Annual Report 2015
Growing Value
The refinancing completed
in June 2014 reduced
ALE’s annual interest
expense by around
$7.0 million, substantially
offsetting the benefits
previously accruing from
the counter hedges that
fully amortised in FY14.
Accordingly, for FY16
and FY17 the normalised
interest expense on the
current borrowings is
expected to be fixed at
$21.0 million.
$27.9m
Deduct $7.7m
Counter Hedge,
$1.2m Part Period
Refi Saving
$19.0m
$7.0m
Refinancing
Savings
Add $0.9m Notes 2 Expense,
Deduct $0.5m Hedge Benefit
$21.0m
$21.4m
$30m
$25m
$20m
$15m
$10m
$5m
$0m
e
s
n
e
p
x
E
t
s
e
r
e
t
n
I
h
s
a
C
Interest on
Borrowings*
Net
Interest
Interest on
Borrowings*
Net
Interest
FY14 / Pre Refinancing
FY15 / Post Refinancing
Average Hedging Term
* at applicable interest rates
7.8
years
Distribution
16.85
cps
Property Values
$900.5
million
WALE
13.4
years
Net Gearing
48.0
percent
All Up Debt Rate
4.35
percent
Average Debt Term
5.5
years
ALE Property Group
Comprising Australian Leisure and Entertainment
Property Trust and its controlled entities
Report For the Year ended 30 June 2015
ABN 92 648 441 429
- 02 -
Directors Report
- 23 -
Statement of changes in Equity
- 20 -
Auditor's
Independence
Declaration
- 21 -
Financial
Statements
- 21 -
Statement of
Comprehensive
Income
- 22 -
Statement of
Financial
Position
Contents
ANNUAL REPORT
2015
ALE Property Group (ASX: LEP)
ALE Property Group is the owner of Australia's largest
portfolio of freehold pub properties. Established in
November 2003, ALE owns a portfolio of 86 pub
properties across the five mainland states of Australia.
All the properties are leased to Australian Leisure and
Hospitality Group Limited (ALH) for a remaining initial
lease term of 13.3 years plus options for ALH to extend.
WWW.ALEGROUP.COM.AU
- 64 -
Investor Information
and
Corporate Directory
- 24 -
Statement of
Cash Flows
- 25 -
Notes to the
Financial Statements
- 61 -
Directors'
Declaration
- 62 -
Independent
Auditor's Report
to Stapled
Securityholders
- 68 -
Australian Leisure
and Entertainment
Property Management
Limited
Annual Report 2015
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
DIRECTORS' REPORT
ALE Property Group ("ALE") comprises Australian Leisure and Entertainment Property Trust (“Trust”) and its controlled entities including
ALE Direct Property Trust ("Sub Trust"), ALE Finance Company Pty Limited ("Finance Company") and Australian Leisure and
Entertainment Property Management Limited ("Company") as the responsible entity of the Trust.
The registered office and principal place of business of the Company is:
Level 10
6 O'Connell Street
Sydney NSW 2000
The directors of the Company present their report, together with the financial statements of ALE, for the year ended 30 June 2015.
1. DIRECTORS
The following persons were directors of the Company during the year and up to the date of this report unless otherwise stated:
Name
Type
Appointed
Resigned
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson (Managing Director)
J T McNally
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
26 November 2013
24 September 2014
6 February 2015
16 November 2004
26 June 2003
6 November 2014
2. PRINCIPAL ACTIVITIES
The principal activities of ALE consist of investment in property and property funds management. There has been no significant change
in the nature of these activities during the year.
3. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the directors, the following significant changes in the state of affairs of ALE occurred during the year:
•
•
•
the remaining ALE Notes 2 debt of $102.6 million was repaid in August 2014;
the 86 individual property values increased by an average of 9.6% to $900.5 million; and
Net Assets increased by 17.6% to $443.74 million and net borrowings (total borrowings less cash) as a percentage of assets (total
assets less cash and derivatives) decreased from 51.7% to 48.0%.
4. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
ALE will continue to maintain its defined strategy of identifying opportunities to increase the profitability of ALE and its value to its stapled
securityholders.
In accordance with the leases of its investment properties over the medium term, ALE expects to receive annual increases in rental
income in line with increases in the consumer price index until the first major market rent review in November 2018.
Apart from the above matters, the directors are not aware of any other future development likely to significantly affect the operations
and/or results of ALE.
2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
5. DISTRIBUTIONS AND DIVIDENDS
Trust distributions paid out and payable to stapled securityholders, based on the number of stapled securities on issue at the respective
record dates, for the year were as follows:
30 June
2015
cents per
security
30 June
2014
cents per
security
30 June
2015
30 June
2014
$’000
$’000
Final Trust income distribution for the year ending 30 June 2015 to be
paid on 7 September 2015
8.45
8.25
16,537
16,145
Interim Trust income distribution for the year ending 30 June 2015
paid on 5 March 2015
Total distribution for the year ending 30 June 2015
8.40
16.85
8.20
16.45
16,439
32,976
16,048
32,193
No provisions for or payments of Company dividends have been made during the year (2014: nil).
6. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
In the opinion of the Directors of the Company, no transaction or event of a material and unusual nature has occurred between the end
of the financial year and the date of this report that may significantly affect the operations of ALE, the results of those operations or the
state of affairs of ALE in future financial years.
7. OPERATIONAL AND FINANCIAL REVIEW
Background
ALE Property Group is the owner of Australia's largest portfolio of freehold pub properties. Established in November 2003, ALE owns a
portfolio of 86 pub properties across the five mainland states of Australia. All the properties in the portfolio are leased to Australian
Leisure and Hospitality Group (ALH) for an average remaining initial lease term of 13.3 years plus options for ALH to extend.
ALE's high quality freehold pubs have long term leases that include a number of unique features that add to the security of net income
and opportunity for rental growth. Some of the significant features of the leases (for 83 of the 86 properties) are as follows:
•
•
•
•
•
Leases commenced in November 2003 with an initial term of 25 years and four options of 10 years for ALH to extend;
The leases are triple net which require ALH to take responsibility for rates, insurance and essentially all structural repairs and
maintenance, as well as land tax in all states except Queensland (3 of the 86 properties are double net);
Annual CPI rent increases are not subject to any cap and rents do not decline with negative CPI;
There is a market rent review in November 2018 that is capped and collared within 10% of the 2017 rent; and
There is a full open market rent review (no cap and collar) in November 2028 at which time ALH has four options of 10 years to
extend the leases.
Current year performance
ALE produced a profit after tax of $99.4 million for the year ended 30 June 2015 compared to a profit of $37.2 million for the year ended
30 June 2014. The increase is primarily due to an increase in the fair value increment to the properties. Other factors include:
•
•
•
•
Rental income increased by 1.9% following the annual rent review in November 2014;
Interest income was lower on the back of decreasing interest rates and lower cash balances;
Finance costs were higher due to the expiration of counter hedge benefits in the prior year exceeding the interest expense savings
achieved from the refinancing in June 2014; and
Management costs reduced marginally and ALE's management expense ratio continues to be one of the lowest in the A-REIT
sector.
ALE has a policy of paying distributions which are subject to the minimum requirement to distribute taxable income of the trust under the
Trust Deed. Distributable Profit is a non-IFRS measure that shows how free cash flow is calculated by ALE. Distributable Profit excludes
items such as unrealised fair value (increments)/decrements arising from the effect of revaluing derivatives and investment property, non-
cash expenses and non-cash financing costs.
3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
During the financial year ALE produced a distributable profit of $29.1 million compared to $31.2 million in the previous financial year. The
table below separates the cash components of ALE's profit that are available for distribution from the non-cash components. The
directors believe this will assist stapled securityholders in understanding the results of operations and distributions of ALE. Distributable
Profit was primarily impacted by the same cash items that affected Operating Profit, namely increased rent and finance costs.
Profit/(loss) after income tax for the year
Adjustment for non-cash items
Fair value decrements /(increments) to derivatives and investment properties
Loss/(Gain) on disposal of investment properties
Employee share based payments
Finance costs - non-cash
Income tax expense
Total adjustments for non-cash items
Total profit available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
Reconciliation of accumulated undistributed income
Opening balance
Available and undistributed/(over distributed) for the year
Closing balance
Earnings and distribution per stapled security:
Basic and diluted earnings
Earnings available for distribution
Total distribution
Accumulated undistributed income at the end of the year
Financial position
30 June
2015
$’000
30 June
2014
$’000
99,364
37,194
(73,543)
-
190
3,087
(43)
(70,309)
29,055
32,976
(3,921)
(18,977)
42
272
7,701
5,000
(5,962)
31,232
32,193
(961)
10,444
11,405
(3,921)
(961)
6,523
10,444
Percentage
Increase /
(Decrease)
30 June
2015
Cents
30 June
2014
Cents
166.79%
(6.95%)
2.43%
50.77
14.85
16.85
3.33
19.03
15.96
16.45
5.34
ALE's net assets increased by 17.6%, compared with the previous year which was largely attributable to an increase in property values
during the year.
Investment property revaluations increased the continuing portfolio value by 9.60% from $821.7 million to $900.5 million during the
year. The average capitalisation rates decreased from 6.42% to 5.99% with the increase in property valuations coming from the
November 2014 CPI rent increase and lower average capitalisation rates across the portfolio.
Net assets per stapled security increased by 17.6% from $1.93 to $2.27 compared to June 2014, primarily as a result of the increase in
property values.
ALE’s market capitalisation increased by around 25% to more than $722 million during the year.
4
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
ALE’s funding structure continues to be characterised by diverse sources of funding instruments with maturity dates averaging 5.5 years.
In June 2014 ALE successfully raised $335 million in debt through an Australian Medium Term Note (AMTN) issue. The debt was issued
with an investment grade rating of Baa2 and at the time was the largest AMTN issue by an AREIT since 2011. The issue was significantly
over subscribed and scaled to deliver a very competitive issue margin outcome for the benefit of ALE's securityholders.
The ALE Notes 2 were repaid in full in August 2014. The balance of the $102.6 million was repaid from exisiting cash reserves. ALE's next
scheduled maturity date is August 2017.
During the year, net covenant gearing reduced from 51.7% to 48.0%. ALE continues to maintain appropriate headroom to all debt
covenants with the nearest equivalent to an average 20.1% fall in property values.
ALE has consistently sought to protect investors from interest rate risk and continues to have long term hedging in place to achieve this
objective.
The fixed rate AMTN debt raised in June 2014 saw ALE enter into fixed rate debt with August 2017 and August 2020 maturities and
accordingly the previously arranged interest rate hedge for the next three and six years was terminated. The debt raising and forward
start hedging arrangements ensures that ALE remains hedged for its base interest rates on 100% of its net debt for an average of 7.8
years.
Business strategies and prospects
ALE has continued to preserve the quality of the existing property portfolio. The refinanced debt and restructured hedging position
provides significant certainty around a stable distribution profile for the medium term.
ALE's objective is to continue to grow distributions by at least CPI.
ALE continues to hold a positive outlook for the market rent prospects for the portfolio. In around three years time the first major review
will occur with the fair market rent capped and collared within 10% of the 2017 rent for each property. There is also a full open fair
market rent review (no caps or collars) in November 2028.
ALE will continue to seek acquisition opportunities that are of a high quality, meet all specified criteria and represent an accretive value
opportunity for securityholders. Even if these opportunities are not available, ALE will continue to work constructively with ALH to ensure
that the existing portfolio of properties continues to perform at the strong profitability levels that currently prevail.
8. INFORMATION ON DIRECTORS
Mr Peter Warne B.A, FAICD, Chairman and Non–executive Director.
Experience and expertise
Peter was appointed as Chairman and Non-executive Director of the Company in September 2003.
Peter began his career with the NSW Government Actuary’s Office and the NSW Superannuation Board before joining Bankers Trust
Australia Limited (BTAL) in 1981. Peter held senior positions in the Fixed Income Department, the Capital Markets Division and the
Financial Markets Group of BTAL and acted as a consultant to assist with integration issues when the investment banking business of
BTAL was acquired by Macquarie Bank Limited in 1999. Peter is Chairman of OzForex Group Limited and a board member of ASX Limited
and Macquarie Group Limited. He is also on the board of NSW Treasury Corporation and is a member of the Advisory Board for the
Australian Office of Financial Management.
Peter graduated from Macquarie University with a Bachelor of Arts, majoring in Actuarial Studies. He qualified as an associate of, and
received a Certificate of Finance and Investment from, the Institute of Actuaries, London.
5
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
Ms Helen Wright LL.B, MAICD, Non-executive Director.
Experience and expertise
Helen was appointed as a non-executive director of the Company in September 2003. She chairs the Audit Compliance and Risk
Management Committee. Helen was a partner of Freehills, a leading Australian firm of lawyers, from 1986 to 2003. She practiced as a
commercial lawyer specialising in legislative interpretation, contract, and real estate projects including development and financing and
related taxation and stamp duties.
Helen is the Chair of the Advisory Committee of Screen NSW (formerly Film & Television Office), and for ten years until recently was the
Statutory and Other Offices Remuneration Tribunal for NSW and the Local Government Remuneration Tribunal for NSW. Prior
appointments include the Boards of several State, commercial, university and charitable entities. Helen has a Bachelor of Laws from the
University of NSW and in 1994 completed the Advanced Management Program at the Harvard Graduate School of Business
Administration.
Ms Phillipa Downes, BSc (Bus Ad), MAppFin, GAICD, Non-executive Director.
Experience and expertise
Pippa was appointed a Director on 26 November 2013.
Ms Downes is a director of the ASX Group clearing and settlement facility licensees and their intermediate holding companies. She is also
on the panel of the ASX Appeals Tribunal. Pippa is also a director of the Pinnacle Foundation. Ms Downes was a Managing Director and
Equity Partner of Goldman Sachs in Australia until October 2011, working in the Proprietary Investment division. Ms Downes has had a
successful international banking and finance career spanning over 20 years where she has led the local derivative and trading arms of
several of the world’s leading Investment Banks. She has extensive experience in Capital Markets, derivatives and asset management.
Prior to joining Goldman Sachs in 2004, Ms Downes was a director and the Head of Equity Derivatives Trading at Deutsche Bank in
Sydney. When Morgan Stanley was starting its equity franchise in Australia in 1998 she was hired to set up the Derivative and Proprietary
Trading business based in Hong Kong and Australia. Ms Downes started her career working for Swiss Bank O’Connor on the Floor of the
Pacific Coast Stock Exchange in San Francisco, followed by the Philadelphia Stock Exchange before returning to work in Sydney as a
director for UBS.
Pippa was previously an appointed Director on the Board of Swimming Australia and the Swimming Australia Foundation. Pippa
graduated from the University of California at Berkeley with a Bachelor of Science in Business Administration majoring and Finance and
Accounting. Pippa also completed a Masters of Applied Finance from Macquarie University in 1998.
Mr Paul Say, BSc(Bus Ad), MAppFin, GAICD, Non–executive Director.
Experience and expertise
Paul has over 30 years’ experience in commercial and residential property management, development and real estate transactions with
major multinational institutions. Mr Say was Chief Investment Officer at Dexus Property Group from 2007 to 2012. Prior to that he was
with Lend Lease Corporation for 11 years in various positions culminating with being the Head of Corporate Finance.
Paul has a Graduate Diploma in Finance and Investment and a Graduate Diploma in Financial Planning. He is a Fellow of the Royal
Institute of Chartered Surveyors, Fellow of the Australian Property Institute and a Licensed Real Estate Agent (NSW, VIC, QLD).
Ms Nancy Milne, OAM, LLB, FAICD, Non–executive Director.
Experience and expertise
Nancy is a former lawyer with over 30 years’ experience with primary areas of legal expertise in insurance and reinsurance, risk
management, corporate governance and professional negligence. She was a partner with Clayton Utz until 2003 and a consultant until
2012. She is currently Chairman of the Securities Exchange Guarantee Corporation. She was previously a director of Australand Property
Group, Crowe Horwarth Australasia, Greenstone Limited and Novion Property Group.
Nancy has a Bachelor of Laws from the University of Sydney. She is a member of the NSW Council of the Australian Institute of Company
Directors and the Institute’s Law Committee.
6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
Mr Andrew Wilkinson B.Bus, CFTP, MAICD, Managing Director.
Experience and expertise
Andrew was appointed Managing Director of the Company in November 2004. He joined ALE as Chief Executive Officer at the time of its
listing in November 2003. Andrew has around 35 years’ experience in banking, corporate finance and funds management. He was
previously a corporate finance partner with PricewaterhouseCoopers and spent 15 years in finance and investment banking with
organisations including ANZ Capel Court and Schroders.
Mr James McNally B.Bus (Land Economy), Dip. Law, Executive Director.
Experience and expertise
James was appointed as an executive and founding director of the company in June 2003. James has over 20 years’ experience in the
funds management industry, having worked in both property trust administration and compliance roles for Perpetual Trustees Australia
Limited and MIA Services Pty Limited, a company that specialises in compliance services to the funds management industry. James’
qualifications include a Bachelor of Business in land economy and a Diploma of Law. James is also a registered valuer and licensed real
estate agent.
Mr Brendan Howell B.Econ, G.Dip App Fin (Sec Inst), Company Secretary.
Experience and expertise
Brendan was appointed to the position of company secretary in April 2007, having previously held the position from September 2003 to
September 2006. Brendan has a Bachelor of Economics from the University of Sydney and a Graduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia. He was formerly an associate member of both the Securities Institute of Australia
and the Institute of Chartered Accountants in Australia.
Brendan has over 23 years’ experience in the funds management and financial services industries. Brendan has a property and
accounting background and has previously held senior positions with a leading Australian trustee company administrating listed and
unlisted property trusts.
For over 14 years Brendan has been directly involved with MIA Services Pty Limited, a company which specialises in funds management
compliance, and acts as an independent consultant and external compliance committee member for a number of property, equity and
infrastructure funds managers. Brendan also acts as an independent director for several unlisted public companies, some of which act as
responsible entities.
Brendan is a member of the Australian Institute of Company Directors.
Independent member of the Audit, Compliance and Risk Management Committee (ACRMC)
Mr David Lawler B.Bus, CPA, Independent ACRMC Member.
Experience and expertise
David was appointed to ALE’s ACRMC on 9 December 2005 and has over 25 years’ experience in internal auditing in the banking and
finance industry. He was the Chief Audit Executive for Citibank in the Philippines, Italy, Switzerland, Mexico, Brazil, Australia and Hong
Kong. He was Group Auditor for the Commonwealth Bank of Australia. David is, the Chairman of the Australian Trade Commission Audit
and Risk Committee, and the National Mental Health Commission Audit Committee, and is an audit committee member of the Australian
Office of Financial Management, the Department of Foreign Affairs and Trade, the Australian Sports Anti-Doping Authority, and the
Australian Maritime Safety Authority. David is Chairman of Australian Settlements Limited. David has a Bachelor of Business Studies from
Manchester Metropolitan University in the UK. He is a Fellow of CPA Australia and a past President of the Institute of Internal Auditors –
Australia.
Directorships of listed entities within the last three years
The following director held directorships of other listed entities within the last three years and from the date appointed up to the date of
this report unless otherwise stated:
Director
P H Warne
P H Warne
P H Warne
P H Warne
Directorships of listed entities
ASX Limited
Crowe Horwath Australasia Limited
OzForex Group Limited
Macquarie Group Limited
Type
Non-executive
Non-executive
Chairman
Non-executive
Resigned
Jan 2015
Appointed
July 2006
May 2007
October 2013
July 2007
7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
Special responsibilities of directors
The following are the special responsibilities of each director:
Director
P H Warne
H I Wright
P J Downes
P G Say
N J Milne
Special responsibilities
Chairman of the Board
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Chair of the Nominations Committee
Chair of the Remuneration Committee
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence
(AFSL)
J T McNally
Responsible Manager of the Company under the Company’s AFSL
Directors’ and key management personnel interests in stapled securities and ESSS rights
The following directors, key management personnel and their associates held or currently hold the following stapled security interests in
ALE:
Name
P H Warne
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
A J Slade
M J Clarke
D J Shipway
Role
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number
held at the
start of the
year
Net
Movement
1,185,000
150,000
213,394
-
-
213,668
55,164
31,418
11,727
4,000
-
-
510
-
20,000
31,055
-
18,582
3,273
-
Number
held at the
end of the
year
1,185,000
150,000
213,904
-
20,000
244,723
55,164
50,000
15,000
4,000
8
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
The following key management personnel currently hold rights over stapled securities in ALE:
Name
Performance Rights
A J Slade
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Capital Manager
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number
held at the
start of the
year
Granted
during the
year
Lapsed /
Delivered
during the
year
Number
held at the
end of the
year
8,272
78,014
77,274
8,825
8,825
-
(8,272)
-
63,732
31,375
7,844
3,922
-
(34,571)
-
-
141,746
74,078
16,669
12,747
Meetings of directors
The number of meetings of the Company’s Board of Directors held and of each Board committee during the year ended 30 June 2015
and the number of meetings attended by each director at the time the director held office during the year were:
Board
ACRMC
Director
P H Warne
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
Held1
11
4
11
11
8
4
11
11
Attended
11
3
9
11
8
4
11
11
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
Held1
8
3
8
8
6
1
n/a
n/a
Attended
8
2
7
8
6
1
n/a
n/a
8
8
Nominations and
Remuneration Committee
Held1
5
Attended
5
-
5
5
5
3
n/a
n/a
n/a
-
5
5
5
3
n/a
n/a
n/a
1 “Held” reflects the number of meetings which the director or member was eligible to attend.
9
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
9 Remuneration Report (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2015 for employees of ALE
including the directors, the Managing Director and key management personnel.
9.1 Remuneration Objectives and Approach
In determining a remuneration framework, the Board aims to ensure the following:
●
●
●
attract, reward and retain high calibre executives;
motivate executives to achieve performance that creates value for stapled securityholders; and
links remuneration to performance and outcomes achieved.
The framework aligns executive reward with achievement of strategic objectives and creation of value for stapled securityholders. To do this
the Board endeavours to ensure that executive reward satisfies the following objectives:
●
●
●
●
●
●
alignment with ALE's financial, operational, compliance and risk management objectives so as to achieve alignment with positive
outcomes for stapled securityholders;
alignment with ALE's overall performance;
transparent, reasonable and acceptable to employees and securityholders;
rewards the responsibility, capability, experience and contribution made by executives;
recognises individual executive's contributions towards value accretive outcomes when measured against Key Performance Indicators
(KPI's); and
market competitive and complementary to the reward strategy of the organisation.
The framework provides a mix of fixed and variable remuneration. Since the year ending 30 June 2012 the variable remuneration has been
provided through the Executive Incentive Scheme (EIS). Any award under the EIS is paid 50% in cash at the year end and 50% in stapled
securities with delivery deferred three years.
