Metropolitan Ambulance Service in Melbourne. Served as Board Member of the
Australian Broadcasting Authority and Chairman of its Audit Committee.
Chairman Audit & Risk Committee
Member Corporate Governance & Nomination Committee
Member Remuneration Committee
Other Listed Public Company Directorships in previous 3 years: Nil
Timothy M. Antonie
Independent Non-Executive Director
Member of the Board since 1 December 2010, Lead Independent Director from 5 September 2017. Holds a Bachelor of Economics
degree (major in accounting) from Monash University and qualified as a Chartered Accountant. Over 20 years experience in
investment banking focussing on large scale mergers and acquisitions and capital raisings in the Australian media and
entertainment, retail and consumer sectors. Managing Director of UBS Investment Banking from 2004 to 2008 and is currently a
principal of Stratford Advisory Group.
Chairman Remuneration Committee
Member Audit & Risk Committee
Member Corporate Governance & Nomination Committee
Other Listed Public Company Directorships in previous 3 years:
Premier Investments Limited, since 1 December 2009
Breville Limited, since 19 December 2013
Netwealth Group Limited, since 20 November 2017
3 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
DIRECTORS AND SECRETARIES (continued)
Directors (continued)
Jennifer Fox Gambrell
Independent Non-Executive Director
Member of the Board since 19 November 2015. Holds a Doctorate in Business Administration (DBA) from the International School
of Management in Paris, France and an MBA from Baylor University, Texas, USA. Until the sale to Accor in 2016, was President of
Fairmont Hotels and Resorts and President FRHI International, overseeing the luxury brand’s global hotel portfolio including Raffles,
Fairmont and Swissôtel in all international markets outside North America. Over 25 years of experience in the luxury, resort and
business segments of the hospitality industry. Formerly Chief Operating Officer, Europe as well as Senior Vice-President Global
Brand Management for InterContinental Hotels Group, and previously holding several senior management roles at Starwood and
ITT Sheraton including VP Global Brand Manager Sheraton Hotels & Resorts.
Chair, Corporate Governance & Nomination Committee
Member Remuneration Committee
Member Audit & Risk Committee
Other Listed Public Company Directorships in previous 3 years:
Millennium & Copthorne Hotels Plc, 19 June 2018 to 27 September 2018
Peter C. Tonagh
Independent Non-Executive Director
Member of the Board since 18 July 2019. Holds a Master in Business Administration (MBA) from INSEAD, France and a Bachelor of
Commerce from UNSW. Was Chief Executive Officer at Foxtel Management Pty. Limited until 2018. Prior to that, Mr. Tonagh held
various other senior executive roles at News Corporation including Chief Executive Officer and Chief Operating Officer at News Corp
Australia, interim CEO of REA Group Limited and Chief Operating Officer and Chief Financial Officer of Foxtel. Mr. Tonagh is a
former Vice President and Partner at The Boston Consulting Group.
Member Corporate Governance & Nomination Committee
Member Remuneration Committee
Member Audit & Risk Committee
Other Listed Public Company Directorships in previous 3 years:
Ten Network Holdings Limited, 30 March 2016 to 16 November 2017
Julie E. Raffe
Finance Director
Member of the Board since 15 May 2012 as alternate director for Messrs. R.G. Kirby and G.W. Burke. Fellow of Chartered
Accountants Australia and New Zealand and in the UK, Fellow of Financial Services Institute of Australia, and graduate of Australian
Institute of Company Directors. Formerly Chief Financial Officer since 1992, Ms. Raffe has over 25 years experience in the media
and entertainment industries. Director of Village Roadshow’s wholly owned subsidiaries and Member of the Executive Committee.
Deputy Chair of not for profit organisation Entertainment Assist.
Member Executive Committee
Other Listed Public Company Directorships in previous 3 years: Nil
Company Secretaries
Simon T. Phillipson
Director of Corporate Affairs
General Counsel
Holds a Bachelor of Laws and Bachelor of Commerce from the University of Melbourne. Chairman of the Group’s Management Risk
& Compliance Committee, Director of Village Roadshow’s wholly owned subsidiaries and Member of the Executive Committee. Mr.
Phillipson has over 20 years with Village Roadshow after working in private legal practice with a major international law firm.
Julie E. Raffe
Finance Director
Appointed secretary of the Company on 29 April 2011. Details as above.
4 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
DIRECTORS AND SECRETARIES (continued)
Relevant Interests
As at the date of this report, the relevant interests of the Directors in the shares (and “in-substance options” which are included in
the totals shown for ordinary shares) and options of the Company and related bodies corporate were as follows:
Name of Director
Robert G. Kirby
Graham W. Burke
John R. Kirby
Jennifer Fox Gambrell
Robert Le Tet
Timothy M. Antonie
Peter C. Tonagh
Julie E. Raffe (alternate)
Ordinary Shares
77,940,322
77,940,322
77,940,322
105,204
323,359
26,810
-
1,091,084
Ordinary Options
-
-
-
-
-
-
-
-
Messrs R.G. Kirby, G.W. Burke and J.R. Kirby each have a relevant interest in 100% of the issued capital of:
- Village Roadshow Corporation Pty. Limited, the immediate parent entity of the Company; and
- Positive Investments Pty. Limited, the ultimate parent entity of the Company.
OPERATING AND FINANCIAL REVIEW
Principal Activities
The principal activities of the Company and its controlled entities (“the Group”, “VRL group” or “consolidated entity”) during the
financial year were:
-
- Cinema exhibition operations (“Cinema Exhibition”);
-
Film distribution operations (“Film Distribution”); and
-
Sales promotion and loyalty program operations (“Marketing Solutions”).
Theme park and water park operations (“Theme Parks”);
Other activities, including corporate overheads, financing activities, digital and information technology development, and other
investments, are included under ‘Other’.
Overview of Results and Dividends / Distributions
The VRL group reported an attributable net loss of $6.6 million for the year ended 30 June 2019 (“FY2019”), compared to an
attributable net profit of $0.2 million for the year ended 30 June 2018 (“FY2018”), which included an attributable net loss from
material items of $27.2 million in FY2019, and an attributable net profit from material items of $7.5 million in FY2018. The
attributable net loss from material items after tax of $27.2 million in FY2019 included a gain on disposal from sale and leaseback of
property of $10.2 million, impairment and other non-cash adjustments of $14.8 million, other provision adjustments of $13.4
million and restructuring costs of $8.0 million – refer page 9 for further details in relation to material items. During the year, the
Group adopted the new revenue accounting standard, Australian Accounting Standards Board (“AASB”) 15, Revenue from Contracts
with Customers. Due to the transition method adopted, the Group has not restated comparative information and therefore may
not be directly comparable. Refer to Note 1(b)(ii) in the Financial Statements for further information.
The attributable net profit before material items and discontinued operations (“NPAT”) for FY2019 was $20.6 million, compared to
the prior year attributable net loss of $7.3 million. Earnings before interest, tax, depreciation and amortisation, excluding material
items and discontinued operations (“EBITDA”) for FY2019 was $124.9 million, compared to the prior year result of $90.9 million.
Basic loss per share from continuing operations was 3.4 cents (FY2018: earnings per share of 0.14 cents). There were no potential
ordinary shares in FY2019 (FY2018: nil). Diluted earnings per share before material items and discontinued operations for FY2019
was 10.7 cents per share, compared to the prior year loss per share of 4.5 cents per share, based on a weighted average total of
191,759,401 ordinary shares (FY2018: 161,855,150 ordinary shares).
No dividends have been declared or paid during FY2019 (FY2018: nil). Subsequent to 30 June 2019, the VRL Board has declared a
fully-franked final dividend of 5.0 cents per ordinary share, which will be paid in October 2019.
Net cash flows from operating activities totalled $82.4 million in FY2019, compared to $21.4 million in the prior year. Cash flows
used in investing and financing activities totalled $84.7 million in FY2019, compared to $58.8 million used in the prior year.
Proceeds from sale of investments/businesses and sale and leaseback of property totalled $52.2 million in FY2019 (FY2018: $263.8
million), proceeds from issue of shares in FY2019 was $49.2 million (FY2018: nil), and net repayment of borrowings in FY2019 was
$124.8 million, compared to net repayment of borrowings of $227.9 million in FY2018.
An analysis of the Group’s operations, financial position, business objectives and future prospects is set out below. Further
financial summary information is set out in the Reconciliation of Results, which forms part of this Directors’ Report, on pages 12
and 13, and in Note 30 to the Financial Statements.
5 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Operational Results
Theme Parks
The Theme Parks division had a stronger FY2019, with EBITDA improving 100% to $76.5 million from $38.3 million in the prior
corresponding period. Changes in revenue recognition under the new accounting standard, AASB 15 have a negative $2.9 million
non-cash impact on earnings and the DC Rivals Hypercoaster lease buyout in January 2019 increases EBITDA by $5.4 million
annually.
The successful execution over the last two years of an ongoing four-part winning strategy focused on differentiating VRTP’s
exceptional theme park offering with; 1. a high-yield ticket strategy; 2. dynamic marketing; 3. smart capital expenditure; and 4.
outstanding customer experience, has seen the Gold Coast Theme Parks’ EBITDA increase 74% in FY2019 to $73.0 million. Further,
deferred revenue from the sale of passes which remained active after 30 June 2019, increased by $6.9 million from FY2018 ($10.7
million) to FY2019 ($17.6 million), reflecting the strength in ticket sales.
The new ticketing strategy saw ticket yields up 25% as consumers migrated to higher priced annual and multi-day passes and as the
number of sales directly through VRTP channels increased. Favourable weather in the peak December and January holiday period
supported the result and drove record attendance by the local Queensland market during that period. The continued success of the
high-yield ticket strategy demonstrates the willingness of guests to pay for the quality experiences delivered by VRTP parks. Multi-
day, multi-park ticket sales represent approximately 50% of total ticket sales reflecting the premium value in these higher-yielding
tickets.
At Warner Bros. Movie World, the DC Rivals HyperCoaster remains a drawcard for ‘thrill seekers’. High-impact initiatives including
the reimagined Scooby Doo Next Generation Spooky Coaster and the new Batmobile introduced in FY2019 maintain the park’s
excitement factor. Aquaman - The Exhibition, was very popular, with around 60% of daily attendances visiting the attraction. This
will be replaced in the year ending 30 June 2020 (“FY2020”) by the new Warner Bros. Studio Showcase. The Fright Nights and White
Christmas evening events delivered record performances in FY2019, monetising assets during extended opening hours, targeting
key market segments and adding another dimension to the theme parks. The Batman 80th anniversary activation and new Harley
Quinn character featured during the DC Super Heroes and Super Villains event during the June – July school holidays and Tom and
Jerry will be added to the parks’ character attractions in September 2019.
At Sea World, the new Thunder Lake stunt show (introduced in April) complements other FY2019 initiatives including the Sea Jellies
exhibit, The Reef splash zone, the new Seal Guardians show and the low-cost Sky-Flyer, adding to the guest experience and length
of stay. Carnivale delivered a record operating profit result in January 2019, maximising the use of the assets during the peak
holiday period on the Gold Coast.
Ten-year agreements outsourcing helicopters and whale watching out of Sea World have seen upgrades to the whale-watching
vessels and lounge facilities, and construction commenced for the new helicopter hangar and heli-pads expansion (funded by the
provider), with completion expected in the first half of FY2020.
FY2020 will see the commencement of the Sea World rejuvenation project. The Vortex is set to open in December 2019 and is the
first in a trilogy of attractions to be introduced within The New Atlantis themed precinct, as management seek to round out the
offering and establish Sea World as a major destination. Responses to the announcement of the new precinct and attractions by
customers and industry commentators have been exceptionally positive.
Sea World Resort delivered a record operating profit, with continued strong occupancy and growth in the average room rate.
Wet’n’Wild maintained its popularity as a successful summer branding campaign drove solid attendance through December and
new shade over Wet’n’Wild Junior also improved the guest experience in this area.
The new Australian Outback Spectacular show, Heartland, launched in late November, with a new storyline and enhanced
projection experience. Further refinements to this show are expected to enhance the guest experience. Shaun the Sheep arrived at
Paradise Country in December 2018, tiger cubs in June 2019 and Tassie devils arriving in December 2019 further expand the
attractive offerings at this park.
Village Roadshow Studios continued its successful run, as Dora the Explorer and Godzilla vs. Kong completed during the year and
Reef Break commenced filming, completing in July 2019. Baz Luhrmann’s untitled Elvis Presley biopic is currently scheduled to film
at the Studios in FY2020.
Topgolf Gold Coast has proven popular, with outstanding guest satisfaction. Topgolf delivered an EBITDA of $3.6 million, below
original expectations. US experience is that it takes time for Topgolf to ‘build’. Management’s focus in FY2020 is on fine-tuning the
wage model for the Australian environment and refining the service delivery to maximise spend per visit and optimise the labour
mix. Additionally, the focus in FY2020 is on the events business, driving sales initiatives and promotions and leveraging the theme
park group’s sales and marketing teams to educate the market about the Topgolf offering. There is no further capital investment in
Topgolf planned in the short term.
The sale of Wet’n’Wild Sydney to Parques Reunidos was completed on 3 October 2018, with net proceeds of approximately $37
million used to reduce VRL’s debt.
6 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Operational Results (continued)
Theme Parks (continued)
Following a difficult summer season, a new management team and strategy was implemented at Wet’n’Wild Las Vegas (50.09%
owned by VRL). The park delivered a FY2019 EBITDA of $0.9 million (FY2018: $2.4 million).
VRTP successfully delivered the opening of Lionsgate Entertainment World at Novotown on Hengqin Island on 31 July 2019. This is
the first fully immersive, Lionsgate-branded, themed, climate-controlled, vertical indoor venue. VRTP will operate the park and
receive management fees.
VRTP continues to pursue opportunities in Asia, with a focus on consulting and management operating agreements and no equity
investment.
The focus in FY2020 is on the continued execution of the strategy, with a new Village Roadshow Theme Parks brand campaign,
which will bring together all the Gold Coast properties, including Topgolf. The high-yield ticketing strategy will continue, with plans
to increase ticket prices annually, supported by a continued focus on the customer experience with a new customer platform,
website optimisation and the commencement of the Sea World New Atlantis project.
FY2020 has started very well with strong attendances across the July school holidays, with July attendances up 12.5% on the prior
comparative period, which are driving strong in-park revenue.
Cinema Exhibition
The Cinema Exhibition division delivered a FY2019 EBITDA result of $53.9 million (FY2018: $58.1 million), which includes a negative
$2.5 million non-cash impact of the new revenue recognition accounting standard, AASB 15, on the division’s reported results.
After a strong first half with top titles including Bohemian Rhapsody, A Star Is Born, Crazy Rich Asians and Aquaman, despite the
performance of Avengers: Endgame, some of the smaller states did not respond as well to certain product and the full-year
underperformed against expectations. Further, earnings were impacted by lower screen advertising than prior year, and the impact
of AASB 15.
With a focus on loyalty and rewarding the customer base, Village made movies more affordable in FY2019, with everyday pricing of
$15 for rewards loyalty program members. This has seen just over half of tickets sold at the rewards member price across the
Victorian and Tasmanian circuits, and the membership base growing approximately 30% year on year. This strategy has positively
impacted guest satisfaction, with increased net promoter scores and positive guest feedback. Additionally, concession sales across
the Village Cinemas managed circuit increased 5% on the prior year, as the loyalty program initiative further stimulated admissions,
combined with a strong first half Gold Class mix.
Following the expansion of Gold Class andmax, plus the successful introduction of Junior in recent years, Village Cinemas is
focused on ‘refashioning for the 2020s’, ensuring Village Cinemas is a destination of choice. Redesigns and refurbishments at
premier sites will be key. Initiatives include Gold Class refurbishment, seating and foyer upgrades, and an increased emphasis on
the diversification of revenue. The first of these refashioned sites will be Knox, where the foyer refurbishment will see the
introduction of kitchen, bar and social activity elements, leveraging the powerful ‘eatertainment’ trend. The new M-City Clayton
site will feature social pre- and post-movie experiences with a ‘taphouse’ style bar, high-quality craft food and beverage menu,
innovative technology for frictionless ordering, and luxury auditoriums with large premium seating. A number of Event Hospitality
& Entertainment (“Event”) managed sites are also scheduled for refurbishment in FY2020. Planned refurbishments and M-City are
biased toward completion in late FY2020, and expected to contribute to earnings in the full-year 2021 and beyond.
The division also has a number of new sites committed, mostly within the Event circuit through the Village/Event joint venture.
As advised to the Australian Securities Exchange on 29 July 2019, iPic Entertainment Inc. (“iPic”) announced that it missed a
scheduled interest payment under its credit facility. On 5 August 2019, iPic announced that it had filed voluntary petitions for
bankruptcy protection under Chapter 11 of the US Bankruptcy code. As a result, VRL has made a payment of $8.0 million to settle
the liability relating to its bank guarantee exposure to the iPic business. The payment by VRL will not have a material impact on
VRL's financial covenants. As at 30 June 2019, VRL has recognised the full amount of this financial guarantee liability at $8.0 million
and included it in material items of income and expense in the Reconciliation of Results on pages 12 and 13. VRL carries its
investment in iPic at nil in its accounts and there is no further recourse to the VRL group in relation to iPic.
FY2020 has started strongly with improved screen advertising, Spiderman: Far from Home’s lifetime result exceeding its
predecessor, Spiderman: Homecoming, by 30% and The Lion King becoming Disney’s highest grossing animated film of all time.
Other key titles in FY2020 include Star Wars: The Rise of Skywalker, Frozen II, Jumanji: The Next Level, the next instalments in the
Bond and Fast & Furious franchises and Wonder Woman 1984.
The strategy of ‘refashioning’ will see increased capital expenditure in FY2020 with the construction of M-City Clayton and as a
number of refurbishments are undertaken across both the Village and Event circuits.
7 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Operational Results (continued)
Film Distribution
The Film Distribution division (“Roadshow”) delivered a FY2019 EBITDA of $8.6 million (FY2018: $13.8 million). Key theatrical titles
released predominantly in the first half, including Aquaman, A Star Is Born and Crazy Rich Asians, with a weaker second half
including disappointing results from Hellboy, Missing Link and Poms. The division’s performance has been impacted by the ongoing
decline in the physical DVD market, which has led to an impairment of goodwill and the recognition of an inventory return liability.
Distribution has ever been a “hit” driven business. Recent market consolidation provides Roadshow the opportunity to enjoy more
flexible and competitive pricing with fewer independent distributors in the market. Roadshow has a forward-looking strategy of
more targeted and flexible film acquisitions, and is vertically aligned to maximise revenue across the entire product lifecycle from
Theatrical, to Home Entertainment and Television.
As part of its usual operations, Roadshow contributes minimum guarantees for the distribution rights to films. A number of
Australian films with great potential are in production for distribution in FY2020 and beyond, including: The Dry; Miss Fisher and the
Crypt of Tears; and Penguin Bloom.
With the support of governments around the world seeing reduced access to pirate sites, the threat of piracy is steadily declining.
Creative Content Australia’s research has seen a 42% overall reduction in piracy since site blocking laws were enacted in 2016.
Almost 1,000 domains have been blocked. Additionally, piracy is no longer the social norm as Creative Content Australia’s research
in 2012 showed that 66% of Australians agreed that accessing pirate content is ‘something that everybody does these days’, in
2018 only 32% of Australians agreed with this.
Roadshow has a low-cost investment approach to content creation – while the contribution is small today, there is potential for
growth.
Roadshow Rough Diamond continues its development of TV drama for domestic and international audiences, with minimal
investment from VRL. Les Norton a 10-episode drama series released on the ABC in August has proven popular, and other projects
are in development.
Blink TV, which is 50% owned by VRL, produced Eurovision - Australia Decides, and Eurovision 2019 for SBS, with Eurovision –
Australia Decides 2020 and Eurovision Asia in development.
FilmNation, which is 31.03% owned by VRL, is continuing its production strategy, with upcoming releases including Promising Young
Woman, The Lodge and The Personal History of David Copperfield. FilmNation continues to build its TV slate with projects including
I Know This Much Is True, The House of The Spirits and Feminist Fight Club. In addition, FilmNation has partnered with Nordic
Entertainment Group to launch a joint venture in the UK, to build a dedicated television content pipeline, while expanding both
partners’ global footprint.
While the decline in sales of physical DVDs and Blu Ray is expected to continue, Roadshow is working to exploit the increasingly
diversified television market as new subscription video on demand (“SVOD”) platforms enter the market, to maximise this new
revenue stream as a content provider. Roadshow will continue to right-size the overhead structure to maximise efficiencies,
including the implementation of a more streamlined management structure from July 2019.
Roadshow’s July performance was impacted by softness in the release schedule. Whilst the division is focused on its film acquisition
strategy, the FY2020 earnings result is ultimately dependent on the performance of upcoming titles. Key theatrical releases include
IT Chapter 2, Birds of Prey, Wonder Woman 1984, Joker, Hustlers, Miss Fisher and the Crypt of Tears, and Midway.
Marketing Solutions
The Marketing Solutions division delivered an FY2019 EBITDA of $5.3 million, down from $8.3 million in FY2018, impacted by lower
promotional activity across the year, mostly occurring in the first half.
Key clients for Edge in FY2019 included Harvey Norman, NIB, Compare the Market and Treasury Wine Estates. Edge continues to
focus on delivering incentive technologies to drive customer acquisition and retention for Australia’s leading brands and retailers.
To this end, Edge continues to invest in technical innovation, including the recently launched Mobile Pay, which allows consumers
to receive digital cash rewards directly to their native smartphone wallets. The division will focus on driving new business and
maximising opportunities with key relationships by solving for the full customer incentive lifecycle with new and existing clients.
As announced on 29 August 2019, the VRL group has signed an agreement to sell Edge Loyalty Systems Pty. Ltd. to Blackhawk
Network (Australia) Pty. Ltd. The sale is expected to be completed by November 2019, subject to approval from the Foreign
Investment Review Board and other customary closing conditions.
Key clients for Opia include HP, Samsung, LG, Microsoft and Google. Opia is looking to do more with these clients and others, both
in existing markets and expanding geographically. The long-term priorities for Opia are to grow the UK and Europe customer base
through a focus on relationships with blue-chip clients and new opportunities in the US and South Africa. Current trading expects
Opia’s FY2020 will see an improvement, with a stronger pipeline of confirmed promotions for FY2020 in the UK, US and Europe.
8 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Operational Results (continued)
Other
A continued commitment to cost reduction has seen FY2019 corporate overheads (EBITDA $19.5 million loss) significantly lower
than FY2018 (EBITDA $27.6 million loss). This includes savings resulting from the 25% reduction in Executive Directors’ base
remuneration and Non-Executive Directors’ fees, effective July 2018. Other savings have been achieved in Shared Services, Finance,
and IT.
FY2018 and FY2019 do not include senior executive bonuses, which will be reinstated in FY2020 if the relevant KPIs are met, and
equate to approximately $4 million (maximum) to Corporate executives. FY2020 will include major IT upgrades across all divisions,
with the $2 million – $3 million in costs reflected in Digital & IT within Corporate & Other.
Material Items
Material items attributable loss after tax of $27.2 million in FY2019 included the following:
- Gain on disposal from sale and leaseback of property of $10.2 million;
-
Impairment of assets and other non-cash adjustments totalling $18.0 million pre-tax, including impairment of assets at
Wet’n’Wild Las Vegas of $5.4 million and impairment of goodwill relating to Film Distribution of $10.0 million;
- Other provision adjustments totalling $15.7 million pre-tax, including recognition of financial guarantee liability relating to iPic
loan of $8.0 million and recognition of return liability relating to inventory in the Film Distribution division of $7.7 million;
- Restructuring and borrowing costs totalling $11.4 million pre-tax, across the VRL group from the cost management program
and refinancing.
Financial Position
During the year ended 30 June 2019, total assets of the consolidated entity decreased by $52.4 million, including a decrease in
asset held for sale of $40.6 million due to the sale of Wet’N’Wild Sydney, a decrease in intangible assets of $13.7 million, which was
mainly due to impairment of goodwill of $10.0 million, and total liabilities decreased by $93.1 million, including a decrease in
interest bearing loans and borrowings of $120.6 million and an increase in trade and other payables of $33.7 million. Also during
FY2019, total equity of the consolidated entity increased by $40.7 million to $434.5 million.
The VRL group’s net debt as at 30 June 2019 was $219.6 million, giving a gearing ratio of 34%, compared to the prior year’s net
debt of $338.5 million and gearing ratio of 46%. Of the total debt of $281.3 million, $6.0 million is classified as current liabilities,
and $275.2 million is classified as non-current liabilities, which has been determined in accordance with the requirements of the
VRL group’s relevant finance agreements. In December 2018, the VRL group successfully refinanced its Group finance facility with a
syndicate of local and international lenders. The total facility of $340 million includes a three-year revolving facility of $230 million
and a five-year term debt facility of $110 million and provides the VRL group with its financing requirements for the medium term.
In FY2019, the VRL Board continued to take proactive steps to reduce group debt levels significantly, which included the 5 for 26
pro-rata accelerated non-renounceable entitlement offer, the sale and leaseback of the Group’s drive-in cinema property at
Coburg, and the sale of Wet’n’Wild Sydney. The proceeds from all of these transactions were used to reduce group debt.
As profitability and cash flow generation have substantially improved and debt levels have reduced the Board has declared a final
FY2019 fully-franked dividend of 5.0 cents per share. The VRL Board is committed to shareholder returns and intends to continue
paying dividends subject to performance continuing to meet expectations and available operating free cash flow.
Events Subsequent to Reporting Date
Other than the following, there have been no material transactions which significantly affect the financial or operational position of
the consolidated entity since the end of the financial year.
As advised to the Australian Securities Exchange on 29 July 2019, iPic Entertainment Inc. ("iPic") announced that it missed a
scheduled interest payment under its credit facility. On 5 August 2019, iPic announced that it had filed voluntary petitions for
bankruptcy protection under Chapter 11 of the US Bankruptcy code. As a result, VRL has made a payment of $8.0 million to settle
the liability relating to its bank guarantee exposure to the iPic business. The payment by VRL will not have a material impact on
VRL's financial covenants. As at 30 June 2019, VRL has recognised the full amount of this financial guarantee liability at $8.0 million,
which has been included in material items of income and expense in the Reconciliation of Results on pages 12 and 13. VRL carries
its investment in iPic at nil in its accounts and there is no further recourse to the VRL group in relation to iPic.
As advised to the Australian Securities Exchange on 29 August 2019, the VRL group has signed an agreement to sell its wholly
owned promotional solutions agency, Edge Loyalty Systems Pty. Ltd., for an enterprise value of $32.3 million to Blackhawk Network
(Australia) Pty. Ltd. Net proceeds from the sale will be used to reduce VRL group debt. The transaction is subject to approval from
Australia’s Foreign Investment Review Board and other customary conditions, and is expected to complete by November 2019.
Environmental Regulation and Performance
The VRL group was subject to the National Greenhouse and Energy Reporting Act for the year ended 30 June 2019, however this
has not had any material impact on the VRL group.
9 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (continued)
Business Objectives and Future Prospects
Strategy/Objectives
The strategy and objectives of the VRL group to enhance shareholder value are summarised as follows:
- Ongoing improvement in sustainable operating earnings and cash flow of each division, including adapting to changing
consumer preferences;
- Continued development of innovative and competitive products and services such as higher yielding cinema offerings and site
refurbishments in the Cinema Exhibition division, new attractions and events for the Theme Parks division, and ongoing
business development for the Marketing Solutions division;
- Ongoing monitoring of opportunities in relation to the Group’s involvement in theme parks in China and South East Asia;
- Commitment to delivering enhanced shareholder returns and paying dividends subject to performance continuing to meet
expectations and available free cash flow.
- Continuing to manage costs and overheads.
Business Risks
Material business risks that could have an effect on the financial prospects of the VRL group, and the way in which the VRL group
seeks to address some of these risks, are as follows:
- Consumer spending – a shift in the patterns with which consumers spend their disposable income could impact the Group in all
of its businesses. Historical experience has shown that the Group’s entertainment offerings are generally impacted less by
economic downturns compared to other discretionary expenditures of consumers;
- Competition – all of the Group’s businesses are continuously vying for customers against a wide variety of competitive forces;
-
Technology – the media through which people receive entertainment content is ever-changing, with increased digitalisation
and portability being key focuses for many consumers, although the appeal of the Group’s ‘out-of-home’ entertainment
experiences appear to have reduced the extent and impact of this issue;
-
- Piracy – the ongoing issue of film piracy poses a challenge to the Group’s Cinema Exhibition and Film Distribution businesses,
and the VRL group is actively working with other industry participants to reduce the severity of this risk – legislative changes in
Australia were implemented in FY2018, which has resulted in a significant number of sites being blocked;
Lack of quality films – the Cinema Exhibition and Film Distribution businesses are dependent on a solid and reliable flow of
quality, high grossing film content. This risk has been partly mitigated in Film Distribution by long term supply contracts with
major suppliers, including Warner Bros., and in Cinema Exhibition by new offerings (e.g. Gold Class, unior) and alternative
content and uses;
Film production volatility – film production is an inherently volatile business, which could impact the Cinema Exhibition and
Film Distribution divisions;
-
-
- Weather – extreme weather events can challenge admission levels at the Group’s Theme Parks businesses, with potential
customers not travelling to such destinations when the weather is severe, such as floods or cyclones. The VRTP ticketing
strategy seeks to partially address this risk by allowing tickets to be utilised when better weather returns;
International tourism – tourism can be affected by multiple factors including foreign currency exchange rates, severe weather,
disease outbreaks and terrorism threats.
Safety – the Theme Parks and Cinema Exhibition businesses operate public venues and (in the case of Theme Parks) rides and
other attractions, with the consequence that there is risk of physical injury or harm. The VRL group takes its commitment to the
safety of both its staff and its patrons at all of the Group’s venues very seriously, primarily in order to ensure that a safe
environment is always provided for patrons and staff, and as a secondary issue, to minimise any adverse legal or reputational
consequences of any serious incidents. As demonstrated following the tragedy at Dreamworld in October 2016, the VRL group
can still be impacted by issues at non-VRL group attractions; and
-
- Development and subsequent operation – the building of either new cinema sites or theme parks, both in Australia and
overseas, involves inherent risks to such development projects, including cost and time overruns, community distaste for a
project, regulatory hurdles and various governmental requirements and permissions, and the subsequent operational
performance of the new developments. However, due to the diversity and scale of the VRL group’s other businesses, any
adverse impact on the Group from any individual development or new operation, whether in Australia or elsewhere, is not
expected to be significant, and the expertise and experience of the Group in delivering and operating such projects mitigates
this risk. It is noted that the Group does not have any equity investments in its management contracts in Asia.
Future Prospects
Subject to the business risks outlined above, and general economic risks and uncertainties, it is anticipated that the VRL group will
produce improved operating profits in FY2020. The Group’s brands are well recognised and respected, and all of the Group’s
businesses are focused on ensuring that their customers have an enjoyable entertainment experience to encourage repeat
visitation. The Company is committed to generating sustainable improved operating earnings and cash flows and maintaining an
acceptable dividend return to shareholders whilst retaining the flexibility for future expansion options.
