ANNUAL REPORT BRISBANE BRONCOS LEAGUES CLUB LIMITED 2014 / 2015

Transcription

1 ANNUAL REPORT BRISBANE BRONCOS LEAGUES CLUB LIMITED 2014 /

2 contents i CONTENTS Notice of Annual General Meeting 1 President s Report 2 Directors Report 4 NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the 27th Annual General Meeting of the Brisbane Broncos Leagues Club Ltd, ACN will be held in the Darcey Mitchell Room, Brisbane Broncos Leagues Club Ltd, Fulcher Road, Red Hill on Thursday, 12 November 2015 at 6.00pm. notice of annual general meeting 1 Auditor s Independence Declaration 6 AGENDA Directors Declaration 7 Independent Auditor s Report 8 Statement of Comprehensive Income 10 Statement of Financial Position 11 Statement of Cash Flows Apologies 2. Confirmation of minutes from the last Annual General Meeting held on Thursday, 20 November Business arising out of minutes. 4. Annual reports for adoption: 4.1 President s Report; and 4.2 Directors Report, Independent Audit Report and Financial Statements. 5. Approval of Committee Members remuneration year ended 30 June Appointment of Grant Thornton Audit Pty Ltd as auditor of the company following the resignation of Pitcher Partners. 7. General business (of which seven days written notice has been given). Notes to the Financial Statements Gender Report 29 Dated 7th October 2015 by order of the Board of Directors. BRISBANE BRONCOS LEAGUES CLUB LIMITED ANNUAL REPORT 2013 / 2014

3 president s report 2 PRESIDENT S REPORT The Board of Directors of the Brisbane Broncos Leagues Club Limited present the 2014/2015 Annual Report to members. During the year under review the Club incurred a loss for the year of $2.033m (2014: loss $4.855m). EBITDAS fell by $0.843m to $2.111m and net cash balances fell by $0.987m. A summary of the Club s financial performance for the 2014/2015 financial year is set out below. Revenue Sales food, bar & bottleshop 5,857 7,383 Gaming machine takings 11,758 13,330 Other 1,367 1,460 18,982 22,173 to mortgage security these funds will reduce outstanding bank debt. The accounts for 2015 recognise the gain of $0.420m as a fair value gain. As noted earlier 2014 recognised an impairment charge of $4.620m. The further fall in profitability during 2015 caused the Board to reassess the carrying values of assets in relation to the expected future cash flows these assets would generate. As a result a further impairment charge of $1.965m is included in the 2015 accounts. After some frank discussions with our bankers the Board recognised that an acceleration in the decline of attendances that caused lower revenues and cash profits meant the club s debt level was unsustainable. With the Club in default of its borrowing covenants and suffering its third consecutive year of falling revenues the Board approached Deloitte to assist with the review of operations and the development of a strategy aimed at maintaining bank support whilst undertaking an assessment of go-forward alternatives. As a result of the Deloitte review, management, under Bob Cutmore, implemented an immediate cost reduction program whilst the Board reviewed expressions of interest from three companies for the management and revitalisation of the business. The proposal selected, Club Services (an Easts Leagues Club company), established a clear path forward incorporating excellent management expertise in a near city venue, funding for facility improvements and members retention of the underlying assets of the Club. No other proposal included these three key components. The Department of Justice and Attorney General through the Office of Liquor and Gaming Regulation approved the application for the Management Agreement on 1 September On behalf of the Board I wish to thank our management team, and in particular Bob Cutmore, who acted positively when faced with the urgency of the restructuring needs of the club. The assistance of Julia Hodgkinson from Deloitte in particular must be recognised along with the patience and support provided by the ANZ bank. president s report 3 Expenses Cost of sales (2,499) (3,262) Gaming machine related expenses (4,896) (5,409) Employee & other (9,476) (10,548) (16,871) (19,219) The commencement of the Club Services agreement provides members with the prospect of a much refreshed facility and the expectation that we can regain our position as one of the premier facilities in Queensland. Signed at Brisbane this 17th day of September 2015 in accordance with a resolution of directors. Profit before interest, tax, depreciation & sponsorship (EBITDAS) 2,111 2,954 Finance costs (606) (598) Depreciation (1,973) (2,517) Profit/(loss) from operations (468) (161) Impairment property, plant and equipment (1,965) (4,620) Lawrence Brindle President Fair value gain investment properties 420 Sponsorship Brisbane Broncos (113) Profit/(loss) before tax (2,013) (4,894) Income tax credit/(expense) (20) 39 Profit/(loss) for the year (2,033) (4,855) COMMENTARY ON OPERATIONS Revenues for the year fell by 14.4% to $19m. The greatest impact on profitability came from the fall in gaming machine takings (down 11.8% or $1.572m). Food, bar and bottleshop sales also fell heavily however the low profit margins in this area meant the fall only had a small impact on the bottom line. Operating costs were managed down by 12.2% and depreciation and amortisation costs fell by $0.544m mainly due to the lower depreciable value resulting from the 2014 impairment charge. The 2015 charge included accelerated depreciation of $0.226m on assets no longer in use. The club also incurred $0.251m in non-recurring advisory fees during the year principally comprising bank advice oncharges and Deloitte s fees. During the year the Board placed its three investment properties on the market. Funds from the sale of these properties (originally purchased for member car parking) will be received in September 2015 and as they were subject

