Annual Report 2020
AVJennings Limited
ABN 44 004 327 771
Housing matters.
Community matters.
2
We have always
championed the
principles of
community, that
housing matters,
community matters.
Angus Johnson,
National Developments Manager
AVJennings Limited - Annual Report 2020 3
Contents.
COMPANY OVERVIEW
Chairman’s Report
2020 Highlights
Property Portfolio
Project Pipeline
Chief Executive Officer’s Report
Committed to Creating and
Supporting Communities
Our Communities
DIRECTORS’ REPORT
Directors’ Report
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
5
7
8
9
11
15
18
20
42
43
44
45
46
93
94
ADDITIONAL INFORMATION
Shareholder Information
Company Particulars
99
102
Empress Apartments, Williamstown, VIC
Artist Impression
COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONAVJennings Limited - Annual Report 2020 4
Argyle, Elderslie, NSW
The housing needs of
buyers have evolved...
as families demand
more quality space
and look towards a
home in the suburbs.
Simon Cheong, Chairman
AVJennings Limited - Annual Report 2020 Chairman’s Report.
5
Dear fellow shareholders, on behalf of
the Board of Directors, I am pleased to
present our 2020 Annual Report.
In the 88-year history of AVJennings,
FY2020 was a year unlike any other. Signs
of a recovery after the first half of the
financial year were soon impacted by
drought and bushfires which dampened
consumer confidence and attendances
at sales offices as people stayed indoors
due to poor air quality. The early months
of 2020 saw a recovery in enquiry levels
and an uplift in contract signings. However,
unfortunately, the COVID-19 pandemic
stymied the anticipated stronger finish to
this financial year.
Revenue was down 11.5% overall to $262.4
million, largely due to a 76.8% decrease
in apartment revenue to $13.2 million,
reflecting project completion timing. The
2019 financial year included the completion
of our GEM apartments at Waterline Place
in Victoria. The next apartment building,
Empress at Waterline Place, is currently
under construction and is expected to
contribute to the 2021 financial year result.
Despite the extraordinary challenges
seen in the 2020 financial year, our core
revenue from land and traditional housing
increased by 4.9% to $246.4 million.
On a positive note, margins did increase for
land and traditional housing in all States
and New Zealand, with the exception of
New South Wales, where margins were
impacted by some price corrections plus
the relative impact of some projects that
yield slightly lower margins. Margins in our
apartments decreased slightly with some
lower value remaining apartments at GEM
sold. Overall, margins decreased 1.7%
to 22.8%.
Recent changes to the Company’s
operating structure have also proved
beneficial. These have not only allowed
the Company to reduce overheads
further during the 2020 financial year
but also to respond quickly to the
challenges we are facing.
Net cash from operations was positive $10
million in the 2020 financial year compared
with net outflows of $45.8 million in the
previous financial year. The improved
cashflow was assisted by solid settlements
and reduced expenditure on production,
acquisitions and overheads.
Our balance sheet strength continues.
Gearing at 28.1% remains within our target
range of net debt to assets of 15 – 35%,
a slight increase from financial year 2019
level at 26.6%.
Whilst the pandemic impacted the 2020
financial result, your Board believes the
results achieved given the extraordinary
circumstances were solid. The Company
remains in a sound financial position, with
moderate gearing and adequate undrawn
banking facilities. For prudent capital
management, the Board decided not to
declare a final dividend. Dividends for the
year were 1.2 cents per share, fully franked.
Our land bank’s diversification, location,
quality and size continue to be a long-
term goal. Controlled lots were 12,134
including land at Caboolture, Queensland
of approximately 3,500 lots, which is under
an option agreement. This compares to a
total number of controlled lots of 9,531 as
at 30 June 2019. Our disciplined approach
to land acquisitions has seen no major new
provisions against the land bank, although
a further $1.6 million provision was booked
relating to legacy regional projects in
Queensland and South Australia.
In response to the COVID-19 pandemic
induced uncertainty, management wound
back production in early March 2020, with
the exception of projects necessary to
facilitate settlements of existing pre-sales.
This capability demonstrates the strength
and flexibility of horizontal development
vs vertical development. While site activity
was scaled back, our planning and design
program continued so as to place us
in a good position to quickly scale up
production as the market recovers.
The housing needs of buyers have evolved
due to the pandemic. With an increase in
working from home, city living is likely to
become less attractive as families demand
more quality space and look towards a
home in the suburbs. This trend will provide
continued support for traditional housing.
I would like to take the opportunity to thank
our Directors for their invaluable guidance
and dedication. During the year, we bade
farewell to Mrs Elizabeth Sam, who retired
after almost 20 years of commitment and
contributions to AVJennings. Elizabeth’s
guidance and insights as a director and
chairperson on numerous committees
has proven a most valuable asset to the
Company and the Board.
Finally, I would like to thank our
shareholders, partners and customers for
their continued trust and support, as well
as our management and employees for
their hard work and commitment during
these unprecedented times.
Simon Cheong
Chairman
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 6
AVJennings Limited - Annual Report 2020 2020 Highlights.
7
Traditional
Markets.
Land & traditional
housing revenue
$246.4m
up $11.5m
4.9% (cid:31)
Apartment revenue
$13.2m
down $43.5m
76.8% (cid:30)
Group revenue
$262.4m
down $34.1m
11.5% (cid:30)
Profit before tax
$13.2m
down $10.6m
44.8% (cid:30)
YOY Comparison
Total revenue
Statutory profit before tax
Statutory profit after tax
Gross margins
Net tangible assets (NTA)
NTA per share
EPS (cents per share)
Dividend fully franked (cents per share)
Quality
Asset Base.
Under
control
12,134 lots
(Includes land under option)
Net funds employed
spread geographically.
Work in
progress
1,117 lots
Strong
Stability.
Net cash from operations
$10.0m
Available line of credit
$122.6m
Net debt
$184.4m
Gearing
28.1%
(inside 15-35% target range)
Total fully
franked dividend
1.2 cps
FY20
$262.4m
$13.2m
$9.0m
22.8%
FY19
$296.5m
$23.8m
$16.4m
24.5%
$390.3m
$393.5m
$0.96
2.23
1.2
$0.97
4.09
2.5
%change
(11.5%)
(44.8%)
(45.0%)
(1.7pp)
(0.8%)
(0.9%)
(45.5%)
(52.0%)
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 8
Property Portfolio.
Number of lots at 30 June 2020.
2,500
2,000
1,500
1,000
500
0
2,210
2,054
Excludes 3,500 lots at Caboolture, Queensland
Excludes 231 lots at Mernda, Victoria
Excludes 13 remnant lots
1,656
1,637
VIC
QLD
SA
NSW
NZ
194
WA
639
Net funds employed by region.
PCP
18%
QLD
21%
PCP
2%
WA
1%
PCP
10%
SA
SA
9%
PCP = Prior corresponding period (FY19)
PCP
30%
NSW
26%
PCP
16%
NZ
17%
PCP
24%
VIC
VIC
26%
AVJennings Limited - Annual Report 2020
Project Pipeline.
9
Project pipeline as at 30 June 2020.
Pre-delivery phase
Development phase
Communities
Remaining
Pre
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)
Arcadian Hills, Cobbitty Stages 1 - 8
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
I
A
R
O
T
C
V
I
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
Ara Hills, Orewa
Lyndarum, Wollert
Lyndarum North, Wollert JV
Harvest Square, Brunswick West
Waterline Place, Williamstown
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
Parkview, Ferndale
119
10
61
444
138
44
526
43
56
196
35
177
5
42
46
55
1,175
205
20
294
2
637
95
1,732
87
296
40
83
205
1,328
77
11
78
28
Excludes 3,500 lots at Caboolture, Queensland
Excludes 231 lots at Mernda, Victoria
Excludes 13 remnant lots
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
10
AVJennings Limited - Annual Report 2020 Chief Executive
Officer’s Report.
Housing matters, community matters.
There is no doubt 2020 has reminded
us of this even more. And not just that
housing and communities matter – we
again see the importance of caring and
vital communities, and of the safety and
security housing gives us and our families.
The impacts from the bushfires and the
COVID-19 crisis have been huge. Lives have
been lost, communities destroyed, wildlife
devastated. The pandemic has been
something most of us have never before
experienced in our lives.
Whatever other challenges we have faced,
the most important was, and remains,
safety. We recognise that this is first and
foremost a serious health crisis and, from
the outset, we proactively implemented
appropriate measures to safeguard the
well-being of our employees, suppliers,
customers and the wider community.
Working from home has been implemented
for virtually all office employees since
March 2020. As some areas have opened
up those employees that need to and
may work from the office are on rotational
shifts to ensure distancing and safety in
their working environment. In July 2020, an
internal survey showed a high percentage
of employees felt safe in their working
environment.
Throughout these challenges, we did not
lose sight of our customers. Many had
already bought and made plans for their
future. We wanted to deliver on those plans
and dreams. Others, potentially challenged
by current accommodation restraints
which challenged dealing with working
from home or home schooling, began
looking for better options.
Whilst we took appropriate steps to keep
everyone safe, we continued at site to
ensure we could finish product that was
sold. Our sales centres remained open,
with pre-arranged appointments and
contactless check-in. This was supported
by increased investment in telephone,
e-mail and on-line support as well as on-
line video content.
The 2020 financial year provided the
Company with many financial challenges.
So too have so many Australians and
New Zealanders faced tough financial
challenges. One of the things I have been
proud of the most has been the way our
employees have responded to challenges
our customers have faced.
And they have done so whilst dealing
with the stress the pandemic has had on
them personally and professionally. In
the face of scaled back operations, our
employees have worked with the Company
to adjust and react. In addition to receipt
of the Federal Government ‘JobKeeper’
support, almost all staff other than those
at site or in sales, and including the Senior
Executive Team, moved to a four day
week for May to July. A modified elevated
leave management plan has also been
agreed for the period between July and
December 2020. Also, our senior executives
agreed to further remuneration initiatives
that saw them give up all entitlements to
current Short Term Incenctives, Long Term
Incentives and Service entitlements. In the
spirit of solidarity, the Board of Directors
also agreed to reduce their fees for the
May to July period. All initiatives were
designed to help to improve cash and profit
outcomes.
I won’t repeat in detail the comments made
by Simon in his Chairman’s Statement
about 2020 financial year outcomes.
However, I think it important to emphasise
his comments that despite the challenges
of the 2020 financial year, AVJennings
remains in a sound financial position, with
moderate gearing and adequate undrawn
banking facilities.
Our flexible, horizontal delivery bias
allowed us to respond quickly to the
pandemic and has allowed us to change
gears as early signs of improvement
emerged. This is even more important given
the relatively short time limits imposed with
the HomeBuilder scheme.
Additionally, our focus on traditional
customer segments has been an important
aspect in providing some stability to sales
11
One of the things
I have been proud
of the most has
been the way
our employees
have responded
to challenges
our customers
have faced.
and, particularly to settlements of pre-
sales. Our customer base is mainly driven
by a fundamental need for housing, which
is understandable, and is less volatile than
some other segments.
Our geographic diversity continues to
provide strength. Normally this is due
to different territories being at different
positions in terms of their residential
markets. But the strength of diversity at
present comes from the need to react
differently as territories have moved in and
out of restrictions in different ways.
As Simon stated in his report, the
Company’s long-term prudent approach
towards acquisitions means that we have
not been unduly exposed to write downs in
asset values. That doesn’t mean we have
been inactive in terms of our land bank.
Securing an option agreement over a large
parcel of land in Caboolture, Queensland,
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 12
Brunswick West, VIC
Artist Impression
on capital-efficient terms, will provide an
important plank in the Company’s future.
Our venture with the Victorian Government
in relation to a public housing site in
Brunswick West provides not only a great
opportunity in itself, we expect to see it
provide a catalyst for future such projects
in Victoria and elsewhere. This is especially
so given the hope that one positive legacy
from the pandemic will be a greater
emphasis on safe housing for those
currently homeless and others challenged
for access to good, secure housing.
Many other existing projects have
advanced in terms of their development
status. Projects at Mernda, Kogarah,
Huntley, Warnervale, Jimboomba,
Rochedale, Deebing Heights, Ripley,
Murray Bridge, Goolwa and Auckland
have all reached important milestones
during the year.
While contract signings in the second
half were lower than was anticipated
before the onset of the pandemic, they
were stronger than we initially feared. As
lockdown restrictions eased in June 2020,
well ahead of what many thought likely
when first introduced, we saw a return
to strong enquiry levels. Net contract
signings in March, April, May and June
were 57, 51, 86 and 97 respectively. A total
of 385 contracts were carried over at
30 June 2020, with a further 76 contracts
signed in July 2020.
As Australia and New Zealand rebuild,
government support will be vital.
Construction, including residential
housing, are vital parts of our economies.
The introduction of HomeBuilder (June)
and State Government incentives such
as stamp duty relief, will be critical in
ensuring existing underlying demand
that we had seen materialise in strong
ways ahead of the pandemic, is given the
incentive and confidence to continue to
transact, especially whilst international
borders remain closed.
Hopefully, we also see one other change
from the pandemic survive. The responses
to the pandemic have seen a new level
of cooperation between industry and
governments. It is vital this continues into
the future and allows for proper and much
needed reform, especially in areas of
taxation, including the highly inefficient
and inequitable area of stamp duty.
Internally, we have taken steps to advance
project planning and approvals to be well
placed to respond to improving conditions.
Two important components of the FY21
result will be the first profit recognition
from Ara Hills, New Zealand, and the
Empress Apartments, Williamstown
Victoria. The timing of our results will
remain very heavily weighted towards
the second half and may be affected by
any extensions to, or reintroduction of
lockdown conditions, especially if they
slow project delivery.
The Company believes that the
longer-term outlook remains bright. As
employment levels rise as the economy
gradually recovers from the shock of
the pandemic, the fundamentals that
drove the early stages of the anticipated
AVJennings Limited - Annual Report 2020 13
FY20 recovery, which may have been
temporarily stalled, remain generally
intact. Whilst short term cycles will always
exist, housing remains a fundamental need
for us all. Both Australia and New Zealand,
in most parts, have traditionally produced
too little housing compared to underlying
needs. As both countries re-open their
borders, they will no doubt seek to attract
new citizens and continue to benefit from
our richly diverse cultures as well as the
economic benefits of growth.
We continually invest in our systems,
employees, business partners and our
communities as we stay focussed on
safety, stability and our values. And we will
stay true to our “why” - Housing Matters,
Community Matters. In a July employee
engagement survey, a high percentage of
our employees reported that they believed
that their personal values and AVJennings’
values align. Their dedication, enthusiasm
and overall commitment makes me proud
to lead AVJennings into its 89th year.
We also believe the pandemic is likely
to see a strengthening of traditional
housing markets. The increased levels
of community engagement reached
during the pandemic support the types
of communities we develop. The likely
increase in working from home, resulting in
less commuting time, will also see demand
for traditional housing, in traditional
communities, grow.
And we never forget the role we play
in one of the most important decisions
made by our customers and the trust that
comes with that. As such, we are proud
that AVJennings has again been 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.
I thank my executive team and all
employees for their commitment at a
most extraordinary and challenging
time. The resilience, strength and caring
attributes they have exhibited throughout
have been exemplary. I also thank our
Chairman, Simon Cheong, the Board, our
business and community partners, and
shareholders for their continued support
over the year. I too, would like to echo
Simon’s words in relation to Elizabeth Sam,
who retired from the Board on 30 June,
and thank her for her commitment and
passion over almost 20 years.
Stay safe.
Peter Summers
Chief Executive Officer
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 14
Jennings Germans at work in the early 1950’s
AVJennings Limited - Annual Report 2020 Committed to Creating and
Supporting Communities.
15
It has been quite a year. Droughts brought
so many great, hardworking Australians to
their knees. Bushfires, the worst in years,
devastated communities and lives were
lost.
The global pandemic, too, has claimed
lives and caused suffering. It has claimed
jobs and caused financial hardship. It
has changed our lives in ways we could
never have imagined most, especially
in freedom of movement. We have all
experienced change. Weddings have been
postponed. Funerals have been attended
under heartbreaking restrictions. Visits
to friends and family curtailed. Travel
plans cancelled. The challenges of home
schooling and no doubt the odd milestone
birthday passed without a proper
celebration. The uncertainty caused stress
and anxiety to many.