SHARE OPTIONS
Details of unissued shares under option, and shares issued as a result of the exercise of options, are set out in Note 20 to the
Financial Statements. Details of share, option and “in-substance option” transactions in relation to Directors and other Key
Management Personnel of the consolidated entity are set out in the Remuneration Report.
10 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
DIRECTORS’ REPORT (continued)
INDEMNIFYING AND INSURANCE OF OFFICERS AND AUDITORS
Since the commencement of the financial year, the Company has not indemnified any person who is or has been an officer or
auditor of the Company or related body corporate against a liability (including costs and expenses incurred in successfully
defending legal proceedings) incurred as an officer or auditor, nor has the Company paid or agreed to pay a premium for insurance
against any such liabilities incurred as an officer or auditor other than an un-allocated group insurance premium which has been
paid to insure each of the Directors and Secretaries of the Company or related body corporate against any liabilities for costs and
expenses incurred in defending any legal proceedings arising out of their conduct as officers of the Company or related body
corporate, other than conduct involving wilful breach of duty.
REMUNERATION REPORT
The Remuneration Report, which forms part of this Directors’ Report, is set out on pages 15 to 27.
DIRECTORS' MEETINGS
The following table sets out the attendance of Directors at formal Directors' meetings and committee of Directors' meetings held
during the period that the Director held office and was eligible to attend:
NAME OF DIRECTOR
Robert G. Kirby
Graham W. Burke
John R. Kirby
David J. Evans
Jennifer Fox Gambrell
Robert Le Tet
Timothy M. Antonie
Julie E. Raffe (alternate)
NUMBER OF MEETINGS HELD WHILE IN OFFICE
Corporate
Governance
and
Nomination
-
-
-
2
6
8
8
-
Remun-
eration
-
-
-
1
3
2
3
-
Audit &
Risk
-
-
-
-
4
4
4
-
Formal
13
13
13
8
13
13
13
1
NUMBER OF MEETINGS ATTENDED
Corporate
Governance
and
Nomination
-
-
-
1
6
8
8
-
Remun-
eration
-
-
-
1
3
2
3
-
Audit &
Risk
-
-
-
-
4
4
4
-
Formal
13
12
13
6
12
13
13
1
Procedural meetings attended by a minimum quorum of three Directors to facilitate document execution and incidental matters
are not included in determining the number of Directors' meetings held.
TAX CONSOLIDATION
A description of the VRL group’s position in relation to Australian Tax Consolidation legislation is set out in Note 5 to the Financial
Statements.
AUDITOR INDEPENDENCE
The Auditor’s Independence Declaration to the Directors of the Company, which forms part of this Directors’ Report, is set out on
page 14.
NON-AUDIT SERVICES PROVIDED BY AUDITOR
Details of the non-audit services provided by the auditor are set out in Note 27 to the Financial Statements. The non-audit services
summarised in Note 27 were provided by the VRL group’s auditor, Ernst & Young. The Directors are satisfied that the provision of
non-audit services 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.
ROUNDING
The amounts contained in this report and in the Financial Statements have been rounded (where applicable) to the nearest
thousand dollars (unless stated otherwise) under the option available to the Company under ASIC Corporations Instrument
2016/191. The Company is an entity to which the Instrument applies.
Signed in accordance with a resolution of the Directors at Melbourne this 29th day of August 2019.
________________________________________
G.W. Burke
Director
11 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
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Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Village Roadshow Limited
As lead auditor for the audit of the financial report of Village Roadshow Limited for the financial year ended 30 June
2019, I declare 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 Village Roadshow Limited and the entities it controlled during the financial year.
Ernst & Young
Kylie Bodenham
Partner
Melbourne
29 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
14
REMUNERATION REPORT
STRUCTURE OF THIS REPORT
The information in this Remuneration Report (“Report”) for the year ended 30 June 2019 (“FY2019”) has been audited as required
by Section 308(3C) of the Corporations Act 2001 (“the Act”) and forms part of the Directors’ Report in accordance with Section 300A
of the Act. The Report is organised as follows:
1. Scope of the Remuneration Report
2. Remuneration strategy and governance
(a) Remuneration framework summary
3. Remuneration framework
(b) Remuneration governance
(c) Changes implemented in FY2019
(d) Changes effective for FY2020
(a) Fixed compensation
(b) Short-term incentives
(c) Long-term incentives
4. Remuneration outcomes and corporate performance
(a) Performance against financial metrics
5. Employment contracts
6. KMP transactions and holdings
7. Non-executive director remuneration
8. Other transactions with KMP
(b) Remuneration outcomes compared to metrics
(c) Remuneration of Key Management Personnel
(d) Five year company performance
(a) Executive Directors
(b) Executive Committee
(a) Ordinary shares held by KMP
(b) ‘In substance options’ held by KMP
(c) Options over ordinary shares held by KMP
(a) Remuneration summary
(b) Directors’ Share Plan
1. SCOPE OF THE REMUNERATION REPORT
This Report details the remuneration arrangements for directors and senior executives of VRL. These key management personnel
(“KMP”) have authority and responsibility for planning, directing and controlling the activities of the Company and its controlled
entities (“the Group”, “VRL group” or “consolidated entity”). The names, positions, and terms of KMP active during FY2019 are as
follows:
Name
Title/Position
Started as KMP
Cessation
Current Category
Robert G. Kirby
Graham W. Burke
Clark J. Kirby
Julie E. Raffe
Chairman
CEO
Chief Executive Officer, Village
Roadshow Theme Parks
Finance Director
5 July 2001
9 September 1988
1 December 2010
28 September 1992
Simon T. Phillipson
General Counsel
13 May 1996
-
-
-
-
-
John R. Kirby
David J. Evans
Robert Le Tet
Timothy M. Antonie
Jennifer Fox Gambrell
Non-Executive Director
Independent Director
Independent Director
Lead Independent Director
Independent Director
12 August 1988
2 January 2007
2 April 2007
1 December 2010
19 November 2015
-
22 November 2018
-
-
-
Mr D. J. Evans retired as a Non-Executive Director on 22 November 2018.
Executive Director
Executive Director
Executive Committee
Member
Executive Committee
Member
Executive Committee
Member
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
15 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
2. REMUNERATION STRATEGY AND GOVERNANCE
Remuneration framework summary
(a)
The Board is committed to transparent and constructive relationships with shareholders, and regularly reviews remuneration
arrangements, to ensure they meet the needs of the business and shareholder expectations. The Group’s remuneration strategy is
to provide a locally and internationally competitive offer, with a significant ‘at-risk’ component to motivate short and long-term
performance in line with its business strategy. The Group’s businesses are global, competitive, complex and fast-moving, with
ongoing changes in consumer behaviour and technology creating new challenges for operators. The Board is conscious of the need
to attract and retain talented senior executives in a global marketplace where industry experience and networks are critical to
success. As a result, VRL benchmarks its senior executive roles against both international and local comparators. There are few
directly comparable businesses operating in the Australian market, particularly in relation to the breadth of the operations. The
challenges, and the opportunities, that this mix of characteristics brings results in the need for remuneration generally being higher
than local senior executive roles for businesses of comparable size.
The Group’s remuneration strategy is designed to motivate executives to deliver shareholder value in the short and long-term. The
‘at-risk’ component of executive remuneration in FY2019 is payable based on achieving the VRL group’s FY2019 EBITDA budget.
Executives also hold substantial interests in the Company in the form of shares and options, further aligning their interests to those
of the shareholders, and are prohibited from hedging those interests while in office.
The Group’s executive remuneration framework is as shown in the table below. The overall Group remuneration objective is to
reinforce the short, medium and long-term financial targets and business strategies of the Group and provide a common interest
between executives and shareholders by aligning the rewards that accrue to executives with the creation of value for shareholders.
OBJECTIVE
Provide competitive, fair and
appropriate compensation
Link remuneration to operational goals
and individual performance
Align to shareholder
wealth creation
Remuneration
structure
BASE REMUNERATION
‘AT-RISK’ REMUNERATION
Short-term incentives
Long-term incentives
Remuneration
components
Base salary, superannuation
and benefits
Annual cash bonuses
Shares and options
Purpose
Reward for role, size and
complexity, individual
contribution and competence
Reward for contribution to annual targets
and individual performance demonstrated
Reward for creation of long-term,
sustainable growth
Remuneration governance
(b)
A summary of the Group’s remuneration governance is set out below. The charter, role, responsibilities, operation and membership
of the Remuneration Committee of the Board are set out in the Company’s Corporate Governance Statement which is available on
the Company’s website at www.villageroadshow.com.au.
Board
Approves remuneration of Executive Directors and senior executives
Sets Non-Executive Director remuneration
Remuneration Committee
Comprising independent Non-Executive Directors
Recommends remuneration for Executive Directors and senior executives
Reviews remuneration at least annually
Using this information
Advice from independent remuneration consultants
Input from management on business performance
International practices in the entertainment industry
Local expectations and practices
Based on our remuneration principles
Reinforce strategic business plans
Align to shareholder value creation
Compete for talent
Retain and motivate our people
16 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
Changes implemented in FY2019
2. REMUNERATION STRATEGY AND GOVERNANCE (continued)
(c)
Effective 1 July 2018, the Company implemented changes to the remuneration framework to further align executive interests with
those of shareholders, particularly having regard to the operating performance in FY2018. These changes were:
(i)
(ii)
(iii)
(iv)
(v)
The base remuneration for each of the Executive Directors was decreased by 25% from $1,725,030 to $1,293,770 per annum
(base remuneration excludes a superannuation amount of $25,000 per annum);
The Short-term incentive (“STI”) plan for the Executive Directors and Executive Committee Members was based on achieving
the VRL group’s FY2019 EBITDA budget;
The Executive Directors entered into new contracts on the above terms with effect from 1 July 2018;
No increase in fixed compensation for KMP who were eligible to participate in the FY2019 STI; and
It was agreed that Executive Share Plan (“ESP”) allocations would be done on an annual basis.
The Non-Executive Directors also agreed to reduce their Board and Committee fees by 25% for FY2019.
All other employment contractual conditions remained in place on existing terms, including the STI clawback policy for all KMP.
(d)
(i)
Changes effective for FY2020
The above arrangements will continue in FY2020 for Executive Directors, Executive Committee Members and Non-Executive
Directors, except that the STI for the Executive Directors and Executive Committee Members will be based on achieving the
VRL group’s FY2020 EBITDA budget and not exceeding FY2020 budget capital expenditure; and
(ii)
No increase in fixed compensation for KMP.
3. REMUNERATION FRAMEWORK
The Group’s remuneration framework for FY2019 is set out below and has three components: fixed compensation, short-term
incentives (“STI”) and long-term incentives (“LTI”).
(a)
Fixed compensation
Objective
Provide a level of fixed compensation which is fair, reasonable and appropriate to attract and retain
executives having regard to the seniority of the position, and the competitiveness of the market (both
locally and globally where appropriate).
Composition
Cash, superannuation, insurance, car allowance or lease and other fringe benefits.
Benchmarks
Reviewed annually by the Remuneration Committee based on the scale and complexity of the role,
benchmarked against comparable roles in the international and local market and having regard to VRL
group’s operating performance. Fixed compensation is set taking into account the levels of STI and LTI
opportunities.
The Group provides benefits such as vehicles maintained by the Group, vehicle leases or car allowances as part of fixed remuneration.
Superannuation or retirement benefit amounts within statutory limits are also paid, including various ancillary insurance covers.
The grossed-up taxable values of these benefits have been included as a non-monetary benefit, with the details of the value of these
benefits set out on pages 21 and 22 of this Report.
(b)
Short-term incentives
Objective
Eligibility
Opportunity
Performance
measures
Link executive remuneration to the achievement of annual operational targets. Levels are set by balancing
the incentive offered with the cost to the Group, and to ensure that a large proportion of an executive’s
remuneration is ‘at-risk’, with the proportion ‘at-risk’ increasing with the seniority of the executive.
Senior executives.
Executive Directors – 100% of base remuneration (excluding superannuation)
Executive Committee Members - 100% of base remuneration (excluding superannuation)
Measure
Calculation
% component
EBITDA, excluding material items of income and
expense and discontinued operations.
100% if EBITDA budget
achieved
Earnings before
interest, tax,
depreciation and
amortisation
(“EBITDA”)
17 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
3. REMUNERATION FRAMEWORK (continued)
(b)
Short-term incentives (continued)
Clawback
Review
Compensation for
deferred grant date
There is a Clawback policy in respect of incentives provided to executives within the Group in the event
that there is an amendment to previously reported results.
Proposed bonus payments to Executive Committee Members are reviewed and approved by the
Remuneration Committee.
With the appointment of Ms. J.E. Raffe as Finance Director of the Company in May 2012, Ms. Raffe’s
proposed ESP allocation was delayed from the June 2012 ESP allotment to other Executive Committee
members, granted at $3.14, to 29 November 2012 to allow for shareholder approval at the Company's
2012 annual general meeting, following which the ESP shares were issued at $3.78. The Company agreed
to compensate Ms. Raffe with an additional bonus at the time of her future sale of these ESP shares for
the additional value, if any, foregone by the deferred grant date. This potential bonus payment to Ms.
Raffe represents a cash-settled share-based payment estimated to be a maximum of $275,439, to be re-
assessed at each financial year for changes in expected probability of payment. The fair value of this
additional bonus amount was estimated on the basis of the estimated after-tax impact of $0.64 per share,
being the difference between $3.78 and $3.14, and is accrued for over the 5 years from date of grant,
being nil for the 2019 financial year (2018: $7,597).
(c)
(i)
Long-term incentives
Executive Share Plan (“ESP”)
Objective
Eligibility
Instrument
Grant value
Grant price
Vesting schedule
Retention of key executive talent and alignment with interests of shareholders, which encourages a sense
of ownership by the holders. Shares may be allotted annually based on seniority, personal and company
performance factors.
All Executive Committee Members and other executives.
The Remuneration Committee issues restricted shares for purchase by executives using a limited recourse
loan. The shares are held directly by the executive who pays for the allotment by obtaining a loan from
the consolidated entity which holds security over the shares. Under the terms of that loan, the holder is
restricted from selling or otherwise dealing with the shares while they are restricted. Any value accruing
to the recipient is derived from improvement in the Company’s share price and dividends and distributions
by the Company.
On 7 December 2018, an allotment of 200,000, 150,000 and 200,000 shares was made to Ms J.E. Raffe,
and Messrs. S.T. Phillipson and C.J. Kirby respectively at $2.50 per share. The fair value of each ‘in-
substance’ option estimated at the date of the issue was $0.59, $0.61 and $0.62 for tranches 1, 2 and 3
respectively.
There were no long-term incentive plan allocations during the year ended 30 June 2018 to any Executive
Committee Member.
For details of current grants to Executive Committee Members, see ‘In Substance Options’ on page 25 of
this Report. The notional adjusted equity value of ESP allotments and the percentage of each Executive
Committee Member’s total remuneration under the LTI are detailed on pages 21 and 22 of this Report.
Shares are issued at the 5-day weighted average price on the market prior to allotment, rounded up to
the next whole cent. The loans issued prior to 1 July 2016 bear interest at the lower of twenty cents and
the cash dividend paid per share per annum and the first twenty cents of dividends per share per year is
used to repay the interest charged. 50% of the remaining dividend per share is used to repay the capital
amount of the loan. If the loan balance owing falls below $2.00 per share, the interest rate becomes 10%
of the balance owing on the loan.
All loans issued post 1 July 2016 bear interest at the lower of twenty five cents and the cash dividend paid
per share per annum. The first twenty five cents of dividends per share per interest year is used to repay
the interest charged, and 50% of the remaining dividend per share is used to repay the capital amount of
the loan. If the loan balance owing falls below $2.50 per share, the interest rate becomes 10% of the
balance owing on the loan.
For allotments made prior to 1 July 2016, one third of the grant is earned and becomes exercisable at the
end of years 3, 4 and 5 from the date of issue.
For allotments made after 1 July 2016, on the third anniversary of the date of issue and each of the
following two anniversaries, up to one third of the shares will become exercisable providing pre-
determined Total Shareholder Return (“TSR”) hurdles are satisfied.
18 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
3. REMUNERATION FRAMEWORK (continued)
(c)
(i)
Long-term incentives (continued)
Executive Share Plan (“ESP”) (continued)
Performance
hurdles
Termination /
forfeiture
Hedging
Dilution
Valuation
(ii)
CEO Option Plan
Objective
Eligibility
Instrument
Grant value
Grant price
There are no specific performance conditions for the removal of restrictions over shares granted under the
ESP prior to 1 July 2016.
Allotments granted after 1 July 2016 are subject to TSR hurdles on the third, fourth and fifth anniversary
of the share issue. The hurdle compares the Company’s TSR against the TSR for an ASX Comparison Group
for the equivalent period. If the Company’s TSR equals or exceeds the 50% median ASX Comparison Group,
then 50% of the relevant tranche will become exercisable. If the TSR equals or exceeds the 75% median
of the Comparison Group then 100% of the tranche will become exercisable. If the Company’s TSR falls
between those two levels, a pro-rata proportion will become free of restrictions. If the TSR is negative or
below the 50% median of the Comparison Group, that tranche will not vest.
If the Executive Committee Member resigns or is dismissed, the restricted shares are forfeited and the loan
on the remaining unrestricted shares must be repaid within six months or such other time as approved by
the Company’s Remuneration Committee. If the market value of the remaining shares at the end of the
six month period is less than the amount owing on the loan, the Company buys back the shares and cancels
them in repayment of the loan without further recourse to the former Executive Committee Member.
There are no provisions for the automatic removal of holding restrictions on the relevant shares in the
event of a change of control of the Company.
Consistent with the Corporations Act 2001, Executive Committee participants are prohibited from hedging
their ESP shares.
The ESP allows for the issue of up to 5% of the Company’s issued shares to executives and employees of
the consolidated entity and significant associated entities.
The fair value of these ‘in substance option’ grants are amortised on a straight-line basis over five years.
The Group does not consider it is appropriate to ascribe a ‘value’ to the LTI for remuneration purposes
other than the amortised fair value measurement in accordance with the provisions of AASB 2: Share-
based Payment. From 1 January 2005, options or ‘in substance options’ granted have been valued using
the Black Scholes or binomial option-pricing model or the Monte Carlo simulation technique, which takes
account of factors including the option exercise price, the current level and volatility of the underlying
share price, the risk-free interest rate, expected dividends on the underlying share, current market price
of the underlying share and the expected life of the option.
The Group has used the fair value measurement provisions of AASB 2: Share-based Payment for all options
or equity instruments granted after 7 November 2002 which had not vested as at 1 January 2005. Under
AASB 2: Share-based Payment these are all required to be accounted for and valued as equity-settled
options. For the purpose of this Report, these have been referred to as ‘in substance options’ even where
the equity instrument itself is not a share option.
Retention of key executive talent and alignment of interests with shareholders. In October 2012, the
employment contract of Mr. Graham Burke was extended to December 2017 and included a replacement
option plan for the previously expired option plan.
Mr. Graham Burke
Options over ordinary shares. The options were not transferable and did not confer any right to
participate in bonus issues or cash issues of ordinary shares. They did not carry voting or dividend rights
and were not listed for quotation on ASX.
All options under this option plan have either lapsed or been exercised and none remain at 30 June 2019.
4.5 million options were issued on 29 November 2012. The fair value of each option estimated at date of
grant on 29 November 2012 was $0.73, $0.74 and $0.75 for Tranches 1, 2 and 3 respectively. The notional
adjusted equity value of the option allotment and the percentage of Mr. Burke’s total remuneration are
detailed on pages 21 and 22 of this Report.
The option exercise price was adjusted for discounted cash issues, and the number of shares issued on
exercise of an option adjusted for bonus issues of shares.
The options were initially exercisable at $3.76 per share. Following the $0.25 per share reduction of share
capital approved by shareholders at the Annual General Meeting on 29 November 2013, the exercise price
of the options was reduced to $3.51 per share, effective from 31 December 2013. Following the pro-rata
non-renounceable 5 for 26 rights issue in July 2018, the exercise price of the remaining options was
reduced to $3.41.
Hedging
Consistent with the Corporations Act 2001 and under the terms of the Option Plan, Mr. Burke was
prohibited from hedging his unvested options.
19 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
Long-term incentives (continued)
CEO Option Plan (continued)
3. REMUNERATION FRAMEWORK (continued)
(c)
(ii)
Other than the CEO Option Plan outlined above, the Executive Directors do not have any other LTI’s, however as noted on page 5 of
the Directors’ Report, given the Executive Directors’ shareholdings, their long-term interests are aligned with other shareholders.
4. REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE
The Group’s focus is on the execution of its strategy, and on driving earnings and free cash flow. VRL’s recovery continued in FY2019
as the Group’s divisions focus on their core business. The Group’s largest division (Theme Parks) is reaping the rewards of an ongoing
strategy implemented over the last two-years focused on differentiating the theme park offering. After a strong first half FY2019 for
the Group’s Cinema Exhibition division, the second half of FY2019 fell short of expectations. The Film Distribution and Marketing
Solutions divisions were impacted by soft trading in FY2019. In aggregate the Group delivered an increased trading result for FY2019,
despite reporting an attributable net loss after tax and material items.
These results and achievements are reflected in executive remuneration outcomes, as outlined below.
Performance against financial metrics
(a)
EBITDA, excluding material items of income and expense and discontinued operations
$124.9 million
Remuneration outcomes compared to metrics
(b)
Executive remuneration outcomes for FY2019 compared to the Company’s metrics are outlined below.
(i)
Short-term incentives (“STI”)
Short-term incentive components
EBITDA
% ‘at-risk’ for
Executive Directors
% ‘at-risk’ for Executive
Committee Members
Earned/Awarded
100%
100%
Not earned
Long-term incentives (“LTI”)
(ii)
Executive Share Plan
Executive Committee Members can participate in the ESP, together with other executives from across the Group. ESP shares may be
allotted annually based on seniority, personal and company performance factors.
On 7 December 2018, an allotment of 200,000, 150,000 and 200,000 shares was made to Ms J.E. Raffe, and Messrs. S.T. Phillipson
and C.J. Kirby respectively at $2.50 per share. The fair value of each ‘in-substance’ option estimated at the date of the issue was
$0.59, $0.61 and $0.62 for tranches 1, 2 and 3 respectively.
There were no long-term incentive plan allocations during the year ended 30 June 2018 to any Executive Committee Member.
CEO option plan
The CEO option plan consisted of 4.5 million options granted to Mr. Graham Burke in 2012 with vesting occurring in three tranches
on 1 March 2016, 2017 and 2018. Vesting was subject to performance hurdles based on the Compound Annual Growth Rate of both
earnings per share and dividends. For more details on the Option Plan, refer to page 19.
In the year ended 30 June 2018, 50% of tranche 3 vested because the Dividend per Share (“DPS”) hurdle was met, and 50% did not
vest because the EPS hurdle was not met. None of the vested options were exercised before the 1 March 2019 expiry date.
All options under this option plan have either lapsed or been exercised and none remain at 30 June 2019.
Remuneration of Key Management Personnel
(c)
The following tables show the total remuneration for all KMP for FY2019 and FY2018 calculated in accordance with Australian
Accounting Standards.
20 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
-
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4
REMUNERATION REPORT (continued)
4. REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE (continued)
(d)
Aggregate Executive KMP Remuneration compared to TSR and Share Price
Five year company performance
The chart reflects the Total Shareholder Return (“TSR”) of the
Company for the current reporting period and in each of the
four preceding years, based on the investment of $1,000 in
ordinary shares on 1 July 2014. It also shows the share price
movement of the Company’s ordinary shares over the five
years to 30 June 2019, historically adjusted downwards for
returns of capital and special dividend payments over the
period.
The bar chart shows
total aggregate annual
the
remuneration, including STI bonuses, of the Executive
Directors and Executive Committee Members during FY2019
and the four preceding years for the KMP in each year.
Excluded from the total aggregate remuneration is the
notional value of share-based payments and any termination
or retirement benefits. Over this five year period the
Company’s share price and TSR has been somewhat volatile
with a substantial reduction up to FY2018 but with an improvement in FY2019, whilst aggregate remuneration has reduced due to
voluntary reductions in fixed remuneration and to the composition of the KMP in prior years.
Executive KMP Non-discretionary STI Remuneration compared to NPAT and CFROI
The STI amounts for Executive KMP shown in the chart
represents the STI amounts accrued for the year to which
the payment relates. The chart reflects the total aggregate
annual STI bonus remuneration of the Executive Directors
and Executive Committee Members for the 2019 financial
year and each of the four preceding years, based on KPIs that
are directly linked to the financial performance of the Group.
The STI bonus amounts shown in the chart have been
normalised where applicable to exclude discretionary STI
bonus amounts for the achievement of individual, personal
KPIs of relevant Executive KMP, so that the STI bonus
payments displayed in the chart are only those elements
that relate to Group’s financial performance benchmarks for
the relevant year. There were no STI bonus payments to any
KMP in FY2017 to FY2019.
The chart also shows the Group’s attributable net profit after tax, before material items and discontinued operations (“NPAT”) over
the two year period to FY2016, as reported for the year in relation to which the remuneration was paid. This component was
amended with effect from 1 July 2016 to be based on attributable net profit after tax, including material items (“Attributable NPAT”)
over a two year period to FY2018. As a result of the Group’s performance over that period, nothing was earned from this component
in FY2017 and FY2018. In FY2019, this component was amended with effect from 1 July 2018 to be based on achieving the VRL
group’s FY2019 EBITDA budget. As a result of VRL group’s EBITDA being below the FY2019 budget, nothing was earned from this
component in FY2019. Due to the change in measurement basis, the Attributable NPAT for FY2017, FY2018 and EBITDA for FY2019
have not been shown in the above chart.
The chart also shows Cash Flow Return on Investment (“CFROI”) over the relevant five year period. This component was amended
with effect from 1 July 2018 and is no longer a performance measure in the determination of FY2019 STI amounts. It is noted that
70.2% and 54.8% of the CFROI component of the STI bonus amount for FY2017 and FY2018 years, respectively, were earned however
the Executive KMP declined to accept these bonus entitlements, which totalled $602,675 in relation to FY2018 and $766,438 in
relation to FY2017. The reduction in the quantum of STI bonus payments (directly linked to financial performance) over recent years
reflects the overall performance of the Group on these NPAT/Attributable NPAT/EBITDA and CFROI hurdles. The above chart
demonstrates the financial performance of the Group over a five year period and broadly tracks the variable ‘at-risk’ STI performance
outcomes for the Executive Directors and Executive Committee Members and reflects the alignment of the interests of those relevant
Executives with those of shareholders.
5. EMPLOYMENT CONTRACTS
Compensation and other terms of employment for the Group's Executives are formalised in employment contracts, which are
reviewed by the Remuneration Committee. The major provisions of the employment contracts relating to compensation are as set
out below.
23 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
01002003004005006007008009001,0002015201620172018201902,0004,0006,0008,00010,00012,000Executive KMP Total Aggregate Remuneration Excluding EquityTotal Shareholder Return (on $1,000 invested on 1 July 2014)Share Price - OrdinaryTSR(A$)Rem(A$'000)Total Shareholder Return and adjusted Ordinary share price month end closing price history –IRESS012345678SharePrice(A$)0102030201520162017201820190200400600800Executive KMP - Aggregate Annual Non-discretionary Bonus RemunerationCash Flow Return On InvestmentNet Profit After Tax Excluding Material Items and Discontinued OperationsCFROI(%)Rem(A$'000)010203040506070NPAT(A$m) REMUNERATION REPORT (continued)
Executive Directors
5. EMPLOYMENT CONTRACTS (continued)
(a)
The ongoing employment contracts dealing with remuneration of VRL’s two Executive Directors, Mr. Robert Kirby and Mr. Graham
Burke, set out a base remuneration package, and an annual capped incentive performance bonus payable on the Company achieving
EBITDA budget for the financial year and there is no provision for pre-determined compensation in the event of termination.
Executive Committee
(b)
Mr. C.J. Kirby, Mr. S.T. Phillipson and Ms. J.E. Raffe have ongoing employment agreements with the Company with no fixed expiry
dates. These provide for base salary and superannuation, a Company motor vehicle provided to Ms. Raffe, and a car allowance
provided to Mr. C.J. Kirby. All Executive Committee Members are also eligible to be paid an annual STI and LTI.
Payment for termination without cause is equal to twelve months of base remuneration and the Executive Committee Member is
restrained from competitive employment during that period. The Group may terminate an employment contract at any time without
notice if serious misconduct has occurred. Where termination with cause occurs, the Executive is only entitled to that portion of
remuneration which is fixed, and only up to the date of termination. On termination with cause, any unexercisable LTI ESP shares
are immediately forfeited and all remaining loans over such LTI shares must be repaid within 6 months of termination.
6. KMP TRANSACTIONS AND HOLDINGS
(a)
Ordinary shares held by KMP
2019
Directors
Robert G. Kirby2
Graham W. Burke2
John R. Kirby2
David J. Evans4
Robert Le Tet
Timothy M. Antonie
Jennifer Fox Gambrell
Executives
Julie E. Raffe
Clark J. Kirby
Simon T. Phillipson
2018
Directors
Robert G. Kirby2
Graham W. Burke2
John R. Kirby2
David J. Evans
Robert Le Tet
Timothy M. Antonie
Jennifer Fox Gambrell
Executives
Julie E. Raffe
Clark J. Kirby
Simon T. Phillipson
Alistair Bennallack3
Balance at the
start of the
year
67,946,273
67,946,273
67,946,273
111,971
234,432
22,485
62,637
-
-
200,000
Balance at the
start of the
year
68,713,136
68,713,136
68,713,136
111,971
188,200
22,485
19,487
-
-
200,000
-
Granted as
remuneration1
On exercise of
options
Net change other
Balance at the end
of the year
-
-
-
-
43,843
-
42,567
-
-
-
-
-
-
-
-
-
-
-
-
-
9,994,049
9,994,049
9,994,049
21,533
45,084
4,325
-
143,724
302,017
(96,826)
77,940,322
77,940,322
77,940,322
133,504
323,359
26,810
105,204
143,724
302,017
103,174
Granted as
remuneration1
On exercise of
options
Net change other
Balance at the end
of the year
-
-
-
-
46,232
-
43,150
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(766,863)
(766,863)
(766,863)
-
-
-
-
-
-
-
-
67,946,273
67,946,273
67,946,273
111,971
234,432
22,485
62,637
-
-
200,000
-
1 Allotments under Directors’ Share Plan from Directors Fees.
2 Refer also to the Directors’ Report disclosures for relevant interests of Directors, in relation to the 100% ownership of the immediate and ultimate
parent entities of VRL.
