Housing matters.
Community matters.
Annual Report 2015
AVJennings Limited ABN 44 004 327 771
Contents
Chairman’s Report
FY15 Results in Detail
FY15 Results in Context
Managing Director’s Report
Community
Property Portfolio
Project Pipeline
Directors’ Report
Consolidated Statement
of Comprehensive Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Auditor’s
Report to the Shareholders
of AVJennings Limited
Shareholder Information
Company Particulars
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2
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30
31
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77
78
81
Your
community
developer
Chairman’s Report
Dear Fellow Shareholders,
On behalf of the Board of Directors, I am pleased to present our
2015 Annual Report.
This past year has shown strong
results for our Company. Profit
before tax increased 78.3% from the
previous year, land bank of lots under
control increased 10.6% to 10,198
and gearing continued to remain low
improving to 13.6% which underlines
the strength of the Company’s
balance sheet. While the results of
this past year have been a good
achievement, we remain confident
the Company is well positioned for
further growth ahead.
This year’s final result of $48.2 million
in profit before tax was a meaningful
outcome. The results were driven by
fundamental improvements in the
business as gross margins improved
to 26.8% from 21.9%. In addition, it
was achieved despite adverse weather
conditions in Sydney and Melbourne
late in the year that contributed to the
delay of some settlements until after
the financial year end. The strong
results for the year enabled us to
declare total dividends for the year
of 4 cents per share.
While results are important, sustaining
good results in an industry with long
lead times requires strategy. The
Board highlighted to shareholders
several years ago that it had
undertaken a strategic review of its
business and operations and based
on some challenging decisions over
a number of years, the Company’s
strategy has proven to be a key driver
of this year’s result.
The strategic decision to expand into
New Zealand several years ago has
also established a positive foothold
in a new market. Performance
has contributed to the improved
results this year and we expect
recent acquisitions in this market to
contribute positively in years ahead.
We have taken further initiatives
during the year to strengthen our
position and business going forward.
Significant steps include recent
acquisitions to further establish our
land bank in key locations, increased
financial capacity with a new $250
million Club facility and the continuing
emphasis and development of our
three key assets – people, product
and brand.
Moving forward, we hope these
strategies and initiatives will see
us well placed for continued good
performance.
The forthcoming financial year is
already shaping up well. In our key
markets we continue to see genuine
demand based upon need for housing
as a result of increased population
growth, a positive rate of household
formation and years of under-building.
We see little speculative activity in our
sector of the market.
The ongoing repositioning of the
Australian economy away from the
resources sector to a broader activity
base is helping to maintain consumer
confidence in housing, especially in
Brisbane, Sydney and Melbourne.
This mood is further accommodated
both by an interest rate environment
that is likely to remain low for the
foreseeable future and our own strong
commitment to delivering good quality
and value in our land and housing
products.
The achievements during the
past year position us well for the
future and would not have been
possible without the persistence and
creativity of our team who take great
pride in knowing that we are building
on a reputation for quality, value,
integrity and reliability carefully
established over 83 years.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 1
Building
on our past.
Shaping
your future.
My fellow Directors and I acknowledge
the work of our highly motivated and
driven staff under the leadership
of our CEO Peter Summers and
thank them for their efforts and
achievements.
As Chairman, I would also like to
thank my fellow Directors for their
active engagement and invaluable
contributions during the year. Their
skill and business experience enable
the Board to appropriately balance
oversight and guidance in the interests
of all stakeholders.
Lastly, I would like to thank all the
shareholders for their continued
support and in particular those that
have been with the Company long term
through the challenging periods in the
past few years. The road ahead looks
more promising for AVJennings and we
appreciate your unwavering support.
Simon Cheong
Chairman
2 | AVJENNINGS LIMITED · ABN 44 004 327 771
FY15 Results in Detail
• Profit before tax $48.2 million (up 78.3% from $27.0 million) and $34.4 million after tax
• Revenue $317.9 million (up 26.9% from $250.6 million)
• Contract signings up 22.8% to 1,737 in line with guidance and settlements up 22.6% to 1,538 contracts
• EPS up 82.8% to 9.0 cents per share and return on balance date market capitalisation increased to 13.9% from 8.6%
• Final fully franked dividend of 3 cents per share declared (a total of 4 cents for the year)
• Dividend policy announced targeting payout of 40-50% of future period NPAT
– Total dividends declared since 2000 to FY15 inclusive is $185.8 million
• Lots under control up 10.6% to 10,198 lots
• $250 million Club debt facility approved and Multicurrency Medium Term Note Programme established
• Gearing (net debt/ total assets) remains low and further improved to 13.6% (total net debt $88.9 million) from 17.1%
• Adverse weather in New South Wales and Queensland impacted results in FY15
Revenues:
$118.5m
$199.4m
$317.9m
$104.3m
$146.3m
$250.6m
1H15
2H15
TOTAL FY15
1H14
2H14
TOTAL FY14
Profit before Tax:
• statutory
$16.8m
$31.4m
$48.2m
$12.5m
$14.5m
$27.0m
• excluding increase/decrease
$13.1m
$31.4m
$44.5m
$7.3m
$14.5m
$21.8m
in impairment provision
Gross Margins:
26.9%
26.8%
26.8%
22.5%
21.5%
21.9%
Inventory Provision
Write Back:
• Before tax
$3.7m
NIL
$3.7m
$5.2m
NIL
$5.2m
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 3
FY15 Results in Context
1000
Contract Signing Units
Settlement Units
s
t
i
n
U
f
o
r
e
b
m
u
N
800
600
400
200
0
1600
1400
1200
1H11
2H11
1H12
2H12
1H13
2H13
1H14
2H14
1H15
2H15
Work In Progress Levels
Completion Units
1000
s
t
i
n
U
f
o
r
e
b
m
u
N
800
600
400
200
0
1H11
2H11
1H12
2H12
1H13
2H13
1H14
2H14
1H15
2H15
• Strong result reflects accelerated
production, higher sales and gross
margins and more settlements in
most jurisdictions
• Standout contributors were
New South Wales, Queensland
and New Zealand
• Active project and product mix
changes enabled us to capitalise
on the strength of our markets
• WIP dipped in 2H15 due to high
level of completions, increased
bias to land sales (i.e. quicker
turnover), strong builder sales and
development staging
– Expected to ramp up in FY16
– Continuing emphasis on land
only and builder sales expected
to sustain revenue
– 30 June 2015 WIP numbers
lower by approximately 200 lots
at Hobsonville compared to
31 December 2014
> Adding back the Hobsonville lots
increases WIP to approximately
1,700 lots
> Hobsonville is a B2B project
with different timing profile
4 | AVJENNINGS LIMITED · ABN 44 004 327 771
Managing Director’s
Report
Housing
matters.
Community
matters.
It was a good year for our Company
but as the Chairman said in his
welcome, we are confident this year’s
result of $34.4 million profit after tax
is the start of a period of sustained
growth and not the culmination of
much publicised favourable market
conditions based on some of the
more sensationalised aspects often
commented on in the media.
The Company is now operating more
efficiently, with new opportunities
available to us at a point in the
cycle where consumer confidence to
transact in housing remains on an
upswing, driven by the strong appeal
of our quality affordable homes. Our
purchasers are seeking to fulfil a
basic need for housing and they do so
against a backdrop of undersupply,
generally stable unemployment rates
and a persistent low interest rate
environment.
Overview
2015 Results
Most companies have some type of
plan. They understand what they
do and how they do it. But great
companies go further. They have a
strong understanding of why they do
what they do.
We want everyone associated
with AVJennings to be proud of
being involved with such an iconic
Company. We believe that this also
leads to greater and more sustainable
outcomes and results.
We strongly believe housing matters
and communities matter. It has been
important to our Company since
1932 and it remains just as important
today. We believe that the home
and community people live in has a
significant influence on their lives. It
is this vision that drives our strategy
of being a leading developer of high
quality, value for money, master-
planned communities in Australia and
New Zealand.
As set out in the Review of Operations
in the Directors’ Report, the Company
recorded a profit before tax of $48.2
million for the full year ended 30 June
2015, up 78.3% on the previous year
(30 June 2014: $27.0 million profit
before tax). Full year revenue of
$317.9 million was up 26.9% on FY14
($250.6 million).
Directors declared a fully franked
final dividend of 3 cents per share
paid in September 2015. This takes
total dividends declared for the year
to 4 cents per share.
Our Brand
With its 83 years of history, the
AVJennings name is a strong asset
for the Company. We understand
how significant a transaction it is for
our customers to buy land or a house
from us. We also understand how
much our customers value the comfort
that comes from what our brand
stands for and that we are committed
to delivering against that - quality,
reliability, value.
But whilst we understand it is a
brand already well known to many
older generations of Australians,
the challenge for us, the present
custodians of the Company, is to
ensure we remain relevant to new
generations. This year we invested in
new-look advertising, some of which
pleasingly features staff members;
fresh e-marketing messaging; the
introduction of new projects and
product designs; and engagement
initiatives that will be continued in
2016 and beyond.
Our People
I would like reiterate the Chairman’s
gratitude to the AVJennings team
for its dedication and energy in all
areas of the business. It has not only
generated a pleasing result this year
but has the Company well positioned
for the future.
We will continue to focus on ensuring
we attract, develop and retain the
right people for our business. And by
the right people, that means people
who are aligned to our values and
culture and who share the same
understanding of how important
housing and communities are to
everyone.
Our Product
At AVJennings we are proud to
produce housing that is both of a high
quality as well as affordable. We have
invested considerably in this area in
recent years and will continue to do
so.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 5
Market Conditions and Outlook
While it is true that the macro-
economic environment has been
conducive to the residential property
sector, AVJennings performed strongly
during 2015 largely due to careful
execution of a considered strategy
that laid a solid foundation and
facilitated the gradual acceleration
of activity and profitability within the
business.
Residential property has been the
subject of considerable focus in
recent times with commentary around
affordability and housing prices
generally, as well as the impact of
foreign buyers. As in most situations,
there is an element of fact in this
discussion. But equally, there is much
exaggeration and incorrect analysis.
Affordability has been a factor for
many years - we have constantly
referred to it in previous annual
reports. Meeting the challenges of
affordability is a central component
of the Company’s strategy through
our focus on both land and housing
options. It is a challenge we have met
as demonstrated by thousands of
customers we have satisfied. And we
remain confident we will continue to
meet this challenge into the future.
As for current demand, whilst
certain market segments have been
driven by specific buyer profiles,
our predominant customers remain
everyday Australians and New
Zealanders who require one of the
most basic needs of all – affordable,
quality housing. In many key markets
there has been a considerable under
supply for an extended period. This is
what is driving, and will continue to
drive, the fundamentals of the markets
in which AVJennings operates.
While management will continue
to work the Company’s existing
assets as efficiently as possible,
maximising revenue and controlling
costs, we know that we must not only
replace stock but secure additional
opportunities in order to maximise
efficiencies within the business and
to meet the demand that exists. The
timing could hardly be better.
Some significant steps in this direction
were taken in the last financial year.
Our acquisitions during the year
included sites at Williamstown and
Wollert in Melbourne and Warnervale
on the New South Wales Central
Coast. We have also extended our
involvement in our joint venture at
Hobsonville in Auckland. These and
other acquisitions made during the
year saw us increase our net inventory
levels for the first time since 2010.
We have a strong financial base
from which to continue this growth.
Realising our aspiration to build
greater scale, with its attendant
productivity gains, is more achievable
than ever following the expansion
of our core Club banking facility
and establishment of the Singapore
Medium Term Note Programme
(MTN Programme) during the year.
The expansion of our Club facility was
both in the number of participants
and the size of the facility. Terms for
the new facility are superior to the
previous terms.
The MTN programme, with the
capacity to raise unsecured debt in
a deep, highly liquid capital market,
allows us to react quickly to take
advantage of suitable opportunities
as they appear.
AVJennings is entering an era of
opportunity and we are well placed
to seize those opportunities. We
enter the new financial year with
not only a good level of contracts in
hand and virtually all developments
in active production, but also with
the capability to pursue appropriate
restocking and other growth
opportunities as they arise. This,
together with ongoing investment in
the brand, the introduction of new
product designs and the continuing
development of our people will help
the Company continue to make the
most of the supportive, fundamentally
sound condition of its chosen markets.
It has been a pleasing year on many
fronts - results, business expansion
and business development. I would like
to thank AVJennings’ Chairman, Simon
Cheong and my fellow Directors for
their counsel and support. We have
a clear strategy and a strong belief in
market fundamentals. We look forward
to the continued growth of your
Company.
Peter Summers
Managing Director
6 | AVJENNINGS LIMITED · ABN 44 004 327 771
Community
AVJennings believes housing matters and community matters.
The concept of community is vital to us in many ways.
Creating
Communities
One of our major aims is to
develop great communities by
the way we plan, design and
build. Whether it be the houses
in which people live or the parks,
gardens, walkways and other
outdoor aspects of our projects,
we aspire to create communities
which allow people to live life
as they want to, safely and
enjoyably.
Participating in
Communities
We recognise communities are not just physical things.
They live in the people who make up those physical
surrounds and we continue to take an interest in the
evolution of those communities. One way we contribute
is by helping bring residents together.
We also recognise that our communities exist within
broader communities outside of the boundaries of
our projects. At AVJennings we pride ourselves of
what we bring to the wider community in a variety
of ways. Whether it be working with local schools,
business communities or sporting clubs; or pushing for
government reform to support greater availability of
affordable housing, we continue to be involved in ways
that enable the creation of great, affordable places to
live and to positively add to the wider community.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 7
Proudly partnering with
Supporting
Communities
AVJennings is proud to be the foundation partner
of the Steve Waugh Foundation which supports
children and young adults who live with the rarest
of disease and our staff participate in various
fundraising activities such as the City2Surf,
City2Sea, Waugh in The West and Ride for a
Cause to support the Foundation. The Company
and its staff also support other charities and
communities, such as with helping to provide
access to a mobile library or by sponsoring junior
sports programs.
The
AVJennings
Community
One of the most important aspects of
community to us is our staff and our
business partners. As they too are members
of the wider community we know our staff
take great pride in what our Company does
in the community.
Throughout the
year there have
been many
opportunities
for our staff
to participate
in ways that
positively make
a difference and
they have proudly
done so.
And as a Company which
values business relationships,
we have been proud to work
on many initiatives with our
business partners. We thank
them for their support and
acknowledge the difference
their support has made in the
community.
A great example has been
the Renee Series of houses
where AVJennings, it’s staff
and business partners, have
worked together to raise funds
to benefit the Steve Waugh
Foundation.
Renee Eliades, after who the
houses are named, is both a
recipient and ambassador for
the Steve Waugh Foundation
and the vibrant 23 year old
proudly lends her name to
the Renee series.
8 | AVJENNINGS LIMITED · ABN 44 004 327 771
Property Portfolio
Development
distribution
by state
QLD
No. of lots:
1,273
NSW
No. of lots:
2,494
WA
No. of lots:
426
SA
No. of lots:
2,470
VIC
No. of lots:
3,301
NZ
No. of lots:
234
Number of Lots
by Location
Net Funds Employed
by Location
13%
32%
25%
24%
4%
2%
QLD
VIC
NSW
SA
WA
NZ
18%
21%
30%
22%
2%
7%
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 9
Project Pipeline
As at 30 June 2015
Project Name
Halpine Lake, Mango Hill
Creekwood, Caloundra
Glenrowan, Mackay
Essington Rise, Leichardt
Nottingham Square, Calamvale
Villaggio, Richlands
Bethania
Elysium, Noosa Heads
Big Sky, Coomera
Argyle, Elderslie
Magnolia, Hamlyn Terrace
Spring Farm
Ravensworth Heights, Goulburn
Seacrest, Sandy Beach
Arcadian Hills, Cobbitty
Cobbitty
Lakes Edge, The Ponds
Boundary Road, Schofields
Warnervale
Arena, Officer
Lyndarum North, Wollert
Wollert JV
Lyndarum, Epping North
Arlington Rise, Portarlington
Hazelcroft, Doreen
Waterline, Williamstown
D
N
A
L
S
N
E
E
U
Q
S
E
L
A
W
H
T
U
O
S
W
E
N
I
A
R
O
T
C
V
I
A Pathways, Murray Bridge
H
T
U
O
S
I
L
A
R
T
S
U
A
River Breeze, Goolwa North
St Clair, Cheltenham
Eyre at Penfield
Z Hobsonville Point, Hobsonville
N
N
R
E
T
S
E
W
A
I
L
A
R
T
S
U
A
Indigo China Green
Viridian China Green
The Heights Kardinya
Viveash
Parkview, Ferndale
Remaining No. of Lots
Pre
FY 2016
FY 2017
FY 2018
FY 2019
FY 2020+
151
388
177
77
31
67
135
12
235
445
428
219
92
123
324
203
37
21
595
10
241
1,820
47
197
295
691
54
80
642
1,684
234
124
74
111
71
46
TOTAL NO. OF REMAINING LOTS
10,181
• Total No. of Remaining Lots does not include 17 remnant lots
• Note that it is not possible for the reader of this Report to calculate the remaining number of lots from year to year because that number
is a product of not only lots purchased and settled but also changes in stage reconfiguration
10 | AVJENNINGS LIMITED · ABN 44 004 327 771
Queensland
MACKAY
NOOSA HEADS
CALOUNDRA
MANGO HILL
BRISBANE
LEICHHARDT
RICHLANDS
CALAMVALE
BETHANIA
COOMERA
The Brisbane, Caloundra and
Coomera markets are rising, having
a flow on effect to the Company’s
projects.
New South Wales
WARNERVALE
HAMLYN TERRACE
SANDY BEACH
CENTRAL COAST
THE PONDS
SYDNEY
COBBITTY
ELDERSLIE
SPRING FARM
GOULBURN
WOLLONGONG
Sydney remains the strongest market
of the areas in which the Company
operates.
Victoria
WOLLERT
DOREEN
WILLIAMSTOWN
MELBOURNE
PORTARLINGTON
OFFICER
The Company has greater focus
on large scale communities in Victoria
relative to our NSW and QLD markets.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 11
South Australia
PENFIELD
ST CLAIR
ADELAIDE
GOOLWA NORTH
MURRAY BRIDGE
The Company’s Eyre at Penfield and
St Clair projects are both long term
and have achieved key milestones.
Western Australia
VIVEASH
SUBIACO
PERTH
FERNDALE
KARDINYA
The Company has invested in 4 Perth
projects providing it the opportunity to
maintain the brand, learn the market,
build relationships and identify counter-
cyclical acquisition opportunities.
New Zealand
HOBSONVILLE POINT
AUCKLAND
The Company’s Hobsonville Point
flagship project will see it looking to
further expand into Auckland.
12 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
Your Directors present their Annual Financial Report (“Report”) on the Group (referred to hereafter as “AVJennings” or “Group”)
consisting of AVJennings Limited (“Company” or “Parent”) and the entities it controlled at the end of, or during, the year ended
30 June 2015.
DIRECTORS
The names of the Company’s Directors in office during the financial year and until the date of this Report are as follows.
Directors were in office for this entire period unless otherwise stated.
S Cheong
RJ Rowley
Chairman (Non-Executive)
Deputy Chairman (Non-Executive)
PK Summers
Managing Director and Chief Executive Officer
E Sam
B Chin
Director (Non-Executive)
Director (Non-Executive)
BG Hayman
Director (Non-Executive)
TP Lai
D Tsang
Director (Non-Executive)
Director (Non-Executive)
COMPANY SECRETARY
The name of the Company Secretary in office during the financial year and until the date of this Report is as follows:
CD Thompson
PRINCIPAL ACTIVITY
The principal activity of the Group during the year was Residential Development.
OPERATING RESULTS
The consolidated profit after tax for the financial year was $34.4 million (2014: $18.8 million).
DIVIDENDS
Dividends paid to members during the financial year were as follows:
2014 final dividend of 2.0 cents per share,
paid 18 September 2014. Fully franked @ 30% tax
2015 interim dividend of 1.0 cent per share,
paid 8 April 2015. Fully franked @ 30% tax
Total cash dividends declared and paid
2015
$’000
7,688
3,844
11,532
2014
$’000
–
–
–
In addition to the above, subsequent to the end of the financial year, a fully franked final dividend of 3.0 cents per share was
paid on 23 September 2015 (2014: 2.0 cents). The Dividend Reinvestment Plan remains suspended.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 13
Directors’ Report
For the year ended 30 June 2015
During the year the Company also contracted a significant
joint venture with AustralianSuper for the development of
approximately 2,000 lots in Wollert, Victoria and with Investa
for Argyle at Elderslie, New South Wales.