4 directors report 4 DIRECTORS REPORT Your directors present their report on the Club for the year ended 30 June DIRECTORS The following persons were directors of the company during the whole of the financial year and up to the date of this report unless otherwise stated: L.G. Brindle (President) (Appointed 20 November 2014) T.W. Condon (Resigned 20 November 2014) R.I. Kennerley (Appointed 20 November 2014) B.P. Cullen (Resigned 20 November 2014) A.J. Joseph (Appointed 20 November 2014) J. Peterson (Resigned 20 November 2014) G.W. Miles K. Macdonald (Resigned 26 March 2015) Details of the current directors are summarised below: LAWRENCE BRINDLE President Lawrence Brindle joined the Board of Directors of Broncos Leagues Club in Previously he was the Chairman of Brisbane Broncos Ltd from 2011 to 2013, a Non-Executive Director from 2008 until 2013 and a Director of Brisbane Broncos (previously Pacific Sports Entertainment Ltd) from 1996 to Mr Brindle held the position of Finance Director of the Queensland Press Group from 1990 to He served as Director of the Australian Stockman s Hall of Fame and Outback Heritage Centre and a Director of the North Queensland Cowboys Rugby League Football Ltd. Lawrence was also appointed Company Secretary on 26 March RICHARD KENNERLEY Vice President and Treasurer Richard Kennerley joined the Board of Directors of Broncos Leagues Club in He is Executive Director of the University of Queensland Business School, Executive Education, Chairman of Cutting Edge and a Member of Youngcare Changemakers Advisory Council. Richard was previously State General Manager of the National Australia Bank. Richard has professional qualifications in banking and corporate treasury and is a Graduate of the Australian Institute of Company Directors. GENE MILES Gene Miles has been a Director for 17 years and represented Australia in rugby league and is a former captain of the Brisbane Broncos. He is currently Executive Chairman of the Former Origin Greats (FOGS). Gene has been a selector for the Qld State of Origin team for the previous 15 years. He is also a life member of Broncos Leagues Club. ANTHONY JOSEPH Tony Joseph joined the Board of Directors of Broncos Leagues Club in He has been a Director of Brisbane Broncos Limited for 5 years. He is Chairman of Brisbane Market Limited and Vice Chairman of Brismark Pty Ltd. Tony is on the Committee for Queensland Men of League as well as a Member of the Australian Institute of Company Directors. 2. PRINCIPAL ACTIVITIES The principal activities of the company are to provide a social and sporting club and to support the game of rugby league specifically through the Brisbane Broncos. There were no significant changes in the nature of the company s activities during the financial year. 3. OBJECTIVES & STRATEGIES Short term The short term objective is to reduce current debt levels and meet lending covenants by improving operating performance by conducting its business affairs in a sound and responsible manner. Long term The long term objectives of the club emanate from its stated principal purposes, which are: (a) To provide for members and for members guests, a social and sporting club with all the usual facilities of a club, including liquor, and other refreshments, libraries and provision for sporting, musical and educational activities and other social amenities; and (b) To sponsor, promote, foster, support and encourage the aims and objects of Brisbane Broncos Rugby League Club Limited and all matters pertaining thereto. Strategy for achieving objectives The club has undertaken the sale of surplus assets and the renegotiation of its funding facilities to restructure the debt profile and provide funding for the upgrade of facilities. To implement the necessary changes to the operating performance the club has employed an experienced club management group. Business plans, budgets and cash flows are being refined to ensure that the goals, objectives and business strategies are achieved. New departmental/management operating and reporting strategies are being implemented to support this objective. Performance measurement and key performance indicator The club utilises industry benchmarks and budgets as to develop key KPIs. External and internal management and the Board of Directors meet on a regular basis to monitor performance and ensure that operations are managed so as to ensure that the most relevant KPI s are kept in focus. 4. MEETINGS OF DIRECTORS During the financial year 13 general director meetings and 2 audit committee meetings were held. Attendances by each director were as follows: 5. LIMITED LIABILITY OF MEMBERS The company was incorporated under the Corporations Act 2001 as a company limited by guarantee. If the company is wound up, and there are remaining liabilities of the company after realising the company s assets, the constitution requires each member to contribute a maximum of $100 each toward meeting any outstanding obligations of the company. At 30 June 2015, the total amount that members of the company may be liable to contribute if the company is wound up is $251,951 (based on the membership fee paid by each member in the 2015 financial year). 6. ROUNDING OF AMOUNTS Pursuant to class order 98/0100, issued by the Australian Securities & Investments Commission, amounts in the directors report and financial report have been rounded off to the nearest thousand dollars unless otherwise indicated. 7. AUDITOR S INDEPENDENCE DECLARATION A copy of the auditor s independence declaration as required under section 307C of the Corporations Act 2001 is attached to this report. Signed at Brisbane this 17th day of September 2015 in accordance with a resolution of directors. Lawrence Brindle President DIRECTORS MEETINGS Number Attended Number Eligible to Attend AUDIT COMMITTEE MEETINGS Number Attended Number Eligible to Attend L.G. Brindle R.I. Kennerley A.J. Joseph 7 8 G.W. Miles K. Macdonald B.P. Cullen T.W. Condon 5 5 J. Peterson There were no other committees. directors report 5

