ANNUAL
REPORT
2018
15 YEARS OF ADDING
VALUE
CURRENT INCOME
FUTURE INCOME
LONG TERM VALUE
“We maintained our core
strategy of ensuring that
we preserve, enhance and
extract maximum value for
our securityholders from our
existing portfolio.”
ROBERT MACTIER
Statutory property values
$1,136.3m
4.98%
Average cap rate
10.3 years
Average lease term
Gearing
41.6%
Average debt maturity
3.7 years
All up cash interest rate
4.26%
Distribution
20.8cps
DEBT MATURITIES AND HEDGING PROFILE
Rental income growth
1.9%
Hedge maturity
7.4 years
Tax deferred
100%
100%
80%
60%
40%
20%
0%
100% of forecast net debt is hedged to November 2025
% Net Debt Hedged
(LHS)
Expires
Nov 25
Avg Fixed and
Hedged Base Rates
(RHS)
$225m
$150m $151m*
3.75%
3.50%
3.25%
3.00%
2.75%
2.50%
e
t
a
R
e
s
a
B
d
e
g
d
e
H
/
d
e
x
F
e
g
a
r
e
v
A
i
FY19
FY20
FY21
FY22
FY23
FY24
FY25
FY26
* balance escalates with CPI
FRONT COVER: GEPPS CROSS HOTEL, ADELAIDE SA
ALE Property Group
Comprising Australian Leisure and Entertainment
Property Trust and its controlled entities
Report For the Year ended 30 June 2018
ABN 92 648 441 429
ANNUAL REPORT
2018
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).
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
54
DIRECTORS' REPORT
For the Year ended 30 June 2018
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 2018.
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
Robert Mactier, B.Ec, MAICD
Independent Non Executive Director
Chairman of the Board
Appointed: 28 November 2016 Appointed Chair: 23 May 2017
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Member of the Nominations Committee
Member of the Remuneration Committee
Robert's other current roles include Chairman of ASX-listed WPP AUNZ Limited (since 2006) and
Consultant to UBS AG in Australia (since June 2007). Between 2006 and January 2017 he served as
a non-executive Director of NASDAQ listed Melco Resorts and Entertainment Limited.
Robert began his career at KPMG and from January 1986 to April 1990 worked across their audit,
management consulting and corporate finance practices. He has extensive investment banking
experience in Australia, having previously worked for Ord Minnett Securities, E.L. & C. Baillieu and
Citigroup between 1990 and 2006.
Robert holds a Bachelor’s degree in economics from the University of Sydney and has been a
Member of the Australian Institute of Company Directors since 2007.
Phillipa Downes, BSc (Bus Ad),
MAppFin, GAICD
Independent Non Executive Director
Appointed: 26 November 2013
Appointed Chair of ACRMC: 26 October 2015
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Phillipa (Pippa) is a Director of the Australian Technology Innovators (Infotrack, LEAP Legal
software), Windlab Limited, the ASX Clearing and Settlement companies and the Sydney Olympic
Park Authority. Pippa is also on the panel of the ASX Appeals Tribunal and is 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. Pippa 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 and Derivatives and strong analytical skills
investing across the capital structures of companies and across multiple asset classes.
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 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. Ms Downes is a member of The AICD and Women
Corporate Directors and in 2016 was named as a Women of Influence in the AFR/Westpac awards.
Page 2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Name
Experience, responsibilities and other directorships
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 and deputy
chairman of the State Insurance Regulatory Authority. 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.
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
James McNally B.Bus (Land
Economy), Dip. Law
Non Executive Director
Michael Triguboff BA (Syd), LLB
(UNSW)
Non Executive Director
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 Frasers Logistic & Industrial Trust (SGX listed) and was previously a
director of GPT Metro Office Fund.
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).
Appointed: 26 June 2003
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.
James is not considered an Independent Director as he has held an Executive Director position with
ALE for the last three years to 15 April 2017.
Appointed: 15 February 2018
Michael is a founding Director of Adexum Capital Limited, a private equity company investing in
both public and private mid-market companies. Michael is also Vice Chairman of Pyrolyx AG, a dual
listed German and Australian company involved in recycling.
Mr Triguboff has a background in equity funds management with groups including MIR and Lazard
Asset Management Pacific, Lazard Asia Funds and was a global partner of Lazard Freres & Co. He
was previously based in the USA and held positions with Quantum Funds and Equity Investments
with a focus on principal investments in both public and private companies.
Michael’s academic qualifications include; Bachelor of Arts from the University of Sydney, Bachelor of
Laws from University of New South Wales, Master of Business Administration from New York
University, Master of Business Systems from Monash University, Master of Computer Science from
University of Illinois at Urbana - Champaign / Columbia University, and Master of Criminology and
Master of Laws from University of Sydney.
Page 3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Name
Experience, responsibilities and other directorships
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
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.
David Lawler B.Bus, CPA
Independent member of ACRMC
Appointed: 9 December 2005 Resigned: 6 December 2017
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. David 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, Cancer Australia, 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
R W Mactier
R W Mactier
P G Say
P G Say
P J Downes
M P Triguboff
Page 4
Directorships of listed entities
WPP AUNZ Limited
Melco Resorts and Entertainment Limited (Nasdaq listed)
GPT Metro Office Fund
Frasers Logistic & Industrial Trust (SGX listed)
Windlab Limited
Pyrolyx AG
Type
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Appointed as
Director
December 2006
December 2006
August 2014
June 2016
July 2017
February 2015
Resigned as
Director
January 2017
September 2016
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
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
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally
M P Triguboff
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-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
50,000
189,110
25,000
20,000
55,164
-
367,737
60,000
18,000
12,825
-
-
-
-
-
-
63,732
-
-
(6,325)
50,000
189,110
25,000
20,000
55,164
-
431,469
60,000
18,000
6,500
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
124,117
60,773
19,445
10,657
34,082
18,475
4,870
3,044
(63,732)
(31,375)
(7,844)
(3,922)
94,467
47,873
16,471
9,779
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 2018 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally
M P Triguboff
A F O Wilkinson
Board
ACRMC
Nominations Committee
and Remuneration
Committee
Held1
11
11
11
11
11
5
11
Attended
11
11
10
11
10
4
11
Held1
7
7
7
7
n/a
n/a
n/a
Attended
7
7
7
7
n/a
n/a
n/a
Held1
5
5
5
5
n/a
n/a
n/a
Attended
5
5
5
5
n/a
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
4
3
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 2018
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 Pty Limited (ALH) for an average remaining initial lease term of 10.3 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 to 2028;
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.
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 5.0% to $1,136.3 million; and
Net Assets increased by 5.8% to $620.1 million and net borrowings (total borrowings less cash) as a percentage of assets (total
assets less cash, derivatives and deferred tax assets) decreased from 42.7% to 41.6%.
Current year performance
ALE produced a profit after tax of $75.1 million for the year ended 30 June 2018 compared to a profit of $130.0 million for the year ended
30 June 2017. The decrease is primarily due to:
•
•
•
•
•
•
Fair value adjustments to investment properties decreased from $89.6 million to $54.3 million in the current year due to lower
reductions in capitalisation rates;
Fair value adjustments to derivatives liabilities decreased from a $14.3 million increment in the prior year to a $4.7 million decrement
in the current year as long term interest rates decreased;
Rental income increased by 1.9% due to the full year impact of the November 2016 rent review of 1.4% and the part year impact of
the November 2017 rent review of 1.9%;
Interest income was lower due to lower average funds on deposit;
Finance costs were higher due to the higher net borrowings; and
Management costs increased during the year due to costs associated with various rent review and property related projects. 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.
During the financial year ALE produced a distributable profit of $29.0 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 changes in rent, finance costs and management
expenses.
Page 6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Profit/(loss) after income tax for the year
Adjustment for non-cash items
Fair value 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
Capital and surplus cash
Earnings and distribution per stapled security:
Basic earnings
Earnings available for distribution
Total distribution
Current year distributable profits
Capital and surplus cash
Financial position
30 June
2018
$’000
30 June
2017
$’000
75,090
130,043
(49,535)
235
3,214
21
(103,899)
248
2,712
14
(46,065)
(100,925)
29,025
40,720
(11,695)
29,118
39,937
(10,819)
29,025
11,695
40,720
30 June
2018
Cents
29,118
10,819
39,937
30 June
2017
Cents
38.36
14.83
20.80
14.83
5.97
20.80
66.43
14.87
20.40
14.87
5.53
20.40
Percentage
Increase /
(Decrease)
(42.26%)
(0.27%)
1.96%
ALE's net assets increased by 5.8%, compared with the previous year which was largely attributable to an increase in property values
during the year.
Investment property valuations increased the value by 5.0% from $1,080.2 million to $1,136.3 million during the year. The increase in
property valuations was attributable to the November 2017 CPI rent increase and average capitalisation rates decreasing from 5.14% to
4.98% across the portfolio. When assessing statutory valuations the independent 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.
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 4.29% for the 35 properties valued.
This compares to the rate of 4.98% which was derived using a combination of the DCF and capitalisation rate methods.
Page 7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Net assets per stapled security increased by 5.8% from $2.99 to $3.17 compared to June 2017, primarily as a result of the increase in
property values.
ALE’s market capitalisation this year increased by around 19.7% to around $1,094.3 million at 30 June 2018.
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 $225 million is scheduled to occur in August 2020. During the year covenant gearing reduced
from 42.7% to 41.6% for the bond issuing entity, ALE DPT. ALE continues to maintain appropriate headroom to all debt covenants with the
nearest equivalent to an average 31% fall in property values.
ALE‘s debt capital structure continues to be characterised by the following positive features:
investment grade credit rating of Baa2 (stable);
debt maturity dates that are diversified over the next 5.4 years;
100% of forecast net debt hedged for the next 7.4 years;
interest cover ratio well above covenant level at 2.6 times;
all up cash interest rate of 4.26% p.a. fixed until the next refinancing in August 2020; and
lower covenent gearing of 41.6% (2017: 42.7%).
ALE has consistently sought to mitigate interest rate volatility and continues to have long term hedging in place to achieve this objective.
Historical performance
To provide context to ALE's historical performance, the following data and graphs outline a five year history of key financial metrics.
FY14
FY15
FY16
FY17
FY18
Distributable profit ($m)
31.2
29.1
29.6
29.1
29.0
Distribution per Security (cents)
16.45
16.85
20.00
20.40
20.80
Continuing property values ($m)2
821.6
900.5
990.5
1,080.2
1,136.3
Covenant gearing 1
1. Total borrowings less cash as a percentage of total assets less cash, deferred tax assets and derivatives for bond issuing entity, ALE DPT
51.7%
47.9%
44.9%
42.7%
41.6%
2. Includes only the value of properties held as at 30 June 2018
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 2018 totalled $18.33.