At AVJennings we
have not only
spoken of the
importance of
community, we
have been
actively involved
in supporting
communities.
David Lowden,
Head of Community
“Out of crisis comes opportunity”. A phrase
we hear often, and without doubt true. But
when you are in the middle of dealing with
so many issues, so much anxiety, it can be
difficult to focus on opportunity. Surviving
seems a good target.
Quite often that inspiration comes from
the past. How many of us have drawn
on the stories from older Australians and
New Zealanders who survived wars and
economically challenging times
together to go on and build two of
the greatest countries in the world.
AVJennings was established in
1932. Given what has happened
since, maybe “established” is
understating things – maybe the
correct word is “created”. As you no
doubt know, 1932 was during not
just a recession, but a depression.
In 1951, the first of 150 German
carpenters left the security of their
homeland to sail to Australia on
the ship “Skaubryn”. They were
answering a call from AVJennings to help
with a labour shortage to build homes in
Canberra. They became fondly known
as the Jennings Germans. To those of us
who haven’t experienced war, certainly
not of the likes of a world war, it is nothing
short of amazing to think that this was
all happening such a short time after the
conclusion of World War II.
In time, a group of men grew into groups
of families. Alongside local tradespeople,
they built 1,850 homes in 18 months.
Some departed for other parts of
Australia, others for other parts of the
world. But many – most – stayed. They
built businesses, plied their incredible
craftsmanship, and helped not only
rebuild, but reshape, Australia post-war.
AVJennings was proud to partner with the
Canberra Museum and Gallery (CMAG) to
celebrate the outstanding achievements
of the Jennings Germans with a public
exhibition. Our National Design Manager,
Richard Baker, spoke at the formal opening.
Richard had become lifelong friends with
Rick Goehner, son of Paul, one of the
original Jennings’ Germans.
But the human race has been challenged
before and we have adapted and seized
opportunities. The sooner we are able to
start along this path the better. At times like
this, hope and inspiration are vital.
Our CEO and others have been invited
to a number of Jennings Germans events
over the years. They always leave with
a sense of the power and importance of
community.
Today isn’t a war. It might feel like it at
times, but it isn’t. It isn’t a depression,
although at times it can feel like it.
What is clear is to start to rebuild our
countries, we will need to do it together.
Divided we will achieve nothing. Together,
as communities, we can build great futures.
Vital communities, safe communities,
aspirational communities – it starts right
there. It was images of communities rising
together in different ways that gave us
our first signs of hope. People walking with
dogs, waving to others, getting to know
names of neighbours for the first time.
People finding inventive ways of keeping
their sense of community, even if that was
a virtual cocktail party or grandparents
reading stories remotely to grandchildren.
At AVJennings we have not only spoken
of the importance of community, we
have been actively involved in supporting
communities.
In 2012 the Company became a founding
corporate partner of the Steve Waugh
Foundation. The Foundation provides vital
equipment and financial grants to children,
young adults and their families living with a
rare disease in our communities.
Alongside our focus on these community
events and charities, we have also been
proud supporters of women’s sport. A few
years ago, with the real possibility of one
of Australia’s proudest women’s sporting
teams folding, we stepped in to help
ensure the Melbourne Boomers survived
and prospered. Within the sponsorship we
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 16
St.Kilda Football Club - AFLW Team
Kate McCarthy, No 9
Laura Geitz, AVJennings Ambassador
Steve Waugh AO, AVJennings Ambassador
& Renee Eliades
Proud sponsors of
AVJennings Limited - Annual Report 2020 17
Spring Farm Public School Site Visit,
Evergreen, Spring Farm, November 2019
asked for a new category of recognition
to be created – volunteers. We know how
so many great people give up their time
to ensure these types of community clubs
and organisations can exist.
great perspective to our staff about
our community. It is not just about
the hardships, but equally about the
inspiration, from how they meet their
challenges, usually with a smile.
This year we became an inaugural sponsor
of St.Kilda Football Club’s AFLW team. The
Club is based in an area containing more
female footballers than any other area in
Australia.
When AVJennings confirmed to Catherine
Clark, CEO of Netball Queensland and
the Firebirds, that it would continue to
stand with them during the pandemic, the
importance of our contribution to netball
and the wider community hit home:
“In the first few days of the pandemic, one
of our managers came into my office with
tears rolling down her cheeks. She was
crying because she had been assured
by AVJennings they would continue to
back us, despite the fact we had no idea
when we would be allowed to play. That’s
how much it meant. We still had to make
some incredibly difficult decisions, but
the amazing and decisive support from
AVJennings meant we could plan our way
through the crisis,” Ms Clark said.
These aren’t just commercial partnerships.
A key outcome is the insight and
opportunity they provide for our staff and
families. They all provide connections to
community.
For ten consecutive years, AVJennings
staff raised funds for the Steve Waugh
Foundation by entering a team in the
City2Surf fun run, held in Sydney each
August. This year’s event will go ‘virtual’ in
October due to COVID-19 but we will be
back next year.
Likewise, AVJennings staff have
participated in the Steve Waugh
Foundation Captain’s Ride since its
creation in 2015. Without exception
the riders all talk about the amazing
experience and positive impact they
believe it will have on their lives. Sadly,
the pandemic has also forced the
postponement of this year’s ride which
was due to be held in November.
Our partnership with the St.Kilda Football
Club has involved leadership training,
the ability for some staff to experience
training camps and a connection to
community through their community
programs. The St.Kilda Football Club has
championed and supported many areas
in recent years, such as the Pride Game,
which is aimed at ensuring such a basic
principle as the LGBTQI community feeling
respected, included and safe in attending
AFL matches.
Hearing from families supported by the
Steve Waugh Foundation, including their
Ambassador, Renee Eliades provides
When AVJennings initiated a $1 million
Bushfire & Community Relief Fund with
an immediate donation of $250,000 to
the Red Cross, and three year grants
program, we also announced an intention
to create a staff volunteer scheme. This is
in addition to the volunteer work our staff
already do with organisations such as
Rotary and the State Emergency Service.
At a more local level, we continue to
ensure we make a positive contribution
to communities. For example, at our new
project, Ara Hills, in New Zealand, we are
supporting a number of local community
organisations, such as the Orewa Surf
Life Saving Club and the Orewa Surf and
Sounds Concert and Fireworks.
Our ambassadors are chosen, not based
on their marketability, but on their aligned
values.
AVJennings Ambassador and former
Australian captain, Laura Geitz, led her
country with distinction and now as a
young mother, is passionate about families
enjoying a healthy and active lifestyle.
Steve Waugh AO is also an AVJennings
Ambassador. One of Australia’s official
‘National Living Treasures’, he is the
epitome of working-class aspiration,
dependability and high achievement.
We have always championed the
principles of community, that housing
matters and community matters. What
we do is develop superb residential
communities. Why we do it is to make a
positive contribution to society by creating
places where people feel like they belong
to a community.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
18
Our Communities.
New South Wales.
New South Wales experienced improving
market conditions prior to the COVID-19
restrictions. We expect demand to further
improve in a COVID-19 recovery phase for
our quality, affordable homes in our local
residential communities. Seacrest project
at Sandy Beach sold out and planning
has progressed at our new communities
at Warnervale in the Central Coast
and Huntley in the south east Illawarra
district. Planning also continues for the
construction of low rise apartments at
Kogarah, inner south of Sydney. Our
four projects in the south-west corridor
of Sydney are trading well in this strong
established market through a range of turn
key built form and land sales.
Queensland.
Queensland had a strong year bringing
new developments to construction
with settlements from the first stage of
projects at Rochedale (Arbor) south east
of Brisbane and Jimboomba (Riverton)
between Brisbane and the Sunshine Coast.
Construction commenced at our Ripley
(Cadence) development south west of
Brisbane. These projects are set to continue
to drive results for the business in the
coming financial years with subsequent
stages delivered. We have entered into
a binding agreement for a project in the
Ripley corridor effectively bolting this
onto our Cadence development and
have commenced planning work on the
Caboolture project (3,500 lots - located
between Caloundra and Brisbane). In
November 2019, AVJennings’ Creekwood
project was nominated as a finalist in
the UDIA Awards for Excellence in the
Environmental Excellence category.
New Zealand.
Ara Hills in Orewa north of Auckland has
commenced construction on Stage 1 with
earthworks, road and bridge construction
with lots oriented to take advantage of the
views to the 34 hectares of open space
within the development and the open
space and ocean of the Orewa district.
AVJennings at Hobsonville Point traded its
last lots recently bringing to a close the
sales over 10 years on this award-winning
development.
Warnervale, NSW
Artist Impression
Creekwood, Caloundra, QLD
Ara Hilla, Orewa, NZ
AVJennings Limited - Annual Report 2020 St Clair, St Clair, SA
Waterline Place, Williamstown, VIC
19
South Australia.
Eyre residential community stands apart
from other developments within the outer
northern growth corridor of Adelaide due
to the upfront delivery of the Eyre Sports
park, local neighbourhood shopping centre
and variety of land and built form catering
to all sections of the market. Our St Clair
project north west of Adelaide remains
attractive to consumers with the mix of
housing types, significant open space
and wetland network and train station
integrated with the shopping centre.
We have seen consistent demand for
medium density terrace housing around
the wetland precinct with Kingfisher
terraces recently completed. Additionally,
with the opportunity of schemes such as
HomeBuilder we have accelerated planning
and development at our regional Murray
Bridge and Goolwa projects.
Victoria.
Lyndarum North, Wollert residents in the
northern corridor continue to move into
this master planned community taking
advantage of the newly complete major
park and wetland system. Planning on
the new Mernda (Aspect) project nearby
continues in earnest with a launch forecast
in late FY21 and on the Brunswick West
(Harvest Square) public housing renewal
project with works forecast to commence in
FY21. Waterline Place at Williamstown has
had the completion of 2 more townhome
precincts and the commencement of
construction on The Empress low rise
apartments showcasing quality design
and attractive streetscapes. In December
2019, AVJennings’ Waterline Place project
was the winner in the UDIA Awards for
Excellence in the High Density Development
(under 10 storeys) category.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 20
The Directors of AVJennings Limited present their report together with the Financial Report of the Group (referred to hereafter as
“AVJennings”,“Group” or “Company”) and the Auditor’s Report thereon for the year ended 30 June 2020. 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
Non-Executive Chairman
Non-Executive Deputy Chairman
PK Summers
Managing Director and Chief Executive Officer
E Sam
B Chin
Non-Executive Director (retired on 30 June 2020)
Non-Executive Director
BG Hayman
Non-Executive Director
TP Lai
BL Tan
P Kearns
Non-Executive Director
Non-Executive Director
Non-Executive Director
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 $9.0 million (2019: $16.4 million).
DIVIDENDS
Dividends paid during the financial year were as follows:
Cash dividends declared and paid
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
2019 final dividend of 1.5 cents per share,
paid 20 September 2019. Fully franked @ 30% tax
2020 interim dividend of 1.2 cents per share,
paid 27 March 2020. Fully franked @ 30% tax
Total cash dividends declared and paid
2020
$’000
-
-
6,093
4,875
2019
$’000
11,848
4,062
-
-
10,968
15,910
Directors’ Report.AVJennings Limited - Annual Report 2020 21
OPERATING AND FINANCIAL REVIEW
Financial Results
The Company recorded Net Profit Before Tax of $13.2M for
the year ended 30 June 2020 down 44.8% on the previous
corresponding year (30 June 2019: $23.8M), and Profit After Tax
of $9.0M (30 June 2019: $16.4M). The result includes $1.6M of the
Federal Government JobKeeper subsidy over the period April to
June 2020.
this recovery in late calendar year 2019 were subdued by the
bushfires which impacted on consumer confidence and also
attendances at sales offices as people stayed indoors due
to poor air quality. The early months of 2020 did see growing
momentum and results were starting to strengthen just when the
first stages of the pandemic hit, draining the last three and a half
months of FY20 of their anticipated strong finish.
As we entered FY20 we had expectations of exceeding the FY19
result. This was on the back of:
•
•
•
improving market conditions, especially in New South Wales
and Victoria;
better results from our Queensland operations from actions
taken in FY19; and
timing of revenue recognition in New Zealand, which would
see the next significant recognition of superlot sales to
builders,
although we knew we would see reduced turnover and results
from our sole apartment project, ‘Waterline Place’ Williamstown,
Melbourne as FY19 benefited from completion of the ‘GEM’
apartments, whereas the next building, ‘Empress’, isn’t due for
completion until the latter part of FY21.
FY20 did, however, toss up unforeseen challenges including
drought, bushfire and a global pandemic. Although our original
expectations for FY20 didn’t materialise, the results achieved are
considered to be good in the circumstances and were in part due
to important improvements in operations and efficiency.
Revenue
While revenue reduced by 11.5% overall, compared to the
previous corresponding period, it requires a deeper analysis.
Despite initial concerns, settlements held up well in the second
half, with only moderate extensions to contracted settlement
periods required in some cases that pushed some settlements
into FY21. While the contract rescission rate increased, the
value and number of affected contracts remains very low as a
proportion of turnover and lots settled during the period.
Pleasingly, our efforts in FY19 addressing certain issues in
Queensland, resulted in much improved outcomes before the
pandemic arrived. These actions included the acquisition of
the balance 50% interest in the ‘Riverton’ JV at Jimboomba,
following which the project was relaunched with good outcomes.
Other projects also performed well. The mix of new projects and
the early stage of their development did see less built form, which
dampened the overall revenue increase as average contract
value declined. Nevertheless, the improvement in results off the
back of work done in FY19 leaves our Queensland operation well
placed for continued growth.
The anticipated lift in revenue and profit from our New Zealand
operations also occurred. The New Zealand business is
dominated by lumpy transactions relating to sales of superlots
to other builders, and revenue and profit recognition for contract
signings in previous financial years arising from the last stage
of our Hobsonville Point, Auckland project, that occurred in the
second half of FY20. While substantial contract signings were
achieved for our new ‘Ara Hills’ project during FY20, revenue and
profit recognition will only commence in FY21.
Land and Traditional Housing
FY20
FY19
• New South Wales
$113.6m
$123.5m
• Victoria
• Queensland
• South Australia
• New Zealand
Sub-Total
Apartments
$43.4m
$40.1m
$16.2m
$33.1m
$246.4m
$13.2m
$59.1m
$32.0m
$19.1m
$1.2m
$234.9m
$56.7m
Total Australia & NZ
(excl. other services income)
$259.6m
$291.6m
Turnover from land and traditional housing of $246.4M was
higher than the prior year (30 June 2019: $234.9M).
In relation to New South Wales and Victoria, the anticipated
recovery was slower to materialise than hoped. Early signs of
The apartments segment, as shown above, is more a reflection
of project delivery timing than market conditions. Revenue from
apartments was down $43.5M to $13.2M (30 June 2019: $56.7M)
due to the completion and substantial settlement of the GEM
apartment building in FY19, with only residual apartment stock
available for settlement in FY20. The next apartment building,
Empress, is due for completion in late FY21.
Margins
Margins increased for land and traditional housing in all States
and New Zealand with the exception of New South Wales. The
margins achieved in New South Wales reflect the impact of
some price corrections plus the relative impact of some projects
that have slightly lower margins. The other area to see margins
decrease was apartments as some lower value remaining
apartments in GEM were sold in FY20. Overall, margins
decreased 1.7% to 22.8%.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 22
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Provisions
Outlook
Whilst our commitment to rational and conservative land
acquisitions has seen the value of most acquisitions protected
from writedowns or provisions, the FY20 result does include an
increase in provisions of $1.6M (FY19:$Nil) relating to regional
projects in Queensland and South Australia. Additionally, $0.5M
(FY19:$0.7M) was provided against the Otan investment and
$0.9M (FY19:$0.6M) against the Pindan investment, both in Perth.
Overheads and JobKeeper
There continued to be a strong focus on overheads, and the pre-
tax result included an amount of $1.6M in relation to JobKeeper
for the April to June period. The Senior Executive Team and the
Board took significant reductions in entitlements. In addition, all
staff other than sales and site staff accepted accelerated leave
arrangements to reduce labour expenses, which extend into FY21.
The Company has substantially restructured in recent years and
continues to look for ways to improve outcomes and efficiencies.
