Annual Report 2021
ABN 92 648 441 429
WWW.ALEGROUP.COM.AU
02
Directors' Report
23
Auditor's Independence Declaration
24
Statement of Comprehensive Income
25
Statement of Financial Position
26
Statement of Changes in Equity
27
Statement of Cash Flows
28
Notes to the Financial Statements
62
Directors' Declaration
63
Independent Auditors Report
68
Investor Information
ALE Property Group is the owner of Australia's largest portfolio of freehold
pub properties. Established in November 2003, ALE owns a portfolio of 82
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
Contents
ALE Property Group
Comprising Australian Leisure and Entertainment
Report For the Year ended 30 June 2021
Property Trust and its controlled entities
ANNUAL REPORT
2021
ALE Property Group (ASX: LEP)
DIRECTORS' REPORT
For the Year ended 30 June 2021
Robert Mactier
Pippa Downes
Paul Say
B Ec. MAICD
BSc (Bus Ad), MAppFin, GAICD
FRICS, FAPI
Appointed: 28 November 2016 Appointed: 26 November 2013
Appointed: 24 September 2014
Appointed Chair: 23 May 2017
The Directors of Australian Leisure and Entertainment Property Management Limited (the 'Company') present their report for the
year ended 30 June 2021.
Directors
The following persons were directors of the Company during the year and up to the date of this report unless otherwise stated:
Independent Non-Executive Chair, Member
of the Remuneration and Nominations
Committee, Member of the Audit,
Compliance and Risk Management
Committee.
Independent Non-Executive Director,
Member of the Remuneration and
Nominations Committee, Chair of the Audit,
Compliance and Risk Management
Committee.
Independent Non-Executive Director, Chair
of the Remuneration and Nominations
Committee, Member of the Audit,
Compliance and Risk Management
Committee.
The registered office and principal place of business of the Company is Suite 28.02, 245-300 George Street, Sydney NSW.
Appointed Chair of Remunerations and
Nominations Committee on 4 August
2015
Appointed Chair of ACRMC: 26 October
2015
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),
Cedar Wood Limited and was previously
a director of GPT Metro Office Fund.
Robert is a Consultant to UBS AG in
Australia (since June 2007). Between
2006 and May 2021 he was Chairman of
ASX-listed WPP AUNZ Limited. Between
2006 and January 2017 he served as a
non-executive Director of NASDAQ listed
Melco Resorts and Entertainment
Limited.
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).
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.
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.
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 Zip Co Limited, Australian
Technology Innovators Pty Ltd, Ingenia
Communities Group and is a
Commissioner of Sport Australia. Pippa is
a former Director of the Sydney Olympic
Park Authority, Windlab Limited, and of
the ASX Clearing and Settlement
companies and was a member of the
ASX Disciplinary Tribunal.
Page 2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Nancy Milne
Michael Triguboff
Bernard Stanton
OAM, LLB, FAICD
BA (Syd), LLB (UNSW)
B Ec., MBA (UoM)
Appointed: 6 February 2015
Appointed: 15 February 2018
Appointed: 13 September 2019
Bernard holds a Bachelor’s degree in
Economics from La Trobe University and
an MBA from Melbourne University.
Michael has a background in equity
funds management with groups
including MIR, 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.
Nancy has a Bachelor of Laws from the
University of Sydney.
Bernard was most recently an Executive
Director with the Caledonia funds
management group from 2005 to June
2019.
Independent Non-Executive Director,
Member of the Remunerations and
Nominations Committee, Member of the
Audit, Compliance and Risk Management
Committee.
Non-Executive Director, Nominee of
Caledonia (Private) Investments Pty Ltd
Michael is a founding Director of
Adexum Capital Limited, a private equity
company investing in both public and
private mid-market companies. Michael
is a Director of Pyrolyx AG, a dual listed
German and Australian tyre recycling
company.
Bernard has more than 40 years senior
executive experience in Australia, USA,
Europe and Asia.
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).
Non-Executive Director, Nominee of
Caledonia (Private) Investments Pty Ltd,
Member of the Audit, Compliance and Risk
Management Committee.
Page 3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Other officers
Guy Farrands
Andrew Wilkinson
Michael Clarke
Grad Dip Man, FAPI, MAICD
B.Bus, CFTP, MAICD
B.Com, MMan, CA, ACIS
Appointed: 1 October 2020
Appointed: 16 November 2004
Appointed: 30 June 2016
Resigned: 30 September 2020
He is also a Non-Executive Director of
affordable accommodation provider
Aspen Group.
Michael joined ALE in October 2006 and
was appointed Company Secretary on 30
June 2016. 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.
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, Australia & New
Zealand.
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.
Company Secretary and Chief Financial
Officer. Responsible Manager of the
Company under the Company’s Australian
Financial Services Licence (AFSL)
Guy has over 30 years’ experience in
direct and listed property markets both
in Australia and internationally. His
career highlights include: Managing
Director and CEO of GEO Property Group
(subsequently Villa World Limited), CEO
of Valad Property Group, (departing prior
to Valad’s acquisition of Crownstone /
Scarborough) and Chief Financial Officer
of Viva Energy REIT. Prior to this his
roles included Division Director of the
real estate division of Macquarie Bank’s
Investment Banking Group.
Directors
Chief Executive Officer and Managing
Director of the Company. Responsible
Manager of the Company under the
Company’s Australian Financial Services
Licence (AFSL)
Former Chief Executive Officer and
Managing Director of the Company.
Page 4
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Information on Directors and Key Management Personnel
Director
Directorships of listed entities
Type
Appointed as
Director
Resigned as
Director
R W Mactier
WPP AUNZ Limited
Non-executive director
December 2006 May 2021
P G Say
Frasers Logistic & Industrial Trust (SGX listed)
Non-executive director
June 2016
P G Say
Cedar Woods Limited
Non-executive director
May 2021
P J Downes
Windlab Limited
Non-executive director
July 2017
June 2020
P J Downes
Ingenia Communities Group
Non-executive director
December 2019
P J Downes
Zip Co Limited
Non-executive director
October 2020
N J Milne
FBR Limited
Non-executive director
August 2018
January 2020
M P Triguboff
Pyrolyx AG
Non-executive director
February 2015
G Farrands
Aspen Group Limited
Non-executive director
November 2012
Role
Number held
at the start
of the year
Net
movement
Number held
at the end of
the year
R W Mactier
Non-executive Director
50,000
-
50,000
P J Downes
Non-executive Director
189,110
(111,797)
77,313
P G Say
Non-executive Director
25,000
-
25,000
N J Milne
Non-executive Director
20,000
-
20,000
M P Triguboff
Non-executive Director
-
-
-
B D Stanton
Non-executive Director
-
-
-
G Farrands
Managing Director
-
-
-
A J Slade
Capital Manager
89,398
16,558
105,956
M J Clarke
Chief Financial Officer and Company Secretary
29,601
4,870
34,471
Role
Number held
at the start
of the year
Granted
during the
year
Delivered
during the
year
Number held
at the end of
the year
A J Slade
Capital Manager
38,053
5,899
(18,475)
25,477
M J Clarke
Finance Manager
15,718
7,079
(4,870)
17,927
Director
Held 1
Attended
Held 1
Attended
Held 1
Attended
R W Mactier
11
11
6
6
4
4
P J Downes
11
11
6
6
4
4
P G Say
11
11
6
6
4
4
N J Milne
11
11
6
6
4
4
B D Stanton
11
11
4
4
n/a
n/a
M P Triguboff
11
11
n/a
n/a
n/a
n/a
G Farrands
10
10
n/a
n/a
n/a
n/a
A F O Wilkinson
1
1
n/a
n/a
n/a
n/a
1 “Held” reflects the number of meetings which the director or member was eligible to attend.
Meetings of directors
Board
ACRMC
Nominations and
The number of meetings of the Company’s Board of Directors held and of each Board committee during the year ended 30 June 2021
and the number of meetings attended by each director at the time the director held office during the year were:
Name
ESSS Rights
The following directors, key management personnel and their associates currently hold the following stapled security interests in ALE:
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:
Directors’ and key management personnel interests in stapled securities and ESSS rights
Name
The following key management personnel currently hold rights over stapled securities in ALE:
Page 5
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Operational and Financial Review
Background
•
•
•
•
•
•
•
On 30 September 2020 Andrew Wilkinson retired as managing director and was succeeded by Guy Farrands.
Net tangible assets per security at 30 June 2021 increased by 24.1% to $3.71 (30 June 2020: $2.98) largely due to net valuation
gains on investment property.
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)
ALE Property Group is the owner of Australia's largest portfolio of freehold pub properties. Established in November 2003, ALE owns a
portfolio of 82 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 7.3 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 79 of the 82 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 82 properties are double net);
Annual CPI rent increases are not subject to any cap and rents do not decline with negative CPI;
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 7.3 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; and
There is a full open rent review (no cap and collar) in November 2028.
Highlights
Distributable Income increased by $4.0 million from $30.4 million in 2020 to $34.4 million in 2021 due to higher rental income from
CPI increases on properties during the year, backdated rental increases from 2018 on 36 properties that were subject to independent
rental determinations received in September 2020 ($1.1 million), lower finance costs ($4.8 million), offset by higher management
expenses ($1.7 million).
Statutory net profit increased by $159.2 million from $20.0 million in 2020 to $179.2 million in 2021 largely due to higher Distributable
Earnings ($4.0 million) and net valuation gains ($141.3 million), profits on sale of properties ($4.2 million) and lower derivative
movements (increment of $6.1 million compared to a decrement of $17.3 million) due to increasing long term interest rates and
derivative restructures during the year, offset by higher borrowing cost amortisation ($4.0 million).
Covenant gearing reduced from 41.3% to 36.4% due to lower net borrowings and increased investment property valuations.
Boundary Hotel, Pelican Waters Tavern, Kedron Park Hotel, Edinburgh Castle Hotel, Noosa Reef Hotel and Morwell Hotel were
designated non-core assets and sold for an aggregate price of $72.86m. This represented a 24.2% premium to the aggregate book
value of these properties. The proceeds of the sales were used to reduce net debt and restructure hedging arrangements.
On 23 June 2021 the parent entity of ALH, Endeavour Group Limited, was seperately listed on the ASX following the demerger from
Woolworths Limited.
Page 6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
30 June
30 June
2021
2020
Profit after income tax for the year
$179.2 million
$20.0 million
Distributable income 1
$34.4 million
$30.4 million
Distributable earning per stapled security
17.15 cents
15.53 cents
Distributions per stapled security
21.5 cents
20.9 cents
Total Assets
$1,340.0 million
$1,214.9 million
Investment properties
$1,294.3 million
$1,174.2 million
Borrowings
$540.9 million
$551.4 million
Net assets
$743.0 million
$584.6 million
Net tangible assets per security
$3.71
$2.98
Covenant gearing
36.4%
41.3%
Financial Results
30 June
30 June
2021
2020
$’000
$’000
Revenue
Rent from investment properties
62,473
61,408
Interest from cash deposits
99
301
Total revenue
62,572
61,709
Management expenses - excluding share based payments
(7,665)
(5,944)
Land tax
(3,329)
(3,313)
Finance costs - cash
(17,205)
(22,041)
Distributable income
34,373
30,411
Fair value adjustments to investment properties
141,301
10,930
Fair value adjustments to derivatives
6,091
(17,306)
Profit on disposal of investment properties
4,230
-
Employee share based payments
(223)
(204)
Finance costs - non-cash
(6,335)
(3,815)
Income tax expense
(266)
7
Operating profit after tax
179,171
20,023
Distribution paid or provided for
42,808
40,916
Distributions made in excess of Distributable Income
8,435
10,505
Distribution funded as follows
Current year distributable profits
34,373
30,411
Distribution reinvestment plan securities issued
12,210
9,857
Capital and surplus cash reserves
(3,775)
648
42,808
40,916
1. Distributable income is a non-statutory measure of profit and is calculated as net profit adjusted for specific non-recurring items and non-cash items, and any fair
value adjustment to investment properties and derivatives.
Page 7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Percentage
30 June
30 June
Increase /
2021
2020
(Decrease)
Cents
Cents
Earnings and distribution per stapled security:
783.4%
90.37
10.23
10.4%
17.15
15.53
2.9%
21.50
20.90
Current year distributable income
17.15
15.53
Securities issued: Distribution reinvestment plan
6.09
4.83
Capital and surplus cash
(1.74)
0.54
21.50
20.90
Investment property portfolio
30 June
30 June
2021
2020
Investment properties, including assets held for sale
$1,294.3 million
$1,174.2 million
Weighted average adopted yield
4.59%
5.08%
Total number of properties
82
86
Weighted average lease expiry
7.3 years
8.3 Years
Properties sold (includes two properties that sold but did not settle until after 30 June)
6
-
Profit on sale of properties (four properties that settled prior to 30 June 2021)
$4.2 million
-
Premium to aggregate book value
24.2%
-
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.