3 Ceased as KMP on 31 December 2017.
4 Ceased as a Director on 22 November 2018
24 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
6. KMP TRANSACTIONS AND HOLDINGS (continued)
‘In substance options’ held by KMP
(b)
2019
Name
Executives
Julie E. Raffe
Simon T. Phillipson
Clark J. Kirby
2018
Balance at
the start of
the year
Granted as
remuneration
Options
exercised
Net
change
other
Balance at the
end of the
year
Vested and
exercisable
at the end
of the year
Vested and
unexercisable
at the end of
the year
747,360
336,500
537,500
200,000
150,000
200,000
-
-
-
-
-
-
947,360
486,500
737,500
702,360
266,667
400,000
-
-
-
Name
Executives
Julie E. Raffe
Simon T. Phillipson
Clark J. Kirby
Alistair Bennallack1
Balance at
the start of
the year
747,360
336,500
537,500
203,334
1 Ceased as KMP on 31 December 2017.
Granted as
remuneration
Options
exercised
Net
change
other
Balance at the
end of the
year
Vested and
exercisable
at the end
of the year
Vested and
unexercisable
at the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
747,360
336,500
537,500
203,334
702,360
233,334
300,000
66,668
-
-
-
-
(c)
Options over ordinary shares held by KMP
2019
Name
Directors
Graham W. Burke
Balance at
start of
the year
Granted as
remuneration
Options
exercised
Net
change
other
Balance at
the end of
the year
Vested and
exercisable
at the end
of the year
Vested and
unexercisable
at the end of
the year
1,500,000
-
-
(1,500,000)1
-
-
-
1 None of the vested options were exercised before the 1 March 2019 expiry date.
2018
Name
Directors
Graham W. Burke
Balance at
start of
the year
Granted as
remuneration
Options
exercised
Net
change
other
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Vested and
unexercisable
at the end of
the year
2,250,000
-
-
(750,000)2
1,500,000
1,500,000
-
2 These options did not vest because the ESP hurdle was not met.
Remuneration summary
7. NON-EXECUTIVE DIRECTOR REMUNERATION
(a)
The Board sets Non-Executive Director remuneration at a level which provides the Group with the ability to attract and retain
appropriately qualified and experienced Non-Executive Directors of the highest calibre, at an acceptable cost to shareholders.
The Constitution of the Company and the ASX Listing Rules specify that the annual aggregate remuneration of Non-Executive
Directors shall be determined from time to time by shareholders in general meeting. An amount not exceeding the annual aggregate
remuneration so determined is then divided between the Non-Executive Directors as agreed.
The latest determination was at the Annual General Meeting held on 15 November 2012, when shareholders approved an aggregate
remuneration level for Non-Executive Directors of $1,300,000 per annum. This aggregate fee level includes any compensation paid
to Non-Executive Directors who may serve on Boards of the consolidated entity. Aggregate payments to Non-Executive Directors
have never exceeded the total pool approved by shareholders.
25 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
Remuneration summary (continued)
7. NON-EXECUTIVE DIRECTOR REMUNERATION (continued)
(a)
Each Non-Executive Director receives a fee for being a Director of the Company. An additional fee is also paid for each Board
Committee or major subsidiary or affiliate on which a Non-Executive Director serves. The payment of additional fees for serving on
a Committee or subsidiary or affiliate Board recognises the additional time commitment required by that Non-Executive Director.
To preserve the independence and impartiality of Non-Executive Directors, no element of Non-Executive Director remuneration is
‘at-risk’ based on the performance of the Group and does not incorporate any bonus or incentive element.
Board and Committee fees are set by reference to a number of relevant considerations including the responsibilities and risks
attaching to the role, the time commitment expected of Non-Executive Directors, fees paid by peer-sized companies and independent
advice received from external advisors. The remuneration arrangements of Non-Executive Directors are periodically reviewed by the
Remuneration Committee to ensure they remain in line with general industry practice, the last review having taken effect from July
2012.
Effective 1 July 2018, Non-Executive Director fees were reduced by 25 percent resulting in the annual Board fee reducing to $75,000
and the fee for each Board Committee representation reducing to $15,000. Board committee chairs are paid at a rate of 50% above
other Committee members in recognition of the additional workload. The additional annual fee for the Lead Independent Director
and Deputy Chairman was reduced to $22,500.
The Group does not have and never has had a retirement benefit scheme for Non-Executive Directors, other than their individual
statutory superannuation benefits which, where applicable, are included as part of the aggregate fee for Non-Executive Directors as
remuneration.
Directors’ Share Plan
(b)
The Group considers it appropriate for Non-Executive Directors to have a stake in the Company and encourages Non-Executive
Directors to hold shares.
The Directors’ Share Plan (“DSP”), effective from 1 January 2011 and renewed by shareholders at the 2013 and 2016 Annual General
Meetings of the Company, enables Non-Executive Directors to salary sacrifice some or all of their fees into ordinary shares in the
Company. The shares are allotted on a salary sacrifice basis at the weighted average market price on ASX on the first 5 trading days
of the third month of the relevant quarter, rounded up to the next whole cent. Non-Executive Directors can vary their participation
in the DSP each calendar year. The various allotments during the year under the DSP are set out in the table below.
Name
R. Le Tet
J. Fox Gambrell
Allotment Date
No. shares
Issue Price
10 September 2018
10 December 2018
8 March 2019
11 June 2019
10 September 2018
10 December 2018
8 March 2019
11 June 2019
12,688
11,885
9,543
9,747
11,824
11,453
9,543
9,747
$2.22
$2.50
$3.34
$3.27
$2.22
$2.50
$3.34
$3.27
The ASX is notified of the various share, option and ‘in substance option’ holdings of all Directors, and they are also set out on page
5 of the Directors’ Report.
8. OTHER TRANSACTIONS WITH KMP
In addition to specific disclosure requirements, the VRL group continuously re-assesses judgemental matters surrounding
relationships with KMP and completeness of its related party disclosures. Judgements relating to the following relationships have
been reviewed by the VRL group and considered prudent to make a judgement in this year to include these as related party
disclosures.
The VRL group purchased uniforms from Leaf Group Pty. Ltd., an entity associated with a relative of R.G. Kirby. Purchases from the
Leaf Group first occurred in 2003, prior to the establishment of the familial relationship with R.G. Kirby, which arose in 2008. The
total purchases were $242,735 in the year ended 30 June 2019 (2018: $298,779). The uniforms were purchased for the Theme Parks
and Cinema Exhibition divisions and these transactions were carried out under arm’s length terms and conditions. As at 30 June 2019,
the total amount owing by the VRL group, and included in current liabilities was $51,150 (2018: $66,767). The Company is in the
process of conducting a competitive tender for uniform purchases for the year ending 30 June 2020.
26 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
REMUNERATION REPORT (continued)
8. OTHER TRANSACTIONS WITH KMP (continued)
As reported in the 31 December 2018 half-year financial report, the Theme Parks division entered into a contract in the current year
for call centre services with Oracle Customer Management Solutions Pty. Ltd. ("OCMS"). OCMS has sub-contracted some of those
services to a company in which a relative of G.W. Burke has an economic interest. Total purchases under the contract were $1,870,391
in the year ended 30 June 2019 and these transactions were carried out under arm’s length terms and conditions. As at 30 June 2019,
there were no amounts owing by the VRL group under the contract. The Group has re-assessed this contract and taken advice, and
determined that it is not a reportable related party transaction. Unless the circumstances change, this transaction will no longer be
disclosed in the future.
Peninsula Cinemas Pty. Ltd. ("Peninsula Cinemas"), which are non-competing cinemas owned by an entity associated with Mr. R.G.
Kirby, exhibit films supplied by the Film Distribution division of the VRL group on arm's length terms and conditions. The total amount
charged by the VRL group for the year ended 30 June 2019 was $228,829 (2018: $242,965). Other net reimbursement amounts paid
by Peninsula Cinemas to the VRL group in relation to operational cinema matters in the year ended 30 June 2019 totalled $18,159
(2018: $8,252).
The VRL group purchased wine from Yabby Lake International Pty. Ltd. (“Yabby Lake”), an entity in which family members of Mr. R.G.
Kirby have an economic interest. The total purchases were $329,789 for the year ended 30 June 2019 (2018: $365,393). The wine
purchased was mainly for the Cinema Exhibition division's Gold Class cinemas and for Corporate functions. These transactions were
carried out under arm's length terms and conditions. The Company has put in place arrangements to cease the purchase of wine
from Yabby Lake by 31 December 2019. In the future, a competitive tender process will be undertaken and Yabby Lake will be able
to participate at that time.
The Film Distribution division of the VRL group distributes a number of older film titles in which Village Roadshow Corporation Pty.
Ltd. ("VRC"), the Company's immediate parent entity, has economic interests. During the year ended 30 June 2019, $265 of film
royalties (2018: $2,685) were paid to VRC.
The VRL group recharged net occupancy costs for accommodation provided and received and other net recharges for services
provided and received, on an arm's length basis, to a number of entities associated (either individually or collectively) with Messrs.
R.G. Kirby, J.R. Kirby and G.W. Burke. The total net amount charged by the VRL group for the various occupancy and other services
in the year ended 30 June 2019 was $144,290 (2018: $126,377).
The VRL group has recognised in the current year $157,270 for the provision of art works and related insurance costs by an entity
associated with Mr. R.G. Kirby, in relation to the years ended 30 June 2019 and 30 June 2018. It has been agreed that from 1 July
2019, there will be no charge for the provision of art works.
As at 30 June 2019, the total amount owing by the related parties detailed above, and included in current assets of the VRL group,
was $46,963 (2018: $63,940), and the total amount owing by the VRL group to the related parties detailed above, and included in
current liabilities, was $67,579 (2018: $103,764).
27 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2019
Continuing operations
Income
Revenue
Other income
Expenses excluding finance costs
Finance costs
Share of net profits of equity-accounted investments
Loss from continuing operations before income tax benefit
Income tax benefit
Loss after tax from continuing operations
Discontinued operations
Profit after tax
Net loss for the year
Loss for the year is attributable to:
Non-controlling interest
Owners of the parent
Other comprehensive income (expense)
Items that may be reclassified subsequently to profit or loss:
Equity instruments at fair value through other comprehensive income
Cash flow hedges
Foreign currency translation
Other comprehensive income (expense) for the year after tax
Total comprehensive expense for the year
Total comprehensive expense for the year is attributable to:
Non-controlling interest
Owners of the parent
(Loss) earnings per share (cents per share)
For (loss) profit for the year attributable to ordinary equity holders of
Village Roadshow Limited:
Basic (loss) earnings per share
Diluted (loss) earnings per share
For (loss) profit from continuing operations for the year attributable
to ordinary equity holders of Village Roadshow Limited:
Basic (loss) earnings per share
Diluted (loss) earnings per share
Notes
2(b)
2(c)
3(b)
3(c)
3(a)
5
21
21
21
4
4
4
4
2019
$'000
2018
$'000
980,543
20,739
(980,861)
(32,496)
1,275
(10,800)
1,220
(9,580)
952,762
193,774
(1,144,092)
(31,485)
904
(28,137)
24,726
(3,411)
-
-
(9,580)
(3,411)
(3,005)
(6,575)
(9,580)
(3,630)
219
(3,411)
(434)
750
450
766
364
2,244
(5,517)
(2,909)
(8,814)
(6,320)
(3,005)
(5,809)
(8,814)
(3,630)
(2,690)
(6,320)
(3.4) cents
(3.4) cents
0.14 cents
0.14 cents
(3.4) cents
(3.4) cents
0.14 cents
0.14 cents
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
28 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Current tax assets
Film distribution royalties
Derivatives
Other
Total current assets
Non-Current Assets
Trade and other receivables
Goodwill and other intangible assets
Investments - equity-accounted
Equity instruments
Property, plant & equipment
Deferred tax assets
Film distribution royalties
Derivatives
Other
Total non-current assets
Total assets
LIABILITIES
Current Liabilities
Trade and other payables
Liabilities held for sale
Interest bearing loans and borrowings
Income tax payable
Provisions
Derivatives
Unearned revenue and other liabilities
Total current liabilities
Non-Current Liabilities
Trade and other payables
Interest bearing loans and borrowings
Lease liability
Deferred tax liabilities
Provisions
Unearned revenue and other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Equity attributable to equity holders of the parent:
Contributed equity
Reserves
Retained earnings
Parent interests
Non-controlling interest
Total equity
Notes
7(a)
8
9
15
11(b)
31(e)
11(a)
8
10
12
15
5(c)
11(b)
31(e)
11(a)
16
17
18
31(e)
2(d),19
16
17
33
5(c)
18
19
20
21
21
22
2019
$'000
2018
$'000
61,653
129,337
23,137
-
1,694
37,439
542
18,967
272,769
17,588
239,957
32,463
1,219
656,217
7,961
53,897
1
173
1,009,476
1,282,245
228,400
-
6,026
405
31,381
129
63,762
330,103
50,833
275,229
106,125
3
8,653
76,790
517,633
847,736
434,509
275,171
88,730
62,740
426,641
7,868
434,509
63,393
119,300
23,578
40,610
2,373
47,704
1,153
10,183
308,294
23,925
253,675
31,742
1,737
639,943
11,417
63,517
63
294
1,026,313
1,334,607
202,777
1,829
6,866
6,880
34,749
16
50,128
303,245
42,736
395,024
102,962
4,751
10,592
81,486
637,551
940,796
393,811
225,548
86,774
70,509
382,831
10,980
393,811
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
29 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Dividends and distributions received
Interest and other items of similar nature received
Finance costs
Income taxes (paid) refunded
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant & equipment
Purchases of software & other intangibles
Purchase of leased asset
Proceeds from sale of property, plant & equipment
Proceeds from sale and leaseback of property
Purchase of investments / businesses
Proceeds from sale of investments / businesses
Loans to (or repaid to) other entities
Loans from (or repaid by) other entities
Net cash flows (used in) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares
Net cash flows used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash
Cash and cash equivalents at end of the year
Total cash classified as:
Continuing operations
Total cash and cash equivalents at end of the year
Notes
7(b)
1(a)
1(a)
7(d)
7(d)
1(a)
7(a)
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2019
$'000
2018
$'000
1,067,271
(958,739)
2,645
1,371
(23,756)
(6,357)
82,435
1,068,498
(1,031,131)
1,019
1,346
(28,162)
9,796
21,366
(38,816)
(9,071)
(31,102)
192
12,296
-
39,911
-
17,489
(9,101)
8,000
(132,800)
49,211
(75,589)
(2,255)
63,393
515
61,653
(69,970)
(14,926)
-
733
99,991
(2,053)
163,813
(10,224)
1,704
169,068
39,000
(266,875)
-
(227,875)
(37,441)
100,400
434
63,393
61,653
61,653
63,393
63,393
30 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
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31 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1
The financial report of Village Roadshow Limited ("the Company" or "VRL") for the year ended 30 June 2019 was authorised for issue on 29
August 2019, in accordance with a resolution of the Directors. VRL is a for-profit entity incorporated in Australia and limited by shares,
which are publicly traded on the Australian Securities Exchange. The principal activities of Village Roadshow Limited and its subsidiaries
("the Group", "VRL group" or "consolidated entity") are described in Note 1(c)(xxix).
(a) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other mandatory professional reporting requirements. The financial report
has also been prepared on a historical cost basis, except for derivatives and any equity instruments that are measured at fair value. The
financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000), unless stated
otherwise, under the option available to the Company under ASIC Corporations Instrument 2016/191. The Company is an entity to which
the Instrument applies. The presentation and classification of comparative items in the financial report have been adjusted where
appropriate to ensure that the disclosures are consistent with the current period.
For the year ended 30 June 2019, the Group made an attributable loss after tax of $6.6 million (2018: $0.2 million profit), and had a
Gearing Ratio of 34% as at 30 June 2019 (2018: 46%). There were significant debt reductions in the year ended 30 June 2019, from the
equity raising ($49 million), the sale of Wet’n’Wild Sydney ($37 million), the sale and leaseback of property ($12 million) and a substantial
improvement in operating net cash flow. In December 2018, the Group also refinanced its Group finance facility with new facilities
totalling $340 million of which $65 million was undrawn at 30 June 2019 and $60 million undrawn at the date of this report. Refer to the
Consolidated Statement of Cash Flows and Note 17 for further information. The Group remains in compliance with its banking covenants
on the VRL group finance facilities. The Directors consider that the going concern basis of preparation in the financial statements is
appropriate on the basis that forecast future debt covenants are projected to be met, based on the Group’s operating cash flows.
(b) Statement of compliance and new accounting standards and interpretations
(i) The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”).
(ii) The Group has adopted the following new and amended Australian Accounting Standards and Australian Accounting Standards Board
("AASB") interpretations in the current financial year.
The Group applies for the first time, AASB 9: Financial Instruments and AASB 15: Revenue from Contracts with Customers . The nature and
effect of these changes are disclosed below.
The Group has also adopted AASB 2016-5: Amendments to Australian Accounting Standards - Classification and Measurement of Share-
impact on the financial position or
based Payment Transactions . Adoption of this amended standard did not have any material
performance of the Group.
AASB 9: Financial Instruments
AASB 9 replaces AASB 139: Financial
measurement, a single, forward-looking "expected loss" impairment model and a substantially-reformed approach to hedge accounting.
Instruments: Recognition and Measurement , and includes a model for classification and
The Group has adopted AASB 9 on the effective date of 1 July 2018. The Group has performed an impact assessment and there is no
significant change to the measurement basis from adoption of the new classification and measurement model under AASB 9.
Receivables previously accounted for at amortised cost are held to collect contractual cashflows and give rise to cashflows representing
solely payments of principle and interest. As a result, these are now classified and measured as debt instruments at amortised cost under
AASB 9. For financial assets and liabilities previously held at fair value, the Group will continue measuring these assets and liabilities at fair
value under AASB 9.
Prior to the adoption of AASB 9, the Group previously recognised quoted equity shares as available-for-sale investments with gains and
losses recognised in other comprehensive income ("OCI"). Under AASB 9, the Group has applied the option for equity instruments not held
for trading to continue to present fair value changes in OCI, therefore there is no impact on transition to AASB 9. Under this option, there
is no recycling of cumulative gains or losses through the profit or loss upon de-recognition of equity instruments. Equity instruments at
fair value through OCI are intended to be held for the foreseeable future.
AASB 9 has changed the Group’s accounting for impairment losses for financial assets by replacing the incurred loss approach under AASB
139 with the forward looking expected credit loss approach on all trade and other receivables, and contract assets. The Group has
adopted the simplified approach and records lifetime expected losses on all trade receivables and contract assets and has established a
provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to debtors and
the economic environment. On adoption of AASB 9, there was no significant impact to the impairment loss allowance.
Under AASB 9, the hedge accounting rules will align the accounting for hedging instruments more closely with the Group's risk
management practices and this has been applied prospectively from 1 July 2018. The Group has determined that all existing hedge
relationships would qualify as continuing hedges under AASB 9, and all derivatives have been designated as hedging instruments.
Accordingly, there is no impact on the accounting for its hedging relationships.
AASB 15: Revenue from Contracts with Customers
The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. AASB 15
supersedes all previous revenue recognition requirements under Australian Accounting Standards.
32 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(b) Statement of compliance and new accounting standards and interpretations (continued)
(ii) AASB 15: Revenue from Contracts with Customers (continued)
The Group has adopted AASB 15 retrospectively using the cumulative effect transition method (i.e. modified approach) at the date of
initial application and therefore comparative information has not been restated and is presented as previously reported under AASB 118
and related interpretations. Additionally, the disclosure requirements in AASB 15 have not been applied to comparative information.
Under this transition method, AASB 15 has only been applied retrospectively to contracts that are not completed contracts at 1 July 2018
and the Group has recognised the cumulative effect of adjustments against the opening balance of equity at this date. The Group has also
applied the practical expedient for completed contracts on transition at 1 July 2018.
The following summarises the impact, net of tax, of transition to AASB 15 on retained earnings attributable to members of the parent and
non-controlling interest at 1 July 2018 (increase/(decrease)):
Retained earnings attributable to members of the parent:
Breakage revenue
Loyalty programs
Admissions revenue
Increase in deferred tax liability
Increase in deferred tax asset
Impact on 1 July 2018
Non-controlling interest:
Admissions revenue
Impact on 1 July 2018
Impact of
adopting
AASB 15
$'000
4,318
(3,648)
(2,240)
(1,305)
1,681
(1,194)
(310)
(310)
Notes
(a)
(b)
(c)
(a)
(b),(c)
(c)
(a) Breakage revenue
Within the Cinema Exhibition segment, non-refundable gift cards and vouchers are sold to customers that give customers the right to
receive goods or services in the future. If a customer does not exercise their right, this amount is recognised as breakage revenue. Prior to
the adoption of AASB 15, the prepayment amount received from a customer was recognised as an unearned revenue liability and the
breakage revenue was recognised upon expiry of the gift cards and vouchers. Under AASB 15, breakage revenue is recognised in
proportion to the pattern of rights exercised by the customer as there is an expectation the Group will be entitled to breakage revenue
and it is considered highly probable a significant reversal will not occur in the future. The breakage rates have been estimated based on
historical redemption rates of gift cards and vouchers sold.
On transition to AASB 15, the Group has determined that for contracts which were not completed as at 1 July 2018, higher breakage
revenue of $4.3 million would have been recognised in the year ended 30 June 2018, had AASB 15 been applied to those contracts. This
has resulted in an increase in retained earnings and a corresponding decrease in the unearned revenue liability on 1 July 2018. An
adjustment of $1.3 million has also been recognised to decrease retained earnings and increase the deferred tax liability associated with
this adjustment.
(b) Loyalty programs
The Cinema Exhibition segment operates loyalty programs where a customer can earn points when they purchase cinema tickets and
concession items which can be redeemed in the future for goods and services. Under AASB 15, these loyalty programs give rise to a
separate performance obligation as it provides a material right to the customer. The Group has allocated a portion of the transaction
price to the loyalty points earned based on relative estimated stand-alone selling price, and deferred the recognition of this revenue until
the points are redeemed. Previously, revenue was deferred on an allocation of the fair value of points issued. On transition to AASB 15,
the Group has determined that lower revenue of $3.6 million would have been recognised cumulatively in periods prior to 1 July 2018 for
open contracts, had AASB 15 been applied to these loyalty programs. This has resulted in a decrease in retained earnings and a
corresponding increase in the unearned revenue liability on 1 July 2018. An adjustment of $1.1 million has also been recognised to
increase retained earnings and increase the deferred tax asset associated with this adjustment.
(c) Admissions revenue
The Theme Parks segment sells annual passes which give customers continuous access to theme parks for a period of 12 months, or the
full operating season in the case of seasonal theme parks. Prior to the adoption of AASB 15, the Group recognised revenue based on
average visitation using historical data over the period in which the passes were available to be used. Where services were yet to be
rendered or visits yet to be made, amounts were recorded as an unearned revenue liability. Under AASB 15, revenue recognition on
annual and seasonal passes has changed and is now recognised on a straight-line basis to reflect that these passes give rise to a stand-
ready performance obligation over the period to which the customer is entitled to use the parks.
An annual pass may also include entry to events which provides a customer with a material right to attend the events. These are separate
performance obligations and the transaction price is allocated between these performance obligations and the stand-ready performance
obligation based on estimated stand-alone selling prices. Revenue is recognised for these events once they have been held and the
performance obligation satisfied.
33 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(b) Statement of compliance and new accounting standards and interpretations (continued)
(ii) AASB 15: Revenue from Contracts with Customers (continued)
(c) Admissions revenue (continued)
On transition to AASB 15, the Group has determined that lower revenue of $2.5 million would have been recognised prior to 1 July 2018,
had revenue been recognised on a straight-line basis previously. This has resulted in a decrease in retained earnings and non-controlling
interest of $2.2 million and $0.3 million, respectively, and a corresponding increase in the unearned revenue liability of $2.5 million. An
adjustment of $0.6 million has also been recognised to increase retained earnings and increase the deferred tax asset associated with this
adjustment.
(d) Rights of return
Within the Film Distribution segment, certain contracts with customers provide a right to return goods. Prior to the adoption of AASB 15,
the Group accounted for this right of return using an average rate of return approach based on historical return data, similar to the
expected value method adopted under AASB 15. Under the previous accounting policy, the amount of revenue related to the expected
returns was deferred and a corresponding adjustment to cost of sales was also deferred, both of which were recognised in trade and other
payables on a net basis. Under AASB 15, the Group presents a refund liability and an asset for the right to recover products from a
customer separately in the statement of financial position. On transition to AASB 15, the Group has reclassified $0.4 million from trade
and other payables to a right-to-return asset in inventory. There was no cumulative effect adjustment against retained earnings.
(e) Presentation and disclosure
The presentation and disclosure of revenue from contracts with customers is not consistent with the disclosure in the prior period as the
Group has adopted the cumulative effect transition method under AASB 15 and the comparative balances have not been restated. Certain
items previously presented in revenue from rendering of services have been reclassified to rental income and certain items previously
presented in other income have been reclassified to revenue from contracts with customers. Refer to Note 2(a) and Note 2(b) for further
information.
The following summarises the impacts of adopting AASB 15 on the Group’s consolidated financial statements for the year ended 30 June
2019 (increase/(decrease)):
Consolidated statement of comprehensive income
Revenue1
Other income
Expenses (including finance costs)
Share of net profits of equity-accounted investments
Loss before income tax expense
Income tax benefit (expense)
Loss after income tax
Non-controlling interests
Total attributable loss after tax to the equity holders of the parent
Summarised consolidated statement of financial position
Inventories
Total current assets
Deferred tax assets
Total non-current assets
Total assets
Trade and other payables
Unearned income
Total current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Retained earnings
Non-controlling interests
Total equity
Notes
As reported
$'000
Adjustments
$'000
(a),(b),(c),(e)
(e)
(d)
(a),(b),(c)
(d)
(a),(b),(c)
(a),(c)
(a),(b),(c)
980,543
20,739
(1,013,357)
1,275
(10,800)
1,220
(9,580)
3,005
(6,575)
23,137
272,769
7,961
1,009,476
1,282,245
228,400
63,762
330,103
3
517,633
847,736
62,740
7,868
434,509
(2,694)
8,188
-
-
5,494
(1,242)
4,252
(33)
4,219
(199)
(199)
(1,594)
(1,594)
(1,793)
(199)
(7,295)
(7,494)
-
-
(7,494)
5,358
343
5,701
Balances
without
adopting
AASB 15
$'000
977,849
28,927
(1,013,357)
1,275
(5,306)
(22)
(5,328)
2,972
(2,356)
22,938
272,570
6,367
1,007,882
1,280,452
228,201
56,467
322,609
3
517,633
840,242
68,098
8,211
440,210
1
Included in the net revenue adjustment above is the estimated FY2019 impact of AASB 15 on revenue from annual passes sold by the Theme Parks
segment. Under the previous visitation basis, it is estimated that revenue would have been $2.9 million higher than the straight-line basis under AASB
15. Revenue estimated using the visitation basis is sensitive to the visitation rate used. A rate of 5.5 times has been used, however using a rate of 5.25
to 5.75 would result in an estimated revenue impact of $4.5 million to $1.5 million.
34 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(b) Statement of compliance and new accounting standards and interpretations (continued)
(iii) A number of standards and interpretations have been issued by the AASB or the International Accounting Standards Board ("IASB"),
which are effective for financial years after 30 June 2019. Further details are as follows:
-
AASB 16: Leases: AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value or the lease includes variable lease payments.
A lessee will recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its
obligation to make lease payments. Depreciation of the right-of-use asset and interest on the lease liability will be recognised.
Application date of this standard is 1 January 2019, and application date for the Group is 1 July 2019. This standard will materially
impact the Group's assets and liabilities in the statement of financial position at transition and in future years, as the Group’s
operating leases (primarily property leases in relation to the Cinema Exhibition and Theme Parks segments) will need to be recognised
in the statement of financial position. Refer to Note 24(a)(i) (operating lease commitments) for an approximation of the potential
impact of AASB 16 on the Group's financial position, being the increase of assets and liabilities. Under AASB 16, the lease liability will
include the measurement of lease extension options based on the likelihood of being exercised, and an offsetting effect of discounting
future lease payments, both of which are not included in Note 24(a)(i).
This standard allows entities to apply certain transitional provisions on initial adoption and the Group plans to adopt the modified
retrospective transition approach on 1 July 2019. Therefore, the comparative information will not be restated and will continue to be
reported under AASB 117: Leases . The majority of leases within the Group are property leases, and for these leases the Group plans to
measure right-of-use assets on transition as if the new accounting rules had always been applied.
Assessment activities continue to be undertaken on the Group's current leases. A detailed review of contracts, financial reporting
impacts and system requirements is well advanced and continuing.
-
-
-
-
AASB 2017-5: Amendments to Australian Accounting Standards - Effective Date of Amendments to AASB 10 and AASB 128 and Editorial
Corrections : This standard defers the mandatory effective dates of amendments to AASB 10 and AASB 128 that were originally made
in AASB 2014-10: Amendments to Australia Accounting Standards - Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture , so that the amendments are required to be applied for annual reporting periods beginning on or after 1
January 2022 instead of 1 January 2018. Application date for the Group is 1 July 2022. The impact of adoption of this standard on the
Group's financial results has not been assessed.
AASB 2017-7: Amendments to Australian Accounting Standards - Long-term Interests in Associates and Joint Ventures : This is an
amendment to AASB 128 to clarify that an entity is required to account for long-term interests in an associate or joint venture, which
in substance form part of the net investment in the associate or joint venture but to which the equity method is not applied, using
AASB 9 Financial Instruments before applying the loss allocation and impairment requirements in AASB 128. Application date of this
standard is 1 January 2019, and application date for the Group is 1 July 2019. The adoption of this standard is not expected to have
any impact on the Group's financial results.
AASB 2018-1: Amendments to Australian Accounting Standards - Annual Improvements 2015-2017 Cycle : Amendments to AASB 3,
AASB 11, AASB 112 and AASB 123 clarifies a number of issues and disclosure requirements contained within these standards.
Application date of this standard is 1 January 2019, and application date for the Group is 1 July 2019. The adoption of this standard is
not expected to have any impact on the Group's financial results.
AASB Interpretation 23: Uncertainty over Income Tax Treatments: This interpretation addresses the accounting for income taxes
where tax treatments involve uncertainty that affects the application of AASB 112. The interpretation does not apply to taxes or levies
outside the scope of AASB 112, nor does it specifically include requirements relating to interest and penalties associated with
uncertain tax treatments. Application date of this standard is 1 January 2019, and application date for the Group is 1 July 2019. The
adoption of this standard is currently being assessed.
The impacts of all other standards and amendments to accounting standards that have been issued by the AASB but are not yet effective
for the year ended 30 June 2019, have been determined as having no significant impact on the financial results of the Group.
(c) Summary of significant accounting policies
(i) Basis of consolidation
The consolidated financial statements comprise the financial statements of the VRL group as at 30 June each year. The financial
statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
In preparing the consolidated financial report, all inter-company balances and transactions, income and expenses and profits and losses
resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control is achieved
when the Group is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
35 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(ii) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred to the acquirer, the
liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-
controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree
either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as
incurred.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the
business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree
is remeasured at fair value as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 9:
Financial Instruments, either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it
shall not be remeasured.