For the period ending 30 June 2018, ALE continued to outperform other equity return benchmarks including the AREIT 300 index and the
All Ordinaries index for periods including one, three, five, ten and fifteen years. For the one year period ALE's total return of 24.5%
outperformed the AREIT 300 index total return of 13.2%.1
1. Source: UBS
Distribution per security
Covenant Gearing
Continuing Property Values ($m)
60.0%
40.0%
20.0%
0.0%
$1,200
$800
$400
$0
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
7
F
Y
1
8
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
7
F
Y
1
8
F
Y
1
4
F
Y
1
5
F
Y
1
6
F
Y
1
7
F
Y
1
8
ALE Property Group
20.0
10.0
0.0
Page 8
DIRECTORS' REPORT
For the Year ended 30 June 2018
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 $5.59 as at 30 June 2018 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 November 2018 the first major review is due
with the market rent capped and collared within 10% of the November 2017 rent for the majority of properties. There is also a full open
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. ALE will also continue to work constructively with ALH with a focus on maintaining and exploring the
potential to further enhance the properties' existing strong profitability through development or better site utilisation.
ALE has continued to preserve the quality of the existing property portfolio. The current debt structure and long term 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.
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, changes in market rent and 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 reduce NTA and could also reduce headroom to debt
covenants. At 30 June 2018 the closest debt covenant would be triggered by a decline of around 31% in property values and a resultant
average capitalisation rate of 7.26%. 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 it has sufficient headroom in it's debt covenants.
Page 9
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Interest rate risk - ALE currently has $526 million of outstanding gross 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 arrangements effectively hedge ALE's forecasted debt to November 2025
at weighted average base rates of between 3.11% and 3.46%.
Refinancing risk - ALE currently has outstanding borrowings representing a covenant gearing level of 41.6%. 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 pub properties are leased to a single tenant, ALH which is owned by Woolworths Limited (75%) and the
Bruce Mathieson Group (25%). In the 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.
Regulatory risk – changes to liquor licence regulation or gaming licence regulation could significantly impact the trading performance of the
operating businesses of ALH and therefore impact the EBITDA of our tenant. EBITDA is a key determining factor for market rent reviews
and therefore could impact on ALE’s long term profitability. ALE is unable to control regulatory changes that may impact on our properties
but monitors potential changes and liaises with ALH to understand the potential impact on hotel profitability.
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
2018
cents per
security
30 June
2017
cents per
security
30 June
2018
30 June
2017
$’000
$’000
Final Trust income distribution for the year ending 30 June 2018 to be
paid on 5 September 2018
10.45
10.25
20,458
20,066
Interim Trust income distribution for the year ending 30 June 2018
paid on 5 March 2018
Total distribution for the year ending 30 June 2018
10.35
20.80
10.15
20.40
20,262
40,720
19,871
39,937
No provisions for or payments of Company dividends have been made during the year (2017: 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 a strategy of identifying opportunities to increase its profitability and value to its stapled securityholders.
In accordance with the leases of its investment properties, ALE has to date received annual increases in rental income in line with increases
in the consumer price index. The first non CPI based market rent review will occur 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 2018
9 REMUNERATION REPORT (Audited)
The Remuneration Report presented below is the remuneration report included in the Directors' Report of Australian Leisure and
Entertainment Property Management Limited (the “Company”). This report provides details on ALE's remuneration structure, decisions and
outcomes for the year ended 30 June 2018 for employees of ALE including the directors, the Managing Director and key management
personnel. This information has been audited as required by section 308(3C) of the Act.
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 following 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 2018, the Committee consisted of the following:
P G Say
P J Downes
N J Milne
R W Mactier
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chairman of Remuneration Committee
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 engaged Conari Partners to review remuneration.
Conari Partners was paid $16,000 for its services.
Page 11
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
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 financial 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 2018
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
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
Managing
Director
Capital
Manager
Finance
Manager and
Company
Secretary
Ongoing
$270,000
3 months
3 months
Asset
Manager
Ongoing
$208,920
1 month
1 month
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$475,900
6 months
6 months
Ongoing
$268,760
3 months
3 months
Managing Director
Mr Wilkinson has signed a 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 2018
9.4 Executive Remuneration outcome for year ended 30 June 2018
The amount of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 17.
Executive Incentive Scheme Outcomes
In terms of total equity returns and other key financial metrics, ALE continues to perform well when compared to other Australian real estate
investment trusts (AREITs) and the wider ASX listed indexes.
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2018.
It was the view of the Committee that all of the standard key performance indicators (KPIs) and all of the major items in the Board approved
corporate strategy had been met. In particular the Committee noted:
Property and Strategic Matters
●
Continued to prepare for the November 2018 market rent review in conjunction with ALE’s Board and a range of valuation and legal
advisers;
Worked constructively with ALH to explore and agree a range of developments that are potentially value enhancing for ALE for a number
of properties;
Explored a number of acquisition opportunities that accorded with ALE’s strategic criteria;
Developed a number of strategic initiatives during the year;
Completed a comprehensive review of ALE’s service providers with a view to ensuring cost savings were maximised and service levels
enhanced; and
Continued to deliver both short and long term total returns for securityholders that outperformed most if not all other AREITs.
Capital Matters
●
●
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
enhancing ALE’s readiness to implement future debt refinancings and additional debt funding of any acquisitions; and
Management reviewed a range of other strategic capital initiatives with particular focus on value enhancement and risk mitigation.
●
●
●
●
●
●
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)
60.0%
50.0%
9.3%
12.0%
EIS Awarded
as a % of
Target
100.0%
100.0%
-
-
EIS
Awarded
$285,540
$134,380
$25,000
$25,000
Cash
Component
$142,770
$67,190
$12,500
$12,500
ESSS
Component
$142,770
$67,190
$12,500
$12,500
Page 14
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
Consequences of performance on securityholder wealth
In considering the Group's performance and benefits to securityholder weath, the remuneration committee have regard to a number of
performance indicators in relation to the current and previous financial years.
A review of ALE's current year performance and history is provided in the Operational and Financial Review on page 6 of the Directors
Report.
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
M J Clarke
D J Shipway
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery
Date
% vested in
year
% forfeited
in year
33,365
27,020
34,082
15,888
13,510
18,475
6,355
5,246
4,870
4,767
1,968
3,044
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
3.15
3.81
4.11
3.15
3.81
4.11
3.15
3.81
4.11
3.15
3.81
4.11
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
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
Opening
Balance
Granted in
Year
Stapled
Securities
Delivered in
the Year
Lapsed in
the Year
Closing
Balance
370,500
181,500
60,000
32,500
124,117
60,773
19,445
10,657
139,965
75,872
20,000
12,500
34,082
18,475
4,870
3,044
(162,500)
(80,000)
(20,000)
(10,000)
(63,732)
(31,375)
(7,844)
(3,922)
-
-
-
-
-
-
-
-
347,965
177,372
60,000
35,000
94,467
47,873
16,471
9,779
Securities
Delivered in
the year -
value paid $
304,882
150,092
37,524
18,762
9.5.4 Directors’ and key management personnel interests in stapled securities and ESSS rights
A summary of directors, key management personnel and their associates holdings in stapled securities and ESSS interests in ALE is shown on
page 5 of the Directors' Report.
Page 15
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
9.6 Equity based compensation
The value of ESSS disclosed in section 9.5.3 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the
five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing this
number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined during the five trading days finishing on 16 August 2018.
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 31 October 2017 was $750,000.
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 in the
current financial year. The results of this review are shown in the fees listed below. 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 reviewed in January 2017. This resulted in changes to the fee levels indicated below. The Directors' fees are
inclusive of superannuation, where applicable.
Board
ACRMC
Chairman*
Member
Chairman
Member
Remuneration Committee
Member
Chairman
Board and Committee Fees
$195,000
$95,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's remuneration is determined in accordance with the above fees. He received an additional $10,000 for being a director of
ALE Finance Company Pty Limited.
Page 16
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
9.8 Details of remuneration
Amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below in tables 1 and 2. The cash bonuses were dependent on the satisfaction of performance conditions as set out in the section 9.4 headed “Executive Incentive Scheme
Outcomes”. Equity based payments for 2018 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 2017 to 30 June 2018
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2018 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally1
M P Triguboff 2
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Capital Manager
Company Secretary and
Finance Manager
Asset Manager
1. James McNally resigned on 8 August 2018
2. Michael Triguboff was appointed a director on 15 February 2018
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
178,082
105,023
120,000
100,457
-
-
-
-
105,000
-
35,310
-
451,177
245,712
227,871
188,908
1,757,540
142,770
67,190
12,500
12,500
234,960
-
-
-
-
-
-
-
-
-
-
178,082
105,023
120,000
100,457
105,000
35,310
593,947
312,902
240,371
201,408
16,918
9,977
-
9,543
-
-
20,048
20,048
19,341
17,962
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Termination
benefits
$
-
ESSS
$
-
Total
$
195,000
$
-
-
-
115,000
-
-
-
120,000
-
-
-
110,000
-
-
-
105,000
-
35,310
-
-
-
-
-
-
-
17,277
-
142,770
774,042
(675)
-
67,190
399,465
16,372
-
12,500
288,584
6,115
-
12,500
237,985
36.9%
33.6%
8.7%
10.5%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
-
18.4%
16.8%
4.3%
5.3%
1,992,500
113,837
39,089
-
234,960
2,380,386
Table 2 Remuneration details 1 July 2016 to 30 June 2017
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2017 are set out in the following table:
Key management personnel
Short term
Name
Role
Salary & Fees
STI Cash Bonus
Non monetary
benefits
R W Mactier 3
P H Warne 4
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
$
$
$
67,013
150,280
100,457
115,000
95,890
-
-
-
-
-
J T McNally
Non-executive Director
103,750
-
A F O Wilkinson
Executive Director
A J Slade
M J Clarke
D J Shipway
Capital Manager
Company Secretary and
Finance Manager
Asset Manager
442,359
241,652
204,781
185,200
1,706,382
139,965
75,872
20,000
12,500
248,337
-
-
-
-
-
-
-
-
-
-
-
Post employment
benefits
Equity based
payment
Superannuation
benefits
Other long term
benefits
Termination
benefits
ESSS
Total
S300A(1)(e)(i)
proportion of
remuneration
performance
based
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
$
6,366
14,277
9,543
-
9,110
-
19,615
19,615
18,509
17,610
$
-
$
-
$
73,379
$
-
$
-
-
164,557
-
-
-
110,000
-
-
-
115,000
-
-
105,000
-
-
103,750
-
-
-
-
-
-
-
2,283
8,686
-
-
139,965
744,187
75,872
421,697
8,062
-
20,000
271,352
5,582
-
12,500
233,392
37.6%
36.0%
14.7%
10.7%
-
-
-
-
18.8%
18.0%
7.4%
5.4%
Total
$
67,013
150,280
100,457
115,000
95,890
103,750
582,324
317,524
224,781
197,700
1,954,719
114,645
24,613
-
248,337
2,342,314
3. Robert Mactier was appointed a director on 23 November 2016
4. Peter Warne resigned as a director on 23 May 2017
Page 17
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2018
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 $121,846 (2017: $53,560) 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 no non-audit services were performed by the auditors.
