Coles Group’s FY26 results released on 25 August 2026 reported net profit after tax of A$1.255 billion excluding significant items and A$1.090 billion including them for the 52 weeks ended 28 June 2026. The A$165 million difference is the after-tax effect of the A$235 million pre-tax significant item linked to the Federal Court judgment received in September 2025 in the Fair Work Ombudsman proceedings.
For a group financial controller, this is not a new A$235 million provision raised with the August results. Coles recognised the additional amount during 1H26, lifting the underpayment-related provision from A$19 million at 29 June 2025 to A$254 million at 4 January 2026. The FY26 annual report records A$254 million at 28 June 2026. Final orders, any appeal, penalties, the class-action effect, settlement timing and provision utilisation remain unresolved or undisclosed.
What changed and what it means
Confusing the A$235m pre-tax addition with the A$165m NPAT gap, or treating the cash-realisation denominator adjustment as settlement cash, can misstate the reporting bridge and weaken close evidence.
- Decision affected
- Decide whether the FY26 reporting file reconciles the provision roll-forward, tax effect, NPAT presentations and cash-realisation denominator, and defines evidence required for later orders and payments.
- Evidence in brief
- Coles reports A$1.255bn NPAT excluding significant items, A$1.090bn including them, a pre-tax item of A$235m, an after-tax effect of A$165m and 101% cash realisation after excluding the provision from EBITDA.
- What remains unresolved
- Final court orders, any appeal, penalties, class-action impact, settlement timing and gross provision utilisation remain unresolved or undisclosed.
- Next verification
- Reconcile the A$19m opening balance, A$235m addition, A$254m closing balance, tax effect and cash-realisation denominator, then refresh the file when orders or payments are disclosed.
Key takeaways
- A$235 million is the additional pre-tax provision and significant item; A$165 million is its after-tax effect on NPAT.
- The closing underpayment-related provision is A$254 million, including the A$19 million balance reported at 29 June 2025.
- Coles’ 101% cash-realisation ratio excludes the A$235 million provision from EBITDA; the 107% alternative changes the denominator, not the cash-flow numerator.
- The year-end file still needs a controlled path from the provision estimate to court orders, gross payments, tax treatment and any later release or top-up.
Keep the provision and profit figures in separate columns
The reporting bridge uses related numbers with different bases. Calling all of them “the underpayment provision” would blur the current-period charge, the tax effect and the balance-sheet estimate.
| Figure | Basis | What it represents | Controller tie-out |
|---|---|---|---|
| A$19m | Balance at 29 June 2025 | Provision carried into FY26 | Opening balance agrees to the prior annual report and ledger. |
| A$235m | Pre-tax, recognised in 1H26 | Additional provision and FY26 significant item | Expense, provision movement and significant-item schedule use the same population and approval. |
| A$254m | Balance at 28 June 2026 | Total underpayment-related provision at year end | Opening balance, additions, utilisations, releases and closing balance reconcile. |
| A$165m | After tax | Reduction from NPAT excluding significant items to NPAT including them | Tax workpaper and the significant-item bridge explain the A$70m difference from the pre-tax amount. |
Coles’ half-year financial report supplies the prior state. It says the A$235 million was recognised after the 5 September 2025 judgment and took the provision to A$254 million at 4 January 2026. The August release therefore completes the full-year presentation; it does not establish a fresh provision-recognition date.
Reconcile NPAT including and excluding significant items
The FY26 NPAT bridge is arithmetically direct:
| Step | A$ million | Evidence treatment |
|---|---|---|
| NPAT excluding significant items | 1,255 | Company-reported performance measure |
| Underpayment significant item, after tax | (165) | Company-reported adjustment |
| NPAT including significant items | 1,090 | Company-reported statutory result |
The implied tax effect is A$70 million, calculated as A$235 million less A$165 million. That is a Finance Circuit calculation from disclosed inputs, not a separately reported Coles line item. The close pack should tie the pre-tax expense to the provision journal, the tax effect to the tax workpaper and the after-tax amount to the significant-item reconciliation.
The control principle is similar to Treasury Wine’s material-item reconciliation, although each issuer’s definitions and excluded items remain specific to its own reporting. A controller should not infer one bridge from another company’s labels or prior-year schedule.
Treat the 101% cash-realisation ratio as a denominator choice
Coles’ FY26 cash-flow table reported A$4.279 billion of net operating cash flow before interest and tax and a cash-realisation ratio of 101%. Its footnote says FY26 EBITDA excludes the A$235 million provision for this calculation and that the ratio would have been 107% if the provision were included.
The disclosed numbers reproduce the rounded ratios:
- A$4.279 billion divided by A$4.220 billion of EBITDA excluding significant items equals about 101.4%, reported as 101%.
- Subtracting the A$235 million provision from that EBITDA gives A$3.985 billion; A$4.279 billion divided by A$3.985 billion equals about 107.4%, reported as 107%.
The numerator is A$4.279 billion in both calculations. The six-point change comes from the EBITDA denominator. It does not show that A$235 million or A$254 million was paid during FY26, and it should not be used as settlement evidence. When cash payments occur, the controller will need a separate tie from bank and payroll records to provision utilisation and cash-flow classification.
Build the provision-to-settlement evidence file
The published endpoints show A$19 million at 29 June 2025, an additional A$235 million recognised in 1H26 and A$254 million at 28 June 2026. They do not disclose a gross movement schedule for the second half. An unchanged balance between January and June would not prove that no payments, estimate changes or offsetting movements occurred.
A controller file should contain:
- Scope and status. The judgment, affected employee population, covered periods, orders still outstanding and the owner of each legal input.
- Provision roll-forward. Opening balance, additions, utilisations, releases, reclassifications and closing balance, each linked to a journal or source schedule.
- Measurement support. The approved assumptions, data population, calculation method, legal advice and review date supporting the year-end estimate.
- Tax bridge. The basis for the A$70 million implied tax effect and the tie to current and deferred tax records.
- Presentation bridge. The link from ledger expense to the A$235 million significant item, A$165 million after-tax effect and both NPAT presentations.
- Cash and settlement evidence. Payment files, bank evidence, employee-level allocation, provision utilisation and any difference between legal settlement and accounting estimate.
The six-proof reconciliation standard provides a useful minimum: controlled population, reliable source, mathematical bridge, supported items, independent review and a governed closure state. For this case, “complete with controlled open items” is more accurate than “settled” while orders and payment timing remain open.
What remains unresolved after FY26
The Fair Work Ombudsman describes the proceedings as ongoing. Coles has said the determination of orders or any appeal could change its assessment and require further remediation payments. Potential penalties and the effect of the related class action also remain uncertain.
The next reporting checks are therefore specific: final court orders, any appeal notice, a Coles update to the estimate, a provision movement, disclosed cash utilisation, a tax change or a subsequent-event note. Until one of those changes the record, FY26 establishes the profit bridge and closing provision balance, not a final settlement outcome.