Earnings available for distribution
Total distribution
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 Income is a non-IFRS measure that shows how free cash flow is calculated by ALE. Distributable Income
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.
Investment property valuations, including properties held for sale, increased in value during the year by 10.24% from $1,174.1 million
to $1,294.3 million. The increase in property valuations was attributable to rent reviews in the current year and a drop in weighted
average adopted yield from 5.08% to 4.59%. During the year six properties were sold and the aggregate price was 24.2% above book
carrying values.
Basic earnings
During the year six properties were sold, four settled prior to 30 June and two will settle after 30 June. The weighted average price
received above book value for the six properties was 24.2% and the weighted average initial yield was 4.44%. These properties were
identified as non-core following the receipt of the rental determinations late last year. It has been some time since ALE sold properties
that are subject to the lease between ALE/ALH and the strong results have highlighted the quality of our portfolio.
Following the receipt of the rental determinations in September 2020 the whole portfolio was independently valued as at 31 December
2020. In June 2021 a sample of 36 properties (44%) were independently valued.
Page 8
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Capital Management
Historical performance
FY17
FY18
FY19
FY20
FY21
Distributable income $m
29.1
29.0
28.3
30.4
34.4
Distribution per security cents
20.40
20.80
20.90
20.90
21.50
Property values $m
1,080.2
1,136.3
1,163.2
1,174.2
1,294.3
Covenant gearing 1
42.7%
41.6%
41.5%
41.3%
36.4%
1. Total borrowings less cash as a percentage of total assets less cash, deferred tax assets and derivatives for bond issuing entity, ALE DPT
In August 2020 and June 2021 a series of hedge restructures and terminations were transacted involving an aggregate cash payment
to the hedge counterparty banks of $16.9 million. The result of these transactions was to lower the average hedge rates from 3.53%
to 2.22%. Apart from the interest rate, the terms of the hedges were not altered and the hedging, covering approximately 100% of
drawn debt, has a weighted average term of 4.4 years (5.4 years at June 2020). The weighted average cost of debt (including the
impact of interest rate swaps and the new borrowings, which are at rates lower than the borrowings they replaced) reduced from
4.11% at June 2020 to 3.48% at June 2021.
ALE’s Distribution Reinvestment Plan (DRP) raised $22.1 million from issuing 4.6 million securities during the year. The DRP is
currently suspended.
ALE believes that the DCF method provides a comprehensive view of the quality of the lease and tenant as well as the 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 4.24% for 36 properties valued. This compares to the
adopted yield of 4.59% for the portfolio which was derived using a combination of the DCF and capitalisation rate methods.
To provide context to ALE's historical performance, the following data and graphs outline a five year history of key financial metrics.
During the year covenant gearing reduced from 41.3% to 36.4% for the AMTN issuing entity, ALE Direct Property Trust. ALE
continues to maintain appropriate headroom to all debt covenants with the nearest covenant trigger equivalent to an average 42% fall
in property values.
$700
$900
$1,100
$1,300
FY17
FY18
FY19
FY20
FY21
Property Values ($m)
30%
35%
40%
45%
FY17
FY18
FY19
FY20
FY21
Covenant Gearing
18.0
19.0
20.0
21.0
22.0
FY17
FY18
FY19
FY20
FY21
Distribution per security
Page 9
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Business strategies and future prospects
•
•
predominantly triple net leases to a strong tenant;
•
long term leases (7.3 year WALE with predominantly 4x10 year options) over strategically important properties;
•
predominantly CPI rental increases with a floor;
•
•
The Directors also considered, among other things:
•
the historically low covenant gearing of ALE, currently 36.4% as at 30 June 2021; and
•
the prevailing economic and interest rate environment and outlook for asset values.
COVID-19
Significant changes in the state of affairs
Following the release of the rent determinations ALE commenced proceedings in the Supreme Court of Victoria seeking declarations
that the 19 Victorian Determinations are not binding on the parties. ALE expects that a decision of the court providing guidance in
relation to the rent review provisions in the leases will be relevant to any rent determinations which are undertaken as at November
2028, when an uncapped and uncollared rent review is due for all properties where the tenant has exercised its option to renew the
lease for a further ten years.
There are two properties that are currently being marketed for sale (in addition to the six properties already sold) and the portfolio
will continue to be reviewed.
ALE holds a positive outlook for the rent review prospects for the portfolio. For the sample of properties that were independently
valued for June 2021 the extent of under renting has been assessed at 43.5% - this compares to 43.4% on the same properties at
December 2020. To determine the extent of under renting of the whole of the portfolio (continuing properties) management used the
December 2020 uncapped rents assessed for properties not valued in June 21. This showed that the under renting was 35.6%,
slightly increased from December 2020.
Following the receipt of the rent determinations, ALE’s Board reviewed the distribution and capital management policy of the Group.
In December 2020 ALE announced a distribution guidance of 21.50 cents per security for 2021, representing a 3% increase relative to
2020 distributions. In addition, it is presently expected that distributions following 2021 will be increased by at least CPI.
The COVID-19 pandemic continues to create economic uncertainty and impacted market activity in many sectors including the pub
sector where trading restrictions have been put in place over the preceding twelve months. During the current year there have been
varying levels of restrictions placed 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.
To date there has been minimal impact on ALE's operating performance or financial position. The Directors continue to monitor the
situation. During the financial period ALH has been paying rent in accordance with the requirements of the leases.
In determining the appropriate distribution and capital management policies, the Directors considered the specific features of ALE’s
investment portfolio including:
a high quality and diversified national pub portfolio with a 87% weighting by value to metropolitan Sydney, Melbourne and
Brisbane;
the opinion of the statutory valuers regarding the under-renting of the; and
the expected rent increases at the finalisation of the 2028 uncapped/uncollared rent reviews (where options to renew are
exercised).
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.
Apart from the above matters, the directors are not aware of any other future development likely to significantly affect the operations
and/or results of ALE.
Page 10
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Material business risks
COVID-19 Risk
Tenant and sector concentration risk
Property Valuation Risk
Refinancing and interest rate risk
Risk Management Mitigation: 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. ALE has commenced proceedings in the Supreme Court of Victoria seeking declarations that the 19 Victorian
Determinations are not binding on the parties. ALE expects that a decision of the court providing guidance in relation to the rent
review provisions in the leases will be relevant to any rent determinations which are undertaken as at November 2028, when an
uncapped and uncollared rent review is due for all properties where the tenant has exercised its option to renew the lease for a
further ten years.
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.
Impact: Properties ALE own are operated as pubs and retail liquor outlets. As part of Government measures the operations are
subject to various trading restrictions. 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.
Risk Management Mitigation: 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.
Impact: All 82 of ALE's pub properties are leased to a single tenant, ALH which is owned by Endeavour Group Limited. Endeavour
Group Limited listed on the ASX on 24 June 2021, following a demerger from Woolworths Limited and is a top 50 ASX listed company.
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. If court decides that ALE’s view of the
proper interpretation of the leases is incorrect the prospects for ALE may change.
Impact: 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.
Risk Management Mitigation: ALE is unable to control the market forces that impact ALE's property values however ALE 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 2021 the closest debt covenant would be triggered by
a decline of around 42% in property values and a resultant average capitalisation rate of 7.89%. 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.
Impact: ALE currently has outstanding gross borrowings of $543 million, representing a covenant gearing level of 36.4%. 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.
Risk Management Mitigation: 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 3.48% and 3.53%. ALE proactively staggers debt maturities, continually monitors debt markets, actively seeks
to maintain ALE's investment grade credit rating and maintains relationships with diverse funding markets to maximise the opportunity
for multiple funding options.
Page 11
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Liquidity risk
Regulatory Risk
Personnel risk
Environmental (including climate risk), social and economic risk
Matters Subsequent to the End Of The Financial Year
Likely Developments and Expected Results of Operations
The Noosa Reef Hotel that sold prior to 30 June 2021 for $11.3 million settled on 26 July 2021. The Boundary Hotel is due to settle on
10 September 2021.
Impact: ALE may be unable to recruit, retain and motivate key personnel.
Risk Management Mitigation: 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.
Risk Management Mitigation: 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.
Impact: 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.
Risk Management Mitigation: 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.
Prior to issuing this report, management consulted with the independent valuers who undertook the valuations as at 30 June 2021 as
to whether any events subsequent to balance date have changed their view of the 30 June 2021 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.
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.
Apart from the mentioned above in the Financial and Operational Review, the directors are not aware of any other future development
likely to significantly affect the operations and/or results of ALE.
The COVID-19 pandemic and lockdowns subsequent to year end continues to create 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.
Impact: 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.
Risk Management Mitigation: 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.
Impact: 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.
Page 12
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
REMUNERATION REPORT (Audited)
Remuneration Objectives and Approach
●
●
●
●
●
●
●
●
●
Remuneration and Nominations Committee
●
●
●
P G Say
P J Downes
N J Milne
R W Mactier
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee engaged Ferguson Partners to review remuneration.
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 2021 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.
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
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;
link remuneration to performance and outcomes achieved.
Non-executive Director
recognises individual executive's contributions towards value accretive outcomes when measured against Key Performance
Indicators (KPIs); and
Non-executive Director
market competitive and complementary to the reward strategy of the organisation.
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
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:
ensure there is an appropriate mix between fixed and "at risk" remuneration.
Page 2 to 4 provides information on the skills, experience and expertise of the Committee members.
Non-executive Director
Chair of Committee
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 2021, the Committee consisted of the following:
Non-executive Director
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 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.
The number of meetings held by the Committee and the members' attendance at them is set out on page 6.
Page 13
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Executive Remuneration
●
●
Fixed Annual Remuneration (FAR)
What is FAR?
How is FAR set?
2021
2020
Guy Farrands
$485,000
-
Andrew Wilkinson 1
-
$495,126
Andrew Slade 2
$279,618
$279,618
Michael Clarke
$300,000
$300,000
Executive Incentive Scheme (EIS)
What is EIS?
EIS is an "at risk" component of executive remuneration.
Executive
Position
Standard
EIS Target
(as a % of
FAR)
% of EIS
paid as
cash
% of EIS
paid as
ESSS
60%
50%
50%
Andrew Wilkinson
60%
50%
50%
50%
50%
50%
n/a3
50%
50%
FAR outcomes for
the year?
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.
Andrew Slade
Capital Manager
Michael Clarke
Chief Financial Officer and
Company Secretary
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.
FAR is set by reference to external market data for comparable roles and responsibilities within similar listed
and unlisted entities within Australia.
FAR is usually reviewed in December each year with any changes being effective from 1 January of the
following year.
The target EIS opportunity for executives varies according to the role and responsibility of the executive.
Fixed Annual Remuneration (FAR)
Managing Director
When is FAR
Reviewed?
EIS is used to reward executives for achieving and exceeding annual individual KPIs.
Executive Incentive Scheme (EIS)
Executive remuneration comprises both a fixed component and an 'at risk' component. It specifically comprises:
Guy Farrands
Managing Director
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.
Page 14
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Contract Details
Executive
Position
Contract Length
Ongoing
Ongoing
Notice by ALE
6 months
3 months
Notice by Executive
6 months
3 months
Guy Farrands
Michael Clarke
Chief Financial Officer and
Company Secretary
Managing Director
causes any significant financial or reputational harm to ALE and/or its businesses.
・
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:
matter at the time of the original award, would have in their reasonable opinion resulted in a lower original
award; or
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 below.
causes ALE to incur a material financial loss; or
・
• the executive engages in any conduct or commits any act which, in the Committee's reasonable
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.
opinion, adversely affects ALE Property Group including, and without limitation, any act which:
• there is no service period condition over the deferred delivery period except if the employee leaves within
six months of grant date then the remaining unvested ESSS would lapse
Summary of Key Contract Terms
results in ALE having to make any material negative financial restatements;
・
• the Committee becomes aware of any executive performance matter which, had it been aware of the
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.
How are EIS
awards delivered?
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?