Details of amounts paid or payable to the auditor (KPMG) for audit services provided during the year are set out below:
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the Group
and other audit work required under the Corporations Act 2001
- in relation to current year
- in relation to prior year
Total remuneration for audit services
Other services
KPMG Australian firm:
Risk assurance and property development advisory services
Total other services
Total remuneration
30 June
2018
$
30 June
2017
$
159,000
-
180,000
15,000
159,000
195,000
-
-
159,000
152,352
152,352
347,352
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 three 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
DIRECTORS' REPORT
For the Year ended 30 June 2018
15 AUDITOR'S INDEPENDENCE DECLARATION
A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 20.
16 ROUNDING OF AMOUNTS
ALE is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191, issued by
the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the
Directors’ Report and Financial Report have been rounded off in accordance with the Instrument to the nearest thousand dollars, unless
otherwise indicated.
This report is made in accordance with a resolution of the directors.
Robert Mactier
Chairman
Dated this 8th day of August 2018
Andrew Wilkinson
Managing Director
Page 19
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 2018
Revenue
Rent from investment properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to investment properties
Fair value increments to derivatives - net
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 earnings per stapled security
Note
4.1
4.1
2
4.1
4.3
4.2
4.2
4.4
4.7
2018
$'000
58,095
1,049
59,144
54,273
-
54,273
113,417
4,738
25,279
2,356
2,759
3,174
38,306
75,111
21
75,090
75,090
Cents
38.36
2017
$'000
57,007
1,324
58,331
89,605
14,294
103,899
162,230
-
24,551
2,228
2,758
2,636
32,173
130,057
14
130,043
130,043
Cents
66.43
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 2018
Current assets
Cash and cash equivalents
Receivables
Other
Total current assets
Non-current assets
Investment properties
Derivatives
Plant and equipment
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
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
3.2
5.1
3.1
3.2
3.3
2018
$'000
46,014
282
308
46,604
1,136,260
834
63
285
1,137,442
1,184,046
8,347
255
20,458
29,060
524,509
10,403
534,912
563,972
620,074
258,118
855
361,101
620,074
$
$3.17
2017
$'000
59,585
258
253
60,096
1,080,160
1,471
28
282
1,081,941
1,142,037
8,151
190
20,066
28,407
521,348
6,302
527,650
556,057
585,980
258,118
893
326,969
585,980
$
$2.99
Page 23
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2018
Share
Based
Payments
Reserve
$'000
Share
Capital
$'000
Retained
Earnings
$'000
Total
$'000
2018
Total equity at the beginning of the year
258,118
893
326,969
585,980
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 purchased - Employee share based payments
Distribution paid or payable
-
-
-
-
-
-
Total equity at the end of the year
258,118
-
-
-
75,090
-
75,090
75,090
-
75,090
235
(273)
-
855
-
(238)
(40,720)
235
(511)
(40,720)
361,101
620,074
2017
Total equity at the beginning of the year
258,118
807
237,018
495,943
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 purchased - Employee share based payments
Distribution paid or payable
-
-
-
-
-
-
Total equity at the end of the year
258,118
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
-
-
-
130,043
-
130,043
130,043
-
130,043
248
(162)
-
893
-
(155)
(39,937)
326,969
248
(317)
(39,937)
585,980
Page 24
ALE Property Group
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2018
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
Payments for investment property
Payments for plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Capitalised borrowing costs paid
Borrowings repaid - AMTN
Borrowings issued - AMTN
Interest rate hedge termination payment
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 (increments)/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
2018
$'000
63,958
(14,240)
1,004
523
(22,558)
28,687
(1,827)
(50)
(1,877)
(53)
-
-
-
(40,328)
(40,381)
(13,571)
59,585
46,014
2018
$'000
75,090
(54,273)
4,738
395
2,819
235
(511)
15
(24)
(3)
(55)
196
65
2017
$'000
62,862
(13,281)
1,312
501
(21,882)
29,512
(75)
(11)
(86)
(892)
(110,000)
150,000
(7,224)
(39,644)
(7,760)
21,666
37,919
59,585
2017
$'000
130,043
(89,605)
(14,294)
433
2,279
248
(317)
19
20
6
(35)
694
21
Net cash inflow from operating activities
28,687
29,512
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 2018
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 2017
to 30 June 2018.
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
Securities 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 8th August 2018.
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 2018
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 to the Audit,
Compliance and Risk Management Committee.
When measuring the fair value of an asset or a liability, ALE
uses market observable data as far as possible. Fair values
are:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e as prices) or indirectly (i.e derived from prices);
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Page 27
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2018
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 2018
Fair value as at beginning of the year
Disposals 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.
2018
$'000
2017
$'000
1,136,260
1,080,160
1,080,160
990,480
-
1,827
-
75
1,081,987
1,136,260
990,555
1,080,160
54,273
89,605
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 2018, the weighted
average investment property capitalisation rate used to
determine the value of all investment properties was 4.98%
(2017: 5.14%).
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 2018
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 10.3 years.
In accordance with ALE's policy of independently valuing at
least one-third of its property portfolio annually, 35
properties were independently valued as at 30 June 2018.
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 Savills, Opteon, CBRE and Herron Todd White.
The remaining 51 properties were subject to Directors'
valuations as at 30 June 2018, identified as "B". The
Directors' valuations of the 51 properties were determined by
taking each property's net rent as at 30 June 2018 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 35 independent valuations
completed at 30 June 2018 on a like for like basis. The
Directors have received advice from Savills, 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
2018
Yields
4.51% - 5.79%
2.50% - 6.10%
2.86% - 5.80%
3.65% - 5.80%
5.41% - 6.51%
2017
Yields
4.65% - 5.76%
3.54% - 6.17%
3.01% - 6.06%
4.76% - 5.98%
5.41% - 6.51%
2018
Average
4.96%
5.04%
4.81%
5.13%
5.93%
2017
Average
5.08%
5.16%
5.02%
5.52%
5.96%
Page 29
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2018
2. Investment property
The fair value measurement for investment property of $1,136.26 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
2018
$000's
Level 3
Pubs
1,136,260
Valuation
Technique
Inputs Used To Measure
Fair Value
Range of Individual
Property Unobservable
Inputs
Capitalisation
method
Gross rent p.a. ($'000's)
Land tax p.a. ($'000's)
Adopted capitalisation rate
$157 - $1,730
$15 - $171
2.50% - 6.51%
Discounted
cash flow
method
Gross rent p.a. ($'000's)
Land tax p.a. ($'000's)
Discount rates p.a.
Terminal capitalisation rates
Consumer price index p.a.
$157 - $1,730
$15 - $171
5.75% - 9.86%
4.75% - 8.00%
2.14% - 2.60%
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.
2018
$'000
2017
$'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
262,582
454,044
778,034
255,796
520,330
834,270
(ii) Amount recognised in the profit and loss
Rental income
58,095
57,007
The majority of ALE's leases expire in November 2028 and
have 4 x 10 year options to extend. As the exercise of the
options are unknown at this point the future minimum lease
payments exclude the options. The comparative numbers
have been calculated on the same basis.
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 2018 with a valuation date of 30 June
2018.
Directors' valuations conducted during June
2018 with a valuation date of 30 June 2018.
Properties were purchased in November 2003, unless
otherwise indicated.
61,408 58,144 Valuation type and date
Page 30
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2018
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
5,548
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
2018
$'000
Fair value
at 30 June
2017
$'000
Fair value
gains/
(losses)
2018
$'000
B
B
A
B
A
A
B
B
A
B
B
B
A
A
B
B
B
A
B
A
B
B
A
B
B
A
A
A
B
A
A
B
A
B
B
B
B
B
A
B
B
B
13,550
13,550
20,150
19,980
7,650
15,400
11,540
14,600
29,900
10,040
12,900
12,900
18,520
19,030
7,050
15,500
11,000
13,900
29,140
9,560
650
650
1,630
950
600
(100)
540
700
760
480
156,360
149,500
6,860
18,470
7,730
11,000
13,300
19,360
15,550
7,160
3,400
13,500
6,400
7,450
9,180
15,700
14,740
4,650
12,700
9,500
14,900
7,310
11,100
11,800
7,090
14,900
8,980
9,940
7,100
10,530
10,300
19,900
10,800
15,010
11,940
17,240
7,350
10,500
12,710
18,410
14,880
6,800
3,290
12,600
6,410
7,080
8,725
14,500
13,800
4,420
11,600
8,680
13,190
6,975
9,800
11,240
6,750
14,580
8,530
9,700
6,500
10,000
9,850
18,710
10,590
14,020
11,190
1,230
380
500
590
950
670
360
110
900
(10)
370
455
1,200
940
230
1,100
820
219
335
1,300
560
340
320
450
240
600
530
450
1,190
210
990
750
Total Queensland properties
147,110
361,390
340,620
19,279
Page 31
ALE Property Group
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2018
$'000
Fair value
at 30 June
2017
$'000
Notes to the financial statements (continued)
For the Year ended 30 June 2018
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
2,507
1,605
4,435
Total South Australian properties
18,646
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
2,717
12,733
5,377
5,566
5,472
12,546
6,132
Total Victorian properties
248,196
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
516,238
Fair value
gains/
(losses)
2018
$'000
350
300
220
190
1,684
170
330
B
B
B
B
A
A
A
B
A
B
A
B
B
B
A
B
A
B
A
B
A
B
B
B
B
A
B
B
A
B
B
B
B
A
A
A
A
A
B
A
B
A
A
B
7,250
6,300
4,590
4,040
8,200
4,200
6,250
6,900
6,000
4,370
3,850
6,180
4,030
5,920
40,830
37,250
3,244
9,860
22,000
21,280
19,500
5,410
26,640
23,630
12,200
19,030
16,200
25,590
9,000
8,380
23,500
15,010
18,090
18,690
2,580
8,900
16,990
17,440
22,000
5,270
24,780
13,970
12,940
7,380
30,000
13,500
13,650
12,800
26,370
23,400
9,530
21,500
20,580
19,000
5,230
25,750
22,840
11,910
18,400
15,500
24,750
8,840
8,100
23,000
14,500
17,500
18,070
2,500
8,730
16,430
16,860
21,410
5,100
23,960
13,500
12,520
7,080
28,290
12,690
13,330
12,460
25,500
16,160
330
500
700
500
180
890
790
290
630
700
840
160
280
500
510
590
620
80
170
560
580
590
170
820
470
420
300
1,710
810
320
340
870
7,240
545,980
521,520
24,460
10,090
4,700
9,550
7,360
31,700
10,000
4,520
9,450
7,300
31,270
90
180
100
60
430
1,136,260
1,080,160
54,273
Page 32
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
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
2018
$'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
150,652
147,753
373,857
524,509
373,595
521,348
2018
$'000
111,900
39,343
(591)
150,652
2017
$'000
111,900
36,524
(671)
147,753
$125 million of CIB were 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
2018
$'000
375,000
(1,143)
373,857
2017
$'000
375,000
(1,405)
373,595
On 10 June 2014 ALE issued $335 million AMTN 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 AMTN are fixed rate securities with interest
payable semi annually. The $110m tranche was repaid early
in May 2017.
