ANNUAL REPORT 2016
QUALITYINCOMEGROWTHOPPORTUNITIES QUALITY
I N C O M E
G R OW T H
O P P O R T U N I T I E S
ALE delivered a superior performance
during the 2016 financial year. The group’s
achievements included increasing property
valuations and an enhanced capital position.
These achievements saw ALE increase
distributions, reduce gearing and deliver
returns to securityholders that again
outperformed the AREIT index
by a material margin.
Peter Warne
Chairman
Andrew Wilkinson
Managing Director
TOTAL
ANNUAL
RETURN
SINCE
NOVEMBER
2003
23%
8.6%
6.2%
6.6%
6.7%
ALL
BONDS
REIT
300
INFL
BONDS
ALL
ORDS
ALE
DISTRIBUTION
20 cps
19%
PROPERTY VALUES
10%
$990m
AVE LEASE TERM
1 YR
12yrs
NET GEARING
45%
3%
ALL UP DEBT INTEREST RATE
4.35%
4 yrs
AVE DEBT TERM
1 YR
AVE HEDGING TERM
2 YRS
9 yrs
Source: ASX, Bloomberg, IRESS, ALE
Note: Amounts are rounded. Please see other
results materials for more details.
ALE Property Group
Comprising Australian Leisure and Entertainment
Property Trust and its controlled entities
Report For the Year ended 30 June 2016
ABN 92 648 441 429
ANNUAL REPORT
2016
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 Pty
Limited (ALH) for an average remaining initial lease term of 12.3 years
plus options for ALH to extend.
WWW.ALEGROUP.COM.AU
Contents
Directors' Report
Auditor's Independence Declaration
Financial Statements
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Auditors Report
Investor Information
02
20
21
22
23
24
25
26
49
50
52
DIRECTORS' REPORT
For the Year ended 30 June 2016
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 2016.
1. DIRECTORS
The following individuals were directors of the Company during the year and up to the date of this report unless otherwise stated:
Name
Experience, responsibilities and other directorships
P H Warne, B.A, FAICD
Independent Non Executive Director
Chairman of the Board
Appointed: 8 September 2003
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Member of the Nominations Committee
Member of the Remuneration Committee
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 Macquarie
Group Limited and OzForex Group Limited and a board member of ASX Limited. He is also on the
board of NSW Treasury Corporation.
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 Phillipa Downes, BSc (Bus Ad),
MAppFin, GAICD
Independent Non Executive Director
Appointed: 26 November 2013
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Ms Downes is a Director of the ASX Group clearing and settlement facility licensees and their
intermediate holding companies. Pippa is a director of the Sydney Olympic Park Authority and 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
investment, 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.
Page 2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
Name
Experience, responsibilities and other directorships
H I Wright, LL.B, MAICD
Independent Non Executive Director
Appointed: 8 September 2003
Resigned: 27 October 2015
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration 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 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 Nancy Milne, OAM, LLB, FAICD
Independent Non Executive Director
Appointed: 6 February 2015
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Nancy has been a professional non-executive director for over a decade. She is a former lawyer
with over 30 years’ experience with primary areas of legal expertise in insurance, risk management
and corporate governance. She was a partner with Clayton Utz until 2003 and a consultant until
2012. She is currently Chairman of the Securities Exchange Guarantee Corporation, deputy
chairman of the State Insurance Regulatory Authority and a director of Pillar Administration. She
was previously a director of Australand Property Group, Crowe Horwarth Australasia, State Plus and
Novion Property Group (now Vicinity Centres).
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 Paul Say, FRICS, FAPI
Independent Non Executive Director
Appointed: 24 September 2014
Member of the ACRMC
Chair of the Nominations Committee
Chair of the Remuneration Committee
Paul has over 30 years’ experience in commercial and residential property management,
development and real estate transactions with major multinational institutions. Paul 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 is a director of GPT Metro Office Fund and Frasers Logistic & Industrial Trust (SGX
listed).
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 and QLD).
Mr James McNally B.Bus (Land
Economy), Dip. Law
Executive Director
Appointed: 26 June 2003
Responsible Manager of the Company under the Company’s AFSL
James is an executive and founding director of the company. 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.
Page 3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
Name
Experience, responsibilities and other directorships
Mr Andrew Wilkinson B.Bus, CFTP,
MAICD
Managing Director
Appointed: 16 November 2004
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence
(AFSL)
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.
2. OTHER OFFICERS
Name
Experience
Mr Michael Clarke BCom, MMan, CA,
ACIS
Company Secretary and Finance Manager
Appointed: 30 June 2016
Michael joined ALE in October 2006 and was appointed Company Secretary on 30 June 2016.
Michael has a Bachelor of Commerce from the University of New South Wales and a Masters of
Management from the Macquarie Graduate School of Management. He is an associate member of
both the Governance Institute of Australia and the Institute of Chartered Accountants in Australia
and New Zealand.
Michael has over 30 years’ experience in accounting, taxation and financial management. Michael
previously held senior financial positions with subsidiaries of listed public companies and spent 12
years working for Grant Thornton. He has also owned and managed his own accounting practice.
Mr David Lawler B.Bus, CPA
Independent member of ACRMC
Appointed: 9 December 2005
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
and Investment 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.
3. INFORMATION ON DIRECTORS AND KEY MANAGEMENT PERSONNEL
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
P G Say
P G Say
Page 4
Directorships of listed entities
ASX Limited
Crowe Horwath Australasia Limited
OzForex Group Limited
Macquarie Group Limited
GPT Metro Office Fund
Frasers Logistic & Industrial Trust (SGX listed)
Type
Non-executive
Non-executive
Chairman
Chairman
Non-executive
Non-executive
Resigned as
Director
Jan 2015
Appointed as
Director
July 2006
May 2007
October 2013
July 2007
August 2014
June 2016
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
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
Executive Director
Executive Director
Capital Manager
Company Secretary and Finance Manager
Asset Manager
Number held
at the start
of the year
Net
movement
Number held
at the end of
the year
1,185,000
213,904
-
20,000
244,723
55,164
50,000
15,000
4,000
-
-
25,000
-
73,136
-
23,611
2,500
-
1,185,000
213,904
25,000
20,000
317,859
55,164
73,611
17,500
4,000
The following key management personnel currently hold rights over stapled securities in ALE:
Name
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
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
141,746
74,078
16,669
12,747
33,365
15,888
6,355
4,767
(43,136)
(23,611)
-
-
131,975
66,355
23,024
17,514
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 2016 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
P H Warne
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
Board
ACRMC
Nominations Committee
and Remuneration
Committee
Held1
14
8
14
14
14
14
14
Attended
13
8
13
11
14
14
14
Held1
6
3
6
6
6
n/a
n/a
Attended
6
3
6
6
5
n/a
n/a
Held1
5
2
5
5
5
n/a
n/a
Attended
5
2
5
5
5
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
6
6
n/a
n/a
1 “Held” reflects the number of meetings which the director or member was eligible to attend.
4. 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.
Page 5
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
5. 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 of the properties in the portfolio are leased to Australian
Leisure and Hospitality Group (ALH) for an average remaining initial lease term of 12.3 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:
•
•
•
•
•
For most of the properties the 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 (three 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.
In October 2015 ALE announced that it had received an unsolicited, indicative, incomplete and non-binding Proposal from its largest
securityholder, Caledonia (Private) Investments Pty Ltd, to acquire up to 100% of ALE’s stapled securities at a price of $3.95 per security.
ALE advised Caledonia that it did not consider the Proposal was in the best interests of all securityholders and that it would not progress
the Proposal. Caledonia withdrew its Proposal in November 2015 and discussions with ALE’s Board in relation to the Proposal ceased.
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 86 individual property values increased by an average of 10.0% to $990.5 million; and
Net Assets increased by 11.8% to $495.9 million and net borrowings (total borrowings less cash) as a percentage of assets (total
assets less cash, derivatives and deferred tax assets) decreased from 48.0% to 44.9%.
Current year performance
ALE produced a profit after tax of $91.2 million for the year ended 30 June 2016 compared to a profit of $99.4 million for the year ended
30 June 2015. The decrease is primarily due to:
•
•
•
•
•
•
Fair value adjustments to investment properties increased from $78.8 million in 2015 to $89.6 million in the current year due to
rental growth and continued reductions in capitalisation rates;
Fair value adjustments to derivatives liabilities increased from $5.2 million in 2015 to $25.2 million in the current year as long term
interest rates continued to decline;
Rental income increased by 1.7% due to the full year impact of the November 2014 rent review of 2.2% and the part year impact
of the November 2015 rent review of 1.5%;
Interest income was lower on the back of decreasing interest rates and lower cash balances;
Finance costs were lower due to the full year impact of interest expense savings achieved from the refinancing in June 2014 and
the repayment of ALE Notes 2 in the August 2014; and
Management costs increased during the year due to costs associated with the response to the Caledonia proposal in October 2015
however 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.
Page 6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
During the financial year ALE produced a distributable profit of $29.6 million compared to $29.1 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 reduced finance costs.
Profit/(loss) after income tax for the year
Adjustment for non-cash items
Fair value decrements /(increments) to derivatives and 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
Distribution funded as follows
Current year distributable profits
Prior year undistributed profits
Capital and surplus cash
Earnings and distribution per stapled security:
Basic and diluted earnings
Earnings available for distribution
Total distribution
Current year distributable profits
Prior year undistributed profits
Capital and surplus cash
Financial position
30 June
2016
$’000
30 June
2015
$’000
91,178
99,364
(64,434)
182
2,613
35
(61,604)
29,574
39,154
(9,580)
29,574
6,523
3,057
39,154
30 June
2016
Cents
46.58
15.11
20.00
15.11
3.33
1.56
20.00
(73,543)
190
3,087
(43)
(70,309)
29,055
32,976
(3,921)
32,976
3,921
-
32,976
30 June
2015
Cents
50.77
14.85
16.85
14.85
2.00
-
16.85
Percentage
Increase /
(Decrease)
(8.25%)
1.75%
18.69%
ALE's net assets increased by 11.8%, compared with the previous year which was largely attributable to an increase in property values
during the year.
Investment property revaluations increased the value by 10.0% from $900.5 million to $990.5 million during the year. The increase in
property valuations was attributable to the November 2015 CPI rent increase and average capitalisation rates decreasing from around
6.0% to 5.5% across the portfolio. When assessing statutory valuations the valuers applied both traditional capitalisation rate and
discounted cashflow (DCF) based valuation methods. The valuation results reflect a combination of these methods but continue to place
significant emphasis upon the traditional capitalisation rate approach.
Page 7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
ALE believes that the DCF method can provide a comprehensive view of the quality of the lease and tenant as well as the medium and
longer term opportunities for reversion to market based levels of rent. In applying the DCF method the valuers made their own
independent assessment of the tenant’s current level of EBITDAR and also adopted industry standard market rental ratios. The valuers
also used a range of assumptions they deemed appropriate for each of the individual properties. Based upon their assessments and
assumptions the valuers’ DCF valuations represented a weighted average capitalisation rate of around 4.8% for the 31 properties valued.
This compares to the rate of around 5.5% which was derived using a combination of the DCF and capitalisation rate methods.
Net assets per stapled security increased by 11.8% from $2.27 to $2.53 compared to June 2015, primarily as a result of the increase in
property values.
ALE’s market capitalisation this year increased by around 23% to more than $891 million at 30 June 2016.
During the year, net covenant gearing reduced from 48.0% to 44.9%. ALE continues to maintain appropriate headroom to all debt
covenants with the nearest equivalent to an average 25.7% fall in property values.