Page 15
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Managing Director
Executive Remuneration outcome for year ended 30 June 2021
Fixed Remuneration Outcomes
Executive Incentive Scheme Outcomes
●
●
●
●
●
●
The EIS awarded to each member of the management team was as follows:
Executive
Target EIS
(as % of
FAR)
EIS
Awarded
(as % of
FAR)
EIS Awarded
as a % of
Target
EIS
Awarded
Cash
Component
Guy Farrands
60%
60.0%
100.0%
$291,000
$145,500
$145,500
Andrew Wilkinson 4
60%
51.0%
85.0%
$63,129
$63,129
-
Andrew Slade
50%
42.5%
85.0%
$118,837
$118,837
-
Michael Clarke
n/a
26.7%
n/a
$80,000
$40,000
$40,000
Consequences of performance on securityholder wealth
Mr Farrands has signed a service agreement that commenced on 1 October 2020. The current base salary, inclusive of
superannuation, is $485,000 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 Mr Farrands 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.
Management implemented a $250 million refinancing by putting in place a $150 million floating rate AMTN and $100 million of
bilateral bank loans with two local and one international bank at lower margins than the existing debt facility;
Property and Strategic Matters
Successfully marketed six properties that were sold during the period that achieved sales prices that were 24.2% in excess of book
values;
Following the receipt of rent determinations during the year, management performed a detailed review and analysis of the
determinations and subsequently launched legal action in the Supreme Court of Victoria to have the Victorian rental
determinations set aside.
Capital Matters
The new bank loans expanded the sources of debt available to ALE to provide a more flexible debt structure;
ESSS
Component
In considering the Group's performance and benefits to securityholder wealth, the committee had regard to a number of performance
indicators in relation to the current and previous financial years.
Fixed Remuneration for all executives was reviewed effective 1 January 2021. No increases were awarded to executives. On 1 July
2021 Michael Clarke was awarded an increase to $330,000 in recognition of becoming Chief Financial Officer during the year.
Performed an analysis of the investment property portfolio to highlight the longer term total returns of the portfolio and identify
non-core properties;
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June
2021. 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:
Successfully implemented a series of derivative hedge restructures and terminations to reduce interest expense over the medium
term.
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.
Page 16
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Remuneration for the year
Short term
Post
employment
benefits
Equity
based
payment
Salary &
Fees
STI Cash
Bonus
Super-
annuation
Annual and
Long
Service
Leave
ESSS
Total
2021
$
$
$
$
$
$
$
Andrew Wilkinson 1
355,074
63,129
16,270
145,355
-
-
579,828
Guy Farrands 5
346,575
145,500
17,175
122
-
145,500
654,872
Andrew Slade 7
257,923
118,837
21,694
2,345
193,961
-
594,760
Michael Clarke
278,306
40,000
21,694
1,806
-
40,000
381,806
1,237,878
367,466
76,833
149,628
193,961
185,500
2,211,266
2020
$
$
$
$
$
$
$
Andrew Wilkinson
469,674
148,538
21,003
11,300
-
148,538
799,053
Andrew Slade
237,446
25,000
19,699
6,902
-
25,000
314,047
Michael Clarke
267,713
30,000
21,003
10,227
-
30,000
358,943
Don Shipway
53,144
-
5,049
-
-
-
58,193
1,027,977
203,538
66,754
28,429
-
203,538
1,530,236
%
%
%
%
Andrew Wilkinson 1
10.9%
-
37.2%
18.6%
Guy Farrands 5
44.4%
22.2%
-
-
Andrew Slade 7
20.0%
-
15.9%
8.0%
Michael Clarke
21.0%
10.5%
16.7%
8.4%
Disclosures relating to equity instruments granted as compensation
Outstanding equity instruments granted as compensation
Executive
Grant Date
Performance
Period Start
Date
Fair value
of Right at
Grant Date
($)
% vested
in year
% forfeited
in year
ESSS Rights
A F O Wilkinson6
29,951
25 Oct 18
1 Jul 17
4.77
31 Jul 21
Nil
Nil
A F O Wilkinson6
10,967
2 Mar 20
1 Jul 18
4.56
31 Jul 22
Nil
Nil
A F O Wilkinson6
35,049
9 Feb 21
1 Jul 19
4.24
31 Jul 23
Nil
Nil
A J Slade 6
14,095
25 Oct 18
1 Jul 17
4.77
31 Jul 21
Nil
Nil
A J Slade 6
5,483
2 Mar 20
1 Jul 18
4.56
31 Jul 22
Nil
Nil
A J Slade 6
5,899
9 Feb 21
1 Jul 19
4.24
31 Jul 23
Nil
Nil
M J Clarke
2,623
25 Oct 18
1 Jul 17
4.77
31 Jul 21
Nil
Nil
M J Clarke
8,225
2 Mar 20
1 Jul 18
4.56
31 Jul 22
Nil
Nil
M J Clarke
7,079
9 Feb 21
1 Jul 19
4.24
31 Jul 23
Nil
Nil
D J Shipway 6
2,623
25 Oct 18
1 Jul 17
4.77
31 Jul 21
Nil
Nil
D J Shipway 6
1,097
2 Mar 20
1 Jul 18
4.56
31 Jul 22
Nil
Nil
Termination
Benefits
2021
2020
At risk
element
Value of
equity
based
payment as
proportion
At risk
element
Value of
equity
based
payment as
proportion
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
Approximate
Delivery
Date
Page 17
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Modification of terms of equity settled share based payment transactions
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
Opening
Balance
Granted in
Year
Stapled
Securities
Delivered in
the Year
Lapsed in
the Year
Closing
Balance
Securities
Delivered in
the year -
value paid $
By Value ($)
A F O Wilkinson 6
332,735
148,538
(139,965)
-
341,308
152,342
A J Slade 6
168,062
25,000
(75,872)
-
117,190
82,581
M J Clarke
70,000
30,000
(20,000)
-
80,000
21,768
D J Shipway 6
30,000
-
(12,500)
-
17,500
13,606
By Number
A F O Wilkinson 6
75,000
35,049
(34,082)
-
75,967
A J Slade 6
38,053
5,899
(18,475)
-
25,477
M J Clarke
15,718
7,079
(4,870)
-
17,927
D J Shipway 6
6,764
-
(3,044)
-
3,720
Equity based compensation
The value of ESSS above 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 11 August 2021.
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.
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 6.
Page 18
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Non-executive Directors' Remuneration
Chairman
Member
Chairman
Member
Chairman
Member
Board and Committee Fees
$195,000
$95,000
$15,000
$10,000
$15,000
$5,000
The Chairman of the Board's fees are inclusive of all committee fees.
Base Fee
Super-
annuation
Total
Base Fee
Super-
annuation
Total
$
$
$
$
$
$
R W Mactier
178,082
16,918
195,000
178,082
16,918
195,000
P J Downes
105,023
9,977
115,000
105,023
9,977
115,000
P G Say
120,000
-
120,000
120,000
-
120,000
N J Milne
100,457
9,543
110,000
100,457
9,543
110,000
M P Triguboff
95,000
-
95,000
95,000
-
95,000
B D Stanton 8
95,093
9,034
104,127
69,200
6,574
75,774
Total
693,655
45,472
739,127
667,762
43,012
710,774
2. Package is based on a four day week.
4. Based on period as Managing Director to 30 September 2020.
5. Guy Farrands was appointed Managing Director on 1 October 2020.
7. Andrew Slades position was made redundant effective 1 July 2021. The termination benefit amounting to $193,961 disclosed was paid on 1 July 2021.
8. Bernard Stanton was appointed a Director on 13 September 2019 and appointed to the ACRMC in August 2020.
1. Andrew Wilkinson resigned as Managing Director on 30 September 2020. His employment ended on 31 March 2021 after the six months notice period concluded
under the terms of his service contract.
Footnotes for Remuneration Report
3. EIS awards are at the discretion of the Committee and the Board
6. No longer employed with ALE but at the discretion of the Board outstanding ESSS rights remain active and may be issued when they vest.
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.
2021
2020
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.
Remuneration Structure
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
Remuneration amd
Nominations Committee
Remuneration for the year ended 30 June 2021
Page 19
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Non-Audit Services
●
●
30 June
30 June
2021
2020
$
$
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
194,458
175,575
- in relation to prior year
-
-
Total remuneration for audit services
194,458
175,575
Other services
KPMG Australian firm:
Other services
7,244
-
Total other services
7,244
-
Total remuneration
201,702
175,575
none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1,
including reviewing or auditing the auditor's own work, acting in a management or decision making capacity for the Company,
acting as an advocate for the Company or jointly sharing economic risk and rewards.
Details of amounts paid or payable to the auditor (KPMG) for audit services provided during the year are set out below:
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 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 some non-audit services were performed by the auditors.
The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
all non-audit services have been reviewed by the ACRMC to ensure that they do not impact the impartiality and objectivity of the
auditor; and
Page 20
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Distributions and Dividends
30 June
30 June
30 June
30 June
2021
2020
2021
2020
security
security
$’000
$’000
10.75
10.45
21,544
20,458
10.75
10.45
21,264
20,458
21.50
20.90
42,808
40,916
Stapled Securities Under Option
Stapled Securities Issued on the Exercise of Options
Insurance of Officers
Environmental Regulation
Auditor's Independence Declaration
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.
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:
No provisions for or payments of Company dividends have been made during the year (2020: nil).
Final Trust income distribution for the year ended 30 June
2021 to be paid on 6 September 2021
Interim Trust income distribution for the year ended 30 June
2021 paid on 5 March 2021
Total distribution for the year ended 30 June 2021
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. ALE does not expect to incur any
material environmental liabilities.
A copy of the Auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 23.
No options over unissued stapled securities of ALE were granted during or since the end of the year.
During the financial year, the Company paid a premium of $1,040,000 (2020: $393,600) to insure the directors and officers of the
Company. The auditors of the Company are not indemnified out of the assets of the Company.
No stapled securities were issued on the exercise of options during the financial year.
Page 21
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2021
Rounding Of Amounts
This report is made in accordance with a resolution of the directors.
Guy Farrands
Managing Director
Dated this 4th day of August 2021
Robert Mactier
Chairman
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.
Page 22
ALE Property Group
23
KPMG, an Australian partnership and a member firm of the KPMG global organization of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All
rights reserved, The KPMG name and logo are trademarks used under license by the independent member firms
of the KPMG global organization, Liability limited by a scheme approved under Professional Standards
Legislation.
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 2021 there have been:
i.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii.
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
4 August 2021
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2021
2021
2020
Note
$'000
$'000
Revenue
Rent from investment properties
4.1
62,473
61,408
Interest from cash deposits
4.1
99
301
Total revenue
62,572
61,709
Other income
Fair value increments to investment properties
2
141,301
10,930
Fair value increments to derivatives - net
4.1
6,091
-
Profit on sale of investment properties
4.1
4,230
-
Total other income
151,622
10,930
Total revenue and other income
214,194
72,639
Expenses
Fair value decrements to derivatives - net
3.2
-
17,306
Finance costs (cash and non-cash)
4.2
23,540
25,856
Queensland land tax expense
3,329
3,313
Management and administration expenses
7,888
6,148
Total expenses
34,757
52,623
Profit before income tax
179,437
20,016
Income tax expense/(benefit)
4.3
266
(7)
Profit after income tax
179,171
20,023
179,171
20,023
Other comprehensive income
-
-
-
-
Total comprehensive income for the year
179,171
20,023
Profit/(Loss) attributable to:
Members of ALE
179,171
20,023
Non-controlling interest
-
-
Profit/(Loss) for the year
179,171
20,023
Total comprehensive income attributable to:
Members of ALE
179,171
20,023
Non-controlling interest
-
-
Total comprehensive income for the year
179,171
20,023
Cents
Cents
Basic earnings per stapled security
4.6
90.37
10.23
Diluted earnings per stapled security
4.6
90.14
10.22
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
Other comprehensive income for the year after income tax
Profit attributable to stapled securityholders of ALE
Page 24
ALE Property Group
STATEMENT OF FINANCIAL POSITION
As At 30 June 2021
2021
2020
Note
$'000
$'000
Current assets
Cash and cash equivalents
3.5
43,621
39,568
Investment properties held for sale
2
68,886
-
Receivables
278
80
Other
1,681
709
Total current assets
114,466
40,357
Non-current assets
Investment properties
2
1,225,375
1,174,160
Plant and equipment
12
25
Right of use asset
-
34
Deferred tax asset
122
306
Total non-current assets
1,225,509
1,174,525
Total assets
1,339,975
1,214,882
Current liabilities
Payables
5,336
6,047
Employee benefits
5.1
202
292
Lease liability
-
42
Distribution payable
21,544
20,458
Total current liabilities
27,082
26,839
Non-current liabilities
Borrowings
3.1
540,894
551,412
Derivatives
3.2
29,015
52,030
Total non-current liabilities
569,909
603,442
Total liabilities
596,991
630,281
Net assets
742,984
584,601
Equity
Contributed equity
3.3
280,185
258,118
Reserve
779
804
Retained profits
462,020
325,679
Total equity
742,984
584,601
$
$
Net assets per stapled security
$3.71
$2.99
Net tangible assets per stapled security
$3.71
$2.98
The above statement of financial position should be read in conjunction with the accompanying Notes.