9.2 Remuneration and Nominations Committee
The Remuneration and Nominations Committee ("the Committee") is a committee comprising non-executive directors of the Company. The
Committee strives to ensure that ALE's remuneration structure strikes an appropriate balance between the interests of ALE securityholders
and rewarding, motivating and retaining employees.
The Committee's charter sets out its role and responsibilities. The charter is reviewed on an annual basis. In fulfilling its role the Committee
endeavours to ensure the remuneration framework established will:
●
●
●
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
ensure there is an appropriate mix between fixed and "at risk" remuneration.
The Committee operates independently of management in its recommendations to the Board and engages remuneration consultants
independently of management. During the year ended 30 June 2015, the Committee consisted of the following:
P H Warne (Chairman)
H I Wright
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Refer page 5 of this report for information on the skills, experience and expertise of the Committee members.
The number of meetings held by the Committee and the members' attendance at them is set out on page 9.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee retained Herbert Smith Freehills to draft updated executive service agreements.
Herbert Smith Freehills was paid $4,864 for drafting of executive service agreements.
10
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
9.3 Executive Remuneration
Executive remuneration comprises both a fixed component and an 'at risk' component. It specifically comprises:
●
●
Fixed Annual Remuneration (FAR)
Executive Incentive Scheme (EIS)
9.3.1 Fixed Annual Remuneration (FAR)
What is FAR?
FAR is the guaranteed salary package of the executive and includes superannuation guarantee levy and salary
sacrificed components such as motor vehicles, computers and superannuation.
How is FAR set?
FAR is set by reference to external market data for comparable roles and responsibilities within similar listed
and unlisted entities within Australia.
When is FAR Reviewed?
FAR is reviewed in December each year with any changes being effective from 1 January of the following year.
9.3.2 Executive Incentive Scheme (EIS)
What is EIS?
EIS is an "at risk" component of executive remuneration.
EIS is used to reward executives for achieving and exceeding annual individual KPIs.
The target EIS opportunity for executives varies according to the role and responsibility of the executive.
EIS awards comprise 50% cash and 50% deferred delivery stapled securities issued under the Executive
Stapled Securities Scheme (ESSS). For executives not invited to participate in the ESSS, the EIS is paid fully in
cash.
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Position
Managing Director
Capital Manager
Finance Manager
Asset Manager
1. EIS awards are at the discretion of the Committee and the Board
Standard
EIS Target
(as a % of
FAR)
60%
50%
n/a1
n/a1
% of EIS
paid as cash
50%
50%
50%
50%
% of EIS
paid as
ESSS
50%
50%
50%
50%
How are EIS targets and
objectives chosen?
At the beginning of each year, in addition to the standard range of operational requirements, the Board sets a
number of strategic objectives for ALE for that year. These objectives are dependent on the strategic
opportunities and issues facing ALE for that year and may include objectives that relate to the short and longer
term performance of ALE. Additionally, specific KPIs are established for all executives with reference to their
individual responsibilities which link to the addition to and protection of securityholder value, improving business
processes, ensuring compliance with legislative requirements, reducing risks within the business and ensuring
compliance with risk management policies, as well as other key strategic non-financial measures linked to
drivers of performance in future economic periods.
How is EIS performance
assessed?
The Committee is responsible for assessing whether the KPIs have been met. To facilitate this assessment, the
Board receives detailed reports on performance from management.
The quantum of EIS payments and awards are directly linked to over or under achievement against the specific
KPIs. The Board has due regard to the achievements outlined in section 9.4.
11
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
How are EIS awards
delivered?
EIS cash payments are made in August each year following the signing of ALE's full year statutory financial
statements.
The deferred component comprises an award of stapled securities under the ESSS. Any securities awarded
under the ESSS are delivered three years after the award date provided certain conditions have been met.
How is the ESSS award
calculated?
The number of ESSS Rights awarded annually under the ESSS will be determined by dividing the value of the
grant by the volume weighted average price for the five trading days commencing the day following the signing
of ALE's full year statutory financial statements, and grossing this number up for the future value of the
estimated distributions over the three year deferred delivery period.
What conditions are
required to be met for
the delivery of an ESSS
award?
During the three year deferred delivery period, the delivery of the Stapled Securities issued under the ESSS
remains subject to the following clawback tests. ESSS rights will be forfeited in whole or in part at the discretion
of the Remuneration Committee if before the end of the deferred delivery period:
• the Committee becomes aware of any executive performance matter which, had it been aware of the
the matter at the time of the original award, would have in their reasonable opinion resulted in a lower
original award; or
• the executive engages in any conduct or commits any act which, in the Committee's reasonable
opinion, adversely affects ALE Property Group including, and without limitation, any act which:
・
・
・
results in ALE having to make any material negative financial restatements;
causes ALE to incur a material financial loss; or
causes any significant financial or reputational harm to ALE and/or its businesses.
9.3.3 Summary of Key Contract Terms
Contract Details
Executive
Position
Managing
Director
Capital
Manager
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$435,625
6 months
6 months
Ongoing
$246,000
3 months
3 months
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James
McNally
Brendan
Howell
Finance
Manager and
Assistant
Company
Secretary
Ongoing
$200,900
3 months
3 months
Asset
Manager
Executive
Director
Company
Secretary and
Compliance
Officer
Ongoing
$191,214
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$90,000
1 month
1 month
Managing Director
On 30 July 2014 Mr Wilkinson signed a new service agreement that commenced on 1 September 2014. The agreement stipulates the
minimum base salary, inclusive of superannuation, as being $425,000, to be reviewed annually each 31 December by the Board. An EIS, if
earned, would be paid 50% as a cash bonus in August each year and 50% in stapled securities issued under the ESSS and delivered three
years following each of the annual grant dates.
In the event of the termination of Andrew Wilkinson’s service agreement and depending on the reason for the termination, amounts may be
payable for unpaid accrued entitlements and a proportion of EIS entitlements as at the date of termination. If employment is terminated in
circumstances of redundancy or without cause then he is entitled to an amount of fixed remuneration for six months. In addition he may
receive a pro-rata EIS award for the period of employment in the year of redundancy.
12
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
9.4 Executive Remuneration outcome for year ended 30 June 2015
Details of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 17.
Executive Incentive Scheme Outcomes
ALE continues to perform well when compared to other Australian real estate investment trusts (AREITs).
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2015.
It was the view of the Committee that most of the standard key performance indicators (KPIs) and most of the major items in the Board
approved corporate strategy had been met. In particular the Committee noted:
Capital Matters
●
ALE enjoyed the positive and material full year impacts of the refinancing and hedge restructure completed just before the
commencement of the year, most notably the resulting annual interest expense saving of around $7 million;
●
●
●
ALE fully redeemed all outstanding ALE Notes 2 debt in September 2014 and thereby eliminated a debt expense at a comparatively high
total cost of 7.83% including a 4.00% credit margin;
ALE’s investment grade credit rating of Baa2 (with stable outlook) was fully maintained;
Management continued to explore a range of debt funding solutions in both the domestic and offshore capital markets with a view to
positioning ALE for future debt refinancings and readiness to implement additional debt funding of any acquisitions; and
●
Management reviewed a range of other strategic initiatives with particular focus on value enhancement and risk mitigation.
Other matters
●
Agreed and completed a rent restructure with ALH that is expected to deliver a lower risk profile for the capped and collared market rent
reviews in 2018. The restructure delivers a value benefit for ALE’s securityholders;
●
●
●
●
●
●
●
Worked constructively with ALH to agree a range of developments that are value enhancing for ALE for a number of properties;
Undertook a comprehensive statutory valuation scoping exercise to ensure that the independent valuer was fully appraised of the key
value drivers of each of the properties;
Completed a comprehensive review of ALE’s service providers with a view to ensuring cost savings were maximised and service levels
enhanced;
Explored a range of acquisition opportunities that accorded with ALE’s strategic criteria;
Worked closely with key equity analysts and investors to ensure that there was a clear understanding of both the quality and value
prospects for ALE’s properties and the simplified, low cost and long term capital structure;
Worked on a number of strategic iniatitives that were agreed at the beginning of the year and were either partially or fully completed by
the end of the year; and
Continued to deliver both short and long term total returns for securityholders that outperformed most if not all other AREITs in the
sector.
The remuneration committee considered these achievements and compared them to key performance indicators for each executive that were
set at the beginning of the financial year. Individual executives contributed to the valuable outcomes outlined above and this was recognised
in the EIS payments made. All the EIS payments are included in the staff remuneration expenses in the current year.
The EIS awarded to each member of the management team was as follows:
Target EIS
(as % of
FAR)
EIS
Awarded
(as % of
FAR)
EIS Awarded
as a % of
Target
EIS
Awarded
Cash
Component
ESSS
Component
60%
50%
n/a
n/a
48.2%
40.7%
19.9%
15.7%
80.3%
81.3%
-
-
$210,000
$100,000
$40,000
$30,000
$105,000
$50,000
$20,000
$15,000
$105,000
$50,000
$20,000
$15,000
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
13
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
ALE's Financial Performance History
To provide context to ALE's performance, the following data and graphs outline a five year history of financial metrics.
FY11
FY12
FY13
FY14
FY15
Distributable profit ($m)
Distribution per Security
31.3
26.7
31.7
31.2
29.1
19.75
16.00
16.00
16.45
16.85
Continuing property values ($m)2
753.9
767.2
781.5
821.6
900.5
Net gearing 1
51.7%
51.9%
50.8%
51.7%
47.9%
1. Total borrowings less cash as a percentage of total assets less cash and derivatives
2. Includes only the value of properties held as at 30 June 2015
The accumulated value of $1.00 initial public offering (IPO) investment in ALE and reinvested distributions, rights renunciation payments and
current market value of securities as at 30 June 2015 totalled $10.58.
According to UBS for the period ending 30 June 2015 ALE continued to outperform other equity return benchmarks including the AREIT 300
index and the All Ordinaries index for periods including three, five and ten years. For the one year period ALE's return of 33.4%
outperformed the AREIT 300 index of 20.2% and All Ordinaries index of 5.7%.
Growth in the value of the continuing properties between ALE's 2003 IPO and 30 June 2014 has averaged 4.75% p.a. This has exceeded
growth in CPI at 2.91% p.a
Distributable Profit ($m)
Gearing
Continuing Property Values ($m)
$30
$20
$10
$0
60.0%
55.0%
50.0%
45.0%
40.0%
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
$950
$900
$850
$800
$750
$700
$650
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
Accumulated Value for: AREITs $1.80, All Ords $2.77, ALE $10.581
1. Distributions include payment for renouncing Sep 2009 rights and all other distributions paid and declared to September 2014
14
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery Date
% vested in
year
% forfeited
in year
43,136
34,878
63,732
23,611
19,092
31,375
8,825
7,844
8,825
3,922
23 Aug 12
30 Sep 13
30 Sep 14
23 Aug 12
30 Sep 13
30 Sep 14
30 Sep 13
30 Sep 14
30 Sep 13
30 Sep 14
1 Jul 11
1 Jul 12
1 Jul 13
1 Jul 11
1 Jul 12
1 Jul 13
1 Jul 12
1 Jul 13
1 Jul 12
1 Jul 13
1.65
2.27
2.55
1.65
2.27
2.55
2.27
2.55
2.27
2.55
31 Jul 15
31 Jul 16
31 Jul 17
31 Jul 15
31 Jul 16
31 Jul 17
31 Jul 16
31 Jul 17
31 Jul 16
31 Jul 17
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
9.5.2 Modification of terms of equity settled share based payment transactions
No terms of equity settled share based payment transactions (including options and rights granted as compensation to key management
personnel) have been altered or modified by the issuing entity during the reporting period or the prior period.
9.5.3 Analysis of movements in performance rights
The movement during the reporting period, by value of performance rights over stapled securities in ALE is detailed below.
Executive
A J Slade
Granted in
year $ (a)
Vested in
year $ (b)
Lapsed in
year $ (c )
-
-
-
Securities
Delivered in
the year $
25,100
Securities
Delivered in
the year
(Number)
8,272
(a) The value of performance rights granted during the year is the assessed fair value at grant date of performance rights granted, allocated
equally over the period from grant date to vesting date. The fair value at grant date has been independently determined by using a Black-
Scholes option pricing model.
(b) The value of performance rights vested during the year is calculated as the market price of the stapled securities of ALE as at the close of
trading on the day the performance rights vested.
(c) The value of performance rights lapsed during the year is calculated using the market price of the stapled securities of ALE as at the close
of trading on the day the performance rights lapsed.
9.5.4 Analysis of movements in ESSS rights
The movement during the reporting period, by value and number of ESSS rights over stapled securities in ALE is detailed below.
Executive
By Value ($)
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
By Number
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Stapled
Securities
Delivered in
the Year
-
(50,000)
-
-
-
(34,571)
-
-
Opening
Balance
Granted in
Year
150,290
132,264
20,000
20,000
78,014
77,274
8,825
8,825
162,500
80,000
20,000
10,000
63,732
31,375
7,844
3,922
15
Securities
Delivered in
the year -
value paid $
-
104,899
-
-
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
312,790
162,264
40,000
30,000
141,746
74,078
16,669
12,747
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
9.6 Equity based compensation
The performance rights value disclosed above as part of specified executive remuneration is the assessed fair value at grant date of
performance rights granted, allocated equally over the period from grant date to vesting date. The fair value at grant date has been
independently determined by using a Black-Scholes option pricing model. This technique takes into account factors such as the exercise
price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the performance right,
the security price at grant date and expected price volatility of the underlying security, the expected distribution yield, the risk-free interest
rate for the term of the performance right and any delayed delivery in the securities to the executive.
The value of ESSS disclosed in section 9.5.4 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the
five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing this
number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined on 13 August 2015.
9.7 Non-executive Directors' Remuneration
9.7.1 Remuneration Policy and Strategy
Non-executive directors' individual fees are determined by the Company Board within the aggregate amount approved by shareholders. The
current aggregate amount which has been approved by shareholders at the AGM on 6 November 2014 was $650,000.
The Board reviews its fees to ensure that ALE non-executive directors are remunerated fairly for their services, recognising the level of skill,
expertise and experience required to conduct the role. The Board reviews its fees from time to time to ensure it is remunerating directors at
a level that enables ALE to attract and retain the right non-executive directors. Fees and payments to non-executive directors reflect the
demands which are made on, and the responsibilities of the Directors. Non-executive directors’ fees and payments were reviewed by Godfrey
Remuneration Group Pty Limited in the current financial year. The result of this review was that no changes to fees and payments were
made. The Chairman’s fees are determined independently from the fees of the other non-executive directors, based on comparative roles in
the external market. The Chairman is not present at any discussion relating to the determination of his own remuneration. Non-executive
directors do not receive any equity based payments, retirement benefits or other incentive payments.
9.7.2 Remuneration Structure
ALE non-executive directors receive a cash fee for service and they have no entitlement to any performance based remuneration, nor can
they participate in any security based incentive scheme.
The current remuneration was last independently reviewed in January 2014. This resulted in no change to the fee levels indicated below.
The Directors' fees are inclusive of superannuation, where applicable.
Board
ACRMC
Remuneration Committee
Chairman*
Member
Chairman
Member
Chairman
Member
Board and Committee Fees
$175,000
$85,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's (Executive Director) remuneration is determined in accordance with the above fees. He receives an additional $5,000 for
being a Responsible Manager of the Company under the Company’s AFSL and $10,000 for being a director of ALE Finance Company Pty
Limited.
16
9.8 Details of remuneration
Amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below in tables 1 and 2. The cash bonuses were dependent on the satisfaction of performance conditions as set out in the section
9.4 headed “Executive Incentive Scheme Outcomes”. Equity based payments for 2015 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
Table 1 Remuneration details 1 July 2014 to 30 June 2015
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2015 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
Salary & Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term benefits
$
Termination
benefits
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
ESSS
$
Total
$
$
P H Warne
Non-executive Director
159,817
J P Henderson
Non-executive Director
H I Wright
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
B R Howell
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
Executive Director
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
33,333
95,890
91,324
75,000
36,530
90,000
399,993
100,000
213,267
182,062
172,672
-
-
-
-
-
-
105,000
50,000
20,000
15,000
1,649,888
190,000
-
-
-
-
-
-
-
-
-
-
-
-
-
159,817
33,333
95,890
91,324
75,000
36,530
90,000
504,993
100,000
263,267
202,062
187,672
15,183
-
9,110
8,676
-
3,470
-
30,761
-
29,983
16,592
16,404
-
-
-
-
-
-
-
-
175,000
-
-
-
33,333
-
-
-
105,000
-
-
-
100,000
-
-
-
40,000
75,000
-
-
90,000
-
6,213
-
105,000
646,967
32.5%
-
-
-
100,000
-
4,370
-
50,000
347,620
2,695
-
20,000
241,349
2,687
-
15,000
221,763
28.8%
16.6%
13.5%
1,839,888
130,179
15,965
-
190,000
2,176,032
Table 2 Remuneration details 1 July 2013 to 30 June 2014
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2014 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
Salary & Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term benefits
$
Termination
benefits
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
ESSS
$
Total
$
$
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
P J Downes
B R Howell
Non-executive Director
Non-executive Director
Company Secretary
160,183
100,000
96,110
54,847
90,000
-
-
-
-
-
A F O Wilkinson
Executive Director
393,567
162,500
J T McNally
Executive Director
100,000
-
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
212,076
175,222
163,949
80,000
20,000
10,000
1,545,954
272,500
-
-
-
-
-
-
-
-
-
-
-
160,183
100,000
96,110
54,847
90,000
556,067
100,000
292,076
195,222
173,949
1,818,454
-
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
59,920
-
-
-
90,000
-
21,156
-
162,500
757,498
42.9%
-
-
-
100,000
-
12,843
-
80,000
402,544
7,281
6,446
-
-
20,000
239,769
10,000
207,410
47,726
-
272,500
2,237,141
39.7%
16.7%
9.6%
14,817
-
8,890
5,073
-
17,775
-
17,625
17,266
17,015
98,461
17
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
16.2%
-
14.4%
8.3%
6.8%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
21.5%
-
19.9%
8.3%
4.8%
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2015
10 Stapled securities under option
No Performance Rights over unissued stapled securities of ALE were granted during or since the end of the year.
11 Stapled securities issued on the exercise of options
No stapled securities were issued on the exercise of performance rights during the financial year.
12 Insurance of officers
During the financial year, the Company paid a premium of $54,544 (2014: $61,276) to insure the directors and officers of the Company.
The auditors of the Company are in no way indemnified out of the assets of the Company.
Under the constitution of the Company, current or former directors and secretaries are indemnified to the full extent permitted by law
for liabilities incurred by these persons in the discharge of their duties. The constitution provides that the Company will meet the legal
costs of these persons. This indemnity is subject to certain limitations.
13 Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Company are important.
The Board of Directors has considered the position and in accordance with the advice received from the ACRMC is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. During the current and previous financial years, no non-audit services were performed by the auditors.
Details of amounts paid or payable to the auditor (KPMG) for audit services provided during the year are set out below:
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the Group
and other audit work required under the Corporations Act 2001
- in relation to current year
- in relation to prior year
Total remuneration for audit services
30 June
2015
$
30 June
2014
$
160,000
5,000
180,500
8,500
165,000
189,000
14 Environmental regulation
While ALE is not subject to significant environmental regulation in respect of its property activities, the directors are satisfied that
adequate systems are in place for the management of its environmental responsibilities and compliance with various licence
requirements and regulations. Further, the directors are not aware of any material breaches of these requirements. At four properties,
ongoing testing and monitoring is being undertaken and minor remediation work is required, however, in most cases ALE is indemnified
by third parties against any remediation amounts likely to be required. ALE does not expect to incur any material environmental
liabilities.
15 Auditor's independence declaration
A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 20.
18
ALE Property Group
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2015
Revenue
Rent from investment properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to investment properties
Profit / (Loss) on disposal of investment property
Other income
Total other income
Total revenue and other income
Expenses
Fair value decrements to derivatives - net
Finance costs (cash and non-cash)
Queensland land tax expense
Other expenses
Total expenses
Profit/(Loss) before income tax
Income tax expense/(benefit)
Profit/(Loss) after income tax
Profit/(Loss) attributable to stapled securityholders of ALE
Other comprehensive income
Other comprehensive income for the year after income tax
Note
6
7
17
8
10
9
12
2015
$'000
55,214
1,779
56,993
78,790
-
53
78,843
135,836
5,247
24,507
2,093
4,668
36,515
99,321
(43)
99,364
99,364
-
-
2014
$'000
54,187
2,216
56,403
40,180
(42)
550
40,688
97,091
21,203
26,737
2,122
4,835
54,897
42,194
5,000
37,194
37,194
-
-
Total comprehensive income for the year
99,364
37,194
Profit/(Loss) attributable to:
Members of ALE
Non-controlling interest
Profit/(Loss) for the year
Total comprehensive income attributable to:
Members of ALE
Non-controlling interest
Total comprehensive income for the year
Basic and diluted earnings per stapled security
14(a)
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
99,364
-
99,364
99,364
-
99,364
Cents
50.77
37,194
-
37,194
37,194
-
37,194
Cents
19.03
21
ALE Property Group
STATEMENT OF FINANCIAL POSITION
For the Year ended 30 June 2015
Note
2015
$'000
2014
$'000
15
16
17
11
13
18
20
19
20
11
21
23
22
44,812
315
250
45,377
900,470
-
18
315
900,803
946,180
7,706
-
16,682
24,388
476,915
1,140
478,055
502,443
443,737
257,870
735
185,132
443,737
$
$2.27
149,963
2,147
249
152,359
821,680
4,108
31
339
826,158
978,517
8,523
102,383
16,271
127,177
474,051
-
474,051
601,228
377,289
257,870
604
118,815
377,289
$
$1.93
Current assets
Cash and cash equivalents
Receivables
Other
Total current assets
Non-current assets
Investment properties
Derivatives
Plant and equipment
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivatives
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserve
Retained profits
Total equity
Net assets per stapled security
The above statement of financial position should be read in conjunction with the accompanying Notes.