On 8 March 2017 ALE issued a further $150m AMTN, with a
maturity date of 20 August 2022.
2017 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
Miami Hotel, QLD1
Properties subject to
mortgages
Total assets pledged as
security
1. Adjoining property purchased in April 2018
2018
$'000
2017
$'000
8,390
8,390
1,136,260
1,080,160
(29,900)
(1,400)
(29,140)
-
1,104,960
1,113,350
1,051,020
1,059,410
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 2018
3. Capital structure and financing
Terms and Repayment Schedule
Nominal
Interest
Rate
5.00%
4.00%
3.40%2
Maturity
Date1
Aug-2020
Aug-2022
Nov-2023
30 June 2018
30 June 2017
Face
Value
$'000
Carrying
Amount
$'000
Face
Value
$'000
Carrying
Amount
$'000
225,000 225,000
150,000 150,000
111,900 151,243
486,900 526,243
225,000 225,000
150,000 150,000
111,900 148,424
486,900 523,424
(1,734)
524,509
(2,076)
521,348
AMTN
AMTN
CIB
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.
Reconciliation of movements in liabilities to cash flows arising from financing activities
Balance as at 1 July 2017
Changes from financing cash flows
Capitalised borrowing costs
Total changes from financing cash flows
Other changes
Amortisation of capitalised borrowing costs
Accumulated indexation
Total other changes
Balance as at 30 June 2018
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 are shown below:
30 June 2018
CIB
AMTN
30 June 2017
CIB
AMTN
Carrying
Amount
$'000
Fair
Value
$'000
150,652
373,857
524,509
165,572
382,082
547,654
147,753
373,595
521,348
153,386
385,474
538,860
Both borrowings are classed as Level 3.
CIB
Borrowings
147,753
AMTN
Borrowings
373,595
Total
Borrowings
521,348
-
-
(53)
(53)
(53)
(53)
80
2,819
2,899
150,652
315
-
315
373,857
395
2,819
3,214
524,509
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.
Debit value adjustments are applied to mark-to-market
liabilities based on ALE's credit risk using the credit rating of
ALE issued by a rating agency for the AMTN issue.
Page 34
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
3.2 Financial Risk Management
The Trust and Group have exposure to the following risks
from their use of financial instruments:
●
●
●
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.
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 Pty 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.
Page 35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
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:
Consumer price index risk
Potential variability in future distributions arise predominantly
from financial assets and liabilities through movements in the
consumer price index (CPI). For example, ALE's investment
properties are subject to annual rental increases based on
movements in the CPI. This will in turn flow through to
investment property valuations.
Profile
At the reporting date, ALE's CPI sensitive financial
instruments were as follows:
Financial instruments
Investment properties
2018
$'000
2017 CIB
$'000
2018
$'000
2017
$'000
1,136,260
(150,652)
985,608
1,080,160
(147,753)
932,407
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
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 2017.
30 June 2018
Investment properties
CIB
100 bps
increase
$'000
100 bps
decrease 30 June 2017
$'000 Investment properties
CIB
100 bps
increase
$'000
100 bps
decrease
$'000
12,687
-
12,687
11,612
-
11,612
-
-
-
-
-
-
Derivative financial assets
Derivative financial liabilities
Borrowings
CIB
AMTN
834
(10,403)
1,471
(6,302)
(150,652)
(373,857)
(534,078)
(147,753)
(373,595)
(526,179)
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
2017.
30 June 2018
Interest rate hedges
CIB
AMTN
30 June 2017
Interest rate hedges
CIB
AMTN
14,073
-
-
14,073
12,814
-
-
12,814
(15,862)
-
-
(15,862)
(14,891)
-
-
(14,891)
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 2018
3. Capital structure and financing
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 may
be restored if required.
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.
The following are the contracted maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements.
30 June 2018
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
(8,347)
(198,144)
(430,125)
Derivative financial instruments
Interest rate hedges
(11,421)
(648,037)
30 June 2017
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
(8,151)
(200,484)
(447,375)
Derivative financial instruments
Interest rate hedges
(6,096)
(662,106)
(8,347)
(2,557)
(8,625)
-
(2,585)
(8,625)
-
(5,238)
(17,250)
-
(16,266)
(395,625)
-
(171,498)
-
202
(19,327)
233
(10,977)
425
(22,063)
(6,721)
(418,612)
(5,560)
(177,058)
(8,151)
(2,536)
(8,625)
-
(2,559)
(8,625)
-
(5,187)
(17,250)
-
(16,112)
(259,875)
-
(174,090)
(153,000)
257
(19,055)
235
(10,949)
450
(21,987)
(2,767)
(278,754)
(4,271)
(331,361)
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.
Page 37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
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 fixed rate
debt past the maturity date to November 2025 through
interest rate hedges.
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Net assets/(liabilities)
2018
$'000
-
834
834
-
(10,403)
(10,403)
(9,569)
2017
$'000
-
1,471
1,471
-
(6,302)
(6,302)
(4,831)
Current year fair value adjustments to derivatives
Fair value increments/
(decrements) to interest rate
hedge derivatives
2018
$'000
2017
$'000
(4,738)
14,294
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.
At 30 June 2018, the notional principal amounts and periods of expiry of the interest rate hedge contracts are as follows:
Borrowing Interest Rate
Hedges
Deposit Interest Rate
Hedges
Net Hedge Position
2018
$'000
-
-
-
-
-
506,000
2017
$'000
-
-
-
-
-
506,000
2018
$'000
-
(30,000)
-
-
-
-
2017
$'000
-
-
(30,000)
-
-
-
2018
$'000
-
(30,000)
-
-
-
506,000
2017
$'000
-
-
(30,000)
-
-
506,000
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Greater than 5 years
ALE has a series of forward start borrowing hedges in place and a deposit hedge that is currently active.
The current forward start borrowing hedge commences on the date of the maturity of the fixed rate August 2020 AMTN
borrowing and increases on maturity of the fixed rate August 2022 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 is 7.4 years at
30 June 2018.
Page 38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
The following chart shows the hedge balances to November 2025.
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
Page 39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
Loan to Value Ratio covenants (LVR)
Borrowing
CIB
CIB
AMTN
AMTN
AMTN
Hedging
Definitions
Net Total Assets
Net Priority Debt
Net Finance Debt
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
Total Assets less Cash less Derivative Assets less Deferred Tax Assets. (ALE DPT)
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 DPT)
All covenants exclude the mark to market value of derivatives. CIB covenants relate to ALE FC. AMTN and hedging covenants
relate to ALE DPT.
ALE currently considers that significant headroom exists with respect of all the above covenants. At all times during the years
ended 30 June 2018 and 30 June 2017, ALE and its subsidiaries were in compliance with all the above covenants.
3.3 Equity
Balance at the beginning of
the period
No movement
2018
$'000
2017
$'000
258,118
258,118
-
258,118
-
258,118
Movements in the number
of fully paid stapled
securities during the year
2018
Number
2017
Number
Opening balance
195,769,080
195,769,080
No movement
Closing balance
-
-
195,769,080
195,769,080
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.
Page 40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
3. Capital structure and financing
The NIVUS were issued to ensure the Responsible Entity
maintained sufficient Net Tangible Assets to satisfy the
requirements of the company's AFSL Licence.
3.5 Cash and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
2018
$'000
2,551
35,073
8,390
46,014
2017
$'000
4,122
47,073
8,390
59,585
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 $2.00 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 2018 all cash assets were
placed on deposit with various banks. As at 30 June 2018,
the weighted average interest rate on all cash assets was
2.46% (2017:2.30%).
3.4 Capital management
Capital management
ALE monitors securityholder equity and manages it to
address risks and add value where appropriate.
The Board’s policy is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to
sustain 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 distributions from surplus cash or
capital 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 2018 and 30 June 2017 were 47.7%
and 48.7% respectively.
The covenent gearing ratios (gross borrowings less cash as a
percentage of total assets less cash, derivatives and deferred
tax assets of ALE DPT) at 30 June 2018 and 30 June 2017
were 41.6% and 42.7% respectively.
Page 41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
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
2018
$'000
2017
$'000
58,095
1,049
59,144
57,007
1,324
58,331
Interest income
As at 30 June 2018 the weighted average interest rate
earned on cash was 2.46% (2017: 2.30%)
54,273
89,605
4.2 Other expenses
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
Fair value increments to
derivatives
Other income
Total other income
Total revenue and other
income
-
-
54,273
14,294
-
103,899
113,417
162,230
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%.
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
Direct property expenses
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
2018
$'000
2017
$'000
196
98
16
176
174
121
1,624
394
2
111
24
61
177
3,174
3,174
2,759
234
75
19
160
308
113
985
393
-
110
23
55
161
2,636
2,636
2,758
(235)
5,698
(248)
5,146
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 2018
4. Business performance
4.3 Finance costs
4.4 Taxation
2018
$'000
2017
$'000 Reconciliation of income tax expense
Finance costs - cash
Capital Indexed Bonds (CIB)
Australian Medium Term
Notes (AMTN)
Interest rate derivative
payments/(receipts)
Other finance expenses
Finance costs - non-cash
Accumulating indexation - CIB
Amortisation - CIB
Amortisation - AMTN
Amortisation - AMTN discount
5,116
4,997
17,250
17,149
(518)
217
22,065
(507)
200
21,839
2,819
80
242
73
3,214
2,279
72
313
48
2,712
Finance costs (cash and
non-cash)
25,279
24,551
Recognition and measurement
Interest expense is recognised on an accruals basis.
Borrowing costs are recognised using the effective interest
rate method.