Several corporate combinations were actively pursued during
the year, however terms could not be agreed at a level where
the Company was confident of value and other transactions
will be explored as opportunities arise.
Gearing remains low (net debt/ total assets is down to 13.6%)
and the Company has further diversified and increased
its sources of funding by successfully expanding and
restructuring its core banking facilities, lifting its core banking
group from three to four banks and increasing the total ‘Club’
facility limit to $250 million (previously $175 million). In
addition, the Company successfully established a Singapore
dollar medium term note programme (MTN Programme)
with a capacity of SGD500 million. Although no notes have
yet been issued under the programme, the ability to tap an
international capital market to raise corporate debt gives the
Company considerable additional scope to pursue suitable
accretive corporate and large direct property acquisitions as
opportunities arise.
Outlook
The Directors and management of AVJennings believe that the
level of activity currently experienced in many of our markets
is the product of strong fundamentals rather than speculative
exuberance. While specific micro-markets (particularly some
inner-suburbs of Sydney and Melbourne) are experiencing
strong price growth, this is generally not the case in most of
the Company’s markets, where price growth is more muted.
Affordable housing and sustainable communities matter
to AVJennings and the underlying strength of our markets
is demonstrated by escalation in the number of contract
signings and settlements, which are a function of our
commitment to delivering good quality homes at affordable
prices.
Sydney is still the most active market in the country, driven by
pent-up demand and inadequate land supply. The significant
‘Arcadian Hills’, Cobbitty and ‘Argyle’, Elderslie projects are
both strong contributors to profit, generating good margins
with new stages at each underway. Good selling prices are
being achieved at ‘Magnolia’, Hamlyn Terrace on the Central
Coast and current and projected market activity in the area
augurs well for future stages of this project as well as for the
new complementary project located in nearby Warnervale.
Market activity and selling prices continue to firm-up in
Brisbane, Noosa, Caloundra and Coomera. Work at the
‘Elysium’ Noosa project is finished and the stock almost sold
out. ‘Creekwood’ Caloundra is performing strongly, with
demand buoyed by new infrastructure investment (including
a major new general hospital) in the Sunshine Coast
catchment. Sales activity at ‘Big Sky’ Coomera has improved
considerably.
OPERATING AND FINANCIAL REVIEW
Financial Results
The Company recorded profit before tax of $48.2 million for
the year ended 30 June 2015, up 78.3% on the previous year
(30 June 2014: $27.0 million profit before tax) and profit after
tax of $34.4 million (30 June 2014: $18.8 million).
Strong revenues in the second half of fiscal 2015, substantial
post balance date cash inflows from the collection of
receivables and confidence in the outlook for fiscal 2016 have
enabled the Directors to declare that a fully franked final
dividend of 3 cents per share be paid in September 2015,
taking total dividends declared for 2015 to 4 cents per share.
The Directors have also determined that it is appropriate for
the Company to target an annual dividend payout range of
40-50% of profit after tax for future years.
Contract signings of 1,737 lots were well up on last year
(1,415 lots) as too were settlements, which rose 22.6% to
1,538 lots, driving full year revenue up 26.9% to $317.9 million
(30 June 2014: $250.6 million). Settlements included the
recognition of revenue from 418 lots (worth $74.6 million) sold
across most jurisdictions during the year on extended terms
to builders (which Management regards as a positive signpost
to a sustainable market).
Business Overview
The result reflects accelerated production, higher sales and
gross margins and more settlements in most jurisdictions.
Standout contributors were New South Wales, Queensland
and New Zealand all of which benefitted from the net positive
effect of active project and product mix changes that enabled
the Company to capitalise on the underlying strength of each
market. Significant contributions from individual projects
were made by ‘Arcadian Hills’, ‘Argyle’, ‘Cavanstone’ and ‘The
Ponds’ in Sydney and ‘Magnolia’ on the Central Coast of New
South Wales; ‘Big Sky’, ‘Creekwood’, ‘Nottingham Square’ and
‘Elysium’ in Queensland and ‘Catalina’ Hobsonville Point in
Auckland, New Zealand.
The Company actively replenished inventory during the year,
which saw controlled land rise 10.6% on the prior year to
10,198 lots at balance date despite the significant increase in
sales. Acquisitions included:
•
the remaining 50% of the St Clair South Australia joint
venture;
• a land parcel at Cobbitty, New South Wales
•
•
(approximately 203 lots);
three equity stakes in residential projects in Perth,
Western Australia (estimated 228 lots);
‘Waterline’, Waterline Place, Williamstown ,Victoria
(up to 691 lots);
• 50 hectares of land at Warnervale Rd, Warnervale
Central Coast, New South Wales (estimated 595 lots); and
• a land parcel at Boundary Rd, Schofields New South
Wales (approximately 21 lots).
14 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
OPERATING AND FINANCIAL REVIEW (continued)
INFORMATION ON THE DIRECTORS
Simon Cheong B.Civ.Eng. MBA
Director since 20 September 2001. Mr Cheong has over 30
years experience in real estate, banking and international
finance. He currently serves as Chairman and Chief Executive
Officer of SC Global Developments Pte Ltd. Mr Cheong has
formerly held positions with Citibank (Singapore) as their
Head of Real Estate Finance for Singapore as well as with
Credit Suisse First Boston as a Director and Regional Real
Estate Head for Asia (excluding Japan). In 1996, Mr Cheong
established his own firm, SC Global Pte Ltd, a real estate and
hotel advisory and direct investment group specialising in
structuring large and complex transactions worldwide. He was
elected President of the prestigious Real Estate Developers’
Association of Singapore (REDAS) for 2 terms from 2007 until
2010. He served on the Board of the Institute of Real Estate
Studies, National University of Singapore from 2008 to 2011
and was a board member of the Republic Polytechnic Board
of Governors from 2008 to 2011. He was also a Council
Member of the Singapore Business Federation, a position he
held from 2007 to 2010. Resident of Singapore.
Responsibilities:
Chairman of the Board, Non-Executive Director, Chairman of
Investments Committee, Member of Remuneration Committee,
Member of Nominations Committee.
Directorships held in other listed entities:
None.
Jerome Rowley SF Fin, FAICD
Director since 22 March 2007. Mr Rowley has been a career
banker since the early 1970s with Citigroup, Morgan Grenfell
and ABN Amro. From 1992 until 2002, he served as Managing
Director and CEO of ABN Amro Australia and Head of
Relationship Management and Structured Finance for ABN
Amro, Asia Pacific. He has been active in both wholesale and
investment banking domestically and internationally. During
his career, Mr Rowley devoted considerable effort towards
the recognition, understanding and management of risk as a
means of profit optimization. Of particular significance was
his involvement in advising and funding including debt, equity
and hybrids, of infrastructure projects in both Australia and
Asia Pacific. Resident of Sydney.
Responsibilities:
Deputy Chairman of the Board, Non-Executive Director,
Chairman of Risk Management Committee, Member of Audit
Committee, Member of Investments Committee, Member of
Nominations Committee.
Directorships held in other listed entities:
None.
The Melbourne residential land market is strengthening but
demand and supply remain balanced. Future results will be
enhanced by development of the Company’s new flagship
apartment project ‘Waterline’, located in the Melbourne
bayside suburb of Williamstown and the Wollert joint
venture development being undertaken with AustralianSuper.
Waterline is an exciting project that will showcase the
ongoing evolution of AVJennings’ architectural design
language and expose the Company to a different type of
buyer, as well as rejuvenate a former industrial site in one of
Melbourne’s most historic and picturesque areas. The Wollert
joint venture affords the Company an opportunity to partner
with a high profile sponsor in AustralianSuper and continue to
deliver affordable land and housing in Melbourne’s north.
Auckland is a strong market and the high quality, master-
planned Hobsonville Point project continues to experience
significant demand with excellent sales and margins being
generated, leading the Company to explore additional
opportunities in that market.
The South Australian residential market remains stable but
subdued overall, with earnings buoyed by the now wholly
owned ‘St Clair’ project. The Company’s relatively small
investment in four residential projects in Perth, Western
Australia is performing in line with expectations.
Key economic drivers are positive, with strong consumer
confidence to transact in housing bolstered by low interest
rates and inflation, positive population growth and continuing
housing shortages in Sydney and Auckland. The level of
contracts carried over into the first half of fiscal 2016 will
give a strong start, notwithstanding the usual bias of results
towards the latter part of the year due to seasonality and
production staging. The Directors believe that it is appropriate
to provide contract signings guidance for the year ending
30 June 2016 in the range of 1,800 to 2,100 lots.
SIGNIFICANT EVENTS AFTER THE
BALANCE SHEET DATE
No matter or circumstance has arisen since 30 June 2015
that has significantly affected, or may significantly affect:
a) the Group’s operations in future financial years; or
b) the results of those operations in future financial years; or
c) the Group’s state of affairs in future financial years.
FUTURE DEVELOPMENTS, PROSPECTS AND
BUSINESS STRATEGIES
The prospects and business strategies of the Group are
discussed on page 13 and 14 of this Report.
ENVIRONMENTAL REGULATION
The Group’s operations are subject to various environmental
regulations under both Commonwealth and State legislation,
particularly in relation to its property development activities.
The Group’s practice is to ensure that where operations are
subject to environmental regulations, those obligations are
identified and appropriately addressed. This includes the
obtaining of approvals, consents and requisite licences from
the relevant authorities and complying with their conditions.
There have been no significant known breaches of
environmental regulations to which the Group is subject.
INFORMATION ON THE DIRECTORS (continued)
Bruce G Hayman
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 15
Directors’ Report
For the year ended 30 June 2015
Director since 18 October 2005. Mr Hayman has over 46
years commercial management experience with 20 of
those at operational Chief Executive or General Manager
level. He is currently Chairman of Chartwell Management
Services where he brings his very wide business experience
to clients by way of the leadership, marketing, business
performance and coaching programs he offers. He has
fulfilled senior management roles both in Australia and
overseas for companies such as Nicholas Pharmaceutical
Group, Dairy Farm Group, Hong Kong Land and Seagram
Corporation. During his time in Singapore, he held the
position of Foundation President of the Singapore Australia
Business Council now known as AUSTCHAM Singapore. He
has also served as CEO of the Australian Rugby Union and
as Chairman of the Board of the Rugby Club Ltd. For his
contribution to tourism in Australia, he has been recognised
by Tourism Training Australia with a Platinum award. He is
Chairman of the Ella Foundation and a Director of Diabetes
NSW. Resident of Sydney.
Responsibilities:
Non-Executive Director, Member of Remuneration Committee,
Member of Nominations Committee, Member of Investments
Committee, Member of Risk Management Committee.
Directorships held in other listed entities:
None.
Teck Poh Lai B.A. Hons. (Economics)
Director since 18 November 2011. Mr Lai has been a career
banker since the late 1960s. He joined Citibank Singapore in
April 1968, rising through the ranks to become Vice President
and Head of the Corporate Banking Division. During his time
with Citibank, Mr Lai undertook international assignments
with Citibank in Jakarta, New York and London. His last
position with Citigroup was as Managing Director of Citicorp
Investment Banking Singapore Ltd (Corporate Finance and
Capital Market Activities) from 1986 to 1987. Mr Lai joined
Oversea-Chinese Banking Corporation (OCBC) in January
1988 as Executive Vice President and Division Head of
Corporate Banking. He moved on to various other senior
management positions in OCBC, such as Head of Information
Technology and Central Operations and Risk Management.
He was head of Group Audit prior to retiring in April 2010.
Resident of Singapore.
Responsibilities:
Non-Executive Director, Member of Audit Committee, Member
of Remuneration Committee, Member of Investments
Committee.
Directorships held in other listed entities:
PT Bank OCBC NISP Tbk (Commissioner) since 4 September
2008.
Oversea-Chinese Banking Corporation since 1 June 2010.
Peter K Summers B.Ec. CA
Director since 27 August 1998. Mr Summers is a Chartered
Accountant and has been employed with the Company
and its related corporations since 1984, when he joined
the Jack Chia Australia Ltd Group from Price Waterhouse
(now PricewaterhouseCoopers). During Mr Summers’ early
period with the Group, he held various management and
directorship roles within the Group. Following the acquisition
of the AVJennings residential business in September 1995,
Mr Summers was appointed Chief Financial Officer, becoming
Finance Director of AVJennings in August 1998. He was
appointed Managing Director and Chief Executive Officer
of the Company on 19 February 2009. Mr Summers has
extensive experience in general and financial management
as well as mergers and acquisitions. Resident of Melbourne.
Responsibilities:
Managing Director and Chief Executive Officer.
Directorships held in other listed entities:
None.
Elizabeth Sam B.A. Hons. (Economics)
Director since 20 September 2001. Mrs Sam has over
40 years experience in international banking and finance.
She has served on numerous high level Singaporean
government financial and banking review committees and
was the Chairman of the International Monetary Exchange
from 1987-1990 and 1993-1996. Mrs Sam is a Director of
SC Global Developments Pte Ltd, the Company’s major
shareholder. Resident of Singapore.
Responsibilities:
Non-Executive Director, Chairman of Nominations
Committee, Chairman of Remuneration Committee.
Directorships held in other listed entities:
Banyan Tree Holdings Limited, since 23 March 2004.
The Straits Trading Company Limited, since 30 April 2008.
Bobby Chin CA (ICAEW) B.Acc.
Director since 18 October 2005. Mr Chin is the Chairman
of NTUC Fairprice Co-operative Limited and NTUC Fairprice
Foundation Limited. He is the Deputy Chairman of NTUC
Enterprise Co-operative Limited and a Director of Singapore
Labour Foundation. He is also a member of the Singapore
Council of Presidential Advisers. Mr Chin served 31 years
with KPMG Singapore and was its Managing Partner from
1992 until September 2005. He is an Associate Member of
the Institute of Chartered Accountants in England and Wales.
Resident of Singapore.
Responsibilities:
Non-Executive Director, Chairman of Audit Committee.
Directorships held in other listed entities:
Yeo Hiap Seng Limited, since 15 May 2006.
Ho Bee Investment Limited, since 29 November 2006.
Sembcorp Industries Limited, since 1 December 2008.
Singapore Telecommunications Limited, since 1 May 2012.
Other Directorships:
Temasek Holdings (Private) Limited, since 10 June 2014
16 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
INFORMATION ON THE DIRECTORS (continued)
David Tsang B.A. (Economics)
Director since 2 June 2014. Mr Tsang has over 20 years
experience in real estate, corporate finance and investments,
completing transactions in Asia, North America and Europe.
He currently holds the position of Managing Director for SC
Global Developments Pte Ltd and has held various senior
director and finance positions within the SC Global Group.
Mr Tsang began his career in Investment Banking with Nesbitt
Burns in New York. He relocated from the United States to
Singapore in 1996 and joined Simon Cheong as a founding
member in establishing SC Global Pte Ltd, a boutique real
estate advisory and principal investment firm. In 1999, Mr
Tsang co-led two successful M&A transactions for the SC
Global Group, acquiring controlling interests in publicly listed
companies MPH Ltd and ANA Hotels (Singapore) Ltd. Mr Tsang
took an executive position as Director of Special Projects
at MPH Ltd from 2000 to 2004, helping to restructure and
unlock value for shareholders. Mr Tsang also helped lead the
transformation of ANA Hotels (Singapore) Ltd into the business
of high end residential development and which continues to
operate today as SC Global Developments. Mr Tsang served
previously as a Director on the Board of AVJennings Ltd from
2004 to 2006. Resident of Singapore.
1.
Individual Key Management Personnel
disclosures
Details of KMP are set out below:
(i)
Directors
S Cheong
RJ Rowley
PK Summers
E Sam
B Chin
Chairman (Non-Executive)
Deputy Chairman (Non-
Executive)
Managing Director and
Chief Executive Officer
Director (Non-Executive)
Director (Non-Executive)
BG Hayman
Director (Non-Executive)
TP Lai
D Tsang
Director (Non-Executive)
Director (Non-Executive)
(ii)
Executives
KMP Executive Committee Members
A Soutar
L Mahaffy
SC Orlandi
CD Thompson
State General Manager
NSW – Ceased employment
30 June 2015
Chief Financial Officer
Chief Strategy Officer
Company Secretary/
General Counsel
General Manager,
Human Resources
Responsibilities:
Non-Executive Director, Member of Audit Committee, Member
of Investments Committee.
L Hunt
Directorships held in other listed entities:
None.
2.
Principles Used to Determine the Nature
and Amount of Remuneration
INFORMATION ON COMPANY SECRETARY
2.1 The Remuneration Committee
Carl D Thompson LLB B. Comm.
The Remuneration Committee comprises four Non-Executive
Directors.
Company Secretary since 12 January 2009. Mr Thompson
previously held the company secretary and general counsel
role at Downer EDI Limited. Prior to that he was a partner at
national law firm Corrs Chambers Westgarth, practising in
corporate and commercial work. Resident of Melbourne.
The Remuneration Committee has delegated decision making
authority for some matters related to the remuneration
arrangements for Executive Directors and Executives, and
is required to make recommendations to the Board on other
matters such as equity-based performance plans.
REMUNERATION REPORT (Audited)
This Remuneration Report outlines the remuneration
arrangements of the Company and the Group in accordance
with the requirements of the Corporations Act 2001 (the Act)
and its regulations. This information has been audited as
required by section 308(3C) of the Act.
The Remuneration Report details the remuneration
arrangements of Key Management Personnel (KMP) who are
defined as those persons having authority and responsibility
for planning, directing and controlling the major activities of
the Company and the Group, directly or indirectly, including
any Director (whether executive or otherwise) of the Parent
Entity and some of the Executive Committee members.
The Remuneration Report is presented under the following
sections:
The Committee approves the remuneration arrangements
of the Chief Executive Officer and other Executives which
includes awards made under both the short term and long
term incentive plans. The Board sets the fees for Non-Executive
Directors.
The objective is to ensure that remuneration policies and
structures are fair and competitive and aligned with the long
term interests of the Group.
The Chief Executive Officer attends Remuneration Committee
Meetings by invitation, where management input is required.
The Chief Executive Officer is not present during any
discussions related to his own remuneration arrangements.
2.2 Use of Remuneration Consultants
Remuneration consultants were last engaged in January
2013 to provide remuneration recommendations as defined in
Section 9B of the Corporations Act 2001.
No remuneration recommendation was made by a
remuneration consultant in respect of the Company during
the year ended 30 June 2015.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 17
Directors’ Report
For the year ended 30 June 2015
The remuneration of Non-Executive Directors for the years
ended 30 June 2015 and 30 June 2014 is detailed on page
23 of this Report.
2.4 Executive Remuneration Arrangements
AVJennings’ executive remuneration strategy is designed to
attract, motivate and retain high performing individuals and
align the interests of Executives and Shareholders.
The executive remuneration framework includes a mix of
fixed and variable remuneration (which covers short term
performance, long term performance and retention).
AVJennings aims to reward Executives with a level and mix
of remuneration commensurate with their position and
responsibilities, and aligned with market practice.
i) Fixed Remuneration
Fixed Remuneration is represented by Total Employment
Cost (TEC) which comprises base remuneration and
superannuation contributions. Base remuneration includes
cash salary and any salary sacrifice items. Superannuation
contributions are capped at the relevant concessional
contribution limit. Fixed remuneration excludes any incentive
entitlements.
Executive contracts of employment do not include any
guaranteed increases. TEC is reviewed annually or on
promotion/appointment to the role. TEC is benchmarked
against market data for comparable roles in comparable
entities in the market. The Company sets TEC based on
relevant market analysis, and having regard to the scope and
nature of the role and the individual executive’s performance,
expertise, skills and experience.
The fixed component of executive remuneration is detailed on
pages 23 and 24.
ii) Variable Remuneration
Variable remuneration is split into three categories: short term,
long term and retention.
A) Short Term Incentive (STI)
Executives participate in a formal STI plan which assesses
performance against pre-determined Key Performance
Indicators (KPIs) over the financial year. The STI is
underpinned by the Company’s performance management
system. Within this system, each executive has KPIs that
are aligned to company, business unit and individual
performance. An STI payment is awarded only when an
agreed level of performance is achieved by individual
executives against KPIs set at the start of each financial year.