An option (put or call) granted over the remaining interest of a business combination where 100% has not been acquired gives rise to a
financial liability for the present value of the estimated redemption amount. This amount, less the calculated non-controlling interest
amount, gives rise to a debit which is recognised in equity, in the controlled entity acquisition reserve. During each financial reporting
period, non-controlling interests continue to receive an allocation of profit or loss which is recognised within equity. At each balance sheet
date, the non-controlling interest in equity is de-recognised, and transferred to the financial liability and any difference between the
change in fair value of the financial liability and the non-controlling interest de-recognised is charged or credited to the controlled entity
acquisition reserve.
(iii) Revenue recognition
The Group is in the business of providing theme park and water park operations, cinema exhibition operations, film and distribution
operations and sales promotion and loyalty program operations. Revenue from contracts with customers is recognised when control of
the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be
entitled in exchange for those goods or services.
(a) Admissions revenue - box office tickets, gift cards and vouchers and loyalty programs
Box office admissions revenue within the Cinema Exhibition segment is recognised on the date of the film screening. The performance
obligation is satisfied when the customer has purchased the ticket and the customer obtains control of the service when they see the film.
When a ticket is sold in advance of the screening, revenue is recorded as an unearned revenue liability until the date of the film screening.
The Cinema Exhibition segment sells non-refundable gift cards and vouchers to customers that give customers the right to receive goods
or services in the future. The performance obligation is to honour this right, or stand-ready to transfer this right, only to the point that any
unredeemed value has not expired within the terms and conditions of purchase. The prepayment amount received from a customer is
recognised as an unearned income liability until the time the customer exercises their right and uses the gift card or voucher to purchase
goods or services from the Group and the performance obligation is satisfied.
If a customer does not exercise their right, this amount is recognised as breakage revenue. Breakage revenue is recognised in proportion
to the pattern of rights exercised by the customer as there is an expectation the Group will be entitled to breakage revenue and that it is
considered highly probable a significant reversal will not occur in the future. The breakage rates have been estimated based on historical
redemption rates of gift cards and vouchers sold.
The Cinema Exhibition segment operates loyalty programs where a customer can earn points when they purchase cinema tickets and
concession items which can be redeemed in the future for goods and services. These loyalty programs give rise to a separate performance
obligation as it provides a material right to the customer. The Group allocates a portion of the transaction prices of goods and services to
the loyalty points based on relative stand-alone selling prices and deferred until such point the points are redeemed and the performance
obligation satisfied.
(b) Admissions revenue - theme park tickets
Revenue relating to short-term admission tickets within the Theme Parks segment is recognised on the date the ticket is validated upon
entry to the theme park. The performance obligation is satisfied when the customer has purchased the ticket and the customer obtains
control of the service when they enter the park. When a ticket is sold in advance, the revenue is recorded as an unearned revenue liability
until the date the ticket is validated.
The Theme Parks segment sells annual passes which give customers continuous access to the theme parks for a period of 12 months, or
the full operating season in the case of seasonal theme parks. Where services were yet to be rendered or visits yet to be made, amounts
are recorded as an unearned revenue liability. Revenue is recognised on annual and seasonal passes on a straight-line basis to reflect that
these passes give rise to a stand-ready performance obligation over the period to which the customer is entitled to use the theme parks.
36 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(iii) Revenue recognition (continued)
(b) Admissions revenue - theme park tickets (continued)
An annual pass may also include entry to events which provides a customer with a material right to attend the events. These are separate
performance obligations and the transaction price is allocated between these performance obligations and the stand-ready performance
obligation based on stand-alone selling prices. Revenue is recognised for these events once they have been held and the performance
obligation is satisfied.
(c) Accommodation and conference revenue
Accommodation and conference revenue within the Theme Parks segment is recognised when the customer occupies the hotel room or
the day the conference is held. When a hotel room or conference room is sold in advance, the revenue is recorded as an unearned
revenue liability until the date the room is occupied or the conference held. The performance obligation is satisfied when the customer
obtains control of the accommodation and conference service for each day they occupy the rooms.
(d) Film and television licence revenue
The Film Distribution segment grants a licence to a customer for the right to show a film title or television program, as it exists at the point
in time the licence is granted. That right is static at that point and there are no changes or on-going involvement from the Group.
It is at
this point which the customer obtains control of the film title or television program and the performance obligation is satisfied. Revenue is
recognised at the start of the licence period based on the available date of the title to the customer. Revenue relating to film titles
exhibited at theatres is recognised based on box office performance.
(e) Sales promotion and client loyalty programs revenue
In the Marketing Solutions segment, revenue earned from promotional activities is recognised as the Group satisfies its performance
obligations under promotional contracts over time, because the customer simultaneously receives and consumes the benefits provided by
the Group. Where promotional contracts span more than one reporting period, the progress of work is based on the assessment of the
value of work performed at that date and a contract asset is recognised.
Commissions earned on certain gift card programs is recognised in revenue at a point in time. The performance obligation is satisfied at
the time the gift card is sold, as it is at this point those participating can benefit from the gift card program.
(f) Sale of goods - concessions
Revenue from the sale of concession goods in the Cinema Exhibition and Theme Parks segments is recognised at a point in time. The
performance obligation is satisfied when the customer obtains control of the goods at the point of sale.
(g) Sale of goods - film and television distribution
The Film Distribution segment sells film and television DVD and Blu-ray goods. Revenue from the sale of these goods is recognised at point
in time when the product reaches the customer. It is at this point when the customer obtains control of the goods as they have the ability
to direct the use of and obtain substantially all the remaining benefits from the goods they have received.
Certain contracts with customers provide a right to return goods. The Group accounts for this right of return using an expected value
method as this method best predicts the amount of variable consideration to which the Group will be entitled. The amount of revenue
related to the expected returns is deferred and a corresponding adjustment to cost of sales is also deferred, and the Group separately
presents a refund liability and an asset for the right to recover products from a customer.
(h) Sponsorship revenue
Revenue from sponsorship agreements in the Cinema Exhibition and Theme Parks segments is generally recognised on a straight-line basis
as the performance obligation is satisfied over time when the customer simultaneously receives and consumes the benefits provided by
the Group over the period of the agreement.
(i) Screen advertising revenue
Revenue from screen advertising in the Cinema Exhibition segment is recognised as the performance obligation is satisfied over time when
the customer simultaneously receives and consumes the benefits as the Group makes the cinema available for screening and transfers the
control of the screening of advertisements to the customer over the period of the agreement.
(j) Interest income
Revenue is recognised as interest accrues using the effective interest rate method. This is a method of calculating the amortised cost of a
financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
(k) Rental income
Rental income is recognised on a straight-line basis over the life of the lease.
(l) Dividends
Revenue is recognised when the Group’s right to receive the payment is established.
(m) Unearned income
Unearned income is a contract liability which is the obligation to transfer goods or services to a customer for which the Group has received
consideration, or is due consideration, from the customer. If a customer pays consideration in advance before the Group transfers goods
or services to the customer, an unearned income liability is recognised.
37 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(iii) Revenue recognition (continued)
(n) Contract assets
Contract assets primarily relate to the Group's rights to consideration for work completed but not billed at the reporting date. Contract
assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the
customer.
Comparative policies
The Group has applied AASB 15 retrospectively using the cumulative effect transition method, therefore comparative information has not
been restated. As a result, the comparative information provided continues to be accounted for in accordance with the Group’s previous
accounting policies. Until 30 June 2018, the Group classified its revenue from the sale of goods and revenue from the rendering of
services.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. The following specific recognition criteria must also be met before revenue is recognised:
(a) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred
or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the
buyer at the time of delivery of the goods to the customer.
(b) Rendering of services
Revenue from the rendering of services is recognised when control of a right to be compensated for the services has been attained by
reference to the stage of completion. Where contracts span more than one reporting period, the stage of completion is based on an
assessment of the value of work performed at that date.
(iv) Borrowing costs
Borrowing costs are expensed as incurred, except where they are directly attributable to qualifying assets. Where directly attributable to
a qualifying asset, borrowing costs are capitalised as part of the cost of that asset.
(v) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. Lease incentives are
recognised in profit or loss as an integral part of the total lease expense.
Leases in which the Group is the lessor and the lease does not transfer substantially all the risks and rewards of ownership of an asset is
classified as an operating lease. Rental income arising is accounted for on a straight-line basis over the lease term and is included in
revenue in the profit and loss.
(vi) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an
original maturity 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.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
(vii) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method, less an allowance for any uncollectible amounts. Collectability of trade receivables is
reviewed on an ongoing basis. Bad debts are written off when identified. Objective evidence takes into account financial difficulties of
the debtor, default payments or if there are debts outstanding longer than agreed terms. Refer 1(c)(x) to accounting policies of
impairment of financial assets for when an allowance for expected credit losses is recognised.
(viii) Inventories
Inventories are valued at the lower of cost and net realisable value and are accounted for on a first in first out basis. Net realisable value
is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to
make the sale.
38 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(ix) Derivative financial instruments and hedging
The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps, caps and collars (floors and
caps) to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value.
Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as effective cash flow hedges, are
taken directly to profit or loss for the year. The fair values of forward currency contracts and interest rate swaps, caps and collars are
determined by reference to valuations provided by the relevant counterparties, which are reviewed for reasonableness by the Group
using discounted cash flow models. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
For the purposes of hedge accounting, hedges are classified as cash flow hedges when they hedge exposure to variability in cash flows
that are attributable either to a particular risk associated with a recognised asset or liability or to a forecast transaction. A hedge of the
foreign currency risk of a firm commitment is accounted for as a cash flow hedge.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes
to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will
assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows
attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows
and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods
for which they were designated.
Cash flow hedges are hedges of the Group's exposure to variability in cash flows that are attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast transaction and that could affect profit or loss. Where a hedge meets the strict
criteria for hedge accounting, the effective portion of the gain or loss on the hedging instrument is recognised directly in other
comprehensive income, while the ineffective portion is recognised in profit or loss.
Amounts taken to other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as
when hedged income or expenses are recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-
financial asset or liability, the amounts taken to other comprehensive income are transferred to the initial carrying amount of the non-
financial asset or liability.
If cash flow hedge accounting is discontinued, the amount that has been accumulated in other comprehensive income must remain in
accumulated other comprehensive income if the hedged future cash flows are still expected to occur. Otherwise, the amount will be
immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any
amount remaining in accumulated other comprehensive income must be accounted for depending on the nature of the underlying
transaction.
(x) Impairment of financial assets
The Group assesses at each reporting date whether a financial asset or group of financial assets is impaired.
(a) Financial assets at amortised cost
From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
amortised cost and at fair value through other comprehensive income. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. For trade receivables and contract assets, the Group applies the simplified approach
permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group has
established a provision matrix that is based on the Group’s historical credit loss experience, adjusted for forward-looking factors specific to
debtors and the economic environment. The maximum exposure to credit risk at the reporting date is the carrying value of each class of
financial assets disclosed in Note 31. The Group does not hold collateral as security.
(b) Financial assets at fair value through other comprehensive income ("FVOCI")
For debt instruments at FVOCI, the Group applies the low credit risk simplification. At every reporting date, the Group evaluates whether
the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue
cost or effort.
(c) Equity instruments at FVOCI
Equity instruments designated at FVOCI are not subject to impairment assessment.
Comparative policies
The Group has applied AASB 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative
information provided continues to be accounted for in accordance with the Group’s previous accounting policies. Until 30 June 2018, the
Group classified its financial assets in the categories of financial assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments, and available-for-sale investments.
39 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(x) Impairment of financial assets (continued)
Comparative policies (continued)
(a) Financial assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of
the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the
effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an
allowance account. The amount of the loss is recognised in profit or loss.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant,
and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets
with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of
impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment
loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(b) Financial assets carried at cost
If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value
(because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery of such an
unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.
(c) Available-for-sale investments at fair value
If there is objective evidence that an available-for-sale investment at fair value is impaired, an amount comprising the difference between
its cost and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.
Reversals of impairment losses for available-for-sale investments are not recognised in profit.
(xi) Foreign currency translation
Both the functional and presentation currency of the Company and the majority of its Australian subsidiaries is Australian dollars ($). Each
entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured
using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the
reporting date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign
currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to other comprehensive
income until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to
exchange differences on those borrowings are also recognised in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the
date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined.
As at the reporting date the assets and liabilities of subsidiaries with functional currencies other than Australian dollars are translated into
the presentation currency of the Company at the rate of exchange ruling at the reporting date and their profit or loss items are translated
at the weighted average exchange rate for the year. The exchange differences arising on the translation are taken directly to other
comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income
relating to that particular foreign operation is recognised in profit or loss.
(xii) Discontinued operations and assets held for sale
A discontinued operation is a component of an entity that has been disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business
or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented
separately on the face of the statement of comprehensive income.
Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value
less cost to sell if the carrying amount will be recovered principally through a sale transaction. These assets are not depreciated or
amortised following classification as held for sale. For an asset or disposal group to be classified as held for sale, it must be available for
sale in its present condition and its sale must be highly probable.
40 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xiii) Investments in associates and joint ventures
The Group’s investments in associates and joint ventures are accounted for using the equity method of accounting in the consolidated
financial statements. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint
arrangement. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to
joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
Under the equity method, an investment in an associate or joint venture is carried in the consolidated statement of financial position at
cost plus post-acquisition changes in the Group's share of net assets of the associate or joint venture. Goodwill relating to an associate or
joint venture is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group
determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the
associate or joint venture. The consolidated statement of comprehensive income reflects the Group's share of the results of operations of
the associate or joint venture.
Where there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any
changes and discloses this in the consolidated statement of changes in equity. Adjustments are made to bring into line any dissimilar
reporting dates or accounting policies that may exist.
When the Group's share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including
any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate or joint venture.
(xiv) Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the arrangement. The Group recognises its interest in joint operations by recognising its share of
the assets that the operations control and the liabilities incurred. The Group also recognises its share of the expenses incurred and the
income that the operations earn from the sale of goods or services.
(xv) Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are measured based on the expected manner of recovery of carrying value of an
asset or liability. The expected manner of recovery of indefinite life intangible assets is through sale and not use.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences
except:
-
when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is
not a business combination and that, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit or
loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the
timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse
in the foreseeable future.
-
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the
carry-forward of unused tax credits and unused tax losses can be utilised, except:
-
when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit or
loss nor taxable profit or loss; or
- when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in
which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the
foreseeable future and taxable profit will be available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised
deferred income tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in other comprehensive
income are recognised in other comprehensive income, and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities
relate to the same taxable entity and the same taxation authority.
41 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xv) Income tax (continued)
Tax Consolidation
For Australian income tax purposes, various entities in the Group have formed a Tax Consolidated group, and have executed a combined
Tax Sharing and Tax Funding Agreement (“TSA”) in order to allocate income tax expense to the relevant wholly-owned entities
predominantly on a stand-alone basis. In addition, the TSA provides for the allocation of income tax liabilities between the entities should
the head entity default on its income tax payment obligations to the Australian Taxation Office.
Tax effect accounting by members of the Tax Consolidated Group
Under the terms of the TSA, wholly owned entities compensate the head entity for any current tax payable assumed and are compensated
for any current tax receivable, and are also compensated for deferred tax assets relating to unused tax losses or unused tax credits that
are recognised on transfer to the parent entity under tax consolidation legislation. The funding amounts are determined at the end of
each six month reporting period by reference to the amounts recognised in the wholly-owned entities' financial statements, determined
predominantly on a stand alone basis. Amounts receivable or payable under the TSA are included with other amounts receivable or
payable between entities in the Group.
(xvi) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
-
-
when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST components of cash flows arising from investing and
financing activities, which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(xvii) Property, plant & equipment
Property, plant & equipment is stated at cost less accumulated depreciation and any accumulated impairment in value. Such cost includes
the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major
inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for
capitalisation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:
-
-
Buildings and improvements are depreciated over the lesser of any relevant lease term and 40 years, using the straight-line method.
Plant, equipment and vehicles are depreciated over periods of between three and 25 years using the straight-line or reducing balance
method.
Pooled animals are classified as part of property, plant & equipment and are not depreciated.
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end,
and when acquired as part of a business combination.
Impairment
The carrying values of property, plant & equipment are reviewed for impairment at each reporting date, with recoverable amount being
estimated when events or changes in circumstances indicate that the carrying value may be impaired.
The recoverable amount of property, plant & equipment is the higher of fair value less costs of disposal and value in use. In assessing fair
value less costs of disposal, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
the estimated price at which an orderly transaction to sell the asset or to transfer the liability would take place between market
participants at the measurement date under current market conditions.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to
which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or
cash-generating unit is then written down to its recoverable amount.
De-recognition and disposal
An item of property, plant & equipment is de-recognised upon disposal or when no further future economic benefits are expected from its
use or disposal.
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the year the asset is de-recognised.
42 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xviii) Investments and other financial assets
Financial assets in the scope of AASB 9: Financial Instruments are classified as those to be measured subsequently at amortised cost, fair
value through other comprehensive income ("OCI"), and fair value through profit or loss ("FVPL"). The classification depends on the
Group's business model for managing the financial assets and the contractual terms of the cash flows. At initial recognition, the Group
measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits to purchase
the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets
within the period established generally by regulation or convention in the marketplace.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are two measurement categories into which the Group classifies its debt instruments:
(a) Financial assets at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are
measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate
method. Any gain or loss arising on de-recognition is recognised directly in profit or loss and presented in other gains/(losses) together
with foreign exchange gains and losses. The Groups' financial assets at amortised cost includes trade and other receivables.
(b) Financial assets at fair value through other comprehensive income ("FVOCI")
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent
solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for
the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss.
When the financial asset is de-recognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or
loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective
interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as a
separate line item in the profit or loss.
(c) Financial assets at fair value through profit or loss ("FVPL")
Assets that do not meet the criteria for amortised cost are measured at FVPL. A gain or loss on a debt instrument that is subsequently
measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value
gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss
following the de-recognition of the investment. Dividends from such investments continue to be recognised in profit or loss as revenue
when the Group’s right to receive payments is established.
Comparative policies
The Group has applied AASB 9 retrospectively, but has elected not to restate comparative information. As a result, the comparative
information provided continues to be accounted for in accordance with the Group’s previous accounting policy. Until 30 June 2018, the
group classified its financial assets in the categories of financial assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments, and available-for-sale investments.
(a) Financial assets at fair value through profit or loss
In accordance with AASB 7: Financial Instruments: Disclosures , financial assets classified as held for trading are included in the category
"financial assets at fair value through profit or loss". Financial assets are classified as held for trading if they are acquired for the purpose
of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on financial assets held for trading are recognised in profit or loss.
It should be noted that even though these assets are
classified as held for trading (in accordance with AASB 139 terminology), the Group is not involved in speculative activities and only uses
derivatives for risk management purposes.
(b) Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group
has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this
classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This
cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the
effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all
fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the
investments are de-recognised or impaired, as well as through the amortisation process. The Group does not currently have held-to-
maturity investments.
43 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xviii) Investments and other financial assets (continued)
Comparative policies (continued)
(c) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Such assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when
the loans and receivables are de-recognised or impaired.
(d) Available-for-sale investments
Available-for-sale investments are those derivative financial assets that are designated as available-for-sale or not classified as any of the
three preceding categories. After initial recognition, available-for-sale investments are either carried at cost less any accumulated
impairment losses, or are measured at fair value with gains or losses being recognised in other comprehensive income until the
investments are de-recognised or until the investments are determined to be impaired, at which time the cumulative gain or loss
previously reported in other comprehensive income is recognised in profit or loss.
The fair values of investments that are actively traded in organised financial markets are determined by reference to quoted market bid
prices at the close of business on the reporting date.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily de-recognised
when the rights to receive cash flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass-through"
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
(xix) Goodwill
Goodwill acquired in a business combination is initially measured at cost, being the excess of the fair value of the consideration
transferred over the Group’s interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to
which the goodwill is so allocated:
-
-
represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
is not larger than an operating segment determined in accordance with AASB 8: Operating Segments .
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the
goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying
amount, an impairment loss is recognised.
When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of
and the portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
(xx) Intangible assets
Intangible assets acquired separately are initially measured at cost. The cost of an intangible asset acquired in a business combination is its
fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation
Internally generated intangible assets, excluding capitalised development costs, are not
and any accumulated impairment losses.
capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the
useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes
in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for
by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on
intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the nature of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level.
Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to
determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite
to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
44 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xx) Intangible assets (continued)
A summary of the policies applied to the Group’s intangible assets is as follows:
Brand names
Useful lives: Indefinite
Amortisation method used: No amortisation
Internally generated or acquired: Acquired
Impairment testing: Annually and more frequently when an indication of impairment exists.
Film distribution rights
Useful lives: Finite
Amortisation method used: Amortised over estimated useful lives which range from 1 to 25 years.
Internally generated or acquired: Acquired
Impairment testing: When an indication of impairment exists. The amortisation method and remaining useful life are reviewed at each
financial year-end.
Software and other intangibles
Useful lives : Finite
Amortisation method used: Amortised over estimated useful lives which range from 2 to 25 years. The estimated useful life remaining is in
the range of 2 to 15 years.
Internally generated or acquired: Acquired
Impairment testing: When an indication of impairment exists. The amortisation method and remaining useful life are reviewed at each
financial year-end.
Assets that are classified as having an indefinite life are the brand names in the Theme Parks division. This conclusion has been based on
the length of time that the brands have been in existence, and the fact that they have an established market presence.
(xxi) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or
when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of its fair value less costs of disposal and its value in use and is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value
in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit
to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-
generating unit is considered impaired and is written down to its recoverable amount.
Impairment losses relating to continuing operations are recognised in those expense categories consistent with the nature of the impaired
asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Other than goodwill, a previously
recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount.
That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount,
in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
(xxii) Trade and other payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group
prior to the end of the financial year that are unpaid, and arise when the Group becomes obliged to make future payments in respect of
the purchase of these goods and services.
(xxiii) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
rate method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised.
(xxiv) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in
profit or loss net of any reimbursement.
45 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xxiv) Provisions (continued)
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to
the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.
(xxv) Employee leave benefits
Wages, salaries, annual leave and sick leave
Provision is made for wages and salaries, including non-monetary benefits, and annual leave in respect of employees' services up to the
reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating
sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
Liabilities arising in respect of wages and salaries, annual leave and any other employee entitlements expected to be settled within twelve
months of the reporting date are measured at their nominal amounts. All other employee benefit liabilities are measured at the present
value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. The value of
the employee share incentive scheme is being charged as an employee benefits expense. Refer to Note 1(c)(xxvi) for the share-based
payment transactions policy.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
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 high quality corporate bonds with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
(xxvi) Share-based payment transactions
The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby
employees render services in exchange for shares or rights over shares (equity-settled transactions). The plans currently in place to
provide these benefits are the Company’s Executive Share Plan and Loan Facility and the 2012 Option Plan for the Company's Chief
Executive Officer. The grant of rights under the Executive Share Plan and Loan Facility are treated as 'in substance options', even where
the equity instrument is not an option.
The cost of equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at
which they are granted. The fair value is determined by an external valuer using either the Monte Carlo, binomial or Black-Scholes models.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the
shares of VRL (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. No
adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the
determination of fair value at grant date. The profit or loss charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards
where vesting is only conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In
addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is
otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as
described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (refer
Note 4).
Shares in the Group relating to the various employee share plans and which are subject to non-recourse loans are deducted from equity.
Refer Note 26 for share-based payment disclosures relating to 'in substance options'.
(xxvii) 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 buyback of shares are shown in equity, net of
tax, as part of the buyback cost.
46 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xxviii) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity
(other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any
bonus element.
When there are potential ordinary shares that are dilutive, diluted earnings per share is calculated as net profit attributable to members of
the parent, adjusted for:
-
-
-
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses;
and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary
shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(xxix) Segment reporting
The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive management
team (the chief operating decision maker) in assessing performance and in determining the allocation of resources.
Discrete financial information about each of these segments is reported to the executive management team on a monthly basis. These
operating segments are then aggregated based on similar economic characteristics to form the following reportable segments:
- Theme Parks
- Cinema Exhibition
- Film Distribution
- Marketing Solutions
- Other
Theme park and water park operations
Cinema exhibition operations
Film distribution operations
Sales promotion and loyalty program operations
Other represents financial information which is not allocated to the reportable
segments.
A geographic region is identified when products or services are provided within a particular economic environment subject to risks and
returns that are different from those segments operating in other economic environments. Revenue from geographic locations is
attributed to geographic location based on the location of the customers.
The segment revenue that is disclosed to the chief operating decision maker in Note 30 is in accordance with IFRS. Inter-segment revenue
applies the same revenue recognition principles as per Note (1)(c)(iii).
(xxx) Financial guarantees
Financial guarantee is initially recognised at fair value as the economic benefit to the guarantee holder. Subsequently at each reporting
date, guarantees are measured at the higher of the expected credit loss allowance or the amount initially recognised less cumulative
amortisation.
Comparative policies
The fair values of financial guarantee contracts as disclosed in Note 29 have been assessed using a probability weighted discounted cash
flow approach. In order to estimate the fair value under this approach the following assumptions were made:
-
-
Probability of Default: This represents the likelihood of the guaranteed party defaulting in the remaining guarantee period and is
assessed based on historical default rates of companies rated by Standard & Poors.
Recovery Rate: This represents the estimated proportion of the exposure that is expected to be recovered in the event of a default by
the guaranteed party and is estimated based on the business of the guaranteed parties. The recovery rate used for the year ended 30
June 2018 was 60%.
The values of the financial guarantees over each future year of the guarantees' lives is discounted over the contractual term of the
guarantees to reporting date to determine the fair values. The contractual term of the guarantees matches the underlying obligations to
which they relate. The financial guarantee liabilities determined using this method are then amortised over the remaining contractual
term of the guarantees.
(xxxi) Film distribution royalties
Film distribution royalties represent the consolidated entity's minimum guaranteed royalty commitments to licensors in return for the
acquisition of distribution rights. The commitments can be for either the life of contract or part thereof. On entering into the agreement
the commitments are brought to account in the statement of financial position as assets and liabilities (the latter in respect of any unpaid
components).
Film distribution royalties are expensed in line with the exploitation of the distribution rights. At the time the distribution rights are first
exploited, a forecast of the lifetime earnings and royalties is made and any impairment is immediately taken to profit or loss. The forecast
royalties are then reviewed and revised over the commitment period to ensure the carrying amount is equal to the lesser of the expected
future royalties to be generated or the balance of the minimum guaranteed royalties.
47 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CORPORATE INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
1
(c) Summary of significant accounting policies (continued)
(xxxii) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be
complied with. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related
asset. Government grants relating to an asset are presented in the statement of financial position as unearned revenue.
(d) Significant accounting judgements, estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on judgements, estimates and assumptions of future
events. The key judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of certain assets and liabilities within the next annual reporting period are:
(i) Impairment of goodwill and intangibles with indefinite useful lives
The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires
an estimation of the recoverable amount of the cash-generating units to which the goodwill and intangibles with indefinite useful lives are
allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with
indefinite useful lives are disclosed in Note 10.
(ii) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the
date at which they are granted. The fair value is determined by an external valuer using a binomial option pricing model, a Monte Carlo
simulation technique or the Black-Scholes model, as appropriate, using the assumptions detailed in Note 26.
(iii) Impairment of film distribution royalties
The Group determines whether film distribution royalties are impaired at least at each reporting date. This requires an estimation of the
recoverable amount of the film distribution royalties based on calculations of the discounted cash flows expected to be received in
relation to the royalties. Refer to Note 11 for further information.
(iv) Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in
determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues
based on estimates of whether additional taxes will be due (refer to Note 23(a)(ii)). Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the current and deferred tax provision in the period
in which such determination is made.
(v) Impairment of non-financial assets other than goodwill and indefinite life intangibles
The Group assesses for impairment of assets at each reporting date by evaluating conditions specific to the Group and to the particular
asset that may lead to impairment.
If an impairment trigger is identified, the recoverable amount of the asset is determined. Refer to
Note 10 and Note 15 for further information.
(vi) Estimated selling prices - loyalty programs
The Group estimates the stand-alone selling price of points awarded under the loyalty programs in the Cinema Exhibition segment. The
Group ensures that the value assigned to the loyalty points is commensurate to the stand-alone selling price of the products eligible for
redemption. In estimating the value of the points issued, the Group considers the mix of products that will be available in the future in
exchange for loyalty points and customers’ preferences. Any significant changes in customers’ redemption patterns will impact the value
of the points issued.
(vii) Gift card and voucher breakage rates
The Group estimates the amount of breakage revenue on gift card and voucher sales in the Cinema Exhibition segment. When estimating
any breakage amount, the Group has to consider the constraint on variable consideration. The Group expects it will be entitled to
breakage revenue and that it is considered highly probable a significant reversal will not occur in the future. If the Group's expectation
changes and it does not expect to be entitled to a breakage amount, it would not recognise any breakage amounts as revenue until the
likelihood of the customer exercising their right becomes remote. The Group applies statistical projection methods in its estimation of the
breakage rates based on historical redemption rates of gift cards and vouchers sold. Any significant changes in customers’ redemption
patterns, or the period of time the customer has to redeem their gift card and voucher, will impact the breakage rates applied and the
value of breakage revenue recognised.
48 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
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1
2 3 4 5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
REVENUE AND OTHER INCOME (continued)
2
(b) Revenue
Revenue from contracts with customers
Finance revenue
Rental income
Dividends received
Total revenues
(c) Other income
Management fees from -
Other entities
Associates
Net gain on disposal of investment1 (for 2018 refer material items of income and expense in
Reconciliation of Results contained in Directors' Report)
Net gain on sale and leaseback of property (refer material items of income and expense in
Reconciliation of Results contained in Directors' Report)
Unearned revenue written back
Commissions / fees received
Other
Total other income
2019
$'000
2018
$'000
966,089
1,371
13,075
8
980,543
951,436
1,326
-
-
952,762
4,242
294
8,388
396
-
156,922
10,248
-
-
5,955
20,739
-
8,328
6,887
12,853
193,774
1
The net gain on disposal of investment in the prior year of $156.9 million mainly related to the sale of the Group's Singapore Cinema Exhibition
investment.
(d) Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
Trade receivables, which are included in Trade and other receivables
Contract assets, which are included in Trade and other receivables
Unearned revenue (contract liabilities)
30 June
2019
$'000
97,538
7,096
51,231
1 July
20181
$'000
105,162
1,992
45,996
1
The Group recognised the cumulative effect of initially applying AASB 15 as an adjustment to the opening balance at 1 July 2018.
Trade receivables are non-interest bearing and are generally on terms of 30-90 days.
The contract assets primarily relate to the Group's rights to consideration for work completed but not billed at the reporting date.
Contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an
invoice to the customer.