22
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2015
Share
Capital
$'000
Note
Share
based
payments
reserve
$'000
Retained
Earnings
$'000
Total
$'000
2015
Total equity at the beginning of the year
257,870
604
118,815
377,289
Total comprehensive income for the period
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with Members of ALE recognised directly in
Equity:
Employee share based payments
Employee share based payments - securities purchased
Distribution paid or payable
23
22/23
14
-
-
-
-
-
-
Total equity at the end of the year
257,870
-
-
-
99,364
-
99,364
99,364
-
99,364
190
(59)
-
735
-
(71)
(32,976)
190
(130)
(32,976)
185,132
443,737
2014
Total equity at the beginning of the year
254,080
382
113,895
368,357
Total comprehensive income for the period
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
-
-
-
Transactions with Members of ALE recognised directly in
Equity:
Employee share based payments
Employee share based payments - securities purchased
Securities issued - Distribution Reinvestment Plan
Costs associated with on market purchase of Securities for
Distribution Reinvestment Plan
Distribution paid or payable
Total equity at the end of the year
23
22/23
21
21
14
-
-
3,939
(149)
-
257,870
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
-
-
-
272
(50)
-
-
-
604
37,194
-
37,194
37,194
-
37,194
-
(81)
-
-
(32,193)
118,815
272
(131)
3,939
-
(149)
(32,193)
377,289
23
ALE Property Group
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2015
Note
Cash flows from operating activities
Receipts from tenant and others
Payments to suppliers and employees
Interest received - bank deposits
Net interest received - interest rate hedges
Borrowing costs paid
Net cash inflow from operating activities
15
Cash flows from investing activities
Net proceeds from disposal of properties
Payments for plant and equipment
Net cash inflow from investing activities
Cash flows from financing activities
Capitalised borrowing costs paid
Derivative termination payments
Proceeds from borrowings
Costs of on-market acquisition of securities for DRP
Borrowings repaid
CMBS
ALE Notes 2
Distributions paid (net of DRP securities issued)
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
15
2015
$'000
60,820
(11,778)
1,946
587
(22,735)
28,840
1,200
-
1,200
(10)
-
-
-
-
(102,597)
(32,584)
(135,191)
(105,151)
149,963
44,812
2014
$'000
60,232
(12,586)
2,075
7,413
(27,235)
29,899
4,458
(6)
4,452
(1,522)
(27,053)
339,736
(149)
(160,000)
(62,404)
(27,648)
60,960
95,311
54,652
149,963
The above statement of cash flows should be read in conjunction with the accompanying Notes.
24
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 1
Reporting Entity
ALE is domiciled in Australia. ALE, the stapled entity, was formed by stapling together the units in the Trust and the shares in the
Company. For the purposes of financial reporting, the stapled entity reflects the consolidated entity. The parent entity and deemed
acquirer in this arrangement is the Trust. The results reflect the performance of the Trust and its subsidiaries including the Company
from 1 July 2014 to 30 June 2015.
The stapled securities of ALE are quoted on the Australian Stock Exchange under the code LEP and comprise one unit in the Trust and
one share in the Company. The unit and the share are stapled together under the terms of their respective constitutions and cannot
be traded separately. Each entity forming part of ALE is a separate legal entity in its own right under the Corporations Act 2001 and
Australian Accounting Standards. The ALE Property Group is a for-profit entity.
The Company is the Responsible Entity of the Trust.
Note 2
Basis of preparation
(a) Compliance Statement
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001. The financial statements also comply with the International Financial Reporting Standards (IFRS) and interpretations adopted
by the International Accounting Standards Board.
(b) Basis of measurement
The financial statements are prepared on the historical cost basis except for the following which are measured at fair value:
•
•
derivative financial instruments
investment property
The methods used to measure fair value are discussed further in Note 4.
The consolidated financial statements were authorised for issue by the Board of Directors on 4th August 2015.
(c) Functional and presentation currency
These financial statements are presented in Australian dollars, which is ALE's functional currency.
ALE is an entity of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005
and CO 06/51 effective 31 January 2006) and in accordance with that Class Order, all financial information presented in Australian
dollars has been rounded to the nearest thousand unless otherwise stated.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial statements are described in the following notes:
•
•
•
Note 17 - Investment property
Note 24 - Measurement of share based payments
Note 33 - Valuation of financial instruments
25
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 3
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all years presented unless otherwise stated. The financial statements include financial statements for the ALE
Property Group (ALE), consisting of the Australian Leisure and Entertainment Property Trust and its subsidiaries. Summarised financial
information in relation to Australian Leisure and Entertainment Trust as the parent entity is presented in Note 34 to the financial
statements.
Principles of consolidation
(a)
The financial statements incorporate the assets and liabilities of all subsidiaries as at balance date and the results for the period then
ended. The Trust and its controlled entities together are referred to collectively in this financial report as ALE. Entities are fully
consolidated from the date on which control is transferred to the Trust; where applicable, entities are deconsolidated from the date
that control ceases.
Subsidiaries are all those entities (including special purpose entities) over which ALE has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether ALE controls another
entity.
All balances and effects of transactions between the subsidiaries of ALE have been eliminated in full.
Investment property
(b)
Properties (including land and buildings) held for long term rental yields and capital appreciation and that are not occupied by ALE are
classified as investment properties.
Investment property is initially brought to account at cost which includes the cost of acquisition, stamp duty and other costs directly
related to the acquisition of the properties. The properties are subsequently revalued and carried at fair value. Fair value is based on
active market prices, adjusted for any difference in the nature, location or condition of the specific asset or where this is not available,
an appropriate valuation method which may include discounted cash flow projections and the capitalisation method. The fair value
reflects, among other things, rental income from the current leases and assumptions about future rental income in light of current
market conditions. It also reflects any cash outflows that could be expected in respect of the property.
Subsequent expenditure is capitalised to the properties' carrying amount only when it is probable that future economic benefits
associated with the expenditure will flow to ALE and the cost of the item can be reliably measured. Maintenance and capital works
expenditure is the responsibility of the tenant under the triple net leases in place over 83 of the 86 properties. For the remaining three
hotels capital works expenditure and structural maintenance is the responsibility of ALE. ALE undertakes periodic condition and
compliance reviews by a qualified independent consultant to ensure properties are properly maintained.
Land and buildings that comprise investment property are not depreciated.
The carrying value of the investment property is reviewed at each reporting date and each property is independently revalued at least
every three years. Changes in the fair values of investment properties are recorded in the Statement of Comprehensive Income.
Gains and losses on disposal of a property are determined by comparing the net proceeds on disposal with the carrying amount of the
property at the date of disposal. Net proceeds on disposal are determined by subtracting disposal costs from the gross sale proceeds.
Cash and cash equivalents
(c)
For the purposes of the cash flow statement, cash and cash equivalents includes cash at bank, deposits at call and short term money
market securities which are readily convertible to cash.
26
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 3
Summary of significant accounting policies (continued)
Receivables
(d)
Trade debtors are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts.
Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A
provision for doubtful receivables is established when there is objective evidence that all amounts due may not be collected according
to the original terms of the receivables. The amount of any provision is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in
the Statement of Comprehensive Income.
Investments and financial assets
(e)
Financial assets classified as loans and deposits are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and arise when money and services are provided to a debtor with no intention of selling the receivable.
Loans and receivables are carried at amortised cost using the effective interest rate method. Under this method, fees, costs, discounts
and premiums directly related to the financial asset are spread over its effective life.
Trade and other payables
(f)
These amounts represent liabilities for goods and services provided to ALE prior to the end of the period which are unpaid at the
balance sheet date. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
(g)
Interest bearing liabilities are initially recognised at cost, being the fair value of the consideration received, net of issue and other
transaction costs associated with the borrowings.
After initial recognition, interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate
method. Under this method, fees, costs, discounts and premiums directly related to the financial liability are spread over the expected
life of the borrowings on an effective interest rate basis.
Interest bearing liabilities are classified as current liabilities unless an unconditional right exists to defer settlement of the liability for at
least 12 months after the balance sheet date.
Derivatives
(h)
ALE documents, at the inception of any hedging transaction, the relationship between hedging instruments and hedged items, as well
as its risk management objective and strategy for undertaking various hedge transactions. ALE also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will
continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative
financial instruments used for hedging purposes are disclosed in Note 11.
To date, ALE has not designated any of its derivatives as cash flow hedges and accordingly ALE has valued them all at fair value with
movements recorded in the Statement of Comprehensive Income.
Provisions
(i)
Provisions are recognised when there is a present legal or constructive obligation as a result of past events; it is more likely than not
that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Distributions and dividends
(j)
Provisions are made for the amounts of any distributions or dividends declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the financial year but not distributed at the balance date.
27
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 3
Summary of significant accounting policies (continued)
(k)
Ordinary units and ordinary shares are classified as contributed equity.
Contributed equity
Incremental costs directly attributable to the issue of new units, shares or options are shown in Contributed Equity as a deduction, net
of tax, from the proceeds.
Distributions to stapled securityholders that include a return of capital are shown in Equity as a transfer from (or reduction of)
Contributed Equity.
Revenue recognition
(l)
Rental income from operating leases is recognised on a straight line basis over the lease term. Rentals that are based on a future
amount that changes with other than the passage of time, including CPI linked rental increases, are only recognised when
contractually due. An asset will be recognised to represent the portion of an operating lease revenue in a reporting period relating to
fixed increases in operating lease revenue in future periods. These assets will be recognised as a component of investment properties.
Interest and investment income is brought to account on a time proportion basis using the effective interest rate method and if not
received at balance date is reflected in the Statement of Financial Position as a receivable.
Expenses
(m)
Expenses including operating expenses, Queensland land tax expense and other outgoings (if any) are brought to account on an
accruals basis. Borrowing costs are recognised using the effective interest rate method.
(n)
(i)
Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave due to be settled within 12 months of the
reporting date, are recognised as a current liability 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. Liabilities for accumulated sick leave are recognised as an expense
when the leave is taken and measured at the rates paid or payable.
(ii)
Share based payments
Executive Stapled Security Scheme (ESSS)
The grant date fair value of ESSS Rights granted to employees is recognised as an employee expense, with a corresponding increase
in equity, over the period that the employees become unconditionally entitled to the ESSS rights. The amount recognised as an
expense is adjusted to reflect the actual number of ESSS Rights that vest.
The fair value at grant date is determined as the value of the ESSS Rights in the year in which they are awarded. The number of ESSS
Rights issued annually under the ESSS will be determined by dividing the value of the grant by the volume weighted average price for
the five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements and
grossing this number up for the future value of the estimated distributions over the three year deferred delivery period.
Upon the exercise of ESSS rights, the balance of the share based payments reserve relating to those performance rights is transferred
to Contributed Equity.
Bonus and incentive plans
(iii)
Liabilities and expenses for bonuses and incentives are recognised where contractually obliged or where there is a past practice that
may create a constructive obligation.
28
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 3
Summary of significant accounting policies (continued)
(iv)
Long service leave
ALE recognises liabilities for long service leave when employees reach a qualifying period of continuous service (five years). 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. 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 national government bonds with the terms to maturity and currency that match, as
closely as possible, the estimated future cash flow.
Retirement benefit obligations
(v)
ALE pays fixed contributions to employee nominated superannuation funds and ALE's legal or constructive obligations are limited to
these contributions. The contributions are recognised as an expense as they become payable. Prepaid contributions are recognised as
an asset to the extent that a cash refund or a reduction in the future payments is available.
Income tax
Trusts
(o)
(i)
Under current legislation, Trusts are not liable for income tax, provided that their taxable income and taxable realised gains are fully
distributed to securityholders each financial year.
Companies
(ii)
The income tax expense or benefit for the reporting period is the tax payable on the current reporting period's taxable income based
on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or 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. Similarly, no deferred
tax asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in controlled
entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary differences at the
tax rates expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in Equity.
Earnings per stapled security
Basic earnings per stapled security
(p)
(i)
Basic earnings per stapled security is calculated by dividing the profit attributable to the equity holders of ALE by the weighted
average number of stapled securities outstanding during the reporting period.
Diluted earnings per stapled security
(ii)
Diluted earnings per stapled security adjusts the figures used in the determination of basic earnings per stapled security to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential stapled securities and the
weighted average number of stapled securities assumed to have been issued for no consideration in relation to dilutive potential
stapled securities.
29
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 3
Summary of significant accounting policies (continued)
Goods and services tax (GST)
(q)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from
the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from,
or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to, the taxation authority, are presented as operating cash flow.
Financial risk management
(r)
ALE's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. ALE's overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of ALE. ALE uses derivative financial instruments such as interest rate hedges to reduce certain risk exposures (Notes 5
and 33 provide further information).
New accounting standards and interpretation not yet adopted
(s)
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January
2015, and have not been applied in preparing these financial statements. Those which may be relevant to the Group are set out
below. The Group does not plan to adopt these standards early.
IFRS 9 Financial Instruments (2010), IFRS 9 Financial Instruments (2009)
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9
includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model
for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the
guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods
beginning on or after 1 January 2018, with early adoption permitted.
The Group is assessing the potential impact on its consolidated financial statement resulting from the application of IFRS 9.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
exisiting revenue recognition guidance, including IAS 18 Revenue, AIS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted.
The Group is assessing the potential impact on its financial statements resulting from the application of IFRS 15.
30
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 4
Determination of fair values
A number of ALE’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial
assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.
Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that
asset or liability.
When measuring the fair value of an asset or a liability, ALE uses market observable data as far as possible. Fair values are
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e as prices) or indirectly (i.e derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that
is significant to the entire measurement.
ALE recognises transfers between levels of fair value hierarchy at the end of the reporting period during which the change has
occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
Note 17
Note 33
Investment property
Financial instruments
Note 5
Financial risk management
Overview
The Trust and Group have exposure to the following risks from their use of financial instruments:
credit risk
●
●
liquidity risk
● market risk
This note presents information about ALEs exposure to each of the above risks, its objectives, policies and processes for measuring
and managing risk and the management of capital. Further quantitative disclosures are included throughout this financial report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board
has established an Audit, Compliance and Risk Management Committee, which is responsible for developing and monitoring risk
management policies. The committee reports regularly to the Board of Directors on its activities.
Risk management policies are established to identify and analyse the risks faced by ALE, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and ALE’s activities. ALE, through its training and management standards and procedures, has developed a disciplined and
constructive control environment in which all employees understand their roles and obligations.
The Audit Compliance and Risk Management Committee oversees how management monitors compliance with ALE’s risk management
policies and procedures and reviews the adequacy of the risk management framework.
Credit risk
Credit risk is the risk of financial loss to ALE if its tenant or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from ALE’s receivables from the tenant, investment securities and derivatives contracts.
Trade and other receivables
ALE’s exposure to credit risk is influenced mainly by the individual characteristics of its tenant. ALE has one tenant (Australian Leisure
and Hospitality Group Limited) and therefore there is significant concentration of credit risk with that company. Credit risk of the
tenant is constantly monitored to ensure the tenant has appropriate financial standing. There are also cross default provisions in the
leases and the properties are essential to the tenant's business operations and those of the tenant's shareholders.
31
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 5
Financial risk management (continued)
Liquidity risk
Liquidity risk is the risk that ALE will not be able to meet its financial obligations as they fall due. ALE’s approach to managing liquidity
is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to ALE’s reputation. ALE manages its liquidity risk by
using detailed forward cash flow planning and by maintaining strong relationships with banks and investors in the capital markets.
ALE has liquidity risk management policies which assist it in monitoring cash flow requirements and optimising its cash return on
investments. Typically ALE ensures that it has sufficient cash on demand to meet expected operational expenses and commitments
for the purchase/sale of assets for a period of 90 days (or longer if deemed necessary), including the servicing of financial obligations.
Market risk
Market risk is the risk that changes in market prices, such as the consumer price index and interest rates, will affect ALE’s income or
the value of its holdings of leases and financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
ALE enters into derivatives and financial liabilities in order to manage market risks. All such transactions are carried out within the
guidelines set by the Audit, Compliance and Risk Management Committee.
Interest rate risk
ALE adopts a policy of ensuring that all exposure to changes in interest rates on borrowings are hedged. This is achieved by entering
into interest rate hedges to fix the interest rates or by issuing fixed rate borrowings.
Property valuation risk
ALE owns a number of investment properties. Those property valuations may increase or decrease from time to time. ALE's financing
facilities contain gearing covenants. ALE reviews the risk of gearing covenant breaches by constantly monitoring gearing levels and
has contingency capital management plans to ensure that sufficient headroom is maintained.
Capital management
ALE monitors securityholder equity and manages it to address risks and add value where appropriate.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Board of Directors monitors the return on capital, which ALE defines as distributable income divided
by total contributed equity, excluding minority interests. The Board of Directors also monitors the level of gearing.
The Board seeks to maintain a balance between the higher returns that may be achieved with higher levels of borrowings and the
advantages and security afforded by a sound capital position. While ALE does not have a specific return on capital target, it seeks to
ensure that capital is being most efficiently used at all times. In seeking to manage its capital efficiently, ALE from time to time may
undertake on-market buybacks of ALE stapled securities. ALE has also from time to time made ongoing capital distribution payments
to stapled securityholders on a fully transparent basis. Additionally, the available total returns on all new acquisitions are tested
against the anticipated weighted cost of capital at the time of the acquisition.
ALE assesses the adequacy of its capital requirements, cost of capital and gearing as part of its broader strategic plan.
Gearing ratios are monitored in the context of any increase or decrease from time to time based on existing property value
movements, acquisitions completed, the levels of debt financing used and a range of prudent financial metrics, both at the time and
on a projected basis going forward.
The outcomes of the ALE strategic planning process plays an important role in determining acquisition and financing priorities over
time.
The total gearing ratios (total liabilities as a percentage of total assets) at 30 June 2015 and 30 June 2014 were 53.1% and 61.5%
respectively.
The net gearing ratios (total borrowings less cash as a percentage of total assets less cash and derivatives) at 30 June 2015 and 30
June 2014 were 48.0% and 51.7% respectively.
32
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 6
Rent from investment properties
Rent from continuing properties
During the current and previous financial years, ALE's investment property lease rentals were
reviewed to state based CPI annually and are not subject to fixed increases, apart from the
lease for the Pritchard's Hotel, NSW which has fixed increases of 3%.
2015
$'000
2014
$'000
55,214
55,214
54,187
54,187
Note 7
Interest income
Operating bank and term deposit interest
1,779
2,216
As at 30 June 2015 the weighted average interest rate earned on cash was 2.75% (2014:
3.39%)
Note 8
Current year fair value adjustments to derivatives
Fair value increments/(decrements) to interest rate hedge derivatives
(5,247)
(5,247)
(21,203)
(21,203)
During the current year a portion of the derivative value movement was realised upon
termination of hedges.
Note 9
Other expenses
Annual reports
Audit, accounting, tax and professional fees
Depreciation expense
Insurance
Legal fees
Occupancy costs
Corporate and other expenses
Property revaluations, and condition and compliance audits
Registry fees
Salaries, fees and related costs
Staff training
Travel and accommodation
Trustee and custodian fees
Total other expenses
Less: Share based payments expense
Total cash other expenses
96
193
13
178
165
124
552
396
126
2,538
23
114
150
4,668
4,668
(190)
4,478
114
213
17
177
208
120
797
276
147
2,521
20
82
143
4,835
4,835
(272)
4,563
33
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
2015
$'000
2014
$'000
Note 10 Finance costs (cash and non-cash)
Finance costs - cash
Capital Indexed Bonds (CIB)
Commercial Mortgage Backed Securities (CMBS)
Australian Medium Term Notes (AMTN)
ALE Notes 2
Interest rate derivative payments/(receipts)
CMBS early redemption penalty
ALE Notes 2 buyback premium
Other finance expenses
Finance costs - non-cash
Accumulating indexation - CIB
Amortisation - CIB and CMBS
Amortisation - AMTN
Amortisation - AMTN discount
Amortisation - ALE Notes 2
Finance costs (cash and non-cash)
Note
20(b)
20(c)
20(d)
20(e)
-
(iv)
(v)
(ii)
(i)
20(b)
(iii)
(iii)
(iii)
(iii)
(i)
(ii)
(iii)
(iv)
(v)
Amounts represent net cash finance costs after derivative payments and receipts.
Other borrowing costs such as rating agency fees and liquidity fees.
Establishment costs of the various borrowings are amortised over the period of
the borrowing on an effective rate basis. In June 2014 the CMBS borrowings
were redeemed and therefore all unamortised establishment costs were written
off.
The CMBS had a maturity date of 20 May 2016 and were redeemed early on 20
June 2014. In accordance with the loan agreement an early repayment penalty
was incurred.
During June 2014 ALE undertook an on-market buyback of ALE Notes 2 at $101
per note. The ALE Notes 2 have a face value of $100 so a $1 premium per note
was paid on the notes bought back and cancelled.
Note 11
Derivatives
Non current assets
Total assets
Non current liabilities
Total liabilities
Net assets/(liabilities)
4,867
-
15,925
940
(534)
-
-
222
21,420
2,513
58
270
32
214
3,087
24,507
2015
$'000
-
-
(1,140)
(1,140)
(1,140)
4,752
7,748
875
10,454
(7,677)
1,680
624
580
19,036
3,625
2,603
8
1
1,464
7,701
26,737
2014
$'000
4,108
4,108
-
-
4,108
34
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
2015
$'000
2014
$'000
Note 11
Derivatives (continued)
Instruments used by ALE
ALE uses derivative financial instruments in the normal course of business in order to hedge
exposure to fluctuations in interest rates in accordance with ALE's financial risk management
policies. As at balance date, ALE has hedged all non CIB net borrowings past the maturity
date of the AMTN through nominal interest rate hedges. Interest rate hedges are carried on
the Statement of Financial Position at fair value. Changes in the mark to market fair value of
these derivatives are recognised in the Statement of Comprehensive Income.
Note 20 contains further information on the derivative financial instruments in place over net
borrowings.
