AVJennings
Annual Report 2019

Plain-text annual report

Annual Report 2019 AVJennings Limited ABN 44 004 327 771 Housing matters. Community matters. 2 We’re always looking to improve what we do and offer people more. Stenio Orlandi, COO AVJennings Limited - Annual Report 20193 Contents. COMPANY OVERVIEW Chairman’s Report FY19 Highlights Property Portfolio Project Pipeline Chief Executive Officer’s Report Creating and Supporting Communities Our Communities DIRECTORS’ REPORT Directors’ Report 5 7 8 9 11 12 14 16 31 30 FINANCIAL STATEMENTS 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 Members of AVJennings Limited 85 34 84 33 32 ADDITIONAL INFORMATION Shareholder Information Company Particulars 91 94 COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONAVJennings Limited - Annual Report 20194 We will continue to focus on delivering quality, affordable housing... Simon Cheong, Chairman AVJennings Limited - Annual Report 2019Chairman’s Report. 5 Dear fellow shareholders, on behalf of the Board of Directors, I am pleased to present our 2019 Annual Report. I would like to begin by thanking you for your investment and commitment to AVJennings. The last year has been challenging for property developers, investors and purchasers alike, but it has been pleasing to have the continued support of our shareholders. The tougher than expected market conditions, particularly in Sydney and Melbourne, where transaction volumes and pricing fell the furthest, were well documented in the financial press and persisted through to the latter part of the financial year. However, we believe that the market has reached its bottom and there are reliable early indicators of recovery. In this challenging year, the Company recorded revenues of $296.5 million and profit before tax of $23.8 million. Our margins held up well, even increasing slightly to 24.5%. Cash flows were weaker than in the prior year, reflecting lower sales. As a predominantly horizontal developer we are able to regulate the volume of production in line with market conditions. Although we reduced work-in- progress (WIP) by 18% overall, we were nevertheless able to bring a number of projects to production stage. As at 30 June 2019, we had 1,600 lots in WIP which will enable us to respond to a strengthening market and provide us with a solid platform for FY20. Our balance sheet remains strong, with net assets of $396 million. Our debt to assets gearing ratio remains well within the Company’s target range of 15- 35% and continues to follow the traditional pattern of rising with production in the first half, before declining with stronger settlements in the second. The quality and quantity of our land bank remains one of our long-term goals for a sustainable business. While the land bank remained steady at 9,531 lots under control as of 30 June 2019, it will increase significantly to ~13,500 lots once the recently announced transaction relating to a significant master-planned project at Caboolture in Queensland completes. The Caboolture project between Brisbane and the Sunshine Coast will underpin growth and provide a solid base for the Queensland business for a long time. More recently, we announced a development agreement with Victoria’s Department of Housing for the renewal of an ageing public housing estate in Brunswick West, an inner Melbourne suburb. Sydney remains a difficult market in which to secure sizeable land parcels, but our acquisitions team continues to assess and bid on potential targets. Recent media commentary suggesting the residential housing market is past its low point is consistent with our internal lead indicator data and provides comfort that conditions are slowly improving. This was a factor in the Board declaring a 1.5 cent fully franked final dividend, taking dividends for the year to 2.5 cents per share. Fundamental drivers of demand remain in place, with continued population growth in our major markets, continuing low interest rates, and a relatively stable economic and employment environment. This bolsters our confidence in the future. We will continue to focus on delivering quality, affordable housing in our major markets to maintain our exposure to the most stable part of the residential market and are excited about the year ahead and the opportunities before us. I would like to express thanks to my fellow Board members for their dedication during the year, including our new Non- Executive Director, Philip Kearns AM. We are delighted to have a person of Philip’s calibre join our Board. His broad industry experience, energy and enthusiasm will complement the Board’s existing mix of experience and skills. On behalf of the Board, I would like to thank our management, employees, partners and shareholders for their continuing support and commitment. Simon Cheong Chairman AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION6 AVJennings Limited - Annual Report 20192019 Highlights. 7 Financials. Inventory. Revenue -20.3% (cid:31) WIP Pipeline $296.5m ~ 1,600lots Capital Management. Total fully franked dividends 2.5 cps Profit before tax -47.1% (cid:31) $23.8m Diversified mix of land, housing and apartments + 970 settlements Net debt $182m Cash receipts from customers Under control Gearing $355.9m 9,531 lots YOY Comparison Revenue Profit before tax Profit after tax Gross Margins Net Tangible assets NTA per Share EPS Dividend fully franked 26.6% (inside 15-35% target range) FY19 $296.5m $23.8m $16.4m 24.5% $393.5m $0.97 4.1 2.5 FY18 $372.2m $45.1m $31.3m 24.0% $396.2m $1.00 8.1 5.0 %change (20.3%) (47.1%) (47.6%) 0.5pp (0.7%) (3.4%) (49.7%) (50%) AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION8 Property Portfolio. Net funds employed by region. Number of lots at 30 June 2019. 2% WA 10% SA 16% NZ 30% NSW QLD 18% VIC 24% Project locations. WA VIVEASH SUBIACO PERTH FERNDALE KARDINYA SA EYRE ST CLAIR ADELAIDE MURRAY BRIDGE GOOLWA NORTH 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 QLD NSW VIC 211 738 1,855 1,956 2,237 2,534 Lots WA NZ SA NSW QLD VIC 9,531 Total MACKAY CALOUNDRA CABOOLTURE BRIDGEMAN DOWNS BRISBANE ROCHEDALE LEICHHARDT BETHANIA RIPLEY & DEEBING HEIGHTS JIMBOOMBA SANDY BEACH HOBSONVILLE POINT AUCKLAND OREWA WARNERVALE HAMLYN TERRACE CENTRAL COAST KOGARAH SYDNEY COBBITTY SPRINGFARM ELDERSLIE HUNTLEY NZ WOLLERT MERNDA WILLIAMSTOWN MELBOURNE AVJennings Limited - Annual Report 2019 Project Pipeline. 9 Project pipeline as at 30 June 2019. Pre-delivery phase Development phase Communities Remaining Pre FY2020 FY2021 FY2022 FY2023 Post no. of lots. S E L A W H T U O S W E N D N A L S N E E U Q Argyle, Elderslie Magnolia, Hamlyn Terrace Evergreen, Spring Farm (South) Evergreen, Spring Farm (East Village) Seacrest, Sandy Beach Arcadian Hills, Cobbitty Stages 1 - 8 Arcadian Hills, Cobbitty Stages 9 & 10 Arcadian Grove, Cobbitty Warnervale Evergreen, Spring Farm Kogarah (apartment project) Huntley Creekwood, Caloundra Glenrowan, Mackay Essington Rise, Leichhardt Parkside, Bethania Anise, Bridgeman Downs Arbor, Rochedale 2 Riverton, Jimboomba Deebing Springs, Deebing Heights Arbor, Rochedale 1 Cadence, Ripley D Buckley B, Hobsonville Point W E N N A L A E Z Ara Hills, Orewa I A Lyndarum, Wollert R O T C V I Lyndarum North, Wollert JV Waterline Place, Williamstown H T U O S A I L A R T S U A N R E T S E W A I L A R T S U A Pathways, Murray Bridge River Breeze, Goolwa North St Clair Eyre at Penfield Indigo China Green, Subiaco Fine China Precinct Viridian China Green, Subiaco Fine China Precinct The Heights, Kardinya Viveash Parkview, Ferndale • Excludes 230 lots at Mernda, Victoria (conditional) • Excludes 13 remnant lots 146 50 91 441 24 177 25 57 595 60 56 231 70 177 5 90 63 55 1,196 210 79 292 156 582 95 1,872 336 53 80 284 1,428 80 14 85 4 28 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 10 We want to make sure that our customers’ lives are all the better for the housing and communities they live in. Peter Summers, CEO AVJennings Limited - Annual Report 201911 None of this can be achieved without significant support and effort. I thank my executive team and all AVJennings staff for their enormous efforts during a challenging year. I am sure we are all looking forward to seeing the results of those efforts moving forward. I also thank the Board, all our business partners and our shareholders for their support over the past 12 months. Peter Summers CEO Chief Executive Officer’s Report. The Chairman’s Report and Review of Operations cover extensively a number of matters. They address the market conditions and our focus on achieving settlements from pre-sales on hand at the start of FY19. They also cover in detail our balance sheet and our land bank. In particular they highlight two significant transactions that have been entered into since year end - our partnership at Brunswick West with the Victorian Government and our Heads of Agreement in relation to around 3,500 lots at Caboolture in Queensland. They also talk to a growing confidence that market conditions are improving, especially in the key markets of Melbourne and Sydney. That growing confidence matches well with the advancements we have made in many projects across regions and particularly in Auckland and Queensland. What I’d like to address in my Report does not go over these matters again, but talks to our commitment to long term strategy and long term sustainable success. Whilst market conditions made new sales challenging for much of FY19, there was still considerable activity within the industry as development occurred as a consequence of strong sales in previous years. Therefore, the costs, and mainly availability, of trades and materials was still problematic and achieving completion of relevant stages was not without its challenges. Restraints on availability of finance to buyers also raised risks in achieving settlements. I have no doubt our outcomes in terms of completions and settlements reflect a trust in our brand, our investment in improving our skills base across the business, our investment in our systems, and our belief in fostering relationships with suppliers and business partners. Likewise, whilst Brunswick West and Caboolture West are significant as individual projects, it is how they were achieved that is especially rewarding. Both required, and will continue to require, significant effort to advance them to projects that contribute to our bottom line. They show the type of long-term vision that is required to ensure the Company is well placed for the future. The most important aspect of any business is people. They, together with our brand, our values and our commitment to why we exist ultimately defines AVJennings. Downturns test many things. They test the quality of your projects. They test your balance sheet. They test your systems and methods. But more importantly, they test people, they test relationships, and they test your brand. I’m proud to say we have come through FY19 well in response to these tests. At a time when trust is even more important to buyers, AVJennings was highly commended for being one of the most trusted brands in Australia in a public survey conducted by the Reader’s Digest trusted brands program. We continue to invest in both our people and our key business relationships. This investment isn’t just aimed at preserving what has been established over 87 years since 1932. It is designed to add to that through a commitment to innovation and being ready for what is always a changing world. We also continue to stay true to our values and the reason we exist. We truly believe Housing Matters, Community Matters. We want to make sure that our customers’ lives are all the better for the housing and communities they live in. And true to that, we continue to invest in our relationships with the wider community, whether that be supporting our staff in their own community endeavours and through direct partnerships with great organisations such as the Steve Waugh Foundation. So, whilst we can focus on the numbers in this Annual Report, and the short-term aspects in particular, I do believe FY19 will prove in time to have played a crucial part in AVJennings achieving its long-term goals. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 12 Committed to Creating and Supporting Communities. We are proud to know so many of our staff give so much of themselves to the community. David Lowden, Head of Community It is true that the world is a more complex place and we often hear from those around us about never seeming to have enough time. Our societies are changing and the pace of change seems to be ever increasing. But looking at this through a different lens can also be seen as the world being more diverse, with our lives offering us more choice. Our communities are becoming more diverse and we benefit from that diversity in so many ways as new cultures bring everything from new ideas, food and lifestyles. As our communities change, we too need to understand those changes and incorporate into our communities and into our housing choices those features that are required to meet those changes, and to allow the positives of those changes to thrive. And whilst much evolution occurs, so much stays the same. As busy as our lives have become, we want that sense of calm when we arrive home. We want our individualism to shine through as the world gets smaller and differences start to blend. We want to feel safe but we don’t want isolation. We want to be part of thriving and vibrant communities. to meet each other, while retaining individual privacy and personal security. Community matters. It matters because feeling like you belong to a community is so important for every individual’s wellbeing and that has flow on effects for society in general. Another constant in this ever changing world is the Australian and New Zealand pride in lending a hand to those who need it. We are two nations who are renown for their generousity. Often this is in response to major events such as natural disasters. But most of this occurs every day, in all sorts of ways. At AVJennings, while we work hard to make our housing estates great places to live, we also want to contribute to the broader community by supporting various groups that align with our values and make a positive contribution to society. There is no greater example of this than Neale Daniher who has selflessly raised money and awareness for sufferers of Motor Neurone Disease (MND) since being diagnosed with it himself in 2014. Daniher won the 2019 Victorian of the Year Award, proudly supported by AVJennings. in the Women’s National Basketball League and the Queensland Firebirds in the Super Netball League. And although former Australian netball captain Laura Geitz has retired her Firebirds’ bib, we are delighted she remains part of the AVJennings’ team as a company ambassador, alongside another former national team captain, Steve Waugh. Both are highly respected figures in the community, not only for their superb sporting careers, but because they are excellent role models. We were also pleased to welcome St Kilda Football Club player ambassador Jade Gresham who is himself a role model, particularly for people of Indigenous heritage. Gresham will be instrumental in further improving our knowledge of Aboriginal Australian culture. As part of our commitment to develop diverse communities, we became a major sponsor of the inaugural RunWest festival in western Sydney, which was established to celebrate the diversity of the region and to encourage an active lifestyle. The event attracted almost 7,000 people with more than 300 people helping to stage the event as part of the AVJennings Volunteer Workforce. We take the time to masterplan our communities so that it is easier for people Our Company has been a long-standing champion of women’s sport through our partnerships with the Melbourne Boomers On the topic of volunteers, two of our staff members were part of the support crew for the Puka Up ride that raises awareness AVJennings Limited - Annual Report 2019 13 of mental health issues. AVJennings was pleased to again be able to partner with mental health advocate Wayne Schwass to help reduce the number of people who take their own life each year. Helping those in need is what the Steve Waugh Foundation (SWF) does day in and day out. The Foundation provides grants and much-needed equipment to the families of children and young people suffering from diseases so rare that they slip ‘between the cracks’ of the health care support system. AVJennings was the inaugural partner of the Foundation and we are pleased to be able to continue to support its great work. And it’s not just through direct AVJennings support. For example, for the past 10 years, many AVJennings staff, their families and friends have competed in the Sydney City to Surf challenge, raising over $125,000 for SWF. Overall, support from AVJennings to SWF has reached well over $1 million. We are also proud to know so many of our staff give so much of themselves to the community, especially as volunteers and where possible we support them in these endeavours. For AVJennings, contributing to the Community is not a box ticking exercise in corporate social responsibility, it’s at the core of everything we do. Proud sponsors of AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 14 Our Communities. New South Wales. New South Wales has experienced softer market conditions in the last year after its record highs of the last few years. However, there has been recent signs of a market recovery. We expect demand to increase for quality, affordable homes in the areas where we have residential communities. AVJennings has three projects in the south-west corridor of Sydney as well as a dream lifestyle neighbourhood at Hamlyn Terrace on the Central Coast. Queensland. Queensland is set to become a significant contributor to future profit with a number of projects to make contributions this financial year. We have a strong presence in the Ipswich region with the Cadence residential community in Ripley and Deebing Springs in Deebing Heights. There have also been some exciting acquisitions with AVJennings now owning 100% of the Riverton project in Jimboomba and we entered into a binding heads of agreement to develop 3,500 lots in Caboolture (located between Caloundra and Brisbane). South Australia. It is apt that the suburb and our Eyre residential community share the same name because the residents have a strong bond with where they live. The Eyre Sports Park on the doorstep of the housing estate is a jewel in the crown of the area and AVJennings is proud to sponsor clubs that call it home. St Clair continues to be the envy of many with its integration of different housing types, wetlands, playing fields, public transport, shopping centre and amenities all within the boundary of the residential community. Argyle, Elderslie Deebing Springs, Artist Impression Eyre Sports Park, Eyre St Clair Townhomes AVJennings Limited - Annual Report 201915 Victoria. The first residents of the beautifully designed Lyndarum North residential community moved in this year. They’ll soon be joined by many more with dozens of new homes under construction each month. Waterline Place at Williamstown is now a vibrant village within a village thanks to the completion and settlement in 2019 of the GEM apartments. And AVJennings was proud to be selected by the Victorian Government as its preferred partner in a public housing renewal project in Brunswick West which will see a mix of private and public housing in a campus style precinct. New Zealand. AVJennings continued to increase its presence in New Zealand with the significant acquisition of Ara Hills in Orewa, north of