Building on
Strong Foundations
Annual Report 2020
ALE Property Group
Miami Tavern,
Gold Coast, QLD
ALE Property Group
Comprising Australian Leisure and Entertainment
Property Trust and its controlled entities
Report For the Year ended 30 June 2020
ABN 92 648 441 429
ANNUAL REPORT
2020
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) a wholly owned subsidary of Endeavour Group Limited
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
22
23
24
25
26
27
28
52
53
58
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 2020.
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
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
Phillipa Downes, BSc (Bus Ad),
MAppFin, GAICD
Independent Non Executive Director
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 (now J P Morgan), E.L.
& C. Baillieu and Citigroup between 1990 and 2006.
Robert holds a Bachelor’s degree in economics from the University of Sydney, has been a Member
of the Australian Institute of Company Directors since 2007 and is a former member of the Institute
of Chartered Accountants in Australia and New Zealand.
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
Pippa Downes is a respected Non-Executive Director with over 25 years of distinguished career
achievements in the international business and finance sector. Pippa currently sits on the board of
the Australian Technology Innovators (Infotrack, LEAP legal software, sympli), Ingenia Communities
Group and is a Commissioner of Sport Australia. Pippa is a former Director of the Sydney Olympic
Park Authority, Windlab Limited, and the ASX Clearing and Settlement companies and was a
member of the ASX Disciplinary Tribunal.
Pippa has had a successful international banking and finance career and has led the local derivative
and investment arms of several of the world’s premier Investment Banks. Her most recent role was
as a Managing Director and Equity Partner of Goldman Sachs in Australia. She is a member of the
Australian Institute of Company Directors and Women Corporate Directors and in 2016 was named
as one of the Westpac/AFR’s 100 Women of Influence for her work in diversity. Pippa’s long
standing passion for diversity, sport and educational disadvantage has been focussed through her
governance and fundraising work on not for profit entities such as The Pinnacle Foundation,
Swimming Australia and the Swimming Australia Foundation.
She has a Master’s in Applied Finance from Macquarie University and Bachelor of Science (Business
Administration) from University of California, Berkeley. Pippa was a dual international athlete having
been a member of the Australian Swim Team and represented Hong Kong at the International
Rugby Sevens.
Page 2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 is also currently the Chair of the
Accounting Professional and Ethical Standards Board. She was previously a director of Australand
Property Group, Crowe Horwarth Australasia, FBR Limited, 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
Michael Triguboff BA (Syd), LLB
(UNSW)
Non Executive Director
Nominee of Caledonia (Private)
Investments Pty Ltd
Bernard Stanton
Non Executive Director
Nominee of Caledonia (Private)
Investments Pty Ltd
Paul has over 35 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: 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 Chief Executive Officer of Pyrolyx AG, a
dual listed German and Australian tyre recycling company.
Mr Triguboff has a background in equity funds management with groups including MIR and Lazard
Asset Management Pacific, and Lazard Asia Funds. He 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.
Appointed: 13 September 2019
Member of the ACRMC
Bernard was most recently an Executive Director with the Caledonia funds management group from
2005 to June 2019.
Bernard has more than 40 years senior executive experience in Australia, USA, Europe and Asia.
Bernard holds a Bachelor’s degree in Economics from La Trobe University and an MBA from
Melbourne University.
Page 3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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
Responsible Manager of the Company under the Company’s Australian Financial Services Licence
(AFSL)
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 35 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.
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
P G Say
P J Downes
P J Downes
N J Milne
M P Triguboff
Directorships of listed entities
WPP AUNZ Limited
Frasers Logistic & Industrial Trust (SGX listed)
Windlab Limited
Ingenia Communities Group
FBR Limited
Pyrolyx AG
Type
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
Appointed
as Director
Resigned as
Director
December 2006
June 2016
July 2017
December 2019
August 2018
February 2015
June 2020
January 2020
Page 4
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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
M P Triguboff
B D Stanton
A F O Wilkinson
A J Slade
M J Clarke
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
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
-
-
464,834
75,888
24,355
-
-
-
-
-
-
27,020
13,510
5,246
50,000
189,110
25,000
20,000
-
-
491,854
89,398
29,601
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
Role
Executive Director
Capital Manager
Finance 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
91,053
46,080
12,739
10,967
5,483
8,225
(27,020)
(13,510)
(5,246)
75,000
38,053
15,718
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 2020 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
B D Stanton
M P Triguboff
A F O Wilkinson
Board
ACRMC
Nominations and
Remuneration Committee
Held1
11
11
11
11
9
11
11
Attended
11
11
11
11
8
8
11
Held1
6
6
6
6
-
n/a
n/a
Attended
6
6
6
6
-
n/a
n/a
Held1
4
4
4
4
n/a
n/a
n/a
Attended
4
4
4
4
n/a
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 2020
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 8.3 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;
Change of control protections – a change in more than 20% of the ownership of ALH requires ALE’s consent based on its reasonable
opinion that ALH will continue to have the financial capacity, business skills, other resources and authorisations to enable it to
conduct the permitted operating uses profitably and perform all of its the lease obligations (an exception applies if ALH becomes an
ASX listed entity)
Assignment protections - following ALE approved assignments, ALE continues to enjoy the benefit of an effective guarantee from ALH
of any new tenant’s obligations for the remaining lease term of around 8.3 years, as ALH is not released on assignment;
All earnings from all improvements on the properties are included for rent review purposes, irrespective of who funded the
improvements;
A rent review commenced in November 2018 which is capped and collared within 10% of the 2017 rent; and
There is a full open rent review (no cap and collar) in November 2028.
Current year performance
ALE produced a profit after tax of $20.0 million for the year ended 30 June 2020 compared to a profit of $26.6 million for the year ended
30 June 2019. The decrease is primarily due to:
•
•
•
•
•
•
Increases in rental income of 2.0% due to CPI increases on 40 properties averaging 1.7% and the full year impact of the November
2018 rent review increase of 10% on 36 of those 40 properties;
Fair value adjustments to investment properties decreased from $26.6 million to $10.9 million;
Fair value adjustments to derivatives liabilities decreased from a decrement of $25.2 million to $17.3 million in the current year as
long term interest rates continued to decrease;
Interest income was lower due to lower average funds on deposit and lower deposit rates;
Finance costs were consistent with the prior year; and
Management costs decreased during the year due to the prior year amount including significant costs associated with the rent review
submissions. ALE's normalised 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 properties, non-
cash expenses and non-cash financing costs.
Page 6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
During the financial year ALE produced a distributable profit of $30.4 million compared to $28.3 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 and management expenses.
Profit after income tax for the year
Adjustment for non-cash items
Fair value adjustments 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
Over distributed for the year
Distribution funded as follows
Current year distributable profits
Capital and surplus cash reserves
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
2020
$’000
30 June
2019
$’000
20,023
26,620
6,376
204
3,815
(7)
10,388
30,411
40,916
(10,505)
30,411
10,505
40,916
30 June
2020
Cents
10.23
15.53
20.90
15.53
5.37
20.90
(1,484)
117
3,014
26
1,673
28,293
40,916
(12,623)
28,293
12,623
40,916
30 June
2019
Cents
13.60
14.45
20.90
14.45
6.45
20.90
Percentage
Increase /
(Decrease)
(24.78%)
7.47%
0.00%
ALE's net assets decreased by 3.5%. This was attributable to the distributions exceeding the accounting profit. Accounting profit included
cash items as wells as non-cash items including fair value increases in derivative liabilities and increases in property values.
Investment property valuations increased in value by 0.9% from $1,163.2 million to $1,174.1 million during the year. The increase in
property valuations was attributable to rent reviews in the current year that averaged 1.7% on 43 properties and a slight drop in adopted
capitalisation rates from 5.09% to 5.08% 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.
Page 7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
ALE believes that the DCF method provides 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 yield of around 4.51% for 82 properties valued. This compares to the adopted
yield of 5.08% for the portfolio which was derived using a combination of the DCF and capitalisation rate methods.
Net assets per stapled security decreased by 3.5% from $3.09 to $2.99 compared to June 2019.
During the year covenant gearing reduced from 41.5% to 41.3% for the AMTN issuing entity, ALE DPT. ALE continues to maintain
appropriate headroom to all debt covenants with the nearest covenant trigger equivalent to an average 33% fall in property values. Also in
April 2020 ALE secured a debt facility of $250 million to repay the maturing AMTN and bank debt facilities.
ALE‘s debt capital structure continues to be characterised by the following positive features:
investment grade credit rating of Baa2 (stable);
debt maturity dates that are diversified over the next 2.4 years;
100% of forecast net debt hedged for the next 5.4 years;
interest cover ratio well above covenant level at 2.7 times;
all up cash interest rate of 4.11% p.a. fixed until the next refinancing in April 2022; and
lower covenant gearing of 41.3% (2019: 41.5%).
ALE has consistently sought to mitigate interest rate volatility and continues to have long term hedging in place to achieve this objective.
Historical performance
To provide context to ALE's historical performance, the following data and graphs outline a five year history of key financial metrics.
FY16
FY17
FY18
FY19
FY20
Distributable profit ($m)
29.6
29.1
29.0
28.3
30.4
Distribution per Security (cents)
20.00
20.40
20.80
20.90
20.90
Continuing property values ($m)2
990.5
1,080.2
1,136.3
1,163.2
1,174.2
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
44.9%
42.7%
41.6%
41.5%
41.3%
2. Includes only the value of properties held as at 30 June 2020
The accumulated value of $1.00 initial public offering (IPO) investment in ALE and reinvested distributions, rights renunciation payments
and the $4.97 market value of securities as at 30 June 2020 totalled $17.67. This is equivalent to 18.9% p.a. total return since the ASX
listing.
For the period ending 30 June 2020, ALE continued to perform strongly compared to other equity return benchmarks including the AREIT
300 index and the All Ordinaries index over the medium and long term.