The prima facie income tax expense on profit before income
tax reconciles to the income tax expense in the financial
statements as follows:
2018
$'000
2017
$'000
Profit before income tax
Profit attributable to entities
not subject to tax
75,111
130,057
74,790
129,923
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)
321
96
(80)
-
5
21
24
(3)
21
134
40
(27)
1
-
14
6
8
14
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 2018
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
2018
$
2017
$
159,000
-
180,000
15,000
159,000
195,000
-
152,352
159,000
347,352
4.6 Distributable income
Reconciliation of profit after tax to amounts available for
distribution:
Profit after income tax
Plus /(less)
Fair value adjustments to
investment properties
Fair value adjustments to
derivatives - net
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
Capital and surplus cash
2018
$'000
75,090
2017
$'000
130,043
(54,273)
(89,605)
4,738
(14,294)
235
3,214
21
248
2,712
14
(46,065)
(100,925)
29,025
29,118
40,720
39,937
(11,695)
(10,819)
29,025
29,118
11,695
40,720
10,819
39,937
Page 44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2018
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.
2018
2017
2018
2017
Profit attributable to members
of the Group ($000's)
75,090
130,043
Distributable profit
attributable to members of
the Group ($000's)
29,025
29,118
Weighted average number of
stapled securities
195,769,080
195,769,080
Number of stapled securities
at the end of the year
195,769,080
195,769,080
Basic earnings per security
(cents)
38.36
66.43
Distributable profit per
security (cents)
14.83
14.87
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
2018
2017
14.83
14.87
Distribution paid per stapled
security
20.80
20.40
2018
2017
Profit attributable to members
of the Group ($000's)
75,090
130,043
Under/(over) distributed for
the year
(5.97)
(5.53)
Weighted average number of
stapled securities
Diluted earnings per security
(cents)
195,946,060
195,988,389
38.32
66.35
Distribution funded as follows
Current year distributable
profits
Capital and surplus cash
14.83
5.97
20.80
14.87
5.53
20.40
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 2018
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
2018
$'000
2017 Long service leave
$'000
Employee benefits provision:
Current
255
190
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
2018
$
2017
$
1,992,500
113,837
39,089
234,960
-
2,380,386
1,954,719
114,645
24,613
248,337
-
2,342,314
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 2018
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 2018 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.
AASB 9 Financial Instruments (2010), AASB 9
Financial Instruments (2009)
AASB 9, published in July 2014, replaces the existing
guidance in IAS 39 Financial Instruments: Recognition and
Measurement. AASB 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. AASB 9 is effective for annual
reporting periods beginning on or after 1 January 2018, with
early adoption permitted.
The Group has assessed the potential impact on its
consolidated financial statement resulting from the
application of AASB 9 based on its positions as at 30 June
2018 and hedging arrangements during 2018 under IAS 39.
Based on its assessment the new classification and
measurement approach for financial assets, financial
liabilities or the impairment requirements for financial assets
will not have a material impact on the financial statements.
AASB16 Leasing
AABS 16 establishes a comprehensive framework the
accounting policies and disclosures applicable to leases, both
for lessees and lessors. AABS 16 is effective for annual
reporting periods beginning on or after 1 January 2019, with
early adoption permitted.
The Company has assessed the potential impact on its
financial statements resulting from the application of AASB
16 to be immaterial.
AASB 15 Revenue from Contracts with Customers
AASB 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, IAS 11 Construction
Contracts and IFRIC 13 Customer Loyalty Programmes.
AASB 15 is effective for annual reporting periods beginning
on or after 1 January 2018, with early adoption permitted.
The Group has completed an assessment of the potential
impact of the adoption of AASB 15 on its financial statements
and there will be no significant changes.
Other standards
The following amended standards and interpretations are not
expected to have a significant impact on the Company’s
financial statements:
Other standards
The following amended standards and interpretations are not
expected to have a significant impact on the Company’s
financial statements:
Classification and Measurement of Share-based Payment
Transactions (Amendments to IFRS 2).
IFRIC 22 Foreign Currency Transactions and Advance
Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
Annual Improvements to IFRSs 2014-2016 Cycle –
Amendments to IFRS 1 and IAS 28
Page 47
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2018
6. Other
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.
Transactions with related parties
For the year ended 30 June 2018, the Company received
$4,359,742 of expense reimbursement from the Trust (2017:
$4,460,628), and the Finance Company charged the Sub
Trust $8,033,147 interest (2017: $7,366,400).
Comparative information has been presented in conformity
with the requirements of AASB 8 Operating Segments.
All of ALE Property Group's pub properties are leased to
members of the ALH Group, and accordingly 100% of the
rental income is received from ALH (2017: 100%). Non pub
rental income comprises less than 1% of total revenue.
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.
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.
6.5 Investments in controlled entities
The Trust owns 100% of the issued units of the Sub Trust.
The Sub Trust owns 100% of the issued shares of the
Finance Company. The Trust owns none of the issued shares
of the Company, but is deemed to be its "acquirer" under
AASB.
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 non operating.
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.
Robert Mactier is a consultant to UBS AG. UBS AG has
provided debt lead management services to ALE in the past
and may continue to do so in the future. Mr Mactier does not
take part in any decisions to appoint UBS AG in relation to
debt lead management services provided by UBS AG 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.
6.7 Parent Entity Disclosures
As at, and throughout, the financial year ending 30 June
2018 the parent entity of ALE was Australian Leisure and
Entertainment Property Trust.
2018
$'000
2017
$'000
Profit for the year
29,026
29,155
Financial position of the parent entity
Current assets
Cash
21
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
275,852
26,690
20,458
47,148
228,529
15,563
20,066
35,629
240,223
252,431
(23,902)
228,529
252,431
(12,208)
240,223
Page 48
ALE Property Group
DIRECTORS' DECLARATION
For the Year ended 30 June 2018
In the opinion of the directors of the Company:
(a)
the financial statements and notes that are set out on pages 22 to 48 and the Remuneration report contained in
Section 9 of the Directors’ report, are in accordance with the Corporations Act 2001, including
(i)
giving a true and fair view of ALE’s financial position as at 30 June 2018 and of its performance for the financial
year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b)
(c )
(d)
there are reasonable grounds to believe that ALE will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Managing Director, Finance Manager, and Company Secretary as required for the financial year ended 30 June
2018.
The directors draw attention to Note 1 to the financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
This declaration is made in accordance with a resolution of the Directors.
Robert Mactier
Chairman
Andrew Wilkinson
Managing Director
Dated this 8th day of August 2018
Page 49
ALE Property Group
Page 50
Page 51
Page 52
Page 53
INVESTOR INFORMATION
For the Year ended 30 June 2018
Securityholders
The securityholder information as set out below was applicable as at 6 July 2018.
A. DISTRIBUTION OF EQUITY SECURITIES
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 200,000,000
Total
Number of
Holders
742
1,375
963
1,618
110
4,808
Number of
Securities
243,619
4,216,688
7,336,384
41,956,166
142,016,223
195,769,080
% of Issued
Capital
0.12
2.15
3.75
21.43
72.54
100.00
The stapled securities are listed on the ASX and each stapled security comprises one share in Australian Leisure and Entertainment
Property Management Limited (Company) and one unit in Australian Leisure and Entertainment Property Trust (Trust). The number
of securityholders holding less than a marketable parcel of stapled securities is 315.
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below
Rank
Name
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Woolworths Group Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Manderrah Pty Ltd [GJJ Family Account]
National Nominees Limited
CS Third Nominees Pty Limited [HSBC Customer Nominees AU Ltd 13 Account]
HSBC Custody Nominees (Australia) Limited - Account 2
J P Morgan Nominees Australia Limited
Mr Edward Furnival Griffin + Mr Alastair Charles Griffin [Est Jean Falconer Griffin Ac]
National Nominees Limited [Db Account]
Netwealth Investments Limited [Wrap Services Account]
UBS Nominees Pty Ltd [Prime Broking Account]
Mr David Calogero Loggia
BT Portfolio Services Limited [Caergwrle Invest P/L Account]
Bond Street Custodians Limited [Caergwrle Investments Pty Limited Account]
Merlor Holdings Pty Ltd [Basserabie Family Settlement Account]
Mr Nicholas Anthony Dyer
C J H Holdings Pty Ltd [Superannuation Fund Account]
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Totals: Top 20 Holders of Stapled Securities
Totals: Remaining Holders Balance
C. SUBSTANTIAL HOLDERS
Substantial holders of ALE (as per notices received as at 6 July 2018) are set out below:
Stapled Securityholder
Caledonia (Private) Investments Pty Ltd
Woolworths Limited
Allan Gray Australia
Page 54
Number of
Securities
27,950,008
17,789,505
17,652,094
17,076,936
6,708,540
6,600,000
6,545,984
5,312,954
4,990,508
3,296,126
2,795,751
1,547,534
1,293,679
1,200,000
993,226
745,787
700,000
686,243
675,000
660,953
125,220,828
70,548,252
% of Issued
Capital
14.28
9.09
9.02
8.72
3.43
3.37
3.34
2.71
2.55
1.68
1.43
0.79
0.66
0.61
0.51
0.38
0.36
0.35
0.34
0.34
63.96
36.04
Number of
Securities
65,960,122
17,076,936
10,935,829
% of Issued
Capital
33.69
8.72
5.59
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2018
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. 9,080,010 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. 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.
2018
08 Aug
08 Aug
James McNally retires as a Director
Full Year Results, Annual Review / Report
and Property Compendium released
James McNally announces retirement as a Director
Caledonia increases substantial holding to 33.69%
Property valuations increased by 5.1%
05 Jul
05 Jul
07 Jun
06 Jun Half Year distribution of 10.45 cents declared
Full Year distribution of 20.80 cents announced
06 Jun
05 Mar
1st half distribution payment
16 Feb Michael Triguboff appointed a Director
16 Feb
14 Feb Half Year results released
12 Feb
12 Feb
Caledonia increases substantial holding to 32.41%
Allen Gray reduces substantial holding to 5.59%
Taxation Components of Distribution
2017
31 Oct Annual General Meeting
05 Sep 2nd half distribution payment
08 Aug Full Year Results, Annual Review / Report
and Property Compendium released
09 Jun Property valuations increased by 9.1%
09 Jun Half Year distribution of 10.25 cents declared
09 Jun Full Year distribution of 20.40 cents announced
23 May Succession of Chairman
23 May ALE Redeems maturing AMTN
14 Mar Caledonia increases substantial holding to 30.70%
08 Mar ALE completes AMTN refinancing
06 Mar 1st half distribution payment
02 Mar Taxation Components of Distribution
23 Feb Half Year results released
The following events will occur after the date of this Annual
Report:
13 Nov Annual General Meeting
05 Sep
2nd half distribution payment
Page 55
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2018
Stock Exchange Listing
The ALE Property Group (ALE) is listed on the Australian
Securities 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.
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
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.
Lawyers
Allens Linklaters
Level 28, Deutsche Bank Place
Sydney NSW 2000
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.
