Brisbane Broncos Limited and its controlled entities 2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities Contents CORPORATE INFORMATION 1 YEAR IN REVIEW 2 SPONSOR OVERVIEW 2006 AND BEYOND 5 DIRECTORS’ REPORT 7 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF BRISBANE BRONCOS LIMITED 16 CORPORATE GOVERNANCE STATEMENT 17 BALANCE SHEET AS AT 31 DECEMBER 2006 20 INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 21 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 22 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2006 23 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 24 DIRECTORS’ DECLARATION 47 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF BRISBANE BRONCOS LIMITED 48 ASX ADDITIONAL INFORMATION 50 Corporate Information A.B.N. 41 009 570 030 Directors D C Somerville (Chairman) B P Cullen (Managing Director) D S Jackson P W Jourdain D M Watt Company Secretary L A Lanigan Registered Office and Level 1 Principal Place of Business 92 Fulcher Road, Red Hill 4059 Queensland, Australia Share Register Computershare Investor Services Level 19, 307 Queen Street, Brisbane 4000 Queensland, Australia Brisbane Broncos Limited shares are listed on the Australian Stock Exchange. Solicitors Creagh Weightman Level 19, 200 Mary Street, Brisbane 4000 Queensland, Australia Bankers Queensland Country Credit Union 410 Ann Street, Brisbane 4000 Queensland, Australia Auditors Ernst & Young 1 Eagle Street, Brisbane Queensland, Australia 2006 annual financial statements and reports 2 Brisbane Broncos Limited and its controlled entities Year in review FINANCIAL PERFORMANCE 2006 was a successful year both on and off the field for the Brisbane Broncos. The Brisbane Broncos Group achieved another before tax profit in excess of $2 million whilst the football team won the National Rugby League Premiership. The 2006 before tax profit for the Group was $2,261,054 (2005: $2,321,259) and the after tax profit was $1,536,403 (2005: $2,781,935). In 2005 the Group enjoyed an income tax benefit of $460,676 as a result of the recognition of previous losses that were available at that time. However, in 2006 an income tax expense of $724,651 has been recorded. HIGHLIGHTS The standout performances from a financial perspective were the increases in revenue from sponsorship, corporate sales, merchandise, and sustaining the very high level of income from season membership and ticketing achieved in 2005. The Group has positioned itself as an ‘in demand’ corporate partner in the Queensland and Australian market. As such, sponsorship levels have been maintained at record highs and close to capacity. Independent surveys have identified the Brisbane Broncos as the most popular and valuable sporting brand in Australia for the past two years. Although the football team had its highs and lows throughout the season, it played attractive football to still achieve an improved average crowd attendance compared to the 2005 season. Achieving an average attendance of 31,177 per match (30,055 in 2005) ensured the Group’s major income stream remained at a very healthy level. The season opened with a blockbuster against the North Queensland Cowboys (46,229), and finished with the Melbourne Storm (40,159) and the New Zealand Warriors (47,193), with healthy crowds in attendance generally across the board. The New Zealand Warriors match was Shane Webcke’s final premiership game at Suncorp Stadium and with the game promoted as his farewell, the public responded in a fine tribute to this wonderful campaigner for the Club. BRISBANE BRONCOS RUGBY LEAGUE FOOTBALL TEAM The Broncos football team and coaching staff achieved the ultimate success at the end of the 2006 season, winning the NRL Premiership for the sixth time in the grand final on 1 October 2006 at Telstra Stadium. It was a wonderful end to a season that began with dramatic changes to the coaching staff at the end of 2005. I would like to take this opportunity to record congratulations to coach Wayne Bennett, captain Darren Lockyer and all of the coaches and players who worked so hard together to achieve their deserved success. The Brisbane Broncos players also contributed so much to the success of the Queensland State of Origin side in regaining the title, and to the Australian Tri Nations team who were also successful against New Zealand. Congratulations again to all involved and especially to Darren Lockyer who captained all three sides to success and for the second time in his career won the ‘Golden Boot’ award as the world’s best player. BOARD AND SENIOR MANAGEMENT The Board of Directors remained unchanged throughout the reporting period with Chairman Darryl Somerville completing his first financial year in that position. Donald Jackson, Peter Jourdain, Dennis Watt and myself maintained our directorships for the reporting period. Individual director details are listed in the Directors’ Report and notes to the financial statements in this publication. There were no changes in the senior management team as reported in the 2005 annual