5 auditor s independence declaration 6 AUDITOR S INDEPENDENCE DECLARATION DIRECTORS DECLARATION In the directors opinion: (a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including: (i) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and directors declaration 7 (ii) giving a true and fair view of the Club s financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and (b) as set out in note 16, there are reasonable grounds to believe that the Club will be able to pay its debts as and when they become due and payable The Directors Brisbane Broncos Leagues Club Ltd Fulcher Road RED HILL QLD 4059 Signed at Brisbane on 17 September 2015 in accordance with a resolution of directors. AUDITOR S INDEPENDENCE DECLARATION As lead auditor for the audit of Brisbane Broncos Leagues Club Ltd for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: (i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. Lawrence Brindle President PITCHER PARTNERS R C N WALKER Partner Brisbane, Queensland 17 September 2015

6 independent auditor s report 8 INDEPENDENT AUDITOR S REPORT Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act Opinion In our opinion, the financial report of Brisbane Broncos Leagues Club Ltd is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the company s financial position as at 30 June 2015 and of its performance for the year ended on that date; and independent auditor s report 9 b) complying with Australian Accounting Standards - Reduced Disclosure Requirements and the Corporations Regulations Emphasis of Matter INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF BRISBANE BRONCOS LEAGUES CLUB LTD Without modifying our opinion, we draw attention to note 16 in the financial report, which indicates that the company s current liabilities exceed current assets as at 30 June Since balance date the company has entered into various arrangements, as set out in notes 15 and 16 of the financial report, which the directors expect will result in an improvement in earnings and net cash inflows to meet its financial obligations. These conditions, along with other matters as set out in note 16, indicate the existence of a material uncertainty that may cast significant doubt about the company s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business. We have audited the accompanying financial report of Brisbane Broncos Leagues Club Ltd, which comprises the statement of financial position as at 30 June 2015, the statement of comprehensive income, the statement of changes in equity and the 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. PITCHER PARTNERS Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards - Reduced Disclosure Requirements 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. RCN WALKER Partner Brisbane, Queensland 17 September 2015 Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company s preparation of the financial report that gives a true and fair view 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 company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