Auckland. The first builder sales of sections will commence in this financial year. Hobsonville Point has $27 million of pre- sales on hand for the Buckley B stage. This will see our New Zealand operations make a much larger contribution to revenue in FY20. Lyndarum North, Artist Impression GEM Apartments, Waterline Place Ara Hills, Orewa AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION16 The Directors of AVJennings Limited present their report together with the Financial Report of the Group (referred to hereafter as “AVJennings” or “Group”) and the Auditor’s Report thereon for the year ended 30 June 2019. The Group comprises AVJennings Limited (“Company” or “Parent”) and its controlled entities. DIRECTORS The Directors of AVJennings Limited during the financial year and up until the date of this Report are as follows. Directors were in office for the entire period unless otherwise stated. S Cheong RJ Rowley PK Summers E Sam B Chin BG Hayman TP Lai BL Tan P Kearns Non-Executive Chairman Non-Executive Deputy Chairman Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (appointed 21 March 2019) 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 $16.4 million (2018: $31.3 million). DIVIDENDS Dividends paid during the financial year were as follows: Cash dividends declared and paid 2017 final dividend of 3.5 cents per share, paid 19 September 2017. Fully franked @ 30% tax 2018 interim dividend of 2.0 cents per share, paid 19 April 2018. Fully franked @ 30% tax 2018 final dividend of 3.0 cents per share, paid 11 October 2018. Fully franked @ 30% tax 2019 interim dividend of 1.0 cent per share, paid 22 March 2019. Fully franked @ 30% tax Total cash dividends declared and paid 2019 $’000 - - 11,848 4,062 15,910 2018 $’000 13,455 7,688 - - 21,143 Subsequent to the end of the financial year, the Directors have declared a fully franked final dividend of 1.5 cents per share to be paid on 20 September 2019 (2018: 3.0 cents). The Dividend Reinvestment Plan (DRP) is suspended. Directors’ Report.AVJennings Limited - Annual Report 2019 17 OPERATING AND FINANCIAL REVIEW Financial Results The Company recorded a Net Profit Before Tax of $23.8 million for the year ended 30 June 2019, down 47% on the previous year (30 June 2018: $45.1 million) and Net Profit After Tax of $16.4 million (30 June 2018: $31.3 million). our current New Zealand operations means that its results have traditionally been lumpy and, while it traded profitably in FY19, it will make a much larger contribution next financial year as a result of completing those pre-sales. On 2 August 2019 the Company provided a market update indicating that its NPBT for FY19 would be approximately $23 million, and the result is in line with this guidance. Profit for the year was adversely affected by a deterioration in consumer confidence in the residential property market, particularly in the large Melbourne and Sydney markets. This lack of confidence was despite continuing strong industry fundamentals and did not begin to abate until late in FY19 following the Federal election in May 2019, lowering of interest rates and the prospect of improved availability of mortgage finance for customers. Dividends  Directors declared that a fully franked final dividend of 1.5 cents per share be paid in September 2019, taking total dividends declared for FY19 to 2.5 cents per share, fully franked. Business Overview For reasons above, FY19 proved to be a very challenging year. There were fewer contracts signed than in the preceding financial year, with the result that the Company’s performance was underwritten to a greater degree by the settlement of contracts signed in prior periods. This included settlements with good margins at Lyndarum North and ‘Waterline Place’ (GEM Apartments) in Victoria, together with settlements at ‘Arcadian Hills’ Cobbitty, ‘Argyle’ Elderslie, ‘Evergreen’ Spring Farm and ‘Magnolia’ Hamlyn Terrace in NSW. Pleasingly, the rate of settlement failure experienced by the Company was negligible, although a higher number of customers did require a short extension to their contracted settlement period to obtain mortgage finance. FY19 also saw other initiatives and outcomes which, although not materially impacting on results in that year, will be important factors in coming years. In Queensland we were able to advance a number of projects which will see more stages from more projects move into profit recognition in FY20. One of those projects is our significant ‘Riverton’ project in Jimboomba, the remaining 50% of which was acquired from the former joint venture partner during the year. We also substantially advanced development work for the Buckley B stage at Hobsonville Point, Auckland, for which some $26.9 million of pre-sales are on hand. The wholesale nature of Although the South Australian business continued to trade at a loss, we have continued to operate against plans for improved performance. Revision to cost structures, operational methods and product will improve both sales and efficiency. Alongside these changes we have continued to rationalise the level of funds invested in the South Australian business. Benefits will continue to flow from the reorganisation of the Company’s management and project control structure undertaken during the year, which were implemented right across the business. These changes included the appointment of a Chief Operating Officer in August 2018. Balance Sheet and Land Holdings Controlled land inventory rose nominally to 9,531 lots (30 June 2018: 9,373 lots). Reflecting slower market conditions, at 30 June 2019 1,600 lots were under development, 18% below the FY18 number. The gearing ratio (net debt/total assets) at 26.6% was higher than 20.4% in FY18 but remains comfortably within the Company’s target range of 15-35%. The Company extended the term of its main banking facility by a further 12 months to 30 September 2021 on substantially the same terms. While net cash used in operating activities was $45.8 million (30 June 2018: net cash from operating activities $47.6 million) it is important to bear in mind that approximately $62.8 million was invested in the acquisition and first stage of development of Ara Hills. This will be the Company’s new flagship project in Auckland that is expected to start contributing to earnings in 2021. Cash generation from the balance of operations was therefore positive at approximately $17 million, notwithstanding the softer market conditions experienced during the year. Subsequent Events On 2 August 2019 the Company announced it had entered into binding Heads of Agreement documentation with the landowner, to develop a large greenfield site located in Caboolture West, Brisbane. Whilst the total project is expected to yield over 8,000 lots, the Heads of Agreement relates to the initial part of the project which will see the delivery of approximately 3,500 lots into this fast-growing south-east Queensland corridor. This has been secured on a low capital intensive basis. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 18 OPERATING AND FINANCIAL REVIEW (CONTINUED) Outlook ENVIRONMENTAL REGULATION In its FY18 results announcement, as well as at the 2018 Annual General Meeting, the Company informed shareholders of its belief that market conditions would soften in FY19. Although fundamentals for residential property remained sound, a combination of low consumer confidence and difficult mortgage financing conditions for our customers led to this belief. For the reasons stated earlier, the Board and management of AVJennings believe that the bottom of the current property cycle has been reached. A combination of the expected improving market conditions, together with Company specific matters also referred to above, now lead to an expectation the Company will deliver a stronger result in FY20. General market sentiment is clearly beginning to improve, driven in part by continuing supportive market fundamentals, conclusion of the Federal election, relaxation of the minimum mandatory servicing requirement prescribed by APRA for retail banks when they assess home loan applications, and more positive press commentary about residential property markets generally. A modest uptick in visitor numbers to sales offices and on-line has been seen in recent months, and it is reasonably expected that trend will be sustained during FY20. The Company will also have more projects actively selling in more diverse locations during the current year. Significant contribution is also expected to be earned in the first half of FY20 from the recognition of pre-sold land, together with 15 townhouses, within the Buckley B Precinct of the Hobsonville Point project in Auckland NZ. Finally, important demand drivers remain supportive, including continuing positive net migration into major capital cities; ongoing under-building of affordable, detached and low-rise dwellings sufficient to meet the demand; stable employment; low interest rates, and a nascent but perceptible increase in retail bank mortgage lending appetite. 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 requirements. To the best of the Directors’ knowledge, property development activities have and are being undertaken in compliance with these requirements. INFORMATION ON THE DIRECTORS Simon Cheong B.Civ.Eng. MBA Director since 20 September 2001. Mr Cheong has over 35 years experience in real estate, banking and international finance. He currently serves as Founder and Chairman of SC Global Developments Pte Ltd. He 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 twice elected President of the prestigious Real Estate Developers’ Association of Singapore (REDAS) for 2 terms from 2007 till 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. On 1 June 2017, Mr Cheong was appointed a non- executive Director of Singapore Airlines Limited. Resident of Singapore. Responsibilities: SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect: Chairman of the Board, Non-Executive Director, Chairman of Investments Committee, Member of Remuneration Committee, Member of Nominations Committee. (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. Directorships held in other listed entities: Singapore Airlines Limited from 1 June 2017. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The prospects and business strategies of the Group are discussed in the operating and financial review of this Report. Directors’ Report.AVJennings Limited - Annual Report 2019 19 INFORMATION ON THE DIRECTORS Jerome Rowley SF Fin, FAICD Responsibilities: 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. 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. Non-Executive Director, Chairman of Nominations Committee, Chairman of Remuneration Committee. Directorships held in other listed entities: None. Bobby Chin CA (ICAEW) B.Acc. Director since 18 October 2005. Mr Chin is currently the Chairman of NTUC Fairprice Co-operative Ltd, NTUC Fairprice Foundation Ltd and the Housing & Development Board. He is the Deputy Chairman of NTUC Enterprise Co-operative Ltd and a Director of Singapore Labour Foundation. He serves as a member of the Singapore Council of Presidential Advisers and the Corporate Governance Advisory Committee. 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, Member of Nominations Committee. Directorships held in other listed entities: Yeo Hiap Seng Limited, since 15 May 2006. Ho Bee Investment Limited, since 29 November 2006. Singapore Telecommunications Limited, since 1 May 2012. Other Directorships: Temasek Holdings (Private) Limited, since 10 June 2014. Bruce G Hayman Director since 18 October 2005. Mr Hayman has many years of commercial management experience with over 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. 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. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION20 INFORMATION ON THE DIRECTORS (CONTINUED) Teck Poh Lai B.A. Hons. (Economics) Philip Kearns, AM BA (Economics); Grad Dip (Applied Finance) 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. Director since 21 March 2019. Mr Kearns is the Managing Director and CEO of InterRISK Australia Pty Ltd, a division of ASX listed AUB Group. He has over fifteen years’ experience leading financial services organisations where he led significant cultural change and was instrumental in building a client base and introducing investors to innovative opportunities, including in the property sector. Mr Kearns was appointed a member of the Order of Australia in 2017 for significant service to the community through support for charitable organisations, to business, and to rugby union at the elite level. He played 67 tests for the Australia national rugby union team, Wallabies (1989-1999) and captained the team ten times. Resident of Sydney. Responsibilities: Non-Executive Director, Member of Investments Committee, Member of Risk Management Committee. Directorships held in other listed entities: None. INFORMATION ON THE COMPANY SECRETARY Carl D Thompson LLB B. Comm Boon Leong Tan DipUrbVal (Auckland University, NZ) Director since 9 June 2017. Mr Tan has over 36 years experience in real estate investment and asset management. He is a non- executive Director of SC Global Developments Pte Ltd., the Company’s major shareholder. Company Secretary since 12 January 2009. Mr Thompson previously held the company secretary and general counsel role at Downer EDI Ltd. Prior to that he was a partner at national law firm Corrs Chambers Westgarth, practising in corporate and commercial work. Resident of Melbourne. Mr Tan last held the position of Group Chief Operating Officer cum Chief Executive Officer (Singapore Investments) in Mapletree Investments Pte Ltd, a real estate company wholly- owned by Temasek Holdings (Private) Limited. Prior to his career in Mapletree Investments, Mr Tan served in Temasek Holdings (Private) Limited from 1995 to 2003 and held the position of Managing Director (Strategic Investments). His portfolio included Temasek Holdings’ investments in real estate in Asia and Australia. His eight-year career in Temasek Holdings included stints in venture capital investments in the IT sector, infrastructure investments in the energy and transportation sectors, and investments in financial services. Mr Tan had also served at the Inland Revenue Authority of Singapore (IRAS) from 1975 to 1995 where he last held the position of Tax Director in the Superscale grade. Resident of Singapore. Responsibilities: Non-Executive Director, Member of Investments Committee. Directorships held in other listed entities: None. Directors’ Report.AVJennings Limited - Annual Report 201921 REMUNERATION REPORT (AUDITED) This Remuneration Report is provided in accordance with the requirements of the Corporations Act 2001 (the Act) and has been audited as required by section 308(3C) of the Act. participation in committee work, in particular chairmanship of committees and fees paid to directors of comparable companies. NEDs do not receive any retirement benefits or performance- based remuneration. 1. Key Management Personnel (KMP) defined The name and position of each KMP whose remuneration is disclosed in this Report are set out below: (i) Directors S Cheong RJ Rowley PK Summers E Sam B Chin BG Hayman TP Lai BL Tan P Kearns (ii) Executives Non-Executive Chairman Non-Executive Deputy Chairman Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (appointed 21 March 2019) CD Thompson Company Secretary/General Counsel L Mahaffy SC Orlandi(1) L Hunt Chief Financial Officer Chief Operating Officer General Manager, Human Resources (1) Appointed Chief Operating Officer on 14 August 2018. Prior to this, Mr Orlandi was Chief Strategy Officer. 2. Remuneration Framework 2.1 Remuneration Governance The Board has established a Remuneration Committee comprising four Non-Executive Directors which is responsible for determining and reviewing remuneration arrangements for KMP and other senior management personnel. The Committee’s primary objective is to provide a remuneration structure that attracts, retains and motivates staff, which is aligned with shareholder interests and addresses current market and stakeholder views. Three NEDs, Mr S Cheong, Mrs E Sam and Mr BL Tan do not receive fees. However, AVJennings pays a consulting fee to the Ultimate Parent Entity, SC Global Developments Pte Ltd. This consulting fee is not included in the NEDs fee pool. The fees are paid pursuant to a consultancy and advisory agreement for the provision of 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 appropriateness of the agreement and the reasonableness of the fees is assessed annually by the Australian-based independent NEDs 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. This review has been undertaken annually over the past few years and the Australian-based NEDs have, on each occasion, concluded that the fee is appropriate in all the circumstances. The annual fees payable are $600,000 and have been fixed at this level for over ten years. The agreement may be terminated by either party giving six months’ notice or by the Company on 30 days’ notice for cause. The remuneration of NEDs is detailed on page 26. 2.4 Executive Remuneration Arrangements Executive remuneration includes a mix of fixed and variable remuneration. Variable remuneration includes short term incentives, long term incentives and retention components. 2.2 External Advisers No remuneration consultant made any remuneration recommendation as defined in Section 9B of the Corporations Act 2001 during the year ended 30 June 2019. 2.3 Non-Executive Director (NED) Remuneration Arrangements At the Annual General Meeting (AGM) in the year 2000, shareholders approved a maximum annual aggregate fee pool of $400,000 for NEDs. The allocation to individual NEDs is determined after considering factors such as time commitment, the size and scale of the Company’s operations, skill sets, i) Fixed Remuneration Fixed Remuneration is represented by Total Employment Cost (TEC) which comprises base remuneration and superannuation contributions. TEC is reviewed annually or on promotion/appointment to the role. TEC is benchmarked against market data for comparable roles in the market. The Company sets TEC based on relevant market analysis, the scope and nature of the role and the individual’s performance, skills and responsibilities. The fixed component of remuneration of other KMP’s is detailed on page 27. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 22 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.4 Executive Remuneration Arrangements (continued) ii) Variable Remuneration A) Short Term Incentive (STI) Executives participate in a STI plan which assesses achievement against Key Performance Measures (KPM). Each executive has KPMs that are aligned to company, business unit and individual performance. An STI payment is awarded to the extent performance is achieved against the KPMs set at the beginning of the financial year, as appropriate, and with regards to relevant business unit and company performance. STI awards for the executive team in the 2019 financial year were based on the scorecard measures and weightings 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 17% to 30% of TEC. 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 (%) 100 33 STI (%) 35 17 LTI (%) 40 8 Retention (%) 25 8 50 30 10 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 desirability of Senior Executives having a significant equity interest in the Company so as to better align their interest with shareholders; The desire for Senior Executives to receive equity as a proportion of remuneration; 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 Financial and Business Performance Underlying Profit Performance • Group profit before tax. • Return on NFE (Net Funds Employed). • Cost to income ratio. • Appropriate and efficient capital management. • Alignment of priorities and allocation of resources. • Market conditions, in particular performance in the Business Performance • Implementation of Company strategy and prevailing market. 