The unearned revenue liability, or contract liability, primarily relates to the advance consideration received from customers for admissions
tickets, annual and season passes and gift card and vouchers, and the value of unredeemed customer loyalty points. As at 30 June 2019,
the amount of unearned revenue relating to consideration received in advance is $47.2 million. This will be recognised as revenue over
the next 0 to 3 years, the majority of which is expected to be recognised within 12 months. Revenue will be recognised either at the point
in time when customers use their admission tickets, gift cards and vouchers, or over a period of time when customers are entitled to use
their annual and season passes. At 30 June 2019, the value of unredeemed customer loyalty points is $4.0 million. This will be recognised
as revenue when the points are redeemed by customers.
(e) Right of return assets and refund liabilities
Right of return assets
Refund liabilities -
Arising from retrospective rebates
Arising from rights of return2
30 June
2019
$'000
199
2,122
13,101
1 July
20181
$'000
359
1,552
2,339
The Group recognised the cumulative effect of initially applying AASB 15 as an adjustment to the opening balance at 1 July 2018.
1
2 Following a detailed analysis of the expected value of excess and slow moving inventory returns in the Film Distribution segment in the year ended 30
June 2019, other provision adjustments totalling $5.4 million after tax were recognised. A right of return refund liability of $11.9 million was
recognised, partly offset by a reduction in royalty amounts payable in trade and other payables at 30 June 2019.
50 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
3
EXPENSES FROM CONTINUING OPERATIONS
(a) Share of net profits of equity-accounted investments
Share of net profits of equity-accounted investments (refer Note 12)
1,275
904
2019
$'000
2018
$'000
(b) Expenses excluding finance costs
Employee expenses -
Employee benefits
Defined contribution superannuation expense
Share-based payment expense (credit)
Remuneration and other employee expenses
Total employee expenses
Cost of goods sold
Occupancy expenses -
Operating lease rental - minimum lease payments
Operating lease rental - contingent rental payments
Other occupancy expenses
Total occupancy expenses
Film hire and other film expenses
Depreciation of -
Buildings & improvements
Plant, equipment & vehicles
Amortisation of -
Leasehold improvements
Software & other intangibles
Total depreciation and amortisation
Net loss on disposal of property, plant & equipment
Net loss on disposal of businesses (refer material items of income and expense in
Reconciliation of Results contained in Directors' Report)
Net foreign currency (gains) losses
Impairment and other non-cash adjustments (refer material items of income and expense
in Reconciliation of Results contained in Directors' Report)
Other provision adjustments (refer material items of income and expense in Reconciliation
of Results contained in Directors' Report)
Management and services fees paid
Theme park operating expenses
Repairs and maintenance
Advertising and promotions
Restructuring costs (refer material items of income and expense in Reconciliation of Results
contained in Directors' Report)
Allowance for expected credit loss (reversed)
Bad debts (recovered) written off
Other expenses
Total expenses excluding finance costs
(c) Finance costs
Total finance costs before finance restructuring costs
Finance restructuring costs (refer material items of income and expense in Reconciliation of
Results contained in Directors' Report)
Total finance costs
16,661
17,572
381
208,905
243,519
112,764
50,388
4,569
26,214
81,171
231,788
4,609
37,393
10,964
17,458
70,424
209
1,928
(623)
18,330
18,073
(1)
216,184
252,586
126,408
52,880
3,897
26,070
82,847
223,651
4,208
38,661
11,500
16,370
70,739
255
-
532
17,981
167,435
15,714
3,660
30,593
18,626
90,696
8,735
37
(157)
53,796
980,861
-
3,828
33,220
19,891
98,395
7,589
(3)
169
56,550
1,144,092
29,829
30,635
2,667
32,496
850
31,485
(LOSS) EARNINGS PER SHARE
4
Basic (loss) earnings per share amounts are calculated by dividing net (loss) profit attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares outstanding during the year.
(a) (Loss) earnings per share:
Net (loss) profit attributable to ordinary equity holders of VRL
Basic (loss) earnings per share
Diluted (loss) earnings per share
Net (loss) profit from continuing operations attributable to ordinary equity holders of VRL
Basic (loss) earnings per share
Diluted (loss) earnings per share
2019
2018
(3.4) cents
(3.4) cents
0.14 cents
0.14 cents
(3.4) cents
(3.4) cents
0.14 cents
0.14 cents
51 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
(LOSS) EARNINGS PER SHARE (continued)
4
(b) The following reflects the net loss and weighted average share data outstanding during the period:
Net loss from continuing operations
Net loss attributable to non-controlling interest from continuing operations
Net (loss) profit attributable to ordinary equity holders of VRL (from continuing operations and in total)
Weighted average number of ordinary shares for basic earnings per share
Weighted average number of ordinary shares for diluted earnings per share¹
2019
$'000
(9,580)
3,005
(6,575)
2018
$'000
(3,411)
3,630
219
2019
2018
No. of Shares No. of Shares
161,855,150
191,759,401
161,855,150
191,759,401
1
The issued options were reviewed and determined to represent nil potential ordinary shares as at 30 June 2019 as these options would have an
antidilutive effect on earnings per share (2018: nil potential ordinary shares).
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
completion of these financial statements.
Under Accounting Standard AASB 2: Share-based Payment, shares issued under the Company's various share plans are required to be
accounted for as options. Shares issued under these plans are referred to as 'in-substance options' and are included in ordinary shares for
the purposes of the (loss) earnings per share calculation.
5
(a)
INCOME TAX
Major components of income tax benefit from continuing operations for the years ended 30 June
2019 and 2018 are:
Statement of Comprehensive Income
Current income tax:
Current income tax expense
Deferred income tax:
Relating to origination and reversal of temporary differences
Net deferred tax asset taken up in retained earnings on transition to AASB 15 (refer Note 1(b)(ii))
Movements taken up in Other Comprehensive Income instead of income tax benefit
Income tax benefit reported in statement of comprehensive income - continuing operations
(b)
A reconciliation of income tax benefit applicable to accounting loss before income tax at the
statutory income tax rate to income tax benefit at the Group's effective income tax rate is as
follows:
Net loss before income tax
At the statutory income tax rate of 30% (2018: 30%)
Adjustments in respect of current income tax of previous years
Non-assessable income / expense reversals
Non-deductible expenses
Other deductible expenses
After-tax equity-accounted profits included in pre-tax loss
Net deferred tax balances recognised / de-recognised (refer income tax benefit material items, in
Reconciliation of Results contained in Directors' Report)
Deferred tax balances not recognised
Other
Total income tax benefit - continuing operations - at effective tax rate of 11.3% (2018: 87.9%)
2019
$'000
2018
$'000
304
(3,858)
(669)
(376)
1,961
1,220
24,586
-
3,998
24,726
(10,800)
3,240
849
2,496
(1,341)
2,439
383
576
(7,257)
(165)
1,220
(28,137)
8,441
-
47,077
(325)
-
271
18,439
(49,037)
(140)
24,726
52 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
INCOME TAX (continued)
5
(c) Deferred tax
Deferred income tax at 30 June relates to the following:
CONSOLIDATED
Deferred tax liabilities:
Property, plant & equipment
Film distribution royalties
Intangible assets
Unrealised foreign currency gains
Derivatives
Other
Net-down with deferred tax assets
Total deferred income tax liabilities
Deferred tax assets:
Post-employment benefits
Property, plant & equipment
Sundry creditors and accruals
Provisions and unrealised foreign currency losses
Unearned income
Balance remaining from business combination in 2016
Capitalised development costs
Derivatives
Benefits from revenue losses and prepaid income tax
Other
Net-down with deferred tax liabilities
Total deferred income tax assets
Deferred income tax benefit
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
2018
$'000
2019
$'000
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
2018
$'000
2019
$'000
20,021
23,627
2,191
5,612
202
805
(52,455)
3
8,943
11,453
4,717
2,065
25,379
-
-
24
7,272
563
(52,455)
7,961
31,373
28,990
2,587
2,898
365
1,956
(63,418)
4,751
9,589
20,808
2,118
2,832
26,144
123
-
29
11,169
2,023
(63,418)
11,417
11,352
5,363
396
(2,714)
163
1,151
-
(646)
(9,355)
2,599
(767)
(765)
(123)
-
(5)
(3,897)
(1,460)
-
(4,070)
1,508
58
(2,303)
(346)
(590)
-
327
2,352
438
516
21,720
(562)
(1,391)
(878)
11,169
636
-
1,292
28,584
2019
$'000
2018
$'000
(d)
The following deferred tax assets arising from tax losses have not
been brought to account as realisation of those benefits is not
probable:
Benefits for capital losses
19,299
25,293
Village Roadshow Limited - Tax Consolidation
Effective from 1 July 2003, VRL and its relevant wholly-owned entities have formed a Tax Consolidated group. Members of the Tax
Consolidated group have executed a combined Tax Sharing and Tax Funding Agreement ("TSA") in order to allocate income tax expense to
the wholly-owned entities predominantly on a stand-alone basis.
In addition, the TSA provides for the allocation of income tax liabilities
between the entities should the head entity default on its income tax payment obligations to the Australian Taxation Office. At balance
date, the possibility of default is remote. The head entity of the Tax Consolidated group is VRL. VRL has formally notified the Australian
Taxation Office of its adoption of the tax consolidation regime.
Village Roadshow Limited - Tax Consolidation contribution amounts
In the year ended 30 June 2019, VRL recognised an increase in current tax liabilities of $17.4 million (2018: $7.5 million), and an increase in
inter-company receivables of $17.4 million (2018: $7.5 million) in relation to tax consolidation contribution amounts. The Group's
utilisation of the tax losses has offset these tax consolidation contribution amounts.
DIVIDENDS DECLARED
6
(a) Declared during the year
There have been no dividends declared or paid during the year ended 30 June 2019 (2018: nil).
(b) Declared subsequent to year-end1
Final dividend on ordinary shares of 5.0 cents per share fully-franked (2018: nil cents per share)
2019
$'000
2018
$'000
9,757
9,757
-
-
1
The final dividend for the year ended 30 June 2019, which was declared subsequent to year-end, was not accrued in the 30 June 2019 Financial
Statements.
53 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CASH AND CASH EQUIVALENTS / FINANCING FACILITIES
7
(a) Reconciliation of cash
Cash on hand and at bank1
Deposits at call
Total cash and cash equivalents - continuing operations
2019
$'000
2018
$'000
61,284
369
61,653
62,943
450
63,393
1
Cash on hand and at bank includes $6.7 million (2018: $2.9 million) of cash held on behalf of customers which is
restricted and held in separate bank accounts and used for payment of promotional rebates. This balance cannot
be called upon should the Group become insolvent.
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:
Total cash and cash equivalents - continuing operations
Total cash and cash equivalents for the purposes of the statement of cash flows
61,653
61,653
63,393
63,393
(b) Reconciliation of net loss to net operating cash flows
Net loss
Adjustments for:
Depreciation
Amortisation
Impairment and other non-cash adjustments (refer Note 3(b))
Provisions
Shared-based payment expense (credit)
Net gains on disposal of assets (refer Note 2(c) and Note 3(b))
Unrealised foreign currency (gains) losses
Difference between interest expense and interest paid on finance lease liability
Difference between equity-accounted results and cash dividends/interest received
Changes in assets and liabilities:
(Increase) decrease - trade and other receivables
Increase (decrease) - trade and other payables
Increase - net current tax assets
Increase (decrease) - unearned income
(Decrease) increase - other payables and provisions
Increase - inventories
Decrease - capitalised borrowing costs
(Decrease) increase - deferred and other income tax liabilities
Increase - prepayments and other assets
Decrease - film distribution royalties
Net operating cash flows
(c) Financing facilities available
At reporting date, the following financing facilities were available:
Total facilities
Facilities used at reporting date
Facilities unused at reporting date
Refer also to Note 31 for an analysis of the Group's liquidity profile.
(9,580)
(3,411)
42,002
28,422
17,981
(2,070)
381
(8,111)
(155)
3,010
1,361
(13,994)
12,709
(538)
8,307
(4,012)
(598)
4,607
(6,123)
(9,230)
18,066
82,435
42,869
27,870
167,435
1,725
(1)
(156,667)
396
1,462
115
13,320
(59,175)
(20,769)
(14,008)
3,110
(3,203)
2,082
6,299
(1,540)
13,457
21,366
350,926
285,926
65,000
436,756
405,756
31,000
As at the date of this report, there were undrawn financing facilities of $60.0 million.
(d)
Reconciliation of movements in interest bearing loans & borrowings to cash flows arising from financing activities
Balance as at 1 July 2018
Changes from financing cash flows:
Proceeds from borrowings
Repayment of borrowings
Total changes from financing cash flows
Non-cash changes:
Effect of changes in exchange rates
Amortisation of capitalised borrowing costs
Other changes
Balance as at 30 June 2019
54 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
Current
Interest
Bearing Loans
& Borrowings
$'000
6,866
Non-Current
Interest
Bearing Loans
& Borrowings
$'000
395,024
-
(1,201)
(1,201)
370
-
(9)
6,026
8,000
(131,599)
(123,599)
48
3,747
9
275,229
Total
$'000
401,890
8,000
(132,800)
(124,800)
418
3,747
-
281,255
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
7
(d)
CASH AND CASH EQUIVALENTS / FINANCING FACILITIES (continued)
Reconciliation of movements in interest bearing loans & borrowings to cash flows arising from financing activities (continued)
Balance as at 1 July 2017
Changes from financing cash flows:
Proceeds from borrowings
Repayment of borrowings
Total changes from financing cash flows
Non-cash changes:
Effect of changes in exchange rates
Amortisation of capitalised borrowing costs
Other changes
Balance as at 30 June 2018
TRADE AND OTHER RECEIVABLES
8
Current:
Trade and other receivables
Allowance for expected credit losses (a)
Non-current:
Trade and other receivables
Loans receivable
Due from associates
Allowance for expected credit losses (b)
(a) Trade and other receivables and allowance for expected credit losses1
0 to 3 months - Gross trade and other receivables
> 3 months - Gross trade and other receivables
0 to 3 months - ECL*
> 3 months - ECL*
Total trade and other receivables after allowance
Current
Interest
Bearing Loans
& Borrowings
$'000
1,072
Non-Current
Interest
Bearing Loans
& Borrowings
$'000
626,418
-
(1,064)
(1,064)
43
-
6,815
6,866
39,000
(265,811)
(226,811)
219
2,013
(6,815)
395,024
2019
$'000
Total
$'000
627,490
39,000
(266,875)
(227,875)
262
2,013
-
401,890
2018
$'000
129,465
(128)
129,337
119,715
(415)
119,300
17,561
27
17,588
30,731
(30,731)
-
17,588
140,907
6,146
(68)
(60)
146,925
12,996
10,894
23,890
26,215
(26,180)
35
23,925
140,662
2,943
(60)
(355)
143,190
* Expected Credit Losses ("ECL").
1
Contract assets are included within total trade and other receivables. The expected credit loss on contract assets is negligible.
Movements in the allowance for expected credit losses were as follows:
Carrying amount at beginning
Charge for the year
Foreign exchange translation
Amounts written off for the year
Carrying amount at end
(b) Due from associates and for allowance for expected credit losses
Movements in the allowance for expected credit losses were as follows:
Carrying amount at beginning
Increase for the year
Decrease for the year
Carrying amount at end
415
14
2
(303)
128
1,195
258
(1)
(1,037)
415
26,180
4,551
-
30,731
36,885
3,231
(13,936)
26,180
55 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
INVENTORIES
9
Current:
Merchandise held for resale - at cost
Provision for stock loss
2019
$'000
2018
$'000
24,738
(1,601)
23,137
25,670
(2,092)
23,578
Note: Cost of goods sold expense is represented by amounts paid for inventories - refer Note 3(b).
GOODWILL AND OTHER INTANGIBLE ASSETS
10
FOR THE YEAR ENDED 30 JUNE 2019
At 1 July 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Year ended 30 June 2019
At 1 July 2018, net of accumulated amortisation and impairment
Additions / transfers
Net currency movements arising from investments in foreign operations
Acquisition - Refer Note 34
Impairment
Disposals
Amortisation - refer Note 3(b)
Net carrying amount
At 30 June 2019
Cost
Accumulated amortisation and impairment
Net carrying amount
FOR THE YEAR ENDED 30 JUNE 2018
At 1 July 2017
Cost
Accumulated amortisation and impairment
Net carrying amount
Year ended 30 June 2018
At 1 July 2017, net of accumulated amortisation and impairment
Additions / transfers
Net currency movements arising from investments in foreign operations
Impairment
Disposals
Transferred to Assets held for sale
Amortisation - refer Note 3(b)
Net carrying amount
At 30 June 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Goodwill Brand Names¹
$'000
$'000
Software &
Other
$'000
Total
$'000
315,978
(132,804)
183,174
183,174
-
796
1,076
(10,000)
(601)
-
174,445
317,249
(142,804)
174,445
313,877
(7,804)
306,073
306,073
-
2,101
(125,000)
-
-
-
183,174
315,978
(132,804)
183,174
31,680
(4,020)
27,660
27,660
-
-
-
-
-
-
27,660
31,680
(4,020)
27,660
31,680
(4,020)
27,660
27,660
-
-
-
-
-
-
27,660
110,699
(67,858)
42,841
458,357
(204,682)
253,675
42,841
11,952
21
505
-
(9)
(17,458)
37,852
253,675
11,952
817
1,581
(10,000)
(610)
(17,458)
239,957
116,479
(78,627)
37,852
465,408
(225,451)
239,957
112,167
(64,030)
48,137
48,137
16,064
51
(3,706)
(255)
(1,080)
(16,370)
42,841
457,724
(75,854)
381,870
381,870
16,064
2,152
(128,706)
(255)
(1,080)
(16,370)
253,675
31,680
(4,020)
27,660
110,699
(67,858)
42,841
458,357
(204,682)
253,675
1
In 2019 and 2018, all of the brand names relate to the Village Roadshow Theme Parks group.
(a) Impairment testing of goodwill and brand names
Goodwill and indefinite life intangible assets are tested at least annually for impairment based upon the recoverable amount of the cash
generating units ("CGU's") to which the goodwill and indefinite life intangibles have been allocated. Details of the Group's goodwill and
indefinite life intangible assets are provided below.
Recoverable amount assessed on the basis of fair value less costs of disposal:
The recoverable amount of the material balances of the Group's goodwill and indefinite life intangible assets has been determined based
on fair value less costs of disposal ("FVLCD") calculations. The key assumptions on which the Group has based cash flow projections when
determining FVLCD were that projected future performance was based on past performance and expectations for the future, and that no
significant events were identified which would cause the Group to conclude that past performance was not an appropriate indicator of
future performance.
56 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
10
(a) Impairment testing of goodwill and brand names (continued)
Recoverable amount assessed on the basis of fair value less costs of disposal: (continued)
The pre-tax discount rates applied to the cash flow projections were in the range of 10.5% to 14.3% (2018: 10.4% to 13.0%) for Australian
based CGU's and 9.2% to 10.8% (2018: 9.8% to 11.3%) for the Marketing Solutions UK CGU. Cash flows used were mainly from the Group's
5 year plans. Cash flows beyond five years were extrapolated using a terminal growth rate range of 0% to 2.75% (2018: 0% to 2.75%). The
growth rate does not exceed the long-term average growth rate for the businesses in which the CGU's operate. The Group considers the
inputs and the valuation approach to be consistent with the approach taken by market participants. Under the fair value hierarchy, level 3
inputs were used.
Goodwill allocated for impairment testing included material groupings and 2019 balances as follows:
- Village Roadshow Theme Parks group - $42.6 million (2018: $42.1 million) (re: Australian Theme Park interests)
- Roadshow Distributors Pty. Ltd. group - $17.1 million (2018: $27.1 million) (re: Film Distribution interests)
- Village Cinemas Australia Pty. Ltd. group - $47.2 million (2018: $47.2 million) (re: Australian Cinemas Exhibition interests)
- Village Roadshow Digital Pty. Ltd. group - $22.3 million (2018: $22.3 million) (re: Australian Marketing Solutions interest)
- Edge UK Holdings Ltd. group - $45.3 million (2018: $44.5 million) (re: UK Marketing Solutions interest)
Impairment losses recognised:
In the years ended 30 June 2019 and 30 June 2018, as a result of the on-going decline in the physical market and underperformance of
certain film titles, impairment losses on goodwill of $10.0 million and $30.0 million, respectively, were recognised relating to the Film
Distribution segment thereby reducing the carrying value of the CGU to its recoverable amount.
In the year ended 30 June 2018, the financial performance of the Gold Coast Theme Parks had continued to be significantly impacted by
the tragic incident at a competitor park in the 2017 financial year. As a result, an impairment loss on goodwill of $95.0 million was
recognised relating to the Theme Parks segment thereby reducing the carrying value of the CGU to its recoverable amount. Following the
announcement on 2 July 2018, that the VRL group signed an agreement on 29 June 2018 to sell Wet'n'Wild Sydney, impairment losses on
software and other intangible assets of $3.7 million were recognised to reduce the carrying amount to fair value less costs of disposal.
There was no goodwill recognised relating to Wet'n'Wild Sydney. Assets relating to Wet'n'Wild Sydney were classified as Held for Sale at
30 June 2018.
Brand names:
Brand names owned by the Village Roadshow Theme Parks group are classified as indefinite life intangible assets and are therefore
subject to annual impairment testing. For the purposes of impairment testing the relevant brand names form part of the Australian
Theme Parks CGU (2019: $27.7 million, 2018: $27.7 million). Refer above for further details relating to cash flows, growth and discount
rates.
Sensitivity to changes in assumptions:
With regard to the assessment of recoverable amount of goodwill and other intangible assets for CGU's within the Cinema Exhibition,
Theme Parks and Marketing Solutions segments, if there is a material change to the forecasts and cash flow projection assumptions then
there may be a risk the carrying values will exceed their recoverable amounts. Following the impairment noted above, it is also noted that
if the recovery of earnings of the Film Distribution segment is lower than currently forecast, there may be a risk of further impairment.
OTHER ASSETS AND FILM DISTRIBUTION ROYALTIES
11
(a) Other Assets
Current:
Prepayments
Work in progress
Other assets
Non-current:
Security deposits
(b) Film Distribution Royalties
Opening balance
Additions
Foreign currency movements
Impairment and other non-cash adjustments (refer material items of income and expense in Reconciliation
of Results contained in Directors' Report)1
Film hire and other film expenses
2019
$'000
2018
$'000
5,924
11,914
1,129
18,967
173
173
111,221
51,739
360
(1,819)
(70,165)
91,336
6,233
2,973
977
10,183
294
294
127,205
72,259
1,934
(2,526)
(87,651)
111,221
1
Following a detailed analysis of film distribution royalty amounts in the Film Distribution segment in the year ended 30 June 2019, impairment and
other non-cash adjustments in relation to an onerous contract totalling $1.3 million (2018: $1.8 million) after tax were recognised.
57 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
OTHER ASSETS AND FILM DISTRIBUTION ROYALTIES (continued)
11
(b) Film Distribution Royalties (continued)
Current film distribution royalties
Non-current film distribution royalties
INVESTMENTS - EQUITY-ACCOUNTED
12
Non-current:
Investments - equity-accounted
2019
$'000
2018
$'000
37,439
53,897
91,336
47,704
63,517
111,221
32,463
31,742
(a)
Detailed information: Village Roadshow Entertainment Group business ("VREG") consisting of Village Roadshow Entertainment
Group (BVI) Limited
(i) Nature of Relationship and Ownership Percentage:
The VRL group owns 20% (2018: 20%) of the ordinary shares in VREG. The VRL group has USD 10 million of subordinated notes (ranking in
priority to the ordinary equity of VREG) outstanding from VREG, repayable by November 2022, with a non-cash return of 15.5%.
The investment in VREG is equity-accounted, and as a result of the significant negative net asset position of VREG, the carrying value of the
net investment had been written down to nil due to the recognition of accumulated losses, so that the VRL group had no carrying value for
accounting purposes.
VREG is classified as an associate for accounting purposes, and it is noted that all VREG debt is non-recourse to the VRL group. The VRL
group results only include interest or dividends received in cash from VREG, and in the year ended to 30 June 2019, no cash interest was
included in equity-accounted results (2018: nil), and no cash dividends were received in either the current or previous corresponding
periods.
(ii) Principal Place of Business and Country of Incorporation:
Village Roadshow Entertainment Group (BVI) Limited was incorporated in the British Virgin Islands, and its principal place of business is
Road Town, Tortola, British Virgin Islands.
(iii) Dividends Received:
In the year ended 30 June 2019, the VRL group did not receive any dividends from VREG (2018: nil).
(iv) Summarised Financial Information (at 100%):
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity (deficiency)
Carrying value of investment
Total income
Operating (loss) profit after tax - continuing operations
Operating profit after tax - discontinued operations
Total operating (loss) profit after tax
Other Comprehensive expense
Total Comprehensive (expense) income
Equity-accounted share of VREG's loss after tax
Cumulative unrecognised share of VREG's losses after income tax due to discontinuation of
equity method
2019
$'000
2018
$'000
98,379
207,160
48,759
1,258,016
(1,001,236)
66,719
367,987
119,705
1,128,528
(813,527)
-
-
247,509
(85,131)
-
(85,131)
-
(85,131)
-
144,575
65,353
-
65,353
(553)
64,800
-
(187,983)
(160,617)
The summarised financial information shown above is based on the unaudited management accounts of VREG, as the audited accounts
are not yet available.
All VREG debt is non-recourse to the VRL group.
(b) Detailed information: FilmNation Entertainment LLC ("FilmNation"):
(i) Nature of Relationship and Ownership Percentage:
The VRL group owns 31.03% (2018: 31.03%) of the ordinary shares in FilmNation. FilmNation is classified as an associate for accounting
purposes.
(ii) Principal Place of Business and Country of Incorporation:
FilmNation was incorporated in the United States of America, and the principal place of business for FilmNation and its subsidiaries is 150
West 22nd Street, 9th Floor, New York, USA.
58 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
INVESTMENTS - EQUITY-ACCOUNTED (continued)
12
(b) Detailed information: FilmNation Entertainment LLC ("FilmNation"): (continued)
(iii) Dividends Received:
In the year ended 30 June 2019, the VRL group received $2.6 million in dividends from FilmNation (2018: $1.0 million).
(iv) Summarised Financial Information (at 100%):
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Carrying value of investment
Total income
Operating profit after tax - continuing operations
Operating profit after tax - discontinued operations
Total operating profit after tax
Other Comprehensive Income
Total Comprehensive Income
Equity-accounted share of FilmNation's profit after tax
2019
$'000
2018
$'000
162,445
11,447
76,836
52,374
44,682
31,604
129,473
4,454
-
4,454
-
4,454
1,382
121,035
36,128
84,838
25,247
47,078
30,750
47,597
3,603
-
3,603
-
3,603
1,118
The summarised financial information shown above is based on the unaudited management accounts of FilmNation, as the audited
accounts for FilmNation are prepared as at 31 December each year.
(c) Detailed information: iPic Entertainment Inc. group:
(i) Nature of Relationship and Ownership Percentage:
The VRL group owns 24.4% (2018: 24.5%) of the ordinary shares in iPic Entertainment Inc. group.
iPic Entertainment Inc. is classified as an associate for accounting purposes. The fair value of the VRL group's investment in the iPic
Entertainment Inc. group at 30 June 2019 based on the quoted market price was USD 10.4 million (2018: USD 22.6 million). On 5 August
2019, iPic Entertainment Inc. announced that it had filed voluntary petitions for bankruptcy protection under Chapter 11 of the US
Bankruptcy code. Refer to Note 28 for further information and Note 23(a)(iii) regarding the settlement of VRL's guarantee exposure to the
iPic business.
(ii) Principal Place of Business and Country of Incorporation:
iPic Entertainment Inc. was incorporated in the United States of America, and the principal place of business for the iPic Entertainment
Inc. group is 433 Plaza Real, Suite 335, Boca Raton, Florida, USA.
(iii) Dividends Received:
In the year ended 30 June 2019, the VRL group did not receive any dividends from the iPic Entertainment Inc. group (2018: nil).
(iv) Summarised Financial Information (at 100%):
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity (deficiency)
Carrying value of investment
Total income
Operating loss after tax - continuing operations
Operating profit after tax - discontinued operations
Total operating loss after tax
Other Comprehensive Income
Total Comprehensive Expense
Equity-accounted share of iPic Entertainment Inc. group loss after tax
Cumulative unrecognised share of iPic Entertainment Inc. group losses after income tax
due to discontinuation of equity method (2019: 24.4% and 2018: 24.5%)
2019
$'000
2018
$'000
8,986
208,664
133,171
309,497
(225,018)
17,931
187,559
33,844
298,558
(126,912)
-
-
189,940
(73,618)
-
(73,618)
-
(73,618)
-
182,289
(76,922)
-
(76,922)
-
(76,922)
-
(45,969)
(28,151)
The summarised financial information shown above is based on the unaudited management accounts of iPic Entertainment Inc. group as
the audited accounts for iPic Entertainment Inc. group are prepared as at 31 December each year.
59 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
INVESTMENTS - EQUITY-ACCOUNTED (continued)
12
(d) Aggregated information - other equity-accounted investments:
(i) Aggregated financial information - other equity-accounted investments:
Carrying value of investment
Share of operating loss after tax
Share of other Comprehensive Income
Share of Total Comprehensive Expense
2019
$'000
859
(107)
-
(107)
2018
$'000
992
(214)
-
(214)
INTERESTS IN JOINT OPERATIONS
13
Names and principal activities of joint operations, and the percentage interest held by entities in the Group in those joint operations:
NAME
Australian Theatres
Browns Plains Multiplex Cinemas
Carlton Nova / Palace
Castle Towers Multiplex Cinemas
Loganholme Cinemas
Morwell Multiplex Cinemas
Mt. Gravatt Multiplex Cinemas
TG-VR Australia1
Village / GUO / BCC Cinemas
Village / Sali Cinemas Bendigo
Village Warrnambool Cinemas
Werribee Cinemas
PRINCIPAL ACTIVITY
Multiplex cinema operator
Multiplex cinema operator
Cinema operator
Multiplex cinema operator
Cinema operator
Cinema operator
Cinema operator
Sports entertainment operator
Cinema operator
Cinema operator
Cinema operator
Cinema operator
% INTEREST
HELD 2019
50.00%
50.00%
25.00%
50.00%
50.00%
75.00%
33.33%
see footnote
50.00%
50.00%
50.00%
50.00%
% INTEREST
HELD 2018
50.00%
50.00%
25.00%
50.00%
50.00%
75.00%
33.33%
66.67%
50.00%
50.00%
50.00%
50.00%
1
Effective from 13 August 2018, the ownership percentage of the Topgolf Joint Venture by the VRL group’s joint venture partner, Topgolf Australia Pty.
Ltd. has reduced from 33.33% down to 3.7%. As a result, the VRL group's ownership percentage in the Topgolf Joint Venture has increased from
66.67% to 96.3% (refer Note 34 for further information) and is now controlled by VRL.