Note 12
Income tax
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Income tax expense/(benefit)
Deferred income tax expense included in income tax
expense/(benefit) comprises:
Decrease/(increase) in deferred tax asset (Note 13)
Reconciliation of income tax expense to prima facie tax payable
Profit/(loss) before income tax expense
Profit/(loss) attributable to entities not subject to tax
Profit/(loss) before income tax expense subject to tax
Tax at the Australian tax rate of 30% (2014: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share based payments
Other
Under/(over) provision in prior years
Income tax expense/(benefit)
(67)
24
(43)
24
24
99,321
99,262
59
18
18
-
(79)
(43)
2
4,998
5,000
4,998
4,998
42,194
25,706
16,488
4,946
42
10
2
5,000
35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 13 Deferred tax assets
Deferred tax assets
The balance is attributable to:
Employee benefits
Acquisition proposal due diligence costs
Amortised borrowing costs
Other items
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the income statement (Note 12)
Credited/(charged) to equity
Closing balance
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Note 14 Earning and distributions per stapled security
Reconciliation of profit after tax to amounts available for distribution:
Profit after income tax for the year
Plus /(less)
Fair value increments to investment properties
Fair value decrements to derivatives
Loss/(Gain) on disposal of property
Employee share based payments
Finance costs - non cash
Income tax expense
Adjustments for non-cash items
Total available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
Reconciliation of accumulated undistributed income
Opening balance
Available and undistributed/(over distributed) for the year
2015
$'000
2014
$'000
315
44
-
(170)
(1)
442
315
339
(24)
-
315
485
(170)
315
339
38
1
56
(11)
255
339
5,337
(4,998)
-
339
273
66
339
99,364
37,194
(78,790)
5,247
-
190
3,087
(43)
(70,309)
29,055
32,976
(3,921)
10,444
(3,921)
(40,180)
21,203
42
272
7,701
5,000
(5,962)
31,232
32,193
(961)
11,405
(961)
Note
(a)
17
8
23
10
12
(b)
(d)
(e)
Closing balance
(f)
6,523
10,444
36
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 14 Earning and distributions per stapled security (continued)
Weighted average number of stapled securities used as the denominator in calculating
earnings per stapled security at (a) and (b) below
2015
$'000
2014
$'000
Number of
Stapled
Securities On
Issue
Number of
Stapled
Securities On
Issue
195,702,333
195,437,564
Weighted average number of stapled securities and potential stapled securities used as the
denominator in calculating diluted earnings per stapled security
195,702,333
195,437,564
Stapled securities on issue at the end of the year used in calculating total available for
distribution per stapled security at (c) below
195,702,333
195,702,333
2015
cps
50.77
14.85
14.85
16.85
(2.00)
3.33
2014
cps
19.03
15.98
15.96
16.45
(0.49)
5.34
2,333
34,089
8,390
44,812
10,389
131,184
8,390
149,963
(a)
(b)
(c)
(d)
(e)
(f)
Basic and diluted earnings per stapled security
Basic and diluted earnings per stapled security excluding non-cash items
(Distributable Profit)
Total available for distribution
Distribution per stapled security
Available and under/(over) distributed for the year
Accumulated undistributed income at the end of the year
cps = cents per security
Note 15 Cash assets and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
An amount of $8.39 million is required to be held as a cash reserve as part of the terms of
the CIB issue in order to provide liquidity for CIB obligations to scheduled maturity of 20
November 2023.
An amount of $2 million is required to be held in a term deposit by the Company to meet
minimum net tangible asset requirements of the AFSL licence.
During the year ended 30 June 2015 all cash assets were placed on deposit with the National
Australia Bank Limited. As at 30 June 2015, the weighted average interest rate on all cash
assets was 2.75% (2014: 3.39%).
37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 15 Cash assets and cash equivalents (continued)
Reconciliation of profit after income tax to net cash inflows from operating activities
Profit for the year
Plus/(less):
Fair value decrements/(increments) to investment property
Fair value decrements/(increments) to derivatives
Finance costs amortisation
Loss/(gain) on disposal of investment property
Accumulated indexation on CIB
Share based payments expense
Share based payment securities purchased
Depreciation
Decrease/(increase) in receivables
Decrease/(increase) in deferred tax asset
Decrease/(increase) in other assets
Increase/(decrease) in payables
Increase/(decrease) in provisions
Net cash inflow from operating activities for the year
Distribution payments totalling $Nil (2014: $3,939,103) were satisfied by the issue of
securities under the Distribution Reinvestment Plan.
Note 16
Receivables
Accounts receivable
Other receivables
Interest receivable
Note 17 Investment properties
Investment properties - at fair value
Reconciliation
A reconciliation of the carrying amounts of investment properties at the beginning and end
of the year is set out below:
Carrying amount at beginning of the year
Disposals
Net gain/(loss) from fair value adjustments
Carrying amount at the end of the year
2015
$'000
2015
$'000
99,364
(78,790)
5,247
574
-
2,513
190
(130)
13
634
24
(1)
(817)
19
28,840
104
68
143
315
2014
$'000
2014
$'000
37,194
(40,180)
21,203
4,076
42
3,625
272
(131)
17
(770)
4,998
(23)
(449)
25
29,899
1,783
-
364
2,147
900,470
821,680
821,680
-
78,790
900,470
786,000
(4,500)
40,180
821,680
All investment properties are freehold and 100% owned by ALE and comprise land, buildings and fixed improvements. The plant and
equipment, liquor and gaming licences, leasehold improvements and certain development rights are held by the tenant.
Leasing arrangements
83 of the 86 properties in the portfolio are leased to ALH on a triple net basis for 25 years, mostly starting in November 2003, with four
10 year options for ALH to renew. The remaining three properties are leased on long term leases to ALH on a double net basis.
38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
2015
$'000
2014
$'000
Note 17 Investment properties (continued)
Measurement of fair value
Valuation approach
The basis of valuation of investment properties is fair value, being the amounts for which the properties could be exchanged between
willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and
condition and subject to similar leases. As at 30 June 2015, the weighted average investment property capitalisation rate used to
determine the value of all investment properties was 5.99% (2014: 6.42%).
Investment property is property which is held either to earn rental income or for capital appreciation or for both. Investment property is
measured at fair value with any change therein recognised in profit or loss. ALE has a valuation process for determining the fair value at
each reporting date. An independent valuer, having an appropriate professional qualification and recent experience in the location and
category of property being valued, values individual properties every three years on a rotation basis or on a more regular basis if
considered appropriate and as determined by management in accordance with the Board's approved valuation policy. These external
independent valuations are taken into consideration when determining the fair value of the investment properties. The fair values are
based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a
willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted
knowledgeably, prudently and without compulsion. The weighted average lease term of the properties is around 13 years.
In accordance with ALE's policy of independently valuing at least one-third of its property portfolio annually, 38 properties were
independently valued as at 30 June 2015. The independent valuations are identified as "A" in the investment property table under the
column labelled "Valuation type and date". These valuations were completed by CBRE.
The remaining 48 properties were subject to Directors' valuations as at 30 June 2015, identified as "B". The Directors' valuations of the
48 properties were determined by taking each property's net rent as at 30 June 2015 and capitalising it at a rate equal to the prior year
capitalisation rate for that property, adjusted by the average change in capitalisation rate evident in the 38 independent valuations
completed at 30 June 2015 on a like for like basis. The Directors have received advice from CBRE, that it is reasonable to apply the
same percentage movement in the weighted average capitalisation rates, on a like for like basis.
In June 2015 ALE and ALH agreed to restructure the rent relating to 13 of the 86 properties with application as at 30 June 2015. These
properties were all independently valued at 30 June 2015 and are identified as "C" in the investment property table.
The valuations of each independent property are prepared by considering the aggregate of the net annual passing rental receivable from
the individual properties and, where relevant, associated costs. A capitalisation rate, which reflects the specific risks inherent in the net
cash flows, is then applied to the net annual passing rentals to arrive at the property valuation. The independent valuer also had regard
to discounted cash flows modelling in deriving a final capitalisation rate although the capitalisation of income method remains the
predominate method used in valuing the properties. A table showing the range of capitalisation rates applied to individual properties for
each state in which the property is held is included below.
New South Wales
Victoria
Queensland
South Australia
Western Australia
2015
Yields
5.10% - 6.36%
4.09% - 6.86%
4.62% - 6.75%
5.73% - 6.49%
6.19% - 7.12%
2014
Yields
5.57% - 7.84%
5.23% - 7.19%
5.29% - 6.87%
6.03% - 6.76%
6.49% - 7.29%
2015
Average
5.64%
6.02%
6.05%
6.18%
6.59%
2014
Average
6.56%
6.41%
6.33%
6.52%
6.75%
Valuations reflect, where appropriate, the tenant in occupation, the credit worthiness of the tenant, the triple-net nature and remaining
term of the leases (83 of 86 properties), land tax liabilities (Queensland only) and insurance responsibilities between lessor and lessee
and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with
anticipated reversionary increases, all notices and, where appropriate, counter notices, have been served validly and within the
appropriate time.
39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
2015
$'000
2014
$'000
Note 17 Investment properties (continued)
Fair value hierarchy
The fair value of investment property was determined by having external, independent property valuers, having appropriate recognised
professional qualifications and recent experience in the location and category of the property being valued value approximately one
third of the portfolio every 12 months. The remaining properties are valued by Directors by reference to the movement in capitalisation
rates advised by the independent valuers. The Directors receive advice from the independent valuers that it is reasonable to apply the
same percentage movement in the weighted average capitalisation rates in the sample independently valued, on a state by state, like
for like basis, to the remaining properties.
The fair value measurement for investment property of $900.47 million has been categorised as a level 3 fair value based on inputs to
the valuation technique used.
Level 3 fair value
The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values.
Balance at the beginning of the year
Disposals - at fair value
Changes in fair value (unrealised)
Carrying amount at the end of the year
Valuation techniques and unobservable inputs
821,680
-
78,790
900,470
786,000
(4,500)
40,180
821,680
Fair value
hierarchy
Class of
property
Fair Value
30 June 2015
$000's
Valuation technique
Inputs Used to Measure
Fair Value
Range of Individual
Property
Unobservable
inputs
Level 3
Pubs
900,470
Capitalisation method
Discounted cash flow method
Gross rent p.a ($'000's)
Land tax p.a ($'000's)
Adopted capitalisation rate
$149 - $1,583
$12 - $127
4.09% - 7.12%
Gross rent p.a ($'000's)
Land tax p.a ($'000's)
Discount rates
Terminal capitalisation rates
Consumer price index
$149 - $1,583
$12 - $127
6.50% - 9.25%
6.25% - 7.50%
2.48% - 2.50%
As noted above the independent valuer had regard to discounted cash flows modelling in deriving a final capitalisation rate although the
capitalisation of income method remains the predominant method used in valuing the individual properties.
40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 17
Investment properties (continued)
Property
New South Wales
Blacktown Inn, Blacktown
Brown Jug Hotel, Fairfield Heights
Colyton Hotel, Colyton
Crows Nest Hotel, Crows Nest
Melton Hotel, Auburn
Narrabeen Sands Hotel, Narrabeen
New Brighton Hotel, Manly
Pioneer Tavern, Penrith
Pritchard's Hotel, Mount Pritchard
Smithfield Tavern, Smithfield
Total New South Wales properties
Queensland
Albany Creek Tavern, Albany Creek
Alderley Arms Hotel, Alderley
Anglers Arms Hotel, Southport
Balaclava Hotel, Cairns
Breakfast Creek Hotel, Breakfast Creek
Burleigh Heads Hotel, Burleigh Heads
Camp Hill Hotel, Camp Hill
Chardons Corner Hotel, Annerly
Dalrymple Hotel, Townsville
Edge Hill Tavern, Manoora
Edinburgh Castle Hotel, Kedron
Four Mile Creek, Strathpine
Hamilton Hotel, Hamilton
Holland Park Hotel, Holland Park
Kedron Park Hotel, Kedron Park
Kirwan Tavern, Townsville
Lawnton Tavern, Lawnton
Miami Tavern, Miami
Mount Gravatt Hotel, Mount Gravatt
Mount Pleasant Tavern, Mackay
Noosa Reef Hotel, Noosa Heads
Nudgee Beach Hotel, Nudgee
Palm Beach Hotel, Palm Beach
Pelican Waters, Caloundra
Prince of Wales Hotel, Nundah
Racehorse Hotel, Booval
Redland Bay Hotel, Redland Bay
Royal Exchange Hotel, Toowong
Springwood Hotel, Springwood
Stones Corner Hotel, Stones Corner
Vale Hotel, Townsville
Wilsonton Hotel, Toowoomba
Total Queensland properties
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2015
$'000
Fair value
at 30 June
2014
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2015
$'000
1,850
1,960
2,450
2,770
420
2,340
(5,210)
2,030
5,300
1,440
5,472
5,660
8,208
8,772
3,114
8,945
8,867
5,849
21,130
4,151
80,168
8,396
3,303
4,434
3,304
10,659
6,685
2,265
1,416
3,208
2,359
3,114
3,672
6,604
3,774
2,265
4,434
4,434
4,057
3,208
1,794
6,874
3,020
6,886
4,237
3,397
1,794
5,189
5,755
9,150
5,377
5,661
4,529
B
B
A
B
A
B
C
B
A
B
B
B
A
C
B
B
B
A
C
A
B
B
A
C
B
A
B
C
B
C
C
B
A
B
B
B
B
B
A
B
B
B
10,810
11,410
15,900
16,150
6,000
13,990
9,800
11,830
24,900
8,430
8,960
9,450
13,450
13,380
5,580
11,650
15,010
9,800
19,600
6,990
129,220
113,870
15,350
13,780
5,660
8,150
9,900
15,450
12,010
3,810
2,700
10,450
5,100
5,150
6,560
11,350
11,000
3,560
9,200
7,530
12,000
5,590
8,650
9,700
5,080
12,300
7,130
6,020
3,580
9,280
9,500
15,200
9,350
11,670
9,210
12,200
5,350
7,790
5,990
14,680
11,500
3,625
2,120
5,740
4,690
4,940
6,350
9,610
6,420
3,400
8,730
7,200
8,790
5,325
3,380
12,250
4,750
11,340
6,825
5,800
3,160
8,825
9,075
13,730
9,010
10,390
7,960
1,580
310
360
3,910
770
510
185
580
4,710
410
210
210
1,740
4,580
160
470
330
3,210
265
5,270
(2,550)
330
960
305
220
420
455
425
1,470
340
1,280
1,250
145,254
275,620
240,945
34,675
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Mar-09
Nov-03
Nov-03
Oct-07
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-08
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Jun-04
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Jun-04
Nov-03
Nov-03
Jun-04
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 17
Investment properties (continued)
Property
South Australia
Aberfoyle Hub Tavern, Aberfoyle Park
Eureka Tavern, Salisbury
Exeter Hotel, Exeter
Finsbury Hotel, Woodville North
Gepps Cross Hotel, Blair Athol
Hendon Hotel, Royal Park
Stockade Tavern, Salisbury
Total South Australian properties
Victoria
Ashley Hotel, Braybrook
Bayswater Hotel, Bayswater
Berwick Inn, Berwick
Blackburn Hotel, Blackburn
Blue Bell Hotel, Wendouree
Boundary Hotel, East Bentleigh
Burvale Hotel, Nunawading
Club Hotel - FTG, Ferntree Gully
Cramers Hotel, Preston
Deer Park Hotel, Deer Park
Doncaster Inn, Doncaster
Ferntree Gully Hotel/Motel, Ferntree Gully
Gateway Hotel, Corio
Keysborough Hotel, Keysborough
Mac's Melton Hotel, Melton
Meadow Inn Hotel/Motel, Fawkner
Mitcham Hotel, Mitcham
Morwell Hotel, Morwell
Olinda Creek Hotel, Lilydale
Pier Hotel, Frankston
Plough Hotel, Mill Park
Prince Mark Hotel, Doveton
Royal Exchange, Traralgon
Sandbelt Club Hotel, Moorabbin
Sandown Park Hotel/Motel, Noble Park
Sandringham Hotel, Sandringham
Somerville Hotel, Somerville
Stamford Inn, Rowville
Sylvania Hotel, Campbellfield
The Vale Hotel, Mulgrave
Tudor Inn, Cheltenham
Village Green Hotel, Mulgrave
Young & Jackson, Melbourne
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2015
$'000
Fair value
at 30 June
2014
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2015
$'000
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Feb-06
Nov-03
Nov-03
Jun-08
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
3,303
3,303
1,888
1,605
2,171
1,605
4,435
18,310
3,963
9,905
15,888
9,433
1,982
17,943
9,717
5,095
8,301
6,981
12,169
4,718
3,114
9,622
6,886
7,689
8,584
1,511
3,963
8,019
8,490
9,810
2,171
10,849
6,321
4,529
2,642
12,733
5,377
5,566
5,472
12,546
6,132
B
C
B
B
B
A
C
B
A
C
A
B
A
B
A
B
B
B
C
B
A
B
B
B
C
A
B
B
A
B
B
B
B
A
A
A
A
A
B
A
6,290
5,400
3,930
3,440
4,610
3,500
5,350
5,850
5,800
3,650
3,200
4,290
3,140
7,710
440
(400)
280
240
320
360
(2,360)
32,520
33,640
(1,120)
7,780
18,400
17,500
16,000
4,530
21,000
17,820
9,800
15,680
13,180
20,820
7,400
7,000
17,600
12,580
14,320
15,220
2,400
7,300
14,250
14,110
18,000
4,710
19,830
11,240
10,130
5,700
23,900
10,600
11,300
9,900
21,600
13,600
7,200
17,300
18,610
14,950
4,190
21,190
16,490
9,770
14,500
12,200
19,270
9,190
6,480
14,810
11,650
13,250
14,100
3,290
6,800
13,190
13,060
16,870
4,360
18,350
10,400
9,380
5,280
19,620
10,300
9,900
9,600
20,000
10,420
580
1,100
(1,110)
1,050
340
(190)
1,330
30
1,180
980
1,550
(1,790)
520
2,790
930
1,070
1,120
(890)
500
1,060
1,050
1,130
350
1,480
840
750
420
4,280
300
1,400
300
1,600
3,180
Total Victorian properties
248,121
435,200
405,970
29,230
42
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 17
Investment properties (continued)
Property
Western Australia
Queens Tavern, Highgate
Sail & Anchor Hotel, Fremantle
The Brass Monkey Hotel, Northbridge
Balmoral Hotel, East Victoria Park
Total Western Australian properties
Total investment properties
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2015
$'000
Fair value
at 30 June
2014
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2015
$'000
Nov-03
Nov-03
Nov-07
Jul-07
4,812
3,114
7,815
6,377
22,118
513,971
B
C
A
B
8,210
4,300
9,000
6,400
8,000
4,650
8,330
6,275
27,910
27,255
210
(350)
670
125
655
900,470
821,680
78,790
Reconciliation of fair value gains/losses for year ending 30 June 2015
Fair value as at beginning of the year
Disposals during the year
Carrying amount before revaluations
Fair value as at end of the year
Fair value gain/(loss) for year
Valuation type and date
821,680
-
821,680
900,470
786,000
( 4,500)
781,500
821,680
78,790
40,180
A
B
C
Independent valuations conducted during June 2015 with a valuation date of 30 June 2015.
Directors' valuations conducted during June 2015 with a valuation date of 30 June 2015.
Independent valuations conducted during June 2015 with a valuation date of 30 June 2015 and formed part
of the rental restructure implemented during the year.
43
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 18
Payables
Trade creditors
Interest accrued on CIB
Interest accrued on AMTN
Prepaid interest on AMTN received
Interest accrued on ALE Notes 2
Other accruals
Note 19
Provisions
Provision for distribution
Provision for employee entitlements
Provision for distribution
Balance at the beginning of the year
Provisions made during the year
Provisions used during the year
Balance at the end of the year
Provision for employee entitlements
Balance at the beginning of the year
Provisions made during the year
Provisions used during the year
Balance at the end of the year
2015
$'000
2014
$'000
385
546
5,719
-
-
1,056
7,706
16,537
145
16,682
16,145
32,976
(32,584)
16,537
126
158
(139)
145
237
538
983
4,736
789
1,240
8,523
16,145
126
16,271
15,539
32,237
(31,631)
16,145
101
111
(86)
126
Distribution
The provision for distribution relates to distributions paid to stapled securityholders. The balance
at 30 June 2015 will be paid to securityholders on 7 September 2015.
Employee entitlements
The provision for employee entitlements relates to annual leave and long service leave owing to
employees. It will be paid out as and when employees take leave.
Note 20
Borrowings
Current borrowings
ALE Notes 2
Non-current borrowings
CIB
CMBS
AMTN
Note
(e)
(b)
(c)
(d)
2015
$'000
2014
$'000
-
-
102,383
102,383
143,107
-
333,808
140,536
-
333,515
476,915
474,051
44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 20
Borrowings (continued)
Capital Indexed Bond (CIB)
Gross value of debt
Accumulated indexation
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Accumulating indexation
Amortisation of establishment costs
Closing balance
Commercial Mortgage Backed Securities (CMBS)
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Borrowings repaid
Amortisation of establishment costs
Closing balance
Australian Medium Term Notes (AMTN)
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Proceeds from AMTN issue
Prepaid interest on AMTN received
Borrowing establishment costs capitalised
Discount on issue
Amortisation of establishment costs and discount
Closing balance
ALE Notes 2
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Borrowings repaid
Borrowing establishment costs capitalised
Amortisation of establishment costs
Closing balance
45
2015
$'000
2014
$'000
111,900
32,014
(807)
111,900
29,501
(865)
143,107
140,536
140,536
2,513
58
136,860
3,625
51
143,107
140,536
-
-
-
-
-
-
-
-
-
-
157,449
(160,000)
2,551
-
335,000
(1,192)
335,000
(1,485)
333,808
333,515
333,515
-
-
(10)
-
303
333,808
-
-
-
102,383
(102,597)
-
214
-
-
339,736
(4,736)
(1,387)
(107)
9
333,515
102,597
(214)
102,383
163,350
(62,404)
(27)
1,464
102,383
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 20
Borrowings (continued)
(a) Terms and Repayment Schedule
Nominal
Interest Rate
Maturity
Date1
Face Value
Carrying
Amount
Face Value
Carrying
Amount
30 June 2015
30 June 2014
CIB
AMTN
AMTN
ALE Notes 2
3.4%2
4.25%
5.00%
BBSW + 4.00%
Nov-2023 111,900
110,000
Aug-2017
225,000
Aug-2020
-
Aug-2014
143,914
110,000
225,000
-
111,900
110,000
225,000
102,597
141,401
110,000
225,000
102,597
446,900
478,914
549,497
578,998
Unamortised borrowing costs
Total borrowings
(1,999)
(2,564)
476,915
576,434
1. Maturity date refers to the first scheduled maturity date for each tranche of borrowing.
2. Interest is payable on the indexed balance of the CIB at a fixed rate.
(b) CIB
$125 million of CIB was issued in May 2006 of which $111.9 million face value remains outstanding. A fixed rate of interest of 3.40%
p.a. (including credit margin) applies to the CIB and is payable quarterly, with the outstanding balance of the CIB accumulating
quarterly in line with the national consumer price index. The total amount of the accumulating indexation is not payable until maturity
of the CIB in November 2023.
(c) CMBS
On 29 April 2011 $160 million of CMBS were issued with a scheduled maturity of 20 May 2016.
On 20 June 2014 the outstanding CMBS were redeemed in full in accordance with their terms of issue.
(d) AMTN
On 10 June 2014 ALE issued $335 million AMTNs in two tranches, $110 million with a maturity date of 20 August 2017 and $225
million with a maturity date of 20 August 2020. The AMTNs are fixed rate securities with interest payable semi annually.
(e) ALE Notes 2
$125 million of ALE Notes 2 were issued on 30 April 2010 and $40 million of ALE Notes 2 were issued 1 November 2012, with a
scheduled maturity date of 20 August 2014.
During the prior year ALE conducted an on-market buyback of ALE Notes 2 at $101 per note. A total of 624,038 ALE Notes 2 were
bought back and cancelled. The remaining ALE Notes 2 of $102.6 million were redeemed on their maturity date of 20 August 2014.