•
•
For the three year period ALE's total return of 6.3% exceeded both the AREIT 300 index total return of 2.3% and the All Ordinaries
Index of 5.4%1
For the five year period ALE's total return of 10.8% outperformed both the AREIT 300 index of 4.7% and the All Ordinaries Index of
6.2%.1
For the ten year period ALE's total return of 15.2% outperformed both the AREIT 300 index of 9.2% and the All Ordinaries Index of
7.5%.1
1. Source: UBS
•
Page 8
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
Distribution per security
Covenant Gearing
Continuing Property Values ($m)
20.0
10.0
0.0
60.0%
40.0%
20.0%
0.0%
$1,200
$800
$400
$0
F
Y
1
6
F
Y
1
7
F
Y
1
8
F
Y
1
9
F
Y
2
0
F
Y
1
6
F
Y
1
7
F
Y
1
8
F
Y
1
9
F
Y
2
0
F
Y
1
6
F
Y
1
7
F
Y
1
8
F
Y
1
9
F
Y
2
0
The following chart shows the total annual return of an ALE security over various periods.
1.Includes ALE’s equity market price of $4.97 as at 30 June 2020 and reinvestment of distributions and 2009 renunciation payment
2.All Ordinaries Accumulation Index
3.UBS S&P REIT 300 Index
Business strategies and future prospects
ALE holds a positive outlook for the rent review prospects for the portfolio. In November 2018 the first major review was due with the
reviewed rent capped and collared within 10% of the November 2017 rent for the majority of properties. There is also a full open rent
review (no caps or collars) in November 2028. Rent Determinations for 43 properties remain in progress at the date of this report.
Following the rent determinations ALE will seek to work constructively with ALH with a focus on maintaining and exploring the potential to
further enhance the properties' through development or better site utilisation.
As previously advised, following the finalisation of the rent determinations, ALE’s Board will review the appropriateness of the current
distribution and capital management policy.
COVID-19
The spread of novel coronavirus (COVID-19) was declared a public health emergency by the World Health Organisation on 31 January
2020 and upgraded to a global pandemic on 11 March 2020. The rapid rise of the virus has seen an unprecedented global response by
Governments, regulators and industry sectors. The Australian Federal Government enacted its emergency plan on 29 February 2020 which
has seen the closure of Australian borders from 20 March, an increasing level of restrictions on corporate Australia’s ability to operate,
significant volatility and instability in financial markets and the release of a number of government stimulus packages to support individuals
and businesses as the Australian and global economies face significant slowdowns and uncertainties. The effects of the ongoing COVID-19
pandemic on human life have been devastating. Its impact on the world economy has been unprecedented in both scale and speed.
Page 9
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
ALE's first actions were to ensure the wellbeing and safety of our staff. The Company implemented its Business Continuity Plan and staff
were able to work from home with minimal impact on normal day to day operations. As the crisis eased and restrictions were lifted ALE
implemented appropriate return to work policies in accordance with Government recommendations. To date there has been minimal
impact on ALE’s operating performance or financial position, and property values, as determined independently, have been maintained at
pre COVID-19 levels, showing the resilience and strength of ALE’s long-term the lease covenants and the operating and financial strength
of the lessee. The Directors and management continue to monitor the situation closely and expect the year ahead to be challenging as the
recovery from the effects of the pandemic, from a financial and community perspective, will be long lasting.
Our investment properties are used by ALH as operating pubs and retail liquor outlets. In accordance with Government emergency
measures the operating pubs were closed in March 2020 and in the States where restrictions have been relaxed the pub operations have
gradually reopened. During the financial period ALH has been paying rent in accordance with the requirements of the leases. The Directors
will continue to monitor the business environment to determine if there are any material impacts on ALH's operations that may impact ALE.
In the event that the impacts of COVID-19 become material or more prolonged than anticipated, or if ALH does not continue to meet its
rental obligations (being a key assumption underlying the property valuations), this may have an adverse impact to the fair value of ALE’s
property portfolio.
Significant changes in the state of affairs
In the opinion of the directors, other than matters mentioned above in the Operation and Financial review, no significant changes in the
state of affairs of ALE occurred during the year.
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 are discussed below.
Risk
Impact
Risk Management Mitigation
COVID-19 Risk
Tenant and sector
concentration risk
Properties ALE own are operated as pubs and
retail liquor outlets. As part of Government
measures the operations are subject to various
trading retrictions. In the event that the impacts
of COVID-19 become material or more
prolonged than anticipated, or if ALH does not
continue to meet its rental obligations (being a
key assumption underlying the property
valuations), this may have an adverse impact to
the fair value of ALE’s property portfolio and
ALE's operating results.
All 86 of ALE's pub properties are leased to a
single tenant, ALH which is owned by Endeavour
Group Limited. Endeavour Group is owned by
Woolworth (85.4%) and the Bruce Mathieson
Group (14.6%). In addition all properties are
utilised as operating pubs and retail liquor
outlets. 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.
The Directors will continue to monitor the business environment
to determine if there are any material impacts on ALH's
operations that may impact ALE.
ALE manages this risk by monitoring the operating performance
of each of the hotels and ALH on a regular basis. ALE will
continue to monitor developments concerning ALH closely as the
credit profile of ALH may impact ALE's future ability to secure
debt finance at competitive credit margins. ALE also has the
option of selling properties and/or issuing equity to meet its debt
obligations.
Page 10
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
Risk
Impact
Risk Management Mitigation
Property Valuation
Risk
Properties that ALE owns have values that are
exposed to movements in the Australian
commercial property markets, changes in 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 at
least one third of the property portfolio on an annual basis.
Declines in ALE's property values are recorded on the Statement
of Comprehensive Income, any decreases in value will have a
negative impact on the statutory net profit and net tangible
assets per security and in turn the market price of the Group’s
securities may fall. Increases in gearing could also reduce
headroom to debt covenants. At 30 June 2020 the closest debt
covenant would be triggered by a decline of around 33% in
property values and a resultant average capitalisation rate of
7.61%. By way of comparison it should be noted that in the last
12 years the highest average capitalisation rate of ALE properties
has been 6.60%. ALE considers it currently has sufficient
headroom in it's debt covenants.
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 net debt to
November 2025 at weighted average base rates of between
3.11% and 3.46%. 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 maximise the opportunity for
multiple funding options.
ALE currently has outstanding borrowings of
$557 million, representing a covenant gearing
level of 41.3%. 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. ALE faces the risk of reduced
profitability and distributions should interest
rates on borrowings increase materially.
Refinancing and
interest rate risk
Liquidity risk
Regulatory Risk
The risk that ALE may not be able to generate
sufficient cash resources to settle its obligations
in full as they fall due or can only do so on
terms that are materially
disadvantageous.
ALE monitors its exposure to liquidity risk by ensuring that there
is sufficient cash on hand as required or debt facility funding
available to meet financial liabilities as they fall due. ALE has a
long track record of consistently approaching debt markets for
refinancing well in advance of the scheduled debt maturity dates.
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 EBITDAR of
ALH. EBITDAR is a key determining factor for
rent reviews and therefore could impact on
ALE’s long term profitability.
ALE is unable to control regulatory changes that may impact on
the gaming and liquor licences operating in our properties. It
monitors the regulatory settings and public debate in each state
to determine potential changes and their potential implications
for ALE.
Personnel risk
ALE may be unable to recruit, retain and
motivate key personnel.
ALE has a small management team and employee base. Key
person risk is therefore significant. To mitigate this risk ALE seeks
to document all business and operating processes and ensure the
management team have cross functional capabilities where
possible. Where functions require specialised skills, external
consultants can be engaged to cover functions if required.
Page 11
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
Risk
Impact
Risk Management Mitigation
Environmental
(including climate
risk), social and
economic risk
The risk that our operating and investment
activities, or those of our tenant, give rise to
unintended environmental (including climate
change), social (including problem gambling and
alcohol) and economic consequences.
ALE strives to minimise the impacts of its business and operating
decisions on the environment, society and the economy. Outside
the rights included in the leases and other agreements, ALE is
unable to control the operations of ALH that may have a negative
impact from the operations at our properties but monitors these
potential impacts and liaises with ALH to seek to understand the
actions they are taking to mitigate any consequences.
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
2020
cents per
security
30 June
2019
cents per
security
30 June
2020
30 June
2019
$’000
$’000
Final Trust income distribution for the year ending 30 June 2020 to be
paid on 7 September 2020
10.45
10.45
20,458
20,458
Interim Trust income distribution for the year ending 30 June 2020
paid on 5 March 2020
Total distribution for the year ending 30 June 2020
10.45
20.90
10.45
20.90
20,458
40,916
20,458
40,916
No provisions for or payments of Company dividends have been made during the year (2019: nil).
7. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The COVID-19 pandemic has created unprecedented economic uncertainty and impacted market activity in many sectors including the pub
sector where trading restrictions have been put in place. ALE continues to receive rental income in accordance with the agreed lease
arrangements with ALH.
Prior to issuing this report, management consulted with the independent valuers who undertook the valuations as at 30 June 2020 as to
whether any events subsequent to balance date have changed their view of the 30 June 2020 valuations. The independent valuers and
management are of the opinion that appropriate considerations have been made at 30 June and there has been no changes to the
valuations subsequent to balance date.
In the opinion of the Directors of the Company, other than the above, 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 preserving and enhancing the profitability and value of its portfolio of properties for the benefit
of its stapled securityholders.
In accordance with the leases of its investment properties, ALE has until November 2017 received annual increases in rental income in line
with increases in the consumer price index. The first non CPI based market rent review commenced in November 2018 for 79 of ALE's
properties. As at balance date 36 properties had received a full increase of 10% and 43 properties are to be determined by expert
determining valuers. It is anticipated that the rent determinations will be concluded in the first quarter of FY21. The results of the rent
determinations and the ongoing COVID-19 pandemic may have a negative or positive impact of property valuations. Following the rent
determinations ALE will seek to update the independent valuations of all 86 investment properties.
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 12
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 2020 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
(KPIs); 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 for three years.