ALE’s capital position remains sound. This is evidenced by a steady reduction in gearing and the maintenance of an investment grade
credit rating. ALE’s next debt maturity of $110 million will occur in August 2017. ALE is already prepared for this refinancing with a range
of options available to it. Key debt market participants have continued to provide ALE with positive encouragement to issue in both the
domestic and offshore capital markets. Activities during the year included a number of presentations to capital market participants
throughout Australia, Asia and New Zealand. Meetings were also held with major US Private Placement debt investors in January this
year.
ALE‘s debt capital structure continues to be characterised by the following positive features:
debt structure with two types of fixed rate bonds;
maturity dates that are diversified over the next seven years;
100% of net debt hedged for around nine years;
all up cash interest rate of 4.35% p.a. fixed until refinancing in August 2017; and
lower gearing of 44.9% (2015: 48.0%) that remains below the target range of 50% to 55%.
ALE has consistently sought to mitigate interest rate volatility and continues to have long term hedging in place to achieve this objective.
During the year ALE extended its hedging arrangements to cover forecast debt levels to November 2025.
Historical performance
To provide context to ALE's historical performance, the following data and graphs outline a five year history of key financial metrics.
FY12
FY13
FY14
FY15
FY16
Distributable profit ($m)
26.7
31.7
31.2
29.1
29.6
Distribution per Security (cents)
16.00
16.00
16.45
16.85
20.00
Continuing property values ($m)2
767.2
781.5
821.6
900.5
990.5
Net gearing 1
1. Total borrowings less cash as a percentage of total assets less cash and derivatives
51.9%
50.8%
51.7%
47.9%
44.9%
2. Includes only the value of properties held as at 30 June 2016
Page 8
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
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 2016 totalled $13.70.
According to investment bank UBS, for the period ending 30 June 2016, ALE continued to outperform other equity return benchmarks
including the AREIT 300 index and the All Ordinaries index for periods including one, three, five and ten years. For the one year period
ALE's return of 29.5% outperformed the AREIT 300 index of 24.6% and All Ordinaries index of 2.0%.
Distributable Profit ($m)
Gearing
Continuing Property Values ($m)
$30
$20
$10
$0
60.0%
40.0%
20.0%
0.0%
$1,200
$800
$400
$0
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
5
F
Y
1
6
The following chart shows the total annual return of an ALE security since listing in November 2003.
1.Includes ALE’s equity market price of $4.55 as at 30 June 2016 and reinvestment of distributions and 2009 renunciation payment
2.All Ordinaries Accumulation Index
3.BAIC0 Index - Australian credit inflation-linked securities
4.UBS S&P REIT 300 Index
5.BAMST0 Index- composite of the Composite Bond, Inflation and Credit FRN indices
Business strategies and future prospects
ALE continues to hold a positive outlook for the market rent prospects for the portfolio. In around two years' time the first major review
will occur with the fair market rent capped and collared within 10% of the 2017 rent for the majority of properties. 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.
ALE has continued to preserve the quality of the existing property portfolio. The current debt structure and extended hedging position
provides significant certainty around a stable distribution profile for the medium term.
ALE's objective is to continue to grow distributions at least in line with increases in the CPI.
Page 9
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
Material business risks
ALE is subject to a number of material business risks that may have an impact on the financial prospects of ALE. These risks and how
ALE manages them include:
Property valuation risk - the properties that ALE owns have values that are exposed to movements in the Australian commercial property
markets as well as the general levels of long and short term interest rates. ALE is unable to control the market forces that impact ALE's
property values however ALE constantly monitors the property market to assess general trends in property values. ALE undertakes on-
going condition and compliance audits of our properties and has independent valuers perform valuations on one third of the property
portfolio on an annual basis. Declines in ALE's property values will reduced NTA and could also reduce headroom on debt covenants. At
30 June 2016 the closest debt covenant would be triggered by a decline of around 26% in property values and a resultant average
capitalisation rate of 7.40%. By way of comparison it should be noted that in the last 10 years the highest average capitalisation rate of
ALE properties has been 6.60%. ALE therefore considers its exposure to property valuation risk is appropriate.
Interest rate risk - ALE currently has $479 million of outstanding borrowings and consequently faces the risk of reduced profitability and
distributions should interest rates on borrowings increase materially. To mitigate this risk ALE uses fixed rate borrowings and hedges
variable rate borrowings for the medium and long term. Existing hedging arrangements effectively hedge ALE's debt to November 2025
at average base rates of between 3.26% and 3.54%.
Refinancing risk - ALE currently has outstanding borrowings representing a gearing level of 44.9% and has a medium term policy of
maintaining gearing within a range of 50% to 55%. ALE consequently faces refinancing risk as and when borrowings mature and require
repayment. Failure, delays or increased credit margins in refinancing borrowings could subject ALE to a number of risks that could
potentially impact future earnings. To mitigate these risks ALE proactively staggers debt maturities, continually monitors debt markets,
actively seeks to maintain ALE's current credit rating of Baa2 and maintains relationships with diverse funding markets to ensure multiple
funding options are available. ALE has a long track record of consistently approaching debt markets for refinancing well in advance of the
scheduled debt maturity dates.
Single tenant risk - all 86 of ALE's properties are leased to a single tenant, ALH which is owned by Woolworths Limited (75%) and the
Mathieson family (25%). In event of a default in rental payments by the tenant, ALE may be unable to pay interest on borrowings and
distributions to securityholders. ALE manages this risk by monitoring the operating performance of each of the hotels and ALH on a
regular basis. ALE also has the option of selling properties and/or issuing equity to meet its debt obligations.
6. 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
2016
cents per
security
30 June
2015
cents per
security
30 June
2016
30 June
2015
$’000
$’000
Final Trust income distribution for the year ending 30 June 2016 to be
paid on 5 September 2016
10.10
8.45
19,773
16,537
Interim Trust income distribution for the year ending 30 June 2016
paid on 7 March 2016
Total distribution for the year ending 30 June 2016
9.90
20.00
8.40
16.85
19,381
39,154
16,439
32,976
No provisions for or payments of Company dividends have been made during the year (2015: nil).
7. 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.
8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
ALE will continue to maintain its defined strategy of identifying opportunities to increase its profitability and value to its stapled
securityholders.
In accordance with the leases of its investment properties, 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.
Page 10
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
9 REMUNERATION REPORT (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2016 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
link 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 Remunerations Committee
The Remuneration 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 2016, the Committee consisted of the following:
P G Say
P H Warne
H I Wright
P J Downes
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chairman of Remuneration Committee
(Resigned 27 October 2015)
Page 2 of this report provides 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 5.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee retained Godfrey Remuneration Group to advise on remuneration.
Godfrey Remuneration Group was paid $16,000 for its services.
Page 11
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
Company Secretary and
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.
Page 12
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
$457,400
6 months
6 months
Ongoing
$258,320
3 months
3 months
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James
McNally
Margaret
Sullivan
Finance
Manager and
Company
Secretary
Ongoing
$211,000
3 months
3 months
Asset
Manager
Executive
Director
Compliance
Officer
Ongoing
$200,800
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$50,000
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
starting 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.
Page 13
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.4 Executive Remuneration outcome for year ended 30 June 2016
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 2016.
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 executed a hedge that extended the term of the hedging on 100% of ALE’s net debt to November 2025;
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
●
●
Worked constructively with ALH to agree a range of developments that are value enhancing for ALE for a number of properties;
Undertook a more comprehensive statutory valuation 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 number 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 initiatives 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:
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Target EIS
(as % of
FAR)
60%
50%
n/a
n/a
EIS
Awarded
(as % of
FAR)
45.0%
39.9%
19.0%
7.5%
EIS Awarded
as a % of
Target
75.1%
79.7%
-
-
EIS
Awarded
$206,000
$103,000
$40,000
$15,000
Cash
Component
$103,000
$51,500
$20,000
$7,500
ESSS
Component
$103,000
$51,500
$20,000
$7,500
A review of ALE's current year performance and history is provided in the Operational and Financial Review on page 6 of the Directors
Report.
Page 14
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
M J Clarke
D J Shipway
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery
Date
% vested in
year
% forfeited
in year
34,878
63,732
33,365
19,092
31,375
15,888
8,825
7,844
6,355
8,825
3,922
4,767
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
2.27
2.55
3.15
2.27
2.55
3.15
2.27
2.55
3.15
2.27
2.55
3.15
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
Nil
Nil
Nil
Nil
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 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
(71,250)
(39,000)
(43,136)
(23,611)
Opening
Balance
Granted in
Year
312,790
162,264
40,000
30,000
141,746
74,078
16,669
12,747
105,000
50,000
20,000
15,000
33,365
15,888
6,355
4,767
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
346,540
173,264
60,000
45,000
131,975
66,355
23,024
17,514
Securities
Delivered in
the year -
value paid $
159,603
87,361
-
-
9.6 Equity based compensation
The value of ESSS disclosed in section 9.5.3 and 9.9 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 11 August 2016.
Page 15
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
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's 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.
9.8 Response to Vote Against the 2015 Remuneration Report
At the Annual General Meeting of the Company (AGM) held on 27 October 2015 a resolution was put to the vote that the Remuneration
Report for the last financial year ending 30 June 2015. More than 25% of the votes cast were against adoption of the Report. The resolution
failed to pass because ALE's major securityholder, Caledonia Private Investments, who owned 25.39% and other securityholders that owned
0.61% of securities voted against the resolution.
No negative comments were made at the AGM in respect of the Remuneration Report by representatives of Caledonia who were present.
Subsequent to the AGM members of the Remuneration and Nominations Committee of the company held discussions with Caledonia to gain
an understanding of concerns that may have lead to the rejection of the Remuneration Report resolution. No concerns were given to the
Board in relation to the Remuneration Report. In addtion no other securityholder has expressed concerns in relation to the Remuneration
Report.
On the following basis the Board has made no material adjustments to remuneration arrangements:
1.
2.
3.
4.
At no time in the last three years has the Committee received any negative comments concerning ALE's Remuneration Report;
At no time in the last three years have the levels of Executive and Board Remuneration been varied materially;
ALE's Remuneration Reports in 2012, 2013 and 2014 were all adopted with votes for the Report above 97%;
The Remuneration and Nominations Committee consistently engages external consultants to advise on remuneration matters and
awarded remuneration is within the peer groups used for comparison; and
5.
The Board has been advised of no other concerns with respect to ALE's Remuneration Report.
The Board will continue make itself available to securityholders concerning remuneration matters and will consider any concerns raised.