46
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 20
Borrowings (continued)
(f) Interest rate hedges
At 30 June 2015, the notional principal amounts and periods of expiry of the interest rate hedge contracts are as follows:
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Greater than 5 years
Nominal Interest Rate
Hedges
Counter Hedges on Nominal
Interest Rate Hedges
Net Derivative Position
2015
$'000
-
-
-
-
-
280,000
280,000
2014
$'000
-
-
-
-
-
280,000
280,000
2015
$'000
-
-
-
-
(30,000)
-
(30,000)
2014
$'000
-
-
-
-
-
(30,000)
(30,000)
2015
$'000
-
-
-
-
(30,000)
280,000
250,000
2014
$'000
-
-
-
-
-
250,000
250,000
ALE has a forward start hedge in place and a counter hedge that is currently active. The following chart shows the hedge balances over
the life of the hedges.
The forward start hedge commences on the date of the maturity of the August 2017 AMTN borrowing and increases on maturity of the
August 2020 AMTN borrowings.
The hedge contracts require settlement of net interest receivable or payable on a quarterly basis. The settlement dates coincide with
the dates on which interest is payable on the underlying borrowings. The contracts are settled on a net basis.
The average weighted term of the interest rate hedges and fixed rate securities in relation to the total borrowings of ALE has decreased
from 8.8 years at 30 June 2014 to 7.8 years at 30 June 2015.
The gain or loss from marking to market the interest rate hedges (derivatives) at fair value is taken directly to the Statement of
Comprehensive Income. In the year ended 30 June 2015, a decrement in value of $5.247 million was recognised to the Statement of
Comprehensive Income (2014: decrement in value of $21.203 million).
47
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 20
Borrowings (continued)
(g) Assets pledged as security
The carrying amounts of assets pledged as security as at the balance date for CIB borrowings and certain interest rate derivatives are:
Current assets
Cash - CIB borrowings reserves
Non-current assets
Total investment properties
Less: Properties not subject to mortgages
Pritchard's Hotel, Mt Pritchard, NSW
Properties subject to mortgages
Total assets pledged as security
2015
$'000
8,390
2014
$'000
8,390
900,470
821,680
(24,900)
875,570
883,960
(19,600)
802,080
810,470
In the unlikely event of a default by the properties' tenant, Australian Leisure and Hospitality Group Pty Limited (ALH), and if the assets
pledged as security are insufficient to fully repay CIB borrowings, the CIB holders are also entitled in certain circumstances to recover
certain unpaid amounts from the business assets of ALH.
(i) Financial Covenants
ALE is required to comply with certain financial covenants in respect of its borrowing and hedging facilities. The major financial
covenants are summarised as follows:
Loan to Value Ratio covenants (LVR)
Borrowing
CIB
CIB
AMTN
AMTN
AMTN
LVR Covenant
The new issuance of CIB is not permitted if the
indexed value of CIB exceeds 30% of the value of
properties held as security
Outstanding value of CIB not to exceed 66.6% of
the value of properties held as security
The new issuance of Net Priority Debt is not
permitted to exceed 20% of Net Total Assets
Net Finance Debt not to exceed 60% of Net Total
Assets
Net Finance Debt not to exceed 65% of Net Total
Assets
Consequence
Note holders may call for notes to be redeemed
Note holders may call for notes to be redeemed
Note holders may call for notes to be redeemed
Stapled Security distribution lockup
Note holders may call for notes to be redeemed
Hedging
As per AMTN above
As per AMTN above
Definitions
All covenants exclude the mark to market value of derivatives
Net Total Assets
Total Assets less Cash less Derivative Assets less Deferred Tax Assets.
Net Priority Debt
ALE Finance Company Pty Limited (ALEFC) borrowings less Cash held
against the ALEFC borrowings, divided by Total Assets less Cash less
Derivative Assets less Deferred Tax Assets
Net Finance Debt
Total Borrowings less Cash, divided by Total Assets less Cash less
Derivative Assets less Deferred Tax Assets.
48
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 20
Borrowings (continued)
Interest Cover Ratio covenants (ICR)
Borrowing
CIB
AMTN
Hedging
ICR covenant
ALH EBITDAR to be greater than 7.5 times CIB
Interest expense
ALE DPT EBITDA to be greater than or equal to 1.5
times ALE DPT interest expense
Consequence
Stapled security distributions lockup
Note holders may call for notes to be redeemed
As per AMTN
above
As per AMTN
above
Definitions
Interest amounts include all derivative rate swap payments and receipts
EBITDAR - Earnings before Interest, Tax, Depreciation, Amortisation and Rent
Rating covenant
Borrowing
AMTN
Covenant
AMTN issue rating to be maintained at investment
grade. (ie at least Baa3/BBB-)
Consequence
Published rating of Ba1/BB+ or lower results in a step
up margin of 1.25% to be added to the interest rate
payable
ALE currently considers that significant headroom exists with respect of all the above covenants.
At all times during the years ended 30 June 2015 and 30 June 2014, ALE and its subsidiaries were in compliance with all the above
covenants.
49
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 21
Contributed equity
Balance at the beginning of the period
Securities issued - Distribution Reinvestment Plan
Costs associated with on-market purchase of securities for the Distribution Reinvestment Plan
Movements in the number of fully paid stapled securities during the year
Stapled securities on issue:
Balance at the beginning of the period
Securities issued - Distribution Reinvestment Plan
Balance at the end of the period
Stapled securities
Each stapled security comprises one share in the Company and one unit in the Trust. They cannot
be traded or dealt with separately. Stapled securities entitle the holder to participate in
dividends/distributions and the proceeds on any winding-up of ALE in proportion to the number of,
and amounts paid on, the securities held. On a show of hands every holder of stapled securities
present at a meeting in person or by proxy, is entitled to one vote. On a poll, each ordinary
shareholder is entitled to one vote for each fully paid share and each unit holder is entitled to one
vote for each fully paid unit.
No income voting units (NIVUS)
The Trust issued 9,080,010 of no income voting units (NIVUS) to the Company, fully paid at $1.00
each in November 2003. The NIVUS are not stapled to shares in the Company, have an issue and
withdrawal price of $1.00, carry no rights to income from the Trust and entitle the holder to no
more than $1.00 per NIVUS upon the winding-up of the Trust. The Company has a voting power
of 4.43% in the Trust as a result of the issue of NIVUS. The NIVUS are disclosed in the Company
and the Trust financial reports but are not disclosed in the ALE Property Group financial report as
they are eliminated on consolidation.
Note 22
Retained profits
Balance at the beginning of the year
Profit attributable to stapled securityholders
Transfer from share based payments reserve
Total available for appropriation
Distributions provided for or paid during the year
Balance at the end of the year
Note 23
Share Based Payments Reserve
Balance at the beginning of the year
Employee share based payments
Transfer to/(from) Retained Profits on lapsing of Performance Rights
Issue of stapled securities
Share based payments are detailed further in Note 24.
50
2015
$'000
2014
$'000
257,870
-
-
257,870
254,080
3,939
(149)
257,870
2015
Number of
Stapled
Securities
2014
Number of
Stapled
Securities
195,702,333
-
194,238,078
1,464,255
195,702,333
195,702,333
2015
$'000
2014
$'000
118,815
113,895
99,364
(71)
218,108
(32,976)
185,132
37,194
(81)
151,008
(32,193)
118,815
604
190
(59)
-
735
382
272
(50)
-
604
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 24
Share based payments
During 2007, ALE established a Performance Rights Plan that entitled key management personnel, subject to performance, to become
entitled to acquire stapled securities at nil cost to the employee. Under the Performance Rights Plan grants of performance rights have
been made to Mr Wilkinson and Mr Slade. In accordance with the plan the performance rights vest upon performance hurdles being
achieved. The Performance Rights Plan was discontinued in 2012 and replaced with an Executive Stapled Securities Scheme. There are
no performance rights outstanding at the end of the year.
Performance Rights (PR) Plan
The number and weighted average fair values of the performance rights on issue are as follows:
Outstanding at 1 July
Issued/delivered during year
Outstanding at 30 June
Number of
performance
rights
Weighted
average fair
value
Number of
performance
rights
Weighted
average fair
value
2015
2015
2014
2014
8,272
(8,272)
-
1.05
1.05
-
56,990
(48,718)
8,272
1.05
1.27
1.05
During July 2014 8,272 securities owing to Mr Slade were purchased on market to satisfy the delivery of performance rights that had
vested on 1 July 2014 following the expiry of the two year delayed delivery period.
Executive Stapled Securities Scheme
For the year ended 30 June 2014 the following table summarises the number of ESSS Rights granted. The number of Stapled Securities
awarded was determined by dividing the value of the 2014 grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s 2014 full year statutory financial statements.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
2014
Number
2013
Number
63,732
31,375
7,844
3,922
34,878
19,092
8,825
8,825
For the year ended 30 June 2015 the following ESSS Rights were granted to executives under the ESSS. The number of Stapled
Securities awarded will be determined by dividing the value of the grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s full year statutory financial statements for the year. The number of
securities granted for the current year grants will be determined on 13 August 2015.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
The numbers of ESSS Rights outstanding at the end of the financial year is as follows:
2015
$
2014
$
105,000
50,000
20,000
15,000
162,500
80,000
20,000
10,000
Outstanding at beginning of the year
Granted during year
Vested during year
Lapsed during year
Outstanding at the end of the year
Number
ESSS rights
Weighted
average fair
value
Number of
ESSS rights
2015
2015
2014
Weighted
average fair
value
2014
172,938
106,873
(34,571)
-
245,240
1.87
2.55
1.45
-
2.22
101,318
71,620
-
-
172,938
1.58
2.27
-
-
1.87
51
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 25
Key management personnel disclosures
(a)
Directors
The following persons were Directors of ALE Property Group, comprising Australian Leisure and Entertainment Property Trust and its
controlled entities during the financial year:
Name
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson (Managing Director)
J T McNally
Type
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
24 September 2014
6 February 2015
16 November 2003
26 June 2003
Resigned
6 November 2014
Other key management personnel
(b)
The following persons also had authority and responsibility for planning, directing and controlling the activities of ALE, directly or
indirectly, during the year:
Name
A J Slade
M J Clarke
D J Shipway
B R Howell
Title
Capital Manager
Finance Manager and Assistant Company Secretary
Asset Manager
Company Secretary and Compliance Officer
Compensation for key management
(c)
The following table sets out the compensation for key management personnel in aggregate. Refer to the remuneration report in the
Directors' Report for details of the remuneration policy and compensation details by individual.
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Termination benefits
2015
$
2014
$
1,839,888
130,179
15,965
190,000
-
1,818,454
98,461
47,726
272,500
-
2,176,032
2,237,141
52
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 26 Remuneration of Auditors
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the Group
and other audit work under the Corporations Act 2001
- in relation to current year
- in relation to prior year
Total remuneration for audit services
Note 27 Related party transactions
(a)
Details are set out in Note 34.
Parent entity and subsidiaries
2015
$
2014
$
160,000
5,000
180,500
8,500
165,000
189,000
(b)
Key management personnel and their compensation is set out in Note 25.
Key management personnel
Transactions with related parties
(c)
For the year ended 30 June 2015, the Company received $4,013,868 of expense reimbursement from the Trust (2014: $3,843,332),
and the Finance Company charged the Sub Trust $7,454,819 interest (2014: $45,368,224).
Peter Warne is a non-executive director of Macquarie Group Limited (Macquarie). Macquarie has provided corporate advice and
underwriting services to ALE in the past and may continue to do so in the future. Mr Warne does not take part in any decisions to
appoint Macquarie in relation to any of the above matters.
(d)
All related party transactions are conducted on normal commercial terms and conditions.
Terms and conditions
Outstanding balances are unsecured and are repayable in cash and callable on demand.
Note 28 Commitments
(a)
The Directors are not aware of any capital commitments as at the date of this report.
Capital commitments
Leases as Lessee
(b)
The Company has entered into a 5 year non-cancellable operating lease for office premises at Level 10, 6 O'Connell Street, Sydney
starting November 2010. The Company has also entered into a non-cancellable operating lease for office equipment. The minimum net
lease commitments under these leases are:
(i) Future minimum lease payments
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
(ii) Amount recognised in the profit and loss
2015
$'000
2014
$'000
46
-
-
46
123
46
-
169
Rent expense
123
114
53
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 28 Commitments (continued)
(b)
The Group leases out its investment properties (see note 17)
Leases as lessor
(i) Future minimum lease payments
The future minimum lease payments in relation to non-
cancellable leases are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
(ii) Amount recognised in the profit and loss
2015
$'000
2014
$'000
56,414
246,240
592,420
55,223
237,674
619,316
895,074
912,213
Rental income
55,214
54,187
Note 29 Contingent liabilities and contingent assets
Put and call options
For most of the investment properties, at the end of the initial lease term of 25 years (2028 for most of the portfolio), and at the end
of each of four subsequent ten year terms if the lease in not renewed, there is a call option for ALE (or its nominee) and a put option
for the tenant to require the landlord (or its nominee) to buy plant, equipment, goodwill, inventory, all then current consents, licences,
permits, certificates, authorities or other approvals, together with any liquor licence, held by the tenant in relation to the premises. The
gaming licence is to be included or excluded at the tenant’s option. These assets are to be purchased at current value, at that time, as
determined by the valuation methodology set out in the leases. ALE must pay the purchase price on expiry of the lease. Any leasehold
improvements funded and completed by the tenant will be purchased by ALE from the tenant at each property for an amount of $1.
Bank guarantee
ALE has entered into a bank guarantee of $89,480 in respect of the office tenancy at Level 10, 6 O'Connell Street, Sydney.
Note 30 Investments in controlled entities
The Trust owns 100% of the issued units of the Sub Trust. The Sub Trust owns 100% of the issued shares of the Finance Company.
The Trust owns none of the issued shares of the Company, but is deemed to be its "acquirer" under IFRS.
In addition, the Trust owns 100% of the issued units of ALE Direct Property Trust No.3, which in turns owns 100% of the issued shares
of ALE Finance Company No.3 Pty Limited. Both of these Trust subsidiaries are dormant.
Note 31 Segment information
Business segment
The results and financial position of ALE's single operating segment, ALE Strategic Business Unit, are prepared for the Managing
Director on a quarterly basis. The strategic business unit covers the operations of the responsible entity for the ALE Property Group.
Comparative information has been presented in conformity with the requirements of AASB 8 Operating Segments.
All ALE Property Group's properties are leased to members of the ALH Group, and accordingly 100% of the rental income is received
from ALH (2014: 100%).
Geographical segment
ALE owns property solely within Australia.
Note 32 Events occurring after reporting date
There has not arisen in the interval between the end of the financial year and the date of this report, any transaction or event of a
material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group,
the results of those operations, or the state of affairs of the Group, in future financial years.
54
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 33
Financial Instruments
Credit risk
(a)
ALE's major credit risk is that the tenant will fail to perform its contractual obligations including honouring the terms of the lease
agreements, either in whole or in part. Credit risk is monitored on a continuous basis to determine if the tenant has appropriate financial
standing having regard to the various security arrangements that are in place.
Credit risk on cash is managed through ensuring all cash deposits are held with authorised deposit taking institutions.
The credit risk on the financial assets of ALE which have been recognised in the statement of financial position is generally the carrying
amount net of any provision for doubtful debts.
Exposure to credit risk
Receivables
Derivatives
Cash and cash equivalents
Impairment losses
The ageing of trade receivables at balance date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
More than one year
Note
16
11
15
2015
$'000
315
-
44,812
45,127
2014
$'000
2,147
4,108
149,963
156,218
2015
Gross
2014
Gross
Receivable Impairment
$'000
-
-
-
-
-
$'000
290
-
7
18
-
Receivable Impairment
$'000
-
-
-
-
-
$'000
2,147
-
-
-
-
315
-
2,147
-
Based on historic default rates, ALE believes that no impairment allowances are necessary in respect of trade receivables as at 30 June
2015, as the receivables relate to tenants assessed by ALE as having good credit history.
(b)
Liquidity risk
The following are the contracted maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements.
30 June 2015
Carrying
amount
$'000
Contractual
cash flows
6 months or
less
6-12 months
1-2 years
2-5 years
More than five
years
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
7,706
143,107
333,808
(7,706)
(225,159)
(408,562)
(7,706)
(2,440)
(7,962)
(2,454)
(7,962)
(4,999)
(15,925)
(15,771)
(146,088)
(199,495)
(230,625)
Derivative financial instruments
Interest rate hedges
1,140
(1,360)
193
195
344
(2,269)
177
485,761
(642,787)
(17,915)
(10,221)
(20,580)
(164,128)
(429,943)
55
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 33
Financial instruments (continued)
30 June 2014
Carrying
amount
$'000
Contractual
cash flows
6 months or
less
6-12 months
1-2 years
2-5 years
More than five
years
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
ALE Notes 2
8,523
140,536
333,515
102,383
(8,523)
(230,354)
(424,224)
(104,326)
(8,523)
(2,420)
(7,962)
(104,326)
(2,452)
(7,962)
-
(5,000)
(15,925)
-
(15,773)
(150,500)
-
(204,709)
(241,875)
-
Derivative financial instruments
Interest rate hedges
(4,108)
5,414
448
135
207
(118)
4,742
580,849
(762,013)
(122,783)
(10,279)
(20,718)
(166,391)
(441,842)
Interest rates used to determine contractual cash flows
The interest rates used to determine the contractual cash flows, where applicable, are based on interest rates, including the relevant
credit margin, applicable to the financial liabilities at balance date. The contractual cash flows have not been discounted. The inflation
rates used to determine the contractual cash flows, where applicable, are based on inflation rates applicable at balance date.
Interest rate risk
(c)
Potential variability in future distributions arise predominantly from financial assets and liabilities bearing variable interest rates. For
example, if financial liabilities exceed financial assets and interest rates rise, to the extent that interest rate derivatives (hedges) are
not available to fully hedge the exposure, distribution levels would be expected to decline from the levels that they would otherwise have
been.
ALE also has long term leased property assets and fixed interest rate liabilities that are currently intended to be held until maturity. The
market value of these assets and liabilities are also expected to change as long term interest rates fluctuate. For example, as long term
interest rates rise, the market value of both property assets and fixed or hedged interest rate liabilities may fall (all other
market variables remaining unchanged). These movements in property assets and fixed interest rate liabilities impact upon the net equity
value of ALE.
Profile
At the reporting date, ALE's interest rate sensitive financial instruments were as follows:
Derivative financial assets
Derivative financial liabilities
Borrowings
CIB
ALE Notes 2
AMTN
2015
$'000
-
(1,140)
2014
$'000
4,108
-
(143,107)
-
(333,808)
(140,536)
(102,383)
(333,515)
(478,055)
(572,326)
56
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 33
Financial instruments (continued)
Sensitivity analysis
A change of 100 basis points in the prevailing nominal market interest rates at the reporting date would have increased/(decreased)
equity and profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular the CPI, remain
constant. The analysis was performed on the same basis for 2014.
30 June 2015
Interest rate hedges
CIB
AMTN
30 June 2014
Interest rate hedges
CIB
AMTN
ALE Notes 2
Statement of
Comprehensive Income
Equity
100 bps
increase
100 bps
decrease
100 bps
increase
100 bps
decrease
$'000
$'000
$'000
$'000
6,097
-
-
(6,599)
-
-
6,097
-
-
(6,599)
-
-
6,097
(6,599)
6,097
(6,599)
3,789
-
-
-
(4,345)
-
-
-
3,789
-
-
-
(4,345)
-
-
-
3,789
(4,345)
3,789
(4,345)
The impact on the Statement of Comprehensive Income and Equity arising from a 100 bps movement in interest rates is based on
shifting the projected forward rates by 100 bps at the reporting date, in order to determine the present value of future principal and
interest cash flows.
(d)
Consumer price index risk
Potential variability in future distributions arise predominantly from financial assets and liabilities through movements in the consumer
price index (CPI). For example, ALE's investment properties are subject to annual rental increases based on movements in the CPI. This
will in turn flow through to investment property valuations.
Profile
At the reporting date, ALE's CPI sensitive financial instruments were as follows:
Financial instruments
Investment properties
CIB
2015
$'000
2014
$'000
900,470
(143,107)
821,680
(140,536)
757,363
681,144
57
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 33
Financial instruments (continued)
Sensitivity analysis for variable rate instruments
A change of 100 bps in CPI at the reporting date would have increased/(decreased) Statement of Comprehensive Income and Equity by
the amounts shown below. This analysis assumes that all other variables, in particular the interest rates and capitalisation rates
applicable to investment properties, remain constant. The analysis was performed on the same basis for 2014.
30 June 2015
Investment properties
CIB
30 June 2014
Investment properties
CIB
Statement of
Comprehensive Income
100 bps
decrease
$'000
100 bps
increase
$'000
Equity
100 bps
increase
$'000
100 bps
decrease
$'000
9,961
-
9,961
8,878
-
8,878
-
-
-
-
-
-
9,961
-
9,961
8,878
-
8,878
-
-
-
-
-
-
Investment properties have been included in the sensitivity analysis as, although they are not financial instruments, the long term CPI
linked leases attaching to the investment properties are similar in nature to financial instruments. Under the terms of the leases on the
ALE properties there is no change to rental income should CPI decrease.
There is no impact on the Statement of Comprehensive Income or Equity arising from a 100 bps movement in CPI at the reporting date
on the CIB, as the terms of this instrument use CPI rates for the quarters ending the preceding March and December to determine their
values at 30 June.
58
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
(e)
Fair values
ALE measures and recognises the following financial assets and liabilities at fair value.
Derivative financial instruments
Fair Value hierarchy
The basis for determining fair values is disclosed in Note 4.
The ALE Notes 2 was a traded debt security on the Australian Securities Exchange. The fair value disclosed reflects the market value of
the ALE Notes 2 at the balance date.
The fair value of derivative financial instruments (level 2) is disclosed in the balance sheet.
The carrying amounts of receivable, cash, trade and other payables are assumed to approximate their fair values due to their short term
nature.