9.2 Remuneration and Nominations Committee
The Remuneration and Nominations Committee ("the Committee") is a committee comprising non-executive directors of the Company. The
Committee strives to ensure that ALE's remuneration structure strikes an appropriate balance between the interests of ALE securityholders
and rewarding, motivating and retaining employees.
The Committee's charter sets out its role and responsibilities. The charter is reviewed on an annual basis. In fulfilling its role the Committee
endeavours to ensure the remuneration framework established will:
●
●
●
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
ensure there is an appropriate mix between fixed and "at risk" remuneration.
The Committee operates independently of management in its recommendations to the Board and engages remuneration consultants
independently of management. During the year ended 30 June 2020, 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 and 3 of this Annual 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 of the Annual Report.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee did not engage any consultant to review remuneration.
Page 13
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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
Mark Crick
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 14
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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
Mark
Crick1
Managing
Director
Capital
Manager
Finance
Manager and
Company
Secretary
Ongoing
$300,000
3 months
3 months
Asset
Manager
Ongoing
$270,000
3 months
3 months
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$495,126
6 months
6 months
Ongoing
$279,618
3 months
3 months
1. Mark Crick commenced employment on 6 July 2020
Managing Director
Mr Wilkinson has signed a service agreement that commenced on 1 September 2014. The current base salary, inclusive of superannuation, is
$495,126 and is 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.
On 14th May 2020 the Board announced that Mr Guy Farrands will join ALE as a consultant with effect from 20 May 2020. Mr Farrands will
be providing consultancy and advisory services to Mr Wilkinson and the Board, prior to Mr Wilkinson stepping down as CEO and Managing
Director, which is anticipated to take place in the first quarter of FY 2021. At that time it is intended that Mr Farrands will be appointed as
CEO of ALE and Mr Wilkinson will continue to work closely with Mr Farrands and the Board to ensure a smooth transition, transfer of
corporate history and an in-depth understanding of the 2018 rent determination process.
Page 15
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
9.4 Executive Remuneration outcome for year ended 30 June 2020
The amount of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 19 of the Annual Report.
Fixed Remuneration Outcomes
Fixed Remuneration for all executives was reviewed effective 1 January 2020. Increases of 2% were awarded to executives. An increase of
8.9% was awarded to Michael Clarke in recognition of increased responsibilities, including appointment as a Responsible Manager for the
AFS Licence.
Executive Incentive Scheme Outcomes
For the year to June 2020 ALE delivered a total return of 1.4%. This outperformed the total returns of both the S&P/ASX 300 REIT at
-20.7% and the wider S&P/ASX 300 at -7.2%. With a total return of 18.9% per annum since its 2003 IPO, ALE continues to perform well
over that extended period when compared to the comparative indexes.
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2020.
It was assessed by the Committee that a number of the key performance indicators (KPIs) were met and others were not. In particular the
Committee noted:
Property and Strategic Matters
●
Following the very significant workload undertaken by ALE’s small management team in FY19 to successfully complete a large submission
package relating to the 2018 rent review, management continued to work closely with the determining valuers and provide the additional
information that they required;
Capital Matters
●
Management implemented a $250 million debt facility to fully repay a maturing AMTN and small bank debt facility in a time of market
volatility due to COVID-19 and was seen as proactive risk management;
●
●
●
Importantly, the debt facility did not lock in elevated margin costs for an extended period. Instead, it is intended that the facility be
refinanced as soon as favourable terms are available for an extended tenor in the public or private debt markets;
Management reviewed a range of other strategic initiatives with particular focus on value enhancement and risk mitigation; and
ALE continued to deliver both medium and long term total returns for securityholders that outperformed most of the other AREITs in the
sector.
The remuneration committee considered these achievements and compared them to key performance indicators for each executive that were
set at the beginning of the financial year. Individual executives contributed to the valuable outcomes outlined above and this was recognised
in the EIS payments made. All the EIS payments are included in the staff remuneration expenses in the current year.
The Board is aware of market expectations for board and senior executives to be sharing the financial impact of COVID-19 through reduced
remuneration. The Board considered the issues and took the view that ALE stakeholders were not currently directly impacted by CIVID-19,
deciding that there would be no action on FY20 EIS incentives and that any adjustment to staff and director salaries would be reconsidered if
circumstances changed.
The EIS awarded to each member of the management team was as follows:
Executive
Andrew Wilkinson
Andrew Slade1
Michael Clarke
Target EIS
(as % of
FAR)
60%
50%
n/a
EIS
Awarded
(as % of
FAR)
60.0%
25.5%
20.0%
EIS Awarded
as a % of
Target
100.0%
51.1%
-
EIS
Awarded
$297,076
$50,000
$60,000
Cash
Component
$148,538
$25,000
$30,000
ESSS
Component
$148,538
$25,000
$30,000
1. Based on available hours worked during the period
Page 16
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
Consequences of performance on securityholder wealth
In considering the Group's performance and benefits to securityholder wealth, the remuneration committee have regard to a number of
performance indicators in relation to the current and previous financial years.
A review of ALE's current year performance and history is provided in the Operational and Financial Review commencing on page 6 of the
Annual Report.
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Number of
Rights
Outstanding
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Approximate
Delivery
Date
% vested in
year
Grant Date
Executive
ESSS Rights
Nil
A F O Wilkinson
Nil
A F O Wilkinson
Nil
A F O Wilkinson
Nil
A J Slade
Nil
A J Slade
Nil
A J Slade
Nil
M J Clarke
Nil
M J Clarke
Nil
M J Clarke
D J Shipway 1
Nil
D J Shipway 1
Nil
D J Shipway 1
Nil
1. Mr Shipway resigned effective 24 October 2019 and at the discretion of the Board his ESSS rights remain active and may be issued when they vest.
24 Oct 17
25 Oct 18
2 Mar 20
24 Oct 17
25 Oct 18
2 Mar 20
24 Oct 17
25 Oct 18
2 Mar 20
24 Oct 17
25 Oct 18
2 Mar 20
31 Jul 20
31 Jul 21
31 Jul 22
31 Jul 20
31 Jul 21
31 Jul 22
31 Jul 20
31 Jul 21
31 Jul 22
31 Jul 20
31 Jul 21
31 Jul 22
1 Jul 16
1 Jul 17
1 Jul 18
1 Jul 16
1 Jul 17
1 Jul 18
1 Jul 16
1 Jul 17
1 Jul 18
1 Jul 16
1 Jul 17
1 Jul 18
34,082
29,951
10,967
18,475
14,095
5,483
4,870
2,623
8,225
3,044
2,623
1,097
4.11
4.77
4.56
4.11
4.77
4.56
4.11
4.77
4.56
4.11
4.77
4.56
% forfeited
in year
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 1
By Number
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway 1
Opening
Balance
Granted in
Year
385,735
194,562
52,500
32,500
91,053
46,080
12,739
7,635
50,000
25,000
37,500
5,000
10,967
5,483
8,225
1,097
Stapled
Securities
Delivered in
the Year
(103,000)
(51,500)
(20,000)
(7,500)
(27,020)
(13,510)
(5,246)
(1,968)
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
332,735
168,062
70,000
30,000
75,000
38,053
15,718
6,764
Securities
Delivered in
the year -
value paid $
142,357
71,179
27,639
10,369
1. Mr Shipway resigned effective 24 October 2019 and at the discretion of the Board his ESSS rights remain active and may be issued when they vest.
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 Annual Report.
Page 17
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 13 August 2020.
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 29 October 2019 was $850,000.
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 last reviewed in the
2020 financial year. The results of this review are shown in the fees listed below. 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 2020. This resulted in no 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.
Page 18
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 2020 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 2019 to 30 June 2020
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2020 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
B D Stanton1
M P Triguboff
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
A F O Wilkinson
Executive Director
A J Slade
M J Clarke
D J Shipway2
Capital Manager
Company Secretary and
Finance Manager
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
-
-
-
-
69,200
-
95,000
-
469,674
237,446
267,713
53,144
148,538
25,000
30,000
-
1,695,739
203,538
-
-
-
-
-
-
-
-
-
-
-
178,082
105,023
120,000
100,457
69,200
95,000
618,212
262,446
297,713
53,144
16,918
9,977
-
9,543
6,574
-
21,003
19,699
21,003
5,049
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Termination
benefits
$
-
ESSS
$
-
Total
$
195,000
$
-
-
-
115,000
-
-
-
120,000
-
-
-
110,000
-
-
-
75,774
-
95,000
-
-
-
-
-
-
-
11,300
-
148,538
799,053
6,902
-
25,000
314,047
10,227
-
30,000
358,943
-
-
-
58,193
37.2%
15.9%
16.7%
0.0%
S300A(1)(e)(vi)
Value of equity
based payment as
proportion of
remuneration
$
-
-
-
-
-
-
18.6%
8.0%
8.4%
0.0%
1. Bernard Stanton was appointed a Director on 13 September 2019.
2. Don Shipway resigned on 24 October 2019
Table 2 Remuneration details 1 July 2018 to 30 June 2019
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2019 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
P J Downes
P G Say
N J Milne
J T McNally3
M P Triguboff
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
A F O Wilkinson
Executive Director
A J Slade
M J Clarke
D J Shipway
Capital Manager
Company Secretary and
Finance Manager
Asset Manager
3 James McNally resigned as a director on 8 August 2018
Page 19
$
$
$
178,082
105,023
120,000
100,457
-
-
-
-
11,008
-
95,000
-
460,127
145,175
252,160
192,688
50,000
25,000
37,500
5,000
1,659,720
117,500
-
-
-
-
-
-
-
-
-
-
1,899,277
109,766
28,429
-
203,538
2,241,010
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
$
$
16,918
9,977
-
9,543
-
-
20,531
11,977
20,531
18,322
$
-
$
-
$
195,000
$
-
$
-
-
115,000
-
-
-
120,000
-
-
-
110,000
-
-
-
11,008
-
95,000
-
-
-
-
-
-
-
10,898
-
50,000
591,556
1,002
-
25,000
208,154
5,837
-
37,500
353,528
8,412
-
5,000
229,422
16.9%
24.0%
21.2%
4.4%
-
-
-
-
-
-
8.5%
12.0%
10.6%
2.2%
Total
$
178,082
105,023
120,000
100,457
11,008
95,000
510,127
170,175
289,660
197,688
1,777,220
107,799
26,149
-
117,500
2,028,668
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 $393,600 (2019: $166,050) 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:
Other services
Total other services
Total remuneration
30 June
2020
$
30 June
2019
$
175,785
-
194,065
8,000
175,785
202,065
-
-
20,000
20,000
175,785
222,065
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
(Hendon, Gateway and Burvale Hotels) low levels of Hydrocarbons are present and 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 20
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2020
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 22.