Page 16
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.9 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 2016 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
Table 1 Remuneration details 1 July 2015 to 30 June 2016
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2016 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
P H Warne
H I Wright1
P J Downes
P G Say
N J Milne
B R Howell 2
A F O Wilkinson
J T McNally
A J Slade
M J Clarke 2
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Company Secretary
Executive Director
Executive Director
Capital Manager
Company Secretary and
Finance Manager
D J Shipway
Asset Manager
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
Termination
benefits
$
ESSS
$
Total
$
$
159,817
31,963
96,184
108,750
91,324
90,000
411,512
-
-
-
-
-
-
103,000
100,000
-
222,160
188,465
178,967
1,679,142
51,500
20,000
7,500
182,000
-
-
-
-
-
-
-
-
-
-
-
-
159,817
31,963
96,184
108,750
91,324
90,000
514,512
100,000
273,660
208,465
186,467
1,861,142
15,183
3,037
9,137
-
8,676
-
35,000
-
30,000
17,485
17,040
135,558
-
-
-
-
-
-
-
-
175,000
-
-
-
35,000
-
-
-
105,321
-
-
-
108,750
-
-
100,000
-
-
90,000
-
7,310
-
103,000
659,822
31.2%
-
-
-
100,000
-
3,980
3,088
-
-
51,500
359,140
20,000
249,038
3,060
-
7,500
214,067
17,438
-
182,000
2,196,138
28.7%
16.1%
7.0%
1. Helen Wright resigned as a director on 27 October 2015
2. Brendan Howell resigned as Company Secretary on 30 June 2016 and Michael Clarke was appointed Company Secretary on 30 June 2016
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 2015 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
P H Warne
J P Henderson 3
H I Wright
Non-executive Director
Non-executive Director
Non-executive Director
P J Downes
Non-executive Director
P G Say
N J Milne
Non-executive Director
Non-executive Director
B R Howell
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
A J Slade
M J Clarke
Executive Director
Capital Manager
Finance Manager
D J Shipway
Asset Manager
3. John Henderson resigned as a director on 6 November 2014
Page 17
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
Termination
benefits
$
ESSS
$
Total
$
$
159,817
33,333
95,890
91,324
75,000
36,530
90,000
-
-
-
-
-
-
-
399,993
105,000
100,000
-
213,267
182,062
172,672
1,649,888
50,000
20,000
15,000
190,000
-
-
-
-
-
-
-
-
-
-
-
-
-
159,817
15,183
33,333
95,890
91,324
75,000
36,530
90,000
504,993
100,000
263,267
202,062
187,672
-
9,110
8,676
-
3,470
-
30,761
-
29,983
16,592
16,404
1,839,888
130,179
-
-
-
-
-
-
-
-
-
175,000
-
-
-
33,333
-
-
-
105,000
-
-
-
100,000
-
-
-
75,000
-
-
-
40,000
-
-
-
90,000
-
6,213
-
105,000
646,967
32.5%
-
-
-
100,000
-
4,370
-
50,000
347,620
2,695
2,687
15,965
-
-
20,000
241,349
15,000
221,763
-
190,000
2,176,032
28.8%
16.6%
13.5%
S300A(1)(e)(i)
proportion of
remuneration
performance
based
S300A(1)(e)(i)
proportion of
remuneration
performance
based
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
15.6%
-
14.3%
8.0%
3.5%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
-
-
16.2%
-
14.4%
8.3%
6.8%
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2016
10 STAPLED SECURITIES UNDER OPTION
No options 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 options during the financial year.
12 INSURANCE OF OFFICERS
During the financial year, the Company paid a premium of $51,535 (2015: $54,544) 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 and 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 financial year 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
Other services
KPMG Australian firm:
Financial reporting and risk assurance services
Total other services
Total remuneration
30 June
2016
$
30 June
2015
$
171,500
12,500
160,000
5,000
184,000
165,000
18,259
18,259
-
-
202,259
165,000
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.
Page 18
ALE Property Group
FINANCIAL STATEMENTS
Page 22
Page 23
Page 24
Page 25
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Page 26
Page 28
Page 33
Note
1
2
3
About this report
Investment Property
Capital structure and financing
Page 42
4
Business performance
3.1
3.2
3.3
3.4
3.5
Borrowings
Financial risk management
Equity
Capital management
Cash and cash equivalents
Revenue and income
4.1
4.2 Other expenses
4.3
4.4
4.5
4.6 Distributable income
Earnings per security
4.7
Finance costs
Taxation
Remuneration of auditors
Page 46
5
Employee benefits
Page 47
6 Other
5.1
5.2
5.3
Employee benefits
Key management personnel compensation
Employee share plans
6.1 New accounting standards
Segment reporting
6.2
Events occurring after balance date
6.3
Contingent liabilities and assets
6.4
Investments in controlled entities
6.5
Related party transactions
6.6
Parent entity disclosures
6.7
Page 49
Page 50
Directors' Declaration
Independent Auditor's Report to Stapled Securityholders
Page 21
ALE Property Group
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2016
Revenue
Rent from investment properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to investment properties
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
Salaries and related costs
Other expenses
Total expenses
Profit before income tax
Income tax expense/(benefit)
Profit after income tax
Profit/(Loss) attributable to stapled securityholders of ALE
Basic and diluted earnings per stapled security
Note
4.1
4.1
2
4.3
4.2
4.4
2016
$'000
56,172
1,054
57,226
89,644
43
89,687
146,913
25,210
23,280
2,141
2,509
2,560
55,700
91,213
35
91,178
91,178
Cents
46.58
2015
$'000
55,214
1,779
56,993
78,790
53
78,843
135,836
5,247
24,507
2,093
2,538
2,130
36,515
99,321
(43)
99,364
99,364
Cents
50.77
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
Page 22
ALE Property Group
STATEMENT OF FINANCIAL POSITION
For the Year ended 30 June 2016
Current assets
Cash and cash equivalents
Receivables
Other
Total current assets
Non-current assets
Investment properties
Plant and equipment
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Employee benefits
Distribution payable
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.
Note
3.5
2
5.1
3.1
3.3
2016
$'000
37,919
278
218
38,415
990,480
36
288
990,804
1,029,219
7,457
169
19,773
27,399
479,528
26,349
505,877
533,276
495,943
258,118
807
237,018
495,943
$
$2.53
2015
$'000
44,812
315
250
45,377
900,470
18
315
900,803
946,180
7,706
145
16,537
24,388
476,915
1,140
478,055
502,443
443,737
257,870
735
185,132
443,737
$
$2.27
Page 23
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2016
Share
Capital
$'000
Note
Share
Based
Payments
Reserve
$'000
Retained
Earnings
$'000
Total
$'000
2016
Total equity at the beginning of the year
257,870
735
185,132
443,737
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
Securities issued - Employee share based payments
Distribution paid or payable
-
-
-
-
248
-
Total equity at the end of the year
258,118
-
-
-
91,178
-
91,178
91,178
-
91,178
182
(110)
-
807
-
(138)
(39,154)
182
-
(39,154)
237,018
495,943
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
-
-
-
-
-
-
Total equity at the end of the year
257,870
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
-
-
-
190
(59)
-
735
99,364
-
99,364
99,364
-
99,364
-
(71)
(32,976)
185,132
190
(130)
(32,976)
443,737
Page 24
ALE Property Group
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2016
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
Cash flows from investing activities
Net proceeds from disposal of properties
Payments for investment property
Payments for plant and equipment
Net cash inflow from investing activities
Cash flows from financing activities
Capitalised borrowing costs paid
Borrowings repaid
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
Reconciliation of profit after income tax to net cash inflows from
operating activities
Profit for the year
Plus/(less):
Fair value increments to investment property
Fair value decrements to derivatives
Finance costs amortisation
CIB Accumulated indexation
Share based payments expense
Share based payments securities purchased
Depreciation
Decrease/(increase) in -
Receivables
Deferred tax assets
Other assets
Increase/(decrease) in -
Payables
Provisions
Note
2016
$'000
61,905
(12,847)
1,031
385
(21,049)
29,425
-
(366)
(34)
(400)
2015
$'000
60,820
(11,778)
1,946
587
(22,735)
28,840
1,200
-
-
1,200
-
(10)
-
(35,918)
(35,918)
(6,893)
44,812
37,919
2016
$'000
91,178
(89,644)
25,210
382
2,231
182
-
15
37
27
32
(249)
24
(102,597)
(32,584)
(135,191)
(105,151)
149,963
44,812
2015
$'000
99,364
(78,790)
5,247
574
2,513
190
(130)
13
634
24
(1)
(817)
19
Net cash inflow from operating activities
29,425
28,840
The above statement of cash flows should be read in conjunction with the accompanying Notes.
Page 25
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 30 June 2016
1.
About this report
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 2015
to 30 June 2016.
Accounting 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.
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.
Statement of compliance
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.
The consolidated financial statements were authorised for
issue by the Board of Directors on 3rd August 2016.
Basis of preparation
The Financial Report has been prepared on an historical cost
basis, except for the revaluation of investment properties and
certain financial instruments. Cost is based on the fair values
of the consideration given in exchange for assets. All
amounts are represented in Australian dollars, unless
otherwise noted.
Rounding of amounts
ALE is an entity of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors' Reports) Instrument
2016/191 and in accordance with that Instrument, all
financial information presented in Australian dollars has been
rounded to the nearest thousand unless otherwise stated.
Accounting estimates and judgements
Investment property
Financial instruments
Income taxes
Measurement of share based payments
Note
2
3
4
5
Significant accounting policies
Accounting policies are selected and applied in a manner that
ensures that the resulting financial information satisfies the
concepts of relevance and reliability, thereby ensuring that
the substance of the underlying transactions or other events
is reported. Other significant accounting policies are
contained in the notes to the financial statements to which
they relate to.
(a) Principles of consolidation
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.
Page 26
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
1. About this report
Measurement of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial
and non-financial assets and liabilities.
The Group has an established control framework with respect
to the measurement of fair values. Senior management
regularly reviews significant unobservable inputs and
valuation adjustments. If third party information, such as
bank valuations or independent valuations, is used to
measure fair values then management assess the evidence
obtained from the third parties to support the conclusion that
such valuations meet the requirements of IFRS, including the
level in the fair value hierarchy in which such valuations
should be classified.
Significant valuation issues are reported the to the Audit,
Compliance, and Risk Management Committee.
Page 27
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2.
Investment property
This section provides information relating to the investment properties of the Group.
Investment properties
Reconciliation of fair value gains/losses for year ending 30 June 2016
Fair value as at beginning of the year
Disposals during the year
Resumptions during the year
Additions during year
Carrying amount before revaluations
Fair value as at end of the year
Fair value gain/(loss) for year
Recognition and measurement
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 classified as investment property are not
depreciated.
2016
$'000
2015
$'000
990,480
900,470
900,470
821,680
-
-
366
900,836
990,480
89,644
-
-
-
821,680
900,470
78,790
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.
Measurement of fair value
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 2016, the weighted
average investment property capitalisation rate used to
determine the value of all investment properties was 5.53%
(2015: 5.99%).
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 the Statement of
Comprehensive Income. 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
Page 28
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Investment property
Measurement of fair value (continued)
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 weighted
average lease term of the properties is around 12 years.
In accordance with ALE's policy of independently valuing at
least one-third of its property portfolio annually, 31
properties were independently valued as at 30 June 2016.
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 and Herron Todd White.
The remaining 55 properties were subject to Directors'
valuations as at 30 June 2016, identified as "B". The
Directors' valuations of the 55 properties were determined by
taking each property's net rent as at 30 June 2016 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 31 independent valuations
completed at 30 June 2016 on a like for like basis. The
Directors have received advice from CBRE and Herron Todd
White, that it is reasonable to apply the same percentage
movement in the weighted average capitalisation rates, on a
like for like basis.
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), 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.
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
2016
Yields
4.97% - 6.10%
3.80% - 6.38%
3.20% - 6.49%
5.01% - 6.38%
5.98% - 7.29%
2015
Yields
5.10% - 6.36%
4.09% - 6.86%
4.62% - 6.75%
5.73% - 6.49%
6.19% - 7.12%
2016
Average
5.37%
5.54%
5.46%
5.81%
6.47%
2015
Average
5.64%
6.02%
6.05%
6.18%
6.59%
Page 29
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Investment property
The fair value measurement for investment property of $990.48 million has been categorised as a level 3 fair value based on
inputs to the valuation technique used.
Valuation techniques and unobservable inputs
Fair value
hierarchy
Class of
property
Fair Value
30 June
2016
$000's
Level 3
Pubs
990,480
Valuation
Technique
Inputs Used To Measure
Fair Value
Range of Individual
Property Unobservable
inputs
Capitalisation
method
Gross rent p.a ($'000's)
Land tax p.a ($'000's)
Adopted capitalisation rate
$152 - $1,631
$14 - $127
3.20% - 7.29%
Discounted
cash flow
method
Gross rent p.a ($'000's)
Land tax p.a ($'000's)
Discount rates p.a
Terminal capitalisation rates
Consumer price index p.a
$152 - $1,631
$14 - $127
6.50% - 8.50%
6.00% - 6.50%
2.00% - 2.50%
As noted above the independent valuer had regard to discounted cash flow modelling in deriving a final capitalisation rate
although the capitalisation of income method remains the predominant method used in valuing the individual properties.