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Financial assets measured at fair value
Derivatives
Financial assets not measured at fair value
Cash and cash equivalents
Receivables
Other assets
Financial liabilities not measured at fair value
Trade and other payables
CIB
AMTN
ALE Notes 2
Carrying
Amount
2015
Fair
Value
Fair
Value
Carrying
Amount
2014
Fair
Value
Fair
Value
$'000
$'000 Hierarchy
$'000
$'000
Hierarchy
(1,140)
(1,140)
(1,140)
(1,140)
Level 2
4,108
4,108
Level 2
4,108 4,108
44,812
315
250
45,377
44,812
315
250
45,377
-
-
-
149,963
2,147
249
149,963
2,147
249
152,359 152,359
-
-
-
(7,706)
(143,107)
(333,808)
-
(7,706)
(152,050)
(346,584)
-
-
Level 1
Level 1
-
(8,523)
(140,536)
(333,515)
(102,383)
(8,523)
(144,663)
(337,264)
(103,623)
-
Level 1
Level 1
Level 1
(484,621)
(506,340)
(584,957)
(594,073)
Valuation techniques used to derive level 2 fair values
The fair value of derivatives is determined by using counterparty mark-to-market valuation notices, cross checked internally by using a
generally accepted pricing model based on discounted cash flows analysis using quoted market inputs (interest rates) adjusted for
specific features of the instruments and applying a debit or credit value adjustment based on ALE's or the derivative counterparty's credit
worthiness.
Credit value adjustments are applied to mark-to-market assets based on the counterparty's credit risk using the credit default swap
curves as a benchmark for credit risk.
Debit value adjustments are applied to mark-to-market liabilities based on the ALE's credit risk using the credit rating of ALE issued by a
rating agency for the recent AMTN issue.
59
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2015
Note 34
Parent Entity Disclosures
As at, and throughout, the financial year ending 30 June 2015 the parent entity of ALE was Australian Leisure and Entertainment
Property Trust.
Result of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity
Current assets
Cash
Receivables
Other
Non current assets
Investments in controlled entities
Total assets
Current liabilities
Payables
Provisions
Non current liabilities
Borrowings
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Issued units
Retained earnings
Total equity
2015
$'000
2014
$'000
29,196
-
29,196
32,193
-
32,193
21
-
-
275,656
275,677
39,577
16,537
-
56,114
33
67,009
-
275,656
342,698
789
16,184
102,383
119,356
219,563
223,342
252,192
(32,629)
252,192
(28,850)
219,563
223,342
60
Australian Leisure and Entertainment Property Management Limited
INVESTOR INFORMATION
For The Year Ended 30 June 2015
Securityholders
The securityholder information as set out below was applicable as at 13 July 2015.
A. DISTRIBUTION OF EQUITY SECURITIES
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 999,999,999
Total
Total
Holders
Number of
Securities
% of Issued
Capital
674
1,311
965
1,815
119
4,884
232,831
4,001,172
7,470,395
46,270,922
137,727,013
195,702,333
0.12
2.04
3.82
23.64
70.38
100.00
The stapled securities are listed on the ASX and each stapled security is comprised of one share in Australian Leisure and Entertainment Property
Management Limited (Company) and one unit in Australian Leisure and Entertainment Property Trust (Trust). The NIVUS have been issued by the
Trust to the Company. The number of securityholders holding less than a marketable parcel of stapled securities is 271.
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below
Rank
Name
UBS Nominees Pty Ltd
Woolworths Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Manderrah Pty Ltd [GJJ Family Account]
HSBC Custody Nominees (Australia) Limited [Account 3]
HSBC Custody Nominees (Australia) Limited [GSCO ECA]
Mr Edward Furnival Griffin and Mr Alastair Charles Griffin [Est Jean Falconer Griffin Ac]
Melic Pty Limited [The Melic Unit A/C]
UBS Wealth Management Australia Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited [APN Account]
Merlor Holdings Pty Ltd [Basserabie Family Sett Account]
ABN AMRO Clearing Sydney Nominees Pty Ltd [Custodian Account]
RBC Investor Services Australia Nominees Pty Limited [Bkcust Account]
BT Portfolio Services Limited [Caergwrle Invest P/L Account]
Mr David Calogero Loggia
C J H Holdings Pty Ltd [Superannuation Fund Account]
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Totals: Top 20 Holders of Stapled Securities
Totals: Remaining Holders Balance
Number of
Securities
% of Issued
Capital
25,505,910
17,076,936
15,792,064
12,002,192
10,706,257
6,599,159
6,257,449
3,742,733
3,253,639
2,949,366
2,795,751
2,460,371
2,387,514
2,256,257
1,541,927
1,517,117
767,784
745,787
716,357
660,953
119,735,523
75,966,810
13.03
8.73
8.07
6.13
5.47
3.37
3.20
1.91
1.66
1.51
1.43
1.26
1.22
1.15
0.79
0.78
0.39
0.38
0.37
0.34
61.19
38.81
64
C. SUBSTANTIAL HOLDERS
Substantial holders of ALE (as per notices received as at 13 July 2015) are set out below:
Stapled SecurityName
Caledonia (Private) Investments Pty Ltd
Woolworths Limited
Allan Gray Australia
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
Number of
Securities
% of Issued
Capital
49,686,218
17,076,936
16,070,185
25.39
8.73
8.21
(a) Stapled securities
On a show of hands every stapled securityholder present at a meeting in person or by proxy shall be entitled to have one vote and
upon a poll each stapled security will have one vote.
(b) NIVUS
Each NIVUS entitles the Company to one vote at a meeting of the Trust. 9,080,000 NIVUS have been issued by the Trust to the Company
and 195,702,333 units have been issued by the Trust to stapled securityholders. The NIVUS therefore represent 4.43% of the voting rights of the Trust.
E. EQUITY RESEARCH COVERAGE OF ALE
The following equity research analysts currently cover ALE’s stapled securities:
Paul Checchin and Rob Freeman – Macquarie Securities
Scott Molloy – JP Morgan Securities
Adrian Atkins – Morningstar
Fiona Buchanan and Scott Murdoch – Morgans
Jason Prowd and Jon Mills – Intelligent Investor
65
2015
27 Oct 2015
7 Sep 2015
6 Aug 2015
17 Jul 2015
10 Jun 2014
10 Mar 2015
6 Mar 2015
5 Mar 2015
6 Feb 2015
5 Feb 2015
2014
23 Dec 2014
5 Dec 2014
7 Nov 2014
6 Nov 2014
29 Oct 2014
26 Sep 2014
25 Sep 2014
23 Sep 2014
5 Sep 2014
6 Aug 2014
INVESTOR INFORMATION
The information is provided as a short summary of investor information.
Please view our website at www.alegroup.com.au for all investor information.
Annual General Meeting
Full year distribution payment
Full Year results, Annual Review / Report and Property
Compendium released
Property Valuations increased by 9.6%
Full year distribution of 16.85 cents declared
Caledonia increases substantial holding to 25.39%
Allan Gray reduces substantial holding to 8.21%
Half year distribution payment
Appointment of Nancy Milne as non-executive Director
Half year results released
Property valuations as at 31 December 2014
Caledonia increases substantial holding to 24.32%
Amendment to Distribution Reinvestment Plan
Retirement of John Henderson as non-executive Director
Allan Gray reduces substantial holding to 9.23%
Annual Report posted
Appointment of Paul Say as non-executive Director
Notice of Annual General Meeting
Full year distribution payment
Full Year results, Annual Review / Report and Property
Compendium released
Property Valuations increased by 5.1%
Successful refinancing and hedge restructure
Suspension of DRP announced
25 Jul 2014
15 Jul 2014
19 Jun 2014
16 Jun 2014 On-market buy back of ALE Notes 2
13 Jun 2014
29 May 2014
28 May 2014
8 May 2014
8 Apr 2014
5 Mar 2014
Full Year distribution of 16.45 cents declared
ALE Prices Inaugural AMTN
ALE reaffirms acquisition and capital management strategies
Investment Grade Credit Rating Assigned to ALE
Settlement of sale of Victoria Hotel, Shepparton
Caledonia increases substantial holding to 22.22%
Stock Exchange Listing
The ALE Property Group (ALE) is listed on the Australian Stock Exchange
(ASX). Its stapled securities are listed under ASX code: LEP.
Distribution Reinvestment Plan
ALE has established a distribution reinvestment plan. Details of the plan are
available on the ALE website.
Distributions
Stapled security distributions are paid twice yearly, normally in March
and September.
Electronic Payment of Distributions
Securityholders may nominate a bank, building society or credit union
account for payment of distributions by direct credit. Payments are
electronically credited on the payment dates and confirmed by mailed
advice.
Securityholders wishing to take advantage of payment by direct credit
should contact the registry for more details and to obtain an
application form.
Annual Tax Statement
Accompanying the final stapled security distribution payment, normally in
September each year, will be an annual tax statement which details the tax
components of the year's distribution.
66
Publications
The Annual Review and Annual Report are the main sources of
information for stapled securityholders. In August each year the Annual
Review, Annual Report and Full Year Financial Report, and in February
each year, the Half-Year Financial Report are released to the ASX and
posted on the ALE website. The Annual Review is mailed to stapled
securityholders unless we are requested not to do so. The Full Year and
Half-Year Financial Reports are only mailed on request. Periodically ALE
may also send releases to the ASX covering matters of relevance to investors.
These releases are also posted on the ALE website and may be distributed
by email to stapled securityholders by registering on ALE’s website. The
election by stapled securityholders to receive communications electronically
is encouraged by ALE.
Website
The ALE website, www.alegroup.com.au, is a useful source of information for
stapled securityholders. It includes details of ALE's property portfolio, current
activities and future prospects. ASX announcements are also included on the
site on a regular basis. The ALE Property website,
www.aleproperties.com.au, provides further detailed information on ALE's
property portfolio.
SecurityHolder Enquiries
Please contact the registry if you have any questions about your holding
or payments.
Registered Office
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr Brendan Howell
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
KPMG
10 Shelley Street
Sydney NSW 2000
Lawyers
Allens Linklaters
Level 28, Deutsche Bank Place
Sydney NSW 2000
Custodian (of Australian Leisure and Entertainment Property Trust)
The Trust Company Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Trustee (of ALE Direct Property Trust)
The Trust Company (Australia) Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Registry
Computershare Investor Services Pty Ltd
Reply Paid GPO Box 7115, Sydney NSW 2000
Level 3, 60 Carrington Street, Sydney NSW 2000
Telephone 1300 302 429
Facsimile (02) 8235 8150
www.computershare.com.au
Young & Jackson Hotel
Melbourne, CBD
Located opposite Melbourne’s Flinders Street Station, Federation Square and
St Paul’s Cathedral, the Young & Jackson Hotel has been operating for more
than 150 years on one of Melbourne’s most prominent CBD intersections.
Australian Leisure and Entertainment Property Management Limited
ABN 45 105 275 278
- 69 -
Directors' Report
- 83 -
Auditor's
Independence
Declaration
- 84 -
Financial
Statements
- 84 -
Statement of
Comprehensive
Income
- 85 -
Statement of
Financial Position
- 86 -
Statement of changes
in Equity
- 87 -
Statement of
Cash Flows
- 88 -
Notes to the
Financial Statements
- 103 -
Directors'
Declaration
- 104 -
Independent
Auditor's Report
to Stapled
Securityholders
Contents
ANNUAL REPORT
2015
Australian Leisure and Entertainment
Property Management Limited
Australian Leisure and Entertainment Property
Management Limited is the responsible entity and the
management company of ALE Property Group
WWW.ALEGROUP.COM.AU
- 64 -
Investor Information
and
Corporate Directory
68
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
The Directors of Australian Leisure and Entertainment Property Management Limited (the "Company") present their report for the year
ended 30 June 2015.
The registered office and principal place of business of the Company is:
Level 10
6 O'Connell Street
Sydney 2000
Directors
1
The following persons were directors of the Company during the whole of the year and up to the date of this report unless otherwise
stated:
Name
Type
Appointed
Resigned
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson (Managing Director) Executive
Executive
J T McNally
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
8 September 2003
19 August 2003
8 September 2003
26 November 2013
24 September 2014
6 February 2015
16 November 2004
26 June 2003
6 November 2014
Principal activities
2
During the year the principal activities of the Company consisted of property funds management and acting as responsible entity for the
Australian Leisure and Entertainment Property Trust (the "Trust"). There has been no significant change in the nature of these activities
during the year.
Dividends
3
No provisions for or payments of Company dividends have been made during the year (2014: nil).
Review of operations
4
A summary of the revenue and results for the year is set out below:
Revenue
Expense reimbursement
Interest income
Total revenue
Expenses
Salaries, fees and related costs
Other expenses
Total expenses
Profit/(loss) before income tax
Income tax expense / (benefit)
Profit/(loss) attributable to the shareholders of the Company
Basic and diluted earnings per share
Dividend per share for the year
Net assets per share
5
Significant changes in the state of affairs
30 June
2015
$
30 June
2014
$
4,013,868
12,664
3,843,332
93,199
4,026,532
3,936,531
2,508,417
1,565,452
2,490,680
1,568,256
4,073,869
4,058,936
(47,337)
(122,405)
(74,675)
27,338
16,576
(138,981)
Cents
Cents
0.01
-
7.39
(0.07)
-
7.35
In the opinion of the Directors, there were no significant changes in the state of affairs of the Company that occurred during the year.
69
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
Matters subsequent to the end of the financial year
6
In the opinion of the Directors of the Company, no transaction or event of a material and unusual nature has occurred between the end
of the financial year and the date of this report that may significantly affect the operations of the Company, the results of those
operations or the state of the affairs of the Company in future financial years.
Likely developments and expected results of operations
7
The Company will continue to maintain its defined strategy of identifying opportunities to increase the profitability of the Company and its
value to its shareholders.
The Directors are not aware of any future developments likely to significantly affect the operations and/or results of the Company.
8
Information on Directors
Mr Peter Warne B.A, FAICD, Chairman and Non–executive Director.
Experience and expertise
Peter was appointed as Chairman and Non-executive Director of the Company in September 2003.
Peter began his career with the NSW Government Actuary’s Office and the NSW Superannuation Board before joining Bankers Trust
Australia Limited (BTAL) in 1981. Peter held senior positions in the Fixed Income Department, the Capital Markets Division and the
Financial Markets Group of BTAL and acted as a consultant to assist with integration issues when the investment banking business of
BTAL was acquired by Macquarie Bank Limited in 1999. Peter is Chairman of OzForex Group Limited and a board member of ASX Limited
and Macquarie Group Limited. He is also on the board of NSW Treasury Corporation and is a member of the Advisory Board for the
Australian Office of Financial Management.
Peter graduated from Macquarie University with a Bachelor of Arts, majoring in Actuarial Studies. He qualified as an associate of, and
received a Certificate of Finance and Investment from, the Institute of Actuaries, London.
Ms Helen Wright LL.B, MAICD, Non-executive Director.
Experience and expertise
Helen was appointed as a non-executive director of the Company in September 2003. She chairs the Audit Compliance and Risk
Management Committee. Helen was a partner of Freehills, a leading Australian firm of lawyers, from 1986 to 2003. She practiced as a
commercial lawyer specialising in legislative interpretation, contract, and real estate projects including development and financing and
related taxation and stamp duties.
Helen is the Chair of the Advisory Committee of Screen NSW (formerly Film & Television Office), and for ten years until recently was the
Statutory and Other Offices Remuneration Tribunal for NSW and the Local Government Remuneration Tribunal for NSW. Prior
appointments include the Boards of several State, commercial, university and charitable entities. Helen has a Bachelor of Laws from the
University of NSW and in 1994 completed the Advanced Management Program at the Harvard Graduate School of Business
Administration.
Ms Phillipa Downes, BSc (Bus Ad), MAppFin, GAICD, Non-executive Director.
Experience and expertise
Pippa was appointed a Director on 26 November 2013.
Ms Downes is a director of the ASX Group clearing and settlement facility licensees and their intermediate holding companies. She is also
on the panel of the ASX Appeals Tribunal. Pippa is also a director of the Pinnacle Foundation. Ms Downes was a Managing Director and
Equity Partner of Goldman Sachs in Australia until October 2011, working in the Proprietary Investment division. Ms Downes has had a
successful international banking and finance career spanning over 20 years where she has led the local derivative and trading arms of
several of the world’s leading Investment Banks. She has extensive experience in Capital Markets, derivatives and asset management.
Prior to joining Goldman Sachs in 2004, Ms Downes was a director and the Head of Equity Derivatives Trading at Deutsche Bank in
Sydney. When Morgan Stanley was starting its equity franchise in Australia in 1998 she was hired to set up the Derivative and Proprietary
Trading business based in Hong Kong and Australia. Ms Downes started her career working for Swiss Bank O’Connor on the Floor of the
Pacific Coast Stock Exchange in San Francisco, followed by the Philadelphia Stock Exchange before returning to work in Sydney as a
director for UBS.
Pippa was previously an appointed Director on the Board of Swimming Australia and the Swimming Australia Foundation. Pippa graduated
from the University of California at Berkeley with a Bachelor of Science in Business Administration majoring and Finance and Accounting.
Pippa also completed a Masters of Applied Finance from Macquarie University in 1998.
70
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
Mr Paul Say, BSc(Bus Ad), MAppFin, GAICD, Non-executive Director.
Experience and expertise
Paul has over 30 years’ experience in commercial and residential property management, development and real estate transactions with
major multinational institutions. Mr Say was Chief Investment Officer at Dexus Property Group from 2007 to 2012. Prior to that he was
with Lend Lease Corporation for 11 years in various positions culminating with being the Head of Corporate Finance.
Paul has a Graduate Diploma in Finance and Investment and a Graduate Diploma in Financial Planning. He is a Fellow of the Royal
Institute of Chartered Surveyors, Fellow of the Australian Property Institute and a Licensed Real Estate Agent (NSW, VIC, QLD).
Ms Nancy Milne, OAM, LLB, FAICD, Non-executive Director.
Experience and expertise
Nancy is a former lawyer with over 30 years’ experience with primary areas of legal expertise in insurance and reinsurance, risk
management, corporate governance and professional negligence. She was a partner with Clayton Utz until 2003 and a consultant until
2012. She is currently Chairman of the Securities Exchange Guarantee Corporation. She was previously a director of Australand Property
Group, Crowe Horwarth Australasia, Greenstone Limited and Novian Property Group.
Nancy has a Bachelor of Laws from the University of Sydney. She is a member of the NSW Council of the Australian Institute of Company
Directors and the Institute’s Law Committee.
Mr Andrew Wilkinson B.Bus, CFTP, MAICD, Managing Director.
Experience and expertise
Andrew was appointed Managing Director of the Company in November 2004. He joined ALE as Chief Executive Officer at the time of its
listing in November 2003. Andrew has around 35 years’ experience in banking, corporate finance and funds management. He was
previously a corporate finance partner with PricewaterhouseCoopers and spent 15 years in finance and investment banking with
organisations including ANZ Capel Court and Schroders.
Mr James McNally B.Bus (Land Economy), Dip. Law, Executive Director.
Experience and expertise
James was appointed as an executive and founding director of the company in June 2003. James has over 20 years’ experience in the
funds management industry, having worked in both property trust administration and compliance roles for Perpetual Trustees Australia
Limited and MIA Services Pty Limited, a company that specialises in compliance services to the funds management industry. James’
qualifications include a Bachelor of Business in land economy and a Diploma of Law. James is also a registered valuer and licensed real
estate agent.
Mr Brendan Howell B.Econ, G.Dip App Fin (Sec Inst), Company Secretary.
Experience and expertise
Brendan was appointed to the position of company secretary in April 2007, having previously held the position from September 2003 to
September 2006. Brendan has a Bachelor of Economics from the University of Sydney and a Graduate Diploma in Applied Finance and
Investment from the Securities Institute of Australia. He was formerly an associate member of both the Securities Institute of Australia
and the Institute of Chartered Accountants in Australia.
Brendan has over 23 years’ experience in the funds management and financial services industries. Brendan has a property and
accounting background and has previously held senior positions with a leading Australian trustee company administrating listed and
unlisted property trusts.
For over 14 years Brendan has been directly involved with MIA Services Pty Limited, a company which specialises in funds management
compliance, and acts as an independent consultant and external compliance committee member for a number of property, equity and
infrastructure funds managers. Brendan also acts as an independent director for several unlisted public companies, some of which act as
responsible entities.
Brendan is a member of the Australian Institute of Company Directors.
71
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
Independent member of the Audit, Compliance and Risk Management Committee (ACRMC)
Mr David Lawler B.Bus, CPA, Independent ACRMC Member.
Experience and expertise
David was appointed to ALE’s ACRMC on 9 December 2005 and has over 25 years’ experience in internal auditing in the banking and
finance industry. He was the Chief Audit Executive for Citibank in the Philippines, Italy, Switzerland, Mexico, Brazil, Australia and Hong
Kong. He was Group Auditor for the Commonwealth Bank of Australia. David is, the Chairman of the Australian Trade Commission Audit
and Risk Committee, and the National Mental Health Commission Audit Committee, and is an audit committee member of the Australian
Office of Financial Management, the Department of Foreign Affairs and Trade, the Australian Sports Anti-Doping Authority, and the
Australian Maritime Safety Authority. David is Chairman of Australian Settlements Limited. David has a Bachelor of Business Studies from
Manchester Metropolitan University in the UK. He is a Fellow of CPA Australia and a past President of the Institute of Internal Auditors –
Australia.
Special responsibilities of Directors
The following are the special responsibilities of each Director:
Director
P H Warne
H I Wright
J P Henderson
P J Downes
P G Say
N J Milne
Special responsibilities
Chairman of the Board
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Chair of the Nominations Committee
Chair of the Remuneration Committee
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence (AFSL)
J T McNally
Responsible Manager of the Company under the Company’s AFSL
Directors’ and key management personnel interests in stapled securities and ESSS rights
The following Directors, key management personnel and their associates hold the following stapled security interests in the Company:
Name
P H Warne
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
A J Slade
M J Clarke
D J Shipway
Role
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number held
at the start of
the year
1,185,000
150,000
213,394
-
-
213,668
55,164
31,418
11,727
4,000
Net
Movement
-
-
510
-
20,000
31,055
-
18,582
3,273
-
Number held
at the end of
the year
1,185,000
150,000
213,904
-
20,000
244,723
55,164
50,000
15,000
4,000
72
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
The following key management personnel currently hold rights over stapled securities in ALE:
Name
Performance Rights
A J Slade
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Capital Manager
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number held
at the start of
the year
Granted
during the
year
Lapsed/
Delivered
during the
year
Number held
at the end of
the year
8,272
78,014
77,274
8,825
8,825
-
(8,272)
-
63,732
31,375
7,844
3,922
-
(34,571)
-
-
141,746
74,078
16,669
12,747
Meetings of Directors
The number of meetings of the Company’s Board of Directors held and of each Board committee meeting held during the year ended 30
June 2013 and the number of meetings attended by each Director at the time the Director held office during the year were:
Director
P H Warne
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
Board
ACRMC
Held1
11
4
11
11
8
4
11
11
Attended
11
3
9
11
8
4
11
11
Held1
8
3
8
8
6
1
n/a
n/a
Attended
8
2
7
8
6
1
n/a
n/a
Nominations and
Remuneration Committee
Attended
5
-
5
5
5
3
n/a
n/a
Held1
5
-
5
5
5
3
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
8
D J Lawler
n/a
n/a
8
n/a
n/a
1 “Held” reflects the number of meetings which the Director or member was eligible to attend.