Balance Sheet and Land Holdings
Controlled land inventory at 30 June 2020 was 12,134 lots
(30 June 2019: 13,031 lots). This includes land at Caboolture,
Queensland (approximately 3,500 lot equivalents) over which the
Company holds options that are subject to the achievement of
certain planning milestones. Total inventory excluding land under
option stood at 8,634 lots (30 June 2019: 9,531 lots).
As a response to the pandemic, the Company sharply wound
back physical production in early March to conserve cash in
the face of pandemic-induced uncertainty, although production
continued for those projects necessary to facilitate settlements
of existing presales. This capability demonstrates the strength
and flexibility of the Company’s focus on horizontal development.
Work in progress was down year-on-year to 1,117 lots
(30 June 2019: 1,600 lots), however, planning and design work
continued largely unabated, leaving the Company well placed
to resume physical works in key locations as Government
stimulus measures were introduced and buyer confidence began
to return.
Net debt remained comparable with the prior year at $184.4M
(30 June 2019: $182.1M) and gearing remained moderate with net
debt to total assets of 28.1% (30 June 2019: 26.6%).
Net cash from operations turned around strongly year-on-year
to positive $10.0M (FY19:Net outflow ($45.8M)), assisted by solid
settlements and reduced expenditure on production, acquisitions
and overheads.
From a structural and financial strength aspect, AVJennings
remains in a sound financial position, with moderate gearing
and adequate undrawn banking facilities. Our flexible, horizontal
delivery bias allowed us to respond quickly to the pandemic,
and then change gears as early signs of a recovery emerged.
Additionally, our focus on traditional customer segments and
a conservative and responsible approach to acquisitions are
important aspects of our ability to cope with the ongoing
challenges presented by COVID-19.
While contract signings in the second half were lower than
was anticipated in early January, they were stronger than
management expected they might have been when the
Company revised its internal forecast in March, after the first
lockdown period was triggered in Australia. Contract signings
strengthened in the period leading up to 30 June, as Government
support and stimulus measures, such as HomeBuilder and State
Government Stamp Duty and other measures were announced,
with net contract signings in March, April, May and June of 57, 51,
86 and 97 respectively.
There is short term uncertainty and volatility, but we are
encouraged by recent contract signings and schemes such as
HomeBuilder. A total of 385 contracts were carried over
30 June 2020, with a further 76 contracts signed in July 2020.
As lockdown restrictions eased in June 2020, well ahead of
what many thought likely when first introduced, we saw a return
to strong enquiry levels. No doubt the Federal Government’s
HomeBuilder scheme contributed to this, although we believe it
fundamentally represents the strong level of underlying demand
for housing that we had started to see in the early months of
2020. To a large extent, such schemes don’t so much create
demand as bring forward the timing of buyers’ decisions.
In many areas around Australia, the improved enquiry level
and sales momentum that followed the easing of lockdown
restrictions has continued. The reintroduction of tighter
restrictions in Victoria has slowed that State’s recovery and
shows that the short term remains uncertain and volatile. Net
migration is also unlikely to be a short term positive although
the continuing low cost of capital and strength in a number
of employment sectors not impacted, at least directly, by the
pandemic will provide a solid short term base.
Critical to the short term are support mechanisms provided by
various levels of Australian Government, including the national
HomeBuilder scheme. Apart from influencing buyers not to delay
their purchasing decisions, they also act as a strong incentive for
first home buyers who have found entering the market difficult in
recent years.
Directors’ Report.AVJennings Limited - Annual Report 2020
23
OPERATING AND FINANCIAL REVIEW (CONTINUED)
ENVIRONMENTAL REGULATION
The Group’s operations are subject to various environmental
regulations under both Commonwealth and State legislation,
particularly in relation to its property development activities. The
Group’s practice is to ensure that where operations are subject
to environmental regulations, those obligations are identified
and appropriately addressed. This includes the obtaining of
approvals, consents and requisite licences from the relevant
authorities and complying with their requirements.
To the best of the Directors’ knowledge, property development
activities have and are being undertaken in compliance with
these requirements.
CHANGE IN STATE OF AFFAIRS
The Australian Federal Government began introducing COVID-19
pandemic related constraints on certain activities from early
February 2020. Since then, various levels of Government in
Australia and New Zealand have implemented a variety of
measures aimed at protecting public health. These have had
the effect of restricting business and social activity. Public
perception of the prevalence and seriousness of the virus and the
legally enforceable measures introduced to contain its spread
have negatively affected consumer and business confidence
and outlook. This has had, and (for the foreseeable future) will
continue to have, implications for the way in which the Company
conducts business as well as an adverse effect upon trading
conditions generally.
Internally, we have taken steps to advance project planning and
approvals to be well placed to respond to improving conditions.
Two important components of the FY21 result will be the first
profit recognition from Ara Hills, New Zealand, and the Empress
Apartments, Williamstown Victoria. The timing of our results will
remain very heavily weighted towards the second half and may
be affected by any extensions to, or reintroduction of lockdown
conditions, especially if they slow project delivery.
The Company believes that the longer term outlook remains
bright. As employment levels rise as the economy gradually
recovers from the shock of the pandemic, the fundamentals that
drove the early stages anticipated of the FY20 recovery, which
may have been temporarily stalled, remain generally intact.
Net migration is a key driver of underlying housing demand that
the Company anticipates is also likely to recover strongly when
international borders reopen, as Australia and New Zealand
are relatively less affected by the virus than comparable
jurisdictions. Additionally, the significant trend towards high
density, inner city living over the last 5 years (which was starting
to abate before the pandemic), is unlikely to continue. Renewed
focus on community, safety and increased flexibility in working
arrangements is likely to see stronger support for traditional
housing, which AVJennings is well placed to deliver.
SIGNIFICANT EVENTS AFTER
BALANCE SHEET DATE
The contract for the acquisition of land at 280 Bridge Inn Road
Mernda, Victoria became unconditional on 24 July 2020. The
purchase price is $28.3M and the project yield which is currently
under review, is expected to be about 231 lots. A deposit of 10%
was paid as at 30 June 2020 and the balance is to be settled in
May 2021.
No other matter or circumstance has arisen since 30 June 2020
that has significantly affected, or may significantly affect:
a)
b)
c)
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
FUTURE DEVELOPMENTS, PROSPECTS
AND BUSINESS STRATEGIES
The prospects and business strategies of the Group are
discussed in the operating and financial review of this Report.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 24
INFORMATION ON THE DIRECTORS
Simon Cheong B.Civ.Eng. MBA
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 PwC).
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 was a Director of SC Global Developments Pte Ltd, the
Company’s major shareholder. Resident of Singapore.
Mrs Sam retired from her role as a Director of the Company on
30 June 2020.
Responsibilities:
Non-Executive Director, Chairman of Nominations Committee,
Member of Remuneration Committee.
Directorships held in other listed entities:
None.
Director since 20 September 2001. Mr Cheong has over 35 years
experience in real estate, banking and international finance. He
currently serves as Chairman and Chief Executive Officer 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:
Chairman of the Board, Non-Executive Director, Chairman of
Investments Committee, Member of Remuneration Committee,
Member of Nominations Committee.
Directorships held in other listed entities:
Singapore Airlines Limited since 1 June 2017.
Jerome Rowley SF Fin, FAICD
Director since 22 March 2007. Mr Rowley has been a career
banker since the early 1970s with Citigroup, Morgan Grenfell and
ABN Amro. From 1992 until 2002, he served as Managing Director
and CEO of ABN Amro Australia and Head of Relationship
Management and Structured Finance for ABN Amro, Asia Pacific.
He has been active in both wholesale and investment banking
domestically and internationally. During his career,
Mr Rowley devoted considerable effort towards the recognition,
understanding and management of risk as a means of profit
optimization. Of particular significance was his involvement
in advising and funding including debt, equity and hybrids,
of infrastructure projects in both Australia and Asia Pacific.
Resident of Sydney.
Responsibilities:
Deputy Chairman of the Board, Non-Executive Director,
Chairman of Risk Management Committee, Member of Audit
Committee, Member of Investments Committee, Member of
Nominations Committee.
Directorships held in other listed entities:
None.
Directors’ Report.AVJennings Limited - Annual Report 2020 25
INFORMATION ON THE DIRECTORS (CONTINUED)
Bobby Chin CA (ICAEW) B.Acc.
Lai Teck Poh B.A. Hons. (Economics)
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 also serves as
Chairman of the Singapore 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.
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, Chairman of Remuneration Committee,
Member of Audit Committee, Member of Investments Committee.
Directorships held in other listed entities:
PT Bank OCBC NISP Tbk (Commissioner), since 4 September
2008.
Other Directorships:
Bank of Singapore Limited since 1 January 2020.
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 Land Limited, since 29 November 2006.
Other Directorships:
Temasek Holdings (Private) Limited, since 10 June 2014.
Frasers Logistics & Commercial Asset Management Pte Ltd
since 29 April 2020.
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. 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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 26
INFORMATION ON THE DIRECTORS
(CONTINUED)
INFORMATION ON THE COMPANY SECRETARY
Tan Boon Leong DipUrbVal (Auckland University, NZ)
Carl D Thompson LLB B. Comm
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.
Director since 9 June 2017. Mr Tan has over 36 years of
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.
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 in 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.
Philip Kearns, AM BA (Economics); Grad Dip (Applied Finance)
Director since 21 March 2019. Mr Kearns 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. He is a Director of Venues NSW,
a Government Board that owns and operates multiple sports and
entertainment venues across New South Wales and Coolabah
Capital Investments, a private funds management business. He
was previously the Managing Director and CEO of InterRISK
Australia Pty Ltd, a division of ASX listed AUB Group.
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.
Directors’ Report.AVJennings Limited - Annual Report 2020 27
REMUNERATION REPORT (AUDITED)
A. Introduction
The AVJennings Limited Board is pleased to present the
Remuneration Report for FY20 in accordance with the
requirements of the Corporations Act 2001 (the Act). The Report
has been audited as required by section 308(3C) of the Act.
The effects of the COVID-19 pandemic have been significant,
impacting considerably on the Company’s operations and its
results for the year ended 30 June 2020. This Report not only
sets out the long term approach to remuneration, but also the
actions taken by the Remuneration Committee, Key Management
Personnel (“KMP”) and all staff in relation to COVID-19, in
particular those actions set out in Section I.
(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
(retired 30 June 2020)
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
The Board intends that the Report provides clear and transparent
communication of the remuneration arrangements in place for
the Company’s Directors and Executives. These arrangements
are intended to align remuneration with the Company’s values,
purpose, strategy and performance.
CD Thompson Company Secretary/General Counsel
SC Orlandi
L Mahaffy
L Hunt
Chief Operating Officer
Chief Financial Officer
General Manager, Human Resources
Our purpose is straightforward: “Housing Matters. Community
Matters.” This is supported by our Values which include: integrity,
trustworthiness and being a good corporate citizen.
C. Remuneration Framework
1. Remuneration Governance
The Company’s remuneration arrangements are structured to
attract and retain high quality people and remunerate them for
achieving against our objectives and acting consistently with our
values and purpose. Remuneration arrangements are reviewed
regularly by the Remuneration Committee and adjustments
and redesign made where considered appropriate, balancing
alignment with the Company’s own specific circumstances,
fairness to executives and taking into account market
expectations and industry standards.
B. Persons covered by the Report
This Report sets out the remuneration arrangements in place for
KMP, which comprises the Directors of the Company (executive
and non-executive) and those members of the AVJennings
executive officers who have authority and responsibility for
planning, directing and controlling the activities of the Company
(“Executive KMP”).
The name and position of each KMP for FY20 whose
remuneration is disclosed in this Report as follows:
The Board has established a Remuneration Committee
comprising not less than three Non-Executive Directors (NEDs)
which is responsible for determining and reviewing remuneration
arrangements for KMP, other senior management personnel and
general staff.
2. Remuneration Objectives
AVJennings’ remuneration objectives are to remunerate fairly,
attract and retain talent, drive performance, promote adherence
to values, and are aligned with shareholder interests. They are
also designed to provide an appropriate balance between fixed
and at-risk components to support the Company’s objectives and
strategy and promote sustained growth in shareholder value.
3.Securities Trading Policy
The Company has adopted a Securities Trading Policy (available
on the Company’s website Investor Centre). In accordance
with this policy, Executives are prohibited from hedging the
risk associated with unvested equity-based incentives. Breach
of this requirement could lead to disciplinary action including
dismissal and forfeiture of equity-based incentives. The Policy
also provides for blackout periods for trading in the Company’s
shares around reporting season as well as prohibitions on
insider trading and breach of confidentiality obligations to the
Company.
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4. Cessation of Employment
Where an executive resigns or is terminated for cause, any
unvested awards are forfeited unless otherwise determined by
the Board. In exercising this discretion, the Board considers the
circumstances of the cessation of employment.
•
•
Executive KMP and other senior executives agreed to cancel
all Retention Rights due to be tested for vesting in July 2020.
Executive KMP and other senior executives agreed to cancel
all Long Term Incentive (“LTI”) Rights due to be tested for
vesting in September 2020.
•
Implemented Annual Leave management strategies.
5. 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 2020.
Cancellation of the Retention Rights and the Performance Rights
will save the Company the cost of acquiring shares on market to
meet vesting obligations. Refer to Section I for full details.
6. 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 37.
ii) Other Executives
Other Executives are full time permanent employees with
employment contracts. Their employment contracts do not
have termination dates or termination payments. However, they
specify a notice period of three months.
7. 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 32 and 37. The Directors are the same as those
identified in the Directors’ Report.
The discussion in this Report mainly addresses the formal
remuneration structure which is in place and applies to
remuneration arrangements in a typical year. The unexpected
COVID-19 crisis has had a dramatic impact on the Company,
the residential property industry and more broadly, on the
Australian economy in FY20. Senior management put forward
to the Remuneration Committee, which it accepted, a number
of measures to help the Company navigate this challenging
period of uncertainty. These and other relevant arrangements
were approved by the Remuneration Committee at its May 2020
meeting.
The measures included a number of changes to remuneration
arrangements and these are outlined below:
•
•
•
NED fees were reduced by 20% for the three months May to
July 2020.
The SC Global Management and Consultancy fee was
reduced by 20% for the three months May to July 2020.
Executive KMP and other senior executives agreed to forgo
any Short Term Incentive (“STI”) award in respect of FY20.
8. 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.
9. Remuneration Report at FY19 Annual General Meeting (AGM)
At the Company’s 2019 Annual General Meeting (“AGM”), of
the eligible votes cast on the Remuneration Report, 38.9%
were against the Report. This meant that the Company
recorded a First Strike on the Report. The vote against the
Report represented 6.2% of the Company’s total shares
and approximately one-half of that 6.2%, represented one
particular shareholder. That shareholder has voted against the
Remuneration Report at previous AGM’s. As a consequence,
the Company has on a number of occasions reached out to
the shareholder to ascertain whether there were any specific
concerns, but no response has been provided. The Company did
not receive any specific feedback at the AGM on its remuneration
arrangements.
10. Addressing Feedback
The Company became aware of separate commentary on the
FY19 Remuneration Report from proxy advisers. This feedback
indicated that concerns were held in relation to the following:
•
•
The Return on Equity (“ROE”) component of the LTI Plan
was not considered appropriate. In response to this, the
Remuneration Committee determined at a meeting in
February 2020 to replace the ROE hurdle with a Total
Shareholder Return (“TSR”) hurdle for all grants made in
FY21 and beyond. Further details are provided on page 34;
The Retention component was said not to satisfy the
generally accepted term of measurement (3 years) for an
LTI Plan. The Retention component of the remuneration
structure is not part of the LTI Plan. It was designed as a tool
to promote stability in executive ranks; minimise disruption,
cost and adverse effects of high turnover in executive ranks;
and to ensure that all senior executives had a meaningful
shareholding in the Company to align interests with
shareholders. For this reason, it was determined to make
the retention award as a grant of rights rather than a cash
payment; and
Directors’ Report.AVJennings Limited - Annual Report 2020 29
REMUNERATION REPORT (AUDITED) (CONTINUED)
•
The readability of the Report could be improved. As a result,
the Report has been revamped to make it easier to follow
and with improved disclosure.
Short Term Incentives – which is at risk and is based on satisfying
key performance measures which include a range of financial
and non-financial targets. This award is paid in cash. For the
FY20 year, Executives agreed to forgo any STI payment.
The Company will continue to consult with shareholders and their
representatives to ensure its remuneration practices balance the
need to meet the objectives of the remuneration practices and
the need to be consistent with prevailing community standards.