Page 25
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2021
Share
Capital
Share
Based
Payments
Reserve
Retained
Earnings
Total
$'000
$'000
$'000
$'000
2021
Total equity at the beginning of the year
258,118
804
325,679
584,601
Total comprehensive income for the period
Profit/(Loss) for the year
-
-
179,171
179,171
Other comprehensive income
-
-
-
-
Total comprehensive income for the year
-
-
179,171
179,171
Equity:
Securities issued under the ALE Distribution Reinvestment Plan
22,067
-
-
22,067
Employee share based payments
-
223
-
223
Securities purchased - Employee share based payments
-
(248)
(22)
(270)
Distribution paid or payable
-
-
(42,808)
(42,808)
Total equity at the end of the year
280,185
779
462,020
742,984
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
-
-
20,023
20,023
Other comprehensive income
-
-
-
-
Total comprehensive income for the year
-
-
20,023
20,023
Equity:
Adjustment on initial application of AABS 16
-
-
(27)
(27)
Employee share based payments
-
204
-
204
Securities purchased - Employee share based payments
-
(182)
(70)
(252)
Distribution paid or payable
-
-
(40,916)
(40,916)
Total equity at the end of the year
258,118
804
325,679
584,601
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
Page 26
ALE Property Group
STATEMENT OF CASH FLOWS
2021
2020
$'000
$'000
Cash flows from operating activities
Receipts from tenant and others
68,723
67,600
Payments to suppliers and employees
(19,982)
(15,051)
Interest received - bank deposits
114
339
Net interest received - interest rate hedges
-
721
Borrowing costs paid
(16,688)
(26,189)
Net cash inflow from operating activities
32,167
27,420
Cash flows from investing activities
Net proceeds from disposal of properties
25,430
-
Net cash inflow from investing activities
25,430
-
Cash flows from financing activities
Capitalised borrowing costs paid
(1,853)
(4,926)
Repayment of borrowings
(265,000)
(225,000)
Proceeds from borrowings
250,000
250,000
Hedge restructure/termination payments
(16,924)
-
Lease payments
(112)
(121)
Distributions paid 1
(19,655)
(40,916)
Net cash inflow/(outflow) from financing activities
(53,544)
(20,963)
Net increase/(decrease) in cash and cash equivalents
4,053
6,457
Cash and cash equivalents at the beginning of the year
39,568
33,111
Cash and cash equivalents at the end of the year
43,621
39,568
2021
2020
$'000
$'000
Profit for the year
179,171
20,023
Plus/(less):
Fair value (increments) to investment property
(141,301)
(10,930)
Fair value decrements to derivatives
(6,091)
17,306
Profit on sale of properties
(4,230)
-
Finance costs amortisation
4,940
907
CIB accumulated indexation
1,395
2,908
Share based payments expense
223
204
Share based payments securities purchased
(270)
(252)
Depreciation
117
116
Decrease/(increase) in -
Receivables
(198)
96
Deferred tax assets
184
(10)
Other assets
(972)
(359)
Increase/(decrease) in -
Payables
(711)
(2,587)
Provisions
(90)
(2)
Net cash inflow from operating activities
32,167
27,420
The above statement of cash flows should be read in conjunction with the accompanying Notes.
For the Year Ended 30 June 2021
Reconciliation of profit after income tax to net cash inflows from
operating activities
1. In the current year an amount of $22.067 million in distributions were satisfied through the issue
of securities under the ALE Distribution Reinvestment Plan
Page 27
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year ended 30 June 2021
1.
About this report
Reporting Entity
Statement of compliance
Basis of preparation
COVID-19 Disclosures
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.
The COVID-19 pandemic continues to create economic uncertainty and impacted market activity in many sectors including the pub
sector where trading restrictions have been put in place. During the current year there have been varying levels of restrictions placed
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.
To date there has been minimal impact on ALE's operating performance or financial position. The Directors continue to monitor the
situation. During the financial period ALH has been paying rent in accordance with the requirements of the leases.
Our investment properties are used by ALH as operating pubs and retail liquor outlets. In accordance with Government emergency
measures the operating pubs have been subject to various levels of restrictions since the start of the pandemic. 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.
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 2020 to 30 June
2021.
The stapled securities of ALE are quoted on the Australian Securities Exchange under the code LEP and comprise one unit in the Trust
and one share in the Company. The unit and the share are stapled together under the terms of their respective constitutions and
cannot be traded separately. Each entity forming part of ALE is a separate legal entity in its own right under the Corporations Act
2001 and Australian Accounting Standards. The ALE Property Group is a for-profit entity.
The 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 4th August 2021.
Page 28
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
1. About this report
Rounding of amounts
Accounting estimates and judgements
Accounting estimates and judgements
Note
Investment property
2
Financial instruments
3
Significant accounting policies
Principles of consolidation
All balances and effects of transactions between the subsidiaries of ALE have been eliminated in full.
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.
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 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.
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.
Based on these forecasts, 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.
As at 30 June 2021, the Group had net working capital of $87.4 million, no debt maturities until August 2022 and minimal capital
commitments. The directors have prepared projected cash flow information from balance date to 12 months from the date of these
financial statements taking into consideration the continued minimal business impacts of COVID-19 on ALE. The Directors have also
considered the potential impacts if conditions change and if ALE's business is impacted.
Page 29
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
1. About this report
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).
A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-
financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. Senior management reviews
significant unobservable inputs and valuation adjustments. If third party information is used to measure fair values, such as bank
valuations or independent valuations 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;
Page 30
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2.
Investment property
2021
2020
$'000
$'000
Investment properties held for sale
68,886
-
Investment Properties
1,225,375
1,174,160
Total Investment properties
1,294,261
1,174,160
Reconciliation of fair value gains/losses for year ending 30 June 2021
Fair value as at beginning of the year
1,174,160
1,163,230
Additions during the year
-
-
Disposals during the year
(21,200)
-
Carrying amount before revaluations
1,152,960
1,163,230
Fair value as at end of the year
1,294,261
1,174,160
Fair value gain for the year
141,301
10,930
Individual valuation and carrying amounts
Investment property disposals
During the year the Group sold six investment properties for the total of $58.65 million. The aggregate price achieved for the
properties was 24.2% in excess of the carrying value. Four of the sales were settled prior to 30 June and two will settle by the end of
September 2021.
Each investment property is subject to independent valuation at least once every three years. For December 2020 all properties were
independently valued. At June 2021, 36 investment properties were independently valued by Savills (3) , Charter Keck Cramer (16)
and CBRE (17) , representing 44% of the portfolio by number.
The remaining 46 properties were subject to Directors' valuations as at 30 June 2021. The Directors' valuations of the 46 properties
were determined by taking each property's net rent as at 30 June 2021 and capitalising it at a rate equal to the prior year
capitalisation rate for that property, adjusted by the average change in capitalisation rate evident in the 36 independent valuations
completed at 30 June 2021 on a like for like basis. The Directors have received advice from Charter Keck Cramer, Savills and CBRE,
that it is reasonable to apply the same percentage movement in the weighted average capitalisation rates, on a like for like basis.
The Directors have reviewed the independent valuation outcomes and determined they are appropriate to adopt as at 30 June 2021.
The key inputs into the valuation are based on market information for comparable properties. The independent valuers have
experience in valuing similar assets and have access to market evidence to support their conclusions.
Rent determinations started in the previous years were received during September 2020. ALE is has commenced proceedings in the
Supreme Court of Victoria seeking declarations that the 19 Victorian Determinations are not binding on the parties.
This section provides information relating to the investment properties of the Group.
Page 31
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
Accounting policy - investment properties
Measurement of fair value
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.
Valuations reflect, where appropriate, the tenant in occupation, the credit worthiness of the tenant, the triple-net nature and
remaining term of the leases (79 of 82 properties), land tax liabilities (Queensland only), insurance responsibilities between lessor and
lessee and the remaining economic life of the property.
It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices
and, where appropriate, counter notices, have been served validly and within the appropriate time.
The carrying value of the investment property is reviewed at each reporting date and each property is independently revalued at least
every three years. Changes in the fair values of investment properties are recorded in the Statement of Comprehensive Income.
Gains and losses on disposal of a property are determined by comparing the net proceeds on disposal with the carrying amount of the
property at the date of disposal. Net proceeds on disposal are determined by subtracting disposal costs from the gross sale proceeds.
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 2021, the weighted average investment property capitalisation rate used to
determine the value of all investment properties was 4.59% (2020: 5.08%).
Investment property is a 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 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 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 7.3 years.
As at 30 June 2021 ALE had 36 properties independently valued. These valuations were completed by Charter Keck Cramer, Savills
and CBRE. The Western Australian properties were independently valued at 31 December 2020 and these values were also adopted
for the 30 June 2021 valuations.
Land and buildings classified as investment property are not depreciated.
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. 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 79 of the 82 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.
Page 32
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
COVID-19
Key estimates and assumptions - measurement of fair value
Fair Value
Hierarchy
Class of
Property
Fair Value
30 June 2021
$000's
Valuation
Technique
Level 3
Pubs
1,294,261
Gross rent p.a. ($'000's)
$84 - $1,890
Land tax p.a. ($'000's)
$8 - $193
Adopted capitalisation rate
Gross rent p.a. ($'000's)
$84 - $1,890
Land tax p.a. ($'000's)
$8 - $193
Discount rates p.a.
Terminal capitalisation rates
Consumer price index p.a.
2021
2020
Average
Average
4.31%
5.02%
4.67%
5.07%
4.38%
5.01%
4.95%
5.12%
6.28%
6.29%
Valuations are derived from a number of factors that may include a direct comparison between the subject property and a range of
comparable sales, the present value of net future cash flow projections based on reliable estimates of future cash flows, existing lease
contracts, external evidence such as current market rents for similar properties, and using capitalisation rates and discount rates that
reflect current market assessments of the uncertainty in the amount and timing of cash flows.
The Group had investment properties with a net carrying amount of $1,294,261,000 (2020: $1,174,160,000), representing the
estimated fair values.
The adopted valuation for investment properties are based on valuations determined using a combination of the discounted cash flow
(DCF) method and the income capitalisation method. The DCF and income capitalisation use unobservable inputs (i.e. key estimates
and assumptions) in determining fair value, as per the table below:
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 and the yields achieved by the Group on the
disposal of six properties during the year, indicates that good demand exists for prime assets secured by strong tenant covenants with
long lease terms and yields have firmed from 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.
Inputs Used To Measure Fair
Value
2020
2.50% - 5.29%
Range of Individual Property
Unobservable Inputs
3.99% - 5.48%
2021
2.47% - 7.14%
4.50% - 7.75%
3.75% - 7.00%
1.00% - 2.50%
Discounted
cash flow
method
Capitalisation
method
Western Australia
New South Wales
Victoria
Queensland
5.77% - 7.14%
4.20% - 5.77%
5.80% - 6.93%
3.42% - 6.29%
Adopted Yields
4.46% - 5.86%
2.80% - 5.77%
Adopted Yields
2.47% - 5.26%
3.59% - 4.99%
South Australia
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 33
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
A definition is provided below for each of the inputs used to measure fair value:
Income capitalisation method
Net passing rent
Net market rent
An average of a 10-year period of forecast annual percentage growth rates.
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
This method involves assessing the total net market income receivable from the property and
capitalising this in perpetuity to derive a capital value, with allowances for capital expenditure
reversions.
Net passing rent is the contracted amount for which a property or space within a property is leased.
In the calculation of net rent, the owner recovers some or all outgoings from the tenant on a pro-
rata basis (where applicable).
Net market rent is the estimated amount for which a property or space within a property should
lease between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length
transaction, after proper marketing and wherein the parties have each acted knowledgeably,
prudently and without compulsion. In the calculation of net rent, the owner recovers some or all
outgoings from the tenant on a pro-rata basis (where applicable).
The rate at which net market income is capitalised to determine the value of a property. The rate is
determined with regards to market evidence and the prior external valuation.
The capitalisation rate used to convert income into an indication of the anticipated value of the
property at the end of the holding period when carrying out a discounted cash flow calculation. The
rate is determined with regards to market evidence and the prior external valuation.