7 statement of comprehensive income 10 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 AS AT 30 JUNE 2015 NOTES Revenue Food & beverage 5,857 7,383 Gaming machine takings 11,758 13,330 Other revenue 2 1,367 1,460 Gain on fair value adjustment ,402 22,173 Expenses Food & beverage 5,190 6,504 Gaming 4,896 5,409 Promotions and entertainment 1,708 2,093 Membership Property costs 3,341 4,051 Administration 2,456 2,634 Advisory fees 251 Impairment charge property, plant and equipment 4 1,965 4,620 Finance costs Other expenses ,415 27,067 Profit/(loss) before income tax (2,013) (4,894) Income tax credit/(expense) 3 (20) 39 Profit/(loss) for the year (2,033) (4,855) Other comprehensive income Total comprehensive income/(loss) for the year (2,033) (4,855) STATEMENT OF FINANCIAL POSITION NOTES Current Assets Cash and cash equivalents Trade and other receivables Inventories Investment properties held for sale 6 2,665 Prepayments Total Current Assets 3, Non-Current Assets Property, plant and equipment 4 10,767 14,138 Investment properties 5 2,245 Intangible assets 7 10 Deferred tax assets Total Non-Current Assets 10,817 16,463 Total Assets 13,990 17,169 Current Liabilities Trade and other payables 1,740 1,559 Borrowings 9 8,928 9,326 Provision for employee benefits Unearned revenue Total Current Liabilities 11,106 11,547 Non Current Liabilities Borrowings ,646 Provision for employee benefits Unearned revenue 4 8 Total Non-Current Liabilities 973 1,678 statement of financial position 11 Total Liabilities 12,079 13,225 Net Assets 1,911 3,944 Members Funds Retained profits 1,911 3,944 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Members funds at the beginning of the year 3,944 8,799 Profit/(loss) for the year (2,033) (4,855) Members funds at the end of the year 1,911 3,944 The above statement of comprehensive income should be read in conjunction with the accompanying notes. The above statement of financial position and statement of changes in equity should be read in conjunction with the accompanying notes.

8 statement of cash flows 12 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE 2015 Cash Flows from Operating Activities NOTES Cash receipts in the course of operations 20,845 24,136 Cash payments in the course of operations (18,779) (21,529) Membership fees received Finance costs paid (606) (598) Income tax refund/(payments) 23 Net cash inflow from operating activities 13 1,670 2,203 Cash Flows from Investing Activities Proceeds from sale of property, plant and equipment 4 22 Payments for property, plant and equipment (91) (214) Proceeds from supplier rebates 265 Payments for intangible assets (1) Payments for investment properties (38) Net cash inflow/(outflow) from investing activities (87) 34 Cash Flows from Financing Activities Proceeds from bank borrowings Repayment of bank borrowings (900) (900) Repayment of hire purchase liabilities (1,650) (1,519) Proceeds/(repayments) of other loans (20) 7 Net cash outflow from financing activities (2,570) (2,262) Net decrease in cash held (987) (25) Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 13 (705) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the material accounting policies adopted by the Brisbane Broncos Leagues Club Limited (the Club ) in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act The Club is a not-for-profit entity for the purpose of preparing the financial statements. Compliance with Australian Accounting Standards Reduced Disclosure Requirements AASB101 The financial statements of the Club comply with Australian Accounting Standards Reduced Disclosure Requirements as issued by the Australian Accounting Standards Board (AASB). New and amended standards adopted None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period and is not likely to affect future periods. Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Club s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 1(r). Historic cost convention These financial statements have been prepared under the historical cost convention, except for investment properties which are recognised at fair value through profit or loss. (a) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and (for the purposes of the cash flow statement) bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. (b) Inventories Inventories are measured at the lower of cost and net realisable value. Costs are assigned to individual items of inventory, mainly on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. (c) Property, Plant and Equipment Property, plant and equipment are measured on the cost basis, less depreciation and impairment losses. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Club and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. The depreciable amount of all property, plant and equipment, including building and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the assets useful lives to the Club commencing from the time the asset is held ready for use. The expected useful lives are as follows: Class Life (Years) Buildings Plant and equipment 3-10 notes to the financial statements 13 The above statement of cash flows should be read in conjunction with the accompanying notes.