11. Framework
The remuneration framework is designed to align executive
interests with Company success and long-term shareholder
value. The framework discussed below is the structure which
applies in a typical year. It should be noted that, as a result of
the impact of the COVID-19 crisis, this structure was effectively
modified for FY20, as discussed below. The structure consists of
several components:
For NEDs – this is Directors’ fees. These are annual fees paid
monthly to Australian based Directors (together with the
superannuation guarantee payment) and paid quarterly
to Singapore based Directors (to which no superannuation
payment is applicable). These arrangements do not include SC
Global nominated Directors, as noted in D2 on page 30. NEDs
agreed to a reduction in their fees of 20% for the period 1 May to
31 July 2020.
For Executive KMP, this is made up of:
Fixed remuneration – which is made up of base salary and
superannuation payments. Target fixed remuneration is set
at or below market median which creates a deferred salary
component which is “at risk” under the STI component.
Long Term Incentives – this is a long term (3 year) equity plan
under which Performance Rights are granted annually subject
to performance conditions. The Rights are granted as to 50%
subject to the Earnings Per Share (“EPS”) hurdle and as to
50% to the TSR hurdle from FY21 onwards (previously subject
to an ROE hurdle). The Rights are tested against performance
hurdles at the end of 3 years from grant date in September of
the relevant year. In June 2020, Executives agreed to cancel all
Performance Rights which were due to be tested in September
2020 to determine vesting.
The TSR measure was introduced in February 2020 to replace the
former ROE component of the Performance Rights which uses
market capitalisation as a proxy for equity. The TSR hurdle will
apply to grants under the LTI from FY21 onwards. The old ROE
hurdle will apply to grants which were made in FY19 and FY20.
Retention Component – this is an equity award and is granted
annually and vesting as to one third after the first, second
and third anniversaries of the grant. Rights are granted and
these may vest into shares once the service conditions are met.
The Retention Rights are a retention tool designed to promote
stability in the executive ranks and minimise disruption, cost and
adverse effects of high turnover. In June 2020, Executives agreed
to cancel all Retention Rights which were due to vest in July 2020.
In lieu of a higher fixed remuneration base, a portion of
remuneration is “at risk”. 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 Remuneration between Components is as follows:
CEO
Other Senior Executives
Fixed
Remuneration
(%)
50
75
Total
at Risk
(%)
50
25
STI
at Risk (%)
Split of Total at Risk
Retention
at Risk (%)
LTI
at Risk (%)
35
50
25
25
40
25
The proportions of STI, LTI and retention components take into account:
•
•
The objectives that the Board seeks to achieve and the behaviours which support that outcome;
The desirability of Senior Executives having equity interest in the Company so as to better align their interest with shareholders;
• Market practice; and
•
The service period before Executives can receive equity rewards.
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12. Group Performance
The STI and LTI are linked to performance against Key
Performance Measures (“KPMs”). These are itemised in F and
G below. KPMs include performance measures linked to the
financial performance of the Company and to shareholder value
and are structured to foster achievement of certain financial
metrics. The STI is focussed on short term performance over the
preceding 12 months. The KPMs under the LTI are measured over
the 3 years from grant date.
The KPMs are also linked to other non-financial metrics
considered critical, such as safety performance, as well as
alignment with values, Company purpose and implementation
of Company strategy. The criteria involved in assessment of
Group Performance has altered in FY20 as a result of the impact
of COVID-19. Once the impact of the crisis became apparent,
safety of the Company’s employees, customers, contractors
and the public became paramount, which involved establishing
procedures and protocols for visiting sales offices, attending
offices and conducting operations at site. It also involved
ensuring compliance with these new requirements.
The uncertainty created by the ongoing crisis also meant a re-
prioritisation of relevant remuneration criteria. The Remuneration
Committee met on several occasions during FY20 to consider
changes to the structure proposed by Management. These
involved a greater focus on short term management, whilst also
maintaining focus to set the Company on path to longer term
success. This has involved setting and assessing performance on
quarterly targets in addition to annual for FY21. The Board will
assess targets and performance quarterly and re-set targets as
is considered necessary or appropriate in the circumstances, to
ensure the Company adapts to the changing environment.
The table below shows the Group’s earnings performance as well as the movement in the Group’s EPS, TSR and Market Capitalisation
over the last 5 years.
Financial
Report
Date
30 June 2016
30 June 2017
30 June 2018
30 June 2019
30 June 2020
Profit
After Tax
$’000
40,912
35,717
31,347
16,439
9,041
Basic
EPS
Cents
10.71
9.31
8.13
4.09
2.23
TSR*
Cents
( 4.0 )
15.0
10.0
( 12.5 )
( 4.8 )
Market
Capitalisation
$’000
213,968
253,164
278,074
218,953
188,897
Return on Market
Capitalisation
%
19.12
14.11
11.27
7.51
4.79
*TSR is the aggregate of the movement in the share price and dividends paid per share during the year ended 30 June.
D. NED Remuneration Arrangements
2. SC Global Nominee Directors
1. NED Fee Pool
At the AGM in 2019, shareholders approved an increase in the
maximum annual aggregate fee pool to $650,000 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, participation in committee
work, in particular chairmanship of committees and fees paid to
directors of comparable companies.
NEDs do not receive any leave entitlement benefits or
performance-based remuneration. Australian based NEDs
receive superannuation payments.
For FY20, SC Global had three nominees on the Board,
Mr S Cheong, Mrs E Sam and Mr BL Tan. Mrs Sam also served
on the SC Global Board and effective 30 June 2020, Mrs Sam
retired from the SC Global Board and as a consequence, from
the Company’s Board. These three Directors 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.
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REMUNERATION REPORT (AUDITED) (CONTINUED)
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 fee
payable is $600,000 and has 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. SC Global agreed to a 20% reduction in the consulting fee for the
period 1 May to 31 July 2020.
3. NEDs Remuneration
(a) Approach to setting fees
NEDs receive a base fee for service as a Director and an additional fee for participation in a Committee. The Chair of a
Committee receives a higher fee, reflecting the additional responsibility of that position. The Company’s policy is to pay fees
which are reflective of peer practice in the property sector and similarly sized entities, and which attract and retain directors with
the desired attributes, skills and experience. The fees also reflect the time commitment which directors are expected to provide
and the increased complexities and expectations of the office.
(b) Review
NED fees are reviewed on an ad hoc basis as considered necessary. As a matter of practice, fees have been stable for some years
and the NED fee pool cap was not increased for almost 20 years until 2019.
(c) Board and Committee fees
Board
Audit
Risk
Nominations
Remuneration
Investments
Deputy
Chair
$70,000
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
$60,000
$30,000
$12,000
$30,000
$12,000
N/A
$6,000
N/A
$6,000
N/A
$8,000
As noted above, NEDs agreed to a 20% reduction in fees for the period 1 May to 31 July 2020.
No fee is payable for chairing the Nominations Committee, the Remuneration Committee and the Investments Committee.
(d) Indemnification
Article 112 of the Company’s constitution provides that to the extent permitted by law, it indemnifies a person who is or has been,
an officer of the Company or any related bodies corporate against any liability incurred by the person as such an officer, to
another person and against a liability for costs and expenses incurred by the person in successfully defending proceedings.
(e) Insurance premiums
Article 112 of the Company’s constitution also provides that to the extent permitted by law the Company may pay or agree to pay
a premium in respect of a contract insuring a person who is or has been an officer of the Company or its related bodies corporate
against a liability incurred by the person as such an officer, and for costs and expenses incurred by the person in defending
proceedings as such an officer, whatever the outcome.
During the year the Company paid premiums for policies insuring directors and officers of the Company and its related bodies
corporate against certain liabilities, to the extent permitted by law and subject to certain exclusions. The amount of the premiums
paid in respect of these policies has not been disclosed in accordance with usual practice.
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(f) Fees paid
Fees paid to NEDs in FY20 is set out in the table below:
S Cheong(1)
RJ Rowley(3)
E Sam(1)
B Chin (3) (4)
BG Hayman(3)
TP Lai(3) (4)
BL Tan (1)
P Kearns(3)
Total
Total
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Short-Term
Fees $
Post Employment
Superannuation(2) $
-
-
111,233
115,069
-
-
116,800
72,000
81,218
84,018
104,200
64,500
-
-
70,624
20,294
484,075
355,881
-
-
10,567
10,931
-
-
-
-
7,716
7,982
-
-
-
-
6,709
1,928
24,992
20,841
Total $
-
-
121,800
126,000
-
-
116,800
72,000
88,934
92,000
104,200
64,500
-
-
77,333
22,222
509,067
376,722
(1) These Directors were not paid fees. A consulting fee of $50,000 per month is payable to the Ultimate Parent Entity SC Global Developments Pte Ltd which
covers the services of these Directors. The fee for the months of May and June 2020 were reduced by 20% to $40,000 per month as part of actions taken
to manage overheads in response to the COVID-19 pandemic. Total fees paid for the year was $580,000.
(2) Payments to Defined Contribution Plans consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions.
(3) NEDs also agreed to a 20% reduction in fees for the period 1 May to 31 July 2020.
(4) A portion of the FY20 increase in fees paid to B Chin and TP Lai were due to a one-off timing of a payment.
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.
E. Executive Fixed Remuneration
Executive remuneration includes a mix of fixed and variable remuneration. Variable remuneration includes short term incentives, long
term incentives and retention components.
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. As a starting point, the TEC is typically set at or below market median for the position with
adjustment as necessary to take account of the factors above, the need to secure talent and to motivate the right people to deliver on
the Company’s strategy.
The fixed component of remuneration of Executive KMPs is detailed on page 37.
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REMUNERATION REPORT (AUDITED) (CONTINUED)
F. Short Term Incentive (STI)
Executives participate in a STI plan which assesses achievement
against KPMs. Each executive has KPMs that are aligned
to company, business unit and individual performance. An
STI payment is made 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 units and
company performance.
As a response to the impact of COVID-19, Executive KMP and
other senior executives agreed to forgo any STI award in
respect of FY20. In addition, the Remuneration Committee has
decided that for FY21, STIs and the associated KPMs will be set
and determined on a quarterly basis, to ensure the Company
remains nimble and is responsive to changes in the operating
environment.
Financial and Business Performance
STI payments are based on the scorecard measures and
weightings disclosed below. These targets are 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% of TEC.
The performance conditions are designed to promote
achievement of the Company’s financial and strategic goals,
which in turn should lead to shareholder returns. Targets are also
designed to achieve strong operational disciplines. Non-financial
targets are focussed on maintaining a sustainable business
through improved safety performance, focus on customer
satisfaction and service and to implementation of strategy.
The table below provides an overview of the STI against key
financial and non-financial performance measures and the
weightings for each component.
CEO
COO
Other SET(1)
Underlying Profit Performance
Business Performance
Strategic Initiatives
Individual Performance
objectives
Organisational Performance
Customer and Stakeholder
Performance
• Group profit before tax.
• Return on Net Funds Employed (NFE).
• Operating cashflow.
• Gross margins.
• Appropriate and efficient capital management.
(efficiency of the Balance Sheet).
• Alignment of priorities and allocation of resources to
bring about implementation of company strategy.
• Time (operational delivery against agreed
timeframes) and quality (built form product).
• Improvement in underlying health of the Company.
• Risk management.
• Strategy objectives focussed on exploring growth
opportunities for AVJennings.
• Development and implementation of strategy plans
including growth through organic and corporate
means, new business streams and strategic
alignments.
• Growth in lots under control (three year).
40%
50%
30% to 40%
30%
10%
-
• Aligned to strategic objectives.
-
20%
40% to 50%
• Customer Advocacy.
• Employee retention and engagement.
• Progress longer term inclusion and diversity
People
objectives.
Safety and Environment
• Leadership – maintain a high performing team.
• Succession planning for key positions.
• Providing a safe work environment.
• Minimise the impact of our activities on the
environment.
(1) SET is an abbreviation for the Senior Executive Team.
30%
20%
20%
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 34
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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.
In making its assessments, the Committee considers the following
factors:
•
•
•
•
Performance in implementing Company strategy.
Performance in the prevailing market.
The financial result.
Performance against individual KPMs.
G. Long Term Incentive (LTI)
LTI grants 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 with
performance conditions. The use of Performance 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).
The allocation of Performance Rights is designed to align
executives’ interests with shareholders and to consider
themselves like shareholders. The Rights are subject to real risk
of forfeiture during the vesting period.
In response to the impact of COVID-19, Executive KMP and other
senior executives agreed to cancel all Performance Rights due
to be tested for vesting in September 2020. These Performance
Rights were cancelled in June 2020.
LTI and Performance
The TSR measure was introduced in February 2020 to replace the
former ROE component of the Performance Rights which used
market capitalisation as a proxy for equity. The TSR hurdle will
apply to grants under the LTI from FY21 onwards. The old ROE
hurdle will apply to grants which were made in FY19 and FY20.
The grants made under the LTI Plan in 2017 were cancelled in
accordance with amended remuneration arrangements to deal
with the COVID-19 crisis set out in the STI section above.
50% of Performance Rights granted vest depending on
AVJennings’ average growth rate in EPS over the three financial
years of performance measurement.
50% of Performance Rights granted vest depending on
AVJennings’ TSR over the three financial years of performance
measurement against the ASX 300 Real Estate Index, a
comparator group including peers in the residential property
sector. The comparator group is not directly comparable to
AVJennings as the Index contains non-residential property
participants. However, this comparator group was chosen as
the best approximation as the pool of directly comparable listed
developers was too small to provide a reliable and meaningful
comparator group.
Both elements of the Performance Rights (EPS and TSR, formerly
ROE) are also subject to a service condition. The recipient must
be employed by AVJennings as at 30 June of the year in which
the performance conditions of the Rights are tested. The Rights
only vest if both the service condition and the performance
conditions are satisfied.
The performance conditions are tested at the end of the three-
year measurement period, in the September following release of
the financial statements for that year. There is no re-testing. If the
conditions are not satisfied when they are tested, the Rights are
immediately forfeited.
In the event of a change in control of the Company, the Board
can elect to vest unvested Rights.
The operation of the EPS, ROE and the new TSR hurdles are set
out below.
AVJennings’ EPS growth rate over
the three year performance period
Percentage of Rights
vesting
< 5%
5%
5% - 10%
> = 10%
Nil
50% of the allocation
for the hurdle
Pro-rata between
50% and 100%
100% of the allocation
for the hurdle
AVJennings’ ROE over the three
year performance period
Percentage of Rights
vesting
< 12%
12%
15%
> = 18%
Nil
50% of the allocation
for the hurdle
75% of the allocation
for the hurdle
100% (Straight line
interpolation between
12% and 18%)
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This ROE hurdle was removed in February 2020 and replaced
with TSR hurdle for grants for FY21 and beyond.
Retention component - years
of service
Percentage of
Rights vesting
AVJennings’ TSR rank against ASX
300 RE Index at 30 September
Percentage vesting
Two years
One year
< median
At the median
> median but < 75th percentile
> 75th percentile
H. Retention
Nil
50% of the allocation
for the hurdle
Pro-rata between
50th and 75th
percentiles
100% of the allocation
for the hurdle
Three years
Rationale for Retention Rights
The Company recognises that the TEC is generally set at around
mid-market. It is also recognised that the market for quality
executives is dynamic and that high turnover in executive ranks is
undesirable, costly and disruptive. Accordingly, Retention Rights
are granted to support a number of objectives:
33.33%
33.33%
33.34%
Retention Rights are granted in three equal tranches which vest
in each of the three succeeding years following the year of grant.
• Address the issue of retaining executives;
• Avoid the disruption of turnover in executive ranks;
In response to the impact of COVID-19, Executive KMP and other
senior executives agreed in June 2020 to cancel all Retention
Rights due to vest in July 2020.
• Avoid the costs of recruitment of replacement executives; and
• Avoid the impact on operations, performance and
productivity of executive turnover.
Unvested Retention Rights are subject to real risk of forfeiture, for
example where an executive ceases employment for any reason.