The rate of return used to convert a monetary sum, payable or receivable in the future, into present
value. Theoretically it should reflect the opportunity cost of capital, that is, the rate of return the
capital can earn if put to other uses having similar risk. The rate is determined with regards to
market evidence and the prior external valuation.
Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding the
benefits and liabilities of ownership over the asset’s life including an exit or terminal value. The DCF
method involves the projection of a series of cash flows on a real property interest. To this projected
cash flow series, an appropriate, market-derived discount rate is applied to establish the present
value of the income stream associated with the real property.
Discounted cash flow method
(DCF)
10-year average market
rental growth
Page 34
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
Sensitivity analysis
Put and call options
Ownership arrangements
Due to the uncertainty the COVID-19 pandemic could have 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 2021, 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
adopted 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.
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 $129.3 million and ($104.9 million). This equates to between 9.96% and (8.11%) movement in
values. Even at this unlikely worst case scenario, this would not result in property values approaching the 42% 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 2021 independent valuations included in these accounts.
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.
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 (or its equivalent) is to be included or excluded at the tenant’s option, subject to each relevant State's
Gaming Act. These assets are to be purchased at market value, at that time, as determined by the valuation methodology set out in
the leases. ALE must pay the purchase price on expiry of the lease. Any leasehold improvements funded and completed by the tenant
will be purchased by ALE from the tenant at each property for an amount of $1.
-
(0.50%)
(0.25%)
0.00%
0.25%
0.50%
(0.50%)
1,423,211
1,414,478
1,405,972
1,397,239
1,389,074
(0.25%)
1,363,442
1,354,710
1,346,317
1,337,584
1,329,419
0.00%
1,311,500
1,302,654
1,294,261
1,285,528
1,277,476
0.25%
1,265,227
1,256,495
1,248,102
1,239,256
1,231,204
0.50%
1,223,378
1,214,646
1,206,253
1,197,520
1,189,355
Discount Rate Movement
Capitalisation
Rate
Movement
Page 35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
2021
2020
$'000
$'000
(i) Future minimum lease payments
The future minimum lease payments in relation to non-cancellable leases are receivable as follows:
Within one year
60,058 63,301
Later than one year but not later than five years
252,488
266,119
Later than five years
226,080
275,489
538,626
604,909
Rental income
62,473
61,408
Valuation type and date
A
B
C
Sold during the current financial year
D
Sold but not settled during the current financial year
Properties were purchased in November 2003, unless otherwise indicated.
Fair value at
30 June
Fair value at
30 June
Fair value
gains/
2021
2020
2021
Property
$'000
$'000
$'000
$'000
New South Wales
Blacktown Inn, Blacktown
5,472
B
17,130
14,300
2,830
Brown Jug Hotel, Fairfield Heights
5,660
A
17,200
15,000
2,200
Colyton Hotel, Colyton
8,208
A
24,700
21,700
3,000
Crows Nest Hotel, Crows Nest
8,772
B
29,630
23,800
5,830
Melton Hotel, Auburn
3,114
A
9,900
8,400
1,500
Narrabeen Sands Hotel, Narrabeen (Mar 09)
8,945
A
17,900
16,000
1,900
New Brighton Hotel, Manly
8,867
B
13,470
11,600
1,870
Pioneer Tavern, Penrith
5,849
A
17,900
15,400
2,500
Pritchard's Hotel, Mount Pritchard (Oct 07)
21,130
A
37,900
31,300
6,600
Smithfield Tavern, Smithfield
4,151
A
12,700
10,400
2,300
Total New South Wales properties
80,168
198,430
167,900
30,530
79 of the 82 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.
The majority of ALE's leases expire in November 2028 and have 4 x 10 year options to extend. As the exercise of the options are
unknown at this point the future minimum lease payments exclude the options.
The following tables detail the cost and fair value of each of the Group's investment properties. The valuation type and date is as
follows:
Independent valuations conducted during June 2021 with a valuation date of 30 June 2021.
Directors' valuations conducted during June 2021 with a valuation date of 30 June 2021.
(ii) Amount recognised in the profit and loss
Cost including
additions)
Valuation
type and
date)
Leasing arrangements
Page 36
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
Fair value at
30 June
Fair value at
30 June
gains/
(losses)
2021
2020
2021
Property
$'000
$'000
$'000
$'000
Queensland
Albany Creek Tavern, Albany Creek
8,396
B
22,300
18,800
3,500
Alderley Arms Hotel, Alderley
3,303
B
7,850
7,500
350
Anglers Arms Hotel, Southport
4,434
A
13,000
11,700
1,300
Balaclava Hotel, Cairns
3,304
A
15,300
13,000
2,300
Breakfast Creek Hotel, Breakfast Creek
11,024
A
27,100
23,800
3,300
Burleigh Heads Hotel, Burleigh Heads (Nov 08)
6,685
B
18,200
15,200
3,000
Camp Hill Hotel, Camp Hill
2,265
B
7,050
6,400
650
Chardons Corner Hotel, Annerly
1,416
A
4,300
3,800
500
Dalrymple Hotel, Townsville
3,208
B
15,550
13,100
2,450
Edge Hill Tavern, Manoora
2,359
A
7,500
6,300
1,200
Edinburgh Castle Hotel, Kedron (Sold June 2021)
3,114
C
-
7,700
(200)
Four Mile Creek, Strathpine (Jun 04)
3,672
B
10,900
9,600
1,300
Hamilton Hotel, Hamilton
6,604
B
18,750
17,000
1,750
Holland Park Hotel, Holland Park
3,774
A
17,000
15,400
1,600
Kedron Park Hotel, Kedron Park (Sold April 2021)
2,265
C
-
4,800
(1,400)
Kirwan Tavern, Townsville
4,434
A
14,200
12,300
1,900
Lawnton Tavern, Lawnton
4,434
A
9,300
9,800
(500)
Miami Tavern, Miami1
5,548
A
19,720
15,770
3,950
Mount Gravatt Hotel, Mount Gravatt
3,208
B
8,800
7,500
1,300
Mount Pleasant Tavern, Mackay
1,794
A
13,000
10,900
2,100
Nudgee Beach Hotel, Nudgee
3,020
B
8,050
7,000
1,050
Palm Beach Hotel, Palm Beach
6,886
A
16,500
14,900
1,600
Pelican Waters, Caloundra (Sold April 2021)
4,237
C
-
7,600
-
Prince of Wales Hotel, Nundah
3,397
B
10,800
9,600
1,200
Racehorse Hotel, Booval
1,794
A
9,700
6,900
2,800
Redland Bay Hotel, Redland Bay
5,189
B
11,100
10,500
600
Springwood Hotel, Springwood
9,150
B
26,100
21,500
4,600
Stones Corner Hotel, Stones Corner
5,377
B
11,650
11,000
650
Vale Hotel, Townsville
5,661
B
16,650
13,600
3,050
Wilsonton Hotel, Toowoomba
4,529
B
15,225
13,400
1,825
Total Queensland properties
134,481
375,595
346,370
47,725
1. Includes adjacent lot purchased in April 2018
South Australia
Aberfoyle Hub Tavern, Aberfoyle Park
3,303
B
7,900
7,200
700
Eureka Tavern, Salisbury
3,303
B
6,200
6,350
(150)
Exeter Hotel, Exeter
1,888
B
5,550
5,000
550
Finsbury Hotel, Woodville North
1,605
B
4,900
4,700
200
Gepps Cross Hotel, Blair Athol
2,507
A
8,500
8,000
500
Hendon Hotel, Royal Park
1,605
A
4,950
4,200
750
Stockade Tavern, Salisbury
4,435
A
6,200
6,150
50
Total South Australian properties
18,646
44,200
41,600
2,600
Western Australia
Queens Tavern, Highgate
4,812
B
10,450
10,090
360
Sail & Anchor Hotel, Fremantle
3,114
B
5,180
4,700
480
The Brass Monkey Hotel, Northbridge (Nov 07)
7,815
B
9,500
9,550
(50)
Balmoral Hotel, East Victoria Park (Jul 07)
6,645
B
7,350
7,450
(100)
Total Western Australian properties
22,386
32,480
31,790
690
Cost including
additions)
Valuation
type and
date)
Page 37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
Fair value at
30 June
Fair value at
30 June
gains/
(losses)
2021
2020
2021
Property
$'000
$'000
$'000
$'000
Victoria
Ashley Hotel, Braybrook
3,963
B
11,740
11,300
440
Bayswater Hotel, Bayswater
9,905
A
24,650
21,800
2,850
Berwick Inn, Berwick (Feb 06)
15,888
B
21,310
20,800
510
Blackburn Hotel, Blackburn
9,433
A
19,450
19,200
250
Blue Bell Hotel, Wendouree
1,982
B
6,030
5,500
530
Burvale Hotel, Nunawading
9,717
B
29,610
25,000
4,610
Club Hotel, Ferntree Gully
5,095
A
11,450
11,500
(50)
Cramers Hotel, Preston
8,301
B
21,170
18,300
2,870
Deer Park Hotel, Deer Park
6,981
A
19,150
17,500
1,650
Doncaster Inn, Doncaster
12,169
B
33,010
26,600
6,410
Ferntree Gully Hotel/Motel, Ferntree Gully
4,718
A
9,300
9,400
(100)
Gateway Hotel, Corio
3,114
B
10,250
9,800
450
Keysborough Hotel, Keysborough
9,622
A
26,650
26,500
150
Mac's Melton Hotel, Melton
6,886
A
18,300
17,000
1,300
Meadow Inn Hotel/Motel, Fawkner
7,689
B
22,950
20,000
2,950
Mitcham Hotel, Mitcham
8,584
B
19,640
17,800
1,840
Morwell Hotel, Morwell (Sold April 2021)
1,511
C
-
3,100
(400)
Olinda Creek Hotel, Lilydale
3,963
A
8,800
8,900
(100)
Pier Hotel, Frankston
8,019
B
16,720
16,700
20
Plough Hotel, Mill Park
8,490
B
21,420
19,550
1,870
Prince Mark Hotel, Doveton
9,810
B
26,210
22,000
4,210
Royal Exchange, Traralgon
2,171
B
7,280
7,000
280
Sandbelt Club Hotel, Moorabbin
10,849
B
29,960
24,350
5,610
Sandown Park Hotel/Motel, Noble Park
6,321
B
16,640
16,000
640
Sandringham Hotel, Sandringham
4,529
B
16,720
13,000
3,720
Somerville Hotel, Somerville
2,733
A
8,900
8,500
400
Stamford Inn, Rowville
12,733
A
31,800
30,100
1,700
Sylvania Hotel, Campbellfield
5,377
A
14,100
13,350
750
The Vale Hotel, Mulgrave
5,566
A
16,850
16,000
850
Village Green Hotel, Mulgrave
12,546
B
28,260
25,550
2,710
Young & Jackson, Melbourne
6,132
A
26,350
23,400
2,950
Total Victorian properties
224,797
574,670
525,500
51,870
Total investment properties
480,478
1,225,375
1,113,160
133,415
Valuation
type and
date)
Cost including
additions)
Page 38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
2. Investment property
Investment properties held for resale
Fair value at
30 June
Fair value at
30 June
Fair value
gains/
2021
2020
2021
Property
$'000
$'000
$'000
$'000
Boundary Hotel, East Bentleigh (Jun 08)
17,943
D
32,689
27,500
5,189
Tudor Inn, Cheltenham
5,519
A
11,850
11,900
(50)
Royal Exchange Hotel, Toowong
5,755
B
10,700
10,100
600
Noosa Reef Hotel, Noosa Heads (June 2004)
6,874
D
13,647
11,500
2,147
36,091
68,886
61,000
7,886
Total Investment Properties
516,569
1,294,261
1,174,160
141,301
The Group has four investment properties held for sale at 30 June 2021. Contracts for the sale of two of these properties were
exchanged prior to 30 June 2021, with settlements completed on 26 July 2021 (Noosa Reef Hotel) and to be completed on 10
September 2021 (Boundaty Hotel). Two properties (Tudor In Moorabbin Victoria and Royal Exchange Hotel Toowong Queensland)
have been approved for divestment and are currently in the process of being marketed for sale.
Investment properties are classified as held for sale and measured at fair value if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable and the
asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected
to qualify for recognition as a completed sale within one year from the date of classification.
Accounting policy – Assets held for sale
Cost including
additions)
Valuation
type and
date)
Total Investment Properties held for resale
Page 39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3.