Ownership arrangements
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.
2016
$'000
2015
$'000
(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
249,246
589,312
895,697
246,240
592,420
895,074
(ii) Amount recognised in the profit and loss
Rental income
56,172
55,214
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 market
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.
The following tables detail the cost and fair value of each of
the Group's investment properties. The valuation type and
date is as follows:
A
B
Independent valuations conducted during
June 2016 with a valuation date of 30 June
2016.
Directors' valuations conducted during June
2016 with a valuation date of 30 June 2016.
Properties were purchased in November 2003, unless
otherwise indicated.
57,139 56,414 Valuation type and date
Page 30
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Investment property
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 (Mar 09)
New Brighton Hotel, Manly
Pioneer Tavern, Penrith
Pritchard's Hotel, Mount Pritchard (Oct 07)
Smithfield Tavern, Smithfield
5,472
5,660
8,208
8,772
3,114
8,945
8,867
5,849
21,130
4,151
Total New South Wales properties
80,168
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 (Nov 08)
Camp Hill Hotel, Camp Hill
Chardons Corner Hotel, Annerly
Dalrymple Hotel, Townsville
Edge Hill Tavern, Manoora
Edinburgh Castle Hotel, Kedron
Four Mile Creek, Strathpine (Jun 04)
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 (Jun 04)
Nudgee Beach Hotel, Nudgee
Palm Beach Hotel, Palm Beach
Pelican Waters, Caloundra (Jun 04)
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
8,396
3,303
4,434
3,304
11,024
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
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2016
$'000
Fair value
at 30 June
2015
$'000
Fair value
gains/
(losses)
2016
$'000
A
B
B
A
B
A
B
B
B
A
A
B
B
B
A
A
B
B
A
B
A
B
B
A
A
B
A
B
B
B
B
B
B
A
B
A
B
A
B
A
A
A
12,000
12,230
17,220
17,700
6,550
14,400
10,260
12,690
26,750
8,900
10,810
11,410
15,900
16,150
6,000
13,990
9,800
11,830
24,900
8,430
1,190
820
1,320
1,550
550
410
460
860
1,850
470
138,700
129,220
9,480
15,800
6,320
8,840
11,650
16,950
13,700
4,240
3,070
11,550
5,900
6,500
7,280
12,550
12,750
4,000
10,540
7,950
12,750
6,170
9,700
10,310
5,880
13,620
7,900
6,630
6,000
10,320
10,000
17,130
10,000
12,850
10,300
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
2,020
660
690
1,750
1,134
1,690
430
370
1,100
800
1,350
720
1,200
1,750
440
1,340
420
750
580
1,050
610
800
1,320
770
610
2,420
1,040
500
1,930
650
1,180
1,090
Total Queensland properties
145,619
309,150
275,620
33,164
Page 31
ALE Property Group
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2016
$'000
Fair value
at 30 June
2015
$'000
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Investment property
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
3,303
3,303
1,888
1,605
2,171
1,605
4,435
Total South Australian properties
18,310
Victoria
Ashley Hotel, Braybrook
Bayswater Hotel, Bayswater
Berwick Inn, Berwick (Feb 06)
Blackburn Hotel, Blackburn
Blue Bell Hotel, Wendouree
Boundary Hotel, East Bentleigh (Jun 08)
Burvale Hotel, Nunawading
Club Hotel, 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
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
Total Victorian properties
248,121
Western Australia
Queens Tavern, Highgate
Sail & Anchor Hotel, Fremantle
The Brass Monkey Hotel, Northbridge (Nov 07)
Balmoral Hotel, East Victoria Park (Jul 07)
Total Western Australian properties
Total investment properties
4,812
3,114
7,815
6,377
22,118
514,336
Fair value
gains/
(losses)
2016
$'000
280
160
170
150
1,190
290
200
6,570
5,560
4,100
3,590
5,800
3,790
5,550
6,290
5,400
3,930
3,440
4,610
3,500
5,350
34,960
32,520
2,440
8,750
19,790
18,700
17,450
4,800
22,900
21,000
10,940
17,260
14,520
22,920
8,120
7,710
19,530
13,850
15,770
16,600
2,710
8,020
15,100
15,500
19,660
5,000
22,000
12,380
11,500
6,510
26,000
11,660
12,240
11,440
23,790
14,840
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
970
1,390
1,200
1,450
270
1,900
3,180
1,140
1,580
1,340
2,100
720
710
1,930
1,270
1,450
1,380
310
720
850
1,390
1,660
290
2,170
1,140
1,370
810
2,100
1,060
940
1,540
2,190
1,240
478,960
435,200
43,760
8,300
4,500
9,410
6,500
28,710
990,480
8,210
4,300
9,000
6,400
27,910
900,470
90
200
410
100
800
89,644
B
B
A
B
A
B
B
A
B
A
B
A
B
A
B
B
B
B
B
B
B
B
B
A
B
B
A
A
B
A
A
B
A
B
A
B
B
B
B
B
B
B
B
B
Page 32
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3.
Capital structure and financing
This section provides information on the Group's capital structure and its exposure to financial risk, how they effect the
Group's financial position and how the risks are managed.
3.1 Borrowings
3.4 Capital management
3.2 Financial risk management
3.5 Cash and cash equivalents
3.3 Equity
3.1 Borrowings
2016
$'000
Non-current borrowings
Capital Indexed Bond (CIB)
Australian Medium Term
Notes (AMTN)
CIB
Gross value of debt
Accumulated indexation
Unamortised borrowing costs
Net balance
145,402
143,107
334,126
479,528
333,808
476,915
2016
$'000
111,900
34,245
(743)
145,402
2015
$'000
111,900
32,014
(807)
143,107
$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.
AMTN
Gross value of debt
Unamortised borrowing costs
Net balance
2016
$'000
335,000
(874)
334,126
2015
$'000
335,000
(1,192)
333,808
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.
2015 Recognition and measurement
$'000
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.
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, NSW
Properties subject to
mortgages
Total assets pledged as
security
2016
$'000
2015
$'000
8,390
8,390
990,480
900,470
(26,750)
(24,900)
963,730
875,570
972,120
883,960
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.
Page 33
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
Terms and Repayment Schedule
Nominal
Interest
Rate
3.4%2
4.25%
5.00%
Maturity
Date1
Nov-2023
Aug-2017
Aug-2020
30 June 2016
30 June 2015
Face
Value
$'000
Carrying
Amount
$'000
Face
Value
$'000
Carrying
Amount
$'000
111,900 146,145
110,000
110,000
225,000
225,000
481,145
446,900
(1,617)
479,528
111,900 143,914
110,000 110,000
225,000 225,000
446,900 478,914
(1,999)
476,915
CIB
AMTN
AMTN
Unamortised borrowing costs
Total borrowings
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.
Fair value
The basis for determining fair values is disclosed in Note 1.
The fair value of derivative financial instruments (level 2) is
disclosed in the Statement of Financial Position.
The carrying amount of all financial assets and liabilities
approximates their fair value with the exception of
borrowings which is shown below:
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 AMTN issue.
3.2 Financial Risk Management
The Trust and Group have exposure to the following risks
from their use of financial instruments:
30 June 2016
CIB
AMTN
30 June 2015
CIB
AMTN
Carrying
Amount
$'000
Fair
Value
$'000
145,402
334,126
479,528
151,370
347,019
498,389
143,107
333,808
476,915
152,050
346,584
498,634
Both borrowings are classed as Level 3.
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 flow 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.
●
●
●
credit risk
market risk
liquidity risk
This note presents information about ALE's 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.
Page 34
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
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.
Cash
Credit risk on cash is managed through ensuring all cash
deposits are held with authorised deposit taking institutions.
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.
The Group has considered the collectability and recoverability
of trade receivables. Where warranted, an allowance for
doubtful debts has been made for the estimated
irrecoverable trade receivable amounts arising from the past
rendering of services, determined by reference to past
default experience.
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 short and medium term
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.
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
AMTN
2016
$'000
-
(26,349)
2015
$'000
-
(1,140)
(145,402)
(334,126)
(505,877)
(143,107)
(333,808)
(478,055)
Sensitivity analysis
A change of 100 basis points in the prevailing nominal
market interest rates 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 CPI, remain
constant. The analysis was performed on the same basis for
2015.
30 June 2016
Interest rate hedges
CIB
AMTN
30 June 2015
Interest rate hedges
CIB
AMTN
100 bps
increase
100 bps
decrease
$'000
$'000
19,801
-
-
19,801
6,097
-
-
6,097
(22,474)
-
-
(22,474)
(6,599)
-
-
(6,599)
Page 35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
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.
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.
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.
Profile
At the reporting date, ALE's CPI sensitive financial
instruments were as follows:
Financial instruments
Investment properties
CIB
2016
$'000
2015
$'000
990,480
(145,402)
845,078
900,470
(143,107)
757,363
Sensitivity analysis for variable rate instruments
A change of 100 bps in CPI at the reporting date would
increase rent and hence property value 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 2015.
30 June 2016
Investment properties
CIB
30 June 2015
Investment properties
CIB
100 bps
increase
$'000
100 bps
decrease
$'000
9,937
-
9,937
9,961
-
9,961
-
-
-
-
-
-
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.
Page 36
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
The following are the contracted maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements.
30 June 2016
Contractual
cash flows
$'000
6 months or
less
$'000
6-12 months
1-2 years
2-5 years
$'000
$'000
$'000
More than five
years
$'000
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
(7,457)
(209,970)
(392,637)
(7,457)
(2,454)
(7,962)
(2,478)
(7,962)
(4,994)
(123,588)
(15,522)
(253,125)
(184,522)
-
-
Derivative financial instruments
Interest rate hedges
(32,293)
(642,357)
30 June 2015
225
(17,648)
149
(10,291)
(1,497)
(130,079)
(8,464)
(277,111)
(22,706)
(207,228)
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
(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
(1,360)
(642,787)
193
(17,915)
195
(10,221)
344
(20,580)
(2,269)
(164,128)
177
(429,943)
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 hedges
ALE uses derivative financial instruments, being interest rate
hedges, to manage its exposure to interest rate risk on
borrowings. As at balance date, ALE has hedged all non CIB
net borrowings past the maturity date of the AMTN through
nominal interest rate hedges.
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Net assets/(liabilities)
2016
$'000
2015
$'000
-
-
-
-
(26,349)
(26,349)
(26,349)
-
-
-
-
(1,140)
(1,140)
(1,140)
Current year fair value adjustments to derivatives
Fair value increments/
(decrements) to interest rate
hedge derivatives
2016
$'000
2015
$'000
(25,210)
(5,247)
Recognition and measurement
Interest rate hedges are initially recognised at fair value and
are subsequently remeasured to their fair value at each
reporting date. Any gains or losses arising from the change
in fair value of the interest rate hedges are recognised in the
Statement of Comprehensive Income.
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.
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.
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.
Page 37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
At 30 June 2016, the notional principal amounts and periods of expiry of the interest rate hedge contracts are as follows:
Nominal Interest Rate
Hedges
Counter Hedges on
Nominal Interest Rate
Hedges
2016
$'000
-
-
-
-
-
506,000
2015
$'000
-
-
-
-
-
280,000
2016
$'000
-
-
-
(30,000)
-
2015
$'000
-
-
-
-
(30,000)
-
Net Derivative Position
2016
$'000
-
-
-
(30,000)
-
506,000
2015
$'000
-
-
-
-
(30,000)
280,000
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Greater than 5 years
ALE has a forward start hedge in place and a counter hedge that is currently active. During the current year additional
hedging was put in place to extend the term of the net hedging.