There were no impairment losses in the joint operations.
Share of contingent assets and contingent liabilities incurred jointly with other partners - refer Note 23 for disclosures.
14
SUBSIDIARIES
NAME
Countrywide Property Investments (UK) Limited
DEG Holdings Pty. Limited
Edge Loyalty Systems Pty. Limited
Edge Loyalty Europe Limited
Edge PRI (Asia) Pte. Limited
Edge UK Holdings Limited
Entertainment of The Future Pty. Limited
Harvest Family Entertainment Arizona LLC3
Lyfe Loyalty Pty. Limited
Movie World Holdings Joint Venture
MyFun Pty. Limited
Opia International (UK) Limited
Opia Limited
Opia LP
Opia Risk (SA) Limited2
Opia Russia Limited
Opia US Inc.
Opia (Thailand) Limited3
PC Subscription Limited
Reel DVD Pty. Limited
Roadshow Distributors Pty. Limited
Roadshow Entertainment (NZ) Limited
Roadshow Films Pty. Limited
Roadshow Pay Movies Pty. Limited
Roadshow Productions Pty. Limited
Roadshow Television Pty. Limited
Roadshow Unit Trust
60 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
COUNTRY OF
INCORPORATION¹
United Kingdom
Australia
Australia
United Kingdom
Singapore
United Kingdom
Australia
United States
Australia
Australia
Australia
United Kingdom
United Kingdom
United States
South Africa
Russia
United States
Thailand
United Kingdom
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
% OWNED
2019
80.00%
100.00%
100.00%
80.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
80.00%
80.00%
80.00%
80.00%
80.00%
80.00%
-
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
% OWNED
2018
80.00%
100.00%
100.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
80.00%
80.00%
80.00%
-
80.00%
80.00%
80.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
14
SUBSIDIARIES (continued)
NAME
RPRD #1 Pty. Limited
RPRD #2 Pty. Limited
RPRD #3 Pty. Limited2
Sea World Helicopters Pty. Limited3
Sea World Management Pty. Limited
Sea World Property Trust
Sincled Investments Pty. Limited
Summit Digital Limited
The Waterpark LLC
The Waterpark Management LLC
Village Cinemas Australia Pty. Limited
Village Golf Australia Pty. Limited
Village Golf Holdings Pty. Limited
Village Online Investments Pty. Limited
Village Roadshow (Fiji) Limited
Village Roadshow Attractions USA Inc.
Village Roadshow Australian Films Pty. Limited
Village Roadshow Digital Pty. Limited
Village Roadshow East Coast Pty. Limited
Village Roadshow Exhibition Pty. Limited
Village Roadshow Group Services Pty. Limited
Village Roadshow Holdings Hong Kong Limited
Village Roadshow Holdings Pty. Limited
Village Roadshow Intencity Pty. Limited
Village Roadshow Investments Holdings USA Inc.
Village Roadshow IP Pty. Limited
Village Roadshow Leisure Pty. Limited
Village Roadshow Pictures International Pty. Limited
Village Roadshow Pictures Television Pty. Limited
Village Roadshow Share Plan Pty. Limited
Village Roadshow SPV1 Pty. Limited
Village Roadshow Theatres Pty. Limited
Village Roadshow Theme Parks Operations (Hainan) Limited
Village Roadshow Theme Parks Operations (Yunnan) Co. Limited2
Village Roadshow Theme Parks Operations (Zhuhai) Co. Limited
Village Roadshow Theme Parks Pty. Limited
Village Roadshow Treasury Pty. Limited
Village Roadshow UK Holdings Pty. Limited
Village Roadshow USA Holdings Pty. Limited
Village Theatres 3 Limited
Village Theatres Morwell Pty. Limited
VR - Big Croc Pty. Limited2
VR Corporate Services Pty. Limited
VR ESP Finance Pty. Limited
VR Leisure Holdings Pty. Limited
VR Theme Parks Holdings USA Inc.3
VR Theme Parks USA Inc.3
VRPPL Pty. Limited
VRS Holdings Pty. Limited
VRTP Entertainment Pty. Limited
VRTP Services Pty. Limited
WB Properties Australia Pty. Limited
Wet'n'Wild Sydney Pty. Limited3
WSW Units Pty. Limited
COUNTRY OF
INCORPORATION¹
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United States
United States
Australia
Australia
Australia
Australia
Fiji
United States
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
China
China
Australia
Australia
Australia
Australia
United Kingdom
Australia
Australia
Australia
Australia
Australia
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
1
2
3
Foreign subsidiaries carry out their business activities in the country of incorporation.
Entity purchased or incorporated during the year.
Entity sold or dissolved during the current year.
61 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
% OWNED
2019
99.00%
99.00%
99.00%
-
100.00%
100.00%
100.00%
80.00%
50.09%
50.00%
100.00%
66.67%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
75.00%
100.00%
100.00%
100.00%
100.00%
-
-
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
% OWNED
2018
99.00%
99.00%
-
100.00%
100.00%
100.00%
100.00%
80.00%
50.09%
50.00%
100.00%
66.67%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
75.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
PROPERTY, PLANT & EQUIPMENT
15
Land:
At cost
Finance lease asset:
At cost
Buildings & improvements:
At cost
Less depreciation and impairment
Capital work in progress:
At cost less impairment
Leasehold improvements:
At cost
Less amortisation and impairment
Plant, equipment & vehicles:
At cost
Less depreciation and impairment
(a) Reconciliations
Land:
Carrying amount at beginning
Additions
Disposals
Net foreign currency movements arising from investments in foreign operations
Carrying amount at end
Finance lease asset:
Carrying amount at beginning
Addition - refer Note 33
Carrying amount at end
Buildings & improvements:
Carrying amount at beginning
Additions / transfers
Net foreign currency movements arising from investments in foreign operations
Impairment1
Disposals
Transferred to Assets held for sale1
Depreciation expense
Carrying amount at end
Capital work in progress:
Carrying amount at beginning
Additions
Net foreign currency movements arising from investments in foreign operations
Transferred to Assets held for sale1
Transfers
Carrying amount at end
Leasehold improvements:
Carrying amount at beginning
Additions / transfers
Acquisition - refer Note 34
Net foreign currency movements arising from investments in foreign operations
Impairment1
Disposals
Transferred to Assets held for sale1
Amortisation expense
Carrying amount at end
62 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
2019
$'000
2018
$'000
8,646
10,084
101,500
101,500
154,043
(52,179)
101,864
144,822
(45,516)
99,306
21,001
17,676
296,000
(143,308)
152,692
726,496
(455,982)
270,514
656,217
281,712
(133,300)
148,412
691,164
(428,199)
262,965
639,943
10,084
-
(1,722)
284
8,646
101,500
-
101,500
99,306
9,074
826
(2,407)
(326)
-
(4,609)
101,864
17,676
18,117
16
-
(14,808)
21,001
148,412
7,554
7,798
-
-
(108)
-
(10,964)
152,692
34,413
1,676
(26,220)
215
10,084
-
101,500
101,500
99,397
15,420
586
-
(514)
(11,375)
(4,208)
99,306
15,919
43,900
14
(473)
(41,684)
17,676
167,055
16,555
-
1
(12,160)
(24)
(11,515)
(11,500)
148,412
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
PROPERTY, PLANT & EQUIPMENT (continued)
15
(a) Reconciliations (continued)
Plant, equipment & vehicles:
Carrying amount at beginning
Additions / transfers
Acquisition - refer Note 34
Impairment1
Net foreign currency movements arising from investments in foreign operations
Disposals
Transferred to Assets held for sale1
Depreciation expense
Carrying amount at end
2019
$'000
2018
$'000
262,965
47,492
3,198
(2,977)
180
(2,951)
-
(37,393)
270,514
299,029
34,307
-
(16,480)
53
(194)
(15,089)
(38,661)
262,965
1
Impairment losses on property, plant & equipment of $5.4 million (2018: $8.5 million) were recognised in the year ended 30 June 2019 in relation to
Wet'n'Wild Las Vegas which is in the Theme Parks segment. For the Wet'n'Wild Las Vegas assessment, the pre-tax discount rate used was 10.4% and
the recoverable amount was based on fair value less costs of disposal. Cash flows beyond five years were extrapolated using a terminal growth rate of
2.5%, and the latest updated forecasts were used in the impairment review, which were lower than the forecasts included in the latest 5 year plan due
to the relevant underlying financial performance being lower than expected. The Group considers the inputs and the valuation approach to be
consistent with the approach taken by market participants. Under the fair value hierarchy, level 3 inputs were used, and the impairment losses have
been disclosed in Note 3(b).
Impairment losses for property, plant & equipment of $28.6 million were recognised for continuing operations in the year ended 30 June 2018, related
to the Theme Parks segment. In addition, impairment losses on software and other intangible assets of $3.7 million were recognised in the year ended
30 June 2018, also relating to the Theme Parks segment. Following the announcement on 2 July 2018, that the VRL group had signed an agreement on
29 June 2018 to sell Wet'n'Wild Sydney, impairment losses on property, plant & equipment of $20.1 million were recognised to reduce the carrying
amount to fair value less costs of disposal. Assets relating to Wet'n'Wild Sydney were classified as Held for Sale at 30 June 2018.
Sensitivity to changes in assumptions:
With regard to the assessment of recoverable amount of property, plant & equipment for CGU's within the Cinema Exhibition, Film
Distribution and Marketing Solutions segments, the Group believes that no reasonably possible change in any of the above key
assumptions would cause the carrying value to exceed recoverable amounts. Following the impairment noted above, it is also noted that
if the recovery of earnings of the Wet'n'Wild Las Vegas is lower than currently forecast, there may be a risk of further impairment.
TRADE AND OTHER PAYABLES
16
Current:
Trade and sundry payables
Non-current:
Trade and sundry payables
Owing to other
For terms and conditions refer to Note 31(c)(ii).
INTEREST BEARING LOANS AND BORROWINGS
17
Current:
Secured borrowings
Non-current:
Secured borrowings
2019
$'000
2018
$'000
228,400
202,777
30,220
20,613
50,833
39,227
3,509
42,736
6,026
6,866
275,229
395,024
Terms and conditions relating to the VRL group finance facility:
As advised to the Australian Securities Exchange on 21 December 2018, the VRL group refinanced its Group finance facility with a
syndicate of local and international lenders. The total facility of $340 million includes a three-year revolving facility of $230 million and a
five-year term debt facility of $110 million. These facilities have no scheduled amortisation and are subject to interest at variable interest
rates (however the Group has interest rate hedging in place over a portion of the debt). These facilities are secured by guarantees from
VRL and various wholly-owned subsidiaries and charges over the assets of those subsidiaries.
The VRL group finance facility requires the Group to meet certain debt covenants. The Group is in compliance with these covenants at 30
June 2019.
PROVISIONS
18
Current:
Employee benefits
Other
63 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
2019
$'000
2018
$'000
29,588
1,793
31,381
31,533
3,216
34,749
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
PROVISIONS (continued)
18
Non-current:
Employee benefits
Make good provision
Other
Employee benefit liabilities:
Provision for employee benefits -
Current
Non-current
Aggregate employee benefit liabilities
(a) Reconciliations
Make good provision:
Carrying amount at the beginning of the financial year
Amounts added during the year
Amounts utilised or written back during the year
Discount adjustment
Carrying amount at the end of the financial year
Other provisions:
Carrying amount at the beginning of the financial year
Increase in provision
Amounts utilised or written back during the year
Foreign currency movements
Carrying amount at the end of the financial year
2019
$'000
961
5,223
2,469
8,653
2018
$'000
1,057
4,628
4,907
10,592
29,588
961
30,549
31,533
1,057
32,590
4,628
633
(120)
82
5,223
8,123
-
(3,873)
12
4,262
4,463
500
(501)
166
4,628
5,161
4,138
(1,188)
12
8,123
Make good provision:
In accordance with certain lease agreements, the Group must restore leased premises to the original condition on expiration of the
relevant lease. Provisions are raised in respect of such 'make good' clauses to cover the Group's obligation to remove leasehold
improvements from leased premises where this is likely to be required in the foreseeable future. Make good provisions are also
recognised in relation to the likely closure of rides/attractions in the Theme Parks division. Because of the long-term nature of the liability,
the greatest uncertainty in estimating the provision is the costs that will ultimately be incurred.
Other provisions:
Other provisions mainly comprise of rent incentive provisions which are being amortised over the life of the corresponding leases, with
the balance relating to various other matters.
UNEARNED REVENUE AND OTHER LIABILITIES
19
Current:
Unearned revenue - revenue from contracts with customers - refer Note 2(d)
Unearned revenue - other
Other
Non-current:
Unearned revenue - revenue from contracts with customers - refer Note 2(d)
Unearned revenue - other1
Other
2019
$'000
2018
$'000
50,666
4,214
8,882
63,762
565
76,225
-
76,790
45,198
4,930
-
50,128
798
79,448
1,240
81,486
1
The non-current unearned revenue predominantly relates to the deferred gain on the sale and long-term leaseback of the VRL group's freehold land on
the Gold Coast. As at 30 June 2019, the unearned revenue amounts to $69.3 million (2018: $72.2 million). Refer to Note 33 for further information.
CONTRIBUTED EQUITY
20
Issued and fully paid up capital:
Ordinary shares
Employee share loans deducted from equity1
1 Secured advances - executive loans (refer also to Note 26).
64 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
296,485
(21,314)
275,171
244,428
(18,880)
225,548
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CONTRIBUTED EQUITY (continued)
20
Under the terms of the Executive Share Option Plan Loan Facility, dividends are used to repay the interest accrued with any surplus
dividend payment used to repay the capital amount of the loan.
Under the terms of the Executive Share Plan & Loan Facility to 2011, 10 cents of every dividend per share is used to repay the interest
accrued and 50% of any remaining dividend per share is used to repay the capital amount of the loan. Under the terms of the Executive
Share Plan & Loan Facility for allotments from 2012 onwards, 20 cents of every dividend per share is used to repay the interest accrued
and 50% of any remaining dividend per share is used to repay the capital amount of the loan. For allotments from 1 July 2016, the loan
interest rate is 25 cents per share.
Ordinary shares:
During the 2019 and 2018 years, movements in fully paid ordinary shares on issue were as follows:
Beginning of the financial year
Allotment - September 2017 at $3.73 - Directors' Share Plan
Allotment - December 2017 at $3.91 - Directors' Share Plan
Allotment - March 2018 at $3.42 - Directors' Share Plan
Buy-back - May 2018 at $4.72 - Executive Share Plan
Allotment - June 2018 at $2.40 - Directors' Share Plan
Entitlement offer - July/August 2018 - $1.65
Allotment - September 2018 at $2.22 - Directors' Share Plan
Allotment - December 2018 at $2.50 - Executive Share Plan
Allotment - December 2018 at $2.50 - Directors' Share Plan
Allotment - March 2019 at $3.34 - Directors' Share Plan
Buy-back - May 2019 at $4.72 - Executive Share Plan
Allotment - June 2019 at $3.27 - Directors' Share Plan
End of the financial year
CONSIDERATION
2018
$'000
244,421
73
72
72
(283)
73
-
-
-
-
-
-
-
244,428
2019
$'000
244,428
-
-
-
-
-
49,211
54
3,125
58
64
(519)
64
296,485
2019
Thousands
161,860
-
-
-
-
-
31,130
24
1,250
23
19
(110)
20
194,216
NO. OF SHARES
2018
Thousands
161,830
20
19
21
(60)
30
-
-
-
-
-
-
-
161,860
Entitlement offer:
As advised to the Australian Securities Exchange on 10 July 2018 (and updated a number of times in July and August 2018), the Company
completed a 5 for 26 pro-rata accelerated non-renounceable entitlement offer during the year. The offer raised net proceeds of $49.2
million, and the net proceeds were used to reduce the VRL group’s borrowings.
Issued options:
In accordance with a special resolution of the Company's shareholders on 15 November 2012, 4,500,000 options over ordinary shares
were allotted to Mr. Graham W. Burke, the Chief Executive Officer, with 1,500,000 options being exercisable at an exercise price of $3.76
per share not earlier than 1 March 2016; 1,500,000 options being exercisable at an exercise price of $3.76 per share not earlier than 1
March 2017; and 1,500,000 options being exercisable at an exercise price of $3.76 per share not earlier than 1 March 2018. Following the
$0.25 reduction of share capital approved by shareholders at the Annual General Meeting in November 2013, the exercise price of these
options was reduced to $3.51 per share, effective from 31 December 2013. Following the pro-rata non-renounceable 5 for 26 rights issue
in July 2018, the exercise price of the options was reduced to $3.41.
All the options were subject to performance hurdles as outlined in Note 26 and were exercisable no later than 1 March 2019 or 12 months
following cessation of Mr. Burke’s employment with the Company, whichever was the earlier. 750,000 second tranche options due to vest
on 1 March 2017 vested and 750,000 third tranche options due to vest on 1 March 2018 vested as the DPS CAGR hurdles were met. The
1,500,000 vested options, which remained unexercised as at 30 June 2018, were not exercised and lapsed during the 2019 financial year.
No options remain at 30 June 2019.
The names of all persons who currently hold options are entered in the register kept by the Company, which may be inspected free of
charge.
The Company has issued various 'in substance options' - refer Note 26.
Terms and conditions of contributed equity:
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, holders of such shares have
the right to participate in the distribution of any surplus assets of the Company.
Ordinary shares entitle their holder to the following voting rights:
- On a show of hands - one vote for every member present in person or by proxy.
- On a poll - one vote for every share held.
65 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
CONTRIBUTED EQUITY (continued)
20
Capital management:
When managing capital, management's objective is to ensure that the Group continues as a going concern, as well as to maintain optimal
returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the Group.
As the market is constantly changing and the Group reviews new opportunities, management may change the amount of dividends to be
paid to shareholders, issue new shares or sell assets to reduce debt, as methods of being able to meet its capital objectives.
Management undertake continual reviews of the Group's capital structure and use gearing ratios as a key metric for this analysis (net
debt/total capital). The gearing ratios at 30 June 2019 and 2018 were as follows:
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2019
$'000
281,255
(61,653)
219,602
434,509
654,111
34%
2018
$'000
401,890
(63,393)
338,497
393,811
732,308
46%
Other than as required as usual under various financing agreements, the Group is not subject to any externally imposed capital
requirements.
RESERVES AND RETAINED EARNINGS
21
Foreign currency translation reserve:
The foreign currency translation reserve is used to record exchange differences arising from the
translation of the financial statements of foreign subsidiaries and on equity-accounted investments.
Balance at beginning of year
Amount relating to translation of accounts and net investments before tax effect
Tax effect of relevant movements for the year
Balance at end of year
Cash flow hedge reserve:
This reserve records the portion of the gain or loss on hedging instruments that are classified as cash
flow hedges, and which are determined to be effective hedges.
Balance at beginning of year
Movement on effective hedging instruments during the year before tax effect
Tax effect of movement on effective hedging instruments during the year
Balance at end of year
Equity instruments reserve:
This reserve records the change in fair value in equity instruments financial assets.
Balance at beginning of year
Gain on equity instruments at fair value through OCI
Balance at end of year
2019
$'000
2018
$'000
(9,166)
2,647
(2,197)
(8,716)
(461)
514
236
289
364
(434)
(70)
(3,649)
(2,767)
(2,750)
(9,166)
(2,705)
3,492
(1,248)
(461)
-
364
364
Asset revaluation reserve:
The asset revaluation reserve is used to record uplifts on assets owned following business combinations.
Balance at beginning of year
Balance at end of year
91,474
91,474
91,474
91,474
Employee equity benefits reserve:
This reserve is used to record the value of equity benefits provided to Directors and executives as part
of their remuneration (refer Note 26).
Balance at beginning of year
Share-based payment movements
Balance at end of year
Controlled entity acquisition reserve:
This reserve represents the incremental amount for the put and call options over the remaining 20%
non-controlling interest in Countrywide Property Investments (UK) Limited and subsidiaries ("Opia").
Balance at beginning of year
Change in fair value
Balance at end of year
13,243
381
13,624
13,244
(1)
13,243
(9,024)
809
(8,215)
(8,856)
(168)
(9,024)
66 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
RESERVES AND RETAINED EARNINGS (continued)
21
General reserve:
The general reserve is used for amounts that do not relate to other specified reserves.
Balance at beginning of year
Balance at end of year
Total reserves
Retained earnings:
Balance at the beginning of year
Adoption of new accounting standards - refer Note 1(b)
Net (loss) profit attributable to members of VRL
Total available for appropriation
Balance at end of year
NON-CONTROLLING INTEREST
22
Non-controlling interest in subsidiaries:
Contributed equity / other
Adoption of new accounting standards - refer Note 1(b)
Retained earnings
CONTINGENCIES
23
(a) Contingent liabilities
Best estimate of amounts relating to:
(i) Joint and several obligations for operating lease commitments of partners in joint operations1
1
Refer Note 23(b)(i) for corresponding amount reflecting the related contingent assets.
2019
$'000
2018
$'000
344
344
344
344
88,730
86,774
70,509
(1,194)
(6,575)
62,740
62,740
18,933
(310)
(10,755)
7,868
70,290
-
219
70,509
70,509
17,965
-
(6,985)
10,980
29,098
4,371
(ii) Other contingent liabilities - Income Tax:
The VRL group anticipates that tax audits may occur from time to time in Australia, and the VRL group is subject to routine tax audits in
certain overseas jurisdictions.
As disclosed in Note 22(a)(iii) in the 30 June 2018 financial report, following a Client Risk Review, the Australian Taxation Office (“ATO”)
advised in July 2016 that a Tax Audit was to be carried out in relation to the VRL Tax Consolidated group.
Since the commencement of the audit, VRL has provided multiple rounds of information requested by the ATO. In July 2019, the ATO
issued a position paper. VRL responded to the ATO position paper in August 2019. The outcome of VRL’s response and any subsequent
ATO step is not expected until second quarter of FY20. VRL does not believe that any material impact will arise from this Tax Audit.
(iii) Guarantee issued in relation to Associate:
As disclosed in Note 22(a)(iv) in the 30 June 2018 financial report, VRL procured a bank guarantee to support the financing of an
associated entity relating to the iPic business. VRL’s guarantee exposure in relation to the iPic business is USD 5.6 million and was
previously disclosed as a contingent liability. As at 30 June 2019, VRL has recognised the full amount of this financial guarantee liability at
USD 5.6 million (A$8.0 million). Refer Note 28 for further information.
(b) Contingent assets
In the event that any entity in the Group is required to meet a joint venture or partnership liability in excess of its proportionate share,
that entity has right of recourse against the co-joint venturers or other partners in respect of that excess. Specifically, the Group has a
contingent asset for the amount of the following joint and several operating lease commitments in the event that it is called upon to meet
liabilities of the other joint venturers:
(i) Right of recourse in relation to joint and several obligations for operating lease commitments
of partners in joint operations1
1
Refer Note 23(a)(i) for corresponding amount reflecting the related contingent liabilities.
2019
$'000
2018
$'000
29,098
4,371
67 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
COMMITMENTS
24
(a) Operating leases
The Group has entered into commercial leases for cinemas, offices and other operational location sites. The lease commitments schedule
below includes cinema, office and attraction leases with terms of up to 15 years, however it does not include terms of renewal. In general,
cinema, office and attraction leases do not include purchase options although on rare occasions there may be a purchase option.
Renewals are at the option of the specific entity that holds that lease. In addition, the leases include the Crown leases entered into by Sea
World Property Trust, which have a remaining term of 38 years.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
(i) Operating leases - Minimum lease payments:
Payable within 1 year
Payable between 1 and 5 years
Payable after 5 years
(ii) Operating leases - Percentage based lease payments:1
Payable within 1 year
Payable between 1 and 5 years
Payable after 5 years
Total operating lease commitments
2019
$'000
2018
$'000
48,594
138,054
213,920
400,568
4,254
12,184
18,157
34,595
435,163
53,340
162,423
254,385
470,148
3,340
11,384
15,239
29,963
500,111
1
Accounting standard AASB 117: Leases applies to the rental commitments of the Group. The Group is required to pay percentage rent on certain
operating leases. Percentage rent is payable as either Incentive Rent or Revenue Share.
Incentive Rent occurs when the operating lease creates a
liability to pay the lessor a percentage of the Gross Receipts when a cinema site's earnings exceed the base threshold. Gross receipts are generally
made up of box office takings, concession sales and screen advertising, but may also include revenue from licence fees, arcade games and the sale of
promotional material.
It is not possible for the Group to reliably determine the amount of percentage rent that will be payable under each of the
operating leases, as such, percentage rent is expensed as incurred, rather than being included in the operating rent expense recognised on a straight-
line basis over the life of the lease.
(b) Other expenditure commitments
Estimated capital and other expenditure contracted for at reporting date but not provided for:
2019
$'000
2018
$'000
16,397
7,063
KEY MANAGEMENT PERSONNEL DISCLOSURES
25
Detailed remuneration disclosures of the Key Management Personnel ("KMP") of Village Roadshow Limited and the Group are set out in
the Remuneration Report section of the Directors' Report.
(a) Compensation of Key Management Personnel by category
The compensation, by category, of the KMP is set out below:
Short-term
Post-employment
Other Long-term
Sub-totals
Share-based Payment
Total
VILLAGE ROADSHOW LIMITED
AND THE GROUP
2019
2018
$
$
7,152,668
5,672,443
174,194
145,849
(221,316)
483,314
7,810,176
5,596,976
142,892
(228,990)
7,581,186
5,739,868
(b) Other transactions and balances with Key Management Personnel
In addition to specific disclosure requirements, the VRL group continuously re-assesses judgemental matters surrounding relationships
with KMP and completeness of its related party disclosures. Judgements relating to the following relationships have been reviewed by the
VRL group and considered prudent to make a judgement in this year to include these as related party disclosures.
The VRL group purchased uniforms from Leaf Group Pty. Ltd., an entity associated with a relative of R.G. Kirby. Purchases from the Leaf
Group first occurred in 2003, prior to the establishment of the familial relationship with R.G. Kirby, which arose in 2008. The total
purchases were $242,735 in the year ended 30 June 2019 (2018: $298,779). The uniforms were purchased for the Theme Parks and
Cinema Exhibition divisions and these transactions were carried out under arm’s length terms and conditions. As at 30 June 2019, the total
amount owing by the VRL group, and included in current liabilities was $51,150 (2018: $66,767). The Company is in the process of
conducting a competitive tender for uniform purchases for the year ending 30 June 2020.
68 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
25
(b) Other transactions and balances with Key Management Personnel (continued)
As reported in the 31 December 2018 half-year financial report, the Theme Parks division entered into a contract in the current year for
call centre services with Oracle Customer Management Solutions Pty. Ltd. ("OCMS"). OCMS has sub-contracted some of those services to a
company in which a relative of G.W. Burke has an economic interest. Total purchases under the contract were $1,870,391 in the year
ended 30 June 2019 and these transactions were carried out under arm’s length terms and conditions. As at 30 June 2019, there were no
amounts owing by the VRL group under the contract. The Group has re-assessed this contract and taken advice, and determined that it is
not a reportable related party transaction. Unless the circumstances change, this transaction will no longer be disclosed in the future.
Peninsula Cinemas Pty. Ltd. ("Peninsula Cinemas"), which are non-competing cinemas owned by an entity associated with Mr. R.G. Kirby,
exhibit films supplied by the Film Distribution division of the VRL group on arm's length terms and conditions. The total amount charged by
the VRL group for the year ended 30 June 2019 was $228,829 (2018: $242,965). Other net reimbursement amounts paid by Peninsula
Cinemas to the VRL group in relation to operational cinema matters in the year ended 30 June 2019 totalled $18,159 (2018: $8,252).
The VRL group purchased wine from Yabby Lake International Pty. Ltd. ("Yabby Lake"), an entity in which family members of Mr. R.G. Kirby
have an economic interest. The total purchases were $329,789 for the year ended 30 June 2019 (2018: $365,393). The wine purchased
was mainly for the Cinema Exhibition division's Gold Class cinemas and for Corporate functions. These transactions were carried out
under arm's length terms and conditions. The Company has put in place arrangements to cease the purchase of wine from Yabby Lake by
31 December 2019. In the future, a competitive tender process will be undertaken and Yabby Lake will be able to participate at that time.
The Film Distribution division of the VRL group distributes a number of older film titles in which Village Roadshow Corporation Pty. Ltd.
("VRC"), the Company's immediate parent entity, has economic interests. During the year ended 30 June 2019, $265 of film royalties
(2018: $2,685) were paid to VRC.
The VRL group recharged net occupancy costs for accommodation provided and received and other net recharges for services provided
and received, on an arm's length basis, to a number of entities associated (either individually or collectively) with Messrs. R.G. Kirby, J.R.
Kirby and G.W. Burke. The total net amount charged by the VRL group for the various occupancy and other services in the year ended 30
June 2019 was $144,290 (2018: $126,377).
The VRL group has recognised in the current year $157,270 for the provision of art works and related insurance costs by an entity
associated with Mr. R.G. Kirby, in relation to the years ended 30 June 2019 and 30 June 2018. It has been agreed that from 1 July 2019,
there will be no charge for the provision of art works.
As at 30 June 2019, the total amount owing by the related parties detailed above, and included in current assets of the VRL group, was
$46,963 (2018: $63,940), and the total amount owing by the VRL group to the related parties detailed above, and included in current
liabilities, was $67,579 (2018: $103,764).
26 SHARE-BASED PAYMENT PLANS
(a) Long-Term Incentive Executive Share and Loan Plans ("LTI plans")
During the current and prior periods the consolidated entity had two different LTI plans in which Group employees, including Key
Management Personnel ("KMP"), participated to varying extents. These included:
1. The Company's Executive Share Plan and Loan Facility ("ESP") introduced in 1996; and
2. The 2012 Option Plan over ordinary shares to the Company's CEO ("2012 OP").
At 30 June 2019 only the ESP remains in operation.
All LTI plans were approved by shareholders at the time of their introduction. Grants were made from time to time as appropriate, and all
proposed grants to Directors of the Company were put to shareholders for approval. The quantum of the LTI plan grants are reflective of
the seniority of the position of the relevant executive and their ability to contribute to the overall performance of the consolidated entity.
The ESP plan for senior executives of the consolidated entity has no specific performance conditions for the removal of restrictions over
the relevant shares other than successful achievement of annual performance criteria. Any value accruing to KMP and senior executives
from the LTI plan is derived from improvement in the Company's share price and dividends and distributions by the Company. The LTI
plan also encourages a sense of ownership with those senior executives to whom the LTI plan shares are granted, assisting in aligning their
long-term interests with those of shareholders. From 1 July 2016, the vesting of ESP shares is subject to meeting total shareholder return
performance hurdles, further aligning the interest of executives with shareholders.
The Company considers that the five year period over which the ESP 'in-substance options' are 'earned' and the long-term horizon of the
loans from the consolidated entity for the ESP for the duration of the employees' employment are appropriate given the shorter term
annual performance hurdles to which each senior executive is subject. Similarly, the three, four and five year vesting periods of the
ordinary options granted to the Company's CEO in the 2012 OP, together with the performance conditions attaching to each tranche of
options, were designed to encourage performance and to closely align the CEO's interests with those of shareholders.