9 notes to the financial statements 14 The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. On 1 July 2014 the useful lives of the Club s gaming machines was re-assessed and increased from 3 years to 4.5 years. Rebates from suppliers of gaming machines for volume purchases are applied against the cost of the asset. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in profit or loss. (d) Investment Properties Investment properties, principally comprising residential properties, are held for long-term rental yields and are not occupied by the group. Investment properties are carried at fair value, which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. These valuations are reviewed annually by the Directors. Changes in fair values are recorded in the profit or loss as part of other income or expenditure. (e) Investment properties held for sale Investment properties are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at fair value less costs to sell. (f) Intangible Assets Software assets have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of software over its estimated useful life of 3 years on average. (g) Income Tax The income tax expense or revenue for the period is the tax payable on the current period s taxable income, based on the national income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences, to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that, at the time of the transaction, did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The deferred tax liabilities in relation to investment property that is measured at fair value is determined assuming the property will be recovered entirely through sale. Current and deferred tax balances attributable to amounts recognised in other comprehensive income FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE 2015 or directly in equity are also recognised directly in other comprehensive income or equity. (h) Trade and Other Payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. These amounts represent liabilities for goods and services provided to the Club prior to the end of financial year, which are unpaid. The amounts are usually unsecured and due within 30 days of recognition. (i) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental costs relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Borrowings are classified as current liabilities unless the Club has an unconditional right to defer settlement of the liability for at least 12 months after the balance date. (j) Leases Leases of property, plant and equipment, where the Club has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in liabilities. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the estimated useful life of the asset. Where there is no reasonable certainty that the lessee will obtain ownership, the asset is depreciated over the shorter of the lease term and the asset s useful life. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the lease term. (k) Employee Benefits Wages and salaries, annual leave Liabilities for wages and salaries, including nonmonetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service 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 period. Consideration is given to expect future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Superannuation The Club makes contributions to defined contribution superannuation funds. Contributions are recognised as an expense as they become payable. notes to the financial statements 15

10 notes to the financial statements 16 (l) Provisions Provisions are recognised when the Club has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. (m) Financial Instruments The Club classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Recognition Financial instruments are initially measured at fair value plus transaction costs (except for financial assets carried at fair value through profit or loss). Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest method. Other The Club does not have any financial instruments classified as at fair value through profit or loss, available-for-sale or held-to-maturity. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value of all other financial assets and liabilities, including discounted cash flow analysis, recent arm s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date the Club assesses whether there is objective evidence that a financial asset has been impaired. Impairment losses are recognised in profit or loss, where applicable. (n) Impairment of Assets At each reporting date the Club reviews the carrying values of its assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use, is estimated and compared to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is expensed to profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Club estimates the recoverable amount of the cash-generating unit to which the asset belongs. (o) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (p) Revenue Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE 2015 Revenue from sale of goods, such as food and liquor, 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. Revenue from gaming machines is recognised on the basis of daily takings. Interest revenue is recognised as the interest accrues (using the effective interest rate method). Revenue from membership fees is recognised over the membership period. Members subscription payments in advance are included in unearned revenue. Other amounts received in advance of provision of goods or services are also included in unearned revenue. (q) Trade and Other Receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impaired receivables. Trade and other receivables are usually due for settlement no more than 30 days from the date of recognition. Collectability of receivables is reviewed on an ongoing basis. Debts, which are known to be uncollectible, are written off. A provision for impaired receivables is established when there is objective evidence that the Club will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of the provision is recognised in profit or loss. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. (r) Critical Accounting Estimates and Judgements The Club evaluates estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Club. Key estimates and judgements impacting the financial statements are as follows: Recoverable amount of property, plant and equipment The Club assesses impairment at each reporting date by evaluating conditions specific to the Club that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the assets is determined. The analysis to assess the recoverable amount of property, plant & equipment is based on their value in use which involves an assessment of the Club s net present value of estimated future cash flows. There are a number of critical assumptions used in the value in use calculation, in particular the growth rate of earnings, the level and timing of future capital expenditure and the impact on earnings, and the discount rate applied to the net cash flows see Note 4. (s) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. (t) General This financial report covers Brisbane Broncos Leagues Club Ltd as an individual entity. Brisbane Broncos Leagues Club Ltd is a public company limited by guarantee, incorporated and domiciled in Australia. Its registered office and principal place of business is: Brisbane Broncos Leagues Club Ltd Fulcher Road RED HILL QLD 4059 notes to the financial statements 17