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, extending out to November 2025.
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 term of the interest rate hedges and fixed rate securities in relation to the total borrowings of ALE has increased
from 7.8 years at 30 June 2015 to 9.4 years at 30 June 2016.
The following chart shows the hedge balances over the life of the hedges.
Page 38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
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:
Interest Cover Ratio covenants (ICR)
Borrowing
CIB
AMTN
Hedging
ICR covenant
ALH EBITDAR to be greater than 7.5 times CIB
interest expense
Consequence
Stapled security distributions lockup
ALE DPT EBITDA to be greater than or equal to
1.5 times ALE DPT interest expense
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 (i.e. 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
Loan to Value Ratio covenants (LVR)
Borrowing
CIB
CIB
AMTN
AMTN
AMTN
Hedging
LVR Covenant
The issuance of new CIB is not permitted if the
indexed value of the resultant total CIB
exceeds 25% 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
As per AMTN above
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
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
Net Finance 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
Total Borrowings less Cash, divided by Total Assets less Cash less Derivative Assets less
Deferred Tax Assets.
ALE currently considers that significant headroom exists with respect of all the above covenants. At all times during the years
ended 30 June 2016 and 30 June 2015, ALE and its subsidiaries were in compliance with all the above covenants.
Page 39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
3.3 Equity
2016
$'000
2015
$'000 Capital management
3.4 Capital management
257,870
257,870
ALE monitors securityholder equity and manages it to
address risks and add value where appropriate.
Balance at the beginning of
the period
Securities issued - ESSS
248
-
258,118
257,870
Movements in the number
of fully paid stapled
securities during the year
2016
Number
2015
Number
Opening balance
195,702,333
195,702,333
Securities issued - ESSS
Closing balance
66,747
195,769,080
-
195,702,333
Measurement and recognition
Ordinary units and ordinary shares are classified as
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.
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.
The Board’s policy is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to
sustain the 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 2016 and 30 June 2015 were 51.8%
and 53.1% respectively.
The net gearing ratios (total borrowings less cash as a
percentage of total assets less cash, derivatives and deferred
tax assets) at 30 June 2016 and 30 June 2015 were 44.9%
and 48.0% respectively.
Page 40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
3. Capital structure and financing
3.5 Cash and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
2016
$'000
3,456
26,073
8,390
37,919
2015
$'000
2,333
34,089
8,390
44,812
Recognition and measurement
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.
Cash obligations
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 2016 all cash assets were
placed on deposit with National Australia Bank Limited and
Bankwest Limited. As at 30 June 2016, the weighted average
interest rate on all cash assets was 2.66% (2015:2.75%).
Page 41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
4.
Business performance
This section provides the information that is most relevant to understanding the financial performance of the Group during
the financial year and, where relevant, the accounting policies applied and the critical judgements and estimates made.
4.1 Revenue and income
4.5 Remuneration of auditors
4.6 Distributable income
4.7 Earnings per security
2016
$'000
2015
$'000
56,172
1,054
57,226
55,214
1,779
56,993
Interest income
As at 30 June 2016 the weighted average interest rate
earned on cash was 2.66% (2015: 2.75%)
4.2 Other expenses
4.3 Finance costs
4.4 Taxation
4.1 Revenue and income
Revenue
Rent from investment
properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to
investment properties
Other income
Total other income
Total revenue and other
income
89,644
43
89,687
78,790
53
78,843
146,913
135,836
Recognition and measurement
Revenue
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.
Rental income
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%.
4.2 Other expenses
Audit, accounting, tax and
professional fees
Annual reports
Depreciation expense
Insurance
Legal fees
Occupancy costs
Corporate and property
expenses
Property revaluations, and
condition and compliance
Registry fees
Staff training
Travel and accommodation
Trustee and custodian fees
Total other expenses
Total other expenses
Salaries and related costs
Less: Share based payments
expense
Total cash other expenses
2016
$'000
2015
$'000
206
105
16
167
187
115
908
466
100
32
102
156
2,560
2,560
2,509
(182)
4,887
193
96
13
178
165
124
552
396
126
23
114
150
2,130
2,130
2,538
(190)
4,478
Recognition and measurement
Expenses including operating expenses, Queensland land tax
expense and other outgoings (if any) are brought to account
on an accruals basis.
Page 42
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
4. Business performance
4.3 Finance costs
4.4 Taxation
2016
$'000
2015
$'000 Reconciliation of income tax expense
4,929
4,867
The prima facie income tax expense on profit before income
tax reconciles to the income tax expense in the financial
statements as follows:
Finance costs - cash
Capital Indexed Bonds (CIB)
Australian Medium Term
Notes (AMTN)
ALE Notes 2
Interest rate derivative
payments/(receipts)
Other finance expenses
Finance costs - non-cash
Accumulating indexation - CIB
Amortisation - CIB
Amortisation - AMTN
Amortisation - AMTN discount
Amortisation - ALE Notes 2
Other finance expenses
15,937
-
(390)
191
20,667
2,231
64
284
34
-
-
2,613
15,925
940
(534)
222
21,420
2,513
58
270
32
214
-
3,087
Finance costs (cash and
non-cash)
23,280
24,507
Recognition and measurement
Interest expense is recognised on an accruals basis.
Borrowing costs are recognised using the effective interest
rate method.
Profit before income tax
Profit attributable to entities
not subject to tax
Profit/(Loss) before income
tax expense subject to tax
Tax at the Australian tax rate
Share based payments
Other
Under/(over) provision in
prior years
Income tax
expense/(benefit)
Current tax expense/(benefit)
Deferred tax expense/
(benefit)
Income tax
expense/(benefit)
2016
$'000
2015
$'000
91,213
99,321
91,291
99,262
(78)
(23)
58
1
(1)
35
62
(27)
35
59
18
18
-
(79)
(43)
(67)
24
(43)
Amounts represent net cash finance costs after derivative
payments and receipts.
Recognition and measurement
Finance costs details
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.
Trusts
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.
Current tax
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.
Page 43
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
4. Business performance
4.4 Taxation (continued)
4.5 Remuneration of auditors
Deferred tax
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.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and
the Company/Group intends to settle its current tax assets
and liabilities on a net basis.
Audit services
KPMG Australian firm:
Audit and review of the
financial reports
- in relation to current year
- in relation to prior year
Total remuneration for
audit services
KPMG Australian firm:
Other services
Total remuneration for all
services
2016
$
2015
$
171,500
12,500
160,000
5,000
184,000
165,000
18,259
202,259
165,000
4.6 Distributable income
Reconciliation of profit after tax to amounts available for
distribution:
Profit after income tax
Plus /(less)
Fair value increments to
investment properties
Fair value decrements to
derivatives
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
Distribution funded as follows
Current year distributable
profits
Prior year undistributed
profits
Capital and surplus cash
2016
$'000
91,178
2015
$'000
99,364
(89,644)
(78,790)
25,210
5,247
182
2,613
35
190
3,087
(43)
(61,604)
(70,309)
29,574
29,055
39,154
32,976
(9,580)
(3,921)
29,574
29,055
6,523
3,057
39,154
3,921
-
32,976
Page 44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
4. Business performance
4.7 Earnings per security
Basic earnings per stapled security
The calculation of basic earnings per stapled security is based
on the profit attributable to ordinary securityholders and the
weighted-average number of ordinary stapled securities
outstanding.
The calculation of distributable profit per stapled security is
based on the distributable profit attributable to ordinary
securityholders and the weighted average number of
ordinary stapled securities outstanding.
2016
2015
2016
2015
Profit attributable to members
of the Group ($000's)
91,178
99,364
Distributable profit
attributable to members of
the Group ($000's)
29,574
29,055
Weighted average number of
stapled securities
195,759,597
195,702,333
Number of stapled securities
at the end of the year
195,769,080
195,702,333
Basic earnings per security
(cents)
46.58
50.77
Distributable profit per
security (cents)
15.11
14.85
Diluted earnings per stapled security
The calculation of diluted earnings per stapled security is
based on the profit attributable to ordinary securityholders
and the weighted-average number of ordinary stapled
securities outstanding after adjustments for the effects of all
dilutive potential ordinary stapled securities.
Distributed profit per security
Distributable income per
stapled security
2016
2015
15.11
14.85
Distribution paid per stapled
security
20.00
16.85
2016
2015
Profit attributable to members
of the Group ($000's)
91,178
99,364
Under/(over) distributed for
the year
(4.89)
(2.00)
Weighted average number of
stapled securities
Diluted earnings per security
(cents)
195,999,370
195,947,573
46.52
50.71
Distribution funded as follows
Current year distributable
profits
Prior year undistributed
profits
Capital and surplus cash
15.11
14.85
3.33
1.56
20.00
2.00
-
16.85
Distributable profit per security
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.
Page 45
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2016
5.
Employee benefits
This section provides a breakdown of the various programs ALE uses to reward and recognise employees and key executives,
including Key Management Personnel (KMP). ALE believes that these programs reinforce the value of ownership and
incentives and drive performance both individually and collectively to deliver better returns to securityholders.
5.1 Employee benefits
5.3 Employee share plans
5.2 Key management personnel compensation
5.1 Employee benefits
2016
$'000
2015 Long service leave
$'000
Employee benefits provision:
Current
169
145
Recognition and measurement
The employee benefits liability represents accrued wages and
salaries, leave entitlements and other incentives recognised
in respect of employees’ services up to the end of the
reporting period. These liabilities are measured at the
amounts expected to be paid when they are settled and
include related on-costs, such as workers compensation
insurance, superannuation and payroll tax.
5.2 Key management personnel compensation
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Termination benefits
2016
$
2015
$
1,861,142
135,558
17,438
182,000
-
2,196,138
1,839,888
130,179
15,965
190,000
-
2,176,032
Recognition and measurement
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.
Bonus and incentive plans
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.
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
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.
5.3 Employee share plans
Executive Stapled Security Scheme (ESSS)
The ESSS was established in 2012. 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 rights is
transferred to Contributed Equity.
Page 46
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
6.
Other
This section provides details on other required disclosures relating to the Group to comply with the accounting standards
and other pronouncements.
6.1 New accounting standards
6.5 Investments in controlled entities
6.2 Segment reporting
6.6 Related party transactions
6.3 Events occurring after balance date
6.7 Parent Entity Disclosures
6.4 Contingent liabilities and contingent assets
6.1 New accounting standards
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 17 Leasing
IFRS 17 establishes a comprehensive framework the
accounting policies and disclosures applicable to leases, both
for lessees and lessors. IFRS 17 is effective for annual
reporting periods beginning on or after 1 January 2019, with
early adoption permitted.
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 financial
statements resulting from the application of IFRS 17.
6.2 Segment reporting
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.
The Group is assessing the potential impact on its
consolidated financial statement resulting from the
application of IFRS 9.
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 (2015: 100%).
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 existing 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.
6.3 Events occurring after balance 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.
The Group is assessing the potential impact on its financial
statements resulting from the application of IFRS 15.
6.4 Contingent liabilities and contingent assets
Bank guarantee
ALE has entered into a bank guarantee of $73,273 in respect
of the office tenancy at Level 10, 6 O'Connell Street, Sydney.
Page 47
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2016
6. Other
6.5 Investments in controlled entities
6.7 Parent Entity Disclosures
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.
As at, and throughout, the financial year ending 30 June
2016 the parent entity of ALE was Australian Leisure and
Entertainment Property Trust.
2016
$'000
2015
$'000
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.