70% 30% to 40% 50% improvement in the underlying health of the Company. • Increase in the Group’s market share of the residential property sector. • Risk management. • Customer Advocacy. • Employee retention and engagement. • Leadership. • Providing a safe work environment. • Minimise the impact of our activities on the environment. Non-Financial Customer and Stakeholder Performance People Safety and Environment 30% 60% to 70% 50% Directors’ Report.AVJennings Limited - Annual Report 201923 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.4 Executive Remuneration Arrangements (continued) component of the Performance Rights uses market capitalisation as a proxy for equity. The Remuneration Committee determines the STI to be paid based on an assessment of the extent to which the KPMs are met. The STI payment is made within two months of the financial year end. The Committee has the discretion to adjust STIs upwards or downwards in light of unexpected circumstances or unintended consequences. Based on achievements of the Group in the 2019 financial year and performance against individual KPMs, the Remuneration Committee determined that Executives achieved between 75% and 100% of their target opportunity (average 87%). In making this assessment, the Committee considered the following factors: • Performance in implementing Company strategy. • Performance in the prevailing market. • The financial result. • Performance against individual KPMs. B) Long Term Incentive (LTI) LTI awards are only made to Executives who have the ability to impact the Group’s performance and create shareholder value over the longer term. LTI remuneration is provided by the Issue of Rights which include a performance and a retention component. The use of Rights as an incentive reduces upfront cash requirements (as shares do not need to be acquired for allocations). Shares are acquired on market by the Plan Trustee to satisfy the grant of shares in respect of rights which have vested. Participants do not receive dividends on Rights (as distinct from shares). 12% 15% >=18% The performance conditions are tested at the end of the three- year measurement period. The service rights are split into three tranches that progressively vest each year subject to satisfaction of the service condition. The CEO’s participation was determined as 40% (Performance Rights) and 25% (Service Rights) of TEC respectively. The operation of the EPS, ROE and Retention hurdles are set out below. AVJennings’ EPS growth rate over the three year performance period < 5% 5% 5% – 10% >=10% AVJennings’ ROE over the three year performance period <12% Percentage of rights vesting Nil 50% of the allocation for the hurdle Pro-rata between 50% and 100% 100% of the allocation for the hurdle Percentage of rights vesting Nil 50% of the allocation for the hurdle 75% of the allocation for the hurdle 100% (Straight line interpolation between 12% and 18%) LTI and Retention Retention Rights are granted in three equal tranches which vest in each of the three succeeding years following the year of grant. Retention component – years of service Percentage of rights vesting one year two years three years 33.33% 33.33% 33.34% LTI and Performance Up to 50% of Performance Rights granted vest depending on AVJennings’ average growth rate in Earnings Per Share (EPS) over the three financial years of performance measurement. Up to 50% of Performance Rights granted vest depending on AVJennings’ Return on Equity (ROE) over the three financial years of performance measurement. The Return on Equity (ROE) Rights have been granted to KMP as detailed in the table on page 24. • • • The September 2016 Grant was made for the FY17 year (with final performance conditions testing in September 2019). The September 2017 Grant was made for the FY18 year (with final performance conditions testing in September 2020). The September 2018 Grant was made for the FY19 year (with final performance conditions testing in September 2021). The fair value of the Rights at the date of the Grant is determined by the Plan manager using an appropriate valuation model. The 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 Consolidated Statement of Comprehensive Income represents the movement in cumulative expense recognised between the beginning and end of that period. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION24 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.4 Executive Remuneration Arrangements (continued) The following is the status of Rights granted to KMP under the FY15 and subsequent year LTI Plans: KMP PK Summers PK Summers PK Summers PK Summers PK Summers CD Thompson CD Thompson CD Thompson CD Thompson CD Thompson L Mahaffy L Mahaffy L Mahaffy L Mahaffy L Mahaffy SC Orlandi SC Orlandi SC Orlandi SC Orlandi SC Orlandi L Hunt L Hunt L Hunt L Hunt L Hunt Total Year of Grant FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Fair Value at Grant date $386,528 $341,129 $372,970 $384,170 $395,702 $51,035 $59,904 $65,649 $67,621 $69,652 $46,660 $54,769 $60,022 $61,825 $63,682 $41,301 $48,479 $53,129 $54,725 $57,463 $31,538 $37,021 $40,571 $41,789 $43,044 Rights at beginning of the year 417,106 406,875 634,046 636,504 - 44,740 58,190 105,663 110,981 - 40,905 53,202 96,606 101,469 - 36,207 47,092 85,512 89,816 - 27,648 35,961 65,299 68,586 - Rights granted - - - - 701,392 - - - - 122,234 - - - - 111,757 - - - - 100,843 - - - - 75,540 Rights vested ( 208,553 ) ( 203,438 ) ( 87,309 ) ( 77,504 ) - ( 22,370 ) ( 29,095 ) ( 19,978 ) ( 17,735 ) - ( 20,453 ) ( 26,601 ) ( 18,266 ) ( 16,215 ) - ( 18,104 ) ( 23,546 ) ( 16,168 ) ( 14,353 ) - ( 13,824 ) ( 17,981 ) ( 12,347 ) ( 10,960 ) - Rights forfeited ( 208,553 ) ( 203,437 ) - - - ( 22,370 ) ( 29,095 ) - - - ( 20,452 ) ( 26,601 ) - - - ( 18,103 ) ( 23,546 ) - - - ( 13,824 ) ( 17,980 ) - - - Rights at end of the year - - 546,737 559,000 701,392 - - 85,685 93,246 122,234 - - 78,340 85,254 111,757 - - 69,344 75,463 100,843 - - 52,952 57,626 75,540 $2,930,378 3,162,408 1,111,766 (874,800) ( 583,961 ) 2,815,413 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 securities. 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), Total Shareholder Return (TSR) and Market Capitalisation over the last 5 years. Financial Report Date 30 June 2015 30 June 2016 30 June 2017 30 June 2018 30 June 2019 Profit After Tax $’000 34,385 40,912 35,717 31,347 16,439 Basic EPS Cents 9.03 10.71 9.31 8.13 4.09 TSR* Cents 10.5 ( 4.0 ) 15.0 10.0 ( 12.5 ) Market Capitalisation $’000 245,694 213,968 253,164 278,074 218,953 Return on Market Capitalisation % 14.00 19.12 14.11 11.27 7.51 * TSR is the aggregate of the movement in the share price and dividends paid per share during the year ended 30 June. Directors’ Report.AVJennings Limited - Annual Report 201925 REMUNERATION REPORT (AUDITED) (CONTINUED) 4. Employment Contracts i) Chief Executive Officer Mr Summers’ employment contract 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 27. ii) Other Executives The other Executives are full time permanent employees with employment contracts. The employment contracts do not have termination dates or termination payments. However, they specify a notice period of three months. 5. Remuneration of KMP Details of the nature and amount of each element of remuneration of Directors and Executives are set out in the tables on pages 26 and 27. 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 KMP The number of shares in the Company held during the financial year by each KMP of the Group, including their related parties, are set out below. Opening Balance Vested as Remuneration On market Purchase/ (disposal) For the year ended 30 June 2019 Directors S Cheong E Sam PK Summers RJ Rowley Executives CD Thompson L Mahaffy SC Orlandi L Hunt 209,386,826 215,068 4,200,316 258,502 1,438,459 129,496 413,623 272,616 - - 576,804 - 89,178 81,535 72,171 55,112 Total 216,314,906 874,800 For the year ended 30 June 2018 Directors S Cheong E Sam PK Summers RJ Rowley Executives CD Thompson L Mahaffy SC Orlandi L Hunt 203,818,030 209,349 3,920,188 252,000 1,372,557 182,447 367,431 239,075 - - 248,960 - 52,241 47,762 42,276 32,285 Other (1) 9,494,561 9,752 53,142 11,721 22,672 - 6,499 2,143 Closing Balance 218,881,387 224,820 4,830,262 270,223 1,550,309 211,031 492,293 329,871 9,600,490 226,790,196 5,568,796 5,719 31,168 6,502 209,386,826 215,068 4,200,316 258,502 - - - - - - - - - - - - - - ( 100,713 ) - - 13,661 - 3,916 1,256 1,438,459 129,496 413,623 272,616 Total 210,361,077 423,524 ( 100,713 ) 5,631,018 216,314,906 (1) Includes shares acquired under the Dividend Reinvestment Plan. Refer to note 16. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION26 REMUNERATION REPORT (AUDITED) (CONTINUED) 8. Remuneration Tables i) Non-Executive Directors S Cheong RJ Rowley E Sam(1) B Chin BG Hayman TP Lai BL Tan (1) P Kearns(3) Total Total Year 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Short-Term Fees $ - - 115,069 77,626 - - 72,000 60,000 84,018 45,662 64,500 50,000 - - 20,294 - 355,881 233,288 Post Employment Superannuation(2) $ - - 10,931 7,374 - - - - 7,982 4,338 - - - - 1,928 - 20,841 11,712 Total $ - - 126,000 85,000 - - 72,000 60,000 92,000 50,000 64,500 50,000 - - 22,222 - 376,722 245,000 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. Payments to Defined Contribution Plans consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions. Appointed 21 March 2019. 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. Directors’ Report.AVJennings Limited - Annual Report 2019 27 s t h g i r e h t f o l l a t o n , i l y g n d r o c c a d n a s n o i t i d n o c e c n a m r o f r e p d n a e c i v r e s o t j i t c e b u s e r a h c h w d e t n a r g s t h g i r e h t . s t fi e n e b e l i c h e v r o t o m l f o e u a v e h t o t s e t a e r l ’ r e h t O ‘ f o y n a p m o C e h t o t t s o c e h t t n e s e r p e r s e r u g fi I T L e h T . t s e v t a h t s e r a h s e h t n o d e s a b s i d n a t n e r e ff d s i i s e v i e c e r e v i t u c e x e e h t t n u o m a e h T . t s e v y a m 1 7 1 , 3 9 8 , 2 5 7 7 , 8 4 3 6 4 8 , 0 9 5 5 6 , 2 0 1 7 4 7 , 4 4 6 0 1 , 7 7 3 5 3 8 , 8 6 7 0 2 , 0 6 8 , 1 9 1 0 2 , 8 3 6 8 1 1 , 3 , 7 6 4 4 7 6 6 9 6 3 8 , 5 4 2 0 0 1 , 8 2 8 , 1 9 0 7 8 0 7 3 , 5 6 9 6 4 , , 7 6 5 0 5 7 , 1 8 1 0 2 . s n o i t u b i r t n o c y r a t n u o v e e y o p m e s a l l l l e w s a s t n e m y a p n o i t u b i r t n o C e e t n a r a u G n o i t a u n n a r e p u S f o t s i s n o c s n a P n o i t u b i r t n o C d e n fi e D o t l s t n e m y a P l a t o T l a t o T ) 1 ( ) 2 ( ) 3 ( e c n a m r o f r e P d e t a e R l l a t o T - e r a h S d e s a B ) 3 ( I T L d e u r c c A g n o L % 1 7 . 0 2 4 8 6 3 . 7 2 . 3 1 5 3 8 1 . 3 8 . 1 1 4 6 . 1 1 0 5 . 3 1 5 4 8 1 . 5 9 . 2 1 4 5 . 7 1 1 3 0 , 7 3 0 , 1 2 0 1 , 8 9 1 1 4 5 , 0 3 4 4 5 8 4 2 , , 1 4 0 0 3 3 4 , 9 3 5 8 2 , $ $ $ ) n o i t n e t e R e v a e L 2 7 8 , 5 4 5 5 4 9 , 4 4 , 7 1 5 8 6 5 1 6 2 , 2 7 7 4 1 , 9 7 4 3 9 0 , 1 4 , 5 7 3 0 0 5 7 6 0 6 6 , 3 6 1 , 7 1 3 6 7 , 8 1 9 0 2 , 7 1 4 5 4 , 1 1 4 0 4 , 5 8 4 9 5 8 , 6 3 6 5 5 5 1 , 2 8 5 , 7 5 4 7 1 7 , 5 4 3 , 0 2 6 3 4 3 9 7 4 8 5 , 6 7 7 , 7 2 6 5 6 4 4 , 0 2 8 , 1 1 7 7 3 , 0 1 0 2 1 , 3 1 ) 1 ( $ 1 3 5 , 0 2 9 4 0 0 2 , 1 3 5 , 0 2 9 4 0 0 2 , 1 3 5 , 0 2 9 4 0 0 2 , 1 3 5 , 0 2 9 4 0 0 2 , 1 3 5 , 0 2 9 4 0 0 2 , s e d u c n i ( l e c i v r e S n o i t a u n n a r e p u S ) 2 ( r e h t O $ I T S $ d e u r c c A l a u n n A e v a e L y r a a S l $ $ r a e Y 7 4 7 , 4 4 7 5 4 , 0 7 1 8 5 1 , 2 3 5 9 4 , 0 4 5 9 1 0 2 s r e m m u S K P 8 2 8 , 1 9 - - - - - - - - 2 1 6 , 7 3 ) 3 1 3 , 1 ( 6 9 4 9 2 2 , 8 1 0 2 8 7 1 , 6 8 1 6 8 6 , 2 6 3 2 6 , 7 6 1 6 7 , 7 4 1 3 7 , 4 2 4 6 1 , 7 2 , 0 1 9 0 5 3 8 1 0 2 1 8 7 , 2 1 0 7 1 , 3 3 3 1 , 4 , 8 8 6 5 8 3 8 1 0 2 5 6 1 , 6 7 4 8 1 0 2 7 7 3 , 7 9 3 9 1 0 2 n o s p m o h T D C ) 3 0 0 , 9 ( 6 5 5 , 1 6 3 9 1 0 2 y ff a h a M L 2 6 4 , 7 5 3 5 7 , 0 3 3 4 2 , 4 2 3 9 1 0 2 i d n a l r O C S 6 2 7 , 4 5 0 4 7 , 8 3 0 0 2 4 , 7 5 7 , 1 1 8 0 3 8 0 3 , 8 1 0 2 6 3 5 , 6 3 2 9 1 0 2 t n u H L r e h t O m r e T - g n o L l t n e m y o p m E t s o P m r e T - t r o h S ) D E U N I T N O C ( ) D E T I D U A ( T R O P E R N O I T A R E N U M E R ) d e u n i t n o c ( s e b a T n o l i t a r e n u m e R . 8 P M K r e h t O ) i i AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 28 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 S Cheong RJ Rowley PK Summers E Sam B Chin BG Hayman TP Lai BL Tan P Kearns(1) (1) Appointed 21 March 2019. Held 4 4 4 4 4 4 4 4 1 Investments Committee Attended 4 4 4 4 4 4 4 4 1 Held - 3 - - 3 - 3 - - Attended - 3 - - 3 - 3 - - Meetings of Committees Remuneration Held 1 - - 1 - 1 1 - - Attended 1 - - 1 - 1 1 - - Nominations Held 1 1 - 1 1 1 - - - Attended 1 1 - 1 1 1 - - - Risk Management Attended - 3 - - - 3 - - 1 Held - 3 - - - 3 - - 1 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 ROUNDING 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 Number 218,881,387 224,820 4,830,262 270,223 ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 is applicable to the Group and in accordance with that Instrument, amounts in the Financial Report and the Directors’ Report are rounded to the nearest thousand dollars, unless otherwise indicated. AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s Independence Declaration is set out on page 29. 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. INDEMNIFICATION OF AUDITORS 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). No payment has been made to indemnify Ernst & Young during or since the financial year. Directors’ Report.AVJennings Limited - Annual Report 2019Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au 29 Non Audit Services Auditor’s Independence Declaration to the Directors of AVJennings Limited The Group’s auditor, Ernst & Young provided certain non-audit services as outlined in note 31. The Board has considered these and based on advice received from the Audit Committee, is satisfied that provision of these services is compatible with, and did not compromise, the auditor independence requirements imposed by the Corporations Act 2001, for the following reason: As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the June 2019, I declare to the best of my knowledge and belief, there have been: auditor; and • relation to the audit; and the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as advocate for the Group or jointly sharing economic risks or rewards. b) no contraventions of any applicable code of professional conduct in relation to the audit. Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. Signed in accordance with a resolution of the Directors. Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Peter Summers Director Auditor’s Independence Declaration to the Directors of AVJennings Limited Ernst & Young Simon Cheong Director 5 September 2019 Glenn Maris Partner 5 September 2019 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Auditor’s Independence Declaration to the Directors of AVJennings Limited relation to the audit; and a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Auditor’s Independence Declaration to the Directors of AVJennings Limited a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the Auditor’s Independence Declaration to the Directors of AVJennings best of my knowledge and belief, there have been: b) no contraventions of any applicable code of professional conduct in relation to the audit. Limited a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Ernst & Young a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and Ernst & Young Ernst & Young b) no contraventions of any applicable code of professional conduct in relation to the audit. Glenn Maris Partner Glenn Maris 5 September 2019 Partner Sydney This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. A member firm of Ernst & Young Global Limited Glenn Maris Liability limited by a scheme approved under Professional Standards Legislation Partner 5 September 2019 5 September 2019 Ernst & Young Glenn Maris Partner 5 September 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 30 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Continuing operations Revenue from contracts with customers Sales of land and built form Management fees Revenue Cost of sales Gross profit Share of net (loss)/profit of joint ventures Provision for loss on equity accounted investments Change in inventory loss provisions Fair value adjustment to financial asset Fair value adjustment to investment property Selling and marketing expenses Employee expenses Other operational expenses Management and administration expenses Depreciation expense Finance income Finance costs Other income Profit before income tax Income tax Profit after income tax Other comprehensive income (OCI) Foreign currency translation Other comprehensive income/(loss) Total comprehensive income Profit attributable to owners of the Company Total comprehensive income attributable to owners of the Company Earnings per share (cents per share): Basic earnings per share Diluted earnings per share To be read in conjunction with the accompanying notes. Note 2 & 37 3 3 3 3 10 8 3 3 3 3 4 2019 $'000 2018 $'000 296,467 - - 296,467 ( 223,900 ) 72,567 - 371,190 977 372,167 ( 282,710 ) 89,457 ( 274 ) ( 607 ) - ( 669 ) 800 ( 6,865 ) ( 25,711 ) ( 8,591 ) ( 8,071 ) ( 252 ) 1,315 ( 159 ) 356 226 - 1,111 - - ( 7,285 ) ( 24,392 ) ( 7,534 ) ( 8,192 ) ( 269 ) 1,410 ( 190 ) 740 23,839 ( 7,400 ) 45,082 ( 13,735 ) 16,439 31,347 1,246 1,246 ( 714 ) ( 714 ) 17,685 30,633 16,439 31,347 17,685 30,633 32 32 4.09 4.08 8.13 8.13 Financial Statements.AVJennings Limited - Annual Report 201931 Note 2019 $’000 2018 $’000 5 6 7 9 6 7 8 24 10 11 12 13 14 4(c) 15 13 14 4(d) 15 16 17(a) 17(c) 18,209 15,088 194,748 2,392 230,437 10,033 430,261 1,770 6,649 2,211 1,059 2,816 454,799 8,491 95,096 193,340 7,150 304,077 24,329 295,037 - 10,721 2,880 536 2,816 336,319 685,236 640,396 41,234 543 3,179 6,547 51,503 22,009 199,792 15,173 482 237,456 34,508 13,407 10,597 9,869 68,381 23,397 125,799 23,079 742 173,017 288,959 241,398 396,277 398,998 174,509 8,882 212,886 167,943 6,906 224,149 396,277 398,998 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Current assets Cash and cash equivalents Receivables Inventories Other assets Total current assets Non-current assets Receivables Inventories Investment property Equity accounted investments Financial asset Plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Payables Borrowings Tax payable Provisions Total current liabilities Non-current liabilities Payables Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity To be read in conjunction with the accompanying notes. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION32 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of AVJennings Limited Total equity Foreign Currency Translation Reserve Share- based Payment Reserve Contributed Equity Retained Earnings At 1 July 2017 160,436 3,724 2,898 213,945 381,003 Note $'000 $'000 $'000 $'000 $'000 Comprehensive income: Profit for the year Other comprehensive loss for the year Total comprehensive income for the year Transactions with owners in their capacity as owners: - Ordinary share capital raised - Treasury shares acquired - Share-based payment expense - Dividends paid Total transactions with owners in their capacity as owners At 30 June 2018 At 1 July 2018 - - - - - - - - - - ( 714 ) ( 714 ) 31,347 - 31,347 ( 714 ) 31,347 30,633 16(b) 30(a) 18 7,688 ( 181 ) - - 7,507 167,943 167,943 - - - - - - - - 998 7,688 ( 181 ) 998 ( 21,143 ) ( 21,143 ) 998 ( 21,143 ) ( 12,638 ) 3,010 3,010 - 3,896 224,149 398,998 3,896 224,149 398,998 - ( 11,792 ) ( 11,792 ) Effect of adoption of new accounting standard 37 - At 1 July 2018 (restated) 167,943 3,010 3,896 212,357 387,206 Comprehensive income: Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owners in their capacity as owners: - Ordinary share capital raised - Treasury shares acquired - Share-based payment expense reversed (lapsed rights) - Share-based payment expense - Dividends paid Total transactions with owners in their capacity as owners 16(a) 16(b) 30(a) 30(a) 18 - - - 7,480 ( 914 ) - - - 6,566 - 1,246 1,246 - - - - - - - - - - - ( 402 ) 1,132 - 16,439 - 16,439 16,439 1,246 17,685 - - - - ( 15,910 ) 7,480 ( 914 ) ( 402 ) 1,132 ( 15,910 ) ( 8,614 ) 730 ( 15,910 ) At 30 June 2019 174,509 4,256 4,626 212,886 396,277 To be read in conjunction with the accompanying notes. Financial Statements.AVJennings Limited - Annual Report 2019CONSOLIDATED STATEMENT OF CASH FLOWS Cash flow from operating activities Receipts from customers (inclusive of GST) Payments to other suppliers and employees (inclusive of GST) Interest paid Income tax paid Net cash (used in)/from operating activities Cash flow from investing activities Payments for plant and equipment Interest received Amounts received from joint venture entities Dividends received from joint venture entity Investments in joint venture entities Net cash from/(used in) investing activities Cash flow from financing activities Proceeds from borrowings Repayment of borrowings Payment for treasury shares Dividends paid Proceeds from issue of shares Net cash from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effects of exchange rate changes on cash and cash equivalents 33 Note 2019 $’000 2018 $’000 3 4(c) 19 11 3 24 24 24 16(b) 18 16(a) 355,943 450,776 ( 371,307 ) ( 378,354 ) ( 12,663 ) ( 17,757 ) ( 12,212 ) ( 12,575 ) ( 45,784 ) 47,635 ( 790 ) 1,315 1,536 1,655 - 3,716 ( 15 ) 1,410 - - ( 2,047 ) ( 652 ) 162,128 154,182 ( 101,000 ) ( 194,599 ) ( 914 ) ( 15,910 ) 7,480 ( 181 ) ( 21,143 ) 7,688 51,784 ( 54,053 ) 9,716 8,491 2 ( 7,070 ) 15,562 ( 1 ) Cash and cash equivalents at end of year 5 18,209 8,491 To be read in conjunction with the accompanying notes. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section A – How the numbers are calculated Section A1 Segment information 1. OPERATING SEGMENTS AVJennings operates primarily in residential development. The Group determines segments based on information that is provided to the Managing Director who is the chief operating decision maker (CODM). The CODM assesses the performance and makes decisions about the resources to be allocated to the segment. Each segment prepares a detailed finance report on a monthly basis which summarises the following: • Historic results of the segment; and • Forecast of the segment for the remainder of the year. Reportable Segments Australian States and New Zealand where the company operates: Includes activities relating to Land Development, Integrated Housing and Apartments Development. Other: Includes numerous low value items, amongst the most significant of which is interest. Financial Statements.AVJennings Limited - Annual Report 201935 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS l a t o T r e h t O Z N A S D L Q C V I W S N 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 s t n e m g e S g n i t a r e p O 7 7 9 4 2 8 4 , 0 9 1 , 1 7 3 3 4 6 , 1 9 2 7 6 1 , 2 7 3 7 6 4 , 6 9 2 - - - - - - 1 5 5 4 1 , 7 1 2 , 1 7 7 7 , 2 5 2 1 1 , 9 1 0 6 3 , 1 5 0 5 9 , 1 3 4 2 0 , 7 5 2 2 8 5 1 1 , 8 7 4 5 9 1 , 2 4 5 3 2 1 , l s e a s l a n r e t x E s e u n e v e R - - 5 1 0 2 8 1 3 5 8 1 4 4 6 1 8 3 4 , - 8 3 2 s e e f t n e m e g a n a M 1 5 5 , 4 1 7 1 2 , 1 2 9 7 , 2 5 2 3 1 , 9 1 8 7 6 , 1 5 5 3 1 , 2 3 8 6 6 , 7 5 3 0 2 , 0 2 1 8 7 4 , 5 9 1 0 8 7 , 3 2 1 s e u n e v e r t n e m g e s l a t o T 4 2 4 0 6 , 8 2 5 , 1 4 0 7 1 , 2 3 7 1 3 2 1 , 4 1 8 2 , 2 ) 1 1 4 ( ) 8 7 9 2 ( , 2 3 5 ) 6 1 3 3 ( , 5 4 9 5 1 3 , 1 2 5 6 0 3 5 , 3 5 0 4 2 , s t l u s e r t n e m g e S f o t fi o r p / ) s s o l ( f o e r a h S s t l u s e R : s t n e m g e s g n i t a r e p o g n d r a g e r n o i t a m r o f n i i s t l u s e r d n a s e u n e v e r e h t s t n e s e r p e b a t g n w o i l l l o f e h T ) d e u n i t n o c ( S T N E M G E S G N I T A R E P O . 1 6 2 2 ) 4 7 2 ( 0 3 2 ) 4 5 2 ( 0 5 1 , 2 1 7 6 , 1 0 5 1 , 2 1 7 6 , 1 - - 1 1 1 , 1 - 1 3 1 ) 7 0 6 ( ) 9 6 2 ( ) 2 5 2 ( ) 0 7 3 8 1 ( , ) 9 9 1 , 8 1 ( ) 0 9 1 ( ) 9 5 1 ( 2 8 0 5 4 , 9 3 8 3 2 , ) 5 3 7 , 3 1 ( ) 0 0 4 , 7 ( 7 4 3 , 1 3 9 3 4 , 6 1 - - - - - - - ) 9 6 6 ( ) 7 0 6 ( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ) 1 ( ) 0 2 ( - - 1 9 3 - - - - - - - - - - - - - ) 3 ( - - - - - - - - - - 0 0 8 - - - - - - 0 2 7 - - - - - - - - - - - - - s s o l y r o t n e v n i n i e g n a h C t n e m g e s - n o n r e h t O e u n e v e r s n o i s i v o r p s e r u t n e v t n o i j s t n e m t s u d a e u a v l j r i a F n o s s o l r o f n o i s i v o r P d e t n u o c c a y t i u q e s t n e m t s e v n i i n o i t a c e r p e d d e t a c o l l a n U n o i t a s i t r o m a d n a x a t e m o c n i e r o f e b t fi o r P e s n e p x e x a t e m o c n I t fi o r p t e N t s e r e t n i d e t a c o l l a n U s e s n e p x e d e t a c o l l a n U AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS l a t o T r e h t O Z N A S D L Q C V I W S N 8 1 0 2 0 0 0 ’ $ 9 1 0 2 0 0 0 ’ $ 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 8 1 0 2 9 1 0 2 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ 0 0 0 ’ $ g n i t a r e p O s t n e m g e S s t e s s A , 6 9 3 0 4 6 , 6 3 2 5 8 6 3 1 2 5 2 , 0 3 7 , 1 2 8 2 1 , 4 4 4 2 5 5 0 1 , 8 2 0 , 1 7 3 0 9 2 6 , 3 6 0 8 0 1 , 9 0 7 , 5 2 1 6 2 3 0 7 1 , 4 2 7 , 3 7 1 8 3 6 , 1 2 2 6 4 6 5 9 1 , s t e s s a t n e m g e S 6 9 3 , 0 4 6 6 3 2 , 5 8 6 3 1 2 , 5 2 0 3 7 , 1 2 8 2 1 , 4 4 4 2 5 5 0 1 , 8 2 0 , 1 7 3 0 9 , 2 6 3 6 0 , 8 0 1 9 0 7 , 5 2 1 6 2 3 , 0 7 1 4 2 7 , 3 7 1 8 3 6 , 1 2 2 6 4 6 , 5 9 1 s t e s s a l a t o T s e i t i l i b a i L : s t n e m g e s g n i t a r e p o g n d r a g e r n o i t a m r o f n i i s e i t i l i b a i l d n a s t e s s a e h t s t n e s e r p e b a t g n w o l i l l o f e h T ) d e u n i t n o c ( S T N E M G E S G N I T A R E P O . 1 8 9 3 , 1 4 2 , 9 5 9 8 8 2 2 3 0 , 1 3 1 0 9 4 , 7 7 1 2 3 0 8 1 , 1 1 7 , 8 5 2 9 9 4 , 0 7 9 7 0 5 6 , 9 8 3 6 1 , 1 1 6 4 5 , 8 5 4 9 1 , 4 2 2 , 6 2 1 4 9 5 1 , 8 9 3 , 1 4 2 9 5 9 , 8 8 2 2 3 0 , 1 3 1 0 9 4 , 7 7 1 2 3 0 , 8 1 1 1 7 , 8 5 2 9 9 , 4 0 7 9 7 0 5 , 6 9 8 3 , 6 1 1 1 6 , 4 5 8 5 4 , 9 1 4 2 2 , 6 2 1 4 9 , 5 1 s e i t i l i b a i l t n e m g e S s e i t i l i b a i l l a t o T Financial Statements.AVJennings Limited - Annual Report 2019 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section A2 Profit and loss information 2. REVENUES FROM CONTRACTS WITH CUSTOMERS (a) Disaggregated revenue information The disaggregation of the Group’s revenue from contracts with customers is set out below: Operating Segments 30 June 2019 Types of goods or service Sale of Land Sale of Integrated Housing Sale of Apartments Property Development & Other Services NSW $'000 VIC $'000 QLD $'000 SA NZ $'000 $'000 Total $'000 77,693 45,849 - 238 44,269 14,845 56,708 4,381 2,104 29,846 - 185 7,608 11,504 - 20 1,217 132,891 - - - 102,044 56,708 4,824 Total revenue from contracts with customers 123,780 120,203 32,135 19,132 1,217 296,467 Timing of revenue recognition Goods transferred at a point in time 123,542 115,822 31,950 Services transferred over time 238 4,381 185 19,112 20 1,217 291,643 - 4,824 Total revenue from contracts with customers 123,780 120,203 32,135 19,132 1,217 296,467 (b) Revenue recognition accounting policy (ii) Property development and other services (i) Sale of land, integrated housing and apartments Revenue from the sale of land, houses and apartments is recognised at a point in time when control is transferred to the customer. Except for certain contractual arrangements discussed below, this occurs at settlement when legal title passes and an enforceable right to payment exists. For the following contractual arrangements, revenue is recognised prior to settlement where the customer has obtained control, and a right to payment exists: • Revenue from sales of land on deferred terms to builders in New Zealand. The builder gains control of the land on completion of physical works and can commence building at that point. • Sales of englobo land on deferred terms. Control passes when the contract is unconditional, physical works are complete and the customer has unfettered rights to the land before settlement. • Revenue from sales of land to builders in Australia under put and call arrangements where the builder is the ultimate purchaser and not a conduit between AVJennings and a retail purchaser. The builder gains control of the land on completion of the physical works and can commence building at that point. AVJennings Properties Ltd provides property development and other services to joint venture arrangements entered into by other entities within the Group. The performance obligation is satisfied over time and revenue is progressively recognised based on the terms of the service agreement. (iii) Financing components The Group does not expect to have any contracts for the sale of land, integrated housing and apartments where the duration between the transfer of the goods to the customer and payment by the customer exceeds one year in Australia. In the case of certain contracts for the sale of land in New Zealand and the provision of services in Australia, the duration may exceed one year. The Group discounts the balances in respect of these contracts to reflect the present value of expected cash inflows. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. INCOME AND EXPENSES Revenues Sales of land and built form Management fees Revenue from contracts with customers Total revenues Cost of sales include: Credit from utilisation of inventory provisions Amortisation of finance costs capitalised to inventories Depreciation expense Leasehold improvements Plant, equipment and motor vehicles Total depreciation expense Finance income Note 2 11 11 2019 $'000 - - 296,467 296,467 2018 $'000 371,190 977 - 372,167 ( 791 ) 12,181 ( 2,369 ) 17,220 62 190 252 28 241 269 Interest from financial assets at amortised cost 1,315 1,410 Finance costs Bank loans and overdrafts Less: Amount capitalised to inventories Finance costs expensed Other income Sundry income Impairment of assets Provision for loss on equity accounted investments Net decrease in inventory loss provisions 12,663 ( 12,504 ) 159 12,212 ( 12,022 ) 190 356 740 607 - - 1,111 Financial Statements.AVJennings Limited - Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. INCOME TAX (a) Income tax expense The major components of income tax are: Current income tax - Current income tax charge - Adjustment for prior year Deferred income tax - Current temporary differences - Adjustment for prior year Income tax reported in the Consolidated Statement of Comprehensive Income 39 2019 $’000 2018 $’000 10,266 93 17,955 ( 7 ) ( 2,959 ) ( 4,212 ) - ( 1 ) 7,400 13,735 (b) 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 23,839 45,082 Tax at Australian income tax rate of 30% Net share of equity accounted joint venture losses/(gains) Other non-deductible items Foreign jurisdiction gains/(losses) Effect of lower tax rate in foreign jurisdictions Adjustment for prior year Income tax expense Effective tax rate (c) Numerical reconciliation from income tax expense to income taxes paid Income tax expense Timing differences recognised in deferred tax Adjustment for prior year Exchange rate translation difference Current year tax payable at year end Prior year tax paid in current year Cash taxes paid per Consolidated Statement of Cash Flows 7,152 13,525 82 57 49 ( 33 ) 93 7,400 31% 2019 $’000 7,400 2,959 ( 93 ) ( 23 ) ( 69 ) 363 ( 21 ) ( 55 ) ( 8 ) 13,735 30% 2018 $’000 13,735 4,213 7 ( 20 ) ( 3,179 ) ( 10,597 ) 10,693 17,757 5,237 12,575 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. INCOME TAX (continued) (d) Recognised deferred tax assets and liabilities Opening balance Expense /(benefit) Effect of (1) adoption of new accounting standard Foreign exchange variance Closing balance $’000 $’000 $’000 $’000 $’000 3,072 867 1,626 137 ( 237 ) ( 244 ) 47 318 5,702 ( 116 ) ( 20,257 ) ( 7,486 ) ( 148 ) ( 845 ) 1,983 1,549 82 - ( 45 ) ( 539 ) - - - - - - - 1 1 - 2,835 624 1,674 455 2 5,588 - ( 18,274 ) 5,054 ( 109 ) - - - - - - ( 992 ) ( 66 ) ( 845 ) ( 584 ) ( 28,781 ) 3,075 ( 23,079 ) 2,959 5,054 5,054 ( 109 ) ( 20,761 ) ( 107 ) ( 15,173 ) 4,251 1,164 1,518 214 ( 1,179 ) ( 297 ) 109 ( 77 ) 7,147 ( 1,444 ) ( 21,851 ) ( 11,459 ) ( 368 ) ( 845 ) ( 46 ) 1,594 3,842 220 - 1 ( 34,569 ) 5,657 ( 27,422 ) 4,213 - - - - - - - - - - - - - - ( 1 ) - 3,072 867 1,626 137 ( 1 ) 5,702 - ( 20,257 ) 131 ( 7,486 ) - - - ( 148 ) ( 845 ) ( 45 ) 131 ( 28,781 ) 130 ( 23,079 ) Deferred income tax movement for the year ended 30 June 2019: Deferred tax assets - inventories - accruals - provisions on employee entitlement - other Deferred tax assets Deferred tax liabilities - inventories - unearned revenue - prepayments - brand name - other Deferred tax liabilities Net deferred tax liabilities Deferred income tax movement for the year ended 30 June 2018: Deferred tax assets - inventories - accruals - provisions on employee entitlement - other Deferred tax assets Deferred tax liabilities - inventories - unearned revenue - prepayments - brand name - other Deferred tax liabilities Net deferred tax liabilities (1) Refer to note 37. Financial Statements.AVJennings Limited - Annual Report 201941 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. INCOME TAX (continued) (e) Tax consolidation legislation AVJennings Limited and its wholly owned Australian controlled entities are in a tax consolidated group. The entities in the tax consolidated group have entered into a tax sharing agreement which limits the joint and several liabilities of the wholly owned entities in the case of a default by the head entity, AVJennings Limited. The entities in the tax consolidated group have also entered into a tax funding agreement to fully compensate/be compensated by AVJennings Limited for current tax balances and deferred tax assets or unused tax losses and credits transferred. (f) Accounting Income tax expense is calculated at the applicable tax rate and recognised in the profit and loss for the year, unless it relates to other comprehensive income or transactions recognised directly in equity. The tax expense comprises current and deferred tax. Broadly, current tax represents the tax expense paid or payable for the current year. Deferred tax accounts for tax on temporary differences. Temporary differences generally occur when income and expenses are recognised by tax authorities and for accounting purposes in different periods. Deferred tax assets, including those arising from tax losses, are only recognised to the extent it is probable that sufficient taxable profits will be available to utilise the losses in the foreseeable future. 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. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section A3 Balance Sheet information 5. CASH AND CASH EQUIVALENTS Cash at bank and in hand Accounting 2019 $’000 18,209 2018 $’000 8,491 Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. 6. RECEIVABLES Current Trade receivables (1) Related party receivables Other receivables Total current receivables Non-current Trade receivables (1) Related party receivables Other receivables Total non-current receivables 2019 $’000 9,354 1,681 4,053 2018 $’000 81,731 2,060 11,305 15,088 95,096 754 2,840 6,439 14,003 5,492 4,834 10,033 24,329 (1) The decrease is attributable to the opening retained earnings adjustment on adoption of AASB 15 as explained in note 37. (i) Accounting A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method, less an allowance for impairment. The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. For trade receivables, the Group applies the Standard’s simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. Financial Statements.AVJennings Limited - Annual Report 201943 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. RECEIVABLES (continued) (ii) Expected credit losses Negligible expected credit losses (2018: $Nil) have been recognised by the Group in the current year. At 30 June, the ageing analysis of trade receivables is as follows: Total $'000 Not due $'000 0-30 $'000 31-60 $'000 61-90 $'000 + 91 $'000 + 91# $'000 Number of days overdue 10,108 10,108 95,734 95,731 - - - - - - - 3 - - 2019 2018 # Considered impaired The carrying value of receivables is assumed to approximate their fair value. The Group does not have any significant credit risk exposure to a single customer. Receivables in respect of land and built form require full settlement prior to passing of title. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. INVENTORIES Current Broadacres Land to be subdivided - at cost Borrowing and holding costs capitalised Impairment provision 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 Impairment provision Total work-in-progress Completed inventory Completed houses and apartments - at cost Completed residential land lots - at cost Borrowing and holding costs capitalised Impairment provision Total completed inventory Total current inventories Non-current Broadacres Land to be subdivided - at cost Borrowing and holding costs capitalised Impairment provision 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 Impairment provision Total work-in-progress Completed inventory Completed houses and apartments - at cost Completed residential land lots - at cost Borrowing and holding costs capitalised Impairment provision Total completed inventory Total non-current inventories Total inventories Note 7(a) 7(a) 7(a) 7(a) 7(a) 7(a) 2019 $’000 2018 $’000 4,454 1,028 ( 387 ) 5,095 31,741 21,037 15,613 5,134 - 73,525 62,152 46,057 8,075 ( 156 ) 116,128 35,320 2,844 ( 875 ) 37,289 51,444 22,169 24,125 12,372 ( 607 ) 109,503 35,633 8,802 2,367 ( 254 ) 46,548 194,748 193,340 309,044 30,252 ( 8,877 ) 330,419 45,592 34,938 6,112 11,811 - 98,453 136 1,190 92 ( 29 ) 1,389 219,527 26,380 ( 8,015 ) 237,892 39,829 8,003 2,145 7,210 ( 202 ) 56,985 - 178 11 ( 29 ) 160 430,261 295,037 625,009 488,377 Financial Statements.AVJennings Limited - Annual Report 201945 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. INVENTORIES (continued) (a) Borrowing costs attributable to qualifying assets are capitalised. These include interest and fees, and have been capitalised at a weighted average rate of 6.36% (2018: 6.27%). (b) Inventory with a carrying value of $38,038,622 (2018: $116,235,000) was pledged as security for project specific borrowings (refer to note 14(b)). The Group’s remaining inventory has been pledged as security for the main banking facility (refer to note 14(a)). (c) The increase in inventory is partly attributable to the opening retained earnings adjustment made on adoption of AASB 15 as explained in note 37. Accounting Inventories are carried at the lower of cost and net realisable value (NRV). Cost includes costs of acquisition, development, interest capitalised 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. NRV is the estimated selling price in the ordinary course of business less the estimated costs to complete and sell the inventory. NRV is estimated using the most reliable evidence at the time, including expected fluctuations in selling price and estimated costs to complete and sell. Movement in impairment provisions At beginning of year Amounts utilised Effect of adoption of new accounting standard Amounts reversed At end of year Note (a) 2019 $’000 9,982 ( 791 ) 258 - 9,449 2018 $’000 13,462 ( 2,369 ) - ( 1,111 ) 9,982 (a) AASB 15 was adopted on 1 July 2018 using the modified retrospective approach. Refer to note 37. Revenue previously recognised under AASB 118 on sales contracts with builders in Australia which did not satisfy the recognition criteria under AASB 15 at 30 June 2018, were reversed through opening retained earnings. Inventory provisions utilised in relation to those sales contracts are also reversed. 