11 notes to the financial statements Revenue and Expenses Loss before income tax expense includes the following specific items: Other revenue Commissions Membership fees Rent & recovery of outgoings Entertainment shows Other ,367 1,460 Expenses Depreciation and Amortisation Depreciation - buildings plant and equipment 1,830 2,126 Amortisation - software Total depreciation and amortisation 1,973 2,517 Impairment - land 1,620 Finance Costs - buildings 3,000 - plant and equipment 1,965 1,965 4,620 Interest on bank loans and overdraft Interest on hire purchase liabilities FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE Income Tax Income tax expense/(credit) Current tax (71) Deferred tax (39) Numerical reconciliation of income tax expense to prima facie tax payable (Loss)/profit for the year before income tax expense (2,013) (4,894) Income tax calculated at the Australian rate of 30% (2014: 30%) (604) (1,468) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: - Non-assessable net mutual income (88) (138) - Members only income (96) (106) - Members only expenditure Sponsorship Impairment charge not deductible 589 1,386 - Other items 7 (26) (110) Benefit of tax losses not recognised - 71 Movement in temporary differences (note 8) 20 - Income tax expense/(credit) 20 (39) notes to the financial statements 19 Cost of sales food, bar & bottleshop 2,499 3,262 (Profit)/Loss on sale of plant & equipment (4) (21) Sponsorship Brisbane Broncos Rugby League Club Ltd 113 Employee benefits and employee related expense* 5,329 6,002 Defined contribution superannuation expense* *Superannuation expense is also included within employee benefits expense

12 notes to the financial statements 20 FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE Property, Plant and Equipment Land at cost 5,620 5,620 Provision for impairment (1,620) (1,620) 4,000 4,000 Buildings - at cost 19,717 19,717 Accumulated depreciation and impairment (15,915) (15,782) 3,802 3,935 Plant and equipment - at cost 13,203 15,639 Provision for impairment (1,965) Accumulated depreciation (8,273) (9,436) 2,965 6,203 Total property, plant and equipment 10,767 14,138 In July 2014 an independent valuation of the Club s property, plant and equipment was carried out by Gavin Duthie, a certified practicing valuer, for bank mortgage lending purposed. The valuer provided a going concern value inclusive of land, building improvements, plant and equipment, chattles and licences, at $14 million, being the highest and best use as at 30 June The directors considered the going concern valuation of the Club s property, plant and equipment and recognised an impairment charge of $4,620,000 to the carrying value of land and buildings. At 30 June 2015 the directors considered the recoverable amount of property, plant and equipment based on their value in use which was based on an assessment of the Club s net present value of estimated future cash flows. Future cash flows includes estimated earnings over the next three years, extrapolated thereafter using an estimated growth rate, and future capital expenditure in respect of plant and equipment and refurbishments. A pre-tax discount rate of 13% per annum was applied to the net cash flows. Based on these assumptions, an impairment of $1,965,000 has been applied to plant and equipment at 30 June 2015 as the carrying value of plant and equipment exceeded its recoverable amount. Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below: LAND BUILDINGS PLANT & EQUIPMENT TOTAL Balance at 1 July ,620 7,315 7,011 19,946 Additions 1,634 1,634 Supplier rebates (315) (315) Disposals (1) (1) Depreciation (380) (2,126) (2,506) Impairment charge (1,620) (3,000) (4,620) Balance at 30 June ,000 3,935 6,203 14,138 Additions Reverse prior year supplier rebate receivable Depreciation (133) (1,830) (1,963) Impairment charge (1,965) (1,965) Balance at 30 June ,000 3,802 2,965 10,767 Assets Pledged as Security - Refer to note Investment properties Investment properties at fair value 2,245 Movement in investment properties: Opening balance 2,245 2,207 Additions at cost 38 Reclassification to investment properties held for sale (note 6) (2,245) Closing balance 2,245 notes to the financial statements 21