Financial position of the parent entity
Current assets
Cash
21
21
Profit for the year
70,356
29,196
Non current assets
Investments in controlled
entities
Total assets
Current liabilities
Payables
Provisions
Total liabilities
Net assets
Issued units
Retained earnings
Total equity
275,656
275,677
275,656
275,677
4,900
19,773
24,673
251,004
39,577
16,537
56,114
219,563
252,431
(1,427)
251,004
252,192
(32,629)
219,563
6.6 Related party transactions
Parent entity and subsidiaries
Details are set out in Note 6.5 and 6.7.
Key management personnel
Key management personnel and their compensation are set
out in the Remuneration Report on Page 17.
Transactions with related parties
For the year ended 30 June 2016, the Company received
$4,108,938 of expense reimbursement from the Trust (2015:
$4,013,868), and the Finance Company charged the Sub
Trust $7,243,821 interest (2015: $7,454,819).
Peter Warne is Chairman 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.
Terms and conditions
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.
Page 48
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2016
Securityholders
The securityholder information as set out below was applicable as at 7 July 2016.
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
813
1,300
940
1,712
116
4,881
Number of
Securities
260,353
3,996,308
7,186,003
44,685,089
139,641,327
195,769,080
% of Issued
Capital
0.13
2.04
3.67
22.83
71.33
100.00
The stapled securities are listed on the ASX and each stapled security is composed 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 317.
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below.
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
UBS Nominees Pty Ltd
Woolworths Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited [Account 2]
J P Morgan Nominees Australia Limited
Melic Pty Limited [The Melic Unit A/C]
HSBC Custody Nominees (Australia) Limited [GSCO ECA]
Manderrah Pty Ltd [GJJ Family A/C]
HSBC Custody Nominees (Australia) Limited [Account 3]
Edward Furnival Griffin and Alastair Charles Griffin [Est Jean Falconer Griffin]
UBS Nominees Pty Ltd [Prime Broking A/C]
ABN AMRO Clearing Sydney Nominees Pty Ltd [Custodian Account]
Merlor Holdings Pty Ltd [Basserabie Family Account]
Mr David Calogero Loggia
Merlor Holdings Pty Ltd [Basserabie Family Settlement Account]
BT Portfolio Services Limited [Caergwrle Invest P/L Account]
C J H Holdings Pty Ltd [Superannuation Fund Account]
14
15
16
17
18
19
20
Totals: Top 20 Holders of Stapled Securities
Totals: Remaining Holders Balance
Number of
Securities
21,824,310
17,076,936
17,074,996
11,223,411
10,822,236
8,309,005
7,002,991
4,445,011
3,317,591
3,075,593
2,992,733
2,903,295
2,795,751
2,000,000
1,450,189
1,100,000
988,376
830,026
745,787
660,953
120,639,190
75,129,890
% of Issued
Capital
11.15
8.72
8.72
5.73
5.53
4.24
3.58
2.27
1.69
1.57
1.53
1.48
1.43
1.02
0.74
0.56
0.50
0.42
0.38
0.34
61.62
38.38
Page 52
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2016
C. SUBSTANTIAL HOLDERS
Substantial holders of ALE (as per notices received as at 7 July 2016) are set out below:
Stapled Securityholder
Caledonia (Private) Investments Pty Ltd
Woolworths Limited
Allan Gray Australia
Number of
Securities
52,955,154
17,076,936
13,868,884
% of Issued
Capital
27.05
8.72
7.08
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
(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 195,769,080 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
Richard Jones – JP Morgan Securities
Johannes Faul – Morningstar
Jon Mills – Intelligent Investor
F. ASX ANNOUNCEMENTS
The information is provided as a short summary of investor information.
Please view our website at www.alegroup.com.au for all investor information.
2016
25 Oct
5 Sep
4 Aug
30 Jun
14 Jun
10 Jun
10 Jun
8 Jun
29 Feb
16 Feb
16 Feb
16 Feb
11 Feb
4 Feb
Annual General meeting
2nd half distribution payment
Full Year results, Annual Review / Report and
Property Compendium released
Resignation and appointment of Company
Secretary
Property valuation increased by 10%
Half year distribution of 10.10 cents declared
Full year distribution of 20.00 announced
Change in substantial holding from Woolworths
Taxation Components of Distribution
Results Half Year Ended 31 December 2015
Presentation
Results Half Year Ended 31 December 2015
Appendix 4D - 31 December 2015
Caledonia increases substantial holding to 27.05%
Hedging Extended At Low Interest Rates
2015
16 Dec
10 Jun
2 Nov
27 Oct
7 Sep
6 Aug
17 Jul
10 Jun
10 Jun
10 Mar
6 Mar
5 Mar
6 Feb
5 Feb
Property Valuations increased by 5.9%
Half year distribution of 9.90 cents declared
Moodys Affirms Aaa rating of ALEs Capital
Indexed Bonds
Annual General Meeting
2nd half distribution payment
Full Year results, Annual Review / Report and
Property Compendium released
Property Valuations increased by 9.6% for year
Half year distribution of 8.45 cents declared
Full year distribution of 16.85 cents announced
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
Page 53
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2016
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.
SecurityHolder Enquiries
Please contact the registry if you have any questions about
your holding or payments.
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.
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.
Registered Office
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr Michael Clarke
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
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
Page 54
ALE Property Group
Australian Leisure and Entertainment Property Management Limited
ABN 45 105 275 278
ANNUAL REPORT
2016
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
Contents
Directors' Report
Auditor's Independence Declaration
Financial Statements
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Auditors Report
02
16
17
18
19
20
21
22
32
33
DIRECTORS' REPORT
For the Year ended 30 June 2016
The Directors of Australian Leisure and Entertainment Property Management Limited (the "Company") present their report for the year
ended 30 June 2016.
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 2016.
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
Experience, responsibilities and other directorships
P H Warne, B.A, FAICD
Independent Non Executive Director
Chairman of the Board
Appointed: 8 September 2003
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Member of the Nominations Committee
Member of the Remuneration Committee
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.
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 Phillipa Downes, BSc (Bus Ad),
MAppFin, GAICD
Independent Non Executive Director
Appointed: 26 November 2013
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Ms Downes is a Director of the ASX Group clearing and settlement facility licensees and their
intermediate holding companies. Pippa is a director of the Sydney Olympic Park Authority and 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
investment, 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.
Page 2
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
Name
Experience, responsibilities and other directorships
H I Wright, LL.B, MAICD
Independent Non Executive Director
Appointed: 8 September 2003
Resigned: 27 October 2015
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration 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 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 Nancy Milne, OAM, LLB, FAICD
Independent Non Executive Director
Appointed: 6 February 2015
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Nancy has been a professional non-executive director for over a decade. She is a former lawyer
with over 30 years’ experience with primary areas of legal expertise in insurance, risk
management, and corporate governance She was a partner with Clayton Utz until 2003 and a
consultant until 2012. She is currently Chairman of the Securities Exchange Guarantee
Corporation, deputy chairman of the State Insurance Regulatory Authority and a director of Pillar
Administration. She was previously a director of Australand Property Group, Crowe Horwarth
Australasia, State Plus and Novion Property Group (now Vicinity Centres).
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 Paul Say, FRICS, FAPI
Independent Non Executive Director
Appointed: 24 September 2014
Member of the ACRMC
Chair of the Nominations Committee
Chair of the Remuneration Committee
Paul has over 30 years’ experience in commercial and residential property management,
development and real estate transactions with major multinational institutions. Paul 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 is a director of GPT Metro Office Fund and Frasers Logistic & Industrial Trust (SGX
listed).
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 and QLD).
Mr James McNally B.Bus (Land
Economy), Dip. Law
Executive Director
Appointed: 26 June 2003
Responsible Manager of the Company under the Company’s AFSL
James is an executive and founding director of the company. 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.
Page 3
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
Name
Experience, responsibilities and other directorships
Mr Andrew Wilkinson B.Bus, CFTP,
MAICD
Managing Director
Appointed: 16 November 2004
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence
(AFSL)
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.
2. OTHER APPOINTMENTS
Name
Experience
Mr Michael Clarke BCom, MMan, CA,
ACIS
Company Secretary and Finance
Manager
Appointed: 30 June 2016
Michael joined ALE in October 2006 and was appointed Company Secretary on 30 June 2016.
Michael has a Bachelor of Commerce from the University of New South Wales and a Masters of
Management from the Macquarie Graduate School of Management. He is an associate member of
both the Governance Institute of Australia and the Institute of Chartered Accountants in Australia
and New Zealand.
Michael has over 30 years’ experience in accounting, taxation and financial management. Michael
previously held senior financial positions with subsidiaries of listed public companies and spent 12
years working for Grant Thornton. He has also owned and managed his own accounting practice.
Mr David Lawler B.Bus, CPA
Independent member of ACRMC
Appointed: 9 December 2005
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
and Investment 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.
3. INFORMATION ON DIRECTORS AND KEY MANAGEMENT PERSONNEL
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
P G Say
P G Say
Page 4
Directorships of listed entities
ASX Limited
Crowe Horwath Australasia Limited
OzForex Group Limited
Macquarie Group Limited
GPT Metro Office Fund
Frasers Logistic & Industrial Trust (SGX listed)
Type
Non-executive
Non-executive
Chairman
Non-executive
Non-executive
Non-executive
Resigned as
Director
Jan 2015
Appointed as
Director
July 2006
May 2007
October 2013
July 2007
Áugust 2014
June 2016
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
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
Executive Director
Executive Director
Capital Manager
Company Secretary and Finance Manager
Asset Manager
Number held
at the start
of the year
Net
movement
Number held
at the end of
the year
1,185,000
213,904
-
20,000
244,723
55,164
50,000
15,000
4,000
-
-
25,000
-
73,136
-
23,611
2,500
-
1,185,000
213,904
25,000
20,000
317,859
55,164
73,611
17,500
4,000
The following key management personnel currently hold rights over stapled securities in ALE:
Name
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
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
141,746
74,078
16,669
12,747
33,365
15,888
6,355
4,767
(43,136)
(23,611)
-
-
131,975
66,355
23,024
17,514
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 2016 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
P H Warne
H I Wright
P J Downes
P G Say
N J Milne
A F O Wilkinson
J T McNally
Board
ACRMC
Held 1
14
8
14
14
14
14
14
Attended
13
8
13
11
14
14
14
Held 1
6
3
6
6
6
n/a
n/a
Attended
6
3
6
6
5
n/a
n/a
Nominations Committee
and Remuneration
Committee
Held 1
5
2
5
5
5
n/a
n/a
Attended
5
2
5
5
5
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
6
6
n/a
n/a
1 “Held” reflects the number of meetings which the director or member was eligible to attend.
4. PRINCIPAL ACTIVITIES
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.
Page 5
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For the Year ended 30 June 2016
5. OPERATIONAL AND FINANCIAL REVIEW
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 12.3 years plus options for ALH to extend.
The Company is responsible for the management activities of the ALE Group and also acts as the responsible entity for the Australian
Leisure and Entertainment Property Trust (the "Trust").
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
30 June
2016
$
30 June
2015
$
4,108,938
23,795
4,132,733
4,013,868
12,664
4,026,532
2,479,253
1,811,685
4,290,938
2,508,417
1,565,452
4,073,869
(158,205)
(47,337)
7,763
(74,675)
(165,968)
27,338
Cents
Cents
(0.08)
-
7.27
0.01
-
7.39
Significant Changes In The State Of Affairs
In the opinion of the Directors, there were no significant changes in the state of affairs of the Company that occurred during the year.
6. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
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.
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.
7. DIVIDENDS
No provisions for or payments of Company dividends have been made during the year (2015: nil).
8. 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 the Company, the results of those
operations or the state of the affairs of the Company in future financial years.