STI awards for the executive team in the 2015 financial year
were based on the scorecard measures and weightings as
disclosed below. These targets were set by the Remuneration
Committee and align with the Group’s strategic and business
objectives. They are reviewed annually.
The CEO has a target STI opportunity of 35% of TEC and
other Executives have a STI opportunity of between 17% to
30% of TEC.
REMUNERATION REPORT (Audited) (continued)
2.3 Non-Executive Director Remuneration Arrangements
The Board seeks to set aggregate remuneration at a level
that provides the Group with the ability to attract and retain
Directors of the highest calibre, whilst incurring a cost that is
acceptable to Shareholders.
Fees and payments to Non-Executive Directors reflect the
demands which are made on, and the responsibilities of, the
Directors.
The amount of aggregate remuneration sought to be
approved by Shareholders and the fee structure is reviewed
periodically against fees paid to Non-Executive Directors of
comparable companies. There has been no change to the
basis of Non-Executive Director remuneration since the prior
reporting period.
Three Non-Executive Directors, Mr S Cheong, Mrs E Sam
and Mr D Tsang, do not receive fees, however AVJennings
pays a consulting fee to the Ultimate Parent Entity, SC
Global Developments Pte Ltd. The fees relate to and are paid
pursuant to a consultancy and advisory agreement entered
into in June 2002 (and amended in 2012) for the provision of
services including the following:
• Services of at least two directors on the Board;
• Assistance in sourcing and facilitating financial and
banking requirements particularly from Asian-based
and other institutions;
• Assistance in secretarial and administrative matters in
connection with the Company’s Singapore listing;
• Sourcing and facilitating business, commercial and
investment opportunities; and
• Ancillary advice.
The reasonableness and appropriateness of the agreement
and the level of fees is assessed annually by the Australian-
based independent Non-Executive Directors taking into
account the actual services provided, comparable market
data for similar services, the benefits to the Company and
the likely cost of replacement of the services provided. The
annual fees payable are $600,000. The agreement may be
terminated by either party providing six months’ notice or by
the Company on 30 days’ notice for cause.
Non-Executive Directors do not participate in any incentive
programs. Fees for Non-Executive Directors are fixed and are
not linked to the financial performance of the Company. The
Board believes this is necessary for Non-Executive Directors to
maintain their independence.
Shareholders approved an annual aggregate cap of
$400,000 for non-executive director fees at the 2000 AGM.
This cap has not been altered since. The allocation of fees to
Non-Executive Directors within that cap has been determined
after consideration of a number of factors including the
time commitments of directors, the size and scale of the
Company’s operations, the skill sets of the directors and
fees paid to directors of comparable companies as well as
participation in committee work. Non-Executive Directors are
not entitled to retirement benefits other than (as appropriate
for Australian residents) payment of statutory superannuation
entitlements in addition to directors’ fees.
18 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
2.4 Executive Remuneration Arrangements (continued)
The variable “at risk” component of executive remuneration ensures that a proportion of remuneration varies with performance
(both of the individual and, as appropriate, the business unit and the Company as a whole).
Allocation of Overall Performance Incentive between Components (shown as % of TEC)
Position
CEO
Senior Executives
State General Managers
Total At Risk %
STI %
LTI %
Retention (%)
100
33
50
35
17
30
40
8
10
25
8
10
The proportions of STI, LTI and retention components take into account:
• Market practice;
•
•
The objectives that the Board seeks to achieve and the behaviours which support that outcome;
The desire for senior executives to have a shareholding as a proportion of remuneration in the event that equity rewards
have vested; and
The service period before executives can receive equity rewards.
•
The table below provides an overview of the STI against key financial and non-financial performance measures.
CEO
Senior
Executives
State
General
Managers
70%
30% to 40%
50%
Financial and Business Performance
Underlying Profit
Performance
• Group profit before tax.
• Return on NFE.
• Cost to income ratio.
• Appropriate and efficient capital management.
• Alignment of priorities and allocation of resources.
• Market conditions, in particular performance in the
prevailing market.
• Implementation of Company strategy and improvement
in underlying health of the Company.
• Increase in the Group’s market share of residential
property sector.
• Risk management.
• Customer Advocacy.
Business
Performance
Non-Financial
Customer and
Stakeholder
Performance
People
Safety and
Environment
• Employee retention and engagement.
• Leadership.
• Providing a safe work environment.
• Minimise the impact of our activities on the environment.
30%
60% to 70%
50%
The Remuneration Committee is responsible for determining the STI to be paid based on an assessment of the extent to which
the KPIs are met. To assist in this assessment, the Committee receives detailed reports on performance from management.
This usually occurs within two months of the reporting date. Amounts payable are delivered as a cash bonus in the following
reporting period. The Committee has the discretion to adjust STIs upwards or downwards in light of unexpected or unintended
circumstances. The maximum STI that can be earned is capped to minimise excessive risk taking.
Based on achievements of the Group this year and performance against individual KPIs, the Remuneration Committee
determined that Executives had achieved between 65% and 100% of their target opportunity (average 82%). In making this
assessment, the Committee considered the following factors:
• Performance in the prevailing market.
• Strong profit before tax.
• An increase in contract signings compared to the previous year.
• Performance in implementing Company strategy.
•
Improvement in underlying health of the Company.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 19
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
The operation of the ROE hurdle is set out below.
2.4 Executive Remuneration Arrangements (continued)
B) Long Term Incentive (LTI)
AVJennings’ ROE over the
performance period
Percentage of rights
vesting
LTI awards are made to executives in order to align
remuneration with the creation of shareholder value over the
long term. As such, LTI awards are only made to executives
who are in a position to have an impact on the Group’s
performance against the relevant long term performance
measures.
<12%
12%
12% –18%
>=18%
Nil
50%
Pro-rata between
50% and 100%
100%
LTI and retention (current year)
The operation of the retention hurdle is set out below.
From FY15, share-based remuneration will be provided by
the Issue of Rights. The LTI arrangements were varied by
the Board for the FY15 year to improve the efficiency of the
scheme, reduce the costs to the Company, increase the
value to executives, achieve the retention objective and drive
performance. The variations consisted of:
(a) Changing from a share grant scheme to a rights
based scheme, thus avoiding the upfront cash outflow
associated with the acquisition of shares for each grant.
Shares are only now acquired when the rights vest. A
rights scheme also means executives do not receive
dividends on the rights (as is the case under the former
share scheme).
(b) Re-weighting of short term performance, long term
performance and retention by introducing a retention
component aligned to long term retention (with service
conditions only) which will vest over a three year period.
(c) Changing the Total Shareholder Return (TSR) hurdle of
the LTI component to a Return on Equity (ROE) hurdle
based on return on market capitalisation. From a
shareholders’ perspective, market capitalisation is seen as
an appropriate proxy for equity. The ROE hurdle operates
such that 50% vesting occurs at an average annual return
of 12% with 100% vesting at an average annual return of
18%. The EPS hurdle remains unchanged and is consistent
with the previous years’ LTI awards structure explained
under LTI (previous years) below. The performance
conditions will be tested at the end of the three year
vesting period and the number of rights that may vest will
depend on the level of average annual returns achieved
over that period. The CEO’s participation was determined
as 40% (LTI) and 25% (Retention component) of TEC
respectively.
The operation of the EPS hurdle is set out below.
AVJennings’ EPS growth rate
over the performance period
Percentage of rights
vesting
< 5%
5%
5% –10%
>=10%
Nil
50% of the allocation
for the hurdle
Pro-rata between
50% and 100%
100% of the allocation
for the hurdle
Retention component
– years of service
Percentage of rights
vesting
one year
two years
three years
33.33%
33.33%
33.34%
On 29 May 2015, rights were granted to KMP as detailed in
the table on page 21.
LTI Awards (previous years)
Share-based remuneration:
The AVJ Deferred Employee Share Plan (the LTI Plan)
administers employee share schemes under which shares
may be purchased on-market by the LTI Plan Trustee on behalf
of employees. These shares vest to employees for no cash
consideration subject to certain conditions being satisfied.
Employees may elect not to participate in the scheme. Shares
held by the LTI Plan’s trust and not yet allocated to employees
at the end of the reporting period are shown as treasury
shares in the Financial Statements.
Share-based remuneration benefits are provided to executives
via the Plan. These equity-settled transactions are measured
at fair value at the grant date. The original cost of the shares
is treated as a reduction in share capital and the underlying
shares identified separately as treasury shares. The fair value
of the shares at the grant date is expensed on a straight-line
basis over the vesting period with a corresponding increase
in share-based payment reserve in equity. There is no non-
recourse financing provided to executives in relation to any
share-based payments.
Vesting is subject to both service and performance conditions,
except for the FY2013 delayed grant which is only subject
to the service condition (see page 20). The service condition
requires the executive to be employed by the Company as
at 30 September in the third year after the grant date for
each grant. The performance conditions apply to each grant
– as to 50% as measured by the TSR hurdle and as to 50%
by the EPS hurdle. The two performance hurdles are tested
differently. The EPS hurdle is tested as at 30 June in the test
year (three years after grant). The TSR hurdle is tested at
30 September of the third year after grant.
20 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
2.4 Executive Remuneration Arrangements (continued)
The following is the status of allocations made to KMP under
the LTI Plan:
FY2012 Grant
On 5 September 2011, shares were granted to KMP as
detailed in the table on page 21. Of the shares relating to
the TSR portion, 58% vested during the year. The rest of
the shares were forfeited.
FY2013 Grant
On 12 September 2012, shares were granted to KMP as
detailed in the table on page 21.
FY2013 Delayed Grant
On 25 September 2013, shares were granted to KMP as
detailed in the table on page 21. The grant is subject only to
service conditions as to 50% for one year to 30 September
2014, which have vested during the year, and as to 50% for
two years to 30 September 2015.
FY2014 Grant
On 25 September 2013, shares were granted to KMP as
detailed in the table on page 21.
The service vesting condition is that the employee must still
be employed by AVJennings at 30 September 2014 (for the
FY2012 grant), 30 September 2015 (for the FY2013 grant)
and 30 September 2016 (for the FY2014 grant). In the event
of death or permanent disablement, the shares may vest
to the estate at the Board’s discretion. In the event that the
employee is retrenched, the shares may vest subject to Board
discretion. If the employee resigns (in certain circumstances)
or is terminated, the unvested shares will be forfeited.
The performance vesting conditions are:
•
Total Shareholder Return (TSR) performance measured
against the ASX Small Industrials Index; and
• Earnings Per Share (EPS) growth. AVJennings’ EPS growth
for the performance period must meet or exceed the target
set. The EPS hurdle for total vesting for each grant is as
follows:
FY2012 grant – 10% p.a. growth for the three financial
years to 30 June 2014
FY2013 grant – 10% p.a. growth for the three financial
years to 30 June 2015
FY2014 grant – 10% p.a. growth for the three financial
years to 30 June 2016
Half of the allocation is assessed against each performance
condition. The vesting schedule for the TSR performance
condition is set out in the table below. The holder of the shares
is entitled to receive all dividends paid between grant and
vesting date.
The TSR hurdle was chosen as a performance measure as it
provides a comparison against external performance. The
comparator group against which performance is measured is
the ASX Small Industrials Index. This peer group was chosen as
the pool of listed pure residential developers was considered
too small to provide a reliable and meaningful comparator
group.
AVJennings’ TSR rank against
companies in the Index at
30 September
Percentage
vesting
< median
At the median
Nil
50%
> median but < 75th percentile
Pro-rata between 50th
and 75th percentiles
>=75th percentile
100%
The operation of the EPS hurdle is set out below.
AVJennings’ EPS growth rate
over the performance period
Percentage
vesting
< 5%
5%
5% – 10%
>=10%
Nil
50% of the allocation
for the hurdle
Pro-rata between 50%
and 100%
100% of the allocation
for the hurdle
The fair value of the EPS element of the shares is the market
value at grant date. The Monte Carlo Model is used to fair
value the TSR element. The Model simulates AVJennings’ TSR
and compares it against the ASX Small Industrials Index.
The Model takes into account historic dividends, share price
volatilities and the risk-free yield on an Australian Government
Bond at the grant date matching the remaining effective life
of 3 years.
The EPS hurdle was chosen as it provides a measure over
which executives have more direct control.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 21
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
2.4. Executive Remuneration Arrangements (continued)
The following is the status of shares granted to KMP under the previous years’ LTI Plan:
Shares Granted
Movement of Number of Shares Granted
Name
Grant
Number
Fair Value
Unvested
at 1 July
2014
Forfeited
during the
year
Vested
during the
year
Unvested
at 30 June
2015
KMP Executive
Members
PK Summers
PK Summers
PK Summers
A Soutar
A Soutar
L Mahaffy
SC Orlandi
SC Orlandi
SC Orlandi
CD Thompson
FY2012
FY2013-D
FY2014
FY2013
FY2014
FY2014
FY2012
FY2013-D
FY2014
FY2012
CD Thompson
FY2013-D
CD Thompson
L Hunt
L Hunt
L Hunt
Total
FY2014
FY2012
FY2013-D
FY2014
884,891
285,241
666,349
280,712
147,682
107,957
131,094
42,257
95,558
135,861
43,794
118,078
100,108
32,269
72,973
$311,924
$166,866
$351,499
$74,389
$77,902
$56,947
$46,211
$24,720
$50,407
$47,891
$25,619
$62,286
$35,288
$18,877
$38,493
884,891
285,241
666,349
280,712
147,682
107,957
131,094
42,257
95,558
135,861
43,794
118,078
100,108
32,269
72,973
(628,273)
(256,618)
–
–
–
–
–
–
(93,077)
–
–
(96,462)
–
–
(71,077)
–
–
(142,621)
142,620
–
–
–
–
(38,017)
(21,129)
–
(39,399)
(21,897)
666,349
280,712
147,682
107,957
–
21,128
95,558
–
21,897
–
118,078
(29,031)
(16,135)
–
–
16,134
72,973
3,144,824
$1,389,319
3,144,824
(888,889)
(564,847)
1,691,088
Note: In the table above, “FY2013-D” refers to the FY2013 Delayed Grant.
The following is the status of rights granted to KMP under the restructured share-based remuneration.
FY2015 Grant
Rights Granted
Movement of Number of Rights Granted
Name
PK Summers
A Soutar
L Mahaffy
SC Orlandi
CD Thompson
L Hunt
Total
Grant
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
Number
665,068
92,236
79,812
70,646
87,296
53,946
1,049,004
Unvested
at 1 July 2014
Vested
during the year
Unvested
at 30 June 2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
665,068
92,236
79,812
70,646
87,296
53,946
1,049,004
AVJennings prohibits executives from entering into arrangements to protect the value of unvested LTI awards.
This prohibition includes entering into hedging arrangements in relation to AVJennings shares.
3. Group Performance
The table below shows the Group’s earnings performance as well as the movement in the Group’s Earnings per Share (EPS)
and Total Shareholder Return (TSR) over the current and previous 4 years.
Financial
Report Date
30 June 2011
30 June 2012
30 June 2013
30 June 2014
30 June 2015
Profit / (Loss)
After Tax
$’000
12,893
(29,828)
(15,266)
18,782
34,385
Basic
EPS
Cents
4.72
(10.99)
(5.46)
4.94
9.03
TSR
Cents
4.5
(15.0)
14.0
13.0
10.5
22 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
4. Employment Contracts
i) Chief Executive Officer
Mr Summers’ contract of employment does not have a
termination date and does not stipulate a termination
payment. However, it specifies a six month notice period.
Details regarding the remuneration paid to Mr Summers are
contained in the table on page 23.
During the year no options were either granted to, or
exercised by, Mr Summers. There are currently no unexercised
or outstanding options.
ii) Other Executives
The remaining AVJennings executives are full time permanent
employees with executive employment contracts. The
employment contracts do not have termination dates or
termination payments. However, they specify a notice period
of three months. There are no other terms or conditions that
differ significantly from the standard employment contracts
applicable to other AVJennings employees. During the year,
no options were granted to, or exercised by, the executives.
There are currently no unexercised or outstanding options.
5.
Remuneration of Key Management Personnel
of the Company and the Group
Details of the nature and amount of each element of
remuneration of Directors and executives are set out in the
tables on pages 23 and 24. The Directors are the same as
those identified in the Directors’ Report.
6.
Remuneration Options: Granted and Vested
During the Year
No options were either granted or exercised during the year.
There are currently no unexercised or outstanding options.
None of the Directors or executives hold any options.
7.
Shareholdings of Key Management Personnel
The number of shares in the Company held during the financial year by each Key Management Personnel of the Group,
including their personally related parties, are set out below.
For the year ended 30 June 2015
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
D Tsang
Executives
A Soutar
L Mahaffy
SC Orlandi
CD Thompson
L Hunt
Opening
Balance
Vested as
Remuneration
Closing
Balance
192,318,030
209,349
2,416,266
252,000
837,396
212,131
19,967
143,337
823,152
41,916
–
–
399,239
–
–
–
–
59,146
61,296
45,166
192,318,030
209,349
2,815,505
252,000
837,396
212,131
19,967
202,483
884,448
87,082
Total
197,273,544
564,847
197,838,391
For the year ended 30 June 2014
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
D Tsang(1)
Executives
A Soutar
L Mahaffy
SC Orlandi
CD Thompson
L Hunt
Total
(1) Appointed 2 June 2014.
192,318,030
209,349
2,416,266
252,000
837,396
212,131
19,967
143,337
823,152
41,916
197,273,544
–
–
–
–
–
–
–
–
–
–
–
192,318,030
209,349
2,416,266
252,000
837,396
212,131
19,967
143,337
823,152
41,916
197,273,544
No other Key Management Personnel held shares in AVJennings Limited at any time during the year.
All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable
than those the Company would have adopted if dealing at arm’s length.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 23
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
Directors
Short-Term
Post
Employment
Salary /
Fees
$
Cash
Bonus
$
Other
$
Superannuation(3)
$
Long-Term
Long
Service
Leave
$
Share-
based
Total
Performance
Related
Shares(4)
$
$
%
30 June 2015
S Cheong(1)
RJ Rowley
–
77,626
–
–
–
–
–
7,374
–
–
–
–
–
85,000
–
–
PK Summers(2)
463,984
188,396
77,595
18,783
25,054
17,996
791,808
18.20
E Sam(1)
B Chin
BG Hayman
TP Lai
D Tsang(1)
–
60,000
45,662
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
4,338
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
50,000
50,000
–
697,272
188,396
77,595
30,495
25,054
17,996
1,036,808
30 June 2014
S Cheong(1)
RJ Rowley
–
77,803
–
–
–
–
–
7,197
–
–
–
–
–
85,000
–
–
–
–
–
–
–
PK Summers(2)
457,119
104,519
66,434
25,538
21,878
134,732
810,220
17.92
E Sam(1)
B Chin
BG Hayman
TP Lai
D Tsang(1)(5)
–
60,000
45,767
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
4,233
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
50,000
50,000
–
–
–
–
–
–
690,689
104,519
66,434
36,968
21,878
134,732
1,055,220
(1)
(2)
(3)
These Directors were not paid fees. A consulting fee of $50,000 per month was paid to the ultimate parent entity SC Global Developments Pte Ltd which
covers the services of these Directors. International airfares to attend meetings are paid for by a related entity.
‘Other’ relates to the value of motor vehicle benefits.
Payments to Defined Contribution Plans consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions.
The Group does not contribute to any Defined Benefit Plans.
Includes a reversal of $183,615 (2014: $181,543) relating to shares that did not vest.
(4)
(5) Appointed 2 June 2014.
(a)
(b)
Directors are also reimbursed for airfares (other than the international airfares for those Directors referred to in (1) above), and other expenses relating
to the provision of their services.
With the exception of share-based remuneration for the Chief Executive referred to in 2.4(ii), there were no other share-based payments made to
Directors in the year under review.
