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
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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
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AVJennings Limited - Annual Report 2019COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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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
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GPO Box 2646 Sydney NSW 2001
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Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
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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
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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.