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 56
ALE Property Group
MIAMI TAVERN, GOLD COAST QLD
Australian Leisure and Entertainment Property Management Limited
ABN 45 105 275 278
ANNUAL REPORT
2018
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
Investor Information
02
16
17
18
19
20
21
22
32
33
36
DIRECTORS' REPORT
For the Year ended 30 June 2018
The Directors of Australian Leisure and Entertainment Property Management Limited (the "Company") present their report for the year
ended 30 June 2018.
The registered office and principal place of business of the Company is:
Level 10
6 O'Connell Street
Sydney NSW 2000
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
Robert Mactier, B.Ec, MAICD
Independent Non Executive Director
Chairman of the Board
Appointed: 28 November 2016
Appointed Chair: 23 May 2017
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Member of the Nominations Committee
Member of the Remuneration Committee
Robert’s other current roles include Chairman of ASX-listed WPP AUNZ Limited (since 2006) and
Consultant to UBS AG in Australia (since June 2007). Between 2006 and January 2017 he served as
a non-executive Director of NASDAQ listed Melco Resorts and Entertainment Limited.
Robert began his career at KPMG and from January 1986 to April 1990 worked across their audit,
management consulting and corporate finance practices. He has extensive investment banking
experience in Australia, having previously worked for Ord Minnett Securities, E.L. & C. Baillieu and
Citigroup between 1990 and 2006.
Robert holds a Bachelor’s degree in economics from the University of Sydney and has been a
Member of the Australian Institute of Company Directors since 2007.
Phillipa Downes, BSc (Bus Ad),
MAppFin, GAICD
Independent Non Executive Director
Appointed: 26 November 2013
Appointed Chair of ACRMC: 26 October 2015
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Phillipa (Pippa) is a Director of the Australian Technology Innovators (Infotrack, LEAP Legal
software), Windlab Limited, the ASX Clearing and Settlement companies and the Sydney Olympic
Park Authority. Pippa is also on the panel of the ASX Appeals Tribunal and is 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. Pippa 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 and Derivatives and strong analytical skills investing
across the capital structures of companies and across multiple asset classes.
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 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. Ms Downes is a member of The AICD and Women
Corporate Directors and in 2016 was named as a Women of Influence in the AFR/Westpac awards.
Page 2
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
Name
Experience, responsibilities and other directorships
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 and deputy chairman of
the State Insurance Regulatory Authority. 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.
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 Frasers Logistic & Industrial Trust (SGX listed) and was previously a
director of GPT Metro Office Fund.
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).
James McNally B.Bus (Land
Economy), Dip. Law
Non Executive Director
Appointed: 26 June 2003
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.
James is not considered an Independent Director as he has held an Executive Director position with
ALE for the last three years to 15 April 2017.
Michael Triguboff
Independent Non Executive Director
Appointed: 15 February 2018
Michael is a founding Director of Adexum Capital Limited, a private equity company investing in both
public and private mid-market companies. Michael is also Vice Chairman of Pyrolyx AG, a dual listed
German and Australian company involved in recycling.
Mr Triguboff has a background in equity funds management with groups including MIR and Lazard
Asset Management Pacific, Lazard Asia Funds and was a global partner of Lazard Freres & Co. He
was previously based in the USA and held positions with Quantum Funds and Equity Investments
with a focus on principal investments in both public and private companies.
Michael’s academic qualifications include; Bachelor of Arts from the University of Sydney, Bachelor
of Laws from University of New South Wales, Master of Business Administration from New York
University, Master of Business Systems from Monash University, Master of Computer Science from
University of Illinois at Urbana - Champaign / Columbia University, and Master of Criminology and
Master of Laws from University of Sydney.
Page 3
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
Name
Experience, responsibilities and other directorships
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
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.
David Lawler B.Bus, CPA
Independent member of ACRMC
Appointed: 9 December 2005
Resigned: 6 December 2017
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. David 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, Cancer Australia, 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
R W Mactier
R W Mactier
P G Say
P G Say
P J Downes
M P Triguboff
Directorships of listed entities
WPP AUNZ Limited
Melco Resorts and Entertainment Limited (Nasdaq listed)
GPT Metro Office Fund
Frasers Logistic & Industrial Trust (SGX listed)
Windlab Limited
Pyrolyx AG
Appointed as
Director
December 2006
December 2006
Type
Non-executive
Non-executive
Non-executive August 2014
Non-executive
Non-executive
Non-executive
June 2016
July 2017
February 2015
Resigned as
Director
January 2017
September 2016
Page 4
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
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
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally
M P Triguboff
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-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
50,000
189,110
25,000
20,000
55,164
-
367,737
60,000
18,000
12,825
-
-
-
-
-
-
63,732
-
-
(6,325)
50,000
189,110
25,000
20,000
55,164
-
431,469
60,000
18,000
6,500
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
124,117
60,773
19,445
10,657
34,082
18,475
4,870
3,044
(63,732)
(31,375)
(7,844)
(3,922)
94,467
47,873
16,471
9,779
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 2018 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally
M P Triguboff
A F O Wilkinson
Board
ACRMC
Held 1
11
11
11
11
11
5
11
Attended
11
11
10
11
10
4
11
Held 1
7
7
7
7
n/a
n/a
n/a
Attended
7
7
7
7
n/a
n/a
n/a
Nominations Committee and
Remuneration Committee
Attended
5
5
5
5
n/a
n/a
n/a
Held 1
5
5
5
5
n/a
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
4
3
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 2018
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 10.3 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 earnings per share
Dividend per share for the year
Net assets per share
30 June
2018
$
30 June
2017
$
4,359,742
9,048
4,368,790
4,460,628
7,077
4,467,705
2,728,780
1,354,737
4,083,517
2,727,951
1,663,604
4,391,555
285,273
10,288
274,985
76,150
(526)
76,676
Cents
Cents
0.14
-
7.28
0.04
-
7.28
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 (2017: 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 2018
9 REMUNERATION REPORT (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2018 for employees of ALE
including the directors, the Managing Director and key management personnel. This information has been audited as required by section
308(3C) of the Act.
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 following 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 2018, the Committee consisted of the following:
P G Say
P J Downes
N J Milne
R W Mactier
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chairman of Remuneration Committee
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 engaged Conari Partners to review remuneration.
Conari Partners was paid $16,000 for its services.
Page 7
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
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 2018
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
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
Managing
Director
Capital
Manager
Finance
Manager and
Company
Secretary
Ongoing
$270,000
3 months
3 months
Asset
Manager
Ongoing
$208,920
1 month
1 month
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$475,900
6 months
6 months
Ongoing
$268,760
3 months
3 months
Managing Director
Mr Wilkinson has signed a 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 2018
9.4 Executive Remuneration outcome for year ended 30 June 2018
The amount of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 13.
Executive Incentive Scheme Outcomes
In terms of total equity returns and other key financial metrics, ALE continues to perform well when compared to other Australian real estate
investment trusts (AREITs) and the wider ASX listed indexes.
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2018.
It was the view of the Committee that all of the standard key performance indicators (KPIs) and all of the major items in the Board approved
corporate strategy had been met. In particular the Committee noted:
Property and Strategic Matters
●
Continued to prepare for the November 2018 market rent review in conjunction with ALE’s Board and a range of valuation and legal
advisers;
Worked constructively with ALH to explore and agree a range of developments that are value enhancing for ALE for a number of
properties;
Explored a number of acquisition opportunities that accorded with ALE’s strategic criteria;
Worked on a number of strategic initiatives during the year;
Completed a comprehensive review of ALE’s service providers with a view to ensuring cost savings were maximised and service levels
enhanced; and
Continued to deliver both short and long term total returns for securityholders that outperformed most if not all other AREITs in the
sector.
Capital Matters
●
●
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
enhancing ALE’s readiness to implement future debt refinancings and additional debt funding of any acquisitions; and
Management reviewed a range of other strategic initiatives with particular focus on value enhancement and risk mitigation.
●
●
●
●
●
●
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)
60.0%
50.0%
9.3%
12.0%
EIS Awarded
as a % of
Target
100.0%
100.0%
-
-
EIS
Awarded
$285,540
$134,380
$25,000
$25,000
Cash
Component
$142,770
$67,190
$12,500
$12,500
ESSS
Component
$142,770
$67,190
$12,500
$12,500
Page 10
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
Consequences of performance on shareholder wealth
In considering the Group's performance and benefits to shareholder weath, the remuneration committee have regard to a number of
performance indicators in relation to the current and previous financial years.
A review of ALE's current year performance and history is provided in the Operational and Financial Review on page 6 of the Directors Report
located in the ALE Property Group's Annual Report.
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
M J Clarke
M J Clarke
D J Shipway
D J Shipway
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery
Date
% vested in
year
% forfeited
in year
33,365
27,020
34,082
15,888
13,510
18,475
6,355
5,246
4,870
4,767
1,968
3,044
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
20 Aug 15
24 Oct 16
24 Oct 17
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
1 Jul 14
1 Jul 15
1 Jul 16
3.15
3.81
4.11
3.15
3.81
4.11
3.15
3.81
4.11
3.15
3.81
4.11
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
31 Jul 18
31 Jul 19
31 Jul 20
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
Opening
Balance
Granted in
Year
Stapled
Securities
Delivered in
the Year
Lapsed in
the Year
Closing
Balance
370,500
181,500
60,000
32,500
124,117
60,773
19,445
10,657
139,965
75,872
20,000
12,500
34,082
18,475
4,870
3,044
(162,500)
(80,000)
(20,000)
(10,000)
(63,732)
(31,375)
(7,844)
(3,922)
-
-
-
-
-
-
-
-
347,965
177,372
60,000
35,000
94,467
47,873
16,471
9,779
Securities
Delivered in
the year -
value paid $
304,882
150,092
37,524
18,762
9.5.4 Directors’ and key management personnel interests in stapled securities and ESSS rights
A summary of directors, key management personnel and their associates holdings in stapled securities and ESSS interests in ALE is shown on
pages 5 of the Directors Report.
Page 11
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
9.6 Equity based compensation
The value of ESSS disclosed in section 9.5.3 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the
five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing this
number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined on 16 August 2018.
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 31 October 2017 was $750,000.
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 in the
current financial year. The results of this review are shown in the fees listed below. 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 reviewed in January 2017. This resulted in changes 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
$195,000
$95,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's remuneration is determined in accordance with the above fees. He received an additional $10,000 for being a director of
ALE Finance Company Pty Limited.