I. Remuneration Related Measures Taken in Response to COVID-19
PK Summers
CD Thompson
SC Orlandi
L Mahaffy
L Hunt
Executive KMP
Other Executives
Total
Maximum
STI
Opportunity
Forgone
$
218,397
71,393
66,667
65,272
44,121
465,850
272,784
Rights Cancelled
Service
Rights
Number
268,505
61,440
53,044
56,174
37,970
477,133
256,927
LTI
Performance
Rights
Number
403,993
57,777
46,758
52,825
35,706
597,059
255,635
738,634
734,060
852,694
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 36
REMUNERATION REPORT (AUDITED) (CONTINUED)
Senior executives agreed to a number of changes to
remuneration arrangements in response to the COVID-19 crisis.
The measures are outlined below:
477,133 shares at a cost of $226,781 plus brokerage in acquiring
those shares. In addition, the cancellation resulted in additional
savings being made by avoiding the acquisition of shares for
other executives. That is a real cash saving to the Company.
• Executive KMP and other senior executives agreed to forgo
any STI award in respect of FY20
• Executive KMP and other senior executives agreed to cancel
all Retention Rights due to vest in 2020
• Executive KMP and other senior executives agreed to cancel
all LTI Rights due to be tested for vesting in 2020
• All office-based staff (including Executive KMP) agreed to
take one day of annual leave per week for the period 1 May to
31 July 2020 thereby reducing the Company’s leave liabilities
The cancelled Retention Rights were due to vest in early July
2020, subject to the executives being employed by the Company
at 30 June 2020. All relevant executives including all Executive
KMP remained employed at that date and so all the Retention
Rights would have vested, but for their cancellation in late June.
Cancellation of the Retention Rights saved the Company the
cost of acquiring shares on market to meet vesting obligations.
The share price at the time when those shares would have been
acquired (early July) being the Volume Weighted Average Price
for the first 5 trading days of July was $0.4753. If shares had
been acquired at around that price, just for the Executive KMP
(excluding other executives) the Company would have acquired
Under the accounting standards, the cancellation of Service
Rights does not result in the expense being reversed in the
Income Statement. Therefore, the accounts will not reflect
the saving to the Company even though the cancellation of
Retention Rights saved the Company the cash cost of buying
those shares on market.
The Performance Rights were due to have the performance
conditions tested to determine vesting in September 2020. The
Performance Rights were cancelled in late June and therefore
no testing will take place in September 2020. It is not possible to
determine what percentage, if any, of the Performance Rights
might have vested. In any event, executives including Executive
KMP agreed to cancellation of the Performance Rights and so
saved the Company the cost of acquiring shares on market to
meet any vesting obligation which may have arisen.
In addition, all employees (other than site and sales staff)
including Executive KMP agreed to leave management
arrangements, in particular a 4 day week from 1 May until
31 July 2020. Other leave arrangements have been put in
place from 1 August 2020.
Directors’ Report.AVJennings Limited - Annual Report 2020 37
REMUNERATION REPORT (AUDITED) (CONTINUED)
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AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
38
REMUNERATION REPORT (AUDITED) (CONTINUED)
K. Equity Disclosures
Rights have been granted to KMP as detailed in the table below.
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 September 2019 Grant was made for the FY20 year (with final performance conditions testing in September 2022).
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.
The following is the status of Rights granted to KMP under the LTI Plans:
KMP
PK Summers
PK Summers
PK Summers
PK Summers
CD Thompson
CD Thompson
CD Thompson
CD Thompson
SC Orlandi
SC Orlandi
SC Orlandi
SC Orlandi
L Mahaffy
L Mahaffy
L Mahaffy
L Mahaffy
L Hunt
L Hunt
L Hunt
L Hunt
Total
Year of
Grant
FY17
FY18
FY19
FY20
FY17
FY18
FY19
FY20
FY17
FY18
FY19
FY20
FY17
FY18
FY19
FY20
FY17
FY18
FY19
FY20
Fair Value at
Grant date
$372,970
$384,170
$395,702
$405,605
$65,649
$67,621
$69,652
$71,395
$53,129
$54,725
$57,463
$66,669
$60,022
$61,825
$63,682
$65,275
$40,571
$41,789
$43,044
$44,122
Rights at
1 July 2019
546,737
559,000
701,392
-
85,685
93,246
122,234
-
69,344
75,463
100,843
-
78,340
85,254
111,757
-
52,952
57,626
75,540
-
Rights
granted
-
-
-
871,565
-
-
-
151,894
-
-
-
141,839
-
-
-
138,874
-
-
-
93,871
Rights
vested
( 317,023 )
( 77,504 )
( 85,162 )
-
( 52,832 )
( 17,735 )
( 19,487 )
-
( 42,757 )
( 14,353 )
( 16,077 )
-
( 48,303 )
( 16,215 )
( 17,817 )
-
( 32,649 )
( 10,960 )
( 12,043 )
-
Rights
forfeited
( 229,714 )
-
-
-
( 32,853 )
-
-
-
( 26,587 )
-
-
-
( 30,037 )
-
-
-
( 20,303 )
-
-
-
Rights
cancelled(1)
-
( 481,496 )
( 85,162 )
( 105,840 )
-
( 75,511 )
( 19,487 )
( 24,219 )
-
( 61,110 )
( 16,077 )
( 22,615 )
-
( 69,039 )
( 17,817 )
( 22,143 )
-
( 46,666 )
( 12,043 )
( 14,967 )
Rights at
30 June 2020
-
-
531,068
765,725
-
-
83,260
127,675
-
-
68,689
119,224
-
-
76,123
116,731
-
-
51,454
78,904
$2,485,080
2,815,413
1,398,043
( 780,917 )
( 339,494 )
( 1,074,192 )
2,018,853
(1) Refer to Section I.
Directors’ Report.AVJennings Limited - Annual Report 2020 39
REMUNERATION REPORT (AUDITED) (CONTINUED)
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.
For the year ended 30 June 2020
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
BG Hayman
P Kearns
Executives
CD Thompson
SC Orlandi
L Mahaffy
L Hunt
Opening
Balance
Vested as
Remuneration
218,881,388
224,820
4,830,262
270,223
-
-
1,550,309
492,293
211,031
329,871
-
-
479,689
-
-
-
90,054
73,187
82,335
55,652
Total
226,790,197
780,917
For the year ended 30 June 2019
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
BG Hayman
P Kearns
Executives
CD Thompson
SC Orlandi
L Mahaffy
L Hunt
209,386,826
215,068
4,200,316
258,502
-
-
1,438,459
413,623
129,496
272,616
-
-
576,804
-
-
-
89,178
72,171
81,535
55,112
Total
216,314,906
874,800
(1) Includes shares acquired under the Dividend Reinvestment Plan in the prior year.
On market
Purchase/
(disposal)
231,451
-
( 350,000 )
100,000
235,000
25,000
220,624
-
-
-
462,075
-
-
-
-
-
-
-
-
-
-
-
Other (1)
Closing
Balance
-
-
-
-
-
-
-
-
-
-
-
9,494,562
9,752
53,142
11,721
-
-
22,672
6,499
-
2,143
219,112,839
224,820
4,959,951
370,223
235,000
25,000
1,860,987
565,480
293,366
385,523
228,033,189
218,881,388
224,820
4,830,262
270,223
-
-
1,550,309
492,293
211,031
329,871
9,600,491
226,790,197
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 40
MEETINGS OF DIRECTORS AND DIRECTORS’ COMMITTEES
The number of meetings of Directors and Directors’ Committees held during the year, for the period the Director was a Member of the
Board or a Committee, and the number of meetings attended by each Director are detailed below.
Full Meetings
of Directors
Audit
Held
6
6
6
6
6
6
6
6
6
Attended
6
6
6
5
6
6
6
6
5
Held
-
3
-
-
3
-
3
-
-
Attended
-
3
-
-
3
-
3
-
-
Meetings of Committees
Remuneration
Held
4
-
-
4
-
4
4
-
-
Attended
4
-
-
4
-
4
4
-
-
Nominations
Held
1
1
-
1
1
1
-
-
-
Attended
1
1
-
1
1
1
-
-
-
Risk Management
Attended
-
8
-
-
-
8
-
-
8
Held
-
8
-
-
-
8
-
-
8
S Cheong
RJ Rowley
PK Summers
E Sam
B Chin
BG Hayman
TP Lai
BL Tan
P Kearns
Investments Committee
The Investments Committee does not formally meet in person. It conducts physical inspections of certain major development sites and
receives detailed briefings from management on all major development sites prior to consideration of formal acquisition proposals
which are dealt with by way of circular resolution.
DIRECTORS' INTERESTS
ROUNDING
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 41.
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
BG Hayman
P Kearns
Number
219,112,839
224,820
4,959,951
370,223
235,000
25,000
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 2020 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
41
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 33. 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
June 2019, I declare to the best of my knowledge and belief, there have been:
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of
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.
relation to the audit; and
Signed in accordance with a resolution of the Directors.
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
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
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
1 September 2020
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
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
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.
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
Auditor’s Independence Declaration to the Directors of AVJennings
June 2020, I declare to the 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.
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
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
Glenn Maris
Partner
Glenn Maris
5 September 2019
Partner
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
Ernst & Young
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
1 September 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Glenn Maris
Partner
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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
42
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Revenue from contracts with customers
Revenue
Cost of sales
Gross profit
Share of net loss 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 and amortisation expenses
Finance income
Finance costs
Other income
Profit before income tax
Income tax
Profit after income tax
Other comprehensive income (OCI)
Foreign currency translation (recyclable through profit and loss)
Other comprehensive (loss)/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
To be read in conjunction with the accompanying notes.
Note
2020
$'000
2019
$'000
2
3
3
3
10
8
3
3
3
3
4
262,354
262,354
( 202,461 )
59,893
296,467
296,467
( 223,900 )
72,567
( 66 )
( 947 )
( 1,629 )
( 516 )
( 190 )
( 5,044 )
( 23,531 )
( 6,210 )
( 7,805 )
( 2,125 )
1,264
( 393 )
457
( 274 )
( 607 )
-
( 669 )
800
( 6,865 )
( 25,711 )
( 8,591 )
( 8,071 )
( 252 )
1,315
( 159 )
356
13,158
( 4,117 )
23,839
( 7,400 )
9,041
16,439
( 1,228 )
( 1,228 )
1,246
1,246
7,813
17,685
9,041
16,439
7,813
17,685
34
34
2.23
2.23
4.09
4.08
Financial Statements.AVJennings Limited - Annual Report 2020 43
Note
5
6
7
4(c)
9
6
7
8
26
10
11
12
13
14
15
16
4(c)
17
14
15
16
4(d)
17
2020
$’000
2019
$’000
5,703
23,036
185,366
1,223
4,191
219,519
14,742
401,997
1,580
5,636
1,695
1,214
5,978
2,816
435,658
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
655,177
685,236
16,540
-
1,542
413
5,848
24,343
27,846
190,110
5,060
14,039
649
237,704
41,234
543
-
3,179
6,547
51,503
22,009
199,792
-
15,173
482
237,456
262,047
288,959
393,130
396,277
18
19(a)
19(c)
174,179
8,408
210,543
174,509
8,882
212,886
393,130
396,277
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Current assets
Cash and cash equivalents
Receivables
Inventories
Tax receivable
Other assets
Total current assets
Non-current assets
Receivables
Inventories
Investment property
Equity accounted investments
Financial asset
Plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Lease liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Lease liabilities
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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 44
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity
holders of AVJennings Limited
Total equity
Foreign
Currency
Translation
Reserve
Share-based
Payment
Reserve
Retained
Earnings
Contributed
Equity
Note
$'000
$'000
$'000
$'000
$'000
167,943
3,010
3,896
224,149
398,998
-
-
-
( 11,792 )
( 11,792 )
167,943
3,010
3,896
212,357
387,206
-
-
-
-
1,246
1,246
-
-
-
-
-
-
7,480
18(b)
( 914 )
32(a)
32(a)
20
-
-
-
6,566
174,509
174,509
-
-
-
-
-
( 402 )
1,132
16,439
-
16,439
16,439
1,246
17,685
-
-
-
-
7,480
( 914 )
( 402 )
1,132
-
( 15,910 )
( 15,910 )
730
( 15,910 )
( 8,614 )
4,256
4,256
4,626
4,626
212,886
396,277
212,886
396,277
39
-
-
-
( 416 )
( 416 )
174,509
4,256
4,626
212,470
395,861
-
-
-
-
( 1,228 )
( 1,228 )
18(b)
( 330 )
32(a)
32(a)
20
-
-
-
( 330 )
-
-
-
-
-
-
-
-
-
( 225 )
979
-
754
9,041
-
9,041
9,041
( 1,228 )
7,813
-
-
-
( 330 )
( 225 )
979
( 10,968 )
( 10,968 )
( 10,968 )
( 10,544 )
At 1 July 2018
Effect of adoption of new
revenue accounting standard
At 1 July 2018 (restated)
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
At 30 June 2019
At 1 July 2019
Effect of adoption of new
leases accounting standard
At 1 July 2019 (restated)
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:
- 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
At 30 June 2020
174,179
3,028
5,380
210,543
393,130
To be read in conjunction with the accompanying notes.
Financial Statements.AVJennings Limited - Annual Report 2020
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 from/(used in) operating activities
Cash flow from investing activities
Payments for plant and equipment
Interest received
Amounts received from joint ventures
Dividends received from joint ventures
Net cash from investing activities
Cash flow from financing activities
Proceeds from borrowings
Repayment of borrowings
Principal elements of lease payments
Net payment for treasury shares
Dividends paid
Proceeds from issue of shares
Net cash (used in)/from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
45
Note
2020
$’000
2019
$’000
3
4(c)
21
11
3
26
26
18(b)
20
18(a)
275,933
355,943
( 247,127 )
( 371,307 )
( 9,809 )
( 9,031 )
( 12,663 )
( 17,757 )
9,966
( 45,784 )
( 476 )
1,264
-
-
788
( 790 )
1,315
1,536
1,655
3,716
85,460
162,128
( 95,685 )
( 101,000 )
( 1,761 )
( 330 )
-
( 914 )
( 10,968 )
( 15,910 )
-
7,480
( 23,284 )
51,784
( 12,530 )
18,209
24
9,716
8,491
2
Cash and cash equivalents at end of year
5
5,703
18,209
To be read in conjunction with the accompanying notes.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section A – How the numbers are calculated
Section A1 Segment information
1. OPERATING SEGMENTS
The Group 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
Jurisdictions:
Land Development, Integrated Housing and Apartments Development activities are conducted within our jurisdictions.
Other:
Includes numerous low value items, amongst the most significant of which is interest.
Financial Statements.AVJennings Limited - Annual Report 2020 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Financial Statements.AVJennings Limited - Annual Report 2020
49
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 2020
Types of goods or services
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
48,324
19,512
31,409
7,457
25,317
132,019
65,299
23,909
8,700
8,759
7,747
114,414
-
13,161
247
2,513
-
-
-
-
-
-
13,161
2,760
Total revenue from contracts with customers
113,870
59,095
40,109
16,216
33,064
262,354
Timing of revenue recognition
Goods transferred at a point in time
113,623
56,582
40,109
16,216
33,064
259,594
Services transferred over time
247
2,513
-
-
-
2,760
Total revenue from contracts with customers
113,870
59,095
40,109
16,216
33,064
262,354
Operating Segments
30 June 2019
Types of goods or services
Sale of Land
Sale of Integrated Housing
Sale of Apartments
NSW
$'000
VIC
$'000
QLD
$'000
SA
NZ
$'000
$'000
Total
$'000
77,693
44,269
2,104
7,608
1,217
132,891
45,849
14,845
29,846
11,504
-
56,708
-
-
-
-
-
102,044
56,708
4,824
Property Development & Other Services
238
4,381
185
20
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
19,112
1,217
291,643
Services transferred over time
238
4,381
185
20
-
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
(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.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. REVENUES FROM CONTRACTS WITH CUSTOMERS
(ii) Property development and other services
(continued)
•
•
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 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.
3. INCOME AND EXPENSES
Revenues
Revenue from contracts with customers
Total revenues
Cost of sales include:
Utilisation of inventory provisions
Amortisation of finance costs capitalised to inventories
Impairment of assets
Provision for loss on equity accounted investments
Increase in inventory loss provisions
Note
2020
$'000
2019
$'000
2
262,354
296,467
262,354
296,467
( 456 )
7,730
947
1,629
( 791 )
12,181
607
-
26
7
For the year ended 30 June 2020, the movement in inventory provision resulted from a realignment of future assumptions with current
market conditions relating to projects in Queensland and South Australia.