There are no provisions within the ESP for the automatic removal of restrictions on the relevant shares in the event of a change of control
of the Company.
69 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
26 SHARE-BASED PAYMENT PLANS (continued)
(a) Long-Term Incentive Executive Share and Loan Plans ("LTI plans") (continued)
The ESP has limited recourse loans secured over the relevant shares, together with a buy-back option in the event of default. The
Company has full control over all loans and the repayment thereof and full control over all shares including through holding locks. From 1
July 2011 the Company has implemented a policy that specifically prohibits the hedging of incentive remuneration granted to Executives,
whether restricted or unrestricted. For the CEO’s 2012 ordinary options, the terms of the offers specifically prohibited the hedging of
unvested options by Mr. Burke.
The Company has used the fair value measurement provisions of AASB 2: Share-based Payment for all options or equity instruments
granted to Directors and relevant senior executives after 7 November 2002 which have not vested as at 1 January 2005. Under AASB 2:
Share-based Payment these LTI plan shares and loans are all treated as 'in substance options' even where the equity instrument itself is
not a share option.
The fair value of such 'in substance option' grants is amortised and disclosed as part of Director and senior manager compensation on a
straight-line basis over the vesting period.
From 1 January 2005, 'in substance options' granted as part of employee and executive compensation have been valued using the Black-
Scholes or binomial option-pricing model or the Monte Carlo simulation technique, which takes account of factors including the option
exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the
underlying share, current market price of the underlying share and the expected life of the 'in substance option'.
(b) Share-based Long-Term Incentive grants
(i) Executive Share Plan and Loan Facility ("ESP")
The Company’s ESP was approved by shareholders on 19 November 1996 and allows for the issue of up to 5% of the Company’s issued
shares to relevant employees of the consolidated entity and significant associated entities.
Offers are at the discretion of the Directors and shares are issued at the 5-day weighted average price on the market prior to allotment,
rounded up to the next whole cent. The shares are held directly by the employee who pays for the allotment by obtaining a loan from the
consolidated entity which holds the ESP shares as security.
The ESP was amended in 2012. Shares issued prior to 2012 are earned and become exercisable at the rate of 20% per year over five years
from date of issue. The loan bears interest at ten cents per share per annum, and ten cents of dividends per share each year is used to
repay the interest accrued and 50% of the remaining dividend per share is used to repay the capital amount of the loan. For shares issued
in 2012 and thereafter, one third vest at the end of years 3, 4 and 5 from the date of issue, the loan bears interest at twenty cents per
share per annum, and the first twenty cents of dividends per share per year is used to repay the interest charged, and 50% of the
remaining dividend per share is used to repay the capital amount of the loan. For shares issued in 2012 or thereafter, where the loan
balance owing falls below $2.00 per share, the interest rate becomes 10% of the balance owing on the loan.
The ESP was further amended with effect from 1 July 2016 with the loan bearing interest at the rate of twenty five cents per share and the
vesting of ESP shares being subject to a performance hurdle of total shareholder return relative to the Company's peers.
If the employee resigns or is dismissed, the restricted shares are forfeited and the loan on the remaining unrestricted shares must be
repaid within six months or such other time as approved by Directors.
In circumstances where the market value of the remaining ESP
shares at the end of the six month period is less than the amount owing on the loan, then the Company will buy-back the shares and
cancel them in repayment of the loan without further recourse to the employee. This is the basis on which they have been described as
‘in substance options’.
Under AASB 2: Share-based Payment, any allotments under the ESP are required to be accounted for and valued as equity settled options,
and have been referred to as 'in substance options', even though the equity instrument itself is not an option.
On 29 June 2012, 1,700,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on the
date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $3.14;
Expected volatility: 35% - based on historical volatility;
Risk-free interest rate: 2.73% - the risk-free rate was converted to a continuously compounded rate; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' was $0.79.
These grants have been fully amortised over the vesting period resulting in a nil employee benefits expense for the 2019 and 2018
financial years.
On 22 October 2012, 630,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on
the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $3.52;
Expected volatility: 35% - based on historical volatility;
Risk-free interest rate: 2.78% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' was $0.96.
70 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
26 SHARE-BASED PAYMENT PLANS (continued)
(b) Share-based Long-Term Incentive grants (continued)
(i) Executive Share Plan and Loan Facility ("ESP") (continued)
These grants have been amortised over the vesting period resulting in an employee benefits expense of nil for the 2019 financial year
(2018: $12,483).
On 29 November 2012, 300,000 ordinary shares were allotted under the ESP to Ms. J.E. Raffe. The fair value of each 'in substance option'
was estimated on the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following
assumptions:
-
-
-
-
Value per loan per share: $3.78;
Expected volatility: 35% - based on historical volatility;
Risk-free interest rate: 3.07% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' was $1.05.
These grants have been amortised over the vesting period resulting in an employee benefits expense of nil for the 2019 financial year
(2018: $8,688).
For the June 2012 allotment, the ESP shares were granted at $3.14 to all executives other than Ms. Raffe, whose allocation was delayed to
29 November 2012 at an issue price of $3.78 to allow for shareholder approval at the Company's 2012 annual general meeting. The
Company agreed to compensate Ms. Raffe with an additional bonus at the time of her future sale of ESP shares for the additional value, if
any, foregone by the deferred grant date. This potential bonus payment to Ms. Raffe represents a cash-settled share-based payment
estimated to be a maximum of $275,439, to be re-assessed at each financial year for changes in the expected probability of payment. The
fair value of this cash-settled share-based payment was estimated on the basis of the estimated after-tax impact of $0.64 per share, being
the difference between $3.78 and $3.14 and will be accrued over 5 years from date of grant, being nil for the 2019 financial year (2018:
$7,597).
On 20 December 2012, 400,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on
the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $3.92;
Expected volatility: 35% - based on historical volatility;
Risk-free interest rate: 3.21% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' was $1.12.
These grants have been amortised over the vesting period resulting in an employee benefits expense of nil for the 2019 financial year
(2018: $14,074).
On 29 June 2015, 700,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on the
date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $6.56;
Expected volatility: 30% - based on historical volatility;
Risk-free interest rate: 2.72% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those ‘in substance options’ was $1.30.
These grants have been amortised over the vesting period resulting in an increase in employee benefits expense of $136,084 for the 2019
financial year (2018: $237,057).
On 23 October 2015, 100,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on
the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $7.37;
Expected volatility: 30% - based on historical volatility;
Risk-free interest rate: 2.41% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' was $1.69.
These grants have been amortised over the vesting period resulting in an increase in employee benefits expense of $31,214 for the 2019
financial year (2018: $44,128).
On 16 September 2016, 465,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated
on the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
Value per loan per share: $4.70;
Expected volatility: 30% - annualised based on historical volatility;
Risk-free interest rate: 2.02% - based on the 8 year Australian Government bond yield; and
-
-
-
- Expected life of options: 8 years.
71 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
26 SHARE-BASED PAYMENT PLANS (continued)
(b) Share-based Long-Term Incentive grants (continued)
(i) Executive Share Plan and Loan Facility ("ESP") (continued)
The resulting fair values per option for those 'in substance options' were $0.60 for tranche 1, $0.62 for tranche 2 and $0.64 for tranche 3
being the 3 years in which they are capable of being exercised.
These grants are being amortised over the vesting period resulting in an increase in employee benefits expense of $74,865 for the 2019
financial year (2018: $74,865).
On 2 December 2016, 204,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated on
the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $4.35;
Expected volatility: 30% - annualised based on historical volatility;
Risk-free interest rate: 2.75% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' were $0.47 for tranche 1, $0.54 for tranche 2 and $0.58 for tranche 3
being the 3 years in which they are capable of being exercised.
These grants are being amortised over the vesting period resulting in an increase in employee benefits expense of $27,721 for the 2019
financial year (2018: $27,721).
On 7 December 2018, 1,250,000 ordinary shares were allotted under the ESP. The fair value of each 'in substance option' was estimated
on the date of the grant using the Black Scholes option pricing model with Monte Carlo simulation with the following assumptions:
-
-
-
-
Value per loan per share: $2.50;
Expected volatility: 35% - annualised based on historical volatility;
Risk-free interest rate: 2.313% - based on the 8 year Australian Government bond yield; and
Expected life of options: 8 years.
The resulting fair values per option for those 'in substance options' were $0.59 for tranche 1, $0.61 for tranche 2 and $0.62 for tranche 3
being the 3 years in which they are capable of being exercised.
These grants are being amortised over the vesting period resulting in an increase in employee benefits expense of $111,269 for the 2019
financial year.
The expected volatility of all ESP allotments reflects the assumption that the historical volatility is indicative of future trends, which may
not necessarily be the actual outcome. Under AASB 2: Share-based Payment, any allotments under the ESP are also referred to as 'in
substance options' even though the equity instrument itself is not an option.
(ii) 2012 Option Plan over ordinary shares to the Company's CEO ("2012 OP")
On 15 November 2012, the Company's shareholders approved the 2012 OP, granting 4.5 million options over ordinary shares to the
Company's CEO, Mr. G.W. Burke. The options were issued on 29 November 2012 being exercisable at $3.76 per share, with vesting subject
to performance hurdles relating to growth in earnings per share and growth in dividends. Following the $0.25 reduction of share capital
approved by shareholders at the Annual General Meeting on 29 November 2013, the exercise price of the options was reduced to $3.51
per share, effective from 31 December 2013. Following the pro-rata non-renounceable 5 for 26 rights issue in July 2018, the exercise price
of the options was reduced to $3.41.
The options were not transferable and did not confer any right to participate in bonus issues or cash issues of ordinary shares. The option
exercise price was adjusted for discounted cash issues, and the number of shares issued on exercise of an option was adjusted for bonus
issues of shares. The options did not carry voting or dividend rights and were not listed for quotation on ASX.
One and a half million options were exercisable subject to certain performance conditions not earlier than 1 March 2016; one and a half
million options were exercisable subject to certain performance conditions not earlier than 1 March 2017; and one and a half million
options were exercisable subject to certain performance conditions not earlier than 1 March 2018.
The earnings per share ("EPS") performance hurdle had a starting point of 34.4 cents per ordinary share being diluted earnings per share
before material
items and discontinued operations for the year ended 30 June 2012, with growth measured on financial year
performance, and the dividends per share ("DPS") performance hurdle had a starting point of 22 cents per ordinary share inclusive of
franking credits, being the actual dividends paid in the 2012 calendar year, with growth measured on calendar year performance.
For all options to vest, the Company’s performance had to meet a minimum 8% Compound Annual Growth Rate ("CAGR") in EPS over the
3 year vesting period for half of each tranche to vest, and meet a minimum 8% CAGR in dividends paid over 2 out of the 4 year vesting
period for the other half of each tranche to vest. For half of the options to vest, the Company’s performance had to meet a minimum 4%
CAGR in EPS over the 3 year vesting period for one quarter of each tranche to vest, and meet a minimum 4% CAGR in dividends paid over
2 out of the 4 year vesting period for another quarter of each tranche to vest. Below 4% CAGR in either DPS or in EPS, no options vest,
with a pro-rata straight-line vesting scale between 4% and 8% CAGR for each performance condition.
72 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
26 SHARE-BASED PAYMENT PLANS (continued)
(b) Share-based Long-Term Incentive grants (continued)
(ii) 2012 Option Plan over ordinary shares to the Company's CEO ("2012 OP") (continued)
The effect of the performance hurdles on the potential vesting of the options can be illustrated as follows:
Number of Options able to Vest if:
EPS CAGR hurdle achieved
Dividend CAGR hurdle achieved #
EPS CAGR hurdle achieved
Dividend CAGR hurdle achieved #
EPS CAGR hurdle achieved
Dividend CAGR hurdle achieved #
# Subject to ‘2 out of 4 years’ test.
* A pro-rata straight-line vesting scale applies.
Compound Annual Growth Rate ("CAGR")
< 4%
Nil
Nil
Nil
Nil
Nil
Nil
4%
375,000
375,000
375,000
375,000
375,000
375,000
4% - 8%
Sliding Scale*
Sliding Scale*
Sliding Scale*
Sliding Scale*
Sliding Scale*
Sliding Scale*
= or > 8%
750,000
750,000
750,000
750,000
750,000
750,000
Maximum 1st
Tranche Options
Maximum 2nd
Tranche Options
Maximum 3rd
Tranche Options
The fair value of each option was estimated on the date of grant using the Black Scholes option-pricing model with the following
assumptions:
-
-
-
-
Expected volatility: 35%;
Expected yield: 6%;
Risk-free interest rate: 2.75%; and
Expected life of options: 3, 4 and 5 years ended 1 March 2016, 2017 and 2018 with expiry at 1 March 2019.
The expected life of the options was based on historical data and was not necessarily indicative of exercise patterns occurred. The
expected volatility reflected the assumption that the historical volatility is indicative of future trends, which may also not necessarily be
the actual outcome. The resulting fair values per option for Mr. Burke were $0.73, $0.74 and $0.75 for Tranches 1, 2 and 3, respectively.
These grants have been amortised over the vesting periods resulting in a decrease in employee benefits expense of $419,969 for the 2018
financial year due to the amortisation reversal of lapsed options. There was no amortisation for the 2019 financial year.
In the year ended 30 June 2018, 50% of tranche three options vested as the DPS CAGR hurdle was met, and 50% did not vest as the EPS
hurdle was not met. No options vested or were exercised during 2019. The one and a half million options which vested and remained
unexercised as at 30 June 2018, were not exercised and lapsed during the 2019 financial year. No options remain at 30 June 2019.
(iii) Holdings of Executive Directors and Executive Committee Members
Other than the ESP issue on 7 December 2018 of 200,000, 150,000 and 200,000 shares to Ms J.E. Raffe and Messrs. S.T. Phillipson and C.J.
Kirby, respectively, there have been no allotments to Executive Directors and Executive Committee Members under any share-based
payment plan during the year ended 30 June 2019 (2018: nil).
The number of shares in the Company during the financial year in which the KMP of the Company have a relevant interest, including their
personally-related entities, are set out in the Remuneration Report section of the Directors' Report.
(iv)
Number and weighted average exercise prices ("WAEP") and movements of Options and 'In Substance Options' during the year
Outstanding at beginning of year
Granted during the year
Forfeited / lapsed during the year
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2019
Number
7,013,027
1,250,000
(1,610,000)
(100,000)
6,553,027
4,504,027
2018
2019
Number
WAEP - $
7,913,027
3.81
2.50
-
3.50 (810,000)
3.21 (90,000)
7,013,027
3.61
4,337,362
3.60
2018
WAEP - $
3.78
-
3.60
3.35
3.81
3.41
(v) The outstanding balance is represented by:
Executive Share Plan and Loan Facility: 6,553,027 'in substance options' over ordinary shares in the Company with issue prices ranging
from $2.35 to $7.37.
REMUNERATION OF AUDITORS
27
The auditor of VRL is Ernst & Young (Australia). Aggregate remuneration received or due and receivable
by Ernst & Young, directly or indirectly from the VRL group, in connection with -
Ernst & Young (Australia) -
An audit or review of the financial report of VRL and any other entity in the VRL group
Other services in relation to VRL and any other entity in the VRL group:
Tax
Advisory / Corporate Finance
Assurance related
2019
$
2018
$
1,288,780
1,219,000
145,915
2,380,142
122,763
3,937,600
124,176
2,159,505
37,065
3,539,746
73 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
REMUNERATION OF AUDITORS (continued)
27
Auditors other than Ernst & Young (Australia) -
An audit or review of the financial report of any other entity in the VRL group
Other services in relation to any entity in the VRL group:
Tax
2019
$
2018
$
183,954
170,851
143,421
327,375
4,264,975
104,515
275,366
3,815,112
EVENTS SUBSEQUENT TO REPORTING DATE
28
Other than the following, there have been no material transactions which significantly affect the financial or operational position of the
Group since the end of the financial year.
As advised to the Australian Securities Exchange on 29 July 2019, iPic Entertainment Inc. ("iPic") announced that it missed a scheduled
interest payment under its credit facility. On 5 August 2019, iPic announced that it had filed voluntary petitions for bankruptcy protection
under Chapter 11 of the US Bankruptcy code. As a result, VRL has made a payment of $8.0 million to settle the liability relating to its bank
guarantee exposure to the iPic business. The payment by VRL will not have a material impact on VRL's financial covenants. As at 30 June
2019, VRL has recognised the full amount of this financial guarantee liability at $8.0 million, which has been included in material items of
income and expense in the Reconciliation of Results contained in the Directors' Report. VRL carries its investment in iPic at nil in its
accounts and there is no further recourse to the VRL group in relation to iPic.
As advised to the Australian Securities Exchange on 29 August 2019, the VRL group has signed an agreement to sell its wholly owned
promotional solutions agency, Edge Loyalty Systems Pty. Ltd., for an enterprise value of $32.3 million to Blackhawk Network (Australia)
Pty. Ltd. Net proceeds from the sale will be used to reduce VRL group debt. The transaction is subject to approval from Australia’s Foreign
Investment Review Board and other customary conditions, and is expected to complete by November 2019.
PARENT ENTITY DISCLOSURES
29
(a) Summary financial information
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Employee equity benefit reserve
Total shareholders' equity
Loss after tax
Total comprehensive expense
(b) Financial guarantees1
Financial guarantees
Financial guarantee liability - refer Notes 23 and 28
(c) Franking credit balance
Amount of franking credits (deficit) available as at year-end
Franking credit movements from payment of VRL's current tax amounts recorded at year-end
Franking credit movements from refund of VRL's current tax amounts recorded at year-end
Franking debits that will arise after year-end, in relation to dividends declared
(as at the date of this report)
Amount of franking deficit after adjusting for the above impacts
VILLAGE ROADSHOW LIMITED
2018
$'000
2019
$'000
2,809
470,502
17,783
19,604
275,171
163,105
12,622
450,898
3,742
478,801
17,378
22,317
225,548
218,696
12,240
456,484
(55,591)
(55,591)
(70,530)
(70,530)
159
8,026
8,185
2
-
(1,694)
(4,181)
(5,873)
238
-
238
(6,687)
6,687
(2,335)
-
(2,335)
1
VRL has provided financial guarantees to a number of its subsidiaries, which commit the Company to make payments on behalf of these entities upon
their failure to perform under the terms of the relevant contract. In addition, VRL provided other financial guarantees to its subsidiaries and joint
operations for operating leases and other debt facilities, and as at 30 June 2019, the fair value of these financial guarantees are negligible. The
significant accounting estimates and/or assumptions used in determining the fair value of these guarantees, or the expected credit loss amount, have
been disclosed in Note 1(c)(xxx).
74 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
31
(a) Objectives for holding financial instruments
The Group's principal financial instruments, other than derivatives, comprise bank loans and overdrafts, finance leases and hire purchase
contracts, trade receivables, trade payables, financial guarantees and cash and short-term deposits.
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group's financial
risk management policy. The main purpose of these financial instruments is to raise finance for the Group's operations. The Group also
enters into derivative transactions, including principally interest rate swaps and collars (caps and floors). The purpose is to manage the
interest rate risks arising from the Group's sources of finance. It is, and has been throughout the period under review, the Group's policy
that no speculative trading in financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are cash flow interest rate risk, foreign currency risk, liquidity risk and credit
risk, and include the fair value movements from the financial instruments. The Group uses different methods to measure and manage
different types of risk to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and
assessments of market forecasts for interest rate and foreign exchange. Ageing analyses and monitoring of specific credit allowances are
undertaken to manage credit risk, and liquidity risk is monitored through comparing projected debt levels against total committed
facilities. The Board reviews and agrees policies for managing each of these risks, which are summarised below. Details of significant
accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis on which income and
expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in Note 1.
(b) Risk exposures and responses
Cash flow interest rate risk:
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with a
variable interest rate. The level of debt is disclosed in Note 17.
The primary objectives of interest rate management for the Group are to ensure that:
-
-
-
interest expense does not adversely impact the Group's ability to meet taxation, dividend and other operating obligations as they
arise;
earnings are not subjected to wide fluctuations caused by fluctuating interest commitments; and
covenants agreed with bankers are not breached.
Within the above constraints and targets, the Group's objective in managing interest rate risk is to maintain the stability of interest rate
expense whilst ensuring that an appropriate level of flexibility exists to accommodate potential changes in funding requirements. At
reporting date, the Group had the following mix of financial assets and liabilities exposed to Australian and USA variable interest rate risk
that were not designated in cash flow hedges:
Financial assets: Cash and cash equivalents
Financial liabilities: Secured and unsecured borrowings
Net exposure
CONSOLIDATED
2018
$'000
63,393
2019
$'000
61,653
131,255
69,602
201,890
138,497
The Group enters into interest rate swap, cap and collar agreements ("interest rate derivatives") that are used to convert the variable
interest rates attached to various of its specific facilities into fixed interest rates, or to limit interest rate exposure. The interest rate
derivatives are entered into with the objective of ensuring that earnings are not subject to wide fluctuations caused by fluctuating interest
commitments and ensuring compliance with loan covenants.
Interest rate risk will not generally be hedged unless the underlying debt
facility draw down exceeds A$20 million. For any debt exceeding this level, which is outstanding for more than three months from the
original drawdown date, interest rate exposure will generally be hedged for between 35% and 60% of the outstanding debt balance for a
minimum of 12 months or until termination of the loan, whichever is sooner.
At reporting date, the Group has entered into interest rate derivatives covering debts totalling $150.0 million (2018: $200.0 million).
These interest rate derivatives covered approximately 53% (2018: 50%) of total borrowings of the Group as at reporting date. During the
year ended 30 June 2019, the Group entered into $110.0 million of interest rate caps which have an effective date from September 2019
as the existing interest rate derivatives mature in the 2020 financial year. The interest rate derivatives have been designated in hedging
relationships under Australian Accounting Standards.
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing
positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates. Sensitivity analysis for
interest rate risk exposures has been calculated by estimating the impacts in value and timing based on financial models. The following
sensitivity analysis is based on the interest rate risk exposures in existence at reporting date. A sensitivity of 100 basis points has been
selected as this is deemed to be reasonably possible given the current level of both short-term and long-term Australian and USA interest
rates.
76 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(b) Risk exposures and responses (continued)
Cash flow interest rate risk: (continued)
At 30 June 2019 and 30 June 2018, if interest rates had moved as illustrated in the table below, with all other variables held constant, post
tax profit and equity would have been affected as follows:
Sensitivity analysis
CONSOLIDATED
If interest rates were 100 basis points higher with all other variables
If interest rates were 100 basis points lower with all other variables
POST TAX PROFIT
HIGHER / (LOWER)
2018
$'000
2019
$'000
EQUITY
HIGHER / (LOWER)
2018
$'000
2019
$'000
(1,355)
1,569
(996)
2,396
-
-
-
-
The movements in profit are due to higher/lower interest costs from variable rate debt and cash balances. Movements in equity would be
due to an increase/decrease in the fair value of derivative instruments designated as cash flow hedges. The sensitivities for each year are
impacted by cash, debt and derivative balances, as well as interest rates.
Foreign currency risk:
The Group has transactional foreign currency exposures, which arise from sales or purchases by the relevant division in currencies other
than the division's functional currency. In general, the Group requires all of its divisions to use forward currency contracts to eliminate the
foreign currency exposure on any individual transactions in excess of A$0.5 million, which are generally required to be taken out
immediately when a firm commitment has occurred. The forward currency contracts must be in the same currency as the hedged item,
and it is the Group's policy not to enter into forward contracts until a firm commitment is in place.
In addition, the Group uses forward currency contracts to eliminate the foreign currency exposure on part of the Group's estimated
foreign currency payments, which are regularly updated to ensure a rolling forward cover position.
It is the Group's policy to negotiate the terms of the foreign currency derivatives to match the terms of the underlying foreign currency
exposures as closely as possible, to maximise the effectiveness of the derivatives. As at 30 June 2019 and 30 June 2018, the Group had
hedged the majority (by value) of foreign currency purchases that were firm commitments. The following sensitivity analysis is based on
the foreign currency risk exposures in existence at reporting date. A sensitivity of 10% has been selected as this is deemed to be
reasonably possible given the current level of the United States Dollar and other relevant exchange rates.
At 30 June 2019 and 30 June 2018, if foreign exchange rates had moved as illustrated in the table below, with all other variables held
constant, post tax profit and equity would have been affected as follows:
Sensitivity analysis
CONSOLIDATED
If foreign exchange rates were 10 per cent higher with all other
variables held constant
If foreign exchange rates were 10 per cent lower with all other
variables held constant
POST TAX PROFIT
HIGHER / (LOWER)
2018
$'000
2019
$'000
EQUITY
HIGHER / (LOWER)
2018
$'000
2019
$'000
-
-
-
-
(1,179)
(1,611)
1,611
1,968
The movement in equity is due to an increase/decrease in the fair value of the derivative instruments, which are all designated as cash
flow hedges. The sensitivities for each year are impacted by the derivative balances and exchange rates. There is no movement in profit
in this foreign exchange rate sensitivity analysis due to the fact that movements in the unhedged foreign currency amounts only impact
asset and liability balances.
Commodity price risk:
The Group's exposure to price risk is minimal.
Credit risk:
The Group trades only with recognised, creditworthy third parties.
It is the Group's policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that
the Group's exposure to bad debts is not significant. Refer to Note 1(c)(x) for further information regarding the Group's policy on
recognising an allowance for expected credit losses.
Credit risk in trade receivables is managed in the following ways:
- payment terms are generally 30 to 90 days; and
- a risk assessment process is used for customers over $50,000.
The Group's maximum exposure to credit risk at reporting date in relation to each class of recognised financial asset is the carrying
amount of those assets as recognised in the statement of financial position.
In relation to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligations under
the contract or arrangement. However, the Group ensures that it only enters into contracts with creditworthy institutions, as set out in the
relevant Group policy.
77 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(b) Risk exposures and responses (continued)
Concentrations of credit risk:
The Group minimises concentrations of credit risk in relation to trade accounts receivable by undertaking transactions with a large number
of customers within the specified industries. The customers are mainly concentrated in Australia and the United Kingdom.
Liquidity risk:
Liquidity risk management is concerned with ensuring that there are sufficient funds available to meet the Group's commitments in a
timely manner. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, bank loans, finance leases and hire purchase contracts.
Liquidity risk is measured by comparing projected net debt levels for the next 12 months against total committed facilities on a rolling
monthly basis and includes monthly cash flow forecasts from the Group's operating divisions. Projected net debt levels take into account:
-
-
-
-
-
existing debt;
future operating and financing cash flows;
approved capital expenditure;
approved investment expenditure for new sites; and
dividend distributions and income tax payments.
The risk implied from the values shown in the following table reflects a balanced view of cash inflows and outflows. Leasing obligations,
trade payables and other financial liabilities mainly originate from the financing of assets used in ongoing operations such as property,
plant & equipment and investments in working capital. These assets are considered in the Group's overall liquidity risk. To ensure that the
maturity of funding facilities is not concentrated in one period, the Group will generally ensure that no more than 30% of its committed
facilities mature within any 12 month period. As at 30 June 2019, 2.1% (2018: 1.7%) of the Group's debt will mature in less than one year.
To monitor existing financial assets and liabilities as well as to enable an effective controlling of future risks, the Group has established
comprehensive risk reporting that reflects the expectations of management of settlement of financial assets and liabilities.
The following table reflects all contractually fixed payables and receivables for settlement, repayments and interest resulting from
instruments as at 30 June 2019. For derivative financial
recognised financial assets and liabilities,
instruments and other obligations, the contractual undiscounted cash flows for the respective upcoming fiscal years are presented. Cash
flows for financial assets and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2019.
including derivative financial
Year ended 30 June 2019
(i) Financial assets:
Cash
Receivables and other advances
Derivatives
Security deposits
Total financial assets
(ii) Financial liabilities:
Trade and other payables
Secured and unsecured borrowings
Lease liability
Derivatives
Total financial liabilities
Net maturity
Year ended 30 June 2018
(i) Financial assets:
Cash
Receivables and other advances
Derivatives
Security deposits
Total financial assets
(ii) Financial liabilities:
Trade and other payables
Secured and unsecured borrowings
Lease liability
Derivatives
Total financial liabilities
Net maturity
78 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
1 YEAR OR
LESS
$'000
OVER 1 YEAR
TO 5 YEARS
$'000
MORE THAN 5
YEARS
$'000
61,653
129,337
18,523
-
209,513
228,400
1,215
6,482
18,111
254,208
(44,695)
-
17,588
-
173
17,761
50,833
284,711
27,931
-
363,475
(345,714)
63,393
119,300
25,308
-
208,001
202,777
22,049
6,293
23,525
254,644
(46,643)
-
23,925
-
294
24,219
42,736
426,902
27,117
670
497,425
(473,206)
-
-
388,570
-
388,570
(388,570)
279,233
285,926
422,983
18,111
1,006,253
(778,979)
TOTAL
$'000
61,653
146,925
18,523
173
227,274
TOTAL
$'000
63,393
143,225
25,308
294
232,220
-
-
-
-
-
-
-
-
-
-
-
-
395,866
-
395,866
(395,866)
245,513
448,951
429,276
24,195
1,147,935
(915,715)
1 YEAR OR
LESS
$'000
OVER 1 YEAR
TO 5 YEARS
$'000
MORE THAN 5
YEARS
$'000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(b) Risk exposures and responses (continued)
Liquidity risk: (continued)
Liquidity is managed daily through the use of available cash flow and committed facilities. Refer to Note 7(c) for details of available
financing facilities, which shows that there were undrawn finance facility amounts of $65.0 million as at 30 June 2019 (2018: $31.0
million), and $60.0 million as at the date of this report.
(c) Terms, conditions and accounting policies
The Group's accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument
are as follows:
Recognised Financial Instruments
(i) Financial assets
Receivables - trade debtors:
Trade debtors are non-interest bearing and are carried at fair value due less any allowance for expected credit losses. Credit sales are
normally settled on 30-90 day terms.
Receivables - associates and other advances:
Amounts (other than trade debts) receivable from associated entities and for other advances are carried at either the fair value due or the
amounts initially recorded as recoverable. Interest, when charged, is recognised in profit or loss on an accrual basis, and provided against
when not probable of recovery. There are no fixed settlement terms for loans to associated and other entities.
Unsecured advances:
Unsecured advances are shown at cost.
settlement terms.
Interest, when charged, is recognised in profit or loss on an accrual basis. There are no fixed
Equity instruments:
Equity instruments are shown either at cost or fair value.
(ii) Financial liabilities
Trade and sundry creditors:
Creditors are recognised at amounts to be paid in the future for goods and services already received, whether or not billed to the Group.
They are non-interest bearing and are normally settled on 30-90 day terms.
Accounts payable - associated and other entities:
Amounts owing to associated and other entities are carried at fair value.
accruals basis. There are no fixed settlement terms.