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 5th day of August 2020
Andrew Wilkinson
Managing Director
Page 21
ALE Property Group
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Australian Leisure and Entertainment Property Management
Limited, the Responsible Entity for Australian Leisure and Entertainment
Property Trust
I declare that, to the best of my knowledge and belief, in relation to the audit of ALE Property Group
(comprising Australian Leisure and Entertainment Property Trust and its controlled entities including
ALE Direct Property Trust, ALE Finance Company Pty Limited and Australian Leisure and Entertainment
Property Management Limited) for the financial year ended 30 June 2020 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Eileen Hoggett
Partner
Sydney
5 August 2020
22
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
FINANCIAL STATEMENTS
Page 24
Page 25
Page 26
Page 27
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Page 28
Page 30
Page 36
Note
1
2
3
About this report
Investment Property
Capital structure and financing
Page 45
4
Business performance
Page 49
5
Employee benefits
Page 50
6 Other
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
5.1
5.2
5.3
Employee benefits
Key management personnel compensation
Employee share plans
Changes to accounting policies
6.1
6.2 New accounting standards
Segment reporting
6.3
Events occurring after balance date
6.4
Contingent liabilities and assets
6.5
Investments in controlled entities
6.6
Related party transactions
6.7
Parent entity disclosures
6.8
Page 52
Page 53
Directors' Declaration
Independent Auditor's Report to Stapled Securityholders
Page 23
ALE Property Group
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2020
Revenue
Rent from investment properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to investment properties
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
Diluted earnings per stapled security
Note
4.1
4.1
2
3.2
4.3
4.2
4.2
4.4
4.7
4.7
2020
$'000
61,408
301
61,709
10,930
10,930
72,639
17,306
25,856
3,313
2,718
3,430
52,623
20,016
(7)
20,023
20,023
Cents
10.23
10.22
2019
$'000
60,219
782
61,001
26,639
26,639
87,640
25,155
25,217
2,907
2,335
5,380
60,994
26,646
26
26,620
26,620
Cents
13.60
13.59
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
Page 24
ALE Property Group
STATEMENT OF FINANCIAL POSITION
As At 30 June 2020
Current assets
Cash and cash equivalents
Derivatives
Receivables
Other
Total current assets
Non-current assets
Investment properties
Plant and equipment
Right of use asset
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Employee benefits
Lease liability
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
3.2
2
5.1
3.1
3.2
3.3
2020
$'000
39,568
-
80
709
40,357
1,174,160
25
34
306
1,174,525
1,214,882
6,047
292
42
20,458
26,839
551,412
52,030
603,442
630,281
584,601
258,118
804
325,679
584,601
$
$2.99
2019
$'000
33,111
691
176
350
34,328
1,163,230
39
-
296
1,163,565
1,197,893
8,634
294
-
20,458
29,386
527,523
35,415
562,938
592,324
605,569
258,118
782
346,669
605,569
$
$3.09
Page 25
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2020
Share
Based
Payments
Reserve
$'000
Share
Capital
$'000
Retained
Earnings
$'000
Total
$'000
2020
Total equity at the beginning of the year
258,118
782
346,669
605,569
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:
Adjustment on initial application of AABS 16
Employee share based payments
Securities purchased - Employee share based payments
Distribution paid or payable
-
-
-
-
-
-
-
Total equity at the end of the year
258,118
-
-
-
-
204
(182)
-
804
20,023
-
20,023
(27)
-
(70)
(40,916)
20,023
-
20,023
(27)
204
(252)
(40,916)
325,679
584,601
2019
Total equity at the beginning of the year
258,118
855
361,101
620,074
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.
-
-
-
117
(190)
-
782
26,620
-
26,620
26,620
-
26,620
-
(136)
(40,916)
346,669
117
(326)
(40,916)
605,569
Page 26
ALE Property Group
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2020
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
Repayment of borrowings
Proceeds from borrowings
Lease payments
Distributions paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Reconciliation of profit after income tax to net cash inflows from
operating activities
Profit for the year
Plus/(less):
Fair value (increments) to investment property
Fair value decrements to derivatives
Finance costs amortisation
CIB accumulated indexation
Share based payments expense
Share based payments securities purchased
Depreciation
Decrease/(increase) in -
Receivables
Deferred tax assets
Other assets
Increase/(decrease) in -
Payables
Provisions
2020
$'000
67,600
(15,051)
339
721
(26,189)
27,420
-
-
-
(4,926)
(225,000)
250,000
(121)
(40,916)
(20,963)
6,457
33,111
39,568
2020
$'000
20,023
(10,930)
17,306
907
2,908
204
(252)
116
96
(10)
(359)
(2,587)
(2)
2019
$'000
66,254
(17,117)
904
461
(22,155)
28,347
(331)
(3)
(334)
-
-
-
-
(40,916)
(40,916)
(12,903)
46,014
33,111
2019
$'000
26,620
(26,639)
25,155
423
2,591
117
(326)
27
106
(11)
(42)
287
39
Net cash inflow from operating activities
27,420
28,347
The above statement of cash flows should be read in conjunction with the accompanying Notes.
Page 27
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 30 June 2020
1.
About this report
Reporting Entity
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.
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 2019
to 30 June 2020.
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.
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 5th August 2020.
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.
COVID-19 Disclosures
The spread of novel coronavirus (COVID-19) was declared a
public health emergency by the World Health Organisation on
31 January 2020 and upgraded to a global pandemic on 11
March 2020. The rapid rise of the virus has seen an
unprecedented global response by Governments, regulators
and industry sectors. The Australian Federal Government
enacted its emergency plan on 29 February 2020 which has
seen the closure of Australian borders from 20 March, an
increasing level of restrictions on corporate Australia’s ability
to operate, significant volatility and instability in financial
markets and the release of a number of government stimulus
packages to support individuals and businesses as the
Australian and global economies face significant slowdowns
and uncertainties.
ALE's first actions were to ensure the wellbeing and safety of
our staff. The Company implemented its Business Continuity
Plan and staff were able to work from home with minimal
impact on normal day to day operations. As the crisis eased
and restrictions were lifted ALE implemented appropriate
return to work policies in accordance with Government
recommendations. To date there has been minimal impact on
ALE’s operating performance or financial position, and
property values, as determined independently, have been
maintained at pre COVID-19 levels, showing the resilience
and strength of ALE’s long-term the lease covenants and the
operating and financial strength of the lessee. The Directors
and management continue to monitor the situation closely
and expect the year ahead to be challenging as the recovery
from the effects of the pandemic, from a financial and
community perspective, will be long lasting.
Our investment properties are used by ALH as operating
pubs and retail liquor outlets. In accordance with
Government emergency measures the operating pubs were
closed in March 2020 and in the States where restrictions
have been relaxed the pub operations have gradually
reopened. During the financial period ALH has been paying
rent in accordance with the requirements of the leases. The
Directors will continue to monitor the business environment
to determine if there are any material impacts on ALH's
operations that may impact ALE. In the event that the
impacts of COVID-19 become material or more prolonged
than anticipated, or if ALH does not continue to meet its
rental obligations (being a key assumption underlying the
property valuations), this may have an adverse impact to the
fair value of ALE’s property portfolio.
Following the implementation of the Governments
emergency plans and the shut down of businesses, global
debt and equity markets were severely impacted. At that
time ALE was in the process of organising refinancing of
AMTN borrowings that were due for redemption in August
2020. In April 2020 a debt facility of $250 million was
arranged and used to repay the maturing debt facilities in
May 2020. ALE's next debt maturity is April 2022.
As at 30 June 2020, the Group had net working capital of
$13.5 million, no debt maturities until April 2022 and minimal
capital commitments. The directors have prepared projected
cash flow information from balance date to 12 months from
the date of approval of these financial
Page 28
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
1. About this report
statements taking into consideration the continued minimal
business impacts of COVID-19. The Directors have also
considered the potential impacts if conditions change and if
ALE's business is impacted.
Based on these forecasts, taking account of reasonably
possible downsides the directors believe that it remains
appropriate to prepare the financial statements on a going
concern basis and have a reasonable expectation that the
Group is expected to continue to operate, with headroom,
within available cash levels and the terms of its debt facilities.
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
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
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.
Measurement of fair values
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial
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 29
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
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 2020
Fair value as at beginning of the year
Additions during the year
Carrying amount before revaluations
Fair value as at end of the year
Fair value gain for the year
2020
$'000
2019
$'000
1,174,160
1,163,230
1,163,230
-
1,163,230
1,174,160
1,136,260
331
1,136,591
1,163,230
10,930
26,639
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.
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.
Land and buildings classified as investment property are not
depreciated.
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 2020, the weighted
average investment property capitalisation rate used to
determine the value of all investment properties was 5.08%
(2019: 5.09%).
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 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 8.3 years.
In the current financial year ALE had all properties, apart
from those located in Western Australia independently
valued. These valuations were completed by Savills and
CBRE. The Western Australian properties were subject to
Directors valuations.
Page 30
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
2. Investment property
Measurement of fair value (continued)
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.
to the traditional capitalisation rate method. A table showing
the range of adopted yields applied to individual properties
for each state in which the property is held is included below.
Rent determinations started in the previous years are in
progress for 43 properties and are expected to be completed
during the first quarter of FY21.
