Concise
Financial
Report

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The Concise Financial Report and Auditors’ Report contained within this document represent a Concise Report. The full financial report of Clemenger Group Limited for the year ended 31 December 2014 and the Auditors’ Report thereon will be sent, free of charge, to members upon request. Members wishing to receive the full financial report and Auditors’ Report may arrange for a copy by contacting Adrian Ciabotti on 03 9869 4206.

The Concise Report contained within this document has been derived from the full consolidated financial report of Clemenger Group Limited for the year ended 31 December 2014 and cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the consolidated entity as the full financial report.

Consolidated statement of financial position as at 31 December 2014

The Net Assets of the Group increased by $20 million, the increase was driven by the excess of profits over dividends paid during the year. Non-current interest bearing loans and borrowings and non-current receivables have increased as a result of new loans associated with the Clemenger Employee Share Scheme. Net working capital has increased in line with the Group’s focus on cash retention and working capital maximisation.

  31 Dec 2014 31 Dec 2013
ASSETS $000 $000
     
Current assets    
Cash and cash equivalents 164,888 134,662
Trade and other receivables 81,911 60,906
Other current assets 20,009 17,062
Total current assets 266,808 212,630
     
Non-current assets    
Receivables 39,621 37,844
Deferred tax assets 7,682 6,547
Investments in associates 46,120 49,321
Other non-current assets 12 792
Property, plant and equipment 11,621 8,569
Intangible assets and goodwill 71,520 64,240
Total non-current assets 176,576 167,313
TOTAL ASSETS 443,384 379,943
     
LIABILITIES    
     
Current liabilities    
Trade and other payables 88,381 59,905
Interest bearing loans and borrowings 79
Income tax payable 6,209 4,753
Provisions 10,109 8,924
Other current liabilities 12,326 8,912
Total current liabilities 117,025 82,573
     
Non-current liabilities    
Payables 2,293 1,578
Deferred tax liability 3,062 696
Interest bearing loans and borrowings 41,031 37,085
Provisions 4,069 2,776
Total non-current liabilities 50,455 42,135
TOTAL LIABILITIES 167,480 124,708
NET ASSETS 275,904 255,236
     
EQUITY    
     
Issued capital 23,210 23,210
Reserves (10,659) (8,551)
Retained earnings 260,714 238,580
Parent interests 273,265 253,239
Minority interests 2,639 1,997
TOTAL EQUITY 275,904 255,236

Consolidated statement of profit or loss for the year ended 31 December 2014

For the year ended 31 December 2014, the Group recorded a Profit after Tax of $40.7 million, with $40.1 million attributable to the members of the Group. Trading conditions experienced in the year were broadly consistent with the prior period.

    Year ended
31 Dec 2014
Restated
Year ended
31 Dec 2013
  Note $000 $000
     
Commission and fees 1 289,509 273,939
Cost of Sales   (53,836) (53,258)
Gross Profit   235,673 220,681
       
Interest revenue   7,239 7,617
Other income   3,152 229
Finance costs   (2,226) (2,947)
Staff costs   (147,868) (137,247)
Occupancy costs   (15,468) (14,259)
Depreciation expense and impairment of goodwill   (10,226) (6,597)
Travel & entertainment   (7,462) (6,778)
Communications   (2,021) (2,240)
Other expenses   (16,649) (16,125)
Share of profit of associate   10,399 8,458
Profit before income tax   54,543 50,792
Income tax expense   (13,861) (13,367)
Net profit for the period   40,682 37,425
       
Net profit attributable to      
Members of the group   40,123 36,505
Non controlling interests   559 920
    40,682 37,425

Consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2014

The foreign currency translation movement of $1.4m was due to the New Zealand dollar appreciating 4% against the Australian dollar during 2014. The foreign currency translation movement of $5.9m in 2013 was due to the New Zealand dollar appreciating 16% against the Australian dollar during 2013.