Depreciation and amortisation expense
Depreciation of owned assets
Amortisation of right-of-use assets
Total depreciation and amortisation expense
Finance income
11
12
284
1,841
2,125
252
-
252
Interest from financial assets held for cash management purposes
1,264
1,315
Finance costs
Bank loans and overdrafts
Interest on lease liabilities
Less: Amount capitalised to inventories
Finance costs expensed
Other income
Rent from investment property
Sundry income
Total other income
9,809
335
12,663
-
( 9,751 )
( 12,504 )
393
159
125
332
457
10
346
356
Financial Statements.AVJennings Limited - Annual Report 2020
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
51
2020
$’000
2019
$’000
4,822
226
( 764 )
( 167 )
10,266
93
( 2,959 )
-
4,117
7,400
(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
13,158
23,839
Tax at Australian income tax rate of 30%
Net share of equity accounted joint venture losses
Other non-deductible items
Foreign jurisdiction (losses)/gains
Effect of lower tax rate in foreign jurisdiction
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
Current year tax receivable at year end
Prior year tax paid in current year
Cash taxes paid per the Consolidated Statement of Cash Flows
3,947
7,152
20
205
( 16 )
( 98 )
59
4,117
31%
4,117
931
( 226 )
( 7 )
( 413 )
1,223
3,406
9,031
82
57
49
( 33 )
93
7,400
31%
7,400
2,959
( 93 )
( 23 )
( 3,179 )
-
10,693
17,757
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
52
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
Deferred income tax movement for the year ended
30 June 2020:
Deferred tax assets
- inventories
- accruals
- provisions on employee entitlement
- fair value other assets
- lease liabilities
- other
Deferred tax assets
Deferred tax liabilities
- inventories
- fair value investment property
- unearned revenue
- prepayments
- brand name
- right-of-use assets
- other
Deferred tax liabilities
Net deferred tax liabilities
2,835
624
1,674
-
-
352
134
56
822
665
455
( 400 )
-
-
-
-
1,235
-
5,588
1,629
1,235
( 18,274 )
-
( 992 )
( 66 )
( 845 )
-
( 584 )
275
( 183 )
( 101 )
22
-
( 656 )
( 55 )
-
-
-
-
-
( 1,057 )
-
( 20,761 )
( 698 )
( 1,057 )
( 15,173 )
931
178
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
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 )
( 28,781 )
3,075
( 23,079 )
2,959
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25
-
-
-
-
25
25
-
1
1
-
2
3,187
758
1,730
822
1,900
55
8,452
( 17,999 )
( 183 )
( 1,068 )
( 44 )
( 845 )
( 1,713 )
( 639 )
( 22,491 )
( 14,039 )
2,835
624
1,674
455
5,588
-
( 18,274 )
5,054
( 109 )
-
-
-
-
-
-
( 992 )
( 66 )
( 845 )
( 584 )
5,054
5,054
( 109 )
( 20,761 )
( 107 )
( 15,173 )
(1) For the year ended 30 June 2020, this is the effect of the Leases Accounting Standard - refer to note 39. For the year ended 30 June 2019, the effect relates
to the Revenue Accounting Standard.
Financial Statements.AVJennings Limited - Annual Report 2020 53
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 (TCG).
The entities in the TCG 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 TCG 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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section A3 Balance Sheet information
5. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Accounting
2020
$’000
5,703
2019
$’000
18,209
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
Related party receivables
Other receivables
Total current receivables
Non-current
Trade receivables
Related party receivables
Other receivables
Total non-current receivables
(i) Accounting
2020
$’000
19,451
822
2,763
23,036
8,963
3,079
2,700
2019
$’000
12,184
1,681
1,223
15,088
7,173
2,840
20
14,742
10,033
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 2020 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. RECEIVABLES (continued)
(ii) Expected credit losses
Negligible expected credit losses (2019: $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
28,414
28,414
19,357
19,357
-
-
-
-
-
-
-
-
-
-
2020
2019
# 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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 56
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
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
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)
2020
$’000
2019
$’000
19,577
2,858
( 1,983 )
20,452
31,860
31,098
29,749
6,436
99,143
37,338
25,069
3,497
( 133 )
65,771
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
185,366
194,748
295,363
30,631
( 8,473 )
317,521
309,044
30,252
( 8,877 )
330,419
30,464
29,356
5,194
14,502
79,516
3,458
1,190
345
( 33 )
4,960
45,592
34,938
6,112
11,811
98,453
136
1,190
92
( 29 )
1,389
401,997
430,261
587,363
625,009
Financial Statements.AVJennings Limited - Annual Report 2020 57
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 4.83% (2019: 6.36%).
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.
As at 30 June 2020, significant judgement was required in determining the appropriate estimates and assumptions to be used in
determining the carrying value of inventory. COVID-19 and the Government’s response to it significantly impacted our operations. Key
assumptions and estimates impacted by COVID-19 include:
•
•
forecast future sales and costs, based on the location, type and quality of residential property, recognise and incorporate the
impact of COVID-19.
the impact of government subsidies on the sale of residential property.
Movement in impairment provisions
At beginning of year
Amounts utilised
Effect of adoption of AASB 15
Amounts provided
At end of year
8. INVESTMENT PROPERTY
2020
$’000
9,449
( 456 )
-
1,629
10,622
2019
$’000
9,982
( 791 )
258
-
9,449
The Group has an investment property at Waterline, Victoria. This relates to a retail space asset 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 7.00% (30 June 2019: 6.00%), and Direct Comparison Approach methods
have been adopted in determining the fair value.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INVESTMENT PROPERTY (continued)
Opening balance at 1 July
Transfer from inventory
Net (loss)/gain from fair value remeasurement
Closing balance at 30 June
2020
$’000
1,770
-
( 190 )
1,580
2019
$’000
-
970
800
1,770
Investment properties are measured as Level 3. Refer to note 23(v) for explanation of the levels of fair value measurement.
The impact of COVID-19 and the Government’s response to it, has been incorporated in the measurement of fair value.
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
Property Fund Units
2020
$’000
3,461
730
4,191
2019
$’000
1,897
495
2,392
2020
$'000
2019
$'000
1,695
2,211
These are units in an unlisted property fund which do not have an active market. They are 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 the Statement of Profit and Loss. Expected future cash flows discounted using a rate of 12%, have been
used in determining the fair value. The impact of COVID-19 and the Government’s response to it, has been incorporated in the
measurement of fair value.
Unlisted property fund units are measured as Level 3 financial instruments. Refer to note 23(v) for explanation of the levels of fair
value measurement.
Financial Statements.AVJennings Limited - Annual Report 2020
59
2020
$’000
1,488
( 460 )
1,028
2019
$’000
1,075
( 368 )
707
1,994
( 1,808 )
186
6,772
( 6,420 )
352
1,214
1,059
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 2020
Note
Carrying amount at 1 July 2019
Additions
Disposals
Depreciation charge
Carrying amount at 30 June 2020
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
Leasehold
improvements
$'000
Plant and
equipment
$'000
707
458
( 9 )
( 128 )
1,028
62
720
( 13 )
( 62 )
707
352
18
( 28 )
( 156 )
186
474
70
( 2 )
( 190 )
352
Total
$'000
1,059
476
( 37 )
( 284 )
1,214
536
790
( 15 )
( 252 )
1,059
Plant and equipment are 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
5-10 years or lease term if shorter
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. RIGHT-OF-USE ASSETS
The Group has lease contracts for various office premises, motor vehicles and IT equipment used in its operations. Lease of office
premises generally have lease terms between 3 and 5 years, while motor vehicles and IT equipment have lease terms between 3 and
4 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets. Some of the lease contracts for
office premises include extension options, which are discussed in note 39.
The Group also has certain leases with terms of 12 months or less and leases of office equipment with low value. The Group applies
the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year:
As at 1 July 2019(1)
Additions
Amortisation expense
Disposal
As at 30 June 2020
Current
Non-current
Total
Note
39
3
Motor
vehicle
lease
$’000
464
313
( 296 )
-
481
-
481
481
Right-of-use assets
Office
premises
lease
$’000
2,744
4,169
( 1,409 )
( 196 )
IT
equipment
lease
$’000
316
14
( 136 )
( 5 )
189
-
189
189
5,308
-
5,308
5,308
Total
$’000
3,524
4,496
( 1,841 )
( 201 )
5,978
-
5,978
5,978
(1) The Group adopted AASB 16 using the modified retrospective approach which does not require a restatement of prior year numbers.
13. INTANGIBLE ASSETS
Brand name at cost
Less: accumulated amortisation
Total intangible assets
2020
$’000
9,868
( 7,052 )
2,816
2019
$’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 2020, there were no indicators of impairment. However, an annual impairment test was performed and no impairment
identified.
Financial Statements.AVJennings Limited - Annual Report 2020
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. INTANGIBLE ASSETS (continued)
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 tested annually for impairment. 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.
14. PAYABLES
Current
Unsecured
Land creditors
Trade creditors
Related party payables
Deferred income
Other creditors and accruals
Total current payables
Non-current
Unsecured
Land creditors
Deferred income
Other creditors and accruals
Total non-current payables
Accounting
2020
$’000
2019
$’000
1,323
9,954
130
38
5,095
16,540
23,360
589
3,897
27,846
21,323
6,544
150
1,253
11,964
41,234
20,830
1,167
12
22,009
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 3.84% (2019: 5.68%).
15. BORROWINGS
Current
Bank loans
Total current interest-bearing liabilities
Non-current
Bank loans
Total non-current interest-bearing liabilities
2020
$’000
-
-
2019
$’000
543
543
190,110
199,792
190,110
199,792
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. BORROWINGS (continued)
Accounting
Borrowing costs
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.
Financing arrangements
The Group has access to the following lines of credit:
30 June 2020
Main banking facilities
- bank overdraft
- bank loans
- performance bonds
Contract performance bond facilities
- performance bonds
30 June 2019
Main banking facilities
- bank overdraft
- bank loans
- performance bonds
Project funding facilities
- bank loans
Contract performance bond facilities
- performance bonds
Note
15(a)
15(c)
15(a)
15(b)
15(c)
Available
$'000
Utilised
$'000
Unutilised
$'000
5,000
265,000
30,000
300,000
-
190,110
16,925
207,035
5,000
74,890
13,075
92,965
60,000
30,377
29,623
5,000
275,000
20,000
300,000
-
199,792
17,325
217,117
5,000
75,208
2,675
82,883
4,978
543
4,435
45,000
39,812
5,188
At 30 June 2020 main banking facilities are interchangeable up to $47 million (2019: $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 2020 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. BORROWINGS (continued)
Significant terms and conditions
(a) Main banking facilities
$50,000,000 of the Group’s main banking facilities currently matures on 30 September 2021 with the balance of $250,000,000
maturing on 30 September 2022. 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 15(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 25). The weighted average interest
rate including margin on the main banking facilities at 30 June 2020 was 1.47% (2019: 2.80%).
(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 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 Properties Wollert SPV Pty Ltd.
The AVJennings Properties Wollert SPV Pty Ltd facility was repaid on 29 November 2019.
At reporting date there were no project funding facilities.
(c) Contract performance bond facilities
The Group has entered into Contract performance bond facilities of $60,000,000 (2019: $45,000,000) which are subject to review
annually. $25,000,000 of the facilities expire on 31 December 2020 with the balance expiring on 27 February 2021. 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 25.
16. LEASE LIABILITIES
The Group has lease contracts for various office premises, motor vehicles and IT equipment used in its operations. Lease of office
premises generally have lease terms between 3 and 5 years, while motor vehicles and IT equipment have lease terms between 3 and
4 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets. Some of the lease contracts for
office premises include extension options, the effects which have been incorporated in calculating lease liabilities.
The Group also has certain leases with terms of 12 months or less and leases of office equipment with low value. The Group applies
the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. LEASE LIABILITIES (continued)
Set out below are the carrying amounts of lease liabilities recognised and the movements during the year:
As at 1 July 2019(1)
Additions
Payments
Disposal
As at 30 June 2020
Current
Non-current
Total
Note
39
Motor
vehicle
lease
$’000
471
31 3
( 299 )
-
485
253
232
485
Lease Liabilities
IT
equipment
lease
$’000
323
14
( 134 )
( 6 )
Office
premises
lease
$’000
3,324
4,1 6 9
( 1,328 )
( 245 )
197
107
90
197
5,920
1,182
4,738
5,920
Total
$’000
4,118
4,496
( 1 , 7 6 1 )
( 2 51 )
6,602
1,542
5,060
6,602
(1) The Group adopted AASB 16 using the modified retrospective approach which does not require a restatement of prior year numbers.
The Group recognised rent expense from short-term leases of $334,000 and leases of low-value assets of $224,000 for the year ended
30 June 2020.
17. PROVISIONS
For the year ended 30 June 2020
At 1 July 2019
Arising during the year
Utilised
At 30 June 2020
Current
Non-current
Total
For the year ended 30 June 2019
At 1 July 2018
Arising during the year
Utilised
At 30 June 2019
Current
Non-current
Total
Accounting
Rectification
and
maintenance
$’000
Restructuring
$’000
Annual
leave and long
service leave
$’000
282
680
( 537 )
425
425
-
425
3,850
522
( 4,090 )
282
282
-
282
216
300
( 216 )
300
300
-
300
-
216
-
216
216
-
216
6,531
1,143
( 1,902 )
5,772
5,123
649
5,772
6,761
1,475
( 1,705 )
6,531
6,049
482
6,531
Total
$’000
7,029
2,123
( 2,655 )
6,497
5,848
649
6,497
10,611
2,213
( 5,795 )
7,029
6,547
482
7,029
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 2020 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. CONTRIBUTED EQUITY
Ordinary shares
Treasury shares
Share capital
(a) Movement in ordinary share capital
2020
Number
2019
Number
2020
$’000
2019
$’000
406,230,728
-
406,230,728
( 762,619 )
177,961
( 3,782 )
177,961
( 3,452 )
406,230,728
405,468,109
174,179
174,509
At beginning of year
Issued under the Dividend Reinvestment Plan
At end of year
406,230,728
-
394,926,905
11,303,823
406,230,728
406,230,728
177,961
-
177,961
170,481
7,480
177,961
(b) Movement in treasury shares
2020
Number
2019
Number
2020
$’000
2019
$’000
At beginning of year
( 762,619 )
( 495,632 )
( 3,452 )
( 2,538 )
On market acquisition of shares
Excess funds received from AVJDESP
Employee share scheme issue
At end of year
( 757,523 )
-
1,520,142
( 1,462,177 )
-
1,195,190
( 435 )
105
-
( 914 )
-
-
-
( 762,619 )
( 3,782 )
( 3,452 )
During the year, 757,523 treasury shares were purchased by the AVJ Deferred Employee Share Plan Trust (AVJDESP) at a cost of
$435,000.
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 AVJDESP Trust are disclosed as treasury shares and deducted from contributed equity.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. RESERVES AND RETAINED EARNINGS
(a) Reserves
Foreign
Currency
Translation
Reserve
$'000
Share-based
Payment
Reserve
$'000
3,010
1,246
-
4,256
( 1,228 )
-
3,028
3,896
-
730
4,626
-
754
5,380
Total
$'000
6,906
1,246
730
8,882
( 1,228 )
754
8,408
Note
32(a)
32(a)
At 1 July 2018
Foreign currency translation
Share-based payment expense
At 30 June 2019
Foreign currency translation
Share-based payment expense
At 30 June 2020
(b) Nature and purpose of reserves
Foreign currency translation reserve
Exchange differences arising on translation of foreign operations are recognised in other comprehensive income as explained in note
40(d) 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 revenue accounting standard
Effect of adoption of new leases accounting standard
At beginning of year (restated)
Profit after income tax
Dividends declared and paid
At end of year
Note
39
2020
$'000
212,886
-
( 416 )
212,470
9,041
( 10,968 )
210,543
2019
$’000
224,149
( 11,792 )
-
212,357
16,439
( 15,910 )
212,886
Financial Statements.AVJennings Limited - Annual Report 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. DIVIDENDS
Cash dividends declared and paid
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
2019 final dividend of 1.5 cents per share,
paid 20 September 2019. Fully franked @ 30% tax
2020 interim dividend of 1.2 cents per share,
paid 27 March 2020. Fully franked @ 30% tax
Total cash dividends declared and paid
Dividends proposed
2019 final dividend of 1.5 cents per share,
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%
67
2020
$’000
2019
$’000
-
-
6,093
4,875
10,968
11,848
4,062
-
-
15,910
-
-
6,093
6,093
28,730
27,029
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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section A4 Cash Flow information
21. CASH FLOW STATEMENT RECONCILIATION
Reconciliation of profit after tax to net cash flow from/(used in) operating activities
Profit after tax
Adjustments for non-cash items:
Depreciation and amortisation
Net gain on disposal of right-of-use assets
Net loss on disposal of plant and equipment
Interest revenue classified as investing cash flow
Share of loss of joint ventures
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:
Decrease/(increase) in inventories
(Increase)/decrease in receivables
(Increase)/decrease in other current assets
Decrease in deferred tax liability
Decrease in net current tax liability
(Decrease)/increase in payables
Decrease in provisions
Net cash from/(used in) operating activities
2020
$’000
2019
$’000
9,041
16,439
2,125
( 51 )
37
( 1,264 )
66
1,173
754
190
516
947
36,473
( 12,657 )
( 1,799 )
( 955 )
( 3,959 )
( 20,139 )
( 532 )
252
-
15
( 1,315 )
274
( 533 )
730
( 800 )
669
607
( 89,536 )
29,829
4,758
( 2,852 )
( 7,502 )
6,763
( 3,582 )
9,966
( 45,784 )
Financial Statements.AVJennings Limited - Annual Report 2020 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section B – Risk
22. 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.