Capital structure and financing
3.1 Borrowings
2021
2020
$'000
$'000
Non-current borrowings
Capital Indexed Bond (CIB)
157,838
156,336
Australian Medium Term Notes (AMTN)
298,901
149,576
Bank facilities
84,155
-
Debt facility
-
245,500
540,894
551,412
2021
2020
CIB
$'000
$'000
Gross value of debt
111,900
111,900
Accumulated indexation
46,237
44,842
Unamortised borrowing costs
(299)
(406)
Net balance
157,838
156,336
2021
2020
AMTN
$'000
$'000
Gross value of debt
300,000
150,000
Unamortised borrowing costs
(1,099)
(424)
Net balance
298,901
149,576
2021
2020
Bank facilities
$'000
$'000
Gross value of debt
85,000
-
Unamortised borrowing costs
(845)
-
Net balance
84,155
-
In March 2017 ALE issued AMTNs with a value of $150 million, maturing in August 2022. These are fixed rate securities with interest
payable semi annually
In March 2021 ALE issued AMTNs with a value of $150 million, maturing in August 2024. These are floating rate securities with
interest payable quarterly.
In March 2021 ALE entered into bank loans with a face value of $100 million, with maturities between March 2023 to March 2025.
These are floating rate loans with interest payable quarterly. In June 2021 $15m of the loans were repaid.
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.
The capital structure of the Group consists of debt and equity. The Directors determine the appropriate capital structure
of ALE, specifically how much is raised from shareholders (equity) and how much is borrowed from others (debt) in order to finance
the current and future activities of the Group. The Directors review the Group’s capital structure and distribution policy regularly and
do so in the context of the Group’s ability to continue as a going concern, to invest in opportunities that grow the business and
enhance securityholder value.
$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.
Page 40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
2021
2020
Debt facility
$'000
$'000
Gross value of debt
-
250,000
Unamortised borrowing costs
-
(4,500)
Net balance
-
245,500
Recognition and measurement
Assets pledged as security
2021
2020
$'000
$'000
Current assets
Cash - CIB borrowings reserves
9,920
9,920
Non-current assets
Total investment properties
1,294,261
1,174,160
Less: Properties not subject to mortgages
Pritchard's Hotel, NSW
(37,900)
(31,300)
(1,470)
(1,470)
Properties subject to mortgages
1,254,891
1,141,390
Total assets pledged as security
1,264,811
1,151,310
Miami Hotel, QLD1
1. Adjoining property purchased in April 2018
On 24 April 2020 a $250 million debt facility was established. The facility was repaid in March 2021.
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.
The carrying amounts of assets pledged as security as at the balance date for CIB borrowings and certain interest rate derivatives
are:
In the unlikely event of a default by the properties' tenant, Australian Leisure and Hospitality Group Pty Limited (ALH), and if the
assets pledged as security are insufficient to fully repay CIB borrowings, the CIB holders are also entitled in certain circumstances to
recover certain unpaid amounts from the business assets of ALH.
Page 41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Terms and Repayment Schedule
All up
Face
Carrying
Face
Carrying
Interest
Issue
Maturity
Value
Amount
Value
Amount
Rate3
Rate
Date1
$'000
$'000
$'000
$'000
Debt facility - repaid in March 2021
- - 250,000 250,000
AMTN
4.00%
08-Mar-2017
20-Aug-2022 150,000 150,000
150,000 150,000
CIB
3.40%2
20-May-2006
20-Nov-2023 111,900 158,137
111,900 156,742
AMTN
2.39%
24-Mar-2021
20-Aug-2024 150,000 150,000
- -
Bank Loan
2.04%
29-Mar-2021
29-Mar-2023 25,000 25,000
- -
Bank Loan
2.74%
29-Mar-2021
29-Mar-2024 10,000 10,000
- -
Bank Loan
3.19%
29-Mar-2021
29-Mar-2025 50,000 50,000
- -
496,900 543,137
511,900 556,742
Unamortised borrowing costs
(2,243)
(5,330)
Total borrowings
540,894
551,412
3. Interest rate payable at 30 June 2021 at the nominal rate + margin (including hedged interest rates)
Reconciliation of movements in liabilities to cash flows arising from financing activities
CIB
Borrowings
AMTN
Borrowings
Bank facility
borrowings
Debt Facility
Borrowings
Total
Borrowings
Balance as at 1 July 2020
156,336
149,576
-
245,500
551,412
Changes from financing cash flows
New borrowings
150,000
100,000
-
250,000
Repayment of borrowings
-
-
(15,000)
(250,000)
(265,000)
Payment of borrowing costs
(939)
(914)
(1,853)
Total changes from financing cash flows
-
149,061
84,086
(250,000)
(16,853)
Other changes
Amortisation of capitalised borrowing costs
107
264
69
4,500
4,940
Accumulated indexation
1,395
-
-
-
1,395
Total other changes
1,502
264
69
4,500
6,335
Balance as at 30 June 2021
157,838
298,901
84,155
-
540,894
Fair value
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
Classification
$'000
$'000
$'000
$'000
30 June 2020
CIB
Level 2
157,838
172,253
156,336
167,384
AMTN - August 2022 maturity
Level 2
149,840
153,171
149,576
153,793
AMTN - August 2024 maturity
Level 2
149,061
150,915
-
Bank facilities
Level 2
84,155
85,000
-
-
Debt facility
Level 2
-
-
245,500
250,000
540,894
561,339
551,412
571,177
30 June 2020
30 June 2021
30 June 2020
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:
1. Maturity date refers to the first scheduled maturity date for each tranche of borrowing.
2. Interest is payable on the indexed balance of the CIB at a fixed rate.
30 June 2021
Page 42
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
3.2 Financial Risk Management
●
credit risk
●
market risk
●
liquidity risk
3.2.1 Credit risk
Cash
Trade and other receivables
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.
The Trust and Group have exposure to the following risks from their use of financial instruments:
This note presents information about ALE's exposure to each of the above risks, its objectives, policies and processes for measuring
and managing risk and the management of capital. Further quantitative disclosures are included throughout this financial report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board
has established an Audit, Compliance and Risk Management Committee, which is responsible for developing and monitoring risk
management policies. The committee reports regularly to the Board of Directors on its activities.
Risk management policies are established to identify and analyse the risks faced by ALE, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and ALE’s activities. ALE, through its training and management standards and procedures, has developed a
disciplined and constructive control environment in which all employees understand their roles and obligations.
The Audit, Compliance and Risk Management Committee oversees how management monitors compliance with ALE’s risk
management policies and procedures and reviews the adequacy of the risk management framework.
Credit risk 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.
Credit risk on cash is managed through ensuring all cash deposits are held with authorised deposit taking institutions.
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 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.
The Group has considered the collectability and recoverability of trade receivables. When 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.
Page 43
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
3.2.2 Market risk
Interest rate risk
Profile
2021
2020
$'000
$'000
Derivative financial assets
-
-
Derivative financial liabilities
(29,015)
(52,030)
Borrowings
CIB
(157,838)
(156,336)
AMTN
(298,901)
(149,576)
Bank facilities1
(84,155)
-
Debt facility1
-
(245,500)
(569,909)
(603,442)
1. The Bank and Debt facilities debt are floating rate. Its market value is therefore not affected by changes in interest rates.
Sensitivity analysis
100 bps
100 bps
100 bps
100 bps
increase
decrease
increase
decrease
$'000
$'000
$'000
$'000
30 June 2021
Interest rate hedges
14,844
(15,621)
18,442
(19,698)
CIB
-
-
-
-
AMTN
-
-
-
-
Debt facility
-
-
14,844
(15,621)
18,442
(19,698)
At the reporting date, ALE's interest rate sensitive financial instruments were as follows:
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 CPI, remain constant. This analysis was performed on the same basis for 2020.
30 June 2021
30 June 2020
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 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.
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 interest rates rise, to the extent that interest rate derivatives (hedges) are not in place to fully hedge the
exposure, distributable profit levels would be expected to decline from the levels that they would otherwise have been, and vice-
versa.
ALE also has property assets that are leased on a long term basis 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.
Page 44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Consumer price index risk
Profile
2021
2020
$'000
$'000
Financial instruments
Investment properties
1,294,261
1,174,160
CIB
(157,838)
(156,336)
1,136,423
1,017,824
Sensitivity analysis for variable rate instruments
100 bps
100 bps
100 bps
100 bps
increase
decrease
increase
decrease
$'000
$'000
$'000
$'000
30 June 2021
Investment properties
13,375
-
11,560
-
CIB
-
-
-
-
13,375
-
11,560
-
Property valuation risk
3.2.3 Liquidity 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 may in turn flow through to investment property valuations.
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. This analysis was performed on the same
basis for 2020.
30 June 2021
30 June 2020
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.
At the reporting date, ALE's CPI sensitive financial instruments were as follows:
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 monitoring gearing levels and has
contingency capital management plans to ensure that sufficient headroom may be restored if required.
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 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 return on cash
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.
Page 45
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Contractual cash
flows
6 months or less
6-12 months
1-2 years
2-5 years
More than five
years
30 June 2021
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative financial liabilities
Trade and other payables
(5,336)
(5,336)
-
-
-
-
CIB
(179,355)
(2,706)
(2,730)
(5,533)
(168,386)
-
AMTN - August 2022
(159,000)
(3,000)
(3,000)
(153,000)
-
-
AMTN - August 2024
(161,702)
(1,468)
(1,485)
(3,434)
(155,315)
-
Bank facilities
(93,306)
(1,062)
(1,068)
(27,327)
(63,849)
-
Derivative financial instruments
Interest rate hedges
(31,281)
(524)
(460)
(4,822)
(25,475)
-
(629,980)
(14,096)
(8,743)
(194,116)
(413,025)
-
30 June 2020
Non-derivative financial liabilities
Trade and other payables
(6,047)
(6,047)
-
-
-
-
CIB
(193,040)
(2,606)
(2,623)
(5,328)
(182,483)
-
AMTN
(165,000)
(3,000)
(3,000)
(6,000)
(153,000)
-
Debt facility
(264,240)
(1,974)
(3,391)
(258,875)
-
Derivative financial instruments
Interest rate hedges
(56,562)
(1,705)
(3,376)
(7,089)
(38,113)
(6,279)
(684,889)
(15,332)
(12,390)
(277,292)
(373,596)
(6,279)
Interest rates used to determine contractual cash flows
The following are the contracted maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements.
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 46
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Interest rate hedges
2021
2020
$'000
$'000
Current assets
-
Non-current assets
-
-
Total assets
-
-
Current liabilities
-
-
Non-current liabilities
(29,015)
(52,030)
Total liabilities
(29,015)
(52,030)
Net assets/(liabilities)
(29,015)
(52,030)
Current year fair value adjustments to derivatives
2021
2020
$'000
$'000
Fair value increments/ (decrements) to interest rate hedge derivatives
6,091
(17,306)
Recognition and measurement
At 30 June 2021, the notional principal amounts and periods of expiry of the interest rate hedge contracts are as follows:
2021
2020
2021
2020
2021
2020
$'000
$'000
$'000
$'000
$'000
$'000
Less than 1 year
-
-
-
-
-
-
1 - 2 years
-
-
-
-
-
-
2 - 3 years
-
-
-
-
-
-
3 - 4 years
-
-
-
-
-
-
4 - 5 years
476,000
-
-
-
476,000
-
Greater than 5 years
-
506,000
-
-
-
506,000
Borrowing Interest Rate
Deposit Interest Rate
Net Hedge Position
ALE has fixed rate and variable rate debt. Where debt is at variable rate, interested rate swaps have been put in place to fix this.
Also, forward start interest rate swaps have been put in place that start when the existing fixed rate debt expires. As a result of this
fixed rate debt and swaps, 100% of ALE’s debt is a fixed at a weighted average cost of between 2.00% and 3.53% for a duration of
4.4 years.
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 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 profit and loss.
The gain or loss from marking to market the interest rate hedges (derivatives) at fair value is taken directly to the profit and loss.
ALE has a series of forward start borrowing hedges in place.
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.
Page 47
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Financial covenants
Interest Cover Ratio covenants (ICR)
Borrowing
Current Ratio Consequence
CIB
>42.5x
AMTN
3.38x
Bank Facilities
3.38x
Hedging
3.38x
Definitions
Interest amounts include all interest rate derivative rate swap payments and receipts
EBITDAR - Earnings before Interest, Tax, Depreciation, Amortisation and Rent
The difference between the net debt and the amount hedged is approximately the amount of current fixed rate debt on issue.
The following chart shows the hedge balances to November 2025.
Stapled security distributions lockup
Hedge counterparty may call for hedging to be
closed out
As per AMTN
ICR covenant
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:
Note holders may call for notes to be redeemed
Lender may call for loan to be repaid
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
As per AMTN
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 4.4 years at 30
June 2021.