73
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
9 Remuneration Report (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2015 for employees of ALE
including the directors, the Managing Director and key management personnel.
9.1 Remuneration Objectives and Approach
In determining a remuneration framework, the Board aims to ensure the following:
●
●
●
attract, reward and retain high calibre executives;
motivate executives to achieve performance that creates value for stapled securityholders; and
links remuneration to performance and outcomes achieved.
The framework aligns executive reward with achievement of strategic objectives and creation of value for stapled securityholders. To do this
the Board endeavours to ensure that executive reward satisfies the following objectives:
●
●
●
●
●
●
alignment with ALE's financial, operational, compliance and risk management objectives so as to achieve alignment with positive outcomes
for stapled securityholders;
alignment with ALE's overall performance;
transparent, reasonable and acceptable to employees and securityholders;
rewards the responsibility, capability, experience and contribution made by executives;
recognises individual executive's contributions towards value accretive outcomes when measured against Key Performance Indicators
(KPI's); and
market competitive and complementary to the reward strategy of the organisation.
The framework provides a mix of fixed and variable remuneration. Since the year ending 30 June 2012 the variable remuneration has been
provided through the Executive Incentive Scheme (EIS). Any award under the EIS is paid 50% in cash at the year end and 50% in stapled
securities with delivery deferred three years.
9.2 Remuneration and Nominations Committee
The Remuneration and Nominations Committee ("the Committee") is a committee comprising non-executive directors of the Company. The
Committee strives to ensure that ALE's remuneration structure strikes an appropriate balance between the interests of ALE securityholders
and rewarding, motivating and retaining employees.
The Committee's charter sets out its role and responsibilities. The charter is reviewed on an annual basis. In fulfilling its role the Committee
endeavours to ensure the remuneration framework established will:
●
●
●
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
ensure there is an appropriate mix between fixed and "at risk" remuneration.
The Committee operates independently of management in its recommendations to the Board and engages remuneration consultants
independently of management. During the year ended 30 June 2015, the Committee consisted of the following:
P H Warne (Chairman)
H I Wright
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Refer page 70 of this report for information on the skills, experience and expertise of the Committee members.
The number of meetings held by the Committee and the members' attendance at them is set out on page 72.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the Committee
retained Herbert Smith Freehills to draft updated executive service agreements.
Herbert Smith Freehills was paid $4,864 for drafting of executive service agreements.
74
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
9.3 Executive Remuneration
Executive remuneration comprises both a fixed component and an 'at risk' component. It specifically comprises:
●
●
Fixed Annual Remuneration (FAR)
Executive Incentive Scheme (EIS)
9.3.1 Fixed Annual Remuneration (FAR)
What is FAR?
FAR is the guaranteed salary package of the executive and includes superannuation guarantee levy and salary
sacrificed components such as motor vehicles, computers and superannuation.
How is FAR set?
FAR is set by reference to external market data for comparable roles and responsibilities within similar listed and
unlisted entities within Australia.
When is FAR Reviewed?
FAR is reviewed in December each year with any changes being effective from 1 January of the following year.
9.3.2 Executive Incentive Scheme (EIS)
What is EIS?
EIS is an "at risk" component of executive remuneration.
EIS is used to reward executives for achieving and exceeding annual individual KPIs.
The target EIS opportunity for executives varies according to the role and responsibility of the executive.
EIS awards comprise 50% cash and 50% deferred delivery stapled securities issued under the Executive Stapled
Securities Scheme (ESSS). For executives not invited to participate in the ESSS, the EIS is paid fully in cash.
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Position
Managing Director
Capital Manager
Finance Manager
Asset Manager
1. EIS awards are at the discretion of the Committee and the Board
Standard
EIS Target
(as a % of
FAR)
60%
50%
n/a1
n/a1
% of EIS
paid as cash
50%
50%
50%
50%
% of EIS
paid as ESSS
50%
50%
50%
50%
How are EIS targets and
objectives chosen?
At the beginning of each year, in addition to the standard range of operational requirements, the Board sets a
number of strategic objectives for ALE for that year. These objectives are dependent on the strategic
opportunities and issues facing ALE for that year and may include objectives that relate to the short and longer
term performance of ALE. Additionally, specific KPIs are established for all executives with reference to their
individual responsibilities which link to the addition to and protection of securityholder value, improving business
processes, ensuring compliance with legislative requirements, reducing risks within the business and ensuring
compliance with risk management policies, as well as other key strategic non-financial measures linked to drivers
of performance in future economic periods.
How is EIS performance
assessed?
The Committee is responsible for assessing whether the KPIs have been met. To facilitate this assessment, the
Board receives detailed reports on performance from management.
The quantum of EIS payments and awards are directly linked to over or under achievement against the specific
KPIs. The Board has due regard to the achievements outlined in section 9.4.
How are EIS awards
delivered?
EIS cash payments are made in August each year following the signing of ALE's full year statutory financial
statements.
The deferred component comprises an award of stapled securities under the ESSS. Any securities awarded under
the ESSS are delivered three years after the award date provided certain conditions have been met.
75
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
How is the ESSS award
calculated?
The number of ESSS Rights awarded annually under the ESSS will be determined by dividing the value of the
grant by the volume weighted average price for the five trading days commencing the day following the signing
of ALE's full year statutory financial statements, and grossing this number up for the future value of the
estimated distributions over the three year deferred delivery period.
What conditions are
required to be met for
the delivery of an ESSS
award?
During the three year deferred delivery period, the delivery of the Stapled Securities issued under the ESSS
remains subject to the following clawback tests. ESSS rights will be forfeited in whole or in part at the discretion
of the Remuneration Committee if before the end of the deferred delivery period:
• the Committee becomes aware of any executive performance matter which, had it been aware of the
the matter at the time of the original award, would have in their reasonable opinion resulted in a lower original
award; or
• the executive engages in any conduct or commits any act which, in the Committee's reasonable
opinion, adversely affects ALE Property Group including, and without limitation, any act which:
results in ALE having to make any material negative financial restatements;
causes ALE to incur a material financial loss; or
causes any significant financial or reputational harm to ALE and/or its businesses.
・
・
・
9.3.3 Summary of Key Contract Terms
Contract Details
Executive
Position
Managing
Director
Capital
Manager
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$435,625
6 months
6 months
Ongoing
$246,000
3 months
3 months
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James McNally Brendan
Howell
Finance
Manager and
Assistant
Company
Secretary
Ongoing
$200,900
3 months
3 months
Asset
Manager
Executive
Director
Company
Secretary and
Compliance
Officer
Ongoing
$191,214
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$90,000
1 month
1 month
Managing Director
On 30 July 2014 Mr Wilkinson signed a new service agreement that commenced on 1 September 2014. The agreement stipulates the
minimum base salary, inclusive of superannuation, as being $425,000, to be reviewed annually each 31 December by the Board. An EIS, if
earned, would be paid 50% as a cash bonus in August each year and 50% in stapled securities issued under the ESSS and delivered three
years following each of the annual grant dates.
In the event of the termination of Andrew Wilkinson’s service agreement and depending on the reason for the termination, amounts may be
payable for unpaid accrued entitlements and a proportion of EIS entitlements as at the date of termination. If employment is terminated in
circumstances of redundancy or without cause then he is entitled to an amount of fixed remuneration for six months. In addition he may
receive a pro-rata EIS award for the period of employment in the year of redundancy.
76
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
9.4 Executive Remuneration outcome for year ended 30 June 2015
Details of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 78.
Executive Incentive Scheme Outcomes
ALE continues to perform well when compared to other Australian real estate investment trusts (AREITs).
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2015.
It was the view of the Committee that most of the standard key performance indicators (KPIs) and most of the major items in the Board
approved corporate strategy had been met. In particular the Committee noted:
Capital Matters
●
ALE enjoyed the positive and material full year impacts of the refinancing and hedge restructure completed just before the commencement
of the year, most notably the resulting annual interest expense saving of around $7 million;
●
●
●
ALE fully redeemed all outstanding ALE Notes 2 debt in September 2014 and thereby eliminated a debt expense at a comparatively high
total cost of 7.83% including a 4.00% credit margin;
ALE’s investment grade credit rating of Baa2 (with stable outlook) was fully maintained;
Management continued to explore a range of debt funding solutions in both the domestic and offshore capital markets with a view to
positioning ALE for future debt refinancings and readiness to implement additional debt funding of any acquisitions; and
●
Explored a range of other strategic initiatives with particular focus on value enhancement and risk mitigation.
Other matters
●
Agreed and completed a rent restructure with ALH that is expected to deliver a lower risk profile for the capped and collared market rent
reviews in 2018. The restructure delivers a value benefit for ALE’s securityholders;
●
●
●
●
●
●
Worked constructively with ALH to agree a range of developments that are value enhancing for a number of ALE properties.
Undertook a comprehensive statutory valuation scoping exercise to ensure that the independent valuer was fully appraised of the key
value drivers of each of the properties;
Completed a comprehensive review of ALE’s service providers with a view to ensuring cost savings were maximised and service levels
enhanced;
Explored a range of acquisition opportunities that accorded with ALE’s strategic criteria;
Worked closely with key equity analysts and investors to ensure that there was a clear understanding of both the quality and value
prospects for ALE’s properties and the simplified, low cost and long term capital structure;
Worked on a number of strategic iniatitives that were agreed at the beginning of the year and were either partially or fully completed by
the end of the year; and
●
Continued to deliver both short and long term total returns for securityholders that outperformed most if not all other AREITs in the sector.
The remuneration committee considered these achievements and compared them to key performance indicators for each executive that were
set at the beginning of the financial year. Individual executives contributed to the valuable outcomes outlined above and this was recognised
in the EIS payments made. All the EIS payments are included in the staff remuneration expenses in the current year.
The EIS awarded to each member of the management team was as follows:
Target EIS
(as % of
FAR)
EIS
Awarded
(as % of
FAR)
EIS Awarded
as a % of
Target
EIS
Awarded
Cash
Component
ESSS
Component
60%
50%
n/a
n/a
48.2%
40.7%
19.9%
15.7%
80.3%
81.3%
-
-
$210,000
$100,000
$40,000
$30,000
$105,000
$50,000
$20,000
$15,000
$105,000
$50,000
$20,000
$15,000
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
77
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
ALE's Financial Performance History
To provide context to ALE's performance, the following data and graphs outline a five year history of financial metrics.
FY11
FY12
FY13
FY14
FY15
Distributable profit ($m)
Distribution per Security
31.3
26.7
31.7
31.2
29.1
19.75
16.00
16.00
16.45
16.85
Continuing property values ($m)2
753.9
767.2
781.5
821.6
900.5
Net gearing 1
51.7%
51.9%
50.8%
51.7%
47.9%
1. Total borrowings less cash as a percentage of total assets less cash and derivatives
2. Includes only the value of properties held as at 30 June 2015
The accumulated value of $1.00 initial public offering (IPO) investment in ALE and reinvested distributions, rights renunciation payments and
current market value of securities as at 30 June 2015 totalled $10.58.
According to UBS for the period ending 30 June 2015 ALE continued to out perform other equity return benchmarks including the AREIT 300
index and the All Ordinaries index for periods including three, five and ten years. For the one year period ALE's return of 33.4% outperformed
the AREIT 300 index of 20.2% and All Ordinaries index of 5.7%.
Growth in the value of the continuing properties between ALE's 2003 IPO and 30 June 2014 has averaged 4.75% p.a. This has exceeded
growth in CPI at 2.91% p.a
Distributable Profit ($m)
Gearing
Continuing Property Values ($m)
$30
$20
$10
$0
60.0%
55.0%
50.0%
45.0%
40.0%
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
$950
$900
$850
$800
$750
$700
$650
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
Accumulated Value for: AREITs $1.80, All Ords $2.77, ALE $10.581
1. Distributions include payment for renouncing Sep 2009 rights and all other distributions paid and declared to September 2014
78
Australian Leisure and Entertainment Property Management Limited
9.5 Disclosures relating to equity instruments granted as compensation
DIRECTORS' REPORT
For the year ended 2015
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights that
were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery Date
% vested in
year
% forfeited
in year
43,136
34,878
63,732
23,611
19,092
31,375
8,825
7,844
8,825
3,922
23 Aug 12
30 Sep 13
30 Sep 14
23 Aug 12
30 Sep 13
30 Sep 14
30 Sep 13
30 Sep 14
30 Sep 13
30 Sep 14
1 Jul 11
1 Jul 12
1 Jul 13
1 Jul 11
1 Jul 12
1 Jul 13
1 Jul 12
1 Jul 13
1 Jul 12
1 Jul 13
1.65
2.27
2.55
1.65
2.27
2.55
2.27
2.55
2.27
2.55
31 Jul 15
31 Jul 16
31 Jul 17
31 Jul 15
31 Jul 16
31 Jul 17
31 Jul 16
31 Jul 17
31 Jul 16
31 Jul 17
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
9.5.2 Modification of terms of equity settled share based payment transactions
No terms of equity settled share based payment transactions (including options and rights granted as compensation to key management
personnel) have been altered or modified by the issuing entity during the reporting period or the prior period.
9.5.3 Analysis of movements in performance rights
The movement during the reporting period, by value of performance rights over stapled securities in ALE is detailed below.
Executive
A J Slade
Granted in
year $ (a)
Vested in
year $ (b)
Lapsed in
year $ (c )
-
-
-
Securities
Delivered in
the year $
25,100
Securities
Delivered in
the year
(Number)
8,272
(a) The value of performance rights granted during the year is the assessed fair value at grant date of performance rights granted, allocated
equally over the period from grant date to vesting date. The fair value at grant date has been independently determined by using a Black-
Scholes option pricing model.
(b) The value of performance rights vested during the year is calculated as the market price of the stapled securities of ALE as at the close of
trading on the day the performance rights vested.
(c) The value of performance rights lapsed during the year is calculated using the market price of the stapled securities of ALE as at the close
of trading on the day the performance rights lapsed.
9.5.4 Analysis of movements in ESSS rights
The movement during the reporting period, by value and number of ESSS rights over stapled securities in ALE is detailed below.
Executive
By Value ($)
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
By Number
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Opening
Balance
Granted in
Year
150,290
132,264
20,000
20,000
78,014
77,274
8,825
8,825
162,500
80,000
20,000
10,000
63,732
31,375
7,844
3,922
Stapled
Securities
Delivered in
the Year
-
(50,000)
-
-
-
(34,571)
-
-
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
312,790
162,264
40,000
30,000
141,746
74,078
16,669
12,747
Securities
Delivered in
the year -
value paid $
-
104,899
-
-
79
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the year ended 2015
9.6 Equity based compensation
The performance rights value disclosed above as part of specified executive remuneration is the assessed fair value at grant date of
performance rights granted, allocated equally over the period from grant date to vesting date. The fair value at grant date has been
independently determined by using a Black-Scholes option pricing model. This technique takes into account factors such as the exercise price,
the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradable nature of the performance right, the
security price at grant date and expected price volatility of the underlying security, the expected distribution yield, the risk-free interest rate
for the term of the performance right and any delayed delivery in the securities to the executive.
The value of ESSS disclosed in section 9.5.4 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the five
trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing this
number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined on 13 August 2015.
9.7 Non-executive Directors' Remuneration
9.7.1 Remuneration Policy and Strategy
Non-executive directors' individual fees are determined by the Company Board within the aggregate amount approved by shareholders. The
current aggregate amount which has been approved by shareholders at the AGM on 6 November 2014 was $650,000.
The Board reviews its fees to ensure that ALE non-executive directors are remunerated fairly for their services, recognising the level of skill,
expertise and experience required to conduct the role. The Board reviews its fees from time to time to ensure it is remunerating directors at a
level that enables ALE to attract and retain the right non-executive directors. Fees and payments to non-executive directors reflect the
demands which are made on, and the responsibilities of the Directors. Non-executive directors’ fees and payments were reviewed by Godfrey
Remuneration Group Pty Limited in the current financial year. The result of this review was that no changes to fees and payments were made.
The Chairman’s fees are determined independently from the fees of the other non-executive directors, based on comparative roles in the
external market. The Chairman is not present at any discussion relating to the determination of his own remuneration. Non-executive
directors do not receive any equity based payments, retirement benefits or other incentive payments.
9.7.2 Remuneration Structure
ALE non-executive directors receive a cash fee for service and they have no entitlement to any performance based remuneration, nor can they
participate in any security based incentive scheme.
The current remuneration was last independently reviewed in January 2014. This resulted in no change to the fee levels indicated below. The
Directors' fees are inclusive of superannuation, where applicable.
Board
ACRMC
Remuneration Committee
Chairman*
Member
Chairman
Member
Chairman
Member
Board and Committee Fees
$175,000
$85,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's (Executive Director) remuneration is determined in accordance with the above fees. He receives an additional $5,000 for
being a Responsible Manager of the Company under the Company’s AFSL and $10,000 for being a director of ALE Finance Company Pty
Limited.
80
9.8 Details of remuneration
Amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below in tables 1 and 2. The cash bonuses were dependent on the satisfaction of performance conditions as set out in the section
9.4 headed “Executive Incentive Scheme Outcomes”. Equity based payments for 2014 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For The Year Ended 30 June 2015
Table 1 Remuneration details 1 July 2014 to 30 June 2015
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2014 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
Salary & Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term benefits
$
Termination
benefits
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
ESSS
$
Total
$
$
P H Warne
Non-executive Director
159,817
J P Henderson
Non-executive Director
H I Wright
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
B R Howell
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
Executive Director
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
33,333
95,890
91,324
75,000
36,530
90,000
399,993
100,000
213,267
182,062
172,672
-
-
-
-
-
-
105,000
50,000
20,000
15,000
1,649,888
190,000
-
-
-
-
-
-
-
-
-
-
-
-
-
159,817
33,333
95,890
91,324
75,000
36,530
90,000
504,993
100,000
263,267
202,062
187,672
15,183
-
9,110
8,676
-
3,470
-
30,761
-
29,983
16,592
16,404
-
-
-
-
-
-
-
-
175,000
-
-
-
33,333
-
-
-
105,000
-
-
-
100,000
-
-
-
40,000
75,000
-
-
90,000
-
6,213
-
105,000
646,967
32.5%
-
-
-
100,000
-
4,370
-
50,000
347,620
2,695
-
20,000
241,349
2,687
-
15,000
221,763
28.8%
16.6%
13.5%
-
-
-
-
-
16.2%
-
14.4%
8.3%
6.8%
1,839,888
130,179
15,965
-
190,000
2,176,032
Table 2 Remuneration details 1 July 2014 to 30 June 2015
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2013 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
Salary & Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long
term benefits
$
Termination
benefits
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
ESSS
$
Total
$
$
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
P J Downes
B R Howell
Non-executive Director
Non-executive Director
Company Secretary
160,183
100,000
96,110
54,847
90,000
-
-
-
-
-
A F O Wilkinson
Executive Director
393,567
162,500
J T McNally
Executive Director
100,000
-
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
212,076
175,222
163,949
80,000
20,000
10,000
1,545,954
272,500
-
-
-
-
-
-
-
-
-
-
-
160,183
100,000
96,110
54,847
90,000
556,067
100,000
292,076
195,222
173,949
1,818,454
14,817
-
8,890
5,073
-
17,775
-
17,625
17,266
17,015
98,461
-
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
59,920
-
-
-
90,000
-
21,156
-
162,500
757,498
42.9%
-
-
-
100,000
-
12,843
-
80,000
402,544
7,281
-
20,000
239,769
6,446
-
10,000
207,410
39.7%
16.7%
9.6%
47,726
-
272,500
2,237,141
81
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
21.5%
-
19.9%
8.3%
4.8%
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 30 June 2015
Revenue
Expense reimbursement
Interest income
Total revenue
Annual Report and Annual Review
Audit, accounting, tax and professional fees
Depreciation expense and asset write-offs
Insurance
Legal fees
Occupancy costs
Corporate and other expenses
Registry fees
Salaries, fees and related costs
Staff training
Travel and accommodation
Total expenses
Profit/(loss) before income tax
Income tax expense / (benefit)
Profit/(loss) attributable to the shareholders of the Company
Other comprehensive income
Other comprehensive income for the year after income tax
Note
5
30 June
2015
$
30 June
2014
$
4,013,868
12,664
3,843,332
93,199
4,026,532
3,936,531
96,358
193,300
13,257
177,910
217,988
123,902
480,830
125,705
2,508,417
22,532
113,670
113,570
213,334
16,987
176,801
65,480
120,086
611,820
147,382
2,490,680
20,488
82,308
4,073,869
4,058,936
(47,337)
(122,405)
(74,675)
27,338
16,576
(138,981)
27,338
(138,981)
-
-
-
-
7
Total comprehensive income for the year
27,338
(138,981)
Profit/(Loss) attributable to:
Equity holders of the Company
Minority interest
Total profit/(loss) for the period
Comprehensive income attributable to:
Equity holders of the Company
Minority interest
Total comprehensive income for the year
Basic and diluted earnings/(loss) per share
Dividends paid and payable per share
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
27,338
-
27,338
27,338
-
27,338
Cents
0.01
-
(138,981)
-
(138,981)
(138,981)
-
(138,981)
Cents
(0.07)
-
84
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF FINANCIAL POSITION
For The Year Ended 30 June 2015
Current assets
Cash and cash equivalents
Receivables
Prepayments and other assets
Total current assets
Non-current assets
Plant and equipment
Investment in related party
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Reserves
Total equity
Net assets per share
The above statement of financial position should be read in conjunction with the accompanying Notes.