Interest, when charged, is recognised in profit or loss on an
Secured and unsecured borrowings:
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised. Interest is recognised in profit or loss on
an accrual basis. Bank loans are repayable either monthly or at other intervals, which in some cases are dependant on relevant financial
ratios, or at expiry, with terms ranging from less than one year to greater than five years. While interest is charged either at the bank's
floating rate or at a contracted rate above the Australian dollar BBSY rate, certain borrowings are subject to interest rate swaps or collars
(refer below).
Details of security over bank loans is set out in Note 17.
Finance lease liabilities:
Finance lease liabilities are accounted for in accordance with AASB 117: Leases . As at reporting date, the Group had $106.0 million of
finance lease liabilities (2018: $103.0 million).
Interest rate swaps:
At reporting date, the Group had no interest rate swap agreements in place. Such agreements were being used to hedge the cash flow
interest rate risk of various debt obligations with a floating interest rate.
Interest rate caps and collars:
At reporting date, the Group had entered into interest rate cap agreements. These derivatives are used to assist in hedging the cash flow
interest rate risk of various debt obligations with a floating interest rate.
The interest rate cap has been based on the underlying debt obligations, and closely matched the terms of those obligations.
(iii) Equity
Ordinary shares:
From 1 July 1998, ordinary share capital has been increased based on the proceeds received from shares issued (less direct share issue
costs), and decreased based on the buy-back cost (including direct buy-back costs). Prior to that date, ordinary share capital was
recognised at the par value of the amount paid up, and any excess between the par value and the issue price was recorded in the share
premium reserve. Details of shares issued and the terms and conditions of options outstanding over ordinary shares at reporting date are
set out in Note 20.
79 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(d) Fair values
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments recognised in the
financial statements, excluding any classified under discontinued operations.
CONSOLIDATED
Financial assets:
Cash
Trade and other receivables
Equity instruments at fair value through OCI
Derivatives
Security deposits
Total financial assets
Financial liabilities:
Trade and other payables
Secured and unsecured borrowings
Lease liability
Derivatives
Total financial liabilities
TOTAL CARRYING AMOUNT
AS PER CONSOLIDATED
STATEMENT OF FINANCIAL
POSITION
2018
$'000
2019
$'000
61,653
146,925
1,219
543
173
210,513
279,233
281,255
106,125
129
666,742
63,393
143,225
1,737
1,216
294
209,865
245,513
401,890
102,962
16
750,381
AGGREGATE
NET FAIR VALUE
2018
$'000
2019
$'000
61,653
146,925
1,219
543
173
210,513
279,233
278,160
106,125
129
663,647
63,393
143,225
1,737
1,216
294
209,865
245,513
393,374
102,962
16
741,865
The following methods and assumptions are used to determine the fair values of financial assets and liabilities:
Cash, cash equivalents and short-term deposits:
The carrying amount approximates fair value because of short-term maturity.
Receivables and accounts payable - current:
The carrying amount approximates fair value because of short-term maturity.
Receivables - non-current:
The fair values of non-current receivables are estimated using discounted cash flow analysis, based on current incremental lending rates
for similar types of arrangements.
Borrowings - current:
The carrying amount approximates fair value because of short-term maturity.
Borrowings - non-current:
The net fair values of the secured and unsecured borrowings are determined based on the weighted average market-based interest rates
that are applicable to the borrowings.
Finance lease liability:
The net fair value of the finance lease liability is determined based on the weighted average market-based interest rates that are
applicable to the lease liability.
The Group uses the following methods in calculating or estimating the fair value of a financial asset or financial liability:
Level 1: Fair value is calculated using quoted prices in active markets.
Level 2: Fair value is estimated using inputs other than quoted prices that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices).
Level 3: Fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The fair value of the financial assets and financial liabilities as well as the methods used to estimate the fair value are summarised in the
table below.
80 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(d) Fair values (continued)
Fair value measurement hierarchy for assets and liabilities at 30 June 2019:
Financial assets:
Equity instruments at fair value through OCI
Derivatives
Total
Financial liabilities:
Secured and unsecured borrowings
Lease liability
Payables and accruals
Financial guarantee liability
Derivatives
Total
Fair value measurement hierarchy for assets and liabilities at 30 June 2018:
Financial assets:
Equity instruments at fair value through OCI
Derivatives
Total
Financial liabilities:
Secured and unsecured borrowings
Lease liability
Payables and accruals
Derivatives
Total
Valuation
technique-
market
observable
inputs
(Level 1)
$'000
Valuation
technique-
market
observable
inputs
(Level 2)
$'000
Valuation
technique-
non market
observable
inputs
(Level 3)
$'000
930
-
930
-
-
-
-
-
-
1,364
-
1,364
-
-
-
-
-
-
543
543
278,160
106,125
-
-
129
384,414
-
1,216
1,216
393,374
102,962
-
16
496,352
289
-
289
-
-
9,243
8,026
-
17,269
373
-
373
-
-
10,110
-
10,110
Total
$'000
1,219
543
1,762
278,160
106,125
9,243
8,026
129
401,683
1,737
1,216
2,953
393,374
102,962
10,110
16
506,462
The net fair values of the financial
unobservable market data. Assumptions are based on market conditions existing at each reporting date.
instruments are determined using valuation techniques that utilise data from observable and
The fair value of equity instruments at fair value through OCI are derived from quoted market prices in active markets. As a result, equity
instruments at fair value through OCI have been classified based on the observable market inputs as Level 1.
The fair values of derivatives are calculated as the present value of the estimated future cash flows using an appropriate market based
yield curve, which is independently derived. As a result, these derivatives have been classified based on the observable market inputs as
Level 2. The net fair values of the secured and unsecured borrowings and finance lease liability are determined based on the weighted
average market-based interest rates that are applicable to the borrowings and the lease liability. As a result, these borrowings have been
classified based on the observable market inputs as Level 2.
Payables and accruals relate to the estimated put and call option liability over the remaining 20% non-controlling interest in Opia. The fair
value of payable and accruals is determined using a discounted expected future financial performance based on terms of the sale contract
and the knowledge of the business. As a result, payables and accruals have been classified based on non-observable market inputs as
Level 3. During the year ended 30 June 2019, a profit of $0.9 million (2018: $0.9 million loss) has been recognised in reserves.
An increase (decrease) in the future financial performance of Opia would result in higher (lower) fair value of the put and call option
liability, while a significant increase (decrease) in the discount rate would result in a lower (higher) fair value of the liability.
The financial guarantee liability, included in trade and other payables, relates to the fair value of VRL's bank guarantee exposure in
relation to the iPic business of USD 5.6 million. The fair value of the financial guarantee liability is determined using a probability
discounted cash flow approach based on an assessment of the likelihood of default and an expected recovery rate of 0%. As a result, the
financial guarantee liability has been classified based on non-observable market inputs as Level 3. During the year ended 30 June 2019, a
loss of $8.0 million (2018: nil) has been recognised in the profit or loss and included in material items of income and expense in the
Reconciliation of Results contained in the Directors' Report. Refer to Note 28 for further information.
81 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
31
(e) Derivative financial instruments
Current assets:
Forward currency contracts - cash flow hedges
Interest rate cap - held for trading
Non-current assets:
Forward currency contracts - cash flow hedges
Interest rate cap - held for trading
Current liabilities:
Forward currency contracts - cash flow hedges
2019
$'000
542
-
542
-
1
1
129
129
2018
$'000
1,127
26
1,153
3
60
63
16
16
Instruments used by the Group
The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps, caps and collars (floors and
caps) to hedge its risks associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value. Refer
Note 1(c)(ix).
The Group enters into derivative transactions under International Swaps and Derivatives Association ("ISDA") agreements, which allow for
the netting of relevant transactions which are to be settled at the same time, which does not occur regularly in practice. In certain
situations, such as a default, all outstanding transactions under the relevant ISDA are able to be terminated, and a net amount for
settlement determined. The ISDA agreements do not meet the criteria for offsetting in the statement of financial position, due to no
default having occurred.
(i) Forward currency contracts - cash flow hedges
Cash flow hedges are hedges of the Group's exposure to variability in cash flows that are attributable to a particular risk associated with a
recognised asset or liability, or a highly probable forecast transaction which could affect profit or loss. Where a hedge meets the strict
criteria for hedge accounting, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the
ineffective portion is recognised in profit or loss. The Group has the following foreign currency contracts designated as cash flow hedges
at 30 June 2019 and 30 June 2018:
CONSOLIDATED
USD hedges
NOTIONAL AMOUNTS AUD
2018
$'000
2019
$'000
AVERAGE EXCHANGE RATE
2018
2019
(413)
(1,113)
0.7250
0.7647
NON-KEY MANAGEMENT PERSONNEL RELATED PARTY TRANSACTIONS
32
The following related party transactions occurred during the financial year and were conducted on normal commercial terms and
conditions unless otherwise stated:
(a) Immediate Parent Entity
The Company's immediate parent entity is Village Roadshow Corporation Pty. Limited which is incorporated in Australia. The Company's
ultimate parent entity is Positive Investments Pty. Limited which is incorporated in Australia. Refer also to the Directors' Report
disclosures for relevant interests of Directors in relation to the 100% ownership of the immediate and ultimate parent entities by Messrs.
R.G. Kirby, J.R. Kirby and G.W. Burke.
(b) Associated Entities
Revenues and expenses:
The following transactions with associated entities were included in the determination of the operating loss before tax for the year:
Management & service fee revenue - associates
Management & service fee revenue - other associated entities
Consulting expenses - other associated entity
Film hire and other film expenses (paid by the VRL group to entities in the Village Roadshow
Entertainment Group business - refer Note 12(a))
Film hire and other film expenses (paid by the VRL group to FilmNation Entertainment LLC
- refer Note 12(b))
Receivables and payables:
Any amounts receivable from, or payable to, associates have been separately disclosed in Notes 8 and 16.
82 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
2019
$'000
294
136
146
2018
$'000
396
147
169
19,879
21,553
3,836
3,405
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
FINANCE LEASE RESULTING FROM SALE AND LONG-TERM LEASEBACK
33
Following the sale and long-term leaseback of the VRL group’s freehold land on the Gold Coast, as advised to the Australian Securities
Exchange on 22 December 2017, this transaction has been treated as a sale and finance leaseback in accordance with Accounting
Standards. The initial lease term is for 30 years, with 6 further terms of 10 years each (at the VRL group’s option), with the maximum lease
term of 90 years. The VRL group also has a number of repurchase options at various points throughout the contractual term. Given the
lease calculations have assumed the land will be repurchased after 25 years, consistent with the VRL group’s previous accounting policy to
not depreciate land, the lease asset will not be amortised.
Future minimum lease payments under the finance lease together with the present value of the net minimum lease payments based on
expectation of exercising the option to repurchase the land after 25 years, are as follows:
Within 1 year
After one year but not more than 5 years
More than 5 years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
MINIMUM LEASE PAYMENTS
2018
$'000
6,293
27,117
395,866
429,276
(326,314)
102,962
2019
$'000
6,482
27,931
388,570
422,983
(316,989)
105,994
PRESENT VALUE OF LEASE
PAYMENTS
2018
$'000
6,293
21,498
75,171
102,962
-
102,962
2019
$'000
6,482
22,143
77,369
105,994
-
105,994
Present value of other finance lease liabilities
Total present value of minimum lease payments
131
106,125
-
102,962
131
106,125
-
102,962
BUSINESS COMBINATION
34
Effective from 13 August 2018, the ownership percentage of the Topgolf Joint Venture (“Topgolf JV”) by the VRL group’s joint venture
partner, Topgolf Australia Pty. Ltd. (“Topgolf Australia”) has reduced from 33.33% to 3.7%. As a result, the VRL group's ownership
percentage in the Topgolf JV has increased from 66.67% to 96.3%. The amount receivable by the VRL group in relation to the Topgolf JV
immediately prior to 13 August 2018 of approximately $10.9 million (included in non-current trade and other receivables at 30 June 2018),
was recovered through VRL’s increased share in the Topgolf JV.
Prior to 13 August 2018, for accounting purposes, the Topgolf JV was jointly controlled and was accounted for as a joint operation. The
change in ownership resulted in the VRL group gaining control of the Topgolf JV on 13 August 2018, and therefore represented a business
combination. At the date of gaining control, the VRL group re-measured its existing interest in the joint operation to fair value, but given
the recent completion of the build of the first Topgolf site and the recent commencement of trading, this did not result in a material
change in the carrying value of the VRL group's existing interest in the Topgolf JV.
The estimated fair values of the VRL group's 66.67% interest in assets and liabilities of the Topgolf JV immediately prior to the date of
gaining control and the estimated fair value of the 96.3% controlled identifiable assets and liabilities of the Topgolf JV as at the date of
gaining control were:
Cash and cash equivalents
Property, plant & equipment
Intangible assets
Other assets
Total assets
Payables and accruals
Other liabilities
Total liabilities
Fair value of identifiable net assets
Goodwill arising on acquisition
Cost of combination:
Amount receivable in relation to Topgolf JV converted to equity
INTEREST AT
66.67% PRIOR
TO GAINING
CONTROL
$'000
666
24,741
1,135
794
27,336
INTEREST AT
96.3% ON
GAINING
CONTROL
$'000
962
35,737
1,640
868
39,207
(4,323)
(299)
(4,622)
22,714
-
22,714
(6,269)
(433)
(6,702)
32,505
1,076
33,581
10,867
The goodwill arising from the increase in ownership of the Topgolf JV is $1.1 million. All of the cost base of the goodwill is expected to be
included for capital gains tax purposes on a future disposal of the Topgolf JV. There were no material transactions costs relating to this
acquisition.
83 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
BUSINESS COMBINATION (continued)
34
Topgolf Australia has an option to increase its ownership in the Topgolf JV back to 33.33% at any time prior to 31 December 2020, for
consideration based on market value at the relevant time. The impact of the exercise of this option on control or joint control would
therefore be re-assessed at that time should the option be exercised.
If the increase in the VRL group’s ownership percentage in the Topgolf JV had taken place on 1 July 2018, the impact on revenue and net
profit before tax would not have been material to the VRL group.
DEED OF CROSS GUARANTEE
35
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, during the year ended 30 June 2019, the wholly-owned
subsidiaries listed below entered into a Deed of Cross Guarantee and are relieved from the Corporations Act 2001 requirements for
preparation, audit and lodgement of financial reports, and Directors' reports.
It is a condition of the instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the
deed is that the Company guarantees to each creditor, payment in full of any debt in the event of the winding up of any of the subsidiaries
under certain provisions of the Corporations Act 2001 . If a winding up occurs under other provisions of the Act, the Company will only be
liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The subsidiaries subject to the Deed are:
- Edge Loyalty Systems Pty. Limited
- Roadshow Distributors Pty. Limited
- Roadshow Films Pty. Limited
- Village Cinemas Australia Pty. Limited
- Village Golf Holdings Pty. Limited
- Village Roadshow Digital Pty. Limited
- Village Roadshow Theatres Pty. Limited
- Village Roadshow Theme Parks Pty. Limited
A consolidated statement of comprehensive income and a consolidated statement of financial position, comprising the Company and
controlled entities which are party to the deed, after eliminating all transactions between parties to the deed, for the year ended, and as
at, 30 June 2019 respectively are as follows:
Statement of Comprehensive Income
Profit before tax
Income tax expense
Profit after tax
Retained earnings at the beginning of the year
Adoption of new accounting standard
Retained earnings at the end of the year
Statement of Financial Position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Film distribution royalties
Derivatives
Other
Total current assets
Non-current assets
Trade and other receivables
Goodwill and other intangible assets
Property, plant & equipment
Investments
Deferred tax assets
Film distribution royalties
Other
Total non-current assets
Total assets
84 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
2019
$'000
13,671
(11,920)
1,751
254,302
(924)
255,129
33,065
76,005
21,684
1,694
37,439
542
5,402
175,831
591,229
158,997
306,460
59,632
26,699
53,897
97
1,197,011
1,372,842
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the year ended 30 June 2019
35
DEED OF CROSS GUARANTEE (continued)
Statement of Financial Position (continued)
LIABILITIES
Current liabilities
Trade and other payables
Income tax payable
Provisions
Derivatives
Unearned revenue
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing loans and borrowings
Lease liability
Deferred tax liabilities
Provisions
Unearned revenue and other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
2019
$'000
190,089
112
28,852
129
52,798
271,980
59,471
279,828
106,125
3
6,366
76,790
528,583
800,563
572,279
275,171
41,979
255,129
572,279
85 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of Village Roadshow Limited, I state that:
(1) In the opinion of the Directors -
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated entity's financial position as at 30 June 2019 and of its performance for the
year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; 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)
the financial report also complies with International Financial Reporting Standards as issued by the International Accounting
Standards Board, as disclosed in Note 1(b)(i).
(d)
at the date of this declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785. The nature of the Deed of Cross Guarantee is such that each company which is party to the
deed, guarantees to each creditor payment in full of any debt in accordance with the Deed of Cross Guarantee.
There are reasonable grounds to believe that the Company and Group entities identified in Note 35 to the financial statements will
be able to meet any liabilities to which they are, or may become, subject to by virtue of the Deed of Cross Guarantee.
(2)
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A
of the Corporations Act 2001 for the financial year ended 30 June 2019.
On behalf of the Board
________________________________________
G.W. Burke
Director
Melbourne, 29 August 2019
86 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
INDEPENDENT AUDITOR’S REPORT
To the members of Village Roadshow Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Village Roadshow Limited (the company) and its subsidiaries (collectively the
Group), which comprises the consolidated balance sheet as at 30 June 2019, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory
information and the Directors’ Declaration.
In our opinion:
the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated financial position of the Group at 30 June 2019 and of its
consolidated financial performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current year. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters.
For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report
section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The
results of our audit procedures, including the procedures performed to address the matters below, provide the basis
for our audit opinion on the accompanying financial report.
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1. Impairment assessment of goodwill, other intangible assets, film distribution royalties and
property, plant & equipment
Why significant
How the matter was addressed in the audit
At 30 June 2019 the Group’s assets include goodwill,
other intangible assets, film distribution royalties, and
property, plant and equipment.
The Group performs an impairment assessment on an
annual basis or when an indicator of impairment is
identified to assess whether the carrying values of these
assets exceed their recoverable amounts. Impairment
charges were recognised in respect of the Las Vegas
Theme Park and Film Distribution Cash Generating Units at
30 June 2019.
Assessing the quantum of the impairment charges
recognised and determining whether or not further
impairment charges relating to these assets were required
was a key audit matter. This involved assessing the
judgements inherent in the cash flow forecast and testing
key assumptions supporting the impairment models such
as forecast business growth rates, discount rates and
terminal values assumptions.
Refer to Notes 10, 11 and 15 for disclosures relating to
impairment charges recognised in the year ended 30 June
2019 and related disclosure in respect of the Group’s
impairment testing.
► We evaluated the Group’s cash flow forecasts supporting the
impairment assessments for goodwill, other intangible assets,
film distribution royalties and property, plant and equipment,
and compared them to the Board-approved budget.
► We evaluated the appropriateness of the key assumptions in
the forecasts and considered the historical reliability of the
Group’s cash flow forecasting process. We performed
sensitivity analysis on the key assumptions in the forecasts to
understand the extent of change in those assumptions that
would either individually or collectively result in an
impairment charge.
► We involved our valuation specialists to assess whether the
methodology applied was in accordance with Australian
Accounting Standards and evaluated key assumptions
including terminal values, long term growth rates, discount
rates, capital expenditure assumptions and working capital
requirements applied in the impairment models.
► We assessed the discount rates applied by comparing them to
the cost of capital for the Group and we also performed
market capitalisation and earnings multiples cross checks in
comparison with other comparable businesses, to
corroborate the assumptions in the impairment testing
models.
► We assessed the adequacy of the disclosures included in
Notes 10, 11 and 15.
2. Revenue recognition
Why significant
How the matter was addressed in the audit
The Group operates through four divisions, Theme Parks,
Cinema Exhibition, Film Distribution and Marketing
Solutions. Each of these divisions has specific revenue
models and contractual arrangements resulting in differing
revenue recognition requirements in accordance with
Australian Accounting Standards.
This was significant to our audit due to the complexity and
judgement involved across the Group’s revenue streams.
Transition to AASB 15 Revenue from Contracts with
Customers required a change in the way contractual
arrangements and revenue recognition requirements were
assessed and applied. The key areas include:
► Theme Park sales revenue from admissions on season
passes include entry to events which are separate
performance obligations. There is judgement in
allocating the transaction price between performance
obligations which are based on estimates of stand-alone
selling prices.
► Film Distribution revenue is derived from a range of
sources including theatrical distribution, physical and
digital entertainment sales, and television and
subscription video-on-demand services. The division has
multiple contractual arrangements with differing terms.
► We assessed the impact of transition to AASB 15 Revenue
from Contracts with Customers.
► We assessed the effectiveness of relevant controls over
revenue within each of the four operating divisions.
► We inspected the terms of significant sales contracts and
assessed whether they were consistent with the basis of
revenue recognised by the Group.
► We agreed the data underlying the calculation of admission
revenue to sales records and other systems having assessed
the relevant controls relating to the recording of that
revenue.
► We performed an analysis on customer redemption and
breakage using historical data, to allow us to set
expectations as to the level of redemptions, and compared
this with the Group's estimate, obtaining explanations and
examining evidence for significant differences. Further, we
assessed the overall consistency of the customer redemption
and breakage assumptions and inputs used to calculate the
estimated value of revenue for the year.
► We performed sensitivity analysis around key redemption
rate assumptions.
► We considered the adequacy of the Group's disclosures and
the accounting policies included in Notes 1(c)(iii) and 2 of the
financial report.
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► Cinema Exhibition revenue from advanced purchase
tickets is deferred and recognised as the tickets are
redeemed. There is complexity and judgement in the
recognition of breakage revenue from vouchers and gift
cards, as well as the deferral of revenue and allocation
of transaction price to loyalty program points.
► Marketing Solutions revenue is based on estimates of
gift card and promotion redemption rates.
The Group's disclosures and the accounting policies are
included in Notes 1(c)(iii) and 2 of the financial report.
Information Other than the Financial Report and Auditor’s Report
The Directors are responsible for the other information. The other information comprises the information included
in Village Roadshow Limited’s 2019 Annual Report other than the financial report and our auditor’s report thereon.
We obtained the Director’s Report that is to be included in the Annual Report prior to the date of this auditor’s
report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form
of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Directors’ Responsibilities for the Financial Report
The Directors are responsible for the preparation of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit. We also:
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
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► Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated to the Directors, we determine those matters that were of most significance in the
audit of the financial report of the current year and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the Directors' Report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Village Roadshow Limited for the year ended 30 June 2019, complies
with section 300A of the Corporations Act 2001.
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Responsibilities
The Directors 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.
Ernst & Young
Kylie Bodenham
Partner
Melbourne
29 August 2019
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ADDITIONAL INFORMATION
SHARE REGISTER INFORMATION
The following information is given to meet the requirements of the Listing Rules of the Australian Securities Exchange Limited.
Substantial Shareholders
Notices of substantial shareholders received as at 30 August 2019 and the number of ordinary shares held:
Name
Village Roadshow Corporation Pty Limited
Vijay Vijendra Sethu
Distribution of Security Holders as at 30 August 2019
Ordinary Shares
77,940,322
9,948,235
% of Total
40.38
6.24
Category of Holding
Ordinary Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 and over
Number of holdings less than marketable parcel (180 shares)
Number
of Holders
2,470
2,162
501
474
79
5,686
387
%
Number of Units
43.44
38.02
8.81
8.34
1.39
100.00
1,280,758
5,279,993
3,692,416
10,782,781
174,096,770
195,132,718
26,161
Voting Rights of Ordinary Shares
On a show of hands – one vote per every member present in person or by proxy. On a poll – one vote for every share held.
20 Largest Security Holders as at 30 August 2019
Name of Holder
Village Roadshow Corporation Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
GW Burke Investments Pty Ltd
C & J Kirby Investments Pty Ltd
RGK Superannuation Pty Ltd
BNP Paribas Noms (NZ) Ltd
Ravenscourt Pty Ltd
Glenn Hargraves Investments Pty Ltd
National Nominees Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited-GSI EDA
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
BNP Paribas Noms Pty Ltd
Clark Kirby
JRK Retirement Nominees Pty Ltd
Mr Christopher B Chard
Mr Graham William Burke
TOTAL
Shares
65,960,636
29,701,676
24,233,683
12,014,379
3,624,212
2,475,006
2,265,133
2,168,161
2,000,000
1,909,527
1,792,541
1,605,692
1,556,333
1,445,407
999,652
947,765
937,500
909,000
904,000
894,231
158,344,534
%
33.80
15.22
12.42
6.16
1.86
1.27
1.16
1.11
1.02
0.98
0.92
0.82
0.80
0.74
0.51
0.49
0.48
0.47
0.46
0.46
81.15
%
0.66
2.70
1.89
5.53
89.22
100.00
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
92 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
ADDITIONAL INFORMATION (continued)
FIVE YEAR FINANCIAL SUMMARY - VRL GROUP
Operating Results - Continuing Operations ($'000)
Total revenue, excluding material items1
EBITDA before material items
EBIT before material items
Net interest expense, excluding material items
Tax expense (benefit), excluding tax on material items
Net profit (loss) excluding material items attributable
to members
Total dividends declared2
Statement of Financial Position ($'000)
Total shareholders' equity
Net borrowings
Funds employed
Total assets
Other Major Items ($'000)
Capital expenditure and investments3
Depreciation & amortisation expense
Ratios
Return on average total shareholders' equity (%)
EBIT / average funds employed (%)
Net debt / total capital (%)
Interest cover (times)
Per Share Calculations
EPS pre-material items and discontinued operations
(cents per share)4
EPS including material items and discontinued
operations (cents per share)4
Dividends - ordinary shares (cents per share)2
Net tangible assets ($ per share)
Other
Accumulation index - Ordinary shares (index base
1,000 as at 1 July 2014)5
2019
2018
2017
2016
2015
980,543
124,859
54,435
28,458
5,683
20,580
9,757
952,762
90,863
20,124
29,309
(2,721)
998,120
136,286
62,856
30,064
8,090
(7,294)
23,606
-
-
434,509
219,602
654,111
1,282,245
393,811
338,497
732,308
1,334,607
400,132
527,090
927,222
1,461,344
1,039,865
168,753
97,145
27,839
17,542
50,865
45,109
480,359
534,719
1,015,078
1,555,676
967,625
165,713
97,500
26,317
20,962
50,075
44,766
525,643
402,156
927,799
1,496,316
47,887
70,424
86,949
70,739
87,020
73,430
158,250
71,608
97,052
68,213
4.5
7.9
34
1.9
10.7
(3.4)
5.0
0.96
(1.3)
2.4
46
0.7
(4.5)
0.1
-
0.80
5.4
6.5
57
2.1
14.6
(41.3)
-
0.02
10.4
10.0
53
3.5
31.4
9.7
28.0
0.47
9.6
10.8
43
3.7
31.0
27.2
28.0
1.08
449
353
619
778
901
1
2
3
4
5
Due to the adoption of AASB 15 in FY2019, the Group has not restated comparative information and therefore may not be directly comparable.
Represents dividends on ordinary shares declared in relation to the relevant financial year. Excludes any distributions and special dividends.
Excludes the buyout of the Hypercoaster lease in FY2019.
Represents Diluted EPS on ordinary shares.
Represents value of $1,000 invested on 1 July 2014 with all dividends reinvested.
GOLD COAST
THEME PARKS
THEME PARKS PERFORMANCE SUMMARY
Year ended 30 June 2019
Key Earnings Metrics ($m)
EBITDA
EBIT
PBT
Year ended 30 June 2018
EBITDA
EBIT
PBT
Note: Figures presented are before Non-Controlling Interests relating to Wet'n'Wild Las Vegas, and before Material Items.
WET'N'WILD
SYDNEY
/ LAS VEGAS
41.9
1.8
(10.6)
0.9
(0.2)
(1.2)
1.4
(5.0)
(8.5)
(2.1)
(2.2)
(2.4)
73.0
30.2
14.7
3.6
1.7
0.4
TOPGOLF
ASIA THEME
PARKS
THEME PARKS
(TOTAL)
(0.9)
(1.0)
(1.0)
(2.9)
(3.0)
(3.0)
76.5
30.7
12.9
38.3
(8.3)
(24.4)
CINEMA EXHIBITION PERFORMANCE SUMMARY
Year ended 30 June 2019
Key Earnings Metrics ($m)
EBITDA
EBIT
PBT
Year ended 30 June 2018
EBITDA
EBIT
PBT
Note: Figures presented are VRL share, before Material Items, Other includes Leisure in 2019 (2018: Leisure, iPic and Belfast).
54.0
37.2
33.3
58.0
41.2
37.7
AUSTRALIA
OTHER
EXHIBITION
(TOTAL)
(0.1)
(0.6)
(0.6)
0.1
(0.5)
(1.5)
53.9
36.5
32.7
58.1
40.7
36.2
#
93 VILLAGE ROADSHOW LIMITED - 2019 ANNUAL REPORT
Internal use only
ADDITIONAL INFORMATION (continued)
CORPORATE DIRECTORY
Contact Information
Principal Administrative Office & Registered Office
Village Roadshow Limited
Level 1, 500 Chapel Street
South Yarra Vic 3141
Australia
Ph: +613 9281 1000
Fax: +613 9660 1764
Divisional Offices
Theme Parks
Village Roadshow Theme Parks
Pacific Motorway
Oxenford Qld 4210
Australia
Ph: +617 5573 3999
Fax: +617 5573 3666
Film Distribution
Roadshow Films
Level 1, 1 Garden Street
South Yarra Vic 3141
Australia
Ph: +613 9821 1000
Fax: +613 9660 1764
Home Exchange
Australian Securities Exchange
Level 4, North Tower, Rialto
525 Collins Street
Melbourne Vic 3000
Ph: 1300 300 279
Fax: 1300 300 021
Cinema Exhibition
Village Entertainment
Level 1, 500 Chapel Street
South Yarra Vic 3141
Australia
Ph: +613 9281 1000
Fax: +613 9660 1764
Marketing Solutions
Edge
Level 1, 500 Chapel Street
South Yarra Vic 3141
Australia
Ph: +613 9821 1000
Fax: +613 9660 1764
Opia
184 Shepherds Bush Road
London W6 7NL
United Kingdom
Ph: +44 1932 450 461
Investor Inquiries
To ensure shareholders and other interested parties can keep up to date on the Company, Village Roadshow Limited’s website contains
information on the Company including its business unit profiles, result announcements, securities exchange releases and other information for
investors. The site can be accessed at www.villageroadshow.com.au
Please contact the Company’s share registry for all inquiries on your Village Roadshow shareholding, such as confirmation of shareholding
details and change of address advice.
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street,
Abbotsford Vic 3067 Australia
Ph: 1300 555 159 Fax: 03 9473 2500 within Australia
Ph: +613 9415 4062 outside Australia
Website: www.computershare.com
94 VILLAGE ROADSHOW LIMITED – 2019 ANNUAL REPORT
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