Page 12
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' REPORT
For the Year ended 30 June 2018
9.8 Details of remuneration
Amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below in tables 1 and 2. The cash bonuses were dependent on the satisfaction of performance conditions as set out in the section 9.4 headed “Executive Incentive Scheme
Outcomes”. Equity based payments for 2018 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 2017 to 30 June 2018
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2017 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Equity based
payment
Name
Role
R W Mactier
P J Downes
P G Say
N J Milne
J T McNally1
M P Triguboff 2
A F O Wilkinson
A J Slade
M J Clarke
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-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
$
178,082
105,023
120,000
100,457
-
-
-
-
105,000
-
35,310
-
451,177
245,712
227,871
188,908
1,757,540
142,770
67,190
12,500
12,500
234,960
-
-
-
-
-
-
-
-
-
-
178,082
105,023
120,000
100,457
105,000
35,310
593,947
312,902
240,371
201,408
1,992,500
16,918
9,977
-
9,543
-
-
20,048
20,048
19,341
17,962
113,837
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Termination
benefits
$
-
ESSS
$
-
Total
$
195,000
$
-
-
-
115,000
-
-
-
120,000
-
-
-
110,000
-
-
-
105,000
-
35,310
-
-
-
-
-
-
-
17,277
-
142,770
774,042
(675)
-
67,190
399,465
16,372
-
12,500
288,584
6,115
-
12,500
237,985
39,089
-
234,960
2,380,386
36.9%
33.6%
8.7%
10.5%
1. James McNally resigned as a director on 8 August 2018
2. Michael Triguboff was appointed a director on 15 February 2018
Table 2 Remuneration details 1 July 2016 to 30 June 2017
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2017 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
R W Mactier 3
P H Warne 4
P J Downes
P G Say
N J Milne
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
A F O Wilkinson
Executive Director
J T McNally
A J Slade
M J Clarke
D J Shipway
Executive Director
Capital Manager
Company Secretary and
Finance Manager
Asset Manager
3. Robert Mactier was appointed a director on 23 November 2016
4. Peter Warne resigned as a director on 23 May 2017
Salary & Fees
$
STI Cash Bonus
$
Non monetary
benefits
$
Total
$
Superannuation
benefits
$
Other long term
benefits
$
Termination
benefits
$
ESSS
$
Total
$
$
67,013
150,280
100,457
115,000
95,890
442,359
-
-
-
-
-
139,965
103,750
-
241,652
204,781
185,200
1,706,382
75,872
20,000
12,500
248,337
-
-
-
-
-
-
-
-
-
-
-
67,013
150,280
100,457
115,000
95,890
582,324
103,750
317,524
224,781
197,700
1,954,719
6,366
14,277
9,543
-
9,110
19,615
-
19,615
18,509
17,610
114,645
-
-
-
-
-
-
-
73,379
-
-
-
164,557
-
-
-
110,000
-
-
-
115,000
-
-
105,000
2,283
-
139,965
744,187
37.6%
-
-
-
103,750
-
8,686
8,062
-
-
75,872
421,697
20,000
271,352
5,582
-
12,500
233,392
24,613
-
248,337
2,342,314
36.0%
14.7%
10.7%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
-
18.4%
16.8%
4.3%
5.3%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
18.8%
-
18.0%
7.4%
5.4%
Page 13
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For the Year ended 30 June 2018
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 $121,846 (2017: $53,560) 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 no non-audit services were performed by the auditors.
Details of amounts paid or payable to the auditor (KPMG) for audit services provided during the year are set out below:
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the Group
and other audit work required under the Corporations Act 2001
- in relation to current year
- in relation to prior year
Total remuneration for audit services
Other services
KPMG Australian firm:
Risk assurance and property development advisory services
Total other services
Total remuneration
30 June
2018
$
30 June
2017
$
159,000
-
180,000
15,000
159,000
195,000
-
-
159,000
152,352
152,352
347,352
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 three 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
DIRECTORS REPORT
For the Year ended 30 June 2018
15 Auditor's independence declaration
A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.
This report is made in accordance with a resolution of the directors.
Robert Mactier
Chairman
Dated this 8th day of August 2018
Andrew Wilkinson
Managing Director
Page 15
Australian Leisure and Entertainment Property Management Limited
FINANCIAL STATEMENTS
Page 18
Page 19
Page 20
Page 21
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 28
4
Employee benefits
Page 29
5 Other
Page 32
Page 33
Directors' Declaration
Independent Auditor's Report to Members
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 17
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2018
Revenue
Expense reimbursement
Net 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 shareholders ALE
Basic earnings per share
Note
2018
$
2.1
2.1
2.2
2.2
2.3
2.4
4,359,742
9,048
4,368,790
2,728,780
1,354,737
4,083,517
285,273
10,288
274,985
274,985
Cents
0.14
2017
$
4,460,628
7,077
4,467,705
2,727,951
1,663,604
4,391,555
76,150
(526)
76,676
76,676
Cents
0.04
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 2018
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 share
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
2018
$
2017
$
2,397,306
2,932,412
307,559
5,637,277
62,895
9,080,010
70,924
9,213,829
14,851,106
348,540
255,209
603,749
603,749
2,439,819
3,020,857
253,109
5,713,785
27,573
9,080,010
57,127
9,164,710
14,878,495
440,355
189,544
629,899
629,899
14,247,357
14,248,596
14,767,075
855,297
(1,375,015)
14,247,357
$
0.07
14,767,075
892,837
(1,411,316)
14,248,596
$
0.07
Page 19
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2018
Share
based
payments
reserve
$
Share
Capital
$
Retained
Earnings
$
Total
$
2018
Total equity at the beginning of the year
14,767,075
892,837
(1,411,316)
14,248,596
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
-
-
-
-
-
-
-
-
274,985
-
274,985
274,985
-
274,985
(272,500)
234,960
(238,684)
-
(511,184)
234,960
Total equity at the end of the year
14,767,075
855,297
(1,375,015)
14,247,357
2017
Total equity at the beginning of the year
14,767,075
806,804
(1,332,885)
14,240,994
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
-
-
-
-
-
-
-
-
76,676
-
76,676
76,676
-
76,676
(162,304)
248,337
(155,107)
-
(317,411)
248,337
Total equity at the end of the year
14,767,075
892,837
(1,411,316)
14,248,596
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 2018
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 outflow 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
The above statement of cash flows should be read in conjunction with the accompanying Notes.
2018
$
2017
$
6,594,882
(6,607,866)
21,332
8,348
(50,861)
(50,861)
-
-
(42,513)
2,439,819
6,047,573
(5,935,895)
60,582
172,260
(11,429)
(11,429)
-
-
160,831
2,278,988
2,397,306
2,439,819
2018
$
274,985
15,539
234,960
(511,184)
(11,402)
(54,450)
(13,797)
99,847
65,665
(91,815)
8,348
2017
$
76,676
19,850
248,337
(317,411)
38,343
(38,480)
(8,226)
(101,404)
20,341
234,234
172,260
Page 21
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 30 June 2018
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
Securities 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 8th August 2018.
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 2018
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
2018
$
2017
$
Annual Report and Review
Audit, accounting, tax and
professional fees
Depreciation expense
Insurance
Legal fees
Occupancy costs
Corporate and property
expenses
Registry fees
Staff training
Travel and accommodation
Total other expenses
Salaries and related costs
Total expenses
2018
$
2017
$
98,404
75,458
196,258
15,539
170,999
85,654
121,012
470,816
110,628
24,193
61,234
1,354,737
2,728,780
4,083,517
233,800
19,850
160,093
69,701
112,533
803,171
110,364
23,227
55,407
1,663,604
2,727,951
4,391,555
Recognition and measurement
Expenses including operating expenses, are brought to
account on an accruals basis.
Revenue
Expense reimbursement
Interest from cash deposits
Total revenue
4,359,742
9,048
4,368,790
4,460,628
7,077
4,467,705
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 $6,594,882 (2017:
$6,047,573) 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 2018 the weighted average interest rate
earned on cash was 2.34% (2017: 2.24%)
Page 23
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2018
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:
Profit 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
2018
$
2017
$
285,273
85,582
76,150
22,845
(80,003)
-
(23,722)
-
4,709
351
10,288
24,085
(13,797)
(526)
7,700
(8,226)
10,288
(526)
2018
$
2017
$
Deferred tax assets
70,924
57,127
The balance is
attributable to:
Employee benefits
Other
Tax losses
Net deferred tax assets
76,843
(5,919)
-
70,924
57,961
(834)
-
57,127
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.
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
57,127
48,901
13,797
-
70,924
8,226
-
57,127
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.
65,234
57,127
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in
Equity.
5,690
70,924
-
57,127
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 2018
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.
2018
2017
Profit/(Loss) attributable to
members of the company
274,985
76,676
Weighted average number of
share
195,769,080
195,769,080
Basic earnings per share
(cents)
0.14
0.04
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
2018
$
2017
$
159,000
-
180,000
15,000
159,000
195,000
-
152,352
159,000
347,352
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
Profit/(Loss) attributable to
members of the Company
Weighted average number of
shares
Diluted earnings per share
(cents)
2018
2017
274,985
76,676
195,946,060
195,988,389
0.14
0.04
Page 25
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2018
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
2018
$
324,033
2,073,273
2,397,306
2017
$
366,546
2,073,273
2,439,819
Trust Non-Income Voting
Units (NIVUS)
2018
$
2017
$
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.
The NIVUS were issued to ensure the Responsible Entity
maintained sufficient Net Tangible Assets to satisfy the
requirements of the company's AFSL Licence.
3.2 Receivables
Accounts receivable
Loan to related party
Other receivable
Interest receivable
2018
$
22,073
2,846,765
19,679
43,895
2,932,412
2017
$ 3.4 Payables
27,321
2,946,612
41,415
5,509
3,020,857
Trade creditors
Creditor accruals
2018
$
160,487
188,053
348,540
2017
$
223,324
217,031
440,355
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.
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.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when
there is objective evidence that all amounts due may not be
collected according to the original terms of the receivables.
The amount of any provision is the difference between the
asset's carrying amount and the present value of estimated
future cash flows, discounted at the effective interest rate.
The amount of the provision is recognised in the Statement of
Comprehensive Income.
Page 26
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2018
3. Assets, liabilities and equity
3.5 Equity
2018
$
2017
$
Balance at the beginning of
the period
No movements
Closing balance
14,767,075
14,767,075
-
14,767,075
-
14,767,075
Movements in the number
of fully paid stapled
securities during the year
Stapled securities on issue:
Opening balance
No movement
Closing balance
Number of
Stapled
Securities
Number of
Stapled
Securities
195,769,080
195,769,080
-
-
195,769,080
195,769,080
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 2018
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
2018
$
2017 Long service leave
$
Employee benefits provision:
Current
255,209
189,544
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
2018
$
2017
$
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Termination benefits
1,992,500
113,837
39,089
234,960
-
2,380,386
1,954,719
114,645
24,613
248,337
-
2,342,314
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 2018
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 2016, 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.
AABS 15 Revenue from Contracts with Customers
AABS 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, IAS 11 Construction
Contracts and IFRIC 13 Customer Loyalty Programmes.