Page 6
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
9 REMUNERATION REPORT (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2016 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
link 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 Committee
The Remuneration 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 2016, the Committee consisted of the following:
P G Say
P H Warne
H I Wright
P J Downes
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chairman of Remuneration Committee
(Resigned 27 October 2015)
Page 2 of this report provides 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 5.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee retained Godfrey Remuneration Group to advise on remuneration.
Godfrey Remuneration Group was paid $16,000 for its services.
Page 7
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
Company Secretary and
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.
Page 8
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
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
$457,400
6 months
6 months
Ongoing
$258,320
3 months
3 months
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James
McNally
Margaret
Sullivan
Finance
Manager and
Company
Secretary
Ongoing
$211,000
3 months
3 months
Asset
Manager
Executive
Director
Compliance
Officer
Ongoing
$200,800
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$50,000
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
starting 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.
Page 9
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.4 Executive Remuneration outcome for year ended 30 June 2016
Details of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 13.
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 2016.
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 executed a hedge that extended the term of the hedging on 100% of ALE’s net debt to November 2025;
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
●
●
Worked constructively with ALH to agree a range of developments that are value enhancing for ALE for a number of properties;
Undertook a more comprehensive statutory valuation 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 number 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 initiatives 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:
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Target EIS
(as % of
FAR)
60%
50%
n/a
n/a
EIS
Awarded
(as % of
FAR)
45.0%
39.9%
19.0%
7.5%
EIS Awarded
as a % of
Target
75.1%
79.7%
-
-
EIS
Awarded
$206,000
$103,000
$40,000
$15,000
Cash
Component
$103,000
$51,500
$20,000
$7,500
ESSS
Component
$103,000
$51,500
$20,000
$7,500
A review of ALE's current year performance and history is provided in the Operational and Financial Review on page 6 of the Directors
Report.
Page 10
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
M J Clarke
D J Shipway
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery
Date
% vested in
year
% forfeited
in year
34,878
63,732
33,365
19,092
31,375
15,888
8,825
7,844
6,355
8,825
3,922
4,767
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
30 Sep 13
1 Oct 14
20 Aug 15
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
1 Jul 12
1 Jul 13
1 Jul 14
2.27
2.55
3.15
2.27
2.55
3.15
2.27
2.55
3.15
2.27
2.55
3.15
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
31 Jul 16
31 Jul 17
31 Jul 18
Nil
Nil
Nil
Nil
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 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
(71,250)
(39,000)
(43,136)
(23,611)
Opening
Balance
Granted in
Year
312,790
162,264
40,000
30,000
141,746
74,078
16,669
12,747
105,000
50,000
20,000
15,000
33,365
15,888
6,355
4,767
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
346,540
173,264
60,000
45,000
131,975
66,355
23,024
17,514
Securities
Delivered in
the year -
value paid $
159,603
87,361
-
-
9.6 Equity based compensation
The value of ESSS disclosed in section 9.5.3 and 9.9 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 11 August 2016.
Page 11
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
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's 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.
9.8 Response to Vote Against the 2015 Remuneration Report
At the Annual General Meeting of the Company (AGM) held on 27 October 2015 a resolution was put to the vote that the Remuneration
Report for the last financial year ending 30 June 2015. More than 25% of the votes cast were against adoption of the Report. The resolution
failed to pass because ALE's major securityholder, Caledonia Private Investments, who owned 25.39% and other securityholders that owned
0.61% of securities voted against the resolution.
No negative comments were made at the AGM in respect of the Remuneration Report by representatives of Caledonia who were present.
Subsequent to the AGM members of the Remuneration and Nominations Committee of the company held discussions with Caledonia to gain
an understanding of concerns that may have lead to the rejection of the Remuneration Report resolution. No concerns were given to the
Board in relation to the Remuneration Report. In addtion no other securityholder has expressed concerns in relation to the Remuneration
Report.
On the following basis the Board has made no material adjustments to remuneration arrangements:
1.
2.
3.
4.
At no time in the last three years has the Committee received any negative comments concerning ALE's Remuneration Report;
At no time in the last three years have the levels of Executive and Board Remuneration been varied materially;
ALE's Remuneration Reports in 2012, 2013 and 2014 were all adopted with votes for the Report above 97%;
The Remuneration and Nominations Committee consistently engages external consultants to advise on remuneration matters and
awarded remuneration is within the peer groups used for comparison; and
The Board has been advised of no other concerns with respect to ALE's Remuneration Report.
5.
The Board will continue make itself available to securityholders concerning remuneration matters and will consider any concerns raised.
Page 12
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2016
9.9 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 2016 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
Table 1 Remuneration details 1 July 2015 to 30 June 2016
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2016 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
P H Warne
H I Wright1
P J Downes
P G Say
N J Milne
B R Howell 2
A F O Wilkinson
J T McNally
A J Slade
M J Clarke 2
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Company Secretary
Executive Director
Executive Director
Capital Manager
Company Secretary and
Finance Manager
D J Shipway
Asset Manager
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
Termination
benefits
$
ESSS
$
Total
$
$
159,817
31,963
96,184
108,750
91,324
90,000
411,512
-
-
-
-
-
-
103,000
100,000
-
222,160
188,465
178,967
1,679,142
51,500
20,000
7,500
182,000
-
-
-
-
-
-
-
-
-
-
-
-
159,817
31,963
96,184
108,750
91,324
90,000
514,512
100,000
273,660
208,465
186,467
1,861,142
15,183
3,037
9,137
-
8,676
-
35,000
-
30,000
17,485
17,040
135,558
-
-
-
-
-
-
-
-
175,000
-
-
-
35,000
-
-
-
105,321
-
-
-
108,750
-
-
100,000
-
-
90,000
-
7,310
-
103,000
659,822
31.2%
-
-
-
100,000
-
3,980
3,088
-
-
51,500
359,140
20,000
249,038
3,060
-
7,500
214,067
17,438
-
182,000
2,196,138
28.7%
16.1%
7.0%
S300A(1)(e)(i)
proportion of
remuneration
performance
based
1. Helen Wright resigned as a director on 27 October 2015
2. Brendan Howell resigned as Company Secretary on 30 June 2016 and Michael Clarke was appointed Company Secretary on 30 June 2016
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 2015 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Name
Role
P H Warne
J P Henderson 3
H I Wright
Non-executive Director
Non-executive Director
Non-executive Director
P J Downes
Non-executive Director
P G Say
N J Milne
Non-executive Director
Non-executive Director
B R Howell
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
A J Slade
M J Clarke
Executive Director
Capital Manager
Finance Manager
D J Shipway
Asset Manager
3. John Henderson resigned as a director on 6 November 2014
Page 13
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
Termination
benefits
$
ESSS
$
Total
$
$
159,817
33,333
95,890
91,324
75,000
36,530
90,000
-
-
-
-
-
-
-
399,993
105,000
100,000
-
213,267
182,062
172,672
1,649,888
50,000
20,000
15,000
190,000
-
-
-
-
-
-
-
-
-
-
-
-
-
159,817
15,183
33,333
95,890
91,324
75,000
36,530
90,000
504,993
100,000
263,267
202,062
187,672
-
9,110
8,676
-
3,470
-
30,761
-
29,983
16,592
16,404
1,839,888
130,179
-
-
-
-
-
-
-
-
-
175,000
-
-
-
33,333
-
-
-
105,000
-
-
-
100,000
-
-
-
75,000
-
-
-
40,000
-
-
-
90,000
-
6,213
-
105,000
646,967
32.5%
-
-
-
100,000
-
4,370
-
50,000
347,620
2,695
2,687
15,965
-
-
20,000
241,349
15,000
221,763
-
190,000
2,176,032
28.8%
16.6%
13.5%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
15.6%
-
14.3%
8.0%
3.5%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
-
-
16.2%
-
14.4%
8.3%
6.8%
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For the Year ended 30 June 2016
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 $51,535 (2015: $54,544) 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 financial years 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
Other services
KPMG Australian firm:
Financial reporting and risk assurance services
Total other services
Total remuneration
30 June
2016
$
30 June
2015
$
171,500
12,500
160,000
5,000
184,000
165,000
18,259
18,259
-
-
202,259
165,000
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.
Page 14
Australian Leisure and Entertainment Property Management Limited
FINANCIAL STATEMENTS
Page 18
Page 19
Page 20
Page 221
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Page 22
Page 23
1
2
About this report
Business performance
Page 26
3
Assets, liabilities and equity
Page 29
4
Employee benefits
Page 30
5 Other
Revenue and income
2.1
2.2 Other expenses
Taxation
2.3
Earnings per share
2.4
Remuneration of auditors
2.5
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
Cash and cash equivalents
Receivables
Investment in related party
Payables
Equity
Employee benefits
Key management personnel compensation
Employee share plans
5.1 New accounting standards
Segment reporting
5.2
Events occurring after balance date
5.3
Contingent liabilities and contingent assets
5.4
Commitments
5.5
Related party transactions
5.6
Financial risk management
5.7
Page 32
Page 33
Directors' Declaration
Independent Auditor's Report to Stapled Securityholders
Page 17
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2016
Revenue
Expense reimbursement
Interest income
Total revenue
Expenses
Salaries and related costs
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
Basic and diluted earnings per stapled security
Note
2016
$
2.1
2.1
2.2
2.2
2.3
4,108,938
23,795
4,132,733
2,479,253
1,811,685
4,290,938
(158,205)
7,763
(165,968)
(165,968)
Cents
(0.08)
2015
$
4,013,868
12,664
4,026,532
2,508,417
1,565,452
4,073,869
(47,337)
(74,675)
27,338
27,338
Cents
0.01
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
Page 18
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF FINANCIAL POSITION
For the Year ended 30 June 2016
Current assets
Cash and cash equivalents
Receivables
Other
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
Employee benefits
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserve
Accumulated losses
Total equity
Net assets per stapled security
The above statement of financial position should be read in conjunction with the accompanying Notes.
Note
3.1
3.2
3.3
2.3(b)
3.4
4.1
3.5
2016
$
2015
$
2,278,988
2,957,796
214,629
5,451,413
35,994
9,080,010
48,901
9,164,905
14,616,318
206,121
169,203
375,324
375,324
2,519,881
3,316,234
218,461
6,054,576
17,582
9,080,010
47,873
9,145,465
15,200,041
590,962
145,203
736,165
736,165
14,240,994
14,463,876
14,767,075
806,804
(1,332,885)
14,240,994
$
$0.07
14,759,025
735,054
(1,030,203)
14,463,876
$
$0.07
Page 19
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2016
Share
Capital
$
Note
Share
based
payments
reserve
$
Retained
Earnings
$
Total
$
2016
Total equity at the beginning of the year
14,759,025
735,054
(1,030,203)
14,463,876
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:
Shares issued - Executive Stapled Security Scheme
Employee share based payments expense
-
-
-
-
-
-
(165,968)
-
(165,968)
(165,968)
-
(165,968)
8,050
(110,250)
182,000
(136,714)
(238,914)
182,000
Total equity at the end of the year
14,767,075
806,804
(1,332,885)
14,240,994
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
Transactions with Members of ALE recognised directly in
Equity:
Purchase of securities to satisfy units required for Executive
Performance Rights 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
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
Page 20
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2016
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 from operating activities
Cash flows from investing activities
Payments for plant and equipment
Net cash inflow from investing activities
Cash flows from financing activities
Shares 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
Reconciliation of profit after income tax to net cash inflows from
operating activities
Profit for the year
Plus/(less):
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 inflow from operating activities
Note
2016
$
2015
$
5,986,596
(6,273,551)
80,506
(206,449)
(34,444)
(34,444)
-
-
5,686,428
(5,656,752)
98,822
128,498
-
-
-
-
(240,893)
2,519,881
128,498
2,391,383
2,278,988
2,519,881
2016
$
(165,968)
16,032
182,000
-
38,221
3,832
(1,028)
81,303
24,000
(384,841)
(206,449)
2015
$
27,338
13,257
190,000
(130,000)
(111,403)
30,363
(6,496)
41,627
18,825
54,987
128,498
The above statement of cash flows should be read in conjunction with the accompanying Notes.