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 yield, 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 adopted yield although the
adopted valuations continue to give much greater weighting
COVID-19
The COVID-19 pandemic has impacted market activity in
many sectors in the economy and this has been particularly
evident in the pub sector where trading restrictions have
been put in place. Notwithstanding the uncertainty that the
COVID-19 pandemic is currently having on property values,
the valuation assessment undertaken by the Group indicates
that demand still exists for prime assets secured by strong
tenant covenants with long lease terms and yields are
holding to pre COVID-19 levels. In the event that the impacts
of COVID-19 become material or more prolonged than
anticipated, and ALH does not continue to meet its rental
obligations (being a key assumption underlying the
valuations), this may have an adverse impact to the fair
value of ALE’s property portfolio.
New South Wales
Victoria
Queensland
South Australia
Western Australia
2020
Adopted Yields
4.46% - 5.86%
2.80% - 5.77%
3.42% - 6.29%
4.20% - 5.77%
5.80% - 6.93%
2019
Adopted Yields
4.57% - 5.96%
2.75% - 6.00%
3.22% - 6.31%
4.02% - 5.80%
5.80% - 6.93%
2020
Average
5.02%
5.07%
5.01%
5.12%
6.29%
2019
Average
5.11%
5.06%
5.02%
5.07%
6.22%
The fair value measurement for investment property of $1,174.16 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
2020
$000's
Level 3
Pubs
1,174,160
Valuation
Technique
Inputs Used To Measure
Fair Value
Range of Individual
Property Unobservable
Inputs
Capitalisation
method
Gross rent p.a. ($'000's)
Land tax p.a. ($'000's)
Adopted capitalisation rate
$84 - $1,835
$7 - $193
2.80% - 7.04%
Discounted
cash flow
method
Gross rent p.a. ($'000's)
Land tax p.a. ($'000's)
Discount rates p.a.
Terminal capitalisation rates
Consumer price index p.a.
$84 - $1,835
$7 - $193
5.25% - 8.68%
5.25% - 7.75%
1.29% - 2.60%
As noted above the independent valuer had regard to discounted cash flow modelling in deriving a final adopted yield
although the capitalisation of income method remains the predominant method used in valuing the individual properties.
Page 31
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
2. Investment property
Sensitivity analysis
Due to the uncertainty the COVID-19 pandemic is currently having on property values, sensitivity analysis has been
undertaken to further stress test the assessment of fair value undertaken for year-end reporting requirements.
The following sensitivity analysis is based on a range of potential capitalisation rate and discount rate movements on a
portfolio basis compared to the capitalisation rates and discount rates adopted by ALE at 30 June 2020, and are considered
to be the key unobservable inputs that would be expected to have the most material impact on the fair values adopted if they
moved.
As noted above the independent external Valuers use a combination of DCF and Capitalisation rate approaches to determine
the adopted value. The stress testing performed was based on the same metrics used by the valuers for each property to
determine an adapted value. The stress testing was based on moving discount rates and pure capitalisation rates by between
+0.50% to -0.50% in 0.25% increments. The resultant adopted value is shown in the table below.
Discount Rate Movement
'000's
(0.50%)
(0.25%)
0.00%
0.25%
0.50%
(0.50%)
(0.25%)
0.00%
0.25%
0.50%
1,275,750
1,229,350
1,188,000
1,150,450
1,116,050
1,268,750
1,222,450
1,181,100
1,143,450
1,109,000
1,262,150
1,215,750
1,174,160
1,136,750
1,102,400
1,255,750
1,209,300
1,168,100
1,130,400
1,095,950
1,249,400
1,202,900
1,161,650
1,123,950
1,089,700
Capitalisation
Rate
Movement
The results of the sensitivity analysis above demonstrates that stress testing the material key inputs by the ranges disclosed
would result in a movements between of $101.6 million and ($84.5 million). This equates to between 8.65% and (7.19%)
movement in values. Even at this unlikely worst case scenario, this would not result in Property values approaching the 33%
decrease where debt covenants would be breached.
While the above sensitivity analysis provides an indication of the extent to which investment property values may move if the
different rates are applicable in the future, ALE offers no forecast of future rates or values or the sufficiency of the rate
movements included in the above analysis. The analysis also makes the assumption that an independent valuer will use the
same proportion of Capitalisation Rate and DCF based values as they applied to the 30 June 2020 independent valuations
included in these accounts.
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.
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
f $1
Page 32
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 to ALH on a double net
basis.
2020
$'000
2019
$'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
63,301 63,258
266,119
350,889
680,309
265,941
382,363
711,562
(ii) Amount recognised in the profit and loss
Rental income
61,408
60,219
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.
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
2. Investment property
Valuation type and date
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 2020 with a valuation date of 30 June 2020.
Directors' valuations conducted during June 2020 with a valuation date of 30 June 2020.
Properties were purchased in November 2003, unless otherwise indicated.
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2020
$'000
Fair value
at 30 June
2019
$'000
Fair value
gains/
(losses)
2020
$'000
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, Miami1
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
1. Includes adjacent lot purchased in April 2018
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
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
14,300
15,000
21,700
23,800
8,400
16,000
11,600
15,400
31,300
10,400
13,900
13,960
20,750
22,800
7,870
16,130
11,540
15,050
29,900
10,400
400
1,040
950
1,000
530
(130)
60
350
1,400
-
167,900
162,300
5,600
18,800
7,500
11,700
13,000
23,800
15,200
6,400
3,800
13,100
6,300
7,700
9,600
17,000
15,400
4,800
12,300
9,800
15,770
7,500
10,900
11,500
7,000
14,900
7,600
9,600
18,700
7,540
11,210
13,540
23,500
15,700
6,500
3,500
14,200
6,230
7,400
8,940
15,990
15,200
4,800
12,920
9,250
14,620
7,110
11,290
11,490
6,900
14,510
7,600
9,400
100
(40)
490
(540)
300
(500)
(100)
300
(1,100)
70
300
660
1,010
200
-
(620)
550
1,150
390
(390)
10
100
390
-
200
Page 33
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
2. Investment property
Property
Queensland (continued)
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
1,794
5,189
5,755
9,150
5,377
5,661
4,529
Total Queensland properties
147,110
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
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
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2020
$'000
Fair value
at 30 June
2019
$'000
Fair value
gains/
(losses)
2020
$'000
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
A
6,900
10,500
10,100
21,500
11,000
13,600
13,400
7,240
10,000
10,110
20,260
10,800
15,300
13,300
(340)
500
(10)
1,240
200
(1,700)
100
367,970
365,050
2,920
7,200
6,350
5,000
4,700
8,000
4,200
6,150
7,250
6,300
5,000
4,700
8,200
4,200
6,250
(50)
50
-
-
(200)
-
(100)
41,600
41,900
(300)
11,300
21,800
20,800
19,200
5,500
27,500
25,000
11,500
18,300
17,500
26,600
9,400
9,800
26,500
17,000
20,000
17,800
3,100
8,900
16,700
19,550
22,000
7,000
24,350
16,000
10,600
22,400
20,800
19,870
5,500
27,130
25,000
12,410
19,360
18,510
26,040
9,160
8,700
24,400
16,000
18,400
17,800
2,620
9,060
16,700
19,250
22,390
6,600
25,500
14,510
700
(600)
-
(670)
-
370
-
(910)
(1,060)
(1,010)
560
240
1,100
2,100
1,000
1,600
-
480
(160)
-
300
(390)
400
(1,150)
1,490
Page 34
ALE Property Group
Notes to the financial statements (continued)
For the ended
2. Investment property
Property
Victoria (continued)
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
4,529
2,733
12,733
5,377
5,566
5,519
12,546
6,132
Total Victorian properties
248,259
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
6,645
22,386
516,569
Cost
including
additions)
$'000
Valuation
type and
date)
Fair value
at 30 June
2020
$'000
Fair value
at 30 June
2019
$'000
Fair value
gains/
(losses)
2020
$'000
A
A
A
A
A
A
A
A
B
B
B
B
13,000
8,500
30,100
13,350
16,000
11,900
25,550
23,400
13,500
7,660
29,300
13,000
15,600
13,020
28,000
23,400
564,900
562,190
10,090
4,700
9,550
7,450
31,790
10,090
4,700
9,550
7,450
31,790
(500)
840
800
350
400
(1,120)
(2,450)
-
2,710
-
-
-
-
-
1,174,160
1,163,230
10,930
Page 35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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
Non-current borrowings
Capital Indexed Bond (CIB)
Australian Medium Term
Notes (AMTN)
Debt facility
CIB
Gross value of debt
Accumulated indexation
Unamortised borrowing costs
Net balance
2020
$'000
2019
$'000
On 24 April 2020 a $250 million debt facility was established.
The facility is for a term of two years and can be repaid at
any time without penalty.
156,336
153,331
149,576
245,500
551,412
2020
$'000
111,900
44,842
(406)
156,336
374,192
-
527,523
2019
$'000
111,900
41,934
(503)
153,331
Recognition and measurement
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.
$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
2020
$'000
2019 Non-current assets
$'000 Total investment properties
Gross value of debt
Unamortised borrowing costs
Net balance
150,000
(424)
149,576
375,000
(808)
374,192
Less: Properties not subject to
mortgages
Pritchard's Hotel, NSW
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:
2020
$'000
2019
$'000
Current assets
Cash - CIB borrowings
reserves
9,920
8,390
1,174,160
1,163,230
Miami Hotel, QLD1
Properties subject to
mortgages
Total assets pledged as
security
1. Adjoining property purchased in April 2018
(31,300)
(1,470)
(29,900)
(1,480)
1,141,390
1,151,310
1,131,850
1,140,240
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.
The AMTN are fixed rate securities with interest payable semi
annually.
On 10 June 2014 ALE issued AMTNs with a value of $225
million, maturing on 20 August 2020. These notes were fully
redeemed on 27 May 2020.
On 8 March 2017 ALE issued AMTNs with a value of $150
million, maturing on 20 August 2022.