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.
The impact of COVID-19 and the Government’s response to it, has
been incorporated in the measurement of fair value.
23. FINANCIAL RISK MANAGEMENT
(i) Judgements
In applying the Group’s accounting policies, management
makes judgements, which can significantly affect the amounts
recognised in the Consolidated Financial Statements.
The Group’s principal financial assets and financial liabilities
comprise receivables, payables, loans and borrowings,
investment in property funds and cash.
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.
(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.
Significant judgement was required in determining the
appropriate estimates and assumptions to be used in
determining the carrying value of inventory. COVID-19 and
the Government’s response to it significantly impacted our
operations. Key assumptions and estimates impacted by
COVID-19 include:
•
•
forecast future sales and costs, based on the location,
type and quality of residential property, recognise and
incorporate the impact of COVID-19.
the impact of Government subsidies on the sale of
residential property.
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.
The Group’s treasury department focuses on the following main
financial risks:
•
•
•
•
interest rate risk,
foreign currency risk,
credit risk,
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.
Responsibility for the monitoring of financial risk exposure and
the formulation of appropriate responses rests with the Chief
Financial Officer.
The Board reviews and approves these policies.
(i) Interest rate risk
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.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. FINANCIAL RISK MANAGEMENT (continued)
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.
At balance date, the Group had the following cash and variable rate borrowings:
Cash
Bank loans
Net financial liabilities
Borrowings not hedged
Weighted
average
interest rate
%
0.36
1.47
2020
2019
Balance
$'000
( 5,703 )
190,110
184,407
184,407
Weighted
average
interest rate
%
0.89
2.80
Balance
$'000
( 18,209 )
200,335
182,126
182,126
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)
2020
$'000
( 100 )
100
2019
$'000
( 89 )
89
Profit After Tax
Higher/(Lower)
2020
$'000
( 645 )
645
2019
$'000
( 637 )
637
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)
2020
$'000
( 24 )
24
2019
$'000
-
-
2020
$'000
( 147 )
147
2019
$'000
( 125 )
125
Financial Statements.AVJennings Limited - Annual Report 2020 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. 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 37 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.
$50,000,000 of the Group’s main banking facilities currently matures on 30 September 2021 with the balance of $250,000,000
maturing on 30 September 2022 and are therefore non-current. In addition, the Group operated certain project funding facilities
which are discussed in note 15(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 2020, none (2019: 0.3%) of the Group’s interest-bearing loans and borrowings will mature in less than one year.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. 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 2020
Financial Assets
Cash and cash equivalents
Receivables
Financial Liabilities
Payables
Interest-bearing loans and borrowings*
Lease liabilities (note 16)
Financial Guarantees
Net maturity
Year ended 30 June 2019
Financial Assets
Cash and cash equivalents
Receivables
Financial Liabilities
Payables
Interest-bearing loans and borrowings*
Financial Guarantees
< 6 months
$'000
6-12 months
$'000
> 1-5 years
$'000
Total
$'000
5,703
13,799
19,502
14,996
1,398
738
1,031
18,163
1,339
-
9,237
9,237
1,544
1,391
804
-
3,739
5,498
-
14,742
14,742
28,959
193,594
5,060
-
227,613
5,703
37,778
43,481
45,499
196,383
6,602
1,031
249,515
(212,871)
(206,034)
< 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
-
4,400
4,400
12,196
2,787
-
14,983
-
10,033
10,033
24,069
206,788
-
230,857
18,209
25,121
43,330
65,303
212,922
1,148
279,373
Net maturity
( 4,636 )
( 10,583 )
( 220,824 )
( 236,043 )
* 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 $123 million (2019: $93 million) of unused credit facilities available. Please refer to
note 15.
Financial Statements.AVJennings Limited - Annual Report 2020 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. 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 2020
Year ended 30 June 2019
Quoted
prices
in active
markets
(Level 1)
$'000
Significant
observable
inputs
(Level 2)
$'000
Significant
unobservable
inputs
(Level 3)
$'000
-
-
-
-
1,695
1,695
Total
$'000
1,695
1,695
-
-
190,110
190,110
-
-
190,110
190,110
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
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.
24. 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 2020, a total dividend of $10,968,000 was paid (2019: $15,910,000).
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
2020
$'000
190,110
( 5,703 )
184,407
393,130
655,177
46.9%
28.1%
2019
$'000
200,335
( 18,209 )
182,126
396,277
685,236
46.0%
26.6%
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section C – Group Structure
25. CONTROLLED ENTITIES
(a) Investment in controlled entities
The following economic entities are the controlled entities of AVJennings Limited:
ECONOMIC ENTITY (1)
2020
2019
2020
2019
% 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
Montpellier Gardens Pty Limited(3)
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
AVJennings SPV No 25 Pty Limited(4)
AVJennings SPV No 26 Pty Limited(4)
Creekwood Developments Pty Limited(3)
Portarlington Nominees Pty Limited(3)
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
Yes
Yes
Yes
No
No
No
Yes
Yes
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
Financial Statements.AVJennings Limited - Annual Report 2020 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. CONTROLLED ENTITIES (continued)
(a) Investment in controlled entities (continued)
% Equity Interest
Included in Banking
Cross Deed of Covenant (2)
ECONOMIC ENTITY (1)
2020
2019
2020
2019
Entities excluded from the Closed Group (continued)
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
AVJennings NZ Management Services Ltd
100
100
100
100
100
100
100
100
100
100
100
100
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
No
No
No
(1) 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.
(2) These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 15(a).
(3) These entities, including AVJennings Limited, are included in the Deeds of Indemnity for performance bond facilities referred to in note 15(c).
(4)
Incorporated on 23 May 2020.
(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 25(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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. 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 25(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 25(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 sales
Other expenses
(Loss)/profit before income tax
Income tax
(Loss)/profit after income tax
Closed Group
2020
$’000
2019
$’000
142,622
( 108,449 )
( 39,085 )
( 4,912 )
1,197
( 3,715 )
149,610
( 106,817 )
( 41,357 )
1,436
( 30 )
1,406
Financial Statements.AVJennings Limited - Annual Report 2020
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. 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:
2020
$’000
2019
$’000
Current assets
Cash and cash equivalents
Receivables
Inventories
Tax receivable
Other assets
Total current assets
Non-current assets
Receivables
Inventories
Equity accounted investments
Financial asset
Plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Payables
Lease liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Interest-bearing loans and borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
1,172
189,845
69,040
1,223
2,580
263,860
5,488
149,375
5,636
1,695
1,214
5,711
2,816
171,935
435,795
7,745
1,485
-
5,410
14,640
19,860
149,000
4,848
13,002
649
187,359
201,999
233,796
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
174,179
5,380
54,237
174,509
4,626
69,336
233,796
248,471
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. 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 revenue accounting standard
Effect of adoption of new leases accounting standard
Comprehensive income:
(Loss)/profit for the year
Total comprehensive (loss)/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
26. EQUITY ACCOUNTED INVESTMENTS
Joint Ventures
Accounting
Closed Group
2020
$’000
248,471
-
( 416 )
( 3,715 )
( 3,715 )
-
( 330 )
754
( 10,968 )
( 10,544 )
2019
$’000
265,812
( 10,133 )
-
1,406
1,406
7,480
( 914 )
730
( 15,910 )
( 8,614 )
233,796
248,471
2020
$’000
2019
$’000
5,636
6,649
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 2020
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. 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
Pindan Capital Group Dwelling Trust - Building Construction
Movements in carrying amount
At beginning of year
Dividends received
Amounts received
Share of loss
At end of year before provision for loss
Provision for loss on investment
At end of year (1)
Interest held
2020
33.3%
2020
$’000
6,649
-
-
( 66 )
6,583
( 947 )
5,636
2019
33.3%
2019
$’000
10,721
( 1,655 )
( 1,536 )
( 274 )
7,256
( 607 )
6,649
(1) The difference between the carrying amount and the share of net assets in the table below relates to the provision for loss recognised by the Group.
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 sales
Expenses
Loss before income tax
Income tax
Loss after income tax
At 30 June 2020, there were no significant commitments entered into by the Joint Venture.
2020
$’000
380
8,552
8,932
218
1,524
1,742
7,190
1,447
( 1,093 )
( 420 )
( 66 )
-
( 66 )
2019
$’000
333
9,161
9,494
252
1,986
2,238
7,256
3,606
( 2,815 )
( 1,058 )
( 267 )
( 7 )
( 274 )
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. INTEREST IN JOINT OPERATIONS
A controlled entity has entered into a Joint Operation. Information relating to the Joint Operation is set out below:
Joint Operation name, principal place of business and principal activities
Wollert Joint Venture (Victoria) - Land Development and Building Construction
Accounting
Interest held
2020
49%
2019
49%
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 Operation have been recognised in the Financial
Statements under the appropriate headings.
The Group’s share of the Joint Operation’s assets, liabilities, revenues and expenses are as follows:
Share of assets and liabilities
Current assets
Non-current assets
Total assets
Current Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share of revenues and expenses
Revenues
Cost of sales
Other expenses
Profit before income tax
Income tax
Profit after income tax
Total comprehensive income for the year
2020
$'000
14,935
24,714
39,649
2,889
6,136
9,025
30,624
20,826
( 13,069 )
( 1,150 )
6,607
( 1,982 )
4,625
4,625
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
Financial Statements.AVJennings Limited - Annual Report 2020 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Section D – Other information
28. CORPORATE INFORMATION
The Consolidated Financial Statements of AVJennings Limited for the year ended 30 June 2020 were authorised for issue in
accordance with a resolution of the Directors on 1 Septmeber 2020.
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 53.94% of the ordinary shares in AVJennings
Limited.
The Group (“AVJennings” or “Group”) consists of AVJennings Limited (“Company” or “Parent”) and its controlled entities.
The nature of the operations and principal activities of the Group are provided in the Directors’ Report.
29. STATEMENT OF COMPLIANCE
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).
30. 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.
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 16 Leases (refer to note 39)
and JobKeeper Payment Scheme (refer to note 40(e)) for further details.
31. 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.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. RELATED PARTY DISCLOSURES (continued)
(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
2020
Number
2019
Number
224,927,833
224,206,692
(c) Entity with significant influence over AVJennings Limited
219,112,839 ordinary shares equating to 53.94% of the total ordinary shares on issue (2019: 218,881,388 and 53.88% respectively) were
held by SC Global Developments Pte Ltd and its subsidiaries in the Parent Entity at 30 June 2020. Certain Directors of SC Global
Developments Pte Ltd are also Directors of AVJennings Limited. Details of Directors’ interests in the shares of the Parent Entity are set
out in the Directors’ Report.
(d) Parent Entity amounts receivable from and payable to controlled entities
The Group recognises an allowance for expected credit losses (ECLs) for all related party receivables. Negligible ECLs over these
amounts have been assessed as at 30 June 2020.
(e) Transactions with related parties
Entity with significant influence over the Group:
SC Global Developments Pte Ltd
Consultancy fee paid/payable
Joint Ventures:
Woodville JV
Accounting services fee received/receivable
Dividends received
Equity repatriations
Joint Operations:
Wollert JV
Management fee received/receivable
Accounting services fee received/receivable
Cusack Lane Development JV
Management fee received/receivable
Accounting services fee received/receivable
(i) Ceased to be a joint venture on 15 February 2020.
(ii) Ceased to be a joint venture on 27 June 2019.
Note
2020
$
2019
$
(i)
(ii)
580,000
600,000
-
-
-
19,500
1,389,669
1,601,719
2,513,092
50,000
4,380,854
50,000
-
-
185,282
29,167
Financial Statements.AVJennings Limited - Annual Report 2020 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. RELATED PARTY DISCLOSURES (continued)
(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 26 and 27.
(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
(h) Amounts advanced to and received from related parties
Amounts advanced
Joint Ventures and others
(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
2020
$’000
822
988
130
2020
$’000
2,090
2020
$’000
2019
$’000
1,681
1,181
150
2019
$’000
1,659
2019
$’000
2,448,879
( 3,938 )
-
34,696
2,216,088
68,835
377,106
44,747
130,007
123,496
105,650
505,326
90,846
348,775
3,220,620
3,269,893
(1)
(2)
‘Other’ represents the value of motor vehicle benefits.
Payments to Defined Contribution Plans represent Superannuation Guarantee Contribution payments.
(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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. SHARE-BASED PAYMENT PLANS
(a) Recognised share-based payment expenses
Total expenses arising from share-based payment transactions
and disclosed as part of employee benefit expenses are shown in
the table below:
Expense arising from equity-settled
share-based payment transactions
Expense reversed on forfeiture of
shares
Total expense arising from
share-based payment
transactions
2020
$’000
2019
$’000
979
1,132
( 225 )
( 402 )
754
730
The share-based payment plan is described in note 32(b).
(b) Type of share-based payment plan
LTI grants 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 with
performance conditions. The use of Performance 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 performance
The TSR measure was introduced in February 2020 to replace the
former ROE component of the Performance Rights which used
market capitalisation as a proxy for equity. The TSR hurdle will
apply to grants under the LTI from FY21 onwards. The old ROE
hurdle will apply to grants which were made in FY19 and FY20.
The comparator group is not directly comparable to AVJennings
as the Index contains non-residential property participants.
However, this comparator group was chosen as the best
approximation as the pool of directly comparable listed
developers was too small to provide a reliable and meaningful
comparator group.
Both elements of the Performance Rights (EPS and TSR, formerly
ROE) are also subject to a service condition. The recipient must
be employed by AVJennings as at 30 June of the year in which
the performance conditions of the rights are tested. The rights
only vest if both the service condition and the performance
conditions are satisfied.
The performance conditions are tested at the end of the three-
year measurement period, in the September following release of
the financial statements for that year. There is no re-testing. If the
conditions are not satisfied when they are tested, the Rights are
immediately forfeited.
The operation of the EPS, ROE and the new TSR hurdles are set
out below.
AVJennings’ EPS growth rate
over the three year performance
period
< 5%
5%
5% – 10%
>=10%
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
AVJennings’ ROE over the three
year performance period
Percentage of Rights
vesting
< 12%
12%
15%
>=18%
Nil
50% of the allocation
for the hurdle
75% of the allocation
for the hurdle
100% (Straight line
interpolation between 12%
and 18%)
50% of Performance Rights granted vest depending on
AVJennings’ average growth rate in EPS over the three financial
years of performance measurement.
This ROE hurdle was removed in February 2020 and replaced
with TSR hurdle for grants for FY21 and beyond.
50% of Performance Rights granted vest depending on
AVJennings’ TSR over the three financial years of performance
measurement against the ASX 300 Real Estate Index, a
comparator group including peers in the residential property
sector.
Financial Statements.AVJennings Limited - Annual Report 2020 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. SHARE-BASED PAYMENT PLANS (continued)
(b) Type of share-based payment plan (continued)
AVJennings TSR rank against ASX 300 RE Index at
30 September
< median
At the median
> median but < 75th percentile
> 75th percentile
Percentage vesting
Nil
50% of the allocation for the hurdle
Pro-rata between 50th and 75th percentiles
100% of the allocation for the hurdle
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%
Unvested retention rights are subject to real risk of forfeiture, for example where an Executive ceases employment for any reason.