24 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
REMUNERATION REPORT (Audited) (continued)
Executives
Short-Term
Post
Employment
Salary /
Fees
$
Cash
Bonus
$
Other
$
Superannuation(1)
$
Long-Term
Long
Service
Leave
$
Share-
based
Total
Performance
Related
Shares
$
$
%
30 June 2015
A Soutar(4)
L Mahaffy
354,351
71,020
324,394
36,599
SC Orlandi(2)
300,397
44,856
CD Thompson(2)
356,462
61,585
L Hunt(2)
209,519
28,545
–
–
–
–
–
34,783
18,783
18,783
18,783
18,783
5,672
49,392
515,218
4,194
18,469
402,439
9,128
2,125
375,289
11,411
5,461
453,702
6,274
1,623
264,744
1,545,123 242,605
–
109,915
36,679
77,070
2,011,392
30 June 2014
M Henesey-
Smith(5)
A Soutar
L Mahaffy
321,280
67,304
15,173
36,214
11,895
30,151
482,017
330,084
31,409
319,712
8,200
SC Orlandi(3)
284,820
21,775
CD Thompson(3)
342,600
35,875
L Hunt(3)
195,400
11,085
–
–
–
–
–
34,660
17,775
17,775
17,775
23,175
3,874
45,181
445,208
2,957
15,391
364,035
11,633
19,509
355,512
11,203
22,934
430,387
6,111
14,898
250,669
23.37
13.68
10.06
12.67
8.73
15.75
17.20
6.48
7.69
10.31
6.12
1,793,896
175,648
15,173
147,374
47,673
148,064 2,327,828
(1)
(2)
(3)
Payments to Defined Contribution Plans consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions. The
Group does not contribute to any Defined Benefit Plans.
‘Shares’ include reversals of $27,202 for SC Orlandi, $28,191 for CD Thompson and $20,772 for L Hunt relating to shares from the FY2012 Grant that did
not vest.
‘Shares’ include reversals of $26,895 for SC Orlandi, $27,873 for CD Thompson and $20,538 for L Hunt relating to shares from the FY2011 Grant that did
not vest.
(4) Ceased employment 30 June 2015.
(5) Ceased employment 11 July 2014.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 25
Directors’ Report
For the year ended 30 June 2015
MEETINGS OF DIRECTORS AND DIRECTORS’ COMMITTEES
The number of meetings of Directors and Directors’ Committees held during the year, for the period the Director was a Member
of the Board or a Committee, and the number of meetings attended by each Director are detailed below.
Full Meetings of
Directors
Audit
Held
4
4
4
4
4
4
4
4
Attended
4
4
4
4
4
4
4
4
Held
–
3
–
3
3
–
3
3
Attended
–
3
–
1
3
–
3
2
Meetings of Committees
Remuneration
Held
1
–
–
1
–
1
1
–
Attended
1
–
–
1
–
1
1
–
Nominations
Held
1
1
–
1
–
1
–
–
Attended
1
1
–
1
–
1
–
–
Risk Management
Attended
–
1
–
–
–
1
–
–
Held
–
1
–
–
–
1
–
–
S Cheong
RJ Rowley
PK Summers
E Sam(1)
B Chin
BG Hayman
TP Lai
D Tsang(2)
(1) Retired from the Audit Committee effective 19 November 2014.
(2) Appointed to the Audit Committee effective 19 November 2014.
Investments Committee
The Investments Committee does not formally meet in person. It conducts physical inspections of certain major development
sites and receives detailed briefings from management on all major development sites prior to consideration of formal
acquisition proposals which are dealt with by way of circular resolution.
DIRECTORS’ INTERESTS
INDEMNIFICATION OF AUDITORS
The relevant interests of the Directors in the shares of the
Company at the date of this Report are:
Director
S Cheong
E Sam
PK Summers*
RJ Rowley
D Tsang
Number
192,318,030
209,349
2,815,505
252,000
837,396
To the extent permitted by law, the Company has agreed
to indemnify its auditors, Ernst & Young, as part of the
terms of its audit engagement agreement against claims
by third parties arising from the audit (for an unspecified
amount) – except for any loss in respect of any matters which
are finally determined to have resulted from Ernst & Young’s
negligent, wrongful or wilful acts or omissions. No payment
has been made to indemnify Ernst & Young during or since
the financial year.
*Does not include unvested shares under the AVJ Deferred Employee
Share Plan. Refer to page 21.
ROUNDING OF AMOUNTS
INDEMNIFYING OFFICERS
During the year, the Group paid a premium in respect of
a contract insuring its Directors and employees against
liabilities that may be incurred in defending civil or criminal
proceedings that may be brought against the Officers in their
capacity as Officers of entities in the Group. In accordance
with common practice, the insurance policy prohibits
disclosure of the nature of the liability insured against and
the amount of the premium.
The amounts contained in this Report and in the Financial
Statements have been rounded to the nearest $1,000 (where
rounding is applicable under the option available to the
Company under the Australian Securities and Investments
Commission (ASIC) Class Order 98/100. The Company is an
entity to which the Class Order applies.
26 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Report
For the year ended 30 June 2015
AUDITOR’S INDEPENDENCE DECLARATION
We have obtained the following Independence Declaration from our auditors, Ernst & Young:
AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF AVJENNINGS LIMITED
In relation to our audit of the financial report of AVJennings Limited for the financial year ended 30 June 2015, to the best of
my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations
Act 2001 or any applicable code of professional conduct.
Ernst & Young
28 September 2015
Mark Conroy
Partner
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
NON-AUDIT SERVICES
A number of non-audit services were provided by the Group’s auditor, Ernst & Young. These non-audit services are detailed
in note 29 to this Financial Report. The Directors are satisfied that the provision of non-audit services is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of
non-audit service provided means that auditor independence was not compromised.
This Report is made in accordance with a resolution of the Directors.
.
Simon Cheong
Director
28 September 2015
Peter Summers
Director
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 27
Revenues
Share of profits of associates and joint venture entities
accounted for using the equity method
Cost of property developments sold
Provision for loss on inventories
Other operational expenses
Selling and marketing expenses
Employee benefits expenses
Depreciation expense
Finance costs
Management and administration expenses
Profit before income tax
Income tax
Profit after income tax
Other comprehensive income
Foreign currency translation
Note
2
2015
$’000
2014
$’000
317,903
250,570
24(b)
1,569
1,967
(232,641)
(195,656)
2
2
2
2
3
3,720
(4,953)
(7,126)
5,154
(3,948)
(6,005)
(20,402)
(17,189)
(300)
(863)
(8,736)
(330)
(457)
(7,093)
48,171
27,013
(13,786)
(8,231)
34,385
18,782
(1,397)
2,065
Other comprehensive (loss)/income for the year
(1,397)
2,065
Total comprehensive income for the year
(32,998)
20,847
Earnings per share for profit attributable to ordinary equity holders of the
parent:
Cents
Cents
Basic earnings per share
Diluted earnings per share
30
30
9.03
9.03
4.94
4.94
28 | AVJENNINGS LIMITED · ABN 44 004 327 771
Consolidated Statement of Financial Position
As at 30 June 2015
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Tax receivable
Other current assets
Total current assets
NON-CURRENT ASSETS
Trade and other receivables
Inventories
Investments accounted for using the equity method
Available-for-sale financial asset
Plant and equipment
Intangible assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Tax payable
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
Note
2015
$’000
2014
$’000
4
5
6
7
5
6
24
8
9
10
11
12
13
15
11
12
14
15
37,812
69,364
4,796
44,557
204,942
168,019
143
2,060
–
1,387
314,321
218,759
12,818
6,159
312,007
212,804
10,667
2,880
605
2,816
27,108
3,000
642
2,816
341,793
252,529
656,114
471,288
117,461
3,008
–
5,510
46,823
4,083
251
4,706
125,979
55,863
51,556
123,716
16,775
742
13,406
81,500
4,041
698
192,789
99,645
318,768
155,508
337,346
315,780
16
17(a)
17(c)
160,436
160,436
3,074
4,361
173,836
150,983
337,346
315,780
Consolidated Statement of Changes in Equity
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 29
Attributable to equity holders of the Parent
Foreign
Currency
Translation
Reserve
Share-based
Payment
Reserve
Retained
Earnings
Contributed
Equity
Total
equity
Note
$’000
$’000
$’000
$’000
$’000
At 1 July 2013
160,960
1,123
1,077
132,201
295,361
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their
capacity as owners
–
–
–
–
2,065
2,065
–
–
–
18,782
18,782
–
2,065
18,782
20,847
- Treasury shares acquired
16(b)
(524)
- Share-based payment expense
reversed (forfeited shares)
- Share-based payment expense
28(a)
28(a)
–
–
–
–
–
–
–
(524)
(579)
675
–
–
(579)
675
(524)
2,065
96
18,782
20,419
At 30 June 2014
160,436
3,188
1,173
150,983
315,780
Profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Transactions with owners in their
capacity as owners
- Share-based payment expense
reversed (forfeited shares)
- Share-based payment expense
- Dividends paid
28(a)
28(a)
18
–
–
–
–
–
–
–
(1,397)
(1,397)
–
–
–
34,385
34,385
–
(1,397)
34,385
32,988
–
–
–
(326)
436
–
–
(326)
436
–
(11,532)
(11,532)
At 30 June 2015
160,436
1,791
1,283
173,836
337,346
–
(1,397)
110
22,853
21,566
30 | AVJENNINGS LIMITED · ABN 44 004 327 771
Consolidated Statement of Cash Flows
For the year ended 30 June 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers, land vendors and employees
Interest paid
Income tax paid
Note
2015
$’000
2014
$’000
317,278
251,561
(320,115)
(242,446)
2
(10,396)
(1,127)
(9,349)
(1,445)
Net cash used in operating activities
19
(14,360)
(1,679)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of plant and equipment
Purchase of plant and equipment
Interest received
Distributions received from associates and joint venture entities
Dividends received from joint venture entity
Payment for available–for–sale financial asset
9
2
Investments in associates and joint venture entities
24(b)
8
(274)
863
18,750
5,350
(1,380)
(6,091)
70
(76)
457
40
–
(1,500)
–
Net cash from / (used in) investing activities
17,226
(1,009)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Payment for treasury shares
Equity dividends paid
240,177
101,591
(199,036)
(105,899)
16(b)
18
–
(11,532)
(524)
–
Net cash from / (used in) financing activities
29,609
(4,832)
NET INCREASE/(DECREASE) IN CASH HELD
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
32,475
4,796
541
(7,520)
11,649
667
CASH AND CASH EQUIVALENTS AT END OF YEAR
4
37,812
4,796
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 31
SECTION A – How the numbers are calculated
Section A1 Segment information
1. OPERATING SEGMENTS
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the chief
operating decision maker in assessing performance and in determining the allocation of resources.
The operating segments are identified by management based on the states in which the Group sells its products and services.
Discrete financial information about each of these operating businesses is reported on a monthly basis.
Types of products and services
The Group operates primarily in residential development.
Accounting policies
The accounting policies used in reporting segments are the same as those contained in the Financial Report.
Operating segments
Jurisdictions:
This includes activities relating to Land Development, Integrated Housing and Apartments Development.
Other:
This includes numerous low value items, amongst the most significant of which are interest and royalty revenue, and certain
sales commissions.
32 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
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Notes to the Consolidated Financial Statements
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AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 33
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34 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
Section A2 Profit and loss information
2. REVENUES AND EXPENSES
Profit from ordinary activities before income tax includes the following revenues and expenses:
Revenues
Developments
Interest revenue
Management fees
Royalty revenue
Sundry revenue
Total revenues
Note
2015
$’000
2014
$’000
307,888
242,861
863
6,613
–
2,539
457
4,998
399
1,855
317,903
250,570
Cost of property developments sold
Amortisation of finance costs capitalised to inventories
10,172
10,579
Employee benefits expenses
Defined contribution superannuation expense
Other employee benefits expenses
Total employee benefits expenses
Depreciation expense
Depreciation
Leasehold improvements
Plant, equipment and motor vehicles
Total depreciation expense
Other expenses
Minimum operating lease payments
Finance costs
Bank loans
Less: Amount capitalised to inventories
Finance costs expensed
Impairment of assets
Decrease in provision for loss on inventories
Total impairment reversed
1,473
18,929
1,307
15,882
20,402
17,189
9
9
7
293
300
13
317
330
2,421
2,235
10,396
(9,533)
863
9,349
(8,892)
457
(3,720)
(5,154)
(3,720)
(5,154)
For the year ended 30 June 2015, the movement resulted from a realignment of future assumptions with current market
conditions in respect of one project in New South Wales.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 35
3. INCOME TAX
The major components of income tax are:
Current income tax
Current income tax charge
Adjustment for prior year
Deferred income tax
Current year temporary differences
Adjustment for prior year
Income tax reported in the Consolidated
Statement of Comprehensive Income
2015
$’000
2014
$’000
915
41
12,871
(41)
1,214
19
6,820
178
13,786
8,231
Numerical reconciliation between aggregate tax recognised in the Consolidated Statement of Comprehensive Income
and tax calculated per the statutory income tax rate:
Accounting profit before income tax
48,171
27,013
Tax at Australian income tax rate of 30% (2014 – 30%)
Adjustment for prior year
Equity accounted share of Joint Venture profits
Other non-deductible items and variations
Income tax
Tax consolidation
14,451
–
(471)
(194)
8,104
197
(590)
520
13,786
8,231
The accounting policy in relation to tax consolidation is set out in note 35(s).
Nature of tax funding arrangements and tax sharing agreements
Entities within the Tax Consolidated Group have entered into a Tax Funding Arrangement and a Tax Sharing Agreement with the
Head Entity. Under the terms of the Tax Funding Arrangement, each of the entities in the Tax Consolidated Group has agreed
to pay or receive a tax equivalent payment to, or from, the Head Entity, based on the current tax liability or current tax asset of
the entity. Such amounts are reflected in amounts receivable from, or payable to, other entities in the Tax Consolidated Group.
The Tax Sharing Agreement entered into between members of the Tax Consolidated Group provides for the determination of
the allocation of income tax liabilities between the entities should the Head Entity default on its tax payment obligations or
if an entity should leave the Tax Consolidated Group. The effect of the Tax Sharing Agreement is that each member’s liability
for tax payable by the Tax Consolidated Group is limited to the amount payable to the Head Entity under the Tax Funding
Arrangement.
36 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
Section A3 Balance Sheet information
4. CASH AND CASH EQUIVALENTS
Reconciliation to Consolidated Statement of Cash Flows
For the purposes of Consolidated Statement of Cash Flows, cash and cash
equivalents comprise the following at 30 June:
Cash at bank and in hand
37,812
4,796
2015
$’000
2014
$’000
5.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Related parties receivables
Funds held in solicitors trust accounts
Other receivables
Allowance for impairment loss
2015
$’000
2014
$’000
62,823
2,993
13
3,535
–
36,556
2,812
2,090
3,181
(82)
Total current trade and other receivables
69,364
44,557
Non-current
Trade receivables
Total non-current trade and other receivables
12,818
6,159
12,818
6,159
(a) Allowance for impairment loss
No impairment loss (2014: $72,000) has been recognised by the Group in the current year.
At 30 June, the ageing analysis of trade receivables is as follows:
Number of days outstanding
Total
$’000
0-30
$’000
31-60
$’000
61-90
$’000
+ 91
$’000
+ 91#
$’000
75,641
75,627
42,715
42,633
7
–
1
–
6
–
–
82
2015
$’000
82
(82)
–
–
2014
$’000
10
–
72
82
2015
2014
# Considered impaired.
At the beginning of the year
Amounts written off during the year
Amounts provided for during the year
At the end of the year
(b) Related party receivables
(d) Fair value and credit risk
For terms and conditions relating to related party receivables,
refer to note 27(k).
Due to the short term nature of these receivables, their
carrying value is assumed to approximate their fair value.
(c) Other receivables
Other receivables generally arise from transactions outside
the usual operating activities of the Group. These receivables
are not past due or impaired.
The maximum exposure to credit risk is the fair value of
receivables. Receivables in respect of land, integrated
housing and apartments are required to be settled in full prior
to passing of title and collateral is therefore unnecessary.
Collateral is not held as security for other receivables, nor is it
currently the Group’s policy to transfer (on-sell) receivables to
special purpose entities.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 37
6. INVENTORIES
Current
Broadacres
Land to be subdivided – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total broadacres
Work-in-progress
Land subdivided or in the course of being subdivided – at cost
Development costs capitalised
Houses and apartments under construction – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total work-in-progress
Completed inventory
Completed houses and apartments – at cost
Completed residential land lots – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total completed inventory
Total current inventories
Non-current
Broadacres
Land to be subdivided – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total broadacres
Work-in-progress
Land subdivided or in the course of being subdivided – at cost
Development costs capitalised
Houses and apartments under construction – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total work-in-progress
Completed inventory
Completed residential land lots – at cost
Borrowing and holding costs capitalised
Provision for loss on inventories
Total completed inventory
Total non-current inventories
Total inventories
Note
2015
$’000
2014
$’000
6(a)
6(a)
6(a)
6(a)
6(a)
6(a)
39,983
10,630
(4,409)
52,688
9,385
(6,583)
46,204
55,490
48,177
29,147
25,950
12,559
(3,304)
53,708
27,821
13,978
7,283
(9,424)
112,529
93,366
7,984
38,025
2,758
(2,558)
2,726
17,444
934
(1,941)
46,209
19,163
204,942
168,019
254,162
164,921
27,562
(19,394)
53,110
(28,298)
262,330
189,733
33,838
4,558
1,219
6,896
(530)
16,509
3,541
–
576
–
45,981
20,626
3,685
2,454
32
(21)
12
(21)
3,696
2,445
312,007
212,804
516,949
380,823
38 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
6. INVENTORIES (continued)
(a) Borrowing costs are recognised as part of the carrying amount of the qualifying asset. Borrowing costs include interest,
fees and costs associated with interest rate derivatives. These costs have been capitalised at a weighted average rate of
6.90% (2014: 7.64%).
(b) Inventory with a book value of $18,019,000 (2014: $92,718,000) had been pledged as security for project specific
borrowings (refer to note 12(b)). The Group’s remaining inventory has been pledged as security for the main banking
facility (refer to note 12(a)).
(c)
Previous write-downs of inventories to net realisable value reversed and recognised as a credit during the year ended
30 June 2015 amounted to $3,720,000 (2014: $5,154,000). The credit has been disclosed as a separate item in the
Consolidated Statement of Comprehensive Income.
Movements in provision for loss on inventories
At the beginning of the year
Amounts utilised
Provisions reversed
At the end of the year
7. OTHER CURRENT ASSETS
Prepayments
Deposits
Total other current assets
8. AVAILABLE-FOR-SALE FINANCIAL ASSET
Property Fund Units
2015
$’000
46,267
(12,331)
(3,720)
2014
$’000
64,896
(13,475)
(5,154)
30,216
46,267
2015
$’000
1,943
117
2014
$’000
1,308
79
2,060
1,387
2015
$’000
2014
$’000
2,880
3,000
These comprise units in unlisted property funds that do not have an active market. As the range of reasonable fair values
can be significant and these estimates cannot be made reliably, the units are measured at cost less impairment.
Impairment and risk exposure
None of the financial assets are either past due or impaired.
All available-for-sale investments are denominated in Australian currency. As a result, there is no exposure to foreign currency
risk. There is also no exposure to price risk as the intention is to hold the investments to maturity.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 39
9. PLANT AND EQUIPMENT
Leasehold improvements
At cost
Less: accumulated depreciation
Total leasehold improvements
Plant, equipment and motor vehicles
At cost
Less: accumulated depreciation
Total plant, equipment and motor vehicles
Total plant and equipment
2015
$’000
410
(347)
63
6,167
(5,625)
542
605
2014
$’000
405
(343)
62
6,426
(5,846)
580
642
Reconciliations
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the year are
set out below:
For the year ended 30 June 2014
Note
Leasehold
improve-
ments
$’000
Plant,
equipment
and motor
vehicles
$’000
Carrying amount at 1 July 2013
Additions
Disposals
Depreciation charge
Carrying amount at 30 June 2014
For the year ended 30 June 2015
Carrying amount at 1 July 2014
Additions
Disposals
Depreciation charge
Carrying amount at 30 June 2015
69
6
–
(13)
62
62
8
–
(7)
63
2
2
Total
$’000
993
76
(97)
(330)
924
70
(97)
(317)
580
642
580
266
(11)
(293)
642
274
(11)
(300)
542
605
40 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
10. INTANGIBLE ASSETS
Brand name at cost
Less: accumulated amortisation
Total intangible assets
2015
$’000
9,868
(7,052)
2014
$’000
9,868
(7,052)
2,816
2,816
The intangible asset relates to the value of the “AVJennings” brand name which was acquired as part of a business combination
in 1995. On recognition, the asset was determined to have a finite life of 20 years and has since been amortised over the expected
useful life. In accordance with the accounting policy discussed in note 35(i), the amortisation period and the amortisation method
for an intangible asset are reviewed at least each financial year-end. A review carried out at 31 December 2009 determined that
the brand name has indefinite useful life. This change in accounting estimate has been applied prospectively with amortisation
ceasing as of 31 December 2009.