Debt facility
Gross value of debt
Unamortised borrowing costs
Net balance
2020
$'000
250,000
(4,500)
245,500
2019
$'000
-
-
-
Page 36
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
3. Capital structure and financing
Terms and Repayment Schedule
Nominal
Interest
Rate
Issue
Rate
Maturity
Date1
30 June 2020
30 June 2019
Face
Value
$'000
Carrying
Amount
$'000
Face
Value
$'000
Carrying
Amount
$'000
AMTN
Debt facility
AMTN
CIB
5.00% 10-Jun-2014
1.75%2
24-Apr-2020
4.00% 08-Mar-2017
3.40%3 20-May-2006
20-Aug-2020
24-Apr-2022
20-Aug-2022
20-Nov-2023
Unamortised borrowing costs
Total borrowings
- -
250,000 250,000
150,000 150,000
111,900 156,742
511,900 556,742
225,000 225,000
-
-
150,000 150,000
111,900 153,834
486,900 528,834
(5,330)
551,412
(1,311)
527,523
1. Maturity date refers to the first scheduled maturity date for each tranche of borrowing.
2. Interest is payable at the nominal floating rate +margin. Hedging applies from August 2020. Nominal rate increases by 0.75% every six months
commencing August 2020.
3. 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 2019
Changes from financing cash flows
New borrowings
Repayment of borrowings
Payment of 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 2020
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 2020
CIB
AMTN
Debt facility
30 June 2019
CIB
AMTN
Carrying
Amount
$'000
156,336
149,576
245,500
551,412
Fair
Value
$'000
167,384
153,793
250,000
571,177
153,331
374,192
527,523
168,488
385,035
553,523
Both borrowings are classed as Level 3.
CIB
Borrowings
AMTN
Borrowings
Debt Facility
Borrowings
Total
Borrowings
153,331
374,192
-
527,523
-
-
97
2,908
3,005
156,336
(225,000)
(225,000)
384
-
384
149,576
270,000
(20,000)
(4,926)
245,074
426
-
426
245,500
270,000
(245,000)
(4,926)
20,074
907
2,908
3,815
551,412
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 37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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.
3.2.1 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.
3.2.2 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 distributable profit arises
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, distributable profit levels would be
expected to decline from the levels that they would otherwise
have been.
Page 38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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 distributable profit 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
2020
$'000
2019 CIB
$'000
2020
$'000
2019
$'000
1,174,160
(156,336)
1,017,824
1,163,230
(153,331)
1,009,899
Derivative financial assets
Derivative financial liabilities
Borrowings
CIB
AMTN
Debt facility
-
(52,030)
691
(35,415)
(153,793)
(149,576)
(245,500)
(600,899)
(153,331)
(374,192)
-
(562,247)
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 2019.
1. The Debt facility debt is floating rate. Its market value is therefore not
affected by changes in interest rates.
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
2019.
30 June 2020
Investment properties
CIB
30 June 2019
Investment properties
100 bps
increase
$'000
100 bps CIB
decrease
$'000
100 bps
increase
$'000
100 bps
decrease
$'000
11,560
-
11,560
11,212
-
11,212
-
-
-
-
-
-
30 June 2020
Interest rate hedges
CIB
AMTN
Debt facility
30 June 2019
Interest rate hedges
CIB
AMTN
18,442
-
-
-
18,442
16,973
-
-
16,973
(19,698)
-
-
-
(19,698)
(18,495)
-
-
(18,495)
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 39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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.
3.2.3 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 2020
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
Debt facility
(6,047)
(193,040)
(165,000)
(264,240)
Derivative financial instruments
Interest rate hedges
(56,562)
(684,889)
30 June 2019
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
(8,634)
(194,801)
(412,875)
Derivative financial instruments
Interest rate hedges
(38,174)
(654,484)
(6,047)
(2,606)
(3,000)
(1,974)
-
(2,623)
(3,000)
(3,391)
-
(5,328)
(6,000)
(258,875)
-
(182,483)
(153,000)
-
-
-
-
-
(1,705)
(15,332)
(3,376)
(12,390)
(7,089)
(277,292)
(38,113)
(373,596)
(6,279)
(6,279)
(8,634)
(2,584)
(8,625)
-
(2,606)
(8,625)
-
(5,264)
(236,625)
-
(184,347)
(159,000)
-
-
-
333
(19,510)
365
(10,866)
(3,812)
(245,701)
(21,456)
(364,803)
(13,604)
(13,604)
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 40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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)
2020
$'000
-
-
-
-
(52,030)
(52,030)
(52,030)
2019
$'000
691
-
691
-
(35,415)
(35,415)
(34,724)
Current year fair value adjustments to derivatives
Fair value increments/
(decrements) to interest rate
hedge derivatives
2020
$'000
2019
$'000
(17,306)
(25,155)
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 2020, 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
2020
$'000
-
-
-
-
-
506,000
2019
$'000
-
-
-
-
-
506,000
2020
$'000
-
-
-
-
-
-
2019
$'000
(30,000)
-
-
-
-
-
2020
$'000
-
-
-
-
-
506,000
2019
$'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. A small deposit hedge expired during FY20.
The current forward start borrowing hedge commences in August 2020 and increases on maturity of both the fixed rate
August 2022 AMTN and the November 2023 CIB 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 5.4 years at
30 June 2020.
Page 41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
3. Capital structure and financing
The following chart shows the hedge balances to November 2025.
The difference between the net debt and the amount hedged is approximately the amount of current fixed rate debt on
issue.
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
ICR covenant
CIB
AMTN
ALH EBITDAR to be greater than 7.5 times
CIB interest expense
ALE DPT EBITDA to be greater than or equal
to 1.5 times ALE DPT interest expense
Debt facility
Hedging
As per AMTN
As per AMTN
Current
Ratio
Consequence
>50x
2.62x
2.62x
2.62x
Stapled security distributions lockup
Note holders may call for notes to be
redeemed
Lender may call for loan to be repaid
Hedge counterparty may call for hedging to
be closed out
Definitions
Interest amounts include all interest rate derivative rate swap payments and receipts
EBITDAR - Earnings before Interest, Tax, Depreciation, Amortisation and Rent
Rating covenant
Borrowing
Covenant
AMTN
AMTN issue rating to be maintained at
investment grade (i.e. at least Baa3/BBB-)
Debt facility
ALE DPT rating to be maintained at
investment grade (i.e. at least Baa3/BBB-)
Current
Rating
Baa2
Baa2
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
Published rating of Baa3/BBB- or lower
results in a step up margin of 0.25% to be
added to the interest rate payable. Rating of
Ba1/BB+ or lower results in a further 1%
added to the interest rate payable
Page 42
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
3. Capital structure and financing
Loan to Value Ratio covenants (LVR)
Borrowing
LVR Covenant
CIB
CIB
AMTN
AMTN
AMTN
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
The new issuance not to result in Net Finance
Debt exceeding 60% of Net Total Assets
Current
Ratio
13.7%
13.7%
11.7%
41.3%
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
The new issuance not to result in Net Finance
Debt exceeding 65% of Net Total Assets
41.3%
Note holders may call for notes to be
redeemed
Debt facility
As per AMTN above
Hedging
As per AMTN above
-
-
Lender may call for loan to be repaid
Hedge counterparty may call for hedging to
be closed out
Definitions
Net Total Assets
Net Priority Debt
Net Finance Debt
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, Debt facility 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 2020 and 30 June 2019, ALE and its subsidiaries were in compliance with all the above covenants.
3.3 Equity
2020
$'000
2019
$'000
Measurement and recognition
Ordinary units and ordinary shares are classified as
contributed equity.
Balance at the beginning of
the period
258,118
258,118
No movement
-
258,118
-
258,118
Movements in the number
of fully paid stapled
securities during the year
2020
Number
2019
Number
Opening balance
195,769,080
195,769,080
No movement
Closing balance
-
-
195,769,080
195,769,080
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.
Page 43
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
3. Capital structure and financing
No income voting units (NIVUS)
The Trust issued 9,080,010 of no income voting units
(NIVUS) to the Company, fully paid at $1.00 each in
November 2003. The NIVUS are not stapled to shares in the
Company, have an issue and withdrawal price of $1.00, carry
no rights to income from the Trust and entitle the holder to
no more than $1.00 per NIVUS upon the winding-up of the
Trust. The Company has a voting power of 4.43% in the
Trust as a result of the issue of NIVUS. The NIVUS are
disclosed in the Company and the Trust financial reports but
are not disclosed in the ALE Property Group financial report
as they are eliminated on consolidation. The NIVUS were
issued to ensure the Responsible Entity maintained sufficient
Net Tangible Assets to satisfy the requirements of the
company's AFSL Licence.
3.4 Capital management
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 2020 and 30 June 2019 were 51.9%
and 49.4% respectively.
The covenant 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 2020 and 30 June 2019
were 41.3% and 41.5% respectively.
3.5 Cash and cash equivalents
Capital management
ALE monitors securityholder equity and manages it to
address risks and add value where appropriate.
Cash at bank and in hand
Deposits at call
Cash reserve
2020
$'000
4,575
25,073
9,920
39,568
2019
$'000
14,648
10,073
8,390
33,111
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 $9.92 million (2019: $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 2020 all cash assets were
placed on deposit with various banks. As at 30 June 2020,
the weighted average interest rate on all cash assets was
0.66% (2019:1.64%).
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.
Page 44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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
2020
$'000
2019
$'000
61,408
301
61,709
60,219
782
61,001
Interest income
As at 30 June 2020 the weighted average interest rate
earned on cash was 0.66% (2019: 1.64%)
10,930
26,639
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
-
-
10,930
-
-
26,639
72,639
87,640
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 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
2020
$'000
2019
$'000
222
55
117
346
368
15
1,047
908
30
112
11
18
181
3,430
3,430
2,718
214
63
27
241
230
129
3,683
420
52
100
18
25
178
5,380
5,380
2,335
(204)
5,944
(117)
7,598
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 45
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
4. Business performance
4.3 Finance costs
4.4 Taxation
2020
$'000
2019
$'000 Reconciliation of income tax expense
Finance costs - cash
Capital Indexed Bonds (CIB)
Australian Medium Term
Notes (AMTN)
Interest rate derivative
payments/(receipts)
Bank debt
Other finance expenses
Finance costs - non-cash
Accumulating indexation - CIB
Amortisation - CIB
Amortisation - AMTN
Amortisation - AMTN discount
Amortisation - Bank debt
Other finance expenses
Finance
5,285
5,206
16,174
17,250
(656)
943
295
22,041
2,908
97
304
80
426
-
3,815
(475)
-
222
22,203
2,591
88
259
76
-
-
3,014
25,856
25,217
Recognition and measurement
Interest expense is recognised on an accruals basis.