Page 21
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 30 June 2016
1.
About this report
Reporting Entity
Australian Leisure and Entertainment Property Management
Limited (the Company) is domiciled in Australia.
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 ALE Property Group is a for-profit entity.
The Company is the Responsible Entity of the Trust.
Statement of compliance
The 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.
The financial statements were authorised for issue by the
Board of Directors on 3rd August 2016.
Basis of preparation
The Financial Report has been prepared on a historical costs
basis, except for the revaluation of investment properties and
certain financial instruments. Cost is based on the fair values
of the consideration given in exchange for assets. All
amounts are represented in Australian dollars, unless
otherwise noted.
Accounting 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.
Accounting estimates and judgements
Income taxes
Employee benefits
Note
2.3
4
Significant accounting policies
Accounting policies are selected and applied in a manner that
ensures that the resulting financial information satisfies the
concepts of relevance and reliability, thereby ensuring that
the substance of the under lying transactions or other events
is reported. Other significant accounting policies are
contained in the notes to the financial statements to which
they relate to.
Page 22
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2016
2.
Business performance
This section provides the information that is most relevant to understanding the financial performance of the Company
during the financial year and, where relevant, the accounting policies applied and the critical judgements and estimates
made.
2.1 Revenue and income
2.4 Earnings per share
2.2 Other expenses
2.3 Taxation
2.5 Remuneration of auditors
2.1 Revenue and income
2.2 Other expenses
2016
$
2015
$
Annual Report and Review
Audit, accounting, tax and
professional fees
Depreciation expense
Insurance
Legal fees
Occupancy costs
Corporate and property
expenses
Registry fees
Salaries and related costs
Staff training
Travel and accommodation
2016
$
2015
$
104,500
96,358
205,750
16,032
167,277
122,216
115,091
846,650
100,207
2,479,253
31,554
102,408
193,300
13,257
177,910
217,988
123,902
480,830
125,705
2,508,417
22,532
113,670
Total other expenses
4,290,938
4,073,869
Recognition and measurement
Expenses including operating expenses, are brought to
account on an accruals basis.
Revenue
Expense reimbursement
Interest from cash deposits
Total revenue
4,108,938
23,795
4,132,733
4,013,868
12,664
4,026,532
Recognition and measurement
Revenue
Expense reimbursement 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.
Expense reimbursement receipts of $5,986,596 (2015:
$5,686,428) 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.
Interest income
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.
As at 30 June 2016 the weighted average interest rate
earned on cash was 2.84% (2015: 2.64%)
Page 23
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Business performance
2.3 Taxation
Recognition and measurement
(a) Reconciliation of income tax expense
The prima facie income tax expense on profit before income
tax reconciles to the income tax expense in the financial
statements as follows:
Loss before income tax
expense subject to tax
Tax at the Australian tax rate
Share based payments
Other
Under/(over) provision in
prior years
Income tax
expense/(benefit)
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Income tax
expense/(benefit)
(b) Deferred tax assets
2016
$
2015
$
(158,205)
(47,462)
(47,337)
(14,201)
54,600
1,306
18,000
70
(681)
(78,544)
7,763
8,791
(1,028)
(74,675)
(68,179)
(6,496)
7,763
(74,675)
2016
$
2015
$
Deferred tax assets
48,901
47,873
The balance is
attributable to:
Employee benefits
Accruals
Other
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the
income statement
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
51,008
-
(2,107)
-
48,901
43,903
-
5,550
(1,580)
47,873
47,873
41,377
1,028
-
48,901
6,496
-
47,873
48,901
47,873
-
48,901
-
47,873
Current tax
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
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.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and
the Company/Group intends to settle its current tax assets
and liabilities on a net basis.
Page 24
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2016
2. Business performance
2.4 Earnings per security
2.5 Remuneration of auditors
Basic earnings per stapled security
The calculation of basic earnings per stapled security is based
on the profit attributable to ordinary securityholders and the
weighted-average number of ordinary stapled securities
outstanding.
2016
2015
Audit services
KPMG Australian firm:
Audit and review of the
financial reports
- in relation to current year
- in relation to prior year
Total remuneration for
audit services
Profit/(Loss) attributable to
members of the company
(165,968)
Weighted average number of
share
195,759,597
27,338 KPMG Australian firm:
Other services
Total remuneration for all
services
195,702,333
2016
$
2015
$
171,500
12,500
160,000
5,000
184,000
165,000
18,259
-
202,259
165,000
Basic earnings per share
(cents)
(0.08)
0.01
Diluted earnings per stapled security
The calculation of diluted earnings per share is based on the
profit attributable to ordinary shareholders and the weighted-
average number of ordinary shares outstanding after
adjustments for the effects of all dilutive potential ordinary
shares
2016
2015
Profit/(Loss) attributable to
members of the Company
Weighted average number of
shares
Diluted earnings per share
(cents)
(165,968)
27,338
195,999,370
195,947,573
(0.08)
0.01
Page 25
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2016
3.
Assets, liabilities and equity
This section provides information relating to the operating assets and liabilities of the Group.
3.1 Cash and cash equivalents
3.2 Receivables
3.3 Investment in related party
3.4 Payables
3.5 Equity
3.1 Cash and cash equivalents
3.3 Investment in related party
Cash at bank
Deposits at call
2016
$
205,715
2,073,273
2,278,988
2015
$
430,461
2,089,420
2,519,881
Trust Non-Income Voting
Units (NIVUS)
2016
$
2015
$
9,080,010
9,080,010
Recognition and measurement
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.
Cash obligations
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.
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.
3.4 Payables
Trade creditors
Creditor accruals
2016
$
83,474
122,647
206,121
2015
$
431,734
159,228
590,962
Recognition and measurement
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.
3.2 Receivables
Accounts receivable
Loan to related party
Other receivable
Interest receivable
2016
$
59,814
2,845,208
46,695
6,079
2,957,796
2015
$
77,366
3,165,425
68,179
5,264
3,316,234
Recognition and measurement
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.
Page 26
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2016
3. Assets, liabilities and equity
3.5 Equity
2016
$
2015
$
Balance at the beginning of
the period
Securities issued - ESSS
14,759,025
14,759,025
8,050
14,767,075
-
14,759,025
Movements in the number
of fully paid stapled
securities during the year
Stapled securities on issue:
Opening balance
Securities issued - ESSS
Closing balance
Number of
Stapled
Securities
Number of
Stapled
Securities
195,702,333
66,747
195,769,080
195,702,333
-
195,702,333
Measurement and recognition
Ordinary shares are classified as 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.
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.
Page 27
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2016
4.
Employee benefits
This section provides a breakdown of the various programs ALE uses to reward and recognise employees and key executives,
including Key Management Personnel (KMP). ALE believes that these programs reinforce the value of ownership and
incentives and drive performance both individually and collectively to deliver better returns to securityholders.
4.1 Employee benefits
4.3 Employee share plans
4.2 Key management personnel compensation
4.1 Employee benefits
2016
$
2015 Long service leave
$
Employee benefits provision:
Current
169,203
145,203
Recognition and measurement
The employee benefits liability represents accrued wages and
salaries, leave entitlements and other incentives recognised
in respect of employees’ services up to the end of the
reporting period. These liabilities are measured at the
amounts expected to be paid when they are settled and
include related on-costs, such as workers compensation
insurance, superannuation and payroll tax.
4.2 Key management personnel compensation
2016
$
2015
$
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Termination benefits
1,861,142
135,558
17,438
182,000
-
2,196,138
1,839,888
130,179
15,965
190,000
-
2,176,032
Recognition and measurement
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.
Bonus and incentive plans
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.
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
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.
4.3 Employee share plans
During 2012, ALE established an Executive Stapled Securities
Scheme.
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 rights is
transferred to Contributed Equity.
Page 28
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2016
5.
Other
This section provides details on other required disclosures relating to the Company to comply with the accounting standards
and other pronouncements including the Company’s capital and financial risk management disclosure.
5.1 New accounting standards
5.5 Commitments
5.2 Segment reporting
5.6 Related party transactions
5.3 Events occurring after balance date
5.7 Financial risk management
5.4 Contingent liabilities and contingent assets
5.1 New accounting standards
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 Company are set out below. The Company 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 Company is assessing the potential impact on its
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 existing 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 resulting from the application of IFRS
15.
IFRS 17 Leasing
IFRS 17 establishes a comprehensive framework the
accounting policies and disclosures applicable to leases, both
for lessees and lessors. IFRS 17 is effective for annual
reporting periods beginning on or after 1 January 2019, with
early adoption permitted.
The Company is assessing the potential impact on its
financial statements resulting from the application of IFRS
17.
5.2 Segment reporting
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.
5.3 Events occurring after balance 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.
5.4 Contingent liabilities and contingent assets
Bank guarantee
ALE has entered into a bank guarantee of $73,273 in respect
of the office tenancy at Level 10, 6 O'Connell Street, Sydney.
Page 29
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2016
5. Other
5.5 Commitments
5.7 Financial risk management
Capital commitments
The Directors are not aware of any capital commitments as
at the date of this report.
Overview
The Company has exposure to the following risks from its
use of financial instruments:
Lease commitments
The Company has entered into a non-cancellable operating
lease for new office premises at Level 10, 6 O'Connell Street,
Sydney starting November 2015. The Company has also
entered into a non-cancellable operating lease for office
equipment. The minimum net lease commitments under
these leases are:
Less than one year
Later than one year but not
later than five years
Later than five years
2016
$
2015
$
106,137
45,695
393,877
-
500,014
-
-
45,695
5.6 Related party transactions
Parent entity, subsidiaries, joint ventures and
The Company has no parent entity, subsidiaries, joint
ventures or associates.
Key management personnel
Key management personnel and their compensation is set
out in the Remuneration Report.
Transaction with related parties
For the year ended 30 June 2016 the Company had charged
the Trust $4,108,938 in expense reimbursement (2015:
$4,013,868).
Peter Warne is Chairman 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
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.
● 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.
Page 30
Australian Leisure and Entertainment Property Management Limited
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.
Exposure to liquidity risk
The Company has no contracted financial liabilities and
therefore the Company's liquidity risk to external parties is
minimal.
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.
Interest rate risk
The Company has no financial interest bearing obligations
and accordingly the Company's interest rate risk is minimal.
Notes to the financial statements (continued)
For the Year ended 30 June 2016
5. Other
5.7 Financial risk management (continued)
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.
Credit risk on cash is managed through ensuring all cash
deposits are held with major domestic banks.
Exposure to credit risk
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.
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
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120-365 days
More than one year
2016
$
112,588
2,278,988
2,391,576
2015
$
150,809
2,519,881
2,670,690
2016
$
2016
$
Gross Impairment
-
-
-
-
-
-
97,785
-
5,196
9,607
-
112,588
2015
$
2015
$
Gross Impairment
-
-
-
-
-
-
125,067
-
7,092
18,650
-
150,809
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.
Page 31
Australian Leisure and Entertainment Property Management Limited
REGISTERED OFFICE
Level 10, Norwich House
6 O’Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
COMPANY SECRETARY
Mr Michael Clarke
Level 10, Norwich House
6 O’Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
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
AUDITORS
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Level 38
Tower Three
International Towers, Sydney
300 Barangaroo Avenue
Sydney NSW 2000
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