13 notes to the financial statements Investment properties held for sale Investment properties held for sale - at fair value 2,665 Movement in investment properties: Opening balance Reclassification from investment properties 2,245 Fair value adjustment 420 Closing balance 2,665 The 3 investment properties owned by the Club adjoin the Club on the southern side and are being leased to either Brisbane Broncos Football Club or third parties. During 2015 financial year, the Club entered into an agreement to sell the properties with settlement due in September The properties were revalued at June 2015 based on their selling price. Assets Pledged as Security Refer to note Intangible assets Software - at cost Accumulated amortisation (71) (61) 10 Reconciliations Balance at 1 July Additions 1 Amortisation (10) (11) Balance at 30 June Deferred Tax Assets Deferred tax assets Deferred income tax relates to the following: Tax losses Employee benefits Accrued expenses Investment properties (126) - Net deferred tax assets Benefit of tax losses not recognised FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE Borrowings Current Secured Bank overdraft 1, Bank loans 6,858 7,757 Hire purchase liabilities 1,010 1,481 Unsecured 8,876 9,253 Other loans Non-Current Secured 8,928 9,326 Hire purchase liabilities 883 1, ,646 Bank finance facilities The Club has two bank overdraft facilities for $810,000 (2014: $nil) and $500,000 (2014: $500,000) respectively. At 30 June 2015 the total amount drawn on the overdraft facilities was $1,008,000 (2014: $15,000). The Club has a bank loan of $6,858,000 (2014: $7,757,000). The bank overdrafts and loan facilities require the Club to comply with certain financial covenants which include an interest cover ratio and debt to earnings ratio. The bank loans were classified as a current liability at 30 June 2014 and The Club also has hire purchase liabilities under the same finance facilities. At 30 June 2015 the total amount owing as hire purchase liabilities under these facilities was $1,073,000 (2014: $1,622,000). The balance of the hire purchase liabilities was owing to another finance provider. On 14 July 2015 the bank provided the Club with a new finance facility which effectively waived any covenant breaches in the previous year. The new loan facility requires the Club to comply with the same financial covenants as the previous facility starting from 1 July The interest ratio cover is to be tested quarterly and the debt to earnings ratio is to be tested annually. Further information on the restated bank finance facility is summarised in note 15 (a). Assets Pledged as Security All the assets of the Club are pledged as security. 10. Company Limited by Guarantee The Club is a public company limited by guarantee under the Corporations Act The amount which is capable of being called up in the event of winding up of the Club is not to exceed $100 per member by virtue of the Club s memorandum of association. notes to the financial statements 23

14 notes to the financial statements Commitments for Expenditure Hire purchases Commitments in relation to hire purchases are payable as follows: Within one year 1,079 1,606 Later than one year but not later than five years 904 1,709 Minimum lease payments 1,983 3,315 Future finance charges (90) (188) 1,893 3,127 Hire purchases comprise of items of plant and equipment, mainly poker machines, under commercial hire purchase terms and conditions. Hire purchase liabilities are secured by the underlying assets. FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE Related Party Transactions (a) Key Management Personnel Compensation Key management personnel compensation 474, ,480 (b) Related Parties (i) Brisbane Broncos Limited The Club has a number of transactions with Brisbane Broncos Limited. One of the objectives of the Club, under its constitution, is to support the game of rugby league specifically through Brisbane Broncos Rugby League Club Ltd ( Broncos Football Club ) a controlled entity of Brisbane Broncos Limited. In relation to the bi-annual election of the Club s directors the Broncos Football Club may nominate, two nominees for each of the positions of President, Vice President, and Honorary Treasurer. It also may nominate eight nominees for the six of the other positions as Director. Transactions between the Club and Broncos Football Club are at arm s length and summarised as follows: Revenue received/receivable - Rent of premises and recovery of outgoings 285, ,522 - Catering 89, ,037 - Other 1,646 6,498 notes to the financial statements 25 Expenses paid/payable - Sponsorship 112,500 - Other 25,553 34,398 (ii) Other related parties The Club pays legal fees to McCullough Robertson of which Jim Peterson (a director of the Club during the year) is a partner. Fees paid/payable to McCullough Robertson in the 2015 financial year were $210,607 (2014: $211,984) of which $136,305 (2014: $130,243) was recovered through insurance in relation to the matter summarised in note 14. The directors utilised the facilities of the Club during the year within a normal employee/customer relationship on terms and conditions no more favourable than those which is reasonable to expect would have been adopted if dealing with them at arm s length in the same circumstances.