Page 48
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
Rating covenant
Borrowing
Current
Rating
Consequence
AMTN
Baa2
Bank facilities
Baa2
Loan to Value Ratio covenants (LVR)
Borrowing
Current Ratio Consequence
CIB
12.6%
CIB
12.6%
AMTN
10.8%
AMTN
36.4%
AMTN
36.4%
Bank facilities
-
Hedging
-
Definitions
Net Total Assets
Total Assets less Cash less Derivative Assets less Deferred Tax Assets. (ALE DPT)
Net Priority Debt
Net Finance Debt
As per AMTN above
Published rating of Ba1/BB+ or lower results in a
step up margin of 1.25% to be added to the
interest rate payable
As per AMTN above
Covenant
Stapled Security distribution lockup
Note holders may call for notes to be redeemed
Note holders may call for notes to be redeemed
Net Finance Debt is not permitted to exceed
60% of Net Total Assets
Net Finance Debt is not permitted to exceed
60% of Net Total Assets
LVR Covenant
The issuance of new CIB is not permitted if the
indexed value of the resultant total CIB exceeds
25% of the value of properties held as security
Outstanding value of CIB not to exceed 66.6%
of the value of properties held as security
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
Note holders may call for notes to be redeemed
Hedge counterparty may call for hedging to be
closed out
Net Priority Debt is not permitted to exceed 20%
of Net Total Assets
Note holders may call for notes to be redeemed
Lender may call for loan to be repaid
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
AMTN issue rating to be maintained at
investment grade (i.e. at least Baa3/BBB-)
ALE DPT rating to be maintained at investment
grade (i.e. at least Baa3/BBB-)
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 2021 and 30 June 2020, ALE and its subsidiaries were in compliance with all the above covenants.
Page 49
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
3.3 Equity
2021
2020
$'000
$'000
Balance at the beginning of the period
258,118
258,118
Issue of securities under the ALE Distribution Reinvestment Plan
22,067
-
280,185
258,118
Movements in the number of fully paid stapled securities during the year
2021
2020
Opening balance
195,769,080
195,769,080
Issue of securities under the ALE Distribution Reinvestment Plan
4,638,443
-
Closing balance
200,407,523
195,769,080
Measurement and recognition
Stapled securities
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
4.31% 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.
Ordinary units and ordinary shares are classified as contributed equity.
Incremental costs directly attributable to the issue of new units, shares or options are shown in Contributed Equity as a deduction,
net of tax, from the proceeds.
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 50
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
3. Capital structure and financing
3.4 Capital management
Capital management
3.5 Cash and cash equivalents
2021
2020
$'000
$'000
Cash at bank and in hand
31,508
4,575
Deposits at call
2,193
25,073
Cash reserve
9,920
9,920
43,621
39,568
Recognition and measurement
Cash obligations
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 its Australian Financial Services License.
During the year ended 30 June 2021 all cash assets were placed on deposit with various banks. As at 30 June 2021, the weighted
average interest rate on all cash assets was 0.30% (2020:0.66%).
ALE monitors securityholder equity and manages it to address risks and add value where appropriate.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the
future development of the business. The Board of Directors monitors the return on capital, which ALE defines as distributable income
divided by total contributed equity, excluding minority interests. The Board of Directors also monitors the level of gearing.
The Board seeks to maintain a balance between the higher returns that may be achieved with higher levels of borrowings and the
advantages and security afforded by a sound capital position. While ALE does not have a specific return on capital target, it seeks to
ensure that capital is being most efficiently used at all times. In seeking to manage its capital efficiently, ALE from time to time may
undertake on-market buybacks of ALE stapled securities. ALE has also from time to time made distributions from surplus cash or
capital to stapled securityholders. Additionally, the available total returns on all new acquisitions are tested against the anticipated
weighted cost of capital at the time of the acquisition.
ALE assesses the adequacy of its capital requirements, cost of capital and gearing as part of its broader strategic plan.
Gearing ratios are monitored in the context of any increase or decrease from time to time based on existing property value
movements, acquisitions completed, the levels of debt financing used and a range of prudent financial metrics, both at the time and
on a projected basis going forward.
The total gearing ratios (total liabilities as a percentage of total assets) at 30 June 2021 and 30 June 2020 were 44.5% and 51.9%
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 2021 and 30 June 2020 were 36.4% and 41.3% respectively.
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.
An amount of $9.92 million (2020: $9.92 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.
Page 51
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
4.
Business performance
4.1 Revenue and income
2021
2020
$'000
$'000
Revenue
Rent from investment properties
62,473
61,408
Interest from cash deposits
99
301
Total revenue
62,572
61,709
Other income
Fair value increments to investment properties
141,301
10,930
Fair value increments to derivatives
6,091
-
Profits on sale of investment properties
4,230
-
Other income
-
-
Total other income
151,622
10,930
Total revenue and other income
214,194
72,639
Recognition and measurement
Revenue
Rental income
Interest income
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.
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.
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%. In
September 2020 Rent Determinations on 43 properties were received.
As at 30 June 2021 the weighted average interest rate earned on cash was 0.30% (2020: 0.66%)
Page 52
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
4. Business performance
4.2 Finance costs
2021
2020
$'000
$'000
Finance costs - cash
Capital Indexed Bonds (CIB)
5,331
5,285
Australian Medium Term Notes (AMTN)
6,771
16,174
Interest rate derivative payments/(receipts)
119
(656)
Bank facilities
582
-
Debt Facility
4,206
943
Other finance expenses
196
295
17,205
22,041
Finance costs - non-cash
Accumulating indexation - CIB
1,395
2,908
Amortisation - CIB
107
97
Amortisation - AMTN
181
304
Amortisation - AMTN discount
83
80
Amortisation - Bank loans
69
-
Amortisation - Debt facility
4,500
426
6,335
3,815
Finance costs (cash and non-cash)
23,540
25,856
Recognition and measurement
Finance costs details
4.3 Taxation
Reconciliation of income tax expense
2021
2020
$'000
$'000
Profit before income tax
179,437
20,016
Profit attributable to entities not subject to tax
179,483
20,005
Profit/(Loss) before income tax expense subject to tax
(46)
11
Tax at the Australian tax rate
(14)
3
Share based payments
(14)
(14)
Tax losses not recoverable
300
-
Other
(6)
4
Income tax expense/(benefit)
266
(7)
Current tax expense/(benefit)
82
-
Deferred tax expense/ (benefit)
184
(7)
Income tax expense/(benefit)
266
(7)
Interest expense is recognised on an accruals basis.
Borrowing costs are recognised using the effective interest rate method.
Amounts represent net cash finance costs after derivative payments and receipts.
Other borrowing costs such as rating agency fees and liquidity fees.
Establishment costs of the various borrowings are amortised over the period of the borrowing on an effective rate basis.
The prima facie income tax expense on profit before income tax reconciles to the income tax expense in the financial statements as
follows:
Page 53
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
4. Business performance
4.3 Taxation (continued)
Recognition and measurement
Trusts
Current tax
Deferred tax
Offsetting deferred tax balances
4.4 Remuneration of auditors
2021
2020
$
$
Audit services
KPMG Australian firm:
Audit and review of the financial reports
- in relation to current year
194,458
175,785
- in relation to prior year
-
-
Total remuneration for audit services
194,458
175,785
KPMG Australian firm:
Other services
7,244
-
Total remuneration for all services
201,702
175,785
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.
The income tax expense or benefit for the reporting period is the tax payable on the current reporting period's taxable income based
on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No
deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Similarly, no
deferred tax asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable
that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in Equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Company/Group intends to settle its current tax assets and liabilities on a net basis.
Page 54
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
4. Business performance
4.5 Distributable income
2021
2020
$'000
$'000
Profit after income tax
179,171
20,023
Plus /(less)
Fair value adjustments to investment properties
(141,301)
(10,930)
Fair value adjustments to derivatives - net
(6,091)
17,306
Profits on sale of investment properties
(4,230)
-
Employee share based payments
223
204
Finance costs - non cash
6,335
3,815
Income tax expense
266
(7)
Adjustments for non-cash items
(144,798)
10,388
Total available for distribution
34,373
30,411
Distribution paid or provided for
42,808
40,916
Distributions made in excess of Distributable Income
(8,435)
(10,505)
Distribution funded as follows
Current year distributable income
34,373
30,411
Securities issued: Distribution reinvestment plan *
12,210
9,857
Capital and surplus cash
(3,775)
648
42,808
40,916
4.6 Earnings per security
Basic earnings per stapled security
2021
2020
Profit attributable to members of the Group ($000's)
179,171
20,023
Weighted average number of stapled securities
198,266,757
195,769,080
Basic earnings per security (cents)
90.37
10.23
Diluted earnings per stapled security
2021
2020
Profit attributable to members of the Group ($000's)
179,171
20,023
Weighted average number of stapled securities
198,773,934
195,911,039
Diluted earnings per security (cents)
90.14
10.22
Reconciliation of profit after tax to amounts available for distribution:
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.
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 securities for FY20 issued under the Distribution Reinvestment Plan were issued on September 2020 but related to June 2020 distribution, and therefore the
comparative has been updated accordingly.
Page 55
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
4. Business performance
2021
2020
Distributable income attributable to members of the Group ($000's)
34,373
30,411
Number of stapled securities at the end of the year
200,407,523
195,769,080
Distributable income per security (cents)
17.15
15.53
Distributed income per security
2021
2020
(Cents)
(Cents)
Distributable income per stapled security
17.15
15.53
Distribution paid per stapled security
21.50
20.90
Distributions made in excess of Distributable Income
(4.35)
(5.37)
Distribution funded as follows
Current year distributable income
17.15
15.53
Securities issued: Distribution reinvestment plan
6.09
5.04
Capital and surplus cash
(1.74)
0.33
Capital and surplus cash
21.50
20.90
Distributable profit per security
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.
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.
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.
Page 56
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
5.
Employee benefits
5.1 Employee benefits
2021
2020
$'000
$'000
Employee benefits provision:
Current
202
292
Recognition and measurement
5.2 Key management personnel compensation
2021
2020
$
$
Short term employee benefits
2,298,999
1,899,277
Post employment benefits
122,305
109,766
Other long term benefits
149,628
28,429
Share based payments
185,500
203,538
Termination benefits
193,961
-
2,950,393
2,241,010
Recognition and measurement
Wages and salaries, annual leave and sick leave
Bonus and incentive plans
Long service leave
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.
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.
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.
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.
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.
Page 57
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
5. Employee benefits
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 58
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
6.
Other
6.1 Changes to accounting policies
6.2 New accounting standards
•
•
•
•
•
6.3 Segment reporting
Business segment
This section provides details on other required disclosures relating to the Group to comply with the accounting standards
and other pronouncements.
The Group has not made any significant changes to Accounting Policies in the current year.
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 ALE Property Group.
Comparative information has been presented in conformity with the requirements of AASB 8 Operating Segments.
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 July
2020:
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material [AASB 101 and AASB 108]
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business [AASB 3]
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform [AASB 9, AASB
139 and AASB 7]
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not
Yet issued in Australia [AASB 1054]
Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting Standards –
References to the Conceptual Framework
The amendments listed above did not have any material impact on the amounts recognised in the current year.
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 (2020: 100%). Non pub rental income comprises less than 1% of total revenue.
Page 59
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
6. Other
6.4 Events occurring after balance date
6.5 Contingent liabilities and contingent assets
Bank guarantee
6.6 Investments in controlled entities
6.7 Related party transactions
Parent entity and subsidiaries
Details are set out in Note 6.6 and 6.8.
Key management personnel
Transactions with related parties
Robert Mactier is a consultant to UBS AG. UBS AG has provided debt lead management services to ALE in the past and may 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. No transactions that involved UBS AG were performed during the year.
ALE has a bank guarantee of $112,388 in respect of the a new office tenancy at Level 28, Suite 28.01, 264 George Street, Sydney.
The Trust owns 100% of the issued units of the Sub Trust. The Sub Trust owns 100% of the issued shares of the Finance Company.
The Trust owns none of the issued shares of the Company, but is deemed to be its "acquirer" under AASB.
In addition, the Trust owns 100% of the issued units of ALE Direct Property Trust No.3, which in turns owns 100% of the issued
shares of ALE Finance Company No.3 Pty Limited. Both of these Trust subsidiaries are non-operating.
Key management personnel and their compensation are set out in the Remuneration Report on Page 19.