The prima facie income tax expense on profit before income
tax reconciles to the income tax expense in the financial
statements as follows:
2020
$'000
2019
$'000
Profit before income tax
Profit attributable to entities
not subject to tax
Profit/(Loss) before income
tax expense subject to tax
Tax at the Australian tax rate
Share based payments
Other
Under/(over) provision in
prior years
Income tax
Current tax expense/(benefit)
Deferred tax expense/
(benefit)
Income tax
expense/(benefit)
20,016
26,646
20,005
26,388
11
3
(14)
2
2
(7)
-
(7)
(7)
258
77
(63)
-
12
26
15
11
26
Borrowing costs are recognised using the effective interest
rate method.
Recognition and measurement
Amounts represent net cash finance costs after derivative
payments and receipts.
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 46
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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
2020
$
2019
$
175,785
-
194,065
8,000
175,785
202,065
-
20,000
175,785
222,065
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
2020
$'000
20,023
2019
$'000
26,620
(10,930)
(26,639)
17,306
25,155
204
3,815
(7)
10,388
30,411
117
3,014
26
1,673
28,293
40,916
40,916
Over distributed
(10,505)
(12,623)
Distribution funded as follows
Current year distributable
profits
Capital and surplus cash
30,411
28,293
10,505
40,916
12,623
40,916
Page 47
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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.
2020
2019
2020
2019
Profit attributable to members
of the Group ($000's)
20,023
26,620
Distributable profit
attributable to members of
the Group ($000's)
30,411
28,293
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)
10.23
13.60
Distributable profit per
security (cents)
15.53
14.45
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
2020
2019
15.53
14.45
Distribution paid per stapled
security
20.90
20.90
2020
2019
Profit attributable to members
of the Group ($000's)
20,023
26,620
Under/(over) distributed for
the year
(5.37)
(6.45)
Weighted average number of
stapled securities
Diluted earnings per security
(cents)
195,911,039
195,929,320
10.22
13.59
Distribution funded as follows
Current year distributable
profits
Capital and surplus cash
15.53
5.37
20.90
14.45
6.45
20.90
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 48
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the Year ended 30 June 2020
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
2020
$'000
2019 Long service leave
$'000
Employee benefits provision:
Current
292
294
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
2020
$
2019
$
1,899,277
109,766
28,429
203,538
-
2,241,010
1,777,220
107,799
26,149
117,500
-
2,028,668
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 49
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
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 Changes to accounting policies
6.5 Contingent liabilities and contingent assets
6.2 New accounting standards
6.6 Investments in controlled entities
6.3 Segment reporting
6.7 Related party transactions
6.4 Events occurring after balance date
6.8 Parent Entity Disclosures
6.1 Changes to accounting policies
The impact of the transition is summarised below:
The Group has initially applied AASB 16 Leases from 1 July
2019. A number of other new standards are also effective
from 1 January 2020 but they do not have a material effect
on the Group’s financial statements.
Right of use assets
Lease liabilities
Retained earnings
AASB 16 establishes a comprehensive framework for
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.
The Company applied AASB 16 using the modified
retrospective approach, under which the cumulative effect of
initial application is recognised in retained earnings at 1 July
2019. Accordingly the comparative information for June 2019
is not restated. The details of the changes in accounting
policies are disclosed below. Additionally the disclosure
requirements in AASB 16 have not been applied to
comparative information.
Under AASB 16, a contract is, or contains, a lease if the
contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration. As a
lessee the Company has one lease, for office premises, that
was previously classified as an operating lease under AASB
117. Under AASB 16 that lease has been recognised as a
right-of-use asset and lease liability. The Company does not
act as a Lessor.
On transition to AASB 16, the Company recognised right-of
use asset and liabilities, recognising the difference in retained
earnings. When measuring the lease liabilities for the lease
that had been classified as an operating lease, lease liabilities
were measured at the present value of remaining lease
payments, discounted at the Group's incremental borrowing
rate as at 1 July 2019. Right-of-use assets were measured at
the carrying value as if AASB 16 had been applied since the
commencement date discounted using the lessee's
incremental borrowing rate at the date of initial application.
The incremental borrowing rate applied was 2.10%.
Operating lease commitments at 30 June
2019 as disclosed under AASB 16 in the
Company's financial statements
Discounted using the incremental borrowing
rate at 1 July 2019
Recognised exemption for leases of low-value
assets
6.2 New accounting standards
A number of new standards are effective for annual periods
beginning after 1 January 2020 and earlier application is
permitted; however, the Group has not early adopted the
new or amended standards in preparing these consolidated
financial statements and does not expect them to have a
significant impact on the consolidated financial statements.
6.3 Segment reporting
Business segment
The results and financial position of ALE's single operating
segment, ALE Strategic Business Unit, are prepared for the
Managing Director on a quarterly basis. The strategic
business unit covers the operations of the responsible entity
for the ALE Property Group.
Comparative information has been presented in conformity
with the requirements of AASB 8 Operating Segments.
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 (2019: 100%). Non pub
rental income comprises less than 1% of total revenue.
1 July 2019
000's
136
(163)
27
171
168
(5)
163
Page 50
ALE Property Group
Notes to the financial statements (continued)
For the Year ended 30 June 2020
6. Other
6.4 Events occurring after balance date
The COVID-19 pandemic has created unprecedented
economic uncertainty and impacted market activity in many
sectors including the pub sector where trading restrictions
have been put in place. To date, ALE continues to receive
rental income in accordance with the agreed lease
arrangements with ALH.
Prior to issuing this report, management consulted with the
independent valuers who undertook the valuations as at 30
June 2020 as to whether any events subsequent to balance
date have changed their view of the 30 June 2020
valuations. The independent valuers and management are of
the opinion that appropriate considerations have been made
at 30 June and there has been no changes to the valuations
subsequent to balance date.
Apart from the above, 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.
6.5 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.
Transactions with related parties
For the year ended 30 June 2020, the Company received
$4,477,922 of expense reimbursement from the Trust (2019:
$4,009,810), and the Finance Company charged the Sub
Trust $8,307,406 interest (2019: $7,904,515).
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.
6.8 Parent Entity Disclosures
As at, and throughout, the financial year ending 30 June
2020 the parent entity of ALE was Australian Leisure and
Entertainment Property Trust.
2020
$'000
2019
$'000
Profit for the year
20,695
28,293
Financial position of the parent entity
Current assets
6.6 Investments in controlled entities
Cash
21
21
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.
Non current assets
Investments in controlled
entities
Total assets
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.
6.7 Related party transactions
Parent entity and subsidiaries
Details are set out in Note 6.6 and 6.8.
Key management personnel
Key management personnel and their compensation are set
out in the Remuneration Report on Page 19.
Current
Payables
Provisions
Total liabilities
Net assets
Issued units
Retained earnings
Total equity
275,656
275,677
275,656
275,677
59,533
20,458
79,991
195,686
39,312
20,458
59,770
215,907
252,431
(56,745)
195,686
252,431
(36,524)
215,907
Page 51
ALE Property Group
DIRECTORS' DECLARATION
For the Year ended 30 June 2020
In the opinion of the directors of the Australian Leisure and Entertainment Property Management Limited (the Company) as
responsible entity of the Australian Leisure and Entertainment Property Trust:
(a)
the financial statements and notes that are set out on pages 24 to 51 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 Group's financial position as at 30 June 2020 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 the Group 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
2020.
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 5th day of August 2020
Page 52
ALE Property Group
Independent Auditor’s Report
To the stapled security holders of ALE Property Group
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
ALE Property Group (the Stapled Group).
In our opinion, the accompanying Financial
Report of the Stapled Group is in
accordance with the Corporations Act
2001, including:
giving a true and fair view of the
Stapled Group’s financial position as
at 30 June 2020 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report of the Stapled Group comprises:
Consolidated Statement of financial position as at 30
June 2020;
Consolidated Statement of comprehensive income,
Consolidated Statement of changes in equity, and
Consolidated Statement of cash flows for the year
then ended;
Notes including a summary of significant accounting
policies; and
Directors’ Declaration.
The Stapled Group consists of the Australian Leisure
and Entertainment Property Trust and Australian Leisure
and Entertainment Property Management Limited and
the entities it controlled at the year-end or from time to
time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Stapled Group in accordance with the Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant
to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.
53
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report of the current year.
This matter was addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on this matter.
Valuation of Investment Properties ($1,174.16m)
Refer to Note 2 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The valuation of investment properties is a
key audit matter due to the significance of
the balance and judgment required by us in
assessing the key valuation assumptions,
methodologies and the final adopted values.
The Stapled Group's investment properties
comprise direct ownership of 86 freehold
hotels. All 86 properties have long-term lease
agreements in place with Australian Leisure
and Hospitality Group (ALH). In the prior year,
the first major rent review commenced on 79
of ALE’s 86 investment properties. At the
date of this report, 36 rent notices have been
accepted and there remains to be 43 rent
notices subject to independent
determination.
There are significant judgments in assessing
the fair value of properties and evaluating
available evidence. This was further
heightened with the existence of the COVID-
19 pandemic, with decreasing market
transactions which are ordinarily strong
sources of evidence regarding fair value.
Notwithstanding the COVID-19 pandemic,
ALH continues to meet all rental obligations
despite reduced operations since March
2020.