15 notes to the financial statements 26 FOR THE YEAR ENDED 30 JUNE 2015 FOR THE YEAR ENDED 30 JUNE Notes to Cash Flow Statement Reconciliation of Net Profit/(loss) to Net Cash from Operating Activities Profit/(loss) for the year (2,033) (4,855) Amortisation and depreciation 1,973 2,517 Gain on fair value adjustment investment properties (420) - Impairment charge property, plant and equipment 1,965 4,620 Profit on sale of property, plant and equipment (4) (21) Changes in operating assets and liabilities: (Increase)/decrease in: Inventories Trade receivables and prepayments Current tax assets 23 Deferred tax assets 20 (39) Increase/(decrease) in: Trade and other payables 181 (93) Unearned revenue (21) (41) Provisions (145) 15 Net cash provided by operating activities 1,670 2,203 Reconciliation of Cash and Cash Equivalents Cash and cash equivalents at the end of the financial year as shown in the statement of cash flow is reconciled to the statement of financial position as follows: Cash and cash equivalent assets Bank overdraft (1,008) (15) Non-cash Activities (705) 282 During the 2015 year the Club acquired plant and equipment with an aggregate fair value of $416,000 by means of hire purchase loans (2014: $1,420,000). 14. Contingent Liabilities The Club entered into a call option agreement with Principal Properties Pty Ltd (Principal Properties) in November That option, if exercised, would have entitled Principal Properties to acquire a portion of the Club s land at Fulcher Road located at the southern car parking area. The option has lapsed or, in Principal Properties view, has been terminated. Principal Properties is seeking, under a claim lodged in the Queensland Supreme Court in July 2012, damages against the Club in an amount of approximately $7.5 million for the loss of profits Principal Properties says it has suffered as a result of the Club s alleged repudiation of the option by not approving the draft development approval application prepared by Principal Properties. The Club has lodged its defence to that claim and is vigorously defending the action. Principal Properties has provided an amount of $330,000 on account of security for the Club s legal fees in this litigation which should be released to the Club if it is successful in its defence of Principal Properties claim. The matter is set down for an 8 day trial in the Queensland Supreme Court, commencing on 14 September A substantial part (but not all) of the Club s litigation costs are covered under an insurance policy held by the Club. The Club would not have the financial capacity to pay any award of damages to Principal Properties if it is unsuccessful in this litigation. 15. Events Subsequent to reporting date (a) Bank Finance Facilities On 14 July 2015 the bank provided the Club with a restated letter of offer which effectively waived the previous breaches of the financial covenants (as summarized in note 9) and restated the financial arrangements under the new facility. The new arrangements provides the Club with the following facilities Facility Limit Drawn 30 Jun-15 Expiry Bank loan 6,858 6, Aug-17 Asset finance 1,400 1,073 Not before next Review Date Overdraft (1) Oct-15 Overdraft (2) Not before next Review Date 9,568 8,939 (b) Management Services Agreement Club Services On 2 July 2015 the Club entered into a five year Management Services Agreement ( MSA ) with Club Services Pty Ltd ( Club Services ), an associated company of Eastern Suburbs Leagues Club Limited ( Easts Leagues Club ). Under the MSA, Club Services is to provide various services to the Club including to recruit, pay and take full responsibility for the Club s general manager. The MSA is conditional on various consents from the Commissioner for Liquor and Gaming and other parties which are expected to be received in September The Club has agreed to pay Club Services a management service fee which comprises a fixed amount per annum and a variable performance fee based on the Club s earnings each year over the term of the agreement. (c) Finance Facility Agreement Club Services On or around the same date as the MSA, the Club entered into a Facility Agreement and Security Deed with Club Services. Under the Facility Agreement, Club Services has agreed to provide the Club with a loan of $1,500,000 for the purpose of funding replacement gaming machines ($1,070,000) and specific improvements to the Club. Interest is to accrue on the principal outstanding at 10% per annum. The loan will be secured by a charge over the gaming machines acquired by the Club under the Facility Agreement and certain other assets of the Club. The loan is to be repaid the earlier of five years after the first drawdown or at the date of expiry of the MSA. notes to the financial statements 27