  Year ended
31 Dec 2014
Restated
Year ended
31 Dec 2013
  $000 $000
     
Net profit for the period 40,682 37,425
     
Other comprehensive income    
Items that may be reclassified subsequently to profit and loss:    
Foreign currency translation movement (net of tax) 1,446 5,942
Total comprehensive income for the period 42,128 43,367
     
Total comprehensive income for the period is attributable to:    
Owners of Clemenger Group Limited 41,569 42,447
Non controlling interests 559 920
  42,128 43,367

Consolidated statement of changes in equity for the year ended 31 December 2014

The composition of retained earnings during the year was impacted by profits for the year, offset by a dividend paid to shareholders. The foreign currency translation reserve movement of $1.4m was due to the New Zealand dollar appreciating 4% against the Australian dollar during 2014.

  Share capital Retained earnings Aquisition premium reserve Foreign currency translation reserve Owners of the parent Non controlling interest Total
  $000 $000 $000 $000 $000 $000 $000
               
At 1 January 2014 23,210 238,580 (14,028) 5,477 253,239 1,997 255,236
Profit for the year   40,123     40,123 559 40,682
Other comprehensive income     1,446 1,446   1,446
Transactions with owners in their capacity as owners:
               
Dividends paid (17,989)     (17,989) (613) (18,602)
Acquisition of non-controlling interest   (3,554)   (3,554) (670) (4,224)
Non-controlling interest arising on a business combination         1,366 1,366
At 31 December 2014 23,210 260,714 (17,582) 6,923 273,265 2,639 275,904
               
At 1 January 2013 23,210 219,625 (14,028) (465) 228,342 1,891 230,233
Profit for the year   36,505     36,505 920 37,425
Other comprehensive income     5,942 5,942   5,942
Transactions with owners in their capacity as owners:
               
Dividends paid (17,550)     (17,550) (853) (18,403)
Acquisition of non-controlling interest         39 39
Non-controlling interest arising on a business combination        
At 31 December 2013 23,210 238,580 (14,028) 5,477 253,239 1,997 255,236

Consolidated cash flow statement for the year ended 31 December 2014

Net cash flows from operating activities increased during the year as a result of the decrease in payments to suppliers outstripping the movement in receipts from clients during 2014. The balance of cash and cash equivalents increased from the previous year, due to the movement in operating activities outlined above, coupled with an increase due to the consolidation of Marketforce and GRA Everingham from December 2014.

  Year ended
31 Dec 2014
Year ended
31 Dec 2013
  $000 $000
     
Cash flows from operating activities    
Receipts from clients (including GST) 511,303 514,137
Payments to suppliers (including GST) (458,971) (481,234)
Interest received 7,239 7,617
Interest paid (2,226) (2,947)
Income tax paid (13,535) (13,614)
Net cash flows from operating activities 43,810 23,959
     
Cash flows from investing activities    
Purchase of property, plant & equipment (6,188) (5,676)
Purchase of other intangibles (72) (677)
Proceeds from repaid employee shareholder loans 2,427 2,306
Loans to employee investing shareholders (6,441) (12,072)
Purchase of business/subsidiary, net of cash acquired 8,737 (6,074)
Additional investment in controlled entities (4,266) (1,032)
Proceeds/(divestment) from sale of controlled entities (624) 1,233
Proceeds from sale of associates 769
Dividends from associates 6,963 3,881
Net cash flows from investing activities 1,305 (18,334)
     
Cash flows from financing activities    
Dividend paid (17,989) (17,550)
Repayment of finance lease liabilities (79) (394)
Dividend paid to non-controlling interests (613) (853)
Proceeds from borrowings 3,946 9,588
Net cash flows used in financing activities (14,735) (9,209)
     
Net increase/(decrease) in cash and cash equivalents 30,380 (3,584)
Cash and cash equivalents at beginning of period 134,662 135,965
Net foreign exchange differences (154) 2,058
Cash and cash equivalents at end of period 164,888 134,662

Notes to the Concise Financial Statements for the year ended 31 December 2014

  Year ended
31 Dec 2014
Restated
Year ended
31 Dec 2013
  $000 $000
     
1. Revenue and expenditure items    
Commissions and fees 289,509 273,939
Interest revenue 7,239 7,617
Total statutory IFRS revenue 296,748 281,556
Further to revenue outlined above, the group’s share of revenue from associates accounted for under the equity method 76,607 73,054
Total Clemenger group revenue 373,355 354,610
     
2. Dividends proposed on ordinary shares    
A fully franked dividend of $0.1125 cents (31 December 2013 – $0.1025 cents) per share was declared at the board meeting held on 28th January 2015,it has not been provided for in the 31 December 2014 financial statements. 19,744 17,989
Clemenger Group Limited franking account balance 78,656 73,801

Franking credits of $3.1m will arise from the 4th instalment of tax payable for the Clemenger tax consolidated group.