Note
8
9
10
11
12
13
14
15
16
30 June
2015
$
2,519,881
3,316,234
218,461
30 June
2014
$
2,391,383
3,246,458
248,824
6,054,576
5,886,665
17,582
9,080,010
47,873
30,838
9,080,010
41,377
9,145,465
9,152,225
15,200,041
15,038,890
590,962
145,203
736,165
736,165
535,974
126,378
662,352
662,352
14,463,876
14,376,538
14,759,025
(1,030,203)
735,054
14,759,025
(986,904)
604,417
14,463,876
14,376,538
Cents
7.39
Cents
7.35
85
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CHANGES IN EQUITY
For The Year Ended 30 June 2015
Share Capital
$
Share based
payments
reserve
$
Retained
Earnings
$
Total
$
2015
Total equity at the beginning of the year
14,759,025
604,417
(986,904)
14,376,538
Total comprehensive income for the period
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transacations with Members of ALE recognised directly in
Equity:
Purchase of securities to satisfy units required for Executive
Performance Rights Plan
Shares issued - dividend reinvestment plan
Employee share based payments expense
-
-
-
-
-
-
-
-
-
27,338
27,338
27,338
27,338
(59,363)
-
190,000
(70,637)
-
-
(130,000)
-
190,000
Total equity at the end of the year
14,759,025
735,054
(1,030,203)
14,463,876
2014
Total equity at the beginning of the year
14,606,975
382,672
(766,975)
14,222,672
Total comprehensive income for the period
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transacations with Members of ALE recognised directly in
Equity:
Purchase of securities to satisfy units required for Executive
Performance Rights Plan
Shares issued - dividend reinvestment plan
Employee share based payments expense
-
-
-
-
-
-
(138,981)
(138,981)
(138,981)
(138,981)
152,050
-
(50,755)
-
272,500
(80,948)
-
-
(131,703)
152,050
272,500
Total equity at the end of the year
14,759,025
604,417
(986,904)
14,376,538
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
86
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CASH FLOWS
For The Year Ended 30 June 2015
Note
30 June
2015
$
30 June
2014
$
Cash flows from operating activities
Management fee received and expense reimbursements
Payments to suppliers and employees
Interest received - bank deposits and investment arrangements
Net cash inflow/(outflow) from operating activities
8
Cash flows from investing activities
Payments for plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Shares issued
Net cash (outflow) from financing activities
5,686,428
(5,656,752)
98,822
128,498
-
-
-
-
6,022,182
(6,154,481)
75,150
(57,149)
(6,146)
(6,146)
-
-
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
128,498
2,391,383
(63,295)
2,454,678
Cash and cash equivalents at the end of the year
8
2,519,881
2,391,383
The above statement of cash flows should be read in conjunction with the accompanying Notes.
87
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 1
Basis of preparation
(a) Statement of compliance
Australian Leisure and Entertainment Property Management Limited (the Company) is domiciled in Australia. The financial statements are
general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASs) (including
Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial
statements also comply with the IFRS and interpretations adopted by the International Accounting Standards Board.
The stapled securities of ALE are quoted on the Australian Stock Exchange under the code LEP and comprise one unit in Australian
Leisure and Entertainment Property Trust and one share in the Company. The unit and the share are stapled together under the terms of
their respective constitutions and can not be traded separately. Each entity forming part of ALE is a separate legal entity in its own right
under the Corporations Act 2001 and Australian Accounting Standards.
The Company is a for-profit entity and is primarily involved in property management industry.
The financial statements were authorised for issue by the Board of Directors on 4th August 2015.
(b) Basis of measurement
The financial statements are prepared on the historical cost basis.
The methods used to measure fair values are discussed further in Note 3.
(c) Functional and presentation currency
These financial statements are presented in Australian dollars, which is the Company’s functional currency.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial statements are described in the following Notes:
• Note 21 - measurement of share based payments
Note 2
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all years presented, unless otherwise stated.
Cash and cash equivalents
(a)
For the purposes of the cash flow statement, cash and cash equivalents includes cash at bank, deposits at call and short term money
market securities which are readily convertible to cash.
88
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 2
Summary of significant accounting policies (continued)
Receivables
(b)
Trade debtors are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade
receivables are generally due for settlement within 30 days.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for
doubtful receivables is established when there is objective evidence that all amounts due may not be collected according to the original
terms of the receivables. The amount of any provision is the difference between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the Statement of
Comprehensive Income.
Investments and financial assets
(c)
Financial assets classified as loans and deposits are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and arise when money and services are provided to a debtor with no intention of selling the receivable.
Loans and deposits are carried at amortised cost using the effective interest rate method. Under this method, fees, costs, discounts and
premiums directly related to the financial asset are spread over its effective life.
Trade and other payables
(d)
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid at the
balance sheet date. The amounts are unsecured and are usually paid within 30 days of recognition.
Provisions
(e)
Provisions are recognised when there is a present legal or constructive obligation as a result of past events, it is more likely than not that
an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Dividends
(f)
Provision is made for the amount of any dividends declared, being appropriately authorised and no longer at the discretion of the entity,
on or before the end of the financial year but not distributed at the balance date.
(g)
Earnings per share
Basic earnings per share
(i)
Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted average
number of shares outstanding during the reporting period.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential shares and the weighted average number of
shares assumed to have been issued for no consideration in relation to dilutive potential shares.
(h)
Ordinary shares are classified as contributed equity.
Contributed equity
Incremental costs directly attributable to the issue of new units, shares or options are shown in Contributed Equity as a deduction, net of
tax, from the proceeds.
89
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 2
Summary of significant accounting policies (continued)
(i)
(i)
Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the
reporting date, are recognised as a current liability 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. Liabilities for non-accumulating sick leave are recognised as an expense
when the leave is taken and measured at the rates paid or payable.
(ii)
Share based payments
Executive Stapled Security Scheme Rights (ESSS)
The grant date fair value of ESSS rights granted to employees is recognised as an employee expense, with a corresponding increase in
equity, over the period that the employees become unconditionally entitled to the performance rights. The amount recognised as an
expense is adjusted to reflect the actual number of ESSS rights that vest.
The fair value at grant date is determined as the value of the Executive Incentive Award in the year in which it is awarded. The number
of ESS Rights issued annually under the ESSS awarded annually will be determined by dividing the value of the grant by the volume
weighted average price for the five trading days commencing the day following the signing of ALE Property Group’s full year statutory
financial statements.
Bonus plans
(iii)
Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a past practice that may create a
constructive obligation.
Long service leave
(iv)
The Company will begin to recognise liabilities for long service leave when employees reach a qualifying period of continuous service.
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. 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 national government bonds with the terms to maturity and currency that match, as closely
as possible, the estimated future cash flow.
Retirement benefit obligations
(v)
The Company pays fixed contributions to employee superannuation funds and the Company's legal or constructive obligations are
limited to these contributions. The contributions are recognised as an expense as they become payable. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Revenue
(j)
Management fee income is brought to account on an accruals basis, and if not received at balance date is reflected in the balance sheet
as a receivable.
(k)
Interest income is recognised on a time proportion basis using the effective interest method.
Interest income
Expenses
(l)
Expenses including operating expenses and other outgoings are brought to account on an accruals basis and, if not paid at balance date,
are reflected in the balance sheet as payables.
90
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 2
Summary of significant accounting policies (continued)
Income tax
(m)
The income tax expense or revenue for the reporting period is the tax payable on the current reporting period's taxable income, based on
the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between
the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or 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. Similarly, no deferred tax
asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities
where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will
not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected
to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in Equity.
Goods and Services Tax (GST)
(n)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable, to the taxation authority are presented as operating cash flow.
New accounting standards and UIG interpretation
(o)
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January
2014, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out
below. The Group does not plan to adopt these standards early.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
exisiting revenue recognition guidance, including IAS 18 Revenue, AIS 11 Construction Contracts and IFRIC 13 Customer Loyalty
Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted.
The company is assessing the potential impact on its financial statements from the application of IFRS 15.
Note 3
Determination of fair values
A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-
financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following
methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the Notes specific
to that asset or liability.
Receivables
The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash
flows, discounted at the market rate of interest at the reporting date.
91
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 4
Financial risk management
Overview
The Company has exposure to the following risks from its use of financial instruments:
● credit risk
● liquidity risk
● market risk
This note presents information about the Company’s exposure to each of the above risks, their objectives, policies and processes for
measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial
report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has
established the Audit, Compliance and Risk Management Committee, which is responsible for developing and monitoring risk management
policies. The committee reports regularly to the Board of Directors on its activities.
Risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, has
developed a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Audit, Compliance and Risk Management Committee oversees how management monitors compliance with the Company's risk
management policies and procedures and reviews the adequacy of the risk management framework.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Company’s receivables from customers and investment securities.
Trade and other receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer. The Company has few
customers and therefore there is significant concentration of credit risk. Credit risk has been minimised primarily by ensuring, on a
continuous basis, that the customers have appropriate financial standing.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.
The Company has liquidity risk management policies, which assist it in monitoring cash flow requirements and optimising its cash return
on investments. Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses and
commitments for the purchase/sale of assets for a period of 90 days (or longer if deemed necessary), including the servicing of financial
obligations.
Market risk
Market risk is the risk that changes in market prices, such as the consumer price index and interest rates, will affect the Company’s
income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return.
The Company enters into derivatives and financial liabilities in order to manage market risks. All such transactions are carried out within
the guidelines set by the Audit, Compliance and Risk Management Committee.
Interest rate risk
The Company adopts a policy of ensuring that all exposure to changes in interest rates on borrowings is hedged. This is achieved by
entering into interest rate swaps to fix the interest rates. At present the Company has no borrowings outstanding.
92
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
30 June
2015
$
30 June
2014
$
Note 5
Expense reimbursements
Reimbursement of expenses for managing the Head Trust and controlled entities
4,013,868
3,843,332
Fees are charged to the Trust and its controlled entities by the Company for reimbursement of
expenses incurred in the management of the trust and responsible entity services.
Expense reimbursement receipts of $5,686,428 (2014: $6,022,182) disclosed in the statement of
cash flows is comprised predominantly of expenses paid for by the Company on behalf of the Trust
and other ALE group entities and subsequently reimbursed from the entities. The legal obligations
for these expenses are the responsibility of the individual ALE group entities and are not expenses
of the Company.
Note 6
Auditors' remuneration
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the ALE Property Group
and other audit work under the Corporations Act 2001
- in relation to current year
- in relation to prior year
Total remuneration for audit services
Note 7
Income tax expense/(benefit)
Current tax expense/(benefit)
Deferred tax expense
Income tax expense/(benefit)
Decrease/(increase) in deferred tax asset
Reconciliation of income tax expense to prima facie tax payable
Profit/(loss) before income tax expense
Tax at the Australian tax rate of 30% (2014: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Share based payments
Non deductible expenses
Under/(over) provision in prior years
Income tax expense/(benefit)
160,000
5,000
165,000
180,500
8,500
189,000
(68,179)
(6,496)
(74,675)
(6,496)
(6,496)
3,550
13,026
16,576
13,026
13,026
(47,337)
(122,405)
(14,201)
(36,722)
18,000
70
(78,544)
(74,675)
42,239
7,368
3,691
16,576
93
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 8
Cash and cash equivalents
Cash at bank
Deposits at call
(a) As at 30 June 2015 the weighted average interest rate earned on cash was 2.64%
(2014: 3.64%).
(b) The deposits represent office occupancy security deposits.
Reconciliation of profit after income tax to net cash inflows from operating activities
Profit/(loss) for the year
Depreciation
Non-cash employee benefits expense - share based payments
Share based payment securities purchased
(Increase)/decrease in receivables
(Increase)/decrease in other assets
(Increase)/decrease in deferred tax asset
Increase/(decrease) in loan from related party
Increase/(decrease) in provisions
Increase/(decrease) in payables
Net cash inflows from operating activities
Note 9
Receivables
Accounts receivable
Loan to related party
Other receivable
Interest receivable
Note 10 Investment in related party
Trust Non-Income Voting Units (NIVUS)
30 June
2015
$
30 June
2014
$
(a)
(b)
430,461
2,089,420
2,519,881
206,919
2,184,464
2,391,383
27,338
13,257
190,000
(130,000)
(111,403)
30,363
(6,496)
41,627
18,825
54,987
128,498
77,366
3,165,425
68,179
5,264
3,316,234
(138,981)
16,987
272,500
(131,703)
20,042
(49,166)
13,026
(153,864)
25,313
68,697
(57,149)
15,282
3,207,052
-
24,124
3,246,458
9,080,010
9,080,010
The Company was issued 9,080,010 of non-income voting units (NIVUS) in the Trust fully paid at
$1.00 each in November 2003. The NIVUS are not stapled to shares in the Company, have an issue
and withdrawal price of $1.00, carry no rights to income from the Trust and entitle the holder to no
more than $1.00 per NIVUS upon the winding-up of the Trust. The Company has a voting power of
4.43% in the Trust as a result of the issue of NIVUS. The NIVUS are disclosed in the Company but
are not disclosed in the ALE Property Group financial statements as they are eliminated on
consolidation.
94
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
30 June
2015
$
30 June
2014
$
47,873
41,377
43,903
-
5,550
(1,580)
-
47,873
41,377
6,496
47,873
47,873
-
47,873
38,256
918
(660)
(7,235)
10,098
41,377
54,403
(13,026)
41,377
31,279
10,098
41,377
431,734
159,228
590,962
232,418
303,556
535,974
145,203
145,203
126,378
126,378
14,759,025
14,759,025
14,759,025
-
14,759,025
14,606,975
152,050
14,759,025
Note 11 Deferred tax asset
Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in statement of comprehensive income
Employee benefits
Acquisition proposal due diligence
Accruals
Other
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the statement of comprehensive income (Note 7)
Closing balance at
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Note 12 Payables
Trade creditors
Creditor accruals
Note 13 Provisions
Provision for employee entitlements
Note 14 Contributed equity
(a)
Share capital
Issued share capital
(b)
Movements in ordinary share capital
Opening balance
Shares issued - Dividend Reinvestment Plan
Balance at the end of the period
95
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Shares on issue
Opening balance
Shares issued - Dividend Reinvestment Plan
Closing balance
(c) Shares
Fully paid stapled securities in the Company were issued at $1.00 per stapled security. Each
stapled security comprises one $0.10 share in the Company and one $0.90 unit in the Trust. They
cannot be traded or dealt with separately. Stapled securities entitle the holder to participate in
dividends/distributions and the proceeds on any winding up of the Company in proportion to the
number of and amounts paid on the securities held. On a show of hands, every holder of stapled
securities present at a meeting in person or by proxy, is entitled to one vote. On a Company poll,
each ordinary shareholder is entitled to one vote for each fully paid share, and on a Trust poll each
unitholder is entitled to one vote for each fully paid unit.
Note 15 Accumulated losses
Retained losses
Balance at the beginning of the year
Net profit/(loss) attributable to ordinary shareholders
Transfer from/(to) share based payments reserve
Balance at the end of the year
Note 16 Reserves
Share-based payments reserve
Balance at the beginning of the year
Employee share based payments expense
Transfer to/(from) Retained Profits
Balance at the end of the year
30 June
2015
$
30 June
2014
$
No. of shares
No. of shares
195,702,333
-
194,238,078
1,464,255
195,702,333
195,702,333
30 June
2015
$
30 June
2014
$
(1,030,203)
(986,904)
(986,904)
27,338
(70,637)
(1,030,203)
(766,975)
(138,981)
(80,948)
(986,904)
735,054
604,417
604,417
190,000
(59,363)
735,054
382,672
272,500
(50,755)
604,417
96
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
30 June
2015
$
30 June
2014
$
Note 17 Segment information
Business segment
ALE has one reportable segment, as described below, which is ALE's strategic business unit. The strategic business unit is based upon
internal management reports that are reviewed by the Managing Director on at least a quarterly basis. The strategic business unit covers
the operations of the responsible entity for the ALE Property Group.
Comparative information has been presented in conformity with the requirements of AASB 8 Operating Segments.
The Company received 100% of its expense reimbursement from the Head Trust (2014: 100%).
Geographical segment
The Company operates solely within Australia.
Note 18 Events occurring after reporting date
The Directors are not aware of any matter or circumstance occurring after balance date which may materially affect the Company's
operations, the results of those operations or the state of affairs of the Company.
Note 19 Contingent liabilities
Bank guarantee
The Company has entered into a bank guarantee of $89,480 in respect of an office tenancy at Level 10, 6 O'Connell Street, Sydney.
The directors are not aware of any material contingent liabilities as at the date of this report.
Note 20 Commitments
(a)
The Directors are not aware of any capital commitments as at the date of this report.
Capital commitments
Lease commitments
(b)
The Company has entered into a non-cancellable operating lease for new office premises at Level 10, 6 O'Connell Street, Sydney starting
November 2010. The Company has also entered into a non-cancellable operating lease for office equipment. The minimum net lease
commitments under these leases are:
Commitments for minimum lease payments in relation to non-cancellable operating leases are
Within one year
Later than one year but not later than five years
Later than five years
30 June
2015
$
45,695
-
-
45,695
30 June
2014
$
123,173
45,695
-
168,868
97
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
30 June
2015
$
30 June
2014
$
Note 21 Share based payments
During 2007, ALE established a Performance Rights Plan that entitles key management personnel, subject to performance, to become
entitled to acquire stapled securities at nil cost to the employee. Under the Performance Rights Plan grants of performance rights have
been made to Mr Wilkinson and Mr Slade. In accordance with the plan the performance rights vest upon performance hurdles being
achieved. The Performance Rights Plan was terminated in 2012 and replaced with an Executive Stapled Securities Scheme. During the
year all outstanding performance rights outstanding vested and were issued.
Performance Rights Plan
The terms and conditions of outstanding grants are as follows:
The vesting conditions for Mr Slade's performance rights are tested annually soon after 30 June each year. One third of the number of
performance rights issued are tested at each 30 June over a three year period.
The number and weighted average fair values of the performance rights on issue are as follows:
Number of
performance
rights
2015
Weighted
average fair
value
2015
Number of
performance
rights
2014
Weighted
average fair
value
2014
Outstanding at 1 July
Issued/delivered during year
Outstanding at 30 June
8,272
(8,272)
-
1.05
1.05
-
56,990
(48,718)
8,272
1.05
1.27
1.05
During the year 8,272 stapled securities were delivered to Mr Slade upon expiry of the two year delayed delivery period applicable to the
vested rights.
The performance rights value is the assessed fair value at grant date of the performance rights, allocated equally over the period from
grant date to vesting date. The fair value at grant date has been independently determined by using a Black-Scholes option pricing
model. This technique takes into account factors such as the exercise price, the term of the performance rights, the vesting and
performance criteria, the impact of dilution, the non-tradable nature of the performance rights, the security price at grant date and
expected price volatility of the underlying security, the expected distribution yield and the risk-free interest rate for the term of the
performance rights.
98
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
30 June
2015
$
30 June
2014
$
Note 21 Share based payments (continued)
For the year ended 30 June 2014 the following ESSS Rights were awarded. The number of Stapled Securities awarded was determined
by dividing the value of the 2014 grant by the volume weighted average price for the five trading days commencing the day following the
signing of ALE Property Group’s 2014 full year statutory financial statements.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
2014
Number
63,732
31,375
7,844
3,922
2013
Number
34,878
19,092
8,825
8,825
For the year ended 30 June 2015 the following ESSS Rights were granted to executives under the ESSS. The number of Stapled
Securities awarded will be determined by dividing the value of the grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s full year statutory financial statements for the year. The number of
securities granted for the current year grants will be determined on 13 August 2015.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
The numbers of ESSS Rights outstanding at the end of the financial year is as follows:
Outstanding at 1 July
Granted during year
Vested during year
Lapsed during year
Outstanding at 30 June
Number ESSS
rights
2015
Weighted
average fair
value
2015
172,938
106,873
(34,571)
-
245,240
1.87
2.55
1.45
-
2.22
Note 22 Related party transactions
(a)
Parent entity, subsidiaries, joint ventures and associates
The Company has no parent entity, subsidiaries, joint ventures or associates.
(b)
Key management personnel and their compensation is set out in Note 23.
Key management personnel
2015
$
105,000
50,000
20,000
15,000
2014
$
162,500
80,000
20,000
10,000
Number of
ESSS rights
2014
101,318
71,620
-
-
172,938
Weighted
average fair
value
2014
1.58
2.22
-
-
1.87
(c)
For the year ended 30 June 2015 the Company had charged the Trust $4,013,868 in expense reimbursement (2014: $3,843,332).
Transaction with related parties
Peter Warne is a Non-Executive director of Macquarie Group Limited (“Macquarie”). Macquarie has provided banking services and
corporate advice to ALE in the past and may continue to do so in the future. Mr Warne does not take part in any decisions to appoint
Macquarie in relation to banking services and corporate advice provided by Macquarie to ALE.
Terms and conditions
(d)
All related party transactions are conducted on normal commercial terms and conditions. Outstanding balances are unsecured and are
repayable in cash and callable on demand.
99
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 23 Key management personnel
(a)
The following persons were Directors of the Company during the financial year:
Directors
Name
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson (Managing Director)
J T McNally
Type
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
24 September 2014
6 February 2015
16 November 2004
26 June 2003
Resigned
6 November 2014
Other key management personnel
(b)
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Company, directly or
indirectly, during the year.
Name
A J Slade
B R Howell
M J Clarke
D J Shipway
Title
Capital Manager
Company Secretary and Compliance Officer
Finance Manager and Assistant Company Secretary
Asset Manager
Compensation for key management personnel
(c)
The following table sets out the compensation for key management personnel in aggregate. Refer to the remuneration report in the
Directors' Report for details of the remuneration policy and compensation details by individual.
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Total
Share based payments expense in the year
ESSS rights granted in 2015
ESSS rights granted in 2014
Total
30 June
2015
$
1,839,888
130,179
15,965
190,000
30 June
2014
$
1,818,454
98,461
47,726
272,500
2,176,032
2,237,141
190,000
-
190,000
-
272,500
272,500
100
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 24 Earnings per share
(a)
Basic earnings per share
Attributable to equity holders of the Company
Basic and diluted earnings per equity holders of the Company
Attributable to securityholders of the stapled entity
Basic and diluted earnings per stapled security before financing costs attributable to
the Company securityholders divided by the average number of securities
Basic and diluted earnings per stapled security using realised operating income
30 June
2015
cents
30 June
2014
cents
0.01
0.01
0.01
(0.07)
(0.07)
(0.07)
Number
2015
Number
2014
(b)
Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in calculating
earnings per share
195,702,333
195,437,564
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
195,702,333
195,437,564
101
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2015
Note 25
Financial Instruments
Credit risk
(a)
ALE's major credit risk is the risk that the tenant will fail to perform its contractual obligations including honouring the terms of the lease
agreements either in whole or in part. Credit risk has been minimised primarily by ensuring, on a continuous basis, that the tenant has
appropriate financial standing.
Credit risk on cash is managed through ensuring all cash deposits are held with major domestic banks.
The credit risk on financial assets of the Company which have been recognised in the balance sheet is generally the carrying amount net
of any provision for doubtful debts.
Exposure to credit risk
Receivables
Cash and cash equivalents
Impairment losses
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120-365 days
More than one year
(b)
Liquidity Risk
2015
$
150,809
2,519,881
2014
$
39,406
2,391,383
2,670,690
2,430,789
2015
2014
Gross
Receivables
$
125,067
-
7,092
18,650
-
150,809
Impairment
$
-
-
-
-
-
-
Gross
Receivables
$
39,406
-
-
-
-
39,406
Impairment
$
-
-
-
-
-
-
The Company has no contracted financial liabilities and therefore the Company's liquidity risk to external parties is minimal.
(c)
The Company has no financial interest bearing obligations and accordingly the Company's interest rate risk is minimal.
Interest rate risk
102
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