Investment properties are subject to external
independent valuation once every three years
on a rotational basis. At 30 June 2020, the
total portfolio (except for 4 WA properties)
were independently valued.
We focused on the important features of the
Stapled Group’s investment property valuation
Our procedures included:
• Understanding the Stapled Group’s process
regarding the valuation of investment property,
including how potential COVID-19 impacts
have been considered;
• Assessing the methodologies used in the
valuations of investment property for
consistency with accounting standards and
Stapled Group policies;
• Assessing the scope, competence and
objectivity of external experts engaged by
the Stapled Group and internal valuers;
• Meeting the valuers (Savills for NSW and OLD
and CBRE for VIC and SA) to discuss and
challenge the valuation methodology and the
assumptions;
For a sample of externally valued properties:
• Challenging key assumptions including:
capitalisation rates, discounts rates, terminal
capitalisation rates and future rental income
(including anticipated rental for rent disputed
properties and that ALH will continue to
meet all rental obligations despite COVID-19)
by considering publicly available sales
evidence, historical data and the property
specific attributes including location, asset
condition and land area;
• Challenging the final property value by
comparing the cap rate and DCF valuations,
54
and reconciling differences to property
specific attributes. These include location,
asset condition, trading performance, land
area, proximity to the next market rent
reassessments and whether the rent notice
is undergoing determination;
For the internally valued WA properties, using
our knowledge of the business and the
industry we assessed the overall valuation
adopted remains appropriate with regard to
the property specific attributes;
Consulted with KPMG real estate valuation
specialists to gain an understanding of
prevailing market conditions, including
existence of market transactions, and
application of the Stapled Group’s valuation
methodologies; and
Assessing the disclosures in the financial
report including checking the sensitivity
analysis calculations, using our
understanding obtaining from our testing,
against accounting standard requirements.
This was considered in light of changes and
uncertainties of COVID-19 that existed at
balance date and up until issuance of our
audit report.
process. In order of application, these included:
Categorisation of investment properties:
used to identify unique attributes of the
property such as location, asset condition,
trading performance, land areas, iconic
profile of the building and whether the 2019
rent review has been accepted or remain in
dispute. We assessed the use of these
unique attributes for the implications on
property values.
Key assumptions and methodology adopted
in the independent valuation
methodologies: being capitalisation rates,
discount rates and future rental income
inputs to the capitalisation rates (cap rate)
and discounted cash flow (DCF)
methodology. A key feature of the long-
term leases that impact DCF values are the
rental assessments in 2019 (limited to
properties whose rental is under
determination) and 2028 upon reversion to
market based levels of rent.
Judgements in assessing the results: the
Stapled Group adopts a final property
value based on their evaluation of the
results of the independent valuers work,
taking into consideration property specific
attributes. We spent significant effort in
assessing the basis of these judgements,
their consistent application and available
market comparators.
COVID-19 considerations: we also paid
particular attention to knowledge and
sources of information available regarding
market conditions specific to year end,
versus those uncertainties or market
knowledge at different dates, given how
the impacts of business disruption and
resultant government measures from
COVID-19 are changing rapidly the dynamic
of markets.
55
Other Information
Other Information is financial and non-financial information in ALE Property Group’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. This includes the
Directors’ Report. The Directors of Australian Leisure and Entertainment Property Management
Limited, the Responsible Entity of Australian Leisure and Entertainment Property Trust are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error; and
assessing the Stapled Group’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Stapled Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
56
Report on the Remuneration Report of Australian and Entertainment Property
Management Limited
The information below is a reproduction of our opinion on the Remuneration Report of Australian
Leisure and Entertainment Property Management Limited, (the Company) as the Responsible
Entity of Australian and Leisure Entertainment Property Trust.
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Australian Leisure and Entertainment
Property Management Limited for the
year ended 30 June 2020 complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
section 9 of the Directors’ report for the year ended 30
June 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Eileen Hoggett
Partner
Sydney
5 August 2020
57
INVESTOR INFORMATION
For the Year ended 30 June 2020
Securityholders
The securityholder information as set out below was applicable as at 13 July 2020.
A. DISTRIBUTION OF EQUITY SECURITIES
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001+
Total
Number of
Holders
1,072
1,628
913
1,408
102
5,123
Number of
Securities
375,199
4,660,743
6,960,989
36,490,249
147,281,900
195,769,080
% of Issued
Capital
0.19
2.38
3.56
18.64
75.22
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 368.
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below
Rank
Name
1
UBS Nominees Pty Ltd
2
Citicorp Nominees Pty Limited
3
Endeavour Group Limited
4
HSBC Custody Nominees (Australia) Limited
5
Brispot Nominees Pty Ltd (House Head Nominee A/C)
6
Manderrah Pty Ltd (GJJ Family A/C)
7
HSBC Custody Nominees (Australia) Limited - A/C 2
8
National Nominees Limited
9
HSBC Custody Nominees (Australia) Limited-GSCO ECA
10
HSBC Custody Nominees (Australia) Limited-GSI EDA
11
J P Morgan Nominees Australia Pty Limited
12
Netwealth Investments Limited (Wrap Services A/C)
13
CS Third Nominees Pty Limited (HSBC Custody Nomonies Australia Ltd 13 A/C)
14
Woodross Nominees Pty Ltd
15
Mr Alastair Charles Griffin
16
Mr Edward Furnival Griffin
17
Mr David Stewart Field
18
Bt Portfolio Services Limited (Caergwrle Investments P/L A/C)
19
Loto Jade Pty Ltd (Loto Jade A/C)
Mr Nicholas Anthony Dyer
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 13 July 2020) are set out below:
Stapled S Name
Caledonia (Private) Investments Pty Ltd
Endeavour Group Limited
UBS Group AG
Page 58
Number of
Securities
22,823,282
21,010,964
17,076,936
13,655,639
13,332,321
6,600,000
6,142,639
5,419,288
5,187,027
4,093,988
4,086,083
2,376,174
1,776,468
1,499,999
1,397,876
1,397,875
812,000
745,787
710,934
675,000
130,820,280
64,948,800
% of Issued
Capital
11.66
10.73
8.72
6.98
6.81
3.37
3.14
2.77
2.65
2.09
2.09
1.21
0.91
0.77
0.71
0.71
0.41
0.38
0.36
0.34
66.82
33.18
Number of
Securities
77,595,546
17,076,936
13,748,935
% of Issued
Capital
39.63
8.72
7.02
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2020
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.
2020
05 Aug
Full Year Results, Annual Review / Report
and Property Compendium released
Property valuations increased by 0.9%
Full Year distribution of 20.90 cents announced
05 Aug
23 Jun Half Year distribution of 10.45 cents declared
23 Jun
14 May CEO Succession
27 Apr Debt Capital Management Update
27 Apr New Debt Facility
03 Apr
05 Mar
24 Feb
17 Feb
05 Feb Half Year results released
04 Feb
Caledonia increases substantial holding to 39.63%
1st half distribution payment
UBS Group AG increases substantial holding to 7.02%
Taxation Components of Distribution
Property valuations as at 31 December 2019
The following events will occur after the date of this Annual
Report:
27 Oct
07 Sep
Annual General Meeting
2nd half distribution payment
2019
13 Dec Half Year distribution of 10.45 cents declared
09 Dec Rent review Timetable update
22 Nov Caledonia increases substantial holding to 38.35%
30 Oct Becoming a substantial holder - UBS Group AG
29 Oct Annual General Meeting
15 Oct Ceasing to be a Substantial holder - UBS Group AG
13 Sep Bernard Stanton appointed as a Director
05 Sep 2nd half distribution payment
03 Sep Taxation Components of Distribution
07 Aug Full Year Results, Annual Review / Report
and Property Compendium released
Becoming a substantial holder - UBS Group AG
Property valuations increased by 2.4%
Announcement by Woolworths Relating to ALH
07 Aug CEO Succession Planning
13 Jul
12 Jul
03 Jul
18 Jun Half Year distribution of 10.45 cents declared
18 Jun Full Year distribution of 20.90 cents announced
05 Mar 1st half distribution payment
21 Feb Taxation Components of Distribution
13 Feb Half Year results released
13 Feb Property valuations as at 31 December 2018
Page 59
ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2020
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.
Annual Tax Statement
Accompanying the final stapled security distribution payment,
normally in September each year, will be an annual tax
statement which details the tax components of the year's
distribution.
Publications
The Annual Review and Annual Report are the main sources of
information for stapled securityholders. In August each year the
Annual Review, Annual Report and Full Year Financial Report,
and in February each year, the Half-Year Financial Report are
released to the ASX and posted on the ALE website. The Annual
Review is mailed to stapled securityholders unless we are
requested not to do so. The Full Year and Half Year Financial
Reports are only mailed on request. Periodically ALE may also
send releases to the ASX covering matters of relevance to
investors. These releases are also posted on the ALE website
and may be distributed by email to stapled securityholders by
registering on ALE’s website. The election by stapled
securityholders to receive communications electronically is
encouraged by ALE.
Website
The ALE website, www.alegroup.com.au, is a useful source of
information for stapled securityholders. It includes details of
ALE's property portfolio, current activities and future prospects.
ASX announcements are also included on the site on a regular
basis. The ALE Property website, www.aleproperties.com.au,
provides further detailed information on ALE's property portfolio.
Registered Office
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr Michael Clarke
Level 10, 6 O'Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
Lawyers
Allens Linklaters
Level 28, Deutsche Bank Place
Sydney NSW 2000
Custodian (of Australian Leisure and Entertainment
Property Trust)
The Trust Company Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Trustee (of ALE Direct Property Trust)
The Trust Company (Australia) Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Registry
Computershare Investor Services Pty Ltd
Reply Paid GPO Box 7115, Sydney NSW 2000
Level 3, 60 Carrington Street, Sydney NSW 2000
Telephone 1300 302 429
Facsimile (02) 8235 8150
www.computershare.com.au
Page 60
ALE Property Group
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
2020 Annual Review website
aleproperty2020.reportonline.com.au
Review our properties online
aleproperties.com.au
Visit us online today
alegroup.com.au