3. Registered office
Clemenger Group Limited
474 St Kilda Road
Melbourne, Victoria 3004

4. Changes in the state of affairs
As at 31 December 2014 the group was owned 26.33% (31 December 2013: 26.33%) by directors and staff in the consolidated group and 73.67% (31 December 2013: 73.67%) by Portview Holdings Australia Pty Ltd (31 December 2013: Portview Holdings Australia Pty Ltd).

During the year ended 31 December 2014, the group’s economic interest changed as follows:
ID Database Marketing Pty Ltd – Decreased from 62.5% to nil
Clemenger Tasmania Pty Ltd – Decreased from 37.5% to nil
Hardie Grant Media Pty Ltd – Decreased from 25% to nil
Channel 5 Communications Pty Ltd – Increased from 80% to 100%
GRA Cosway – Increased from 83.16% to 100%
Touchcast Limited – Increased from 76% to 85%
Marketforce Pty Ltd – Increased from 47.5% to 80%
GRA Everingham Pty Ltd – Increased from 49.99% to 54.99%

5. Subsequent events
On 1 February 2015, the business of Clemenger BBDO Adelaide was sold to KWP, the other major advertising agency in Adelaide. This action was taken due to the Adelaide advertising market contracting markedly, with major advertisers either disappearing or moving interstate.

6. Basis of preparation of the concise financial report
The concise financial report has been prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 1039 “Concise Financial Reports”. The presentation currency is Australian dollars.

7.Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable and where noted) under the option available to the company under ASIC CO 98/0100. The company is an entity to which the Class Order applies.

8. Other
The Group enters into customer arrangements at certain agencies in which it acts as a principal. The Group previously recorded these arrangements on a net basis by recording revenue net of recoverable salary and other third party costs. In these circumstances, accounting standards require revenue to be recorded at the gross amount billed. The Directors have determined the impact of this presentation adjustment on commissions and fees revenue and cost of sales as $53.3 million for the year ended 31 December 2013. This presentation adjustment did not impact net profit, or the other financial statements in 2013.

The financial report of Clemenger Group Limited for the year ended 31 December 2014, was authorised for issue in accordance with a resolution of the Directors on 23 March 2015.

Directors’ Declaration
The Directors declare that:

  • The concise financial report of the consolidated entity for the year ended 31 December 2014 is in accordance with Accounting Standard AASB 1039 “Concise Financial Reports”, and
  • The financial statements and specific disclosures included in this concise financial report have been derived from the full financial report for the year ended 31 December 2014.

On behalf of the Board

Jonathan Brett Isaacs
Director
  Hylton John Mackley
Director

23 March 2015

Clemenger Group Limited and controlled entities

Valuation of shares as at 31 December, 2014

Formula as described by the company’s constitution

Net assets after translating 31 December 2014 New Zealand assets and liabilities at the year-end rate of exchange for the applicable financial year.

Less: Dividend to be proposed.

Add: 5.5 times average net profit after tax attributable to parent company shareholders for the last three years, with an adjustment to net profit after tax in 2013 as set out in clause 5(a)(ii)(A).

Divided by: the number of shares on issue at 31 December 2014

Share Price Calculation  
   $000
   
Capital 23,210
Reserves (10,659)
Retained Earnings 260,714
Subtotal (excludes minorities) 273,265
Less: Annual Dividend 19,744
Dividend per share (cents) 11.25 cents
Adjusted Net Assets 253,521
FY December 2014 Profit after tax 40,123
FY December 2013 Profit after tax, as adjusted 36,348
FY December 2012 Profit after tax 35,865
Average PAT x 5.5 205,949
Capitalisation (Average PAT + Net Assets) 459,470
Numbered Issued Shares 175,500,000
Share Valuation $2.62