report. Myself as Managing Director, Louise Lanigan as General Manager Finance and Administration and Company Secretary, and Marty Rowen as Marketing Manager, maintained their positions on the executive team. I take this opportunity to thank my fellow directors for their support and guidance over the past twelve months. The management team and the entire staff appreciate it. I also pass on my thanks to all in the Brisbane Broncos front office for their dedicated contribution to the commercial side of our business. Their management, planning and job execution has ensured the Group enjoyed another productive year. 2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities Year in review (continued) THE YEAR AHEAD The 2006 financial result has facilitated the commencement of a $2 million long overdue renovation and extension to the football team’s gymnasium and training facility. No borrowings will be necessary to fund this project. The early signs for 2007 are positive and it appears that the current levels of sponsorship, season membership, ticketing and corporate sales will be maintained. The football team will remain competitive, and given favourable weather conditions and suitable scheduling of home matches by the National Rugby League, we can look forward with confidence to the coming year. Last year the Group committed to launch a community benefits program to assist charities and the needy. I am pleased to report that this has taken place and in 2007 the Brisbane Broncos Brand will be seen supporting a number of organisations this year both financially and physically. Project Safehands (reducing child violence), Epilepsy Queensland, Motor Neurone Disease Association of Queensland, Rosies (helping the homeless), St Vincent de Paul Society, Diabetes Qld, and the Queensland RSL are all early recipients of the Brisbane Broncos work in this area. Our sponsorship family continues to grow, and headed up by naming rights sponsor Ergon Energy they all deserve our appreciation. Sponsors are the rock we build each year on and without them we would struggle. On behalf of all at the Brisbane Broncos a sincere thank you to this exciting group of businesses who throw their corporate support behind this wonderful organisation. They are all listed elsewhere in this document and deserve your recognition and support in return. I look forward to continuing the momentum the Group has established over the past few years throughout 2007. Brian Patrick Cullen Managing Director 2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities BRONCOS LEADERSHIP TEAM 2006 Darryl Somerville Bruno Cullen Wayne Bennett Darren Lockyer Chairman Managing Director Coach Captain BRONCOS ACHIEVEMENTS 2006 Petero Civoniceva Brad Thorn Darren Lockyer Justin Hodges Player of the Year Best Forward Best Back Most Consistent Sam Thaiday Shane Webcke Darius Boyd Tonie Carroll Most Improved Players’ Player Rookie of the Year Defence Player of the Year Andrew Gee Darren Lockyer Sam Thaiday Darren Lockyer Clubman of the Year Play of the Year Encouragement Award People’s Choice Player of the Year 2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities Sponsor Overview 2006 and Beyond 2006 was a very impressive year for the Brisbane Broncos not only on the field in winning the National Rugby League Premiership, but also off the field as sponsor exposure results were at an all time high. Independent sponsorship measurement company, SCOMM Australia, measured the media exposure generated by all sporting clubs’ major sponsorship assets and then benchmarked each property against all teams in the National Rugby League (NRL), Australian Football League (AFL), Super 14 Rugby Union and A-League Soccer. The 2006 benchmarking results confirmed the Brisbane Broncos as number one in almost every sponsorship category amongst other NRL teams while finishing fourth when measured against all football codes for exposure generated by the Broncos playing jersey. The Brisbane Broncos were a close second to AFL grand finalist Sydney Swans in the total benchmarking results for exposure generated by sporting teams on television. This is a great result considering that AFL is telecast in every state of Australia. 2006 was the first year of the new three year Ergon Energy naming rights agreement with the Broncos football team now known as the Ergon Energy Brisbane Broncos. A number of new sponsors of varying levels also joined the Broncos sponsorship family in 2006; these new partners included Queensland Transport, WOW Sight and Sound, Bundaberg Rum, Strathfield and Quest Newspapers. Our sponsorship portfolio again increased in 2006 with a growth of 2.3% from 2005 - a very positive result, considering the substantial 14% increase the previous year. The end of season 2006 saw nine of the clubs eleven largest sponsorship contracts expire. This brought with it a significant level of contract negotiations which became more complex when new potential sponsors expressed interest in a number of the expiring sponsorship categories.