The brand name is tested for impairment annually, or more frequently if there are indicators of impairment. At 30 June 2015, there
were no indicators of impairment.
11. TRADE AND OTHER PAYABLES
Current
Unsecured
Land creditors
Trade creditors
Related party payables
Other creditors and accruals
Total current payables
Non-Current
Unsecured
Land creditors
Total non-current payables
Land creditors
2015
$’000
2014
$’000
89,689
12,403
3,128
12,241
17,646
11,094
2,750
15,333
117,461
46,823
51,556
13,406
51,556
13,406
Titles for the unsecured land creditors only transfer to the Group on full payment of the amount outstanding or upon
provision of some other security.
Related party payables
For terms and conditions relating to related party payables, refer to note 27(k).
Fair value
Due to the short term nature of current payables, their carrying amount is assumed to approximate their fair value.
Non-current land creditors have been discounted using a rate of 6.95% (2014: 7.32%).
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 41
12. INTEREST-BEARING LOANS AND BORROWINGS
Current
Secured
Bank loans
Total current interest-bearing liabilities
Non-current
Secured
Bank loans
Total non-current interest-bearing liabilities
Financing arrangements
The Group has access to the following lines of credit:
30 June 2015
Main banking facilities
- bank overdraft
- bank loans
- performance bonds
Other non-cash facilities
Project funding facilities
- bank loans
2015
$’000
2014
$’000
3,008
4,083
3,008
4,083
123,716
81,500
123,716
81,500
Note
12(a)
12(b)
Available
$’000
Utilised
$’000
Unutilised
$’000
5,000
–
210,000
123,716
35,000
9,778
5,000
86,284
25,222
250,000
133,494
116,506
1,800
–
1,800
3,026
3,026
3,008
3,008
18
18
Contract performance bond facilities
12(c)
- performance bonds
25,000
21,134
3,866
30 June 2014
Main banking facilities
- bank loans
- performance bonds and other non-cash facilities
Project funding facilities
- bank loans
- performance bonds and other non-cash facilities
12(a)
12(b)
140,000
13,600
77,000
5,835
153,600
82,835
11,691
16,000
27,691
8,583
9,977
18,560
63,000
7,765
70,765
3,108
6,023
9,131
Contract performance bond facility
12(c)
- performance bonds
15,000
12,140
2,860
At 30 June 2015 these facilities are interchangeable up to $47 million (2014: $5 million) between the bank loans and
performance bonds/other non-cash facilities.
42 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
12. INTEREST-BEARING LOANS AND BORROWINGS (continued)
Significant terms and conditions
(a) Main banking facilities
The Group’s main banking facilities mature on 30 September 2017. The main banking facilities are secured by a fixed and
floating charge over all the assets and undertakings of the entities within the Group that are obligors under the main banking
facilities, and by first registered mortgages over various real estate inventories other than those controlled by the Group under
project development agreements and those assets pledged as security for project funding (see note 12(b)). The Parent Entity
has entered into a cross deed of covenant with various controlled entities to guarantee obligations of those entities in relation to
the main banking facilities (see note 23). The current interest rates on the bank loans range from 3.09% to 4.30% (2014: 4.20%
to 4.26%).
(b) Project funding facilities
Project funding facilities are secured by:
• a fixed and floating charge over the assets of the entity involved in the relevant project, namely, Portarlington Nominees Pty
Limited; and
• a first registered mortgage over certain real estate inventories of the entity involved in the relevant project, namely,
Portarlington Nominees Pty Limited.
The lines of credit shown are maximum limits which are available progressively as projects are developed. The expiry date for
the facility at the reporting date was August 2015 but has subsequently been extended to September 2015 at the request of
the lender to permit it time to complete its annual review. The outstanding amounts are expected to be repaid or refinanced
prior to expiry of the facility. As at 30 June 2015, the balance outstanding on the bank loan facilities was $3,008,000 (2014:
$8,583,000).
The carrying amounts of the pledged assets are as follows:
Wollert, Victoria
Cheltenham, South Australia
Arlington Rise, Victoria
2015
$’000
–
–
18,051
2014
$’000
29,830
47,707
19,054
The weighted average interest rate on the project funding loans at year-end was 2.09% (2014: 3.27%).
(c) Contract performance bond facilities
The Group has entered into Contract performance bond facilities of $25,000,000 (2014: $15,000,000). The Contract
performance bond facilities are subject to review annually. The facilities expire by 31 December 2015 and management
expects the annual review which is underway, to be completed shortly and the facilities extended for a further 12 months.
The performance bond facilities are secured by Deeds of Indemnity between the Parent Entity and various controlled entities.
Details of the controlled entities included in the Deeds of Indemnity are set out in note 23.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 43
13. TAX PAYABLE
Income tax payable
14. DEFERRED TAX LIABILITIES
The provision for deferred income tax is made up as follows:
– capitalisation of development costs
– prepayments, accruals/provisions and investments
– brand name
– provisions for asset impairments
– tax loss carried forward
Deferred tax liabilities
Reconciliations
2015
$’000
–
2015
$’000
19,106
8,918
845
(9,588)
(2,506)
2014
$’000
251
2014
$’000
21,742
5,729
845
(13,937)
(10,338)
16,775
4,041
Reconciliations of the carrying amount of the deferred tax liability at the beginning and end of the year are set out below:
Carrying amount at beginning of year
Transferred from/to deferred tax assets
Arising temporary differences
Carrying amount at end of year
15. PROVISIONS
Current
Employee benefits
Other
Total current provisions
Non-current
Employee benefits
Total non-current provisions
2015
$’000
4,041
–
12,734
2014
$’000
–
(3,087)
7,128
16,775
4,041
2015
$’000
3,760
1,750
2014
$’000
3,526
1,180
5,510
4,706
742
742
698
698
44 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
16. CONTRIBUTED EQUITY
Ordinary shares
Treasury shares
Share capital
Note
16(a)
16(b)
2015
Number
2014
Number
2015
$’000
2014
$’000
384,423,851
384,423,851
162,793
162,793
(3,502,401)
(4,221,605)
(2,357)
(2,357)
380,921,450
380,202,246
160,436
160,436
(a) Movement in ordinary share capital
Number
Number
$’000
$’000
As at the beginning of the year
384,423,851
384,423,851
162,793
162,793
As at the end of the year
384,423,851
384,423,851
162,793
162,793
Fully paid ordinary shares carry one vote per share and carry the right to dividends. There are currently no unexercised or
outstanding options. No options were exercised during the year.
(b) Movement in treasury shares
Number
Number
$’000
$’000
As at the beginning of the year
(4,221,605)
(3,365,100)
(2,357)
(1,833)
Acquisition of shares by AVJ Deferred
Employee Share Plan Trust
Employee share scheme issue
–
(856,505)
719,204
–
–
–
(524)
–
As at the end of the year
(3,502,401)
(4,221,605)
(2,357)
(2,357)
Treasury shares are shares in AVJennings Limited that are held by the AVJ Deferred Employee Share Plan Trust for the purpose
of issuing shares to executives via the AVJ Deferred Employee Share Plan.
The original cost of the shares is treated as a reduction in share capital and the underlying shares identified separately as
treasury shares.
17. RESERVES AND RETAINED EARNINGS
(a) Reserves
At 1 July 2013
Foreign currency translation
Share-based payment expense
At 30 June 2014
Foreign currency translation
Share-based payment expense
At 30 June 2015
(b) Nature and purpose of reserves
Foreign currency translation reserve
Foreign
Currency
Translation
Reserve
$’000
Share-based
Payment
Reserve
$’000
Note
Total
$’000
1,123
1,077
2,200
2,065
28(a)
–
–
96
2,065
96
3,188
1,173
4,361
(1,397)
–
(1,397)
28(a)
–
110
110
1,791
1,283
3,074
The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial
Statements of subsidiaries which have functional currency different to the Australian dollar. Refer to note 35(y).
Share-based payment reserve
The share-based payment reserve is used to recognise the grant date fair value of shares issued to employees. Refer to note
35(p) for further details of the Plan.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 45
17. RESERVES AND RETAINED EARNINGS (continued)
(c) Retained earnings
Movements in retained earnings were as follows:
At the beginning of the year
Net profit for the year
Dividends
At the end of the year
18. DIVIDENDS
Cash dividends declared and paid
2014 final dividend of 2.0 cents per share,
paid 18 September 2014. Fully franked @ 30% tax
2015 interim dividend of 1.0 cent per share,
paid 8 April 2015. Fully franked @ 30% tax
Total cash dividends declared and paid
Dividends proposed
2014 final dividend of 2.0 cents per share,
to be paid 18 September 2014. Fully franked @ 30% tax
2015 final dividend of 3.0 cents per share,
to be paid 23 September 2015. Fully franked @ 30% tax
Total dividends proposed
2015
$’000
2014
$’000
150,983
132,201
34,385
(11,532)
18,782
–
173,836
150,983
2015
$’000
2014
$’000
7,688
3,844
11,532
–
–
–
–
7,688
11,532
–
11,532
7,688
The Company’s Dividend Reinvestment Plan remains suspended.
Franking credit balance
Franking credits available for subsequent financial years based on a tax rate of 30%
18,596
21,246
46 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
Section A4 Cash Flows information
19. CASH FLOW STATEMENT RECONCILIATION
Reconciliation of profit after tax to net cash flows from operations
Profit after tax
Adjustments for:
Depreciation
Net loss on disposal of plant and equipment
Interest revenue classified as investing cash flow
Share of profits of associates and joint venture entities
Movement in provision for loss on inventories
Share-based payments expense
Change in operating assets and liabilities:
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in prepayments and deposits
Increase in current tax receivables
Decrease in deferred tax assets
Increase in deferred tax liability
Decrease in current tax liability
Increase/(decrease) in trade and other payables
Increase in provisions
Net cash flows used in operating activities
2015
$’000
2014
$’000
34,385
18,782
300
4
(863)
(1,569)
(16,051)
110
(120,075)
(31,466)
(673)
(143)
–
12,734
(251)
330
28
(457)
(1,967)
(18,629)
96
28,619
(23,563)
(1,676)
–
3,087
4,041
(198)
108,350
(10,695)
848
523
(14,360)
(1,679)
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 47
Section B – Risk
20. SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial
statements requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and
accompanying disclosures, and the disclosure of contingent
liabilities. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future
periods.
projects that are in progress, is based on actual costs to date
and estimates of costs to complete.
Share-based payment transactions:
The cost of equity settled securities allocated to employees
is measured by reference to the fair value of the equity
instruments at the date on which they are granted. As
explained in note 28(b), the fair value of some equity
instruments is determined using the Monte Carlo simulation
model which includes a number of judgements and
assumptions. These judgements and assumptions have no
impact on the carrying value of assets and liabilities in the
Consolidated Statement of Financial Position but may impact
the share-based payment expense taken to profit and loss.
(i) Judgements
Valuation of derivatives:
In the process of applying the Group’s accounting policies,
management has made the following judgements, which have
the most significant effect on the amounts recognised in the
Consolidated Financial Statements:
Derivatives not quoted in an active market are valued based
on certain assumptions and estimates. These valuations can
change depending on market volatility.
Recovery of deferred tax assets:
21. FINANCIAL RISK MANAGEMENT
The Group has recognised deferred tax assets relating to
carried forward tax losses to the extent there are sufficient
taxable temporary differences (deferred tax liabilities)
relating to the same taxation authority against which the
unused tax losses can be utilised. However, utilisation of
the tax losses also depends on the ability of the Group to
generate future taxable profits and satisfy certain tests at
the time the losses are recouped. If the entity fails to satisfy
the tests, carried forward deferred tax assets of $2,506,000
(2014: $10,338,000) would have to be written-off to income
tax expense.
Cost of goods sold:
Management uses judgement in determining the method to
be used for cost apportionment. Costs may be apportioned
based on yield, unit entitlement, percentage of revenue or
other equitable methods. Costs include costs incurred to date
as well as forecast costs to bring the inventory into a saleable
state.
(ii) Estimates and assumptions
The key assumptions concerning the future and other key
sources of estimating uncertainty at the reporting date, that
have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the
next financial year are described below. Assumptions and
estimates are based on parameters available when the
Consolidated Financial Statements were prepared. Existing
circumstances and assumptions about future developments,
however, may change due to market changes or
circumstances arising beyond the control of the Group. Such
changes are reflected in the assumptions when they occur.
Estimates of net realisable value of inventories:
The net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of
completion and costs of selling as per note 35(j). Estimates
take into consideration fluctuations in price or cost, and
development time and sales rates. The key assumptions used
in this exercise require the use of management judgement
and are reviewed at least half-yearly.
Profit recognised on developments:
Profit on developments is generally recognised on settlement
as discussed in note 35(r). The calculation of profit for
The Group’s principal financial liabilities comprise of loans
and borrowings, trade and other payables, and financial
guarantee contracts. The main purpose of these financial
liabilities is to finance and guarantee the Group’s operations.
The Group’s principal financial assets include trade and other
receivables, and cash and bank balances that derive directly
from its operations. The Group also enters into derivative
transactions.
The Group is exposed to interest rate risk, foreign currency
risk, credit risk and liquidity risk. The Group’s senior
management oversees the management of these risks.
The Group’s senior management is supported by a central
treasury department that advises on financial risks and the
appropriate financial risk governance framework for the
Group. The central treasury department provides assurance
to the Group’s senior management that the Group’s financial
risk activities are governed by appropriate policies and
procedures and that financial risks are identified, measured
and managed in accordance with the Group’s policies and
risk objectives. All derivative activities for risk management
purposes are carried out by specialists who have the
appropriate skills and experience. It is the Group’s policy
that no trading in derivatives for speculative purposes
may be undertaken. The Board of Directors reviews and
agrees policies for managing each of these risks, which are
summarised below.
(i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group’s exposure to the
risk of changes in market interest rates relates primarily to the
Group’s debt obligations with floating interest rates.
The Group actively manages its interest rate risk and, subject
to its loan maturity and cash flow profile and its view of
the outlook for interest rates over the medium term, may
from time-to-time hedge up to 50% of its forecast average
borrowings at fixed or capped rates of interest. To manage
this, the Group enters into hedging strategies that combine
interest rate caps and flows, as well as floating-to-fixed
interest rate swap contracts. The Group’s forecast cash
position together with its current benign outlook for medium
term interest rates resulted in it retaining more exposure to
floating rates than in some prior years.
48 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
21. FINANCIAL RISK MANAGEMENT (continued)
(i) Interest rate risk (continued)
The fair value exposure on derivatives is an outcome of the
Group’s management of the cash flow volatility arising from
interest rate fluctuations.
Interest rate collar contracts are entered into for notional
principal amounts by receiving an upfront premium for the
floor component that covers a specific period. The interest
rate structure is a combination of purchasing a cap and
selling a floor, which effectively limits rate fluctuations to
within a range. The structure is used because it provides the
benefit of capping interest rate increases whilst limiting the
premium payable by assuming the risk (i.e. foregoing the
benefit) of interest rates falling below the floor rate.
The strike rates for these contracts are benchmarked against
the BBSY bid rate (Australian Bank Bill Swap Reference Rate
– Average Bid Rate) on a quarterly basis. Settlement occurs
quarterly, in favour of the Group, should the BBSY bid rate
be above the cap strike rate (movements in the variable rate
are directly proportional to movements in the BBSY bid rate).
Conversely, settlement occurs in favour of the counterparty,
should the BBSY bid rate be below the floor strike rate. If the
BBSY bid rate remains between the cap and floor rate, no
settlement occurs.
By entering into interest rate swaps, the Group agrees to
exchange, at the end of each quarter, the difference between
fixed and variable rate interest amounts calculated by
reference to an agreed-upon notional principal amount.
The Group’s interest rate derivatives do not qualify for hedge
accounting treatment. Gains or losses arising from changes
in fair value are recognised in profit or loss.
At balance date, the following variable rate borrowings, interest rate cap and interest rate collar contracts were outstanding:
Cash
Bank loans
Net financial liabilities
Interest rate cap and collar
Borrowings not hedged
2015
2014
Weighted
average
interest rate
%
2.16
3.41
Balance
$‘000
(37,812)
126,724
88,912
(20,000)
68,912
Weighted
average
interest rate
%
1.88
4.13
Balance
$‘000
(4,796)
85,583
80,787
(55,000)
25,787
Interest rate derivative contracts are exposed to fair value movements if interest rates change. Details of these contracts are:
Type of derivative
Period
Start
Date
Period
End
Date
Interest rate cap and collar
11-Jun-14
11-Sep-14
Interest rate cap and collar
11-Jun-15
30-Sep-15
Cap
Rate
%
2.95
2.95
Floor
Rate
%
2.50
2.50
Principal Amount
2015
$’000
2014
$’000
–
55,000
20,000
–
At 30 June 2015, 9.2% of the available borrowings are at capped and collared rates of interest (2014: 36.3%).
The Group analyses its interest rate exposure on an ongoing basis. Within this analysis, consideration is given to potential
renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest
rates.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 49
21. FINANCIAL RISK MANAGEMENT (continued)
(i) Interest rate risk (continued)
The following tables demonstrate the sensitivity to a reasonably possible change in interest rates on exposures existing at
balance date.
With all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:
Post Tax Profit
Higher/(Lower)
Other Comprehensive Income
Higher/(Lower)
2015
$’000
(163)
(86)
55
2014
$’000
(34)
(22)
23
2015
$’000
2014
$’000
–
–
–
–
–
–
+100 basis points
+50 basis points
– 50 basis points
(ii) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in
foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s
net investments in foreign subsidiaries.
At balance date, the Group had the following exposure to New Zealand Dollar foreign currency that is not hedged:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total financial liabilities
Net exposure
2015
NZ$’000
2014
NZ$’000
6,399
41,430
47,829
20,120
5,500
25,620
22,209
1,478
37,825
39,303
34,328
–
34,328
4,975
The following table demonstrates the sensitivity to a change in AUD/NZD exchange rates on exposures existing at balance date.
With all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:
AUD/NZD +10%
AUD/NZD – 5%
AUD/NZD -10%
(iii) Price risk
Post Tax Profit
Higher/(Lower)
Other Comprehensive Income
Higher/(Lower)
2015
$’000
(656)
328
656
2014
$’000
(277)
138
277
2015
$’000
(140)
70
140
2014
$’000
(207)
103
207
The Group does not have commodity and equity securities price risk.
50 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
21. FINANCIAL RISK MANAGEMENT (continued)
(iv) Credit risk
Credit risk is the risk that a counterparty will not meet
its obligations under a financial instrument, leading to a
financial loss. The Group is exposed to credit risk from its
operating activities (primarily trade receivables) and from
its financing activities, including deposits with banks and
financial institutions, foreign exchange transactions and other
financial instruments.
Trade Receivables
Contracts for Land, Integrated Housing and Apartments
usually require payment in full prior to passing of title
to customers and collateral is therefore unnecessary.
In the event that title is to pass prior to full payment being
received, appropriate credit verification procedures would
be performed before contract execution.
Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions
is managed by the Group’s treasury department in
accordance with the Group’s policy. Investments of surplus
funds are made only with approved counterparties and
within credit limits assigned to each counterparty. Derivative
counterparties and cash deposits are limited to financial
institutions approved by the Board.
Credit risk arises from potential default of the counterparty,
with a maximum exposure equal to the carrying amount of
the financial assets (as outlined in each applicable note) as
well as $2,801,000 (2014: $8,367,000) in relation to financial
guarantees granted – see note 33 for further information.
The Group has no significant concentrations of credit.
(v) Liquidity risk
The Group manages its liquidity risk by monitoring forecast
cash flows on a fortnightly basis and matching the maturity
profiles of financial assets and liabilities. The objective is
to maintain a balance between continuity of funding and
flexibility through the use of bank loans and committed
available credit facilities.
The current main banking facilities are due to mature
on 30 September 2017 and are therefore non–current.
In addition, the Group operates certain project funding
facilities which are discussed in note 12(b).
At 30 June 2015, 2.4% (2014: 4.8%) of the Group’s
interest–bearing loans and borrowings will mature in less
than one year.