AASB 9 Financial Instruments (2010), IFRS 9
Financial Instruments (2009)
AASB 9, published in July 2014, replaces the existing
guidance in IAS 39 Financial Instruments: Recognition and
Measurement. AASB 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. AASB 9 is effective for annual
reporting periods beginning on or after 1 January 2018, with
early adoption permitted.
AASB 15 is effective for annual reporting periods beginning
on or after 1 January 2018, with early adoption permitted.
The Company has completed an assessment of the potential
impact of the adoption of AASB 15 on its financial statements
and there will be no significant changes.
Other standards
The following amended standards and interpretations are not
expected to have a significant impact on the Company’s
financial statements.
Classification and Measurement of Share-based Payment
Transactions (Amendments to IFRS 2).
IFRIC 22 Foreign Currency Transactions and Advance
Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
Annual Improvements to IFRSs 2014-2016 Cycle –
Amendments to IFRS 1 and IAS 28
The Company has assessed the potential impact on its
financial statement resulting from the application of AASB 9
based on its positions as at 30 June 2018 and hedging
arrangements during 2018 under IAS 39. Based on its
assessment the new classification and measurement
approach for financial assets, financial liabilities or the
impairment requirements for financial assets will not have a
material impact on the financial statements.
AASB 16 Leasing
AASB 16 establishes a comprehensive framework the
accounting policies and disclosures applicable to leases, both
for lessees and lessors. AASB 16 is effective for annual
reporting periods beginning on or after 1 January 2019, with
early adoption permitted.
The Company has assessed the potential impact on its
financial statements resulting from the application of AASB
16 to be immaterial.
Page 29
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2018
5. Other
5.2 Segment reporting
5.6 Related party transactions
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.
5.5 Commitments
Capital commitments
The Directors are not aware of any capital commitments as
at the date of this report.
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
2018
$
2017
$
121,261
110,610
170,899
-
292,160
282,266
-
392,876
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 2018 the Company had charged
the Trust $4,359,742 in expense reimbursement (2017:
$4,460,628).
Robert Mactier is a consultant to UBS AG. UBS AG has
provided investment banking services to ALE in the past and
may continue to do so in the future. Mr Mactier does not
take part in any decisions to appoint UBS AG in relation to
corporate advice provided by UBS AG 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.
5.7 Financial risk management
Overview
The Company has exposure to the following risks from its
use of financial instruments:
● credit risk
● liquidity risk
● market risk
This note presents information about the Company’s
exposure to each of the above risks, their objectives, policies
and processes for measuring and managing risk, and the
management of capital. Further quantitative disclosures are
included throughout this financial report.
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework. The Board has established the Audit, Compliance
and Risk Management Committee, which is responsible for
developing and monitoring risk management policies. The
committee reports regularly to the Board of Directors on its
activities.
Page 30
Australian Leisure and Entertainment Property Management Limited
Notes to the financial statements (continued)
For the Year ended 30 June 2018
5. Other
5.7 Financial risk management (continued)
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.
Impairment losses
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120-365 days
More than one year
2018
$
2018
$
Gross Impairment
-
-
-
-
-
-
72,895
-
-
12,752
-
85,647
The Audit, Compliance and Risk Management Committee
oversees how management monitors compliance with the
Company's risk management policies and procedures and
reviews the adequacy of the risk management framework.
Credit risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from
the Company’s receivables from customers and investment
securities.
Trade and other receivables
The Company’s exposure to credit risk is influenced mainly by
the individual characteristic of each customer. The Company
has few customers and therefore there is significant
concentration of credit risk. Credit risk has been minimised
primarily by ensuring, on a continuous basis, that the
customers have appropriate financial standing.
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
2018
$
85,647
2,397,306
2,482,953
2017
$
74,245
2,439,819
2,514,064
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120-365 days
More than one year
2017
$
2017
$
Gross Impairment
-
-
-
-
-
-
74,245
-
-
-
-
74,245
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Company's
approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking
damage to the Company's reputation.
The Company has liquidity risk management policies, which
assist it in monitoring cash flow requirements and optimising
its cash return on investments. Typically the Company
ensures that it has sufficient cash on demand to meet
expected operational expenses and commitments for the
purchase/sale of assets for a period of 90 days (or longer if
deemed necessary), including the servicing of financial
obligations.
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.
Page 31
Australian Leisure and Entertainment Property Management Limited
DIRECTORS' DECLARATION
For the Year ended 30 June 2018
In the Directors' opinion:
(a)
the financial statements and notes that are set out on pages 18 to 31 and the remuneration report contained in
Section 9 of the Directors’ report, are in accordance with the Corporations Act 2001, including
(i)
giving a true and fair view of the company’s financial position as at 30 June 2018 and of its performance for the
financial year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b)
There are reasonable grounds to believe that ALE will be able to pay its debts as and when they become due and
payable.
(c )
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Managing Director and the Finance Manager/Company Secretary as required for the financial year ended 30 June
2018.
(d)
The directors draw attention to Note 1 to the financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
This declaration is made in accordance with a resolution of the Directors.
Robert Mactier
Chairman
Andrew Wilkinson
Managing Director
Dated this 8th Day of August 2018
Page 32
Australian Leisure and Entertainment Property Management Limited
INVESTOR INFORMATION
For the Year ended 30 June 2018
Securityholders
The securityholder information as set out below was applicable as at 6 July 2018.
A. DISTRIBUTION OF EQUITY SECURITIES
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 200,000,000
Total
Number of
Holders
742
1,375
963
1,618
110
4,808
Number of
Securities
243,619
4,216,688
7,336,384
41,956,166
142,016,223
195,769,080
% of Issued
Capital
0.12
2.15
3.75
21.43
72.54
100.00
The stapled securities are listed on the ASX and each stapled security comprises one share in Australian Leisure and Entertainment Property
Management Limited (Company) and one unit in Australian Leisure and Entertainment Property Trust (Trust). The number of securityholders
holding less than a marketable parcel of stapled securities is 315.
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below
Rank
Name
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Woolworths Group Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Manderrah Pty Ltd [GJJ Family Account]
National Nominees Limited
CS Third Nominees Pty Limited [HSBC Customer Nominees AU Ltd 13 Account]
HSBC Custody Nominees (Australia) Limited - Account 2
J P Morgan Nominees Australia Limited
Mr Edward Furnival Griffin + Mr Alastair Charles Griffin [Est Jean Falconer Griffin Ac]
National Nominees Limited [Db Account]
Netwealth Investments Limited [Wrap Services Account]
UBS Nominees Pty Ltd [Prime Broking Account]
Mr David Calogero Loggia
BT Portfolio Services Limited [Caergwrle Invest P/L Account]
Bond Street Custodians Limited [Caergwrle Investments Pty Limited Account]
Merlor Holdings Pty Ltd [Basserabie Family Settlement Account]
Mr Nicholas Anthony Dyer
C J H Holdings Pty Ltd [Superannuation Fund Account]
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Totals: Top 20 Holders of Stapled Securities
Totals: Remaining Holders Balance
C. SUBSTANTIAL HOLDERS
Substantial holders of ALE (as per notices received as at 6 July 2018) are set out below:
Stapled SecurityName
Caledonia (Private) Investments Pty Ltd
Woolworths Limited
Allan Gray Australia
Number of
Securities
27,950,008
17,789,505
17,652,094
17,076,936
6,708,540
6,600,000
6,545,984
5,312,954
4,990,508
3,296,126
2,795,751
1,547,534
1,293,679
1,200,000
993,226
745,787
700,000
686,243
675,000
660,953
125,220,828
70,548,252
% of Issued
Capital
14.28
9.09
9.02
8.72
3.43
3.37
3.34
2.71
2.55
1.68
1.43
0.79
0.66
0.61
0.51
0.38
0.36
0.35
0.34
0.34
63.96
36.04
Number of
Securities
65,960,122
17,076,936
10,935,829
% of Issued
Capital
33.69
8.72
5.59
Page 36
Australian Leisure and Entertainment Property Management Limited
INVESTOR INFORMATION
For the Year ended 30 June 2018
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. 9,080,010 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. 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.
2018
08 Aug
08 Aug
05 Jul
05 Jul
07 Jun
06 Jun
06 Jun
05 Mar
16 Feb
16 Feb
14 Feb
12 Feb
12 Feb
James McNally retires as a Director
Full Year Results, Annual Review / Report
and Property Compendium released
James McNally announces retirement as a Director
Caledonia increases substantial holding to 33.69%
Property valuations increased by 5.1%
Half Year distribution of 10.45 cents declared
Full Year distribution of 20.80 cents announced
1st half distribution payment
Michael Triguboff appointed a Director
Taxation Components of Distribution
Half Year results released
Caledonia increases substantial holding to 32.41%
Allen Gray reduces substantial holding to 5.59%
2017
31 Oct
05 Sep
08 Aug
09 Jun
09 Jun
09 Jun
23 May
23 May
14 Mar
08 Mar
06 Mar
02 Mar
23 Feb
The following events will occur after the date of this annual report:
13 Nov
05 Sep
Annual General Meeting
2nd half distribution payment
Annual General Meeting
2nd half distribution payment
Full Year Results, Annual Review / Report
and Property Compendium released
Property valuations increased by 9.1%
Half Year distribution of 10.25 cents declared
Full Year distribution of 20.40 cents announced
Succession of Chairman
ALE Redeems maturing AMTN
Caledonia increases substantial holding to 30.70%
ALE completes AMTN refinancing
1st half distribution payment
Taxation Components of Distribution
Half Year results released
Page 37
Australian Leisure and Entertainment Property Management Limited
INVESTOR INFORMATION
For the Year ended 30 June 2018
Stock Exchange Listing
The ALE Property Group (ALE) is listed on the Australian Securities
Exchange (ASX). Its stapled securities are listed under ASX code:
LEP.
Distribution Reinvestment Plan
ALE has established a distribution reinvestment plan. Details of the
plan are available on the ALE website.
Distributions
Stapled security distributions are paid twice yearly, normally in
March and September.
Electronic Payment of Distributions
Securityholders may nominate a bank, building society or credit
union account for payment of distributions by direct credit.
Payments are electronically credited on the payment dates and
confirmed by mailed advice.
Securityholders wishing to take advantage of payment by direct
credit should contact the registry for more details and to obtain an
application form.
SecurityHolder Enquiries
Please contact the registry if you have any questions about your
holding or payments.
Registered Office
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr 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
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.
Lawyers
Allens Linklaters
Level 28, Deutsche Bank Place
Sydney NSW 2000
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.
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 38
Australian Leisure and Entertainment Property Management Limited
GEPPS CROSS HOTEL, ADELAIDE SA
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
KPMG
Level 38
Tower 3
International Towers, Sydney
300 Barangaroo Avenue
Sydney NSW 2000
For more information visit our
2018 Annual Review website
aleproperty2018.reportonline.com.au
Review our properties online
aleproperties.com.au
Visit us online today
alegroup.com.au