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. Where an award is cancelled during the
vesting period other than by forfeiture for failure to satisfy the vesting conditions, it is treated as an acceleration of vesting, and the
entity recognises immediately the amount that would otherwise have been recognised for services received over the remainder of the
vesting period.
(c) Summary of rights granted
The following is the status of rights granted (both KMP and other executives) from FY17 onwards under the restructured share-based
remuneration:
Total rights
granted
Rights vested
to date
Rights forfeited
to date
Rights cancelled
to date
Unvested rights at
30 June 2020
FY2017 Grant
FY2018 Grant
FY2019 Grant
FY2020 Grant
Total
1,859,171
1,671,573
1,841,470
1,978,415
( 1,285,626 )
( 580,892 )
( 402,130 )
-
( 573,545 )
( 22,757 )
( 25,117 )
-
-
( 1,067,924 )
( 236,510 )
( 282,320 )
-
-
1,177,713
1,696,095
7,350,629
( 2,268,648 )
( 621,419 )
( 1,586,754 )
2,873,808
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. SHARE-BASED PAYMENT PLANS (continued)
(c) Summary of rights granted (continued)
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 2020 and 2019.
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
33. AUDITOR’S REMUNERATION
Fees to Ernst & Young
Fees for auditing the statutory financial report of the parent covering the Group and audting the
statutory financial reports of controlled entities
Fees for other services
Total fees to Ernst & Young
2020
Retention
2020
Performance
846,970
$0.4913
7.37
0.67 to 0.77
0.90 to 2.89
$0.56
1,131,445
$0.4505
7.37
0.67
3.09
$0.56
2019
Retention
2019
Performance
800,761
$0.5957
7.35
1.91 to 2.03
0.88 to 2.89
$0.68
1,040,709
$0.5461
7.35
2.05
3.09
$0.68
2020
$
2019
$
318,682
322,407
6,367
8,468
325,049
330,875
Financial Statements.AVJennings Limited - Annual Report 2020 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34. EARNINGS PER SHARE (EPS)
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:
Profit attributable to ordinary equity holders of the Parent
Weighted average number of ordinary shares for diluted EPS
Treasury shares
Weighted average number of ordinary shares for basic EPS
35. 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
2020
$’000
2019
$’000
9,041
16,439
2020
Number
2019
Number
406,230,728
403,146,462
-
( 762,619 )
406,230,728
402,383,843
2020
$’000
2019
$’000
69,679
232,965
69,255
232,541
6
6
6
6
174,179
174,509
5,380
53,400
232,959
4,626
53,400
232,535
-
-
-
-
The Parent Entity has not provided any guarantees other than those mentioned in notes 15(a), 15(c), 25(c) and 37.
(c) Contingent liabilities of the Parent Entity
Please refer to note 37 for details of the Parent Entity’s contingent liabilities.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36. 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
2020(1)
$’000
2019
$’000
269
92
361
350
11
361
2,259
2,003
4,262
3,822
440
4,262
(1) The new leases Accounting Standard was adopted on 1 July 2019 - refer to note 39. Accordingly, lease liabilities for the year ended 30 June 2020 have
been presented in note 16. Only liabilities in respect of short-term leases and leases of low-value assets, are presented here. The Group has applied the
recognition exemption for these leases.
37. CONTINGENCIES
Unsecured
Cross guarantees
The Parent Entity has entered into deeds of cross guarantee
in respect of the debts of certain of its controlled entities as
described in note 25(c).
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 25(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 2020 amounted to $30,377,000 (2019: $39,812,000).
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.
Secured
Banking facilities
The Parent Entity has entered into a cross deed of covenant
with various controlled entities to guarantee the obligations of
those entities in relation to the banking facilities. Details of these
entities are set out in note 25(a).
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 2020, amounted to
$15,894,000 (2019: $16,177,000). 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
2020, amounted to $1,031,000 (2019: $1,148,000). No liability is
expected to arise.
Financial Statements.AVJennings Limited - Annual Report 2020 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
The contract for the acquisition of land at 280 Bridge Inn Road Mernda, Victoria became unconditional on 24 July 2020. The purchase
price is $28.3 million and the project yield which is currently under review, is expected to be about 231 lots. A deposit of 10% was paid
as at 30 June 2020 and the balance is to be settled in May 2021.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect:
a)
b)
c)
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
39. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
The Group applied AASB 16 for the first time from 1 July 2019. The nature and effect of the changes as a result of adoption of these
new accounting standards are described below.
AASB 16 Leases: (adopted by the Group on 1 July 2019)
AASB 16 supersedes AASB 117 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-
Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard 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.
Lessor accounting under AASB 16 is substantially unchanged from that under AASB 117. Lessors will continue to classify leases as either
operating or finance leases using similar principles as in AASB 117.
The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 July 2019.
Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at
the date of initial application. The Group elected to use the recognition exemptions for lease contracts that, at the commencement
date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which
the underlying asset is of low value (‘low-value assets’).
The effect of the adoption of AASB 16 as at 1 July 2019 is as follows:
Assets
Right-of-use assets
Total adjustment on assets
Liabilities
Lease liabilities
Deferred tax liabilities
Total adjustment on liabilities
Equity
Retained earnings
Total adjustment on equity
a)
b)
c)
d)
Right of use assets recognised relating to operating leases
Lease liabilities recognised relating to operating leases
Tax effect of the difference between right of use assets and lease liabilities at adoption
The post tax effect of the adoption on opening retained earnings
Note
(a)
(b)
(c)
(d)
Increase/
(decrease)
$'000
3,524
3,524
4,118
( 178 )
3,940
( 416 )
( 416 )
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(continued)
Lease liabilities as at 1 July 2019 can be reconciled to operating
lease commitments as at 30 June 2019 as follows:
AASB 16 Leases (continued)
Upon adoption of AASB 16, the Group applied a single
recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets.
The Group recognised right-of-use assets and lease liabilities for
those leases previously classified as operating leases, except for
short-term leases and leases of low-value assets. The right-of-use
assets for most leases were recognised based on the carrying
amount as if the standard had always been applied, apart
from the use of the incremental borrowing rate at the date of
initial application. In some leases, the right-of-use assets were
recognised based on the amount equal to the lease liabilities,
adjusted for any related prepaid and accrued lease payments
previously recognised. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted
using the incremental borrowing rate at the date of initial
application. The weighted average incremental borrowing rate
applied to the lease liabilities on 1 July 2019 was 5.68%.
The Group also applied the available practical expedients
wherein it:
• Used a single discount rate to a portfolio of leases with
reasonably similar characteristics.
• Relied on its assessment of whether leases are onerous
immediately before the date of initial application.
• Applied the short-term lease exemptions to leases with
lease terms that end within 12 months at the date of initial
application.
• Excluded initial direct costs from the measurement of the
right-of-use assets at the date of initial application.
• Used hindsight in determining the lease term where the
Operating lease obligations at
30 June 2019
Recognition exemptions:
- Leases of low value assets
- Leases with remaining lease term of less
than 12 months
Cost of service type non-lease components
and other adjustments
Reasonably certain lease extensions
Sub-total
Effect of discounting
Lease liability opening balance reported
as at 1 July 2019 under AASB 16
$'000
4,262
( 387 )
( 426 )
( 166 )
1,231
4,514
( 396 )
4,118
Set out below are the new accounting policies of the Group upon
adoption of AASB 16, which have been applied from the date of
initial application:
Right-of-use assets:
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless
the Group is reasonably certain to obtain ownership of the
leased asset at the end of the lease term, the recognised right-
of-use assets are depreciated on a straight-line basis over the
shorter of its estimated useful life and the lease term. Right-of-
use assets are subject to impairment.
contract contains options to extend or terminate the lease.
Lease liabilities:
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include
fixed payments less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease
payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments
of penalties for terminating a lease, if the lease term reflects
the Group exercising the option to terminate. The variable
lease payments that do not depend on an index or a rate are
recognised as an expense in the period in which the event or
condition that triggers the payment occurs.
Financial Statements.AVJennings Limited - Annual Report 2020
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(continued)
AASB 16 Leases (continued)
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily
determinable.
After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the
lease term, a change in the in-substance fixed lease payments or
a change in the assessment to purchase the underlying asset.
Other Accounting Standards, Interpretations and
Amendments
Several other amendments and interpretations apply for the
first time in 2020, 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. The Group
is currently assessing the impact of standards which will be
effective in future years.
40. 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.
Short-term leases and leases of low-value assets:
a) Basis of consolidation
The Group applies the short-term lease recognition exemption
to its short-term leases of plant and equipment (i.e., those
leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption
to leases of office equipment that are considered of low value
(i.e., below $5,000). Lease payments on short-term leases and
leases of low-value assets are recognised as an expense on a
straight-line basis over the lease term.
Significant judgement in determining the lease term of contracts
with renewal options:
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has the option, under some of its office leases to
lease the assets for additional terms of up to three years. The
Group applies judgement in evaluating whether it is reasonably
certain to exercise the option to renew. That is, it considers
all relevant factors that create an economic incentive for it to
exercise the renewal. After the commencement date, the Group
reassesses the lease term if there is a significant event or change
in circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option to renew (e.g., a change in
business strategy).
The Group included the renewal period as part of the lease term
for leases of office space due to the significance of these assets
to its operations. The renewal options if any, for leases of plant
and equipment and motor vehicles were not included as part of
the lease term because the Group has a record of not exercising
any renewal options for such leases.
The Consolidated Financial Statements comprise the financial
statements of AVJennings Limited and its subsidiaries as at
30 June 2020. 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.
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40. OTHER ACCOUNTING POLICIES (continued)
e) JobKeeper Payment Scheme
c) 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.
The Federal Government introduced a JobKeeper Payment
Scheme to support businesses significantly affected by COVID-19
to help keep more Australians in jobs. The JobKeeper Payment
is available to eligible employers to enable them to pay their
eligible employee’s salary or wages of at least $1,500 (before tax)
per fortnight. Eligible employers are reimbursed a fixed amount
of $1,500 per fortnight for each eligible employee from 30 March
2020, for up to 13 fortnights.
Employers are required to pay eligible employees a minimum
of $1,500 (before tax) per fortnight to claim the JobKeeper
payment. This is paid to the employer in arrears each month by
the ATO. If employers do not continue to pay their employees
for each pay period, they cease to qualify for the JobKeeper
payment.
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.
The Group is eligible for this payment which has been accounted
for in accordance with AASB 120 – Accounting for Government
Grants and Disclosure of Government Assistance. A total amount
of $1,556,000 has been claimed to 30 June 2020. The credit has
been recorded as an offset against employee expenses in the
Statement of Comprehensive Income.
d) Foreign currency translation
(i) Functional and presentation currency
The Group’s functional and presentation currency is Australian
Dollars.
(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.
Financial Statements.AVJennings Limited - Annual Report 2020 93
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 2020 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 29; 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 2020.
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 25 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
1 September 2020
Peter Summers
Director
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
94
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
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
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
Independent Auditor’s Report to the Members of AVJennings Limited
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 2020, I declare to the best of my knowledge and belief, there have been:
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
Opinion
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
b) no contraventions of any applicable code of professional conduct in relation to the audit.
June 2020, I declare to the best of my knowledge and belief, there have been:
We have audited the financial report of AVJennings Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2020, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, notes to the financial
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
statements, including a summary of significant accounting policies, and the directors’ declaration.
relation to the audit; and
In our opinion, the accompanying financial report of the Group is in accordance with the
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Corporations Act 2001, including:
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020
and of its consolidated financial performance for the year ended on that date; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
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Basis for Opinion
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We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
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Financial Report section of our report. We are independent of the Group in accordance with the
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auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
1 September 2020
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
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the Code.
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1 September 2020
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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.
c) 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.
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AVJennings Limited - Annual Report 2020
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
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
95
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
1. Net realisable value (NRV) of inventories
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
Why significant
June 2020, I declare to the best of my knowledge and belief, there have been:
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
How our audit addressed the key audit matter
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
Our audit procedures focused on assessing the judgments and
assumptions made by the Group in the feasibilities underpinning the net
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
realisable value assessments.
b) no contraventions of any applicable code of professional conduct in relation to the audit.
June 2020, I declare to the best of my knowledge and belief, there have been:
Approximately 90% of the Group’s total assets
comprise inventories. Inventories are carried at the
relation to the audit; and
lower of cost and net realisable value and the directors
assess this with reference to the following:
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
Our procedures included the following:
� Capitalised costs to date
relation to the audit; and
� Forecast costs to complete
� Average historic and forecast selling price and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
accumulation
sales rate for each project
� Held discussions with Project Managers to understand the status
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
and progress of a sample of developments
� Assessed and tested the effectiveness of relevant controls over cost
� Changes to the underlying assumptions based
on the impact of changing market conditions
and changes to strategy, which includes the
COVID-19 pandemic negatively impacting the
residential real estate market in Australia.
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This was considered a key audit matter as the
assessment involves a significant degree of judgment
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and can present a range of alternative outcomes.
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1 September 2020
There is judgment involved in determining the
appropriate allocation of cost of sales recognised
upon the realisation of inventories.
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Partner
1 September 2020
Disclosure of inventories is included in Note 7 of the
financial report.
Disclosure of significant judgments is included in Note
22 of the financial report.
� Assessed the impairment methodology, project margin analysis
and feasibility models prepared by management for a sample of
developments in progress
�
Identified higher risk projects, based on our judgment, and
evaluated the assumptions adopted. In doing so, we:
� Compared the forecast sales revenue assumptions to the most
recent historical or comparable sales and external market data
� Corroborated the costs projected to signed contracts or actual
costs incurred for current or comparable projects
� Assessed contingency estimates for remaining development
risks
� 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
� Performed sensitivity analyses in relation to the key forward
looking assumptions including sales price achieved, cost per lot
and escalation rates
� Considered the impact of the market uncertainty arising from
COVID-19 on the Group’s forward looking assumptions.
�
Tested the mathematical accuracy of the feasibilities tested.
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30 June 2020
A member firm of Ernst & Young Global Limited
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AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
96
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
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
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
Information Other than the Financial Report and Auditor’s Report Thereon
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
The directors are responsible for the other information. The other information comprises the information
June 2020, I declare to the best of my knowledge and belief, there have been:
included in the Company’s 2020 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report, and we expect to obtain the remaining sections of the Annual
Report after the date of this auditor’s report.
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
b) no contraventions of any applicable code of professional conduct in relation to the audit.
June 2020, 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 conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
In connection with our audit of the financial report, our responsibility is to read the other information and,
b) no contraventions of any applicable code of professional conduct in relation to the audit.
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.
If, based on the work we have performed on the other information obtained prior to the date of this
Ernst & Young
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
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The directors of the Company are responsible for the preparation of the financial report that gives a true
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and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
1 September 2020
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
1 September 2020
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating 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.
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.
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AVJennings Limited - Annual Report 2020
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
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
97
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
June 2020, I declare to the best of my knowledge and belief, there have been:
•
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
estimates and related disclosures made by the directors.
relation to the audit; and
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
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
b) no contraventions of any applicable code of professional conduct in relation to the audit.
June 2020, I declare to the best of my knowledge and belief, there have been:
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
relation to the audit; and
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
b) no contraventions of any applicable code of professional conduct in relation to the audit.
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.
•
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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.
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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
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identify during our audit.
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1 September 2020
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, actions taken to eliminate
threats or safeguards applied.
Glenn Maris
Partner
1 September 2020
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 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.
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30 June 2020
A member firm of Ernst & Young Global Limited
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30 June 2020
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
98
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
Ernst & Young
Ernst & Young
200 George Street
200 George Street
Ernst & Young
Sydney NSW 2000 Australia
Sydney NSW 2000 Australia
200 George Street
GPO Box 2646 Sydney NSW 2001
GPO Box 2646 Sydney NSW 2001
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
Fax: +61 2 9248 5959
Tel: +61 2 9248 5555
ey.com/au
ey.com/au
Fax: +61 2 9248 5959
ey.com/au
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
Auditor’s Independence Declaration to the Directors of AVJennings
Limited
Report on the Audit of the Remuneration Report
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
June 2020, I