The Group assessed the concentration of liquidity risk with
respect to refinancing its debt and concluded it to be low. The
Group has access to a sufficient variety of sources of funding,
and debt maturing within 12 months can be rolled over with
existing lenders.
A. Non–derivative financial liabilities:
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments.
Year ended 30 June 2015
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Interest-bearing loans and borrowings*
Financial Guarantees
< 6 months
$’000
6–12
months
$’000
> 1–5 years
$’000
Total
$’000
37,812
58,987
–
–
10,377
12,818
37,812
82,182
96,799
10,377
12,818
119,994
106,670
5,163
2,801
10,791
2,109
51,556
129,040
–
–
169,017
136,312
2,801
114,634
12,900
180,596
308,130
Net maturity
(17,835)
(2,523)
(167,778)
(188,136)
* Expected settlement amounts of interest-bearing loans and borrowings include an estimate of the interest payable to the date of expiry of the facilities.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 51
21. FINANCIAL RISK MANAGEMENT (continued)
(v) Liquidity risk (continued)
Year ended 30 June 2014
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Interest-bearing loans and borrowings*
Financial Guarantees
Net maturity
< 6 months
$’000
4,796
35,744
40,540
42,177
5,821
8,367
56,365
(15,825)
6–12
months
$’000
–
8,813
8,813
4,646
1,698
–
6,344
2,469
> 1–5 years
$’000
Total
$’000
–
6,159
4,796
50,716
6,159
55,512
13,406
82,340
–
60,229
89,859
8,367
95,746
158,455
(89,587)
(102,943)
* Expected settlement amounts of interest-bearing loans and borrowings include an estimate of the interest payable to the date of expiry of the facilities.
In addition to maintaining sufficient short term assets to meet short term payments, at reporting date, the Group has
approximately $122 million (2014: $83 million) of unused credit facilities available for its immediate use. Please refer to note 12.
During the year, the Group established a multi-currency medium term note programme (MTN Programme) in Singapore. The MTN
Programme is registered with the Singapore Exchange, has a SGD500 million limit and exists in perpetuity. Its purpose and other
terms and conditions (including controlling covenants) are approved by the Group’s Club Lenders. The MTN Programme provides
the Group with the ability (subject to investor appetite and Club Lender approval), to tap international debt capital markets by
issuing tranches of notes with characteristics selected from the widest possible range of options, instead of, or in addition to
borrowing from more traditional lenders such as banks. No notes have been issued under the MTN Programme to-date.
B. Derivative financial liabilities:
There was insignificant liquidity risk arising from the derivative liabilities held by the Group at balance date.
(vi) Fair value
The following table provides the fair value measurement hierarchy of the Group’s liabilities.
Year ended 30 June 2015
Year ended 30 June 2014
Quoted
prices
in active
markets
(Level 1)
$’000
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
$’000
$’000
$’000
Quoted
prices
in active
markets
(Level 1)
$’000
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
$’000
$’000
$’000
Financial liabilities
Interest-bearing loans
and borrowings
–
–
126,724
126,724
–
–
126,724
126,724
–
–
85,583
85,583
–
–
85,583
85,583
There were no transfers between any of the categories during the year.
Fair values of the Group’s interest-bearing loans and borrowings are determined by using Discounted Cash Flow (DCF) method
using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance
risk as at 30 June 2015 was assessed to be insignificant.
52 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
22. CAPITAL RISK MANAGEMENT
When managing capital, management’s objective is to ensure that the Group continues as a going concern. Management also
aims to maintain an optimal capital structure that reduces the cost of capital.
In order to maintain or adjust the capital structure, management may change the amount of dividends paid to shareholders,
offer a dividend reinvestment plan, return capital to shareholders, issue new shares or sell assets to reduce debt.
During the year ended 30 June 2015, a total dividend of $11,532,000 was paid (2014: Nil).
Management monitors the capital mix through the debt to equity ratio (net debt/total equity) and the debt to total assets ratio
(net debt/total assets). Based on continuing operations of the Group, these ratios are as follows:
Interest-bearing loans and borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total assets
Net debt to equity ratio
Net debt to total assets ratio
Consolidated
2015
$’000
126,724
(37,812)
2014
$’000
85,583
(4,796)
88,912
80,787
337,346
315,780
656,114
471,288
26.4%
13.6%
25.6%
17.1%
AVJennings Limited has complied with the financial conventions of its borrowing facilities during the 2015 and 2014
reporting periods.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 53
Section C – Group Structure
23. CONTROLLED ENTITIES
(a) Investment in controlled entities
The following economic entities are the controlled entities of AVJennings Limited:
ECONOMIC ENTITY (1)
2015
2014
2015
2014
% Equity Interest
Included in Banking Cross
Deed of Covenant (2)
Entities included in the Closed Group
A.V. Jennings Real Estate Pty Limited
AVJennings Real Estate (VIC) Pty Limited
AVJennings Holdings Limited(3)
AVJennings Properties Limited(3)
Jennings Sinnamon Park Pty Limited
Long Corporation Limited(3)
Orlit Pty Limited(3)
Sundell Pty Limited(3)
AVJennings Housing Pty Limited(3)
AVJennings Home Improvements S.A. Pty Limited(3)
AVJennings Mackay Pty Limited(3)
Entities excluded from the Closed Group
Crebb No 12 Pty Limited
Dunby Pty Limited
Epping Developments Limited
Montpellier Gardens Pty Limited
AVJ ODP Pty Limited
AVJennings (Cammeray) Pty Limited
AVJennings Syndicate No 3 Limited
AVJennings Syndicate No 4 Limited(3)
AVJennings Officer Syndicate Limited(3)
AVJennings Properties SPV No 1 Pty Limited
AVJennings Properties SPV No 2 Pty Limited
AVJennings Properties SPV No 4 Pty Limited
AVJennings Wollert Pty Limited
AVJ Erskineville Pty Limited
AVJ Hobsonville Pty Limited
AVJennings Properties SPV No 9 Pty Limited
AVJennings SPV No 10 Pty Limited
Creekwood Developments Pty Limited(3)
Portarlington Nominees Pty Limited
AVJennings St Clair Pty Limited
St Clair JV Nominee Pty Limited
AVJennings Properties Wollert SPV Pty Limited
AVJennings Waterline Pty Limited
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
50
–
–
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
No
No
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
No
No
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
No
Yes
Yes
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
N/A
No
N/A
N/A
(1) All entities are incorporated in Australia. With the exception of AVJ Hobsonville Pty Limited, which has a branch in New Zealand, all entities
operate within Australia.
(2) These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 12(a).
(3) These entities, including AVJennings Limited, are included in the Deeds of Indemnity for performance bond facilities referred to in note 12(c).
54 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
23. CONTROLLED ENTITIES (continued)
(b) Ultimate parent
AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Pte Ltd is the ultimate parent entity.
(c) Deeds of cross guarantee
Certain entities within the Group are parties to deeds of cross guarantee under which each controlled entity guarantees the
debts of the others. By entering into these deeds, the controlled entities are relieved from the requirement to prepare Financial
Statements and Directors’ Reports under Class Order 98/1418 (as amended by Class Orders 98/2017, 00/321, 01/1087,
02/248, 02/1017, 04/663, 04/682, 04/1624, 05/542, 06/51, 08/11, 08/255, 08/618 and 09/626) issued by the Australian
Securities and Investments Commission (ASIC). Those entities included in the Closed Group are listed in note 23(a). These
entities represent a “Closed Group” for the purposes of the Class Order, and as there are no other parties to the deeds of cross
guarantee that are controlled by AVJennings Limited, they also represent the “Extended Closed Group”.
(d) Class order closed group
Certain controlled entities were granted relief by ASIC (under provisions of Class Orders) from the requirement to prepare
separate audited financial statements, where deeds of indemnity have been entered into between the Parent Entity and the
Controlled Entities to meet their liabilities as required (refer to note 23(c)).
The Extended Closed Group referred to in the Directors’ Declaration therefore comprises all of the entities within the Class
Order. Certain entities falling outside of the Extended Closed Group are listed in note 23(a), and are therefore required to
prepare separate annual financial statements.
The Consolidated Statement of Comprehensive Income for those controlled entities which are party to the deed is as follows:
Revenues
Cost of property development sold
Other expenses
Profit before income tax
Income tax
Profit after income tax
Dividends paid
Profit for the year
Closed Group
2015
$’000
2014
$’000
162,203
144,792
(107,270)
(108,027)
(34,941)
(28,951)
19,992
(6,608)
7,814
(2,795)
13,384
5,019
(11,532)
–
1,852
5,019
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 55
23. CONTROLLED ENTITIES (continued)
(d) Class order closed group (continued)
The Consolidated Statement of Financial Position for those controlled entities which are party to the deed is as follows:
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
NON-CURRENT ASSETS
Inventories
Plant and equipment
Intangible assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
2015
$’000
2014
$’000
31,503
4,416
191,386
135,045
89,254
1,852
78,250
1,335
313,995
219,046
132,219
134,188
605
2,816
642
2,816
135,640
137,646
449,635
356,692
50,372
5,411
13,409
4,674
55,783
18,083
118,846
13,718
742
77,000
2,327
698
133,306
80,025
189,089
98,108
260,546
258,584
160,436
160,436
1,282
98,828
1,173
96,975
260,546
258,584
56 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
23. CONTROLLED ENTITIES (continued)
(d) Class order closed group (continued)
The Consolidated Statement of Changes in Equity for those controlled entities which are party to the deed is as follows:
At beginning of year
Profit for the year
Total income and expenses for the year
Equity transactions
– Treasury shares acquired
– Share-based payment expenses
Closed Group
2015
$’000
2014
$’000
258,584
253,993
1,852
1,852
–
110
1,962
5,019
5,019
(524)
96
4,591
At end of year
260,546
258,584
24. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investment in Associate – unincorporated
Interest in Joint Ventures – unlisted
Total equity accounted investments
Note
24(a)
24(b)
2015
$’000
4
2014
$’000
5
10,663
27,103
10,667
27,108
Investments in Associates and joint ventures are accounted for in accordance with the policy outlined in note 35(f).
(a) Investment in Associate
The Group has significant influence over the Associate because it is represented on the project governing body and its
employees provide essential technical knowledge to the project. The Associate is an unincorporated partnership which trades in
Australia. It has a 30 June year-end and its principal activity is the development and sale of residential lots.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 57
24. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)
(a) Investment in Associate (continued)
Associate name and principal activity
Epping JV – Land Development
Movements in carrying amount
At beginning of year
Distribution received
Share of net loss
At end of year
Interest held
2015
2014
10%
2015
$’000
5
–
(1)
4
10%
2014
$’000
46
(40)
(1)
5
Summarised financial information of the Associate
The Group’s share of the results of the Associate and its aggregated assets and liabilities are as follows:
Assets
Liabilities
Revenues
Loss
Impairment
2015
$’000
2014
$’000
6
2
–
(1)
9
4
1
(1)
The Group’s investment in the Associate was not impaired at any time during the year.
Share of Associate’s commitments and contingent liabilities
The Associate’s commitments and contingent liabilities have been entered into on a non-recourse basis and therefore the Group
has no exposure to the Associate’s commitments and contingent liabilities as at the date of this Report.
The Associate had no outstanding performance guarantees at 30 June 2015 (2014: nil).
58 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
24. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)
(b) Interest in Joint Ventures
Joint Venture and principal activities
Eastwood – Land Development and Building Construction
Woodville – Land Development and Building Construction
Pindan Capital Group Dwelling Trust – Building Construction
Movements in carrying amount
At beginning of year
Contributions made
Distributions received
Dividends received
Share of net profit
At end of year
The Group’s share of the Joint Ventures’ assets, liabilities, revenue and expenses are as follows:
Share of assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share of revenue, expenses and results
Revenues
Expenses
Profit before income tax
Income tax
Profit after income tax
Interest held
2015
2014
50%
50%
33.3%
2015
$’000
27,103
6,091
(18,750)
(5,350)
1,569
50%
50%
–
2014
$’000
25,136
–
–
–
1,967
10,663
27,103
7,586
8,970
29,564
–
16,556
29,564
4,846
1,047
5,893
1,717
744
2,461
10,663
27,103
29,985
(27,743)
2,242
(673)
1,569
26,336
(23,525)
2,811
(844)
1,967
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 59
25. INTEREST IN JOINT OPERATIONS
A number of controlled entities have entered into Joint Operations. Information relating to the Joint Operations is set out below:
Joint Operation name and principal activities
Cheltenham Joint Venture – Land Development and Building Construction
Hobsonville Joint Venture – Land Development
Elderslie Joint Venture – Land Development and Building Construction
Wollert Joint Venture – Land Development and Building Construction
Interest Held
2015
2014
–
50%
50%
49%
50%
50%
–
–
On 30 September 2014, the Group purchased the 50% share held by the joint operation partner in the Cheltenham Joint
Venture. Cheltenham did not constitute a business and was therefore accounted for as an asset acquisition.
On 18 November 2014, the Group entered into a joint venture agreement to develop and sell land as well as integrated housing
at Elderslie in New South Wales.
On 28 April 2015, the Group entered into a joint venture agreement to develop and sell land as well as integrated housing at
Wollert in Victoria.
The Group’s interest in the profits and losses of the individually immaterial Joint Operations are included in the Consolidated
Statement of Comprehensive Income, in accordance with the accounting policy described in note 35(e), under the following
classifications:
Revenues
Cost of property developments sold
Other expenses
Profit before income tax
Income tax
Profit after income tax
Total comprehensive income for the year
2015
$’000
15,606
(11,082)
(946)
3,578
(1,073)
2014
$’000
39,431
(32,195)
(993)
6,243
(1,873)
2,505
4,370
2,505
4,370
60 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
25. INTEREST IN JOINT OPERATIONS (continued)
The Group’s interest in the assets and liabilities of individually immaterial Joint Operations are included in the Consolidated
Statement of Financial Position, in accordance with the policy described in note 35(e), under the following classifications:
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
NON-CURRENT ASSETS
Inventories
Plant and equipment
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
2015
$’000
6,259
493
–
–
2014
$’000
343
2,544
25,856
2
6,752
28,745
17,920
18,960
–
2
17,920
18,962
24,672
47,707
10,100
–
8,516
313
10,100
8,829
232
–
232
–
4,500
4,500
10,332
13,329
14,340
34,378
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 61
Section D – Other information
26. CORPORATE INFORMATION
The Consolidated Financial Statements of AVJennings Limited for the year ended 30 June 2015 were authorised for issue in
accordance with a resolution of the Directors on 28 September 2015.
AVJennings Limited (the Parent) is a for-profit Company limited by shares domiciled and incorporated in Australia whose shares
are publicly traded on the Australian Securities Exchange and the Singapore Exchange through SGX Globalquote. The ultimate
parent is SC Global Developments Pte Ltd, a company incorporated in Singapore which owns 50.03% of the ordinary shares in
AVJennings Limited.
The Group (“AVJennings” or “Group”) consists of AVJennings Limited (the “Company” or the “Parent Entity”) and its controlled
entities.
The nature of the operations and principal activities of the Group are provided in the Directors’ Report.
27. RELATED PARTY DISCLOSURES
(a) Ultimate parent
AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Pte Ltd (incorporated in Singapore) is the
ultimate parent entity.
(b) Share and share option transactions with Directors and Director-related entities
The aggregate number of shares and options held at the reporting date either directly or indirectly or beneficially by the
Directors or by an entity related to those Directors of AVJennings Limited are as follows:
Fully paid ordinary shares
Owned by Directors directly,
or indirectly or beneficially
2015
Number
2014
Number
196,432,280
196,033,041
Directors and Director-related entities receive normal dividends on these ordinary shares.
(c) Entity with significant influence over AVJennings Limited
192,318,030 ordinary shares equating to 50.03% of the total ordinary shares on issue (2014: 192,318,030 and 50.03%
respectively) were held by SC Global Developments Pte Ltd and its associates in the Parent Entity at 30 June 2015. Certain
Directors of SC Global Developments Pte Ltd are also Directors of AVJennings Limited. Details of Directors’ interests in the shares
of the Parent Entity are set out in the Directors’ Report.
(d) Parent Entity amounts receivable from and payable to controlled entities
At 30 June 2015, the Parent Entity has not set up any provisions against debts owed by related parties as recoverability is
considered probable (2014: Nil). An impairment assessment is undertaken each financial year-end to determine whether
there is objective evidence that a related party receivable is impaired. If evidence of impairment exists, the impairment loss is
recognised immediately.
62 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
27. RELATED PARTY DISCLOSURES (continued)
(e) Transactions with related parties
Entity with significant influence over the Consolidated Entity:
SC Global Developments Pte Ltd
Consultancy fee paid/payable
Associate:
Epping JV
Note
2015
$
2014
$
(i)
600,000
600,000
Management fee received/receivable
–
54,000
Joint Ventures:
Eastwood JV
Management fee received/receivable
Accounting services fee received/receivable
Dividends received
Distributions received
Cheltenham JV
5,558,869
2,481,692
45,833
50,000
5,350,000
18,750,000
–
–
Accounting services fee received/receivable
(ii)
24,000
72,000
Woodville JV
Accounting services fee received/receivable
30,000
72,000
Wollert JV
Planning services fee received/receivable
Accounting services fee received/receivable
813,450
8,333
–
–
(i) Consultancy fees paid to SC Global Developments Pte Ltd of $600,000 (2014: $600,000).
(ii)
Fees for the period to 30 September 2014 (see note 25).
(f) Joint ventures and Joint operations in which related entities in the Group are venturers
Joint ventures in which the Group has an interest are set out in note 24 and note 25.
(g) Outstanding balances arising from provision of services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties.
Current receivables
Joint Ventures
(h) Loans from related party
Loan received
Joint Venture
2015
$’000
2014
$’000
2,993
2,812
2,978
2,600
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 63
27. RELATED PARTY DISCLOSURES (continued)
(i) Remuneration of Key Management Personnel
Short-term
– Salary/Fees
– Cash bonus
– Other (1)
Post employment
– Superannuation (2)
Long-term
– Long service leave
Share-based payment
2015
$
2014
$
2,242,395
2,484,585
431,001
77,595
280,167
81,607
140,410
184,342
61,733
95,066
69,551
282,796
3,048,200
3,383,048
(1)
(2)
‘Other’ represents the value of motor vehicle benefits.
Payments to Defined Contribution Plans consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions.
The Group does not contribute to any Defined Benefit Plans.
(j) Loans to Key Management Personnel
There are currently no outstanding loans receivable from Key Management Personnel. No loans were advanced to Key
Management Personnel during the year.
(k) Terms and conditions of transactions with related parties
Transactions with related parties are made at arm’s length both at normal market prices and on normal commercial terms.
Outstanding balances at year-end are unsecured, interest free, at call and settlement occurs in cash.
28. SHARE-BASED PAYMENT PLANS
(a) Recognised share-based payment expenses
Total expenses arising from share-based payment transactions and disclosed as part of employee benefit expenses are shown
in the table below:
Expense arising from equity-settled share-based payment transactions
Expense reversed on forfeiture of shares
Total expense arising from share-based payment transactions
The share-based payment plan is described in note 28(b).
2015
$’000
436
(326)
110
2014
$’000
675
(579)
96
64 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
28. SHARE-BASED PAYMENT PLANS (continued)
The operation of the ROE hurdle is set out below.
(b) Type of share-based payment plan
Long term incentive (LTI) awards are made to KMP and certain
executives in order to align remuneration with the creation
of shareholder value over the long term. As such, LTI awards
are only made to executives who are in a position to have an
impact on the Group’s performance against the relevant long
term performance measures.
LTI and retention (current year)
From FY15, share-based remuneration will be provided by
the Issue of Rights. The LTI arrangements were varied by
the Board for the FY15 year to improve the efficiency of the
scheme, reduce the costs to the Company, increase the
value to executives, achieve the retention objective and drive
performance. The variations consisted of:
(a) Changing from a share grant scheme to a rights
based scheme, thus avoiding the upfront cash outflow
associated with the acquisition of shares for each grant.
Shares are only now acquired when the rights vest. A
rights scheme also means executives do not receive
dividends on the rights (as is the case under the former
share scheme).
(b) Re-weighting of short term performance, long term
performance and retention by introducing a retention
component aligned to long term retention (with service
conditions only) which will vest over a three year period.