8. INVESTMENT PROPERTY During the year, the Group has recognised an investment property at Waterline, Victoria. This relates to a retail space asset, previously classified in inventory, which is now being held for long term yield and capital appreciation. The Group accounts for its investment property at fair value and revaluations are recognised through profit and loss. The fair value at reporting date has been determined by the Directors with reference to the most recent external valuation performed by Knight Frank as at 21 November 2018. The Capitalisation Approach using a capitalisation rate of 6.00%, and Direct Comparison Approach methods have been adopted in determining the fair value. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. INVESTMENT PROPERTY (continued) Opening balance at 1 July Transfer from inventory Net gain from fair value remeasurement Closing balance at 30 June 2019 $’000 - 970 800 1,770 2018 $’000 - - - - Investment properties are measured as Level 3. Refer to note 21(v) for explanation of the levels of fair value measurement. It is the policy of the Group for the Directors to review the fair value of each property every year, with reference to the most recent external valuation. Going forward, the fair value for investment properties will be based on periodic, but at least triennial, valuations by qualified external independent valuers. 9. OTHER ASSETS Prepayments Deposits Total other current assets 10. FINANCIAL ASSET 2019 $’000 1,897 495 2,392 2019 $’000 2018 $’000 2,249 4,901 7,150 2018 $’000 Property Fund Units 2,211 2,880 These are units in unlisted property funds which don’t have an active market. In the prior year, they were measured at cost less impairment. As discussed in note 37, AVJennings adopted AASB 9 Financial Instruments on 1 July 2019. As a result, these units are now measured at fair value through profit and loss. The financial asset at fair value through Profit and Loss is carried in the Statement of Financial Position at fair value with net changes in fair value recognised in Statement of Profit and Loss. Expected future cash flows discounted using a rate of 12%, have been used in determining the fair value. Unlisted property fund units are measured as Level 3 financial instruments. Refer to note 21(v) for explanation of the levels of fair value measurement. Financial Statements.AVJennings Limited - Annual Report 201947 2019 $’000 1,075 ( 368 ) 707 6,772 ( 6,420 ) 352 1,059 2018 $’000 376 ( 314 ) 62 6,715 ( 6,241 ) 474 536 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. PLANT AND EQUIPMENT Leasehold improvements At cost Less: accumulated depreciation Total leasehold improvements Plant and equipment At cost Less: accumulated depreciation Total plant and equipment Total plant and equipment (i) 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 2018 Note Leasehold improvements $'000 Plant and equipment $'000 Carrying amount at 1 July 2017 Additions Disposals Depreciation charge Carrying amount at 30 June 2018 For the year ended 30 June 2019 Carrying amount at 1 July 2018 Additions Disposals Depreciation charge Carrying amount at 30 June 2019 (ii) Accounting 3 3 90 - - ( 28 ) 62 62 720 ( 13 ) ( 62 ) 707 702 15 ( 2 ) ( 241 ) 474 474 70 ( 2 ) ( 190 ) 352 Total $'000 792 15 ( 2 ) ( 269 ) 536 536 790 ( 15 ) ( 252 ) 1,059 Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets using the following rates which are consistent with the prior year: Plant and equipment 3-10 years Leasehold improvements 3-10 years or lease term if shorter AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. INTANGIBLE ASSETS Brand name at cost Less: accumulated amortisation Total intangible assets 2019 $’000 9,868 ( 7,052 ) 2,816 2018 $’000 9,868 ( 7,052 ) 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 was amortised over the expected useful life. In accordance with the accounting policy discussed below, the amortisation period and the amortisation method are reviewed each year. A review carried out at 31 December 2009 determined that the brand name had indefinite life. This change in accounting estimate was applied prospectively with amortisation ceasing as of 31 December 2009. At 30 June 2019, there were no indicators of impairment but an annual impairment test was performed and no impairment identified. Accounting 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. 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 it continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. 13. PAYABLES Current Unsecured Land creditors Trade creditors Related party payables Deferred Income Other creditors and accruals Total current payables Non-current Unsecured Land creditors Related party payables Deferred Income Other creditors and accruals Total non-current payables 2019 $’000 2018 $’000 21,323 6,544 150 1,253 11,964 41,234 20,830 - 1,167 12 22,009 12,229 8,298 150 2,158 11,673 34,508 18,884 2,978 1,535 - 23,397 Financial Statements.AVJennings Limited - Annual Report 201949 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Accounting Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. 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 5.68% (2018: 6.86%). 14. BORROWINGS Current Bank loans Total current interest-bearing liabilities Non-current Bank loans Total non-current interest-bearing liabilities Accounting Borrowing costs 2019 $’000 543 543 2018 $’000 13,407 13,407 199,792 199,792 125,799 125,799 Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset whilst in active development. Qualifying assets are assets that take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed as incurred. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of funds. Interest-bearing loans and borrowings Loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. Subsequently, interest-bearing loans and borrowings are measured at amortised cost 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 repayment for at least 12 months after the reporting date. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. BORROWINGS (continued) Financing arrangements The Group has access to the following lines of credit: 30 June 2019 Main banking facilities - bank overdraft - bank loans - performance bonds Project funding facilities - bank loans Contract performance bond facilities - performance bonds 30 June 2018 Main banking facilities - bank overdraft - bank loans - performance bonds Project funding facilities - bank loans Contract performance bond facilities - performance bonds Note 14(a) 14(b) 14(c) 14(a) 14(b) 14(c) Available $'000 Utilised $'000 Unutilised $'000 5,000 275,000 20,000 300,000 - 199,792 17,325 217,117 4,978 543 45,000 39,812 5,000 225,000 20,000 250,000 - 98,586 7,079 105,665 5,000 75,208 2,675 82,883 4,435 5,188 5,000 126,414 12,921 144,335 70,000 40,620 29,380 45,000 28,531 16,469 At 30 June 2019 main banking facilities are interchangeable up to $47 million (2018: $47 million) between the bank loans and performance bonds. During the current and prior year, there were no defaults or breaches of any covenants relating to the facilities. Financial Statements.AVJennings Limited - Annual Report 201951 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. BORROWINGS (continued) Significant terms and conditions (a) Main banking facilities The Group’s main banking facilities mature on 30 September 2021. These 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 14(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 weighted average interest rate including margin on the main banking facilities at 30 June 2019 was 2.80% (2018: 3.32%). (b) Project funding facilities Project funding facilities are secured by: • a fixed and floating charge over the assets of the entities involved in the relevant projects, namely, AVJennings Waterline Pty Ltd and AVJennings Properties Wollert SPV Pty Ltd; and • a first registered mortgage over certain real estate inventories of the entities involved in the relevant projects, namely, AVJennings Waterline Pty Ltd and AVJennings Properties Wollert SPV Pty Ltd. The AVJennings Waterline Pty Ltd facility was repaid on 28 June 2019. 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 is October 2019. The outstanding amounts are expected to be repaid or refinanced prior to expiry of the facility. As at 30 June 2019, the balance outstanding on the bank loan facilities was $543,000 (2018: $40,620,000). The carrying amounts of the pledged assets are as follows: Waterline, Victoria Wollert, Victoria 2019 $’000 - 43,260 2018 $’000 117,703 - The weighted average interest rate including margin on the project funding loans at 30 June 2019 was 2.98% (2018: 3.37%). (c) Contract performance bond facilities The Group has entered into Contract performance bond facilities of $45,000,000 (2018: $45,000,000) which are subject to review annually. $15,000,000 of the facilities expire on 31 December 2019 with the balance expiring on 30 April 2020. 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. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. PROVISIONS At 1 July 2018 Arising during the year Utilised At 30 June 2019 Current Non-Current At 1 July 2017 Arising during the year Utilised Unused amounts reversed At 30 June 2018 Current Non-Current Accounting Rectification and maintenance $’000 3,850 522 ( 4,090 ) Restructuring $’000 - 216 - Annual leave and long service leave $’000 6,761 1,475 ( 1,705 ) 282 282 - 1,692 3,030 ( 561 ) ( 311 ) 3,850 3,850 - 216 216 - - - - - - - - 6,531 6,049 482 6,474 1,652 ( 1,365 ) - 6,761 6,019 742 Total $’000 10,611 2,213 ( 5,795 ) 7,029 6,547 482 8,166 4,682 ( 1,926 ) ( 311 ) 10,611 9,869 742 A provision is recognised when there is 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 obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The non-current portion is discounted using corporate bond rates. Financial Statements.AVJennings Limited - Annual Report 201953 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. CONTRIBUTED EQUITY Ordinary shares Treasury shares Share capital (a) Movement in ordinary share capital 2019 Number 2018 Number 2019 $’000 2018 $’000 406,230,728 394,926,905 ( 762,619 ) ( 495,632 ) 177,961 ( 3,452 ) 170,481 ( 2,538 ) 405,468,109 394,431,273 174,509 167,943 At beginning of year Issued under the Dividend Reinvestment Plan Issued pursuant to the Underwriting Agreement At end of year 394,926,905 11,303,823 - 384,423,851 7,252,488 3,250,566 406,230,728 394,926,905 170,481 7,480 - 177,961 162,793 5,309 2,379 170,481 On 17 August 2018, the Company announced a fully franked final dividend of 3.0 cents per share to be paid on 11 October 2018. The Company also announced the Dividend Reinvestment Plan (DRP) would be reactivated for this dividend. The DRP offered shares in the capital of the Company (Shares) to each shareholder of the Company with a registered address in Australia and New Zealand (and otherwise as determined pursuant to the DRP) by way of reinvestment of some or all of their dividend entitlement. The issue price under the DRP was $0.6616 per share, being the average of the daily volume weighted average price of all AVJennings’ shares sold on the ASX during the Pricing Period, which commenced on 14 September 2018 and concluded on 20 September 2018, less a 2.5% discount. On 11 October 2018, AVJennings issued 11,303,823 Shares to shareholders of AVJennings under the DRP. The issued shares raised $7,480,000 in total. On 11 February 2019, the Company declared a fully franked interim dividend of 1.0 cent per share which was paid on 22 March 2019. The DRP was suspended for this dividend. (b) Movement in treasury shares 2019 Number 2018 Number 2019 $’000 2018 $’000 At beginning of year ( 495,632 ) ( 842,089 ) ( 2,538 ) ( 2,357 ) On market acquisition of shares Employee share scheme issue At end of year ( 1,462,177 ) 1,195,190 ( 248,020 ) 594,477 ( 914 ) - ( 181 ) - ( 762,619 ) ( 495,632 ) ( 3,452 ) ( 2,538 ) During the year, 1,462,177 treasury shares were purchased by the AVJ Deferred Employee Share Plan Trust at a cost of $914,000. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. CONTRIBUTED EQUITY (continued) Holders of ordinary shares are entitled to dividends and to one vote per share at shareholder meetings. Accounting Incremental costs directly attributable to the issue of ordinary shares are shown in equity as a deduction, net of tax, from the proceeds. Shares held by the AVJ Deferred Employee Share Plan Trust are disclosed as treasury shares and deducted from contributed equity. 17. RESERVES AND RETAINED EARNINGS (a) Reserves At 1 July 2017 Foreign currency translation Share-based payment expense At 30 June 2018 Foreign currency translation Share-based payment expense At 30 June 2019 (b) Nature and purpose of reserves Foreign currency translation reserve Foreign Currency Translation Reserve $'000 Share-based Payment Reserve $'000 3,724 ( 714 ) - 3,010 1,246 - 4,256 2,898 - 998 3,896 - 730 4,626 Total $'000 6,622 ( 714 ) 998 6,906 1,246 730 8,882 Note 30(a) 30(a) Exchange differences arising on translation of foreign operations are recognised in other comprehensive income as explained in note 38(e) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the Consolidated Statement of Comprehensive Income when the net investment is disposed of. Share-based payment reserve The share-based payment reserve is used to recognise the fair value of rights to shares or shares issued to employees, with a corresponding increase in employee expense in the Consolidated Statement of Comprehensive Income. (c) Retained earnings Movements in retained earnings were as follows: At beginning of year Effect of adoption of new accounting standard At beginning of year (restated) Profit after income tax Dividends declared and paid At end of year Note 37 2019 $'000 224,149 ( 11,792 ) 212,357 16,439 ( 15,910 ) 2018 $’000 213,945 - 213,945 31,347 ( 21,143 ) 212,886 224,149 Financial Statements.AVJennings Limited - Annual Report 201955 2019 $’000 2018 $’000 - - 11,848 4,062 15,910 13,455 7,688 - - 21,143 - 11,848 6,093 6,093 - 11,848 27,029 22,951 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. DIVIDENDS Cash dividends declared and paid 2017 final dividend of 3.5 cents per share, paid 19 September 2017. Fully franked @ 30% tax 2018 interim dividend of 2.0 cents per share, paid 19 April 2018. Fully franked @ 30% tax 2018 final dividend of 3.0 cents per share, paid 11 October 2018. Fully franked @ 30% tax 2019 interim dividend of 1.0 cent per share, paid 22 March 2019. Fully franked @ 30% tax Total cash dividends declared and paid Dividends proposed 2018 final dividend of 3.0 cents per share, paid 11 October 2018. Fully franked @ 30% tax 2019 final dividend of 1.5 cents per share, to be paid 20 September 2019. Fully franked @ 30% tax Total dividends proposed The Company’s Dividend Reinvestment Plan is suspended. Dividend franking account Franking credits available for subsequent financial years based on a tax rate of 30% The above balance is based on the balance of the dividend franking account at year-end adjusted for: • • franking credits that will arise from the payment of the amount provided for income tax; and franking debits that will arise from the payment of dividends proposed at year-end. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section A4 Cash Flow information 19. CASH FLOW STATEMENT RECONCILIATION Reconciliation of profit after tax to net cash flow (used in)/from operating activities Profit after tax Adjustments for non-cash items: Depreciation Net loss on disposal of plant and equipment Interest revenue classified as investing cash flow Share of loss/(profit) of associates and joint venture entities Change in inventory loss provisions Share-based payments expense Fair value adjustment to investment property Fair value adjustment to financial asset Provision for loss on equity accounted investments Change in operating assets and liabilities: (Increase)/decrease in inventories Decrease in receivables Decrease/(increase) in other current assets (Decrease) in deferred tax liability (Decrease)/increase in current tax liability Increase/(decrease) in payables (Decrease)/increase in provisions Net cash (used in)/from operating activities 2019 $’000 16,439 252 15 ( 1,315 ) 274 ( 533 ) 730 ( 800 ) 669 607 ( 89,536 ) 29,829 4,758 ( 2,852 ) ( 7,502 ) 6,763 ( 3,582 ) ( 45,784 ) 2018 $’000 31,347 269 2 ( 1,410 ) ( 226 ) ( 3,480 ) 998 - - - 34,309 40,578 ( 4,077 ) ( 4,343 ) 5,502 ( 55,971 ) 4,137 47,635 (a) (b) (a) (a) (a) (a) The current year movement includes the effect of the opening retained earnings adjustment explained in note 37. (b) Inventory transferred to investment property is excluded from the movement. Refer to note 8 for detail. Financial Statements.AVJennings Limited - Annual Report 201957 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section B – Risk 21. FINANCIAL RISK MANAGEMENT 20. JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of financial statements involves the use of certain critical accounting estimates and requires management to exercise judgement. These estimates and judgements are continually reviewed based on historical experience, current and expected market conditions as well as other relevant factors. (i) Judgements The Group’s principal financial assets and financial liabilities comprise receivables, payables, loans and borrowings, investment in property funds, and cash. The Group’s treasury department focuses on the following main financial risks: interest rate risk, foreign currency risk, credit risk and liquidity risk. Financial risk activities are governed by appropriate policies and procedures and financial risks are identified, measured and managed in accordance with policies and risk objectives. In applying the Group’s accounting policies, management makes judgements, which can significantly affect the amounts recognised in the Consolidated Financial Statements. Responsibility for the monitoring of financial risk exposure and the formulation of appropriate responses rests with the Chief Financial Officer. Timing of revenue recognition This includes the determination of whether revenue recognition criteria have been satisfied on sales of land lots with deferred settlement terms. The Board reviews and approves these policies. (i) Interest rate risk (ii) Estimates and assumptions Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include: Estimates of net realisable value of inventories: Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made of the net amount expected to be realised from the sale of inventories, and the estimated costs to complete. Profit recognised on developments: The calculation of profit for land lots and built form is based on actual costs to date and estimates of costs to complete. Interest rate risk is the risk that the fair value of a financial instrument or associated future cash flows will fluctuate because of changes in market interest rates. The exposure to market interest rates primarily relates to interest-bearing loans and borrowings issued at variable rates. In assessing interest rate risk, the Group considers loan maturity and cash flow profiles and the outlook for interest rates. The Group uses various techniques, including interest rate swaps, caps and floors to hedge the 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. However, the forecast cash position together with the current benign outlook for medium term interest rates has resulted in the Group retaining all of the drawn debt at variable rates of interest. Fair value measurement: Judgement is exercised in determining: • fair value of financial asset carried at fair value through profit and loss. • fair value of investment property. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and their fair value is reassessed at the end of each reporting period. Derivative financial instruments are not held for trading purposes. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. FINANCIAL RISK MANAGEMENT (continued) At balance date, the following variable rate borrowings were outstanding: Cash Bank loans Net financial liabilities Borrowings not hedged Weighted average interest rate % 0.89 2.80 2019 2018 Weighted average interest rate % 1.43 3.33 Balance $'000 ( 18,209 ) 200,335 182,126 182,126 Balance $'000 ( 8,491 ) 139,206 130,715 130,715 The following table shows the impact on profit after tax if interest rates changed by 50 basis points. The calculation is based on borrowings and cash held at year-end. It assumes that interest is capitalised to qualifying assets as disclosed in note 3: +50 basis points -50 basis points The effect on the basis that no interest is capitalised, would be as follows: +50 basis points -50 basis points (ii) Foreign currency risk Profit After Tax Higher/(Lower) 2019 $'000 ( 89 ) 89 2018 $'000 ( 153 ) 153 Profit After Tax Higher/(Lower) 2019 $'000 (637) 637 2018 $'000 (458) 458 Foreign currency risk arises from NZD denominated assets (balance sheet risk) or from transactions or cash flows denominated in NZD (cash flow risk). 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, profit after tax and equity would have been affected as follows: AUD/NZD +10% AUD/NZD -10% Profit After Tax Higher/(Lower) Equity Higher/(Lower) 2019 $'000 - - 2018 $'000 ( 102 ) 102 2019 $'000 125 ( 125 ) 2018 $'000 ( 173 ) 173 Financial Statements.AVJennings Limited - Annual Report 201959 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. FINANCIAL RISK MANAGEMENT (continued) (iii) Credit risk Credit risk is the risk that a counterparty will not meet its contractual obligations under a financial instrument, leading to a financial loss. Credit risk arises from cash and cash equivalents, receivables, financial assets and from granting of financial guarantees. 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 are performed before contract execution. Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with Group policy. Surplus funds are typically applied to repay drawn loans to minimise borrowing costs. Counterparties are limited to financial institutions approved by the Board. The granting of financial guarantees also exposes the Group to credit risk, being the maximum amount that would have to be paid if the guarantee is called on. As the amounts payable under the guarantees are not significantly greater than the original liabilities, this risk in not material. See note 35 for details regarding financial guarantees. The Group has no significant concentrations of credit risk. (iv) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. 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. These are reviewed by the Chief Financial Officer and presented to the Board as appropriate. 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 2021 and are therefore non-current. In addition, the Group operates certain project funding facilities which are discussed in note 14(b). The maturity profile of all debt facilities is monitored on a regular basis by the Chief Financial Officer and ongoing financing plans presented to the Board for approval well in advance of maturity. At 30 June 2019, 0.3% (2018: 9.6%) of the Group’s interest-bearing loans and borrowings will mature in less than one year. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. FINANCIAL RISK MANAGEMENT (continued) (iv) Liquidity risk (continued) The table below summarises the maturity profile of the Group’s financial assets and liabilities based on contractual undiscounted payments. Year ended 30 June 2019 Financial Assets Cash and cash equivalents Receivables Financial Liabilities Payables Interest-bearing loans and borrowings* Financial Guarantees Net maturity Year ended 30 June 2018 Financial Assets Cash and cash equivalents Receivables Financial Liabilities Payables Interest-bearing loans and borrowings* Financial Guarantees Net maturity < 6 months $'000 6-12 months $'000 > 1-5 years $'000 Total $'000 18,209 10,688 28,897 29,038 3,347 1,148 33,533 (4,636) - 4,400 4,400 12,196 2,787 - 14,983 (10,583) - 10,033 10,033 24,069 206,788 - 18,209 25,121 43,330 65,303 212,922 1,148 230,857 279,373 (220,824) (236,043) < 6 months $'000 6-12 months $'000 > 1-5 years $'000 Total $'000 8,491 61,716 70,207 24,717 2,326 2,135 29,178 41,029 - 33,380 33,380 9,791 15,643 - 25,434 7,946 - 24,329 24,329 26,692 130,275 - 156,967 8,491 119,425 127,916 61,200 148,244 2,135 211,579 (132,638) (83,663) *Expected settlement amounts of interest-bearing loans and borrowings include an estimate of the interest payable to the date of expiry of the facilities. At reporting date, the Group has approximately $93 million (2018: $190 million) of unused credit facilities available. Please refer to note 14. Financial Statements.AVJennings Limited - Annual Report 2019 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. FINANCIAL RISK MANAGEMENT (continued) (v) Fair value The following table provides the fair value measurement hierarchy of the Group’s financial assets and financial liabilities: Year ended 30 June 2019 Year ended 30 June 2018 Quoted prices in active markets (Level 1) $'000 Significant observable inputs (Level 2) $'000 Significant unobservable inputs (Level 3) $'000 Total $'000 2,211 2,211 - - 2,211 2,211 200,335 200,335 - - 200,335 200,335 Financial assets Financial asset Financial liabilities Interest-bearing loans and borrowings - - - - Quoted prices in active markets (Level 1) $'000 Significant observable inputs (Level 2) $'000 Significant unobservable inputs (Level 3) $'000 - - - - - - 139,206 139,206 - - - - Total $'000 - - 139,206 139,206 Management assessed that the fair values of cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. Investment property is considered Level 3. Refer to note 8: Investment Property. 22. CAPITAL MANAGEMENT In managing capital, management’s objective is to achieve an efficient capital structure which optimises the weighted average cost of capital commensurate with business requirements and prudential considerations. During the year ended 30 June 2019, a total dividend of $15,910,000 was paid (2018: $21,143,000). Management monitors capital mix through the debt to equity ratio (net debt/total equity) and the debt to total assets ratio (net debt/ total assets) calculated below: 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 2019 $'000 200,335 (18,209) 182,126 396,277 685,236 46.0% 26.6% 2018 $'000 139,206 (8,491) 130,715 398,998 640,396 32.8% 20.4% AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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) 2019 2018 2019 2018 % 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(4) Dunby Pty Limited(4) Epping Developments Limited(4) Montpellier Gardens Pty Limited(3) AVJ ODP Pty Limited(4) AVJennings (Cammeray) Pty Limited(3) 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(3) AVJennings Properties SPV No 4 Pty Limited(3) AVJennings Wollert Pty Limited(3) AVJ Erskineville Pty Limited(3) AVJ Hobsonville Pty Limited(3) AVJennings Properties SPV No 9 Pty Limited(3) AVJennings SPV No 10 Pty Limited AVJennings SPV No 19 Pty Limited(3) AVJennings SPV No 20 Pty Limited AVJennings SPV No 22 Pty Limited(3) AVJennings SPV No 23 Pty Limited AVJennings SPV No 24 Pty Limited AVJBOS Nominees Pty Limited(4) AVJBOS Eastwood Developments Pty Limited(4) AVJBOS Eastwood Finance Pty Limited(4) 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 - - - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 No No Yes Yes No Yes Yes Yes Yes Yes Yes - - - Yes - Yes No Yes Yes No Yes Yes Yes Yes Yes Yes No Yes No Yes No No - - - No No Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes No Yes No Yes No Yes Yes No Yes Yes Yes Yes Yes Yes No Yes No Yes No No No No No Financial Statements.AVJennings Limited - Annual Report 201963 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. CONTROLLED ENTITIES (continued) (a) Investment in controlled entities (continued) ECONOMIC ENTITY (1) 2019 2018 2019 2018 % Equity Interest Included in Banking Cross Deed of Covenant (2) Entities excluded from the Closed Group Creekwood Developments Pty Limited(3) Portarlington Nominees Pty Limited(3) AVJennings St Clair Pty Limited(3) St Clair JV Nominee Pty Limited(3) AVJennings Properties Wollert SPV Pty Limited AVJennings Waterline Pty Limited Cusack Lane Nominees Pty Ltd(5) AVJennings NZ Management Services Ltd(6) 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 - Yes Yes Yes Yes No No No No Yes Yes Yes Yes No No No No (1) (2) (3) (4) (5) All entities with the exception of AVJennings NZ Management Services Ltd are incorporated in Australia. With the exception of AVJ Hobsonville Pty Limited which has a branch in New Zealand and AVJennings NZ Management Services Ltd which is incorporated and operates in New Zealand, all entities operate within Australia. These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 14(a). These entities, including AVJennings Limited, are included in the Deeds of Indemnity for performance bond facilities referred to in note 14(c). Deregistered during the year. The remaining 50% was acquired as part of the transaction to purchase the joint venture partner’s interest in Cusack Lane Development Joint Venture. Refer to note 25. (6) Incorporated in New Zealand on 24 May 2019. (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 Corporations Instrument 2016/785 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 Corporations Instrument, 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". AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. CONTROLLED ENTITIES (continued) (d) Corporations Instrument closed group Certain controlled entities were granted relief by ASIC (under provisions of the Corporations Instrument) 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 Corporations Instrument. 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 Closed Group 2019 $’000 149,610 ( 106,817 ) ( 41,357 ) 1,436 ( 30 ) 1,406 2018 $’000 240,082 ( 170,670 ) ( 39,315 ) 30,097 ( 9,214 ) 20,883 Financial Statements.AVJennings Limited - Annual Report 2019 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. CONTROLLED ENTITIES (continued) (d) Corporations Instrument closed group (continued) The Consolidated Statement of Financial Position for those controlled entities which are party to the deed is as follows: 2019 $’000 2018 $’000 Current assets Cash and cash equivalents Receivables Inventories Other assets Total current assets Non-current assets Receivables Inventories Equity accounted investments Financial asset Plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Payables Tax payable Provisions Total current liabilities Non-current liabilities 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 7,660 185,479 75,966 1,615 270,720 9,036 164,085 6,649 2,211 1,059 2,816 185,856 456,576 17,758 2,150 6,348 26,256 15,143 152,000 14,224 482 181,849 208,105 248,471 174,509 4,626 69,336 248,471 7,433 177,186 98,337 1,782 284,738 17,708 114,356 7,709 2,880 536 2,816 146,005 430,743 21,871 9,717 5,896 37,484 11,917 94,000 20,788 742 127,447 164,931 265,812 167,943 3,896 93,973 265,812 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. CONTROLLED ENTITIES (continued) (d) Corporations Instrument 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 Effect of adoption of new accounting standard Comprehensive income: Profit for the year Total comprehensive income for the year Transactions with owners in their capacity as owners - Ordinary share capital raised - Treasury shares acquired - Share-based payment expense - Dividends paid Total transactions with owners in their capacity as owners At end of year 24. EQUITY ACCOUNTED INVESTMENTS Joint Ventures Accounting Closed Group 2019 $’000 265,812 ( 10,133 ) 1,406 1,406 7,480 ( 914 ) 730 ( 15,910 ) ( 8,614 ) 2018 $’000 257,567 - 20,883 20,883 7,688 ( 181 ) 998 ( 21,143 ) ( 12,638 ) 248,471 265,812 2019 $’000 2018 $’000 6,649 10,721 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. Joint ventures are accounted for using the equity method. Under the equity method, investments in these entities are carried at cost plus post acquisition changes in the Group’s share of net assets of these entities. The aggregate of the Group’s share of profit or loss after tax of joint ventures is disclosed in the Consolidated Statement of Comprehensive Income. Dividends received from 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 joint venture are eliminated to the extent of the interest in the joint venture, until the underlying assets are realised by the joint venture on consumption or sale. Financial Statements.AVJennings Limited - Annual Report 2019 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. EQUITY ACCOUNTED INVESTMENTS (continued) If there is objective evidence that the investment in the joint venture is impaired, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment and its carrying value and recognises it in the Consolidated Statement of Comprehensive Income. Interest in Joint Ventures Joint Venture and principal activities Woodville - Land Development and Building Construction(1) Pindan Capital Group Dwelling Trust - Building Construction Movements in carrying amount At beginning of year Contributions made Dividends received Amounts received Share of (loss)/profit Provision for loss on equity accounted investments At end of year The Group’s share of the Joint Ventures’ assets, liabilities, revenues 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 revenues and expenses Revenues Cost of property developments sold Expenses (Loss)/profit before income tax Income tax (Loss)/profit after income tax At 30 June 2019, there were no significant commitments entered into by the Joint Venture. (1) During the year, the development and sales of property at Woodville was completed. Interest held 2019 - 33.3% 2019 $’000 10,721 - ( 1,655 ) ( 1,536 ) ( 274 ) ( 607 ) 6,649 2019 $’000 333 9,161 9,494 859 1,986 2,845 6,649 3,606 ( 2,815 ) ( 1,058 ) ( 267 ) ( 7 ) ( 274 ) 2018 50.0% 33.3% 2018 $’000 8,444 2,047 - - 230 - 10,721 2018 $’000 222 13,871 14,093 648 2,724 3,372 10,721 4,920 ( 3,594 ) ( 1,097 ) 229 1 230 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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, principal place of business and principal activities Wollert Joint Venture (Victoria) - Land Development and Building Construction Cusack Lane Development Joint Venture (Queensland) - Land Development Interest held 2019 49% - 2018 49% 50% On 17 April 2019, the Group contracted to purchase the 50% share held by the joint operation partner in the Cusack Lane Development Joint Venture. The transaction settled on 27 June 2019 and was accounted for as an asset acquisition. Accounting 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. The Group’s share of the Joint Operations’ assets, liabilities, revenues 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 revenues and expenses Revenues Cost of property developments sold Other expenses Profit/(loss) before income tax Income tax Profit/(loss) after income tax Total comprehensive income/(loss) for the year 2019 $'000 16,163 27,097 43,260 6,826 7,068 13,894 29,366 34,797 ( 25,856 ) ( 2,141 ) 6,800 ( 2,040 ) 4,760 4,760 2018 $'000 17,793 49,690 67,483 3,376 8,174 11,550 55,933 898 ( 672 ) ( 786 ) ( 560 ) 168 ( 392 ) ( 392 ) Financial Statements.AVJennings Limited - Annual Report 201969 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Section D – Other information 27. STATEMENT OF COMPLIANCE 26. CORPORATE INFORMATION The Consolidated Financial Statements of AVJennings Limited for the year ended 30 June 2019 were authorised for issue in accordance with a resolution of the Directors on 5 September 2019. 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 53.88% of the ordinary shares in AVJennings Limited. The Group (“AVJennings” or “Group”) consists of AVJennings Limited (“Company” or “Parent”) and its controlled entities. These Consolidated Financial Statements are general purpose financial reports. They have been prepared in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board, the Corporations Act 2001 and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 28. BASIS OF PREPARATION These Financial Statements have been prepared on a going concern basis, using historical cost convention with the exception of financial assets at fair value through profit and loss. All figures in the Financial Statements are presented in Australian dollars and have been rounded to the nearest thousand dollars in accordance with ASIC Corporations Instrument 2016/191, unless otherwise indicated. The nature of the operations and principal activities of the Group are provided in the Directors’ Report. Where necessary, comparative information has been restated to conform to the current year’s disclosures. Consistent accounting policies have been applied in the current and prior years with the exception of AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers. See note 37 for further details. 29. 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 2019 Number 2018 Number 224,206,692 214,060,712 (c) Entity with significant influence over AVJennings Limited 218,881,387 ordinary shares equating to 53.88% of the total ordinary shares on issue (2018: 209,386,826 and 53.02% respectively) were held by SC Global Developments Pte Ltd and its subsidiaries in the Parent Entity at 30 June 2019. 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. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. RELATED PARTY DISCLOSURES (continued) (d) Parent Entity amounts receivable from and payable to controlled entities The Group recognises an allowance for expected credit losses (ECLs) for all related party receivables. Negligible expected credit loss over these amounts have been assessed as at 30 June 2019. (e) Transactions with related parties Entity with significant influence over the Group: SC Global Developments Pte Ltd Consultancy fee paid/payable Joint Ventures and Associate Epping JV Equity repatriation Woodville JV Accounting services fee received/receivable Dividends received Equity repatriations Joint Operations: Wollert JV Management fee received/receivable Accounting services fee received/receivable Note 2019 $ 2018 $ (i) 600,000 600,000 - 1,684 19,500 1,389,669 1,601,719 4,380,854 50,000 185,282 29,167 12,000 - - 642,631 50,000 317,626 50,000 Cusack Lane Development JV Management fee received/receivable Accounting services fee received/receivable (i) Consultancy fees paid to SC Global Developments Pte Ltd of $600,000 (2018: $600,000). (ii) (ii) Ceased to be a joint venture on 27 June 2019. (f) Joint ventures and Joint operations in which related entities in the Group are venturers Joint arrangements in which the Group has an interest are set out in notes 24 and 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 Non-current receivables Joint Ventures and others Current payables SC Global Developments Pte Ltd 2019 $’000 2018 $’000 1,681 2,060 1,181 4,336 150 150 Financial Statements.AVJennings Limited - Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. RELATED PARTY DISCLOSURES (continued) (h) Amounts advanced to and received from related parties Amounts advanced Joint Ventures and others Amounts received Joint Ventures (i) Remuneration of Key Management Personnel (KMP) Short-term - Salary/Fees - Accrued annual leave - STI - Other (1) Post employment - Superannuation (2) Long-term - Accrued Long service leave Share-based payment 71 2019 $’000 2018 $’000 1,659 1,156 - 2,978 2019 $’000 2018 $’000 2,216,088 68,835 377,106 44,747 1,983,855 46,965 370,870 91,828 123,496 111,957 90,846 348,775 83,696 674,467 3,269,893 3,363,638 (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. (j) 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. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30. SHARE-BASED PAYMENT PLANS LTI and performance (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: Up to 50% of the Performance Rights granted vest depending on AVJennings’ average growth rate in Earnings Per Share (EPS) over the next three financial years. 2019 $'000 2018 $'000 Up to 50% of the Performance Rights granted vest depending on AVJennings’ Return on Equity (ROE) over the next three financial years. The Return on Equity (ROE) component of the Performance Rights uses market capitalisation as a proxy for equity. Expense arising from equity- settled share-based payment transactions Expense reversed on forfeiture of shares Total expense arising from share-based payment transactions 1,132 ( 402 ) 998 - 730 998 The share-based payment plan is described in note 30(b). (b) Type of share-based payment plan LTI awards are only made to executives who have the ability to impact the Group’s performance and create shareholder value over the long term. LTI remuneration is provided by the Issue of Rights and includes a performance and a retention component. The use of Rights as an incentive reduces the upfront cash requirements (as shares do not need to be acquired for allocations). Shares are acquired on market by the Plan Trustee to satisfy the grant of shares in respect of rights which have vested. Participants do not receive dividends on Rights (as distinct from shares). LTI and retention Retention Rights are granted in three equal tranches which vest in each of the three succeeding years following the year of grant. >=18% Retention component – years of service Percentage of rights vesting one year two years three years 33.33% 33.33% 33.34% The performance conditions are tested at the end of the three- year measurement period. The service rights are split into three tranches that progressively vest each year subject to satisfaction of the service condition. The CEO’s participation was determined as 40% (Performance Rights) and 25% (Service Rights) of TEC respectively. The operation of the EPS, ROE and Retention hurdles are set out below. AVJennings’ EPS growth rate over the three year performance period < 5% 5% 5% –10% >=10% AVJennings’ ROE over the three year performance period <12% 12% 15% Percentage of rights vesting Nil 50% of the allocation for the hurdle Pro-rata between 50% and 100% 100% of the allocation for the hurdle Percentage of rights vesting Nil 50% of the allocation for the hurdle 75% of the allocation for the hurdle 100% (Straight line interpolation between 12% and 18%) Financial Statements.AVJennings Limited - Annual Report 201973 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30. SHARE-BASED PAYMENT PLANS (continued) Accounting The fair value of the Rights at the date of the grant is determined using an appropriate valuation model. The 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 Consolidated Statement of Comprehensive Income represents the movement in cumulative expense recognised between the beginning and end of that period. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. (c) Summary of rights granted The following is the status of rights granted (both KMP and other executives) from FY15 onwards under the restructured share-based remuneration: FY2015 Grant FY2016 Grant FY2017 Grant FY2018 Grant FY2019 Grant Total Total rights granted Rights vested to date Rights forfeited to date Unvested rights at 30 June 2019 1,363,583 1,587,251 1,859,171 1,671,573 1,841,470 ( 792,668 ) ( 973,466 ) ( 505,598 ) ( 242,908 ) - ( 570,915 ) ( 613,785 ) ( 97,085 ) - - - - 1,256,488 1,428,665 1,841,470 8,323,048 ( 2,514,640 ) ( 1,281,785 ) 4,526,623 The following table gives details and inputs in respect of the rights granted for the retention and performance components for the years ended 30 June 2019 and 2018. Number of rights granted Weighted average fair value at measurement date Dividend yield (%) Risk-free interest rate (%) Expected life (years) Share price Number of rights granted Weighted average fair value at measurement date Dividend yield (%) Risk-free interest rate (%) Expected life (years) Share price 2019 Retention 800,761 $0.5957 7.35 1.91 to 2.03 0.88 to 2.89 $0.68 2018 Retention 728,720 $0.6355 6.94 1.58 to 1.91 0.88 to 2.89 $0.72 2019 Performance 1,040,709 $0.5461 7.35 2.05 3.09 $0.68 2018 Performance 942,853 $0.5852 6.94 1.94 3.09 $0.72 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31. AUDITOR’S REMUNERATION Ernst & Young Audit and assurance services - Audit and review of the financial reports of the Group - Share of audit and review costs of the financial reports of the Group's joint ventures - audit related fees Non-assurance services Total auditor's remuneration 32. EARNINGS PER SHARE (EPS) 2019 $ 2018 $ 310,366 305,540 4,154 8,468 6,499 - 322,988 312,039 Basic EPS is 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: 2019 $'000 2018 $'000 Profit attributable to ordinary equity holders of the Parent 16,439 31,347 Weighted average number of ordinary shares for diluted EPS Treasury shares Weighted average number of ordinary shares for basic EPS 2019 Number 2018 Number 403,146,462 386,247,296 ( 762,619 ) ( 495,632 ) 402,383,843 385,751,664 Financial Statements.AVJennings Limited - Annual Report 201975 2019 $'000 2018 $'000 69,255 232,541 61,959 225,245 6 6 6 6 174,509 167,943 4,626 53,400 232,535 3,896 53,400 225,239 - - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 33. 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 for the year (b) Guarantees entered into by the Parent Entity The Parent Entity has not provided any guarantees other than those mentioned in notes 14(a), 14(c), 23(c) and 35. (c) Contingent liabilities of the Parent Entity Please refer to note 35 for details of the Parent Entity’s contingent liabilities. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 34. 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 35. CONTINGENCIES Unsecured Cross guarantees Secured Banking facilities 2019 $’000 2018 $’000 2,259 2,003 4,262 3,822 440 4,262 2,255 1,977 4,232 3,754 478 4,232 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(c). 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(a). 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(a). Contingent liabilities in respect of certain performance bonds, granted by the Group’s financiers, in the normal course of business as at 30 June 2019 amounted to $39,812,000 (2018: $28,531,000). 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. An accrual is taken up for legal costs if a present obligation exists and there is a high degree of certainty on the amount payable. In cases where costs have been estimated after the exercise of judgement, a provision is taken up. 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 2019, amounted to $16,177,000 (2018: $4,943,000). 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 2019, amounted to $1,148,000 (2018: $2,135,000). No liability is expected to arise. Financial Statements.AVJennings Limited - Annual Report 201977 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 36. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE The adoption of AASB 9 did not have a material impact and no adjustments have been made on transition. No matter or circumstance has arisen since 30 June 2019 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. 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS The Group applied AASB 9 and AASB 15 for the first time from 1 July 2018. AASB 16 is not mandatory for the year ended 30 June 2019. The nature and effect of the changes as a result of adoption of these new accounting standards are described below. Several other amendments and interpretations apply for the first time in 2019, but do not have a significant impact on the Consolidated Financial Statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued, but are not yet effective. AASB 9 Financial Instruments: (applied for the Group 1 July 2018) AASB 9 addresses the classification, measurement and derecognition of financial assets, financial liabilities and hedging and a new impairment model for financial assets. Financial assets at fair value through profit or loss include financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets at fair value through profit or loss are carried in the Statement of Financial Position at fair value with net changes in fair value recognised in the Statement of Profit or Loss. The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. For trade receivables, the Group applies the Standard’s simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. AASB 15 Revenue from Contracts with Customers: (applied to the Group 1 July 2018) AASB 15 supersedes AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. AASB 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The core principle of AASB 15 is that revenue is recognised when control of goods or services passes to the customer. AASB 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. In addition, the standard requires extensive disclosures. The adoption of AASB 15 did not have any impact on land and built form revenue previously recognised on settlement. However, the standard materially impacted revenue from land sales previously recognised before settlement. Under the previous standard, AVJennings recognised revenue when the contract for sale was unconditional, significant risks and rewards of ownership had transferred to the buyer, and there was no managerial involvement to a degree usually associated with ownership. AASB 15 is based on the principle that revenue is recognised at a point in time when control of the land or built form passes to the customer. For each sales contract, the relevant facts and circumstances are considered in determining the point at which control passes. Summarised below are the types of contractual arrangements where revenue will continue to be recognised prior to settlement: • Revenue from land sold on deferred terms to builders in New Zealand. The builder gains control of the land on completion of the physical works and can commence building at that point. • Sales of englobo land on deferred terms. Control passes when the contract is unconditional, physical works are complete and the purchaser has unfettered rights to the land before settlement. • Revenue from land sales to builders in Australia under put and call arrangements, where the builder is the ultimate purchaser and not a conduit between AVJennings and a retail purchaser. The builder gains control of the land on completion of the physical works and can commence building at that point. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued) AASB 15 Revenue from Contracts with Customers (continued) Except for those circumstances detailed above, all sales will be recognised on settlement under AASB 15. The Group adopted AASB 15 using the modified retrospective method of adoption with the date of initial application of 1 July 2018. The cumulative effect of initially applying AASB 15 is recognised at the date of initial application as an adjustment to the opening balance of retained earnings. Therefore, the comparative information is not restated and continues to be reported under AASB 118 and related interpretations. Revenue (and associated costs of sales) recognised on sales contracts with builders in Australia which were unconditional but where control had not passed at 30 June 2018, have been reversed through opening retained earnings. The reversal has impacted balance sheet accounts that recorded the original recognition. The effect of adopting AASB 15 as at 1 July 2018 was as follows: Assets Receivables Inventories Total adjustment on assets Liabilities Payables Deferred tax liabilities Total adjustment on liabilities Equity Retained earnings Total adjustment on equity (a) Revenue from land sales contracts reversed. (b) Cost, including capitalised costs relating to contracts reversed. (c) Sales commissions on contracts reversed. (d) Tax effect of profit on reversed contracts. (e) The post tax profit on contracts reversed. Note (a) (b) (c) (d) (e) Increase/ (decrease) $000 ( 64,475 ) 47,533 ( 16,942 ) ( 96 ) ( 5,054 ) ( 5,150 ) ( 11,792 ) ( 11,792 ) The adoption of AASB 15 did not have a material impact on OCI or the Group’s operating, investing and financing cash flows. Following, are the amounts by which each financial statement line item is affected as at, and for, the year ended 30 June 2019 as a result of the adoption of AASB 15. The first column shows amounts prepared under AASB 15 and the second column shows what the amounts would have been had AASB 15 not been adopted. Financial Statements.AVJennings Limited - Annual Report 201979 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued) AASB 15 Revenue from Contracts with Customers (continued) Continuing operations Revenue from contracts with customers Sales of land and built form Management fees Revenue Cost of sales Gross profit Share of net loss of joint ventures Provision for loss on equity accounted investments Fair value adjustment of financial asset Fair value adjustment to investment property Selling and marketing expenses Employee expenses Other operational expenses Management and administration expenses Depreciation expense Finance income Finance costs Other income Profit before income tax Income tax Profit after income tax Net profit Other comprehensive income (OCI) Foreign currency translation Other comprehensive income Total comprehensive income Profit attributable to owners of the Company Total comprehensive income attributable to owners of the Company Earnings per share (cents per share): Basic earnings per share Diluted earnings per share Amounts prepared under Note AASB 15 $’000 Previous AASB $'000 (a) (a) (a) (b) (c) (d) 296,467 - - 296,467 ( 223,900 ) 72,567 - 246,110 4,824 250,934 ( 189,678 ) 61,256 ( 274 ) ( 607 ) ( 669 ) 800 ( 6,865 ) ( 25,711 ) ( 8,591 ) ( 8,071 ) ( 252 ) 1,315 ( 159 ) 356 23,839 ( 7,400 ) 16,439 16,439 1,246 1,246 17,685 16,439 ( 274 ) ( 607 ) ( 669 ) 800 ( 6,806 ) ( 25,711 ) ( 8,591 ) ( 8,071 ) ( 252 ) 1,315 ( 159 ) 356 12,587 ( 4,024 ) 8,563 8,563 1,246 1,246 9,809 8,563 Increase/ (decrease) $’000 ( 296,467 ) 246,110 4,824 ( 45,533 ) 34,222 ( 11,311 ) 59 - - - - - - - - - - - ( 11,252 ) 3,376 ( 7,876 ) ( 7,876 ) - - ( 7,876 ) ( 7,876 ) 17,685 9,809 ( 7,876 ) 4.09 4.08 2.13 2.12 ( 1.96 ) ( 1.96 ) AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued) AASB 15 Revenue from Contracts with Customers (continued) a. Revenue from "sales of land and built form" as well as "management fees" disclosed separately under the previous standard, are now included in "revenue from contracts with customers". The transition to AASB 15 resulted in a net revenue increase of $45,533,000 for the year in comparison to the revenue that would have been recognised had AASB 118 continued to apply. The increase results from the following offsetting items: • AASB 15 was adopted on 1 July 2018 using the modified retrospective approach. Under this approach, revenue previously recognised under AASB 118 on sales contracts with builders in Australia which did not satisfy the recognition criteria under AASB 15 at 30 June 2018, were reversed through opening retained earnings. During the year, $51,693,000 of revenue previously recognised under AASB 118 (which formed part of the $11,792,000 opening retained earnings reversal as disclosed on page 78), has been recognised under AASB 15 in the year to 30 June 2019 thereby increasing comparable revenue. • $6,160,000 of revenue relating to contracts at hand would have satisfied the revenue recognition criteria in the year to 30 June 2019 if AASB 118 continued to apply as significant risks and rewards were deemed to have passed. These contracts however, did not satisfy the recognition criteria under AASB 15 as control had not passed and thereby reduced the comparable revenue. b. Cost and capitalised cost effects in relation to (a) above. c. Sales commission adjustments in relation to (a) above. d. Tax effect of (a), (b) and (c) above. Financial Statements.AVJennings Limited - Annual Report 201981 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued) AASB 15 Revenue from Contracts with Customers (continued) Current assets Cash and cash equivalents Receivables Inventories Other assets Total current assets Non-current assets Receivables Inventories Investment property Equity accounted investments Financial assets Plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Payables Borrowings Tax payable Provisions Total current liabilities Non-current liabilities Payables Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity Amounts prepared under Note AASB 15 $’000 Previous AASB $'000 (a) (b) (c) (d) (e) 18,209 15,088 194,748 2,392 230,437 10,033 430,261 1,770 6,649 2,211 1,059 2,816 454,799 685,236 41,234 543 3,179 6,547 51,503 22,009 199,792 15,173 482 237,456 288,959 396,277 174,509 8,882 212,886 396,277 18,209 34,030 181,437 2,392 236,068 10,033 430,261 1,770 6,649 2,211 1,059 2,816 454,799 690,867 41,271 543 3,179 6,547 51,540 22,009 199,792 16,851 482 239,134 290,674 400,193 174,509 8,882 216,802 400,193 Increase/ (decrease) $’000 - 18,942 ( 13,311 ) - 5,631 - - - - - - - - 5,631 - - - 37 37 - - 1,678 - 1,678 1,715 3,916 - - 3,916 3,916 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS (continued) recognise right of use assets of under 1% of total assets and lease liabilities under 2% of total liabilities if the Standard were to be implemented at 1 July 2019. AASB 15 Revenue from Contracts with Customers (continued) a. Trade receivables are higher as more revenue is recognisable prior to settlement, under the recognition criteria in the previous standard. b. Lower inventory under the previous standard is a consequence of more revenue being recognisable as per (a) above. c Sales commissions payable are higher under the previous standard as more revenue is recognisable. d. Tax effect of higher revenue recognisable under the previous standard. e. The post tax effect of higher revenue recognisable under the previous standard. AASB 16 Leases: (applicable for the Group 1 July 2019) AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under AASB 117. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. AASB 16, requires more extensive disclosures than under AASB 117. The Group will elect to use the exemptions proposed by the standard on lease contracts for which the lease term ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. The Group has leases of certain office equipment (i.e., computers, printing and photocopying machines) that are considered of low value. AVJennings has performed an assessment of AASB 16 on its existing operating lease arrangements as a lessee. Based on the assessment and using a discount rate of 5.68%, the Group would The Group intends to adopt AASB 16 from 1 July 2019 using the modified retrospective approach. 38. OTHER ACCOUNTING POLICIES Significant accounting policies relating to particular items are set out in the relevant notes. Other significant accounting policies adopted in the preparation of the Financial Report are set out below. a. Basis of consolidation The Consolidated Financial Statements comprise the financial statements of AVJennings Limited and its subsidiaries as at 30 June 2019. Subsidiaries are entities over which the Group has control. Control is achieved when the Group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and deconsolidated from the date control ceases. The Financial Statements of subsidiaries are prepared for the same period as the Parent, adopting consistent accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows are fully eliminated in preparing the Consolidated Financial Statements. 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. b. Business combinations Business combinations are accounted for using the acquisition method. This involves recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values. Acquisition-related costs are expensed as incurred. Financial Statements.AVJennings Limited - Annual Report 201983 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ii) Translation of Group Companies’ functional currency to presentation currency The results and financial positions 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 Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position; • 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. c. Leases Leases where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. The Group did not have any finance leases at year end. 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 recognised as an expense 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. d. Goods and services tax (GST) 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; and • 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. e. Foreign currency translation (i) Functional and presentation currency The Group’s functional and presentation currency is Australian Dollars. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION84 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 2018 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 27; 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 2019. 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 5 September 2019 Peter Summers Director Financial Statements.AVJennings Limited - Annual Report 2019 Ernst & Young 200 George Street Sydney NSW 2000 Australia Ernst & Young GPO Box 2646 Sydney NSW 2001 200 George Street Sydney NSW 2000 Australia Ernst & Young GPO Box 2646 Sydney NSW 2001 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au 85 Auditor’s Independence Declaration to the Directors of AVJennings INDEPENDENT AUDITOR’S REPORT Limited Auditor’s Independence Declaration to the Directors of AVJennings To the Members of AVJennings Limited Limited Auditor’s Independence Declaration to the Directors of AVJennings As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 Report on the Audit of the Financial Report June 2019, I declare to the best of my knowledge and belief, there have been: Limited As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in Opinion June 2019, I declare to the best of my knowledge and belief, there have been: As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 We have audited the financial report of AVJennings Limited (the Company) and its subsidiaries (collectively the Group), which June 2019, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, b) no contraventions of any applicable code of professional conduct in relation to the audit. the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes to the a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in financial statements, including a summary of significant accounting policies, and the directors’ declaration. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. b) no contraventions of any applicable code of professional conduct in relation to the audit. relation to the audit; and relation to the audit; and relation to the audit; and In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. (i) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019 and of its consolidated financial performance for the year ended on that date; and Ernst & Young (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Ernst & Young Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further Ernst & Young Glenn Maris described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Partner Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are 5 September 2019 Glenn Maris relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Partner Code. Glenn Maris 5 September 2019 Partner We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 5 September 2019 Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 86 AVJennings Limited - Annual Report 2019 Ernst & Young 200 George Street Sydney NSW 2000 Australia Ernst & Young GPO Box 2646 Sydney NSW 2001 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s Independence Declaration to the Directors of AVJennings 1. Net realisable value (NRV) of inventories Limited Auditor’s Independence Declaration to the Directors of AVJennings Why significant Limited As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Approximately 91% of the Group’s total assets comprise development inventories. Inventories are carried at the lower of As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 cost and net realisable value and the directors assess this with a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in June 2019, I declare to the best of my knowledge and belief, there have been: reference to the following: Our audit procedures focused on assessing the judgments and assumptions made by the Group in the feasibilities underpinning the net realisable value assessments. How our audit addressed the key audit matter relation to the audit; and relation to the audit; and a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. ç Capitalised costs to date ç Forecast costs to complete b) no contraventions of any applicable code of professional conduct in relation to the audit. ç Average historic and forecast selling price and sales rate This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. ç Assessed and tested the effectiveness of relevant controls Our procedures included the following: over cost accumulation per project This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. ç Interviewed Project Managers to understand the status and progress of a sample of developments ç Assessed the impairment methodology, project margin analysis and feasibility models prepared by management for a sample of developments in progress ç Identified higher risk projects, based on our judgment, and evaluated the assumptions adopted. In doing so, we: ç Compared the forecast sales revenue assumptions to the most recent historical or comparable sales and external market data ç Corroborated the costs projected to signed contracts or actual costs incurred for current or comparable projects ç Assessed contingency estimates for remaining development risks ç Selected a sample of identified higher risk projects in which we involved our internal real estate valuation specialists to evaluate the key sales revenue assumptions in these projects ç Performed sensitivity analyses in relation to the key forward looking assumptions including sales price achieved, cost per lot and escalation rates ç Tested the mathematical accuracy of the feasibilities tested. ç Changes to the underlying assumptions based on the impact of changing market conditions and changes to strategy Ernst & Young This was considered a key audit matter as it involves a significant degree of judgment and can present a range of alternative outcomes. Ernst & Young There is judgment involved in determining the appropriate Glenn Maris allocation of cost of sales recognised upon the realisation of Partner inventories. 5 September 2019 Glenn Maris Partner Disclosure of inventories is included in Note 7 of the 5 September 2019 financial report. Disclosure of significant judgments is included in Note 20 of the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 200 George Street Sydney NSW 2000 Australia Ernst & Young GPO Box 2646 Sydney NSW 2001 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au 87 How our audit addressed the key audit matter Auditor’s Independence Declaration to the Directors of AVJennings 2. Revenue recognition and implementation of AASB 15 Revenue from Contracts with Customers Limited Auditor’s Independence Declaration to the Directors of AVJennings Why significant Limited As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: The Group adopted AASB 15 Revenue from Contracts with Customers on 1 July 2018. As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in June 2019, I declare to the best of my knowledge and belief, there have been: Under AASB 15, the Group recognises revenue when control of the asset has been transferred to the customer, generally close to, or at settlement. Previously under AASB 118 Revenue, the Group recognised revenue from asset sales prior to settlement This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. when the significant risks and rewards of ownership had been transferred to the customer. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. Tested the recognition of revenue for a sample of sales to ensure compliance with the Group’s revenue recognition policy and whether revenue has been recognised in the correct period. In doing so, for identified samples, we examined the underlying sales contracts; settlement documentation and noted the cash proceeds received. a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. ç Assessed whether the Group’s revenue recognition policy is set out in accordance with the requirements of AASB 15. b) no contraventions of any applicable code of professional conduct in relation to the audit. Our audit procedures included the following: relation to the audit; and relation to the audit; and ç Upon adoption of AASB 15, the Group elected to apply the modified retrospective method resulting in a decrease to retained earnings of $11.8m. Ernst & Young Disclosure of the Group’s revenue recognition policy is included in Note 2 of the financial report. Ernst & Young We consider revenue recognition to be a key audit matter due Glenn Maris to the significance of the impact of the adoption of AASB 15 Partner on retained earnings, as well as the judgment exercised by the Group when applying the requirements of the Standard and 5 September 2019 Glenn Maris determining at what point in time revenue is recognised. Partner 5 September 2019 Disclosure of the Group’s adjustments on transition together with additional disclosure on revenue from contracts with customers for the year ended 30 June 2019 is included in Note 37 of the financial report. ç ç ç Tested the completeness of the contract population used by the Group for determining the retained earnings adjustment on adoption of AASB 15. Tested a sample of contracts within the retained earnings adjustment recorded by the Group to determine whether the adjustment has been appropriately calculated under adoption of AASB 15. Tested the arithmetic accuracy of the calculations used by the Group to determine the retained earnings adjustment. ç Assessed the adequacy of the related disclosures in the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 88 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Information Other than the Financial Report and Auditor’s Report Auditor’s Independence Declaration to the Directors of AVJennings Auditor’s Independence Declaration to the Directors of AVJennings Limited The directors are responsible for the other information. The other information comprises the information included in the Company’s Limited 2019 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 Report after the date of this auditor’s report. June 2019, I declare to the best of my knowledge and belief, there have been: As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. relation to the audit; and If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report Ernst & Young The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance Ernst & Young with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Glenn Maris Partner Glenn Maris In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, 5 September 2019 Partner disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 5 September 2019 Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au 89 Auditor’s Independence Declaration to the Directors of AVJennings Limited circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Auditor’s Independence Declaration to the Directors of AVJennings • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the Limited As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: disclosures made by the directors. a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and relation to the audit; and • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s b) no contraventions of any applicable code of professional conduct in relation to the audit. ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our b) no contraventions of any applicable code of professional conduct in relation to the audit. auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Ernst & Young We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Ernst & Young We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Glenn Maris Partner Glenn Maris 5 September 2019 Partner From the matters communicated to the Directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless 5 September 2019 law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 90 Ernst & Young 200 George Street Ernst & Young Sydney NSW 2000 Australia 200 George Street GPO Box 2646 Sydney NSW 2001 Ernst & Young Sydney NSW 2000 Australia 200 George Street Ernst & Young GPO Box 2646 Sydney NSW 2001 Sydney NSW 2000 Australia 200 George Street GPO Box 2646 Sydney NSW 2001 Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 Tel: +61 2 9248 5555 ey.com/au Fax: +61 2 9248 5959 Tel: +61 2 9248 5555 ey.com/au Fax: +61 2 9248 5959 Tel: +61 2 9248 5555 ey.com/au Fax: +61 2 9248 5959 ey.com/au Report on the Remuneration Report Auditor’s Independence Declaration to the Directors of AVJennings Auditor’s Independence Declaration to the Directors of AVJennings Limited Opinion on the Remuneration Report Auditor’s Independence Declaration to the Directors of AVJennings Limited Auditor’s Independence Declaration to the Directors of AVJennings Limited As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2019. Limited June 2019, I declare to the best of my knowledge and belief, there have been: As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: In our opinion, the Remuneration Report of AVJennings Limited for the year ended 30 June 2019, complies with section 300A of the a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been: Corporations Act 2001. June 2019, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. b) no contraventions of any applicable code of professional conduct in relation to the audit. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. conducted in accordance with Australian Auditing Standards. This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year. relation to the audit; and relation to the audit; and relation to the audit; and relation to the audit; and Responsibilities Ernst & Young Ernst & Young Ernst & Young Ernst & Young Ernst & Young Glenn Maris Partner Glenn Maris 5 September 2019 Glenn Maris Partner Glenn Maris Partner 5 September 2019 Glenn Maris Partner 5 September 2019 Partner 5 September 2019 Sydney 5 September 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation AVJennings Limited - Annual Report 2019 Shareholder Information. 91 As at 4 October 2019. 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 SCGlobal Developments Pte Ltd Australian Securities Exchange Singapore Exchange 616 803 333 857 173 2,782 526 265 583 190 204 26 1,268 245 Total 881 1,386 523 1,061 199 4,050 771 Ordinary Shares 218,881,387 % 53.88 AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION92 Shareholder Information. As at 4 October 2019. 3. TWENTY LARGEST SHAREHOLDERS ON THE AUSTRALIAN REGISTER Name The Central Depository (Pte) Ltd BNP Paribas Nominees Pty Ltd Citicorp Nominees Pty Ltd HSBC Custody Nominees (Australia) Ltd Brazil Farming Pty Ltd Pacific Custodians Pty Ltd Gillcorp Pty Limited John E Gill Operations Pty Ltd John E Gill Trading Pty Ltd Horrie Pty Ltd JP Morgan Nominees Australia Ltd Luton Pty Ltd Mr Bradley John Newcombe URB Investments Ltd Mr D R M Gill and Mrs J M Gill Ago Pty Ltd Jamplat Pty Ltd Hillmorton Custodians Pty Ltd Di Iulio Homes Pty Ltd Peter Summers Total Ordinary Shares 225,444,3 1 1 16,258,796 13,098,338 12,853,617 11,000,000 6,413,1 3 1 6,343,003 5,609,105 5,598,712 3,747,931 3,443,1 8 1 2,860,853 2,200,000 2,077,631 1,958,5 1 1 1,948,861 1,7 1 3,401 1,293,054 1,258,1 72 1,225,095 % 55.50 4.00 3.22 3.1 6 2. 71 1 .58 1 .56 1 .38 1 .38 0.92 0.85 0.70 0.54 0.51 0.48 0.48 0.42 0.32 0.3 1 0.30 326,345,703 80.34 AVJennings Limited - Annual Report 2019Shareholder Information. As at 4 October 2019. 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 Lim Chin Tiong or Sim Lye Wan Tsang Sze Hang DBS Nominees Pte Ltd Rowland Wong Kwok Ho Raffles Nominees (Pte) Ltd Vesmith Investments Pte Ltd Pansbury Investments Pte Ltd Citibank Nominees Singapore Pte Ltd Hexacon Construction Pte Ltd UOB Kay Hian Pte Ltd OCBC Nominees Singapore Pte Ltd Teo Chiang Long Ng Poh Cheng Wee Kim Choo @ Elizabeth Sam Chng Bee Suan Chua Hung Koon Edmond Total 93 % 47.38 2.96 0.44 0.39 0.35 0.22 0.20 0.20 0.18 0.1 7 0.13 0.1 2 0.09 0.08 0.07 0.07 0.06 0.06 0.06 0.05 Ordinary Shares 192,463,638 12,036,7 9 1 1,782,618 1,570,170 1,408,420 899,283 818,029 804,175 734,910 681,796 532,828 470,515 368,480 341,134 271,537 269,1 7 2 233,1 3 1 224,820 224,220 216,873 216,352,540 53.26 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 on 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 406,230,728. AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION94 Company Particulars. DIRECTORS Mr Simon Cheong Mr Jerome Rowley Mrs Elizabeth Sam Mr Bobby Chin Mr Lai Teck Poh Mr Bruce Hayman Mr Tan Boon Leong Mr Philip Kearns 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 200 George Street Sydney NSW 2000 BANKERS Commonwealth Bank of Australia Ltd and Bankwest Division DBS Bank HSBC Bank Australia Ltd United Overseas Bank Ltd Oversea-Chinese Banking Corporation 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)). SHARE REGISTRY Australia Link Market Services Ltd Tower 4 727 Collins Street, Docklands Vic 3008 Telephone: +61 1300 554 474 Singapore The Central Depository (Pte) Ltd 11 North Buona Vista Drive #06-07 The Metropolis Tower 2 Singapore 138589 Telephone +65 6535 7511 DIVIDENDS Dividends paid in the year under review: Final Dividend of $0.03 for FY18 paid on 11 October 2018 Interim Dividend of $0.01 for FY19 paid on 22 March 2019 AVJennings Limited - Annual Report 2019 Building on our past. Shaping your future. Your community developer. 

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