For the year ended 30 June 2021, the Company received $6,304,287 of expense reimbursement from the Trust (2020: $4,477,922),
and the Finance Company charged the Sub Trust $6,833,310 interest (2020: $8,307,406).
The COVID-19 pandemic and lockdowns subsequent to year end continues to create 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 2021 as
to whether any events subsequent to balance date have changed their view of the 30 June 2021 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.
ALE has a bank guarantee of $73,273 in respect of the office tenancy at Level 10, 6 O'Connell Street, Sydney. This tenancy has
ceased and the bank guarantee will be returned to the Company.
The Noosa Reef Hotel that sold prior to 30 June 2021 for $11.3 million settled on 26 July 2021. The Boundary Hotel is due to settle on
10 September 2021.
Page 60
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS (Continued)
For the Year ended 30 June 2021
6. Other
Terms and conditions
6.8 Parent Entity Disclosures
2021
2020
$'000
$'000
Profit for the year
25,270
20,695
Financial position of the parent entity
Current assets
Cash
21
21
Non-current assets
Investments in controlled entities
275,656
275,656
Total assets
275,677
275,677
Current
Payables
54,433
59,533
Provisions
21,544
20,458
Total liabilities
75,977
79,991
Net assets
199,700
195,686
Issued units
273,984
252,431
Retained earnings
(74,284)
(56,745)
Total equity
199,700
195,686
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.
As at, and throughout, the financial year ending 30 June 2021 the parent entity of ALE was Australian Leisure and Entertainment
Property Trust.
Page 61
ALE Property Group
DIRECTORS' DECLARATION
For the Year ended 30 June 2021
(a)
(i)
(ii)
(b)
(c )
(d)
This declaration is made in accordance with a resolution of the Directors.
Robert Mactier
Guy Farrands
Chairman
Managing Director
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:
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 2021.
The directors draw attention to Note 1 to the financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Dated this 4th day of August 2021
the financial statements and notes that are set out on pages 24 to 61 and the Remuneration report contained in Section 9 of the
Directors’ report, are in accordance with the Corporations Act 2001 , including
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable.
giving a true and fair view of the Group's financial position as at 30 June 2021 and of its performance for the financial
year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
Page 62
ALE Property Group
63
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
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 2021 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 2021;
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 Management Limited and
Australian Leisure and Entertainment Property Trust 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, Australian and Leisure Entertainment Property Trust and
Australian Leisure and Entertainment Property Management Limited (the Responsible Entity) 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.
64
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 ($1,225.4m) and Assets held for sale ($68.9m)
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 and
assets held for sale 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 82 freehold
hotels of which 78 are classified as
investment properties (non-current) and 4
are classified as assets held for sale
(current). All 82 properties have long-term
lease agreements in place with Australian
Leisure and Hospitality Group (ALH).
The Stapled Group’s policy is investment
properties are subject to external valuation at
least once every three years. At 30 June
2021, 36 properties were valued by external
valuers and 44 properties were internally
valued by the Directors’ and 2 properties are
valued based on the executed sales
contract.
We focused on the important features of the
Stapled Group’s investment property valuation
process. In order of application, these included:
Key assumptions and methodology adopted
in the external valuations: being
capitalisation rates, discount rates, terminal
yield and future rental income inputs (net
passing rent, net market rent and 10 year
average market rental growth) to the
capitalisation rates (cap rate) and
discounted cash flow (DCF) methodology.
A key feature of the long- term leases that
Our procedures included:
Understanding the Stapled Group’s process
regarding the valuation of investment
properties, including how potential COVID-19
impacts have been considered;
Assessing the methodologies used in the
valuations of investment properties for
consistency with accounting standards and
the Stapled Group policies;
Assessing the scope, competence and
objectivity of external valuers engaged by the
Stapled Group and internal valuers;
For all externally valued investment properties:
Enquire with the external valuers (Savills, CKC
and CBRE) to challenge the investment
property valuation methodology and the
assumptions applied in the external valuations;
Challenging key assumptions including:
capitalisation rates, discounts rates, terminal
yield and future rental income inputs focusing
on the outliers when compared to properties
within the same region by considering publicly
available sales evidence (including the
investment properties sold by the Stapled
Group during 2021), historical data and the
property specific attributes including location,
asset condition, land area and actual passing
income;
Challenging the Stapled Group’s final
investment property value by comparing the
cap rate and DCF valuations, taking into
consideration differences to property specific
65
impact DCF values are the rental
assessments in 2018 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 external valuers’ work,
taking into consideration property specific
attributes. We spent significant effort in
assessing the Stapled Group’s
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.
attributes. These include location, asset
condition, trading performance, land area and
proximity to the next market rent
reassessments;
Inspecting the outcome of the Stapled
Group’s 2018 rental determinations and how it
was considered in the internal/external
investment properties valuations;
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;
We assessed sources of information for what
reasonable expectations existed at year end
date versus those issues or observations
emerging since year end, and their impact to
the Stapled Group’s investment properties
values;
For all internally valued investment properties:
Inspecting the advice obtained from the
external valuers on the weighted average
change in capitalisation rates, including any
outliers, and its application by the Directors’
for internal valuations of investment
properties;
For the properties classified as assets held for
sale:
Obtaining the executed sales contracts (where
relevant) and inspecting the board meeting
minutes evidencing the investment properties
divestment plan and approval;
Assessing the classification and measurement
of assets held for sale against accounting
standard requirements; and
For financial statement disclosure:
Assessing the disclosures in the financial
report including checking the sensitivity
analysis calculations, using our understanding
obtaining from our testing, against accounting
standard requirements.
66
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. The Directors of the
Responsible Entity 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 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
67
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
In our opinion, the Remuneration Report
of Australian Leisure and
Entertainment Property Management
Limited for the year ended 30 June
2021, complies with Section 300A of the
Corporations Act 2001.
Directors’ responsibilities
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 on
pages 13 to 19 of the Directors’ report for the year ended
30 June 2021.
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
4 August 2021
INVESTOR INFORMATION
For the Year ended 30 June 2021
Securityholders
The securityholder information as set out below was applicable as at 6 July 2021.
A. DISTRIBUTION OF EQUITY SECURITIES
Range
Number of
Holders
Number of
Securities
% of Issued
Capital
1 - 1,000
1,047
353,172
0.18
1,001 - 5,000
1,703
4,803,391
2.40
5,001 - 10,000
923
6,965,179
3.48
10,001 - 100,000
1,427
37,156,528
18.53
100,001+
106
151,129,253
75.41
Total
5,206
200,407,523
100.00
B. TOP 20 EQUITY SECURITYHOLDERS
The names of the 20 largest security holders of stapled securities are listed below
Rank
Name
Number of
Securities
% of Issued
Capital
1
UBS Nominees Pty Ltd
26,562,878
13.25
2
Citicorp Nominees Pty Limited
19,198,328
9.58
3
Endeavour Group Limited
17,845,446
8.90
4
Brispot Nominees Pty Ltd
15,069,064
7.52
5
HSBC Custody Nominees (Australia) Limited
12,566,866
6.27
6
HSBC Custody Nominees (Australia) Limited - A/C 2
10,451,749
5.22
7
HSBC Custody Nominees (Australia) Limited-GSCO ECA
5,593,606
2.79
8
J P Morgan Nominees Australia Pty Limited
5,353,695
2.67
9
HSBC Custody Nominees (Australia) Limited-GSI ESA
4,790,719
2.39
10
Manderrah Pty Ltd
2,045,745
1.02
11
National Nominees Limited
1,967,121
0.98
12
CS Third Nominees Pty Limited
1,808,575
0.90
13
Buttonwood Nominees Pty Ltd
1,547,503
0.77
14
Mr Alastair Charles Griffin
1,397,876
0.70
15
Mr Edward Furnival Griffin
1,397,875
0.70
16
Netwealth Investments Limited
1,188,676
0.59
17
Manderrah Pty Ltd
1,117,789
0.56
18
Mr David Stewart Field
812,000
0.41
19
Bt Portfolio Services Limited
742,494
0.37
20
Bond Street Custodians Limited
700,000
0.35
Totals: Top 20 Holders of Stapled Securities
132,158,005
65.94
Totals: Remaining Holders Balance
68,249,518
34.06
C. SUBSTANTIAL HOLDERS
Substantial holders of ALE (as per notices received as at 6 July 2021) are set out below:
Stapled SName
Number of
Securities
% of Issued
Capital
Caledonia (Private) Investments Pty Ltd
81,551,851
40.69
Endeavour Group Limited
17,845,446
8.90
UBS Group AG
16,146,007
8.06
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 395.
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ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2021
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
(a) Stapled securities
(b) NIVUS
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.
2021
2020
04 Aug
Full Year Results, Annual Review / Report
16 Dec
Credit Rating
and Property Compendium released
11 Dec
Half Year distribution of 10.75 cents declared
09 Jul
Property valuations increased by 7.6%
11 Dec
Capital Management Update
05 Jul
Substantial Holder notice from Endeavour Group
11 Dec
Capital Management Update
01 Jul
Ceasing to be a substantial holder from WOW
17 Nov
Annual General Meeting
29 June Amended Company Constitution
16 Nov
Property Valuation - 31 October 2020
29 June Amended Trust Constitution
19 Oct
Rent Determinations
28 Jun
UBS Group AG substantial holding to 8.06%
01 Oct
CEO Transition
22 Jun
UBS Group AG substantial holding to 10.7%
16 Sep
Caledonia increases substantial holding to 41.23%
18 June Half Year distribution of 10.75 cents declared
14 Aug
Taxation Components of Distribution
18 June Full Year distribution of 21.50 cents announced
05 Aug
Full Year Results, Annual Review / Report
15 Jun
UBS Group AG substantial holding to 8.71%
and Property Compendium released
08 Jun
UBS Group AG substantial holding to 10.67%
05 Aug
Property valuations increased by 0.94%
07 Jun
Change of Securityholder Registry
23 Jun
Half Year distribution of 10.45 cents declared
03 Jun
Sale of Non-Core Properties
23 Jun
Full Year distribution of 20.90 cents announced
22 Apr
Distribution Policy DRP Update
14 May CEO Succession
18 Mar
Capital Management Update
27 Apr
Debt Capital Management Update
25 Feb
Taxation components of Distribution
27 Apr
New Debt Facility
10 Feb
Half Year results released
03 Apr
Caledonia increases substantial holding to 39.63%
05 Mar
1st half distribution payment
24 Feb
17 Feb
Taxation Components of Distribution
26 Oct
Annual General Meeting
05 Feb
Half Year results released
06 Sep
2nd half distribution payment
04 Feb
Property valuations as at 31 December 2019
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.
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 200,407,523 units have been issued by the Trust to stapled securityholders. The NIVUS therefore represent 4.33% of
the voting rights of the Trust.
The following events will occur after the date of this Annual
Report:
UBS Group AG increases substantial holding to 7.02%
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ALE Property Group
INVESTOR INFORMATION
For the Year ended 30 June 2021
Stock Exchange Listing
Securityholder Enquiries
Registered Office
Distribution Reinvestment Plan
Level 28:02 Australia Square Tower
264 George Street, Sydney NSW 2000
Telephone (02) 8231 8588
Distributions
Company Secretary
Michael Clarke
Level 28:02 Australia Square Tower
264 George Street, Sydney NSW 2000
Electronic Payment of Distributions
Telephone (02) 8231 8588
Auditors
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
Annual Tax Statement
The Trust Company Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Trustee (of ALE Direct Property Trust)
Publications
The Trust Company (Australia) Limited
Level 13, 123 Pitt Street
Sydney NSW 2000
Registry
Link Market Services
Locked Bag A14, Sydney South, NSW 1235
Level 12, 680 George Street, Sydney NSW 2000
Telephone 1300 554 474
Email: registrars@linkmarketservices.com.au
www.linkmarketservices.com.au
Website
Securityholders must 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.
The ALE Property Group (ALE) is listed on the Australian
Securities Exchange (ASX). Its stapled securities are listed under
ASX code: LEP.
Please contact the registry if you have any questions about your
holding or payments.
ALE has established a distribution reinvestment plan. Details of
the plan are available on the ALE website.
From 1 July 2021 Stapled security distributions are paid
quarterly, normally in November, February, May and August.
Custodian (of Australian Leisure and Entertainment
Property Trust)
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.
The ALE website, www.alegroup.com.au, is a useful source of
information for stapled securityholders. ASX announcements are
also included. The ALE property website,
www.aleproperties.com.au, provides further detailed information
on ALE's property portfolio.
Securityholders wishing to take advantage of payment by direct
credit should contact the registry for more details and to obtain
an application form.
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.
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ALE Property Group