(c) Changing the Total Shareholder Return (TSR) hurdle
of the LTI component to a Return on Equity (ROE)
hurdle based on return on market capitalisation. From
a shareholders’ perspective, market capitalisation
is seen as an appropriate proxy for equity. The ROE
hurdle operates such that 50% vesting occurs at an
average annual return of 12% with 100% vesting at an
average annual return of 18%. The EPS hurdle remains
unchanged and is consistent with the previous years’ LTI
awards structure explained under LTI (previous years)
below. The performance conditions will be tested at the
end of the three year vesting period and the number of
rights that may vest will depend on the level of average
annual returns achieved over that period. The CEO’s
participation was determined as 40% (LTI) and 25%
(Retention component) of TEC respectively.
The operation of the EPS hurdle is set out below.
AVJennings’ EPS growth rate
over the performance period
Percentage of rights
vesting
<5%
5%
5% –10%
>=10%
Nil
50% of the allocation
for the hurdle
Pro-rata between
50% and 100%
100% of the allocation
for the hurdle
AVJennings’ ROE over the
performance period
Percentage of rights
vesting
<12%
12%
12% –18%
>=18%
Nil
50%
Pro-rata between
50% and 100%
100%
The operation of the retention hurdle is set out below.
Retention component
– years of service
Percentage of rights
vesting
one year
two years
three years
33.33%
33.33%
33.34%
LTI Awards (previous years)
AVJ Deferred Employee Share Plan
The AVJ Deferred Employee Share Plan (the LTI Plan)
administers employee share schemes under which shares
may be purchased on-market by the LTI Plan Trustee on behalf
of employees. These shares vest to employees for no cash
consideration subject to certain conditions being satisfied.
Employees may elect not to participate in the scheme.
Shares held by the LTI Plan’s trustee and not yet allocated to
employees at the end of the reporting period are shown as
treasury shares in the Financial Statements.
Share-based remuneration benefits are provided to executives
via the Plan. These equity-settled transactions are measured
at fair value at the grant date. The original cost of the shares
is treated as a reduction in share capital and the underlying
shares identified separately as treasury shares. The fair value
of the shares at the grant date is expensed on a straight-line
basis over the vesting period with a corresponding increase
in share-based payment reserve in equity. There is no non-
recourse financing provided to executives in relation to any
share-based payments.
Vesting is subject to both service and performance conditions,
except for the FY2013 delayed grant which is only subject
to the service condition (see page 65). The service condition
requires the executive to be employed by the Company as
at 30 September in the third year after the grant date for
each grant. The performance conditions apply to each grant
– as to 50% as measured by the TSR hurdle and as to 50%
by the EPS hurdle. The two performance hurdles are tested
differently. The EPS hurdle is tested as at 30 June in the test
year (three years after grant). The TSR hurdle is tested at
30 September of the third year after grant.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 65
28. SHARE-BASED PAYMENT PLANS (continued)
(b) Type of share-based payment plan (continued)
The following summarises the movement of the number of shares (both KMP and other executives) under the previous years’
LTI Plan:
Purchased
on market
Issued
from holding
account
Forfeited and
transferred
to holding
account
Shares
vested
Unvested
shares
FY2011 Grant
FY2012 Grant
FY2013 Grant
FY2013 Delayed Grant
FY2014 Grant
Holding Account
Total
1,375,452
1,695,735
293,913
–
856,505
–
–
219,255
527,027
753,591
(1,375,452)
–
(1,240,047)
(455,688)
–
–
–
–
513,168
(32,653)
(263,516)
230,858
–
(1,499,873)
2,795,834
(147,682)
–
–
1,462,414
1,295,961
4,221,605
–
–
(719,204)
3,502,401
The following is the status of rights granted under the restructured share-based remuneration.
FY2015 Grant
Total
Rights granted
Rights vested
Unvested rights
1,363,583
1,363,583
–
–
1,363,583
1,363,583
The service vesting condition is that the employee must still
be employed by AVJennings at 30 September 2014 (for the
FY2012 grant), 30 September 2015 (for the FY2013 grant)
and 30 September 2016 (for the FY2014 grant). In the event
of death or permanent disablement, the shares may vest
to the estate at the Board’s discretion. In the event that the
employee is retrenched, the shares may vest subject to Board
discretion. If the employee resigns (in certain circumstances)
or is terminated, the unvested shares will be forfeited.
The performance vesting conditions are:
•
Total Shareholder Return (TSR) performance measured
against the ASX Small Industrials Index; and
• Earnings Per Share (EPS) growth. AVJennings’ EPS growth
for the performance period must meet or exceed the target
set. The EPS hurdle for total vesting for each grant is as
follows:
FY2012 grant – 10% p.a. growth for the three financial
years to 30 June 2014
FY2013 grant – 10% p.a. growth for the three financial
years to 30 June 2015
FY2014 grant – 10% p.a. growth for the three financial
years to 30 June 2016
Half of the allocation is assessed against each performance
condition. The vesting schedule for the TSR performance
condition is set out in the following table. The holder of the
shares is entitled to receive all dividends paid between grant
and vesting date.
The TSR hurdle was chosen as a performance measure as it
provides a comparison against external performance. The
comparator group against which performance is measured is
the ASX Small Industrials Index. This peer group was chosen as
the pool of listed pure residential developers was considered too
small to provide a reliable and meaningful comparator group.
AVJennings’ TSR rank against
companies in the Index at
30 September
Percentage
vesting
< median
At the median
Nil
50%
> median but < 75th percentile
Pro-rata between 50th
and 75th percentiles
>=75th percentile
100%
The operation of the EPS hurdle is set out below.
AVJennings’ EPS growth rate
over the performance period
Percentage
vesting
< 5%
5%
5% – 10%
>=10%
Nil
50% of the allocation
for the hurdle
Pro-rata between 50%
and 100%
100% of the allocation
for the hurdle
The fair value of the EPS element of the shares is the market
value at grant date. The Monte Carlo Model is used to fair
value the TSR element. The Model simulates AVJennings’ TSR
and compares it against the ASX Small Industrials Index.
The Model takes into account historic dividends, share price
volatilities and the risk-free yield on an Australian Government
Bond at the grant date matching the remaining effective life
of 3 years.
The EPS hurdle was chosen as it provides a measure over
which executives have more direct control.
66 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
29. AUDITOR’S REMUNERATION
Amounts received or due and receivable by Ernst & Young (Australia) for:
An audit or review of the 30 June full-year and 31 December interim financial
reports of the Entity and other entities in the Group
– Share of audit or review costs of the financial reports of the
Consolidated Entity’s joint ventures
– Other services in relation to the Entity and any other entities in the Group
– non-audit related fees
Total auditor's remuneration
30. EARNINGS PER SHARE
2015
$
2014
$
264,288
249,832
–
2,869
128,190
1,030
392,478
253,731
Basic EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the Parent by the sum of
the weighted average number of ordinary shares outstanding during the year (adjusted for treasury shares) and the weighted
average number of ordinary shares, if any, that would be issued on conversion of all the dilutive potential ordinary shares into
ordinary shares.
The following reflects the income and share data used in the basic and diluted EPS computations:
Profit attributable to ordinary equity holders of the parent
34,385
18,782
2015
$’000
2014
$’000
Weighted average number of ordinary shares
Treasury shares
2015
Number
2014
Number
384,423,851
384,423,851
(3,502,401)
(4,221,605)
Weighted average number of ordinary shares for earnings per share
380,921,450
380,202,246
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
the date of authorisation of these Financial Statements.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 67
31. PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial statements for the Parent Entity show the following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Contributed equity
Reserves
Share-based payment reserve
Retained earnings
Total equity
Profit for the year
Total comprehensive income
2015
$’000
2014
$’000
51,839
215,125
51,729
215,015
6
6
6
6
160,436
160,436
1,283
53,400
1,173
53,400
215,119
215,009
–
–
–
–
(b) Guarantees entered into by the Parent Entity
The Parent Entity has not provided any financial guarantees other than those mentioned in notes 12(a), 12(c) 23(c) and 33.
(c) Contingent liabilities of the Parent Entity
Please refer to note 33 for details of the Parent Entity’s contingent liabilities.
32. COMMITMENTS
Operating lease commitments – Group as lessee
Operating leases include property, display homes, computer equipment leases and leases for motor vehicles provided under
novated leases. Certain property leases include inflation escalation and market review clauses. No renewal or purchase options
exist in relation to operating leases, and no operating leases contain restrictions on financing or other leasing activities.
Future minimum rentals payable under non-cancellable operating leases are as follows:
Operating leases
Commitments in relation to leases contracted for at the
reporting date but not recognised as liabilities:
Within one year
After one year, but not more than five years
Total operating leases
Represented by:
Non-cancellable operating leases
Cancellable operating leases
Total operating leases
2015
$’000
2014
$’000
1,867
691
2,092
1,655
2,558
3,747
2,268
290
3,087
660
2,558
3,747
68 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
33. CONTINGENCIES
35. SUMMARY OF SIGNIFICANT ACCOUNTING
Unsecured
Cross guarantees
The Parent Entity has entered into deeds of cross guarantee
in respect of the debts of certain of its controlled entities as
described in note 23.
Contract performance bond facilities
The Parent Entity has entered into Deeds of Indemnity with
various controlled entities to indemnify the obligation of
those entities in relation to the Contract performance bond
facilities. Details of these entities are set out in note 23.
Contingent liabilities in respect of certain performance bonds,
granted by the Group’s financiers, in the normal course of
business as at 30 June 2015, amounted to $21,134,000
(2014: $12,140,000). No liability is expected to arise.
Legal issues
From time to time a controlled entity defends actions served
on it in respect of rectification of building faults and other
issues. It is not practicable to estimate the amount, if any,
which the entity could be liable for in this respect. The
Directors anticipate that the resolution of any such matters
currently outstanding will not have a material effect on the
Group’s results.
Secured
Banking facilities
The Parent Entity has entered into a cross deed of covenant
with various controlled entities to guarantee the obligations
of those entities in relation to the banking facilities. Details of
these entities are set out in note 23.
Performance guarantees
Contingent liabilities in respect of certain performance
guarantees, granted by the Group bankers in the normal
course of business to unrelated parties, at 30 June 2015,
amounted to $6,977,000 (2014: $7,445,000). No liability is
expected to arise.
Financial guarantees
Financial guarantees granted by the Group’s bankers
to unrelated parties in the normal course of business at
30 June 2015, amounted to $2,801,000 (2014: $8,367,000).
No liability is expected to arise.
34. SIGNIFICANT EVENTS AFTER THE BALANCE
SHEET DATE
No matter or circumstance has arisen since 30 June 2015
that has significantly affected, or may significantly affect:
a) the Group’s operations in future financial years; or
b) the results of those operations in future financial years; or
c) the Group’s state of affairs in future financial years.
POLICIES
Basis of preparation
The Financial Report is a general purpose financial
report, which has been prepared in accordance
with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards
Board. The Financial Report has also been prepared on a
historical cost basis.
The Financial Report is presented in Australian Dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated.
a) Compliance with IFRS
The Financial Report also complies with the International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
b) New accounting standards and interpretations
(i) Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of
the previous financial year except as follows:
Amendments to Australian Accounting Standards – Offsetting
Financial Assets and Financial Liabilities (effective 1 January
2014 / applicable for Group 1 July 2014)
AASB 2012-3 adds application guidance to AASB 132
Financial Instruments: Presentation to address inconsistencies
identified in applying some of the offsetting criteria of AASB
132, including clarifying the meaning of “currently has a
legally enforceable right of set-off” and that some gross
settlement systems may be considered equivalent to net
settlement.
This amendment has no impact on the disclosure for the
Group.
(ii) Accounting Standards and Interpretation issued but
not yet effective
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
effective have not been adopted by the Group for the annual
reporting period ended 30 June 2015. These are outlined
below:
AASB 9 Financial Instruments (effective 1 January 2018 /
applicable for Group 1 July 2018)
AASB 9 includes requirements for the classification and
measurement of financial assets. It was further amended by
AASB 2010-7 to reflect amendments to the accounting for
financial liabilities.
These requirements improve and simplify the approach for
classification and measurement of financial assets compared
with the requirements of AASB 139.
AASB 9 also removes the volatility in profit and loss that was
caused by changes in the credit risk of liabilities elected to be
measured at fair value. This change in accounting means that
gains caused by the deterioration of an entity’s own credit
risk on such liabilities are no longer recognised in profit or
loss.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 69
35. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
b)
New accounting standards and interpretations
(continued)
Consequential amendments were also made to other
standards as a result of AASB 9, introduced by 2009-11 and
superseded by AASB 2010-7, AASB 2010-10 and AASB 2014-1
– Part E
The Group will review the classification of its existing financial
assets and liabilities in line with the standard.
IFRS 15 Revenue from Contracts with Customers: (effective
1 January 2018 / applicable for Group 1 July 2018)
IFRS 15 establishes principles for reporting useful information
to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from
an entity’s contracts with customers. It replaces AASB 111,
AASB 118 and related IFRIC Interpretations.
The Core principal of IFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those
goods or services. An entity recognises revenue in accordance
with that core principle by applying the following steps:
Step 1: Identify the contract(s) with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance
obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies
a performance obligation
The Group will review contracts it has with customers and
assess the disclosure requirements, if any, of these contracts.
c) Basis of consolidation
The Consolidated Financial Statements comprise the financial
statements of AVJennings Limited and its subsidiaries as at
30 June 2015. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. Specifically, the Group
controls the investee if, and only if, the Group has:
• Power over the investee (existing rights that give it the
current ability to direct the relevant activities of the
investee)
• Exposure, or rights, to variable returns from its involvement
•
with the investee
The ability to use its power over the investee to affect its
returns
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption, and
when the Group has less than a majority of the voting or
similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power
over an investee, including:
•
The contractual arrangement(s) with the other vote
holders of the investee
• Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights
•
The Group re-assesses whether or not it controls an investee
if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation
of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of
a subsidiary acquired or disposed of during the year are
included in the Consolidated Financial Statements from the
date the Group gains control until the date the Group ceases
to control the subsidiary.
Profit or loss and each component of other comprehensive
income (OCI) are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even
if this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All
intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If
the Group loses control over a subsidiary, it derecognises the
related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant
gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
The AVJ Deferred Employee Share Plan Trust was formed to
administer the Group’s employee share scheme. This Trust is
consolidated, as the substance of the relationship is that the
Trust is controlled by the Group. Shares held by the Trust are
disclosed as treasury shares and deducted from contributed
equity.
d) Business combinations
Business combinations are accounted for using the
acquisition method. The cost of an acquisition is the
aggregate of the consideration transferred measured at
acquisition date fair value and the amount of any non-
controlling interests in the acquiree. For each business
combination, the Group elects whether to measure the
non-controlling interests in the acquiree at fair value or at the
proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the
acquisition date.
If the business combination is achieved in stages, any
previously held equity interest is remeasured at its acquisition
date fair value and any resulting gain or loss is recognised in
profit or loss.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in
fair value recognised in profit or loss.
70 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
35. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
e) Joint operations
A joint operation is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights
to the assets and obligations for the liabilities of the joint
operation. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions
about the relevant activities require unanimous consent of
the parties sharing control. The proportionate interests in the
assets, liabilities, revenues and expenses of joint operations
have been recognised in the Financial Statements under the
appropriate headings. Details of the joint operations are set
out in note 25.
f)
Investments in associate and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee,
but is not control or joint control over those policies. Details
relating to the associate are set out in note 24(a).
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights
to the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
Details relating to joint ventures are set out in note 24(b).
The considerations made in determining significant influence
or joint control are similar to those necessary to determine
control over subsidiaries.
Investments in associate and joint ventures are accounted
for using the equity method.
Under the equity method, the investment in an associate or
a joint venture is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise changes
in the Group’s share of net assets of the associate or joint
venture since the acquisition date. Goodwill relating to the
associate or joint venture is included in the carrying amount
of the investment and is neither amortised nor individually
tested for impairment.
The Statement of Comprehensive Income reflects the Group’s
share of the results of operations of the associate or joint
venture. Any change in OCI of those investees is presented
as part of the Group’s OCI. In addition, when there has been
a change recognised directly in the equity of the associate
or joint venture, the Group recognises its share of such
changes, where applicable, in the Statement of Changes
in Equity. Dividends received from an associate or a joint
venture are recognised as a reduction in the carrying amount
of the investment. Unrealised gains and losses resulting from
transactions between the Group and the associate or joint
venture are eliminated to the extent of the interest in the
associate or joint venture, until such time as they are realised
by the associate or joint venture on consumption or sale.
The aggregate of the Group’s share of profit or loss of
associate and joint ventures is shown separately on the face
of the Statement of Comprehensive Income and represents
profit or loss after tax and non-controlling interests in the
associates and joint ventures.
The financial statements of the associate and joint ventures
are prepared for the same reporting period as the Group.
Where necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate or joint venture. At each reporting
date, the Group determines whether there is objective
evidence that the investment in the associate or joint venture
is impaired. If there is such evidence, the Group calculates
the amount of impairment as the difference between the
recoverable amount of the associate or joint venture and
its carrying value and recognises it in the Statement of
Comprehensive Income.
Upon loss of significant influence over the associate or joint
control over the joint venture, the Group measures and
recognises any retained investment at its fair value. Any
difference between the carrying amount of the associate or
joint venture upon loss of significant influence or joint control
and the fair value of the retained investment and proceeds
from disposal is recognised in profit or loss.
g) Plant and equipment
Plant and equipment is stated at historical cost less
depreciation and impairment.
Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
Plant, equipment, and motor vehicles
Motor vehicles under finance lease
Leasehold improvements
3-7 years
2-3 years
3-10 years
An asset’s carrying amount is written down to its recoverable
amount if the carrying amount is greater than the estimated
recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These are included in
profit or loss.
The assets’ useful lives and amortisation methods are
reviewed, and adjusted if appropriate, at each financial
year end.
Derecognition
An item of plant and equipment is derecognised upon
disposal or when no further future economic benefits are
expected from its use or disposal.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use
or sale are capitalised as part of the cost of the asset. All
other borrowing costs are expensed.
Borrowing costs consist of interest and other costs incurred
in connection with the borrowing of funds. Interest income on
borrowed funds pending their expenditure, is deducted from
borrowing costs eligible for capitalisation.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 71
35. SUMMARY OF SIGNIFICANT ACCOUNTING
k) Available-for-sale financial assets
POLICIES (continued)
i)
Intangible assets
Intangible assets acquired separately are measured at cost
on initial recognition. The cost of intangible assets acquired
in a business combination is their fair value as at the date
of the acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation
and accumulated impairment losses. The Group does not
capitalise any expenditure resulting in the creation of
internally generated intangible assets.
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever
there is an indication that the asset may be impaired. The
amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least
at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate,
and are treated as changes in accounting estimates and
adjusted on a prospective basis. The amortisation expense
on intangible assets with finite lives is recognised in the
Statement of Comprehensive Income in the expense category
that is consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised,
but are tested for impairment annually. The assessment of
indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change
in useful life from indefinite to finite is made on a prospective
basis.
j)
Inventories
Inventories are stated at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the
sale. Estimates of net realisable value are based on the most
recent evidence available at the time the estimates are made,
of the amount the inventories are expected to realise and the
estimate of costs to complete. Refer to note 20(ii).
Development projects and land
Cost includes the costs of acquisition, development,
borrowings and all other costs directly related to specific
projects. Borrowing and holding costs such as rates and taxes
incurred after completion of development and construction
are expensed. Costs expected to be incurred under penalty
clauses and rectification provisions are also included.
Construction contracts
Construction work-in-progress is stated at the aggregate
of contract costs incurred to date plus recognised profits
less recognised losses and progress billings. Contract costs
include all costs directly related to specific contracts, and
costs that are specifically chargeable to the customer under
the terms of the contract. The stage of completion is measured
using the percentage of completion method.
The available-for-sale financial asset is an investment in an
unlisted property fund. Such assets are included in non-
current assets unless the investments mature or management
intends to dispose of the investments within 12 months of
the end of the reporting period. Investments are designated
as available-for-sale if they do not have fixed maturities and
fixed or determinable payments and management intends to
hold them for the medium to long term.
The Company intends to hold the property fund units (refer
to note 8) until the development activity being undertaken is
completed, and all products sold.
Recognition and derecognition
Purchases and sales of financial assets are recognised on
trade-date; the date on which the group commits to purchase
or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of
ownership.
When securities classified as available-for-sale are sold,
the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit or loss as
gains and losses from investment securities.
Measurement
These comprise units in unlisted property funds that do not
have an active market. As the range of reasonable fair values
can be significant and these estimates cannot be made
reliably, the units are measured at cost less impairment.
Impairment
The Group assesses at the end of each reporting period
whether there is objective evidence that a financial asset is
impaired. A financial asset is impaired and impairment losses
incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after initial
recognition of the asset (a ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows
of the financial asset that can be reliably estimated. In the
case of equity investments classified as available-for-sale,
a significant or prolonged decline in the fair value of the
security below the cost is considered an indicator that the
assets are impaired.
If there is objective evidence of impairment for an available-
for-sale financial asset, the cumulative loss – measured as
the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset
previously recognised in profit and loss, is taken to profit and
loss. Cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit and loss
in the period.
Impairment losses on equity instruments previously
recognised in profit and loss are not reversed through profit
or loss in a subsequent period. Any increase in fair value
subsequent to an impairment loss is recognised in other
comprehensive income.
72 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
35. SUMMARY OF SIGNIFICANT ACCOUNTING
Short term employee benefit obligations
POLICIES (continued)
l)
Trade and other receivables
Trade receivables are recognised at the amount invoiced less
provision for impairment. Trade receivables are generally due
for settlement between 30 and 180 days.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written-
off by reducing the carrying amount directly. An allowance
account (provision for impairment of trade receivables) is
used when there is objective evidence that the Group will
not be able to collect all amounts due. The amount of the
impairment allowance is the difference between the carrying
amount of the receivable and the present value of estimated
future cash flows, discounted at the effective interest
rate. Cash flows relating to short term receivables are not
discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit
or loss. When a trade receivable for which an impairment
allowance has been recognised becomes uncollectible in a
subsequent period, it is written-off against the allowance
account. Subsequent recoveries of amounts previously written
off are recognised in profit or loss.
m) Cash and cash equivalents
Cash and cash equivalents in the Consolidated Statement of
Financial Position comprise cash at bank and on hand and
short term deposits with a maturity of three months or less,
which are subject to an insignificant risk of changes in value.
For the purpose of the Consolidated Statement of Cash
Flows, cash and cash equivalents consist of cash and
cash equivalents as defined, net of bank overdrafts. Bank
overdrafts are included within interest-bearing loans and
borrowings as part of current liabilities in the Consolidated
Statement of Financial Position.
n)
Interest-bearing loans and borrowings
Loans and borrowings are initially recognised at the fair
value of the consideration received less directly attributable
transaction costs. The difference between the proceeds (net of
transaction costs) and the redemption amount is recognised
in profit and loss over the period of the borrowings using the
effective interest method. Fees paid on establishment of loan
facilities are capitalised as a prepayment and amortised over
the period of the facility.
Borrowings are classified as current liabilities unless there
is an unconditional right to defer settlement for at least 12
months after the reporting date.
o) Provisions
General
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources will be required to
settle the obligation and a reliable estimate can be made of
the amount of the obligation. When the Group expects some
or all of a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognised as a
separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented
in the Statement of Comprehensive Income net of any
reimbursement.
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within
12 months of the reporting date are recognised in respect
of employees’ services up to the reporting date. They are
measured at the amounts expected to be paid when the
liabilities are settled. Expenses for non-accumulating sick
leave are recognised when the leave is taken and are
measured at the rates paid or payable.
Long term employee benefit obligations
The Group recognises a liability for long service leave and
annual leave which is not expected to be settled within 12
months of the reporting date. It is measured as the present
value of expected future payments to be made in respect
of services provided by employees up to the reporting date
using the project unit credit method. 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 corporate bonds with terms to maturity that match,
as closely as possible, the estimated future cash outflows.
p) Share-based payments
Certain Executives of the Group receive remuneration in the
form of share-based payments, whereby they render services
as consideration for equity instruments (equity-settled
transactions).
In previous years, share-based remuneration was provided via
the AVJ Deferred Employee Share Plan. Information relating to
the plan is set out in note 28.
The original cost of equity-settled transactions is treated
as a reduction in share capital and the underlying shares
identified separately as treasury shares. The fair value at
the date when the grant is made is determined using an
appropriate valuation model. That fair value is expensed
over the period in which the performance and/or service
conditions are fulfilled with a corresponding increase in
share-based payment reserve in equity. The cumulative
expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Group’s
best estimate of the number of equity instruments that
will ultimately vest. The expense or credit in the Statement
of Comprehensive Income represents the movement in
cumulative expense recognised between the beginning and
end of that period.
In respect of shares forfeited, no further amounts are
expensed. The cumulative amounts relating to non- market
based measures expensed to the date of forfeiture are
reversed.
For the current year, share-based remuneration will be
provided by an Issue of Rights. The arrangements were varied
by the Board to improve the efficiency of the scheme, reduce
the cost to the Company and increase the value to Executives
to achieve the retention objective and drive performance.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 73
35. SUMMARY OF SIGNIFICANT ACCOUNTING
Construction contracts
POLICIES (continued)
p) Share-based payments (continued)
The fair value of the rights at the date of the grant is
determined using an appropriate valuation model. That fair
value is expensed over the period in which the performance
and/or service conditions are fulfilled with a corresponding
increase in share-based payment reserve in equity. The
cumulative expense recognised for equity-settled transactions
at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the
Group’s best estimate of the number of equity instruments
that will ultimately vest. The expense or credit in the Statement
of Comprehensive Income represents the movement in
cumulative expense recognised between the beginning and
end of that period.
q) Leases
Leases of plant and equipment where the Group, as lessee,
has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at
the lease’s inception at the fair value of the leased property
or, if lower, the present value of the minimum lease payments.
The corresponding rental obligations, net of finance charges,
are included in other short term and long term payables. Each
lease payment is allocated between the liability and finance
cost. The finance cost is charged to the profit or loss over
the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for each
period. The plant and equipment acquired under finance
leases is depreciated over the asset’s useful life or over the
shorter of the asset’s useful life and the lease term if there is
no reasonable certainty that the Group will obtain ownership
at the end of the lease term.
Leases in which a significant portion of the risks and rewards
of ownership are not transferred to the Group as lessee
are classified as operating leases. Payments made under
operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis
over the period of the lease.
Lease income from operating leases where the Group is a
lessor is recognised in income on a straight-line basis over
the lease term. The respective leased assets are included in
the Consolidated Statement of Financial Position based on
their nature.
r) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Revenue is recognised for the major
business activities as follows:
Development projects and land sales
Revenue from the sale of land, houses and apartments is
recognised when the significant risks, rewards of ownership
and effective control have been transferred to the buyer. This
has been determined to occur on settlement.
Revenue from land sales is recognised prior to settlement
when a signed unconditional contract for sale exists,
the significant risks, rewards of ownership and effective
control have been transferred to the buyer, and there is no
management involvement to the degree usually associated
with ownership.
Contract revenue and costs are recognised by reference
to the stage of completion of the contract. Depending on
the nature of the contract, this is measured based on the
proportion of contract costs incurred for work performed to
date relative to the estimated total contract costs; completion
of physical proportion of the contract work; or surveys of
work performed. Where the outcome of a contract cannot
be reliably estimated, contract costs are recognised as an
expense as incurred, and where it is probable that the costs
will be recovered, revenue is recognised to the extent of costs
incurred. Where it is probable that a loss will arise from a
construction contract, the excess of total costs over revenue is
recognised as an expense immediately.
Interest revenue
Revenue is recognised as interest accrues using the effective
interest rate method.
Management fees
Revenue is recognised upon delivery of the services.
Dividends
Dividends are recognised as revenue when the right to receive
payment is established.
s)
Income tax
Current income tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted
at the reporting date in the countries where the Group
operates and generates taxable income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the Statement of
Comprehensive Income.
Deferred income tax is provided using the liability method on
all temporary differences at the reporting date between the
tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are
recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and
unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available
to allow all or part of the deferred income tax asset to be
utilised. Unrecognised deferred income tax assets are re-
assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to be applied in the year when the
asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively
enacted at the reporting date.
74 | AVJENNINGS LIMITED · ABN 44 004 327 771
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
Derivative financial instruments are initially recognised at fair
value on the date a derivative contract is entered into and
are subsequently remeasured to their fair value at the end of
each reporting period. Derivative financial instruments are not
held for trading purposes.
v) Trade and other payables
Trade and other payables represent liabilities for goods
and services provided to the Group prior to the end of the
financial year which are unpaid. The amounts are unsecured
and are usually paid within 30 to 60 days of recognition.
w) Earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the company,
excluding any costs of servicing equity other than
ordinary shares
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and
excluding treasury shares.
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account:
•
•
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares,
and
the weighted average number of additional ordinary
shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
x) Contributed equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the Company’s equity
instruments, for example as the result of a share-based
payment plan, the consideration paid, including any directly
attributable incremental costs is deducted from equity
attributable to the owners of AVJennings Limited as treasury
shares.
Shares held by the AVJ Deferred Employee Share Plan are
disclosed as treasury shares and deducted from contributed
equity.
35. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
s)
Income tax (continued)
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.
Tax consolidation
AVJennings Limited and its wholly-owned controlled entities
implemented the Tax Consolidation Legislation as of 1 July
2002.
The head entity, AVJennings Limited, has entered into an
agreement with its wholly-owned subsidiary, AVJennings
Properties Limited, under which AVJennings Properties Limited
will account for the current and deferred tax amounts of the
controlled entities in the Tax Consolidated Group. The Group
has applied the group allocation approach in determining the
appropriate amount of current taxes and deferred taxes to
allocate to the members of the Tax Consolidated Group.
In addition to its own current and deferred tax amounts,
AVJennings Properties Limited also recognises the current
tax liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed from
controlled entities in the Tax Consolidated Group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as amounts
receivable from, or payable to, other entities in the Group.
t) Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
• when the GST incurred on a sale or purchase of assets or
services is not payable to or recoverable from the taxation
authority, in which case the GST is recognised as part
of the revenue or as part of the cost of acquisition of the
asset or the expense item as applicable.
receivables and payables, which are stated with the
amount of GST included.
•
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the Consolidated Statement of Financial Position.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.
Cash flows are included in the Consolidated Statement of
Cash Flows on a gross basis and the GST component of cash
flows arising from investing and financing activities, which
is recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
u) Derivative financial instruments
The Group uses various techniques, including interest rate
swaps, caps and collars to hedge its risk associated with
interest rate fluctuations. These derivatives do not qualify for
hedge accounting and changes in fair value are recognised in
profit and loss.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 75
35. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
(iii) Translation of Group Companies’ functional currency to
presentation currency
y) Foreign currency translation
(i) Functional and presentation currency
Both the functional and presentation currency of AVJennings
Limited and its Australian subsidiaries is Australian Dollars ($).
A controlled entity, AVJ Hobsonville Pty Limited, has a branch
in New Zealand whose functional currency is New Zealand
Dollars which is translated to the presentation currency for
consolidation reporting.
(ii) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates at the dates of
the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rates are generally
recognised in profit and loss. They are deferred in equity if
they are attributable to part of the net investment in a foreign
operation.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair
value was determined. The gain or loss arising on translation
of non-monetary items measured at fair value is treated in line
with the recognition of gain or loss on change in fair value of
the item (i.e. translation differences on items whose fair value
gain or loss is recognised in other comprehensive income
or profit or loss are also recognised in other comprehensive
income or profit or loss, respectively).
The results and financial position of foreign operations that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
• assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
income and expenses for each Statement of
Comprehensive Income are translated at average
exchange rates; and
•
• all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities are
recognised in other comprehensive income. When a foreign
operation is sold or any borrowings forming part of the net
investment are repaid, the associated exchange differences
are reclassified to profit or loss, as part of the gain or loss on
sale.
z) Comparative figures
To enable meaningful comparison, some comparatives
have been reclassified to conform with the current year’s
presentation.
76 | AVJENNINGS LIMITED · ABN 44 004 327 771
Directors’ Declaration
In accordance with a resolution of the Directors of AVJennings Limited, we state that:
1) In the opinion of the Directors:
i) the Consolidated Financial Statements and Notes are in accordance with the Corporations Act 2001, including;
a) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of their performance for the year
ended on that date; and
b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
Corporations Regulations 2001;
ii) the Consolidated Financial Statements and Notes also comply with International Financial Reporting Standards as
disclosed in note 35(a); and
iii) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2) This declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ended 30 June 2015.
3) In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members
of the Closed Group identified in note 23 will be able to meet any obligations or liabilities to which they are or may become
subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Simon Cheong
Director
28 September 2015
Peter Summers
Director
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 77
Independent auditor’s report to the shareholders
of AVJennings Limited
Report on the financial report
Independence
We have audited the accompanying financial report of
AVJennings Limited, which comprises the consolidated
statement of financial position as at 30 June 2015, the
consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’
declaration of the consolidated entity comprising the
company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards
and the Corporations Act 2001 and for such internal controls
as the directors determine are necessary to enable the
preparation of the financial report that is free from material
misstatement, whether due to fraud or error. In Note 35(a), the
directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that the
financial statements comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance
about whether the financial report is free from material
misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers
internal controls relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness
of the entity’s internal controls. An audit also includes
evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the
financial report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
In conducting our audit we have complied with the
independence requirements of the Corporations Act 2001.
We have given to the directors of the company a written
Auditor’s Independence Declaration, a copy of which is
included in the directors’ report.
Opinion
In our opinion:
a. the financial report of AVJennings Limited is in
accordance with the Corporations Act 2001,
including:
i
giving a true and fair view of the consolidated
entity’s financial position as at 30 June 2015 and
of its performance for the year ended on that date;
and
ii
complying with Australian Accounting Standards
and the Corporations Regulations 2001; and
b. the financial report also complies with International
Financial Reporting Standards as disclosed in Note
35(a).
Report on the remuneration report
We have audited the Remuneration Report included in pages
16 to 24 of the directors’ report for the year ended 30 June
2015. 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 responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of AVJennings Limited
for the year ended 30 June 2015, complies with section 300A
of the Corporations Act 2001.
Ernst & Young
Mark Conroy
Partner
Sydney
28 September 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
78 | AVJENNINGS LIMITED · ABN 44 004 327 771
Shareholder Information
As at 15 September 2015
1. NUMBER OF SHAREHOLDERS AND DISTRIBUTION OF EQUITY SECURITIES
Range of Holdings of Ordinary Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total number of holders
Number of holders of less than a marketable parcel
2. SUBSTANTIAL SHAREHOLDERS
As disclosed by latest notices received by the Company:
Name
SC Global Developments Pte Ltd
IOOF Holdings Limited
Australian
Securities
Exchange
Singapore
Exchange
Total
553
779
290
488
92
2,202
212
665
1,550
512
463
34
3,224
517
1,218
2,329
802
951
126
5,426
729
Ordinary
Shares
192,318,030
43,897,871
%
50.03
11.42
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 79
Shareholder Information
As at 15 September 2015
3. TWENTY LARGEST SHAREHOLDERS ON THE AUSTRALIAN REGISTER
Name
The Central Depository (Pte) Ltd
National Nominees Ltd
JP Morgan Nominees Australia Ltd
Citicorp Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
John E Gill Operations Pty Ltd
John E Gill Trading Pty Ltd
Citicorp Nominees Pty Limited
Gillcorp Pty Limited
AET SFS Pty Ltd
HSBC Custody Nominees (Australia) Ltd-NT Comnwlth Super Corp
HSBC Custody Nominees (Australia) Ltd
HSBC Custody Nominees (Australia) Ltd – A/c 3
Luton Pty Ltd
Horrie Pty Ltd
Gillcorp Pty Limited
AET SFS Pty Ltd
D R M Gill & J M Gill (Gill Super Fund A/c)
Merril Lynch (Australia) Nominees Pty Ltd
Di Iulio Homes Pty Ltd (Di Iulio Super Fund A/c)
Ordinary
Shares
%
225,010,211
58.53
28,571,511
16,905,350
13,083,908
10,784,967
5,459,927
5,433,222
5,223,089
4,738,416
4,109,717
3,373,269
3,037,755
2,677,934
2,100,000
2,000,000
1,475,123
1,296,036
1,242,832
1,227,546
1,178,700
7.43
4.40
3.40
2.81
1.42
1.41
1.36
1.23
1.07
0.88
0.79
0.70
0.55
0.52
0.38
0.34
0.32
0.32
0.31
Total
338,929,513
88.17
80 | AVJENNINGS LIMITED · ABN 44 004 327 771
Shareholder Information
As at 15 September 2015
4. TWENTY LARGEST SHAREHOLDERS ON THE SINGAPORE REGISTER
Name
UOB Nominees (2006) Pte Ltd
United Overseas Bank Nominees Pte Ltd
Trimount Pte Ltd
Oei Hong Leong Foundation Pte Ltd
UOB Kay Hian Pte Ltd
DBS Nominees Pte Ltd
Lim Chin Tiong or Sim Lye Wan
Tsang Sze Hang
Rowland Wong Kwok Ho
OCBC Nominees Singapore Pte Ltd
Vesmith Investments Pte Ltd
Pansbury Investments Pte Ltd
Raffles Nominees (Pte) Ltd
Hexacon Construction Pte Ltd
Chng Bee Suan
Teo Chiang Long
HSBC (Singapore) Nominees Pte Ltd
Wee Kim Choo @ Elizabeth Sam
Lim Kong Wee (Lin Guangwei)
Goh Choon Eng
Total
Ordinary
Shares
%
179,235,872
46.62
12,129,414
1,659,940
1,462,112
1,297,345
1,292,065
1,120,420
837,396
738,833
639,312
634,876
496,160
484,532
368,480
312,320
250,648
225,953
209,349
200,974
188,905
3.16
0.43
0.38
0.34
0.34
0.29
0.22
0.19
0.17
0.17
0.13
0.13
0.10
0.08
0.07
0.06
0.05
0.05
0.05
203,784,906
53.01
Percentages are calculated on the total number of shares on issue.
5. VOTING RIGHTS
Ordinary Shareholder
On a show of hands, every member present in person or by representative, proxy or attorney shall have one vote, and on a poll
each fully paid share shall have one vote.
6. TOTAL NUMBER OF SHARES
The total number of shares on issue and listed on the Australian Securities Exchange is 384,423,851.
AVJENNINGS LIMITED · ANNUAL REPORT 2015 | 81
Company Particulars
SHARE REGISTRY
Australia
Boardroom Pty Limited
Level 2, Grosvenor Place, 225 George Street
Sydney NSW 2000
Telephone: 1300 737 760 (within Australia)
+61 2 9290 9600 (outside Australia)
Singapore
The Central Depository (Pte) Ltd
11 North Buona Vista Drive #06-07
The Metropolis Tower 2
Singapore 138589
Telephone +65 6535 7511
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company
will be held at:
Metropol Meeting Room 4
Level 3, Crown Metropol Melbourne
8 Whiteman Street
Southbank Vic 3006
Friday, 20 November 2015 at 10.00am.
DIVIDENDS
Dividends paid in the year under review:
• Final Dividend of $0.02 for FY14 paid on 18 September 2014
• Interim Dividend of $0.01 for FY15 paid on 8 April 2015
DIRECTORS
Mr Simon Cheong
Mr Jerome Rowley
Mrs Elizabeth Sam
Mr Bobby Chin
Mr Teck Poh Lai
Mr Bruce Hayman
Mr David Tsang
Mr Peter Summers
COMPANY SECRETARY
Mr Carl Thompson
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
Level 4, 108 Power Street
Hawthorn Vic 3122
Telephone +61 3 8888 4800
AUDITORS
Ernst & Young
680 George Street
Sydney NSW 2000
BANKERS
Commonwealth Bank of Australia Ltd
(Bankwest Division)
DBS Bank
HSBC Bank Australia Ltd
National Australia Bank Ltd
United Overseas Bank Ltd
STOCK EXCHANGE LISTINGS
Australia
The Company is listed on:
The Australian Securities Exchange
Level 4, 525 Collins Street
Melbourne VIC 3000
Singapore
The Company’s shares are also quoted and traded on:
The Singapore Exchange
11 North Buona Vista Drive #06-07
The Metropolis Tower 2
Singapore 138589
through SGX Globalquote (formerly known as the Central
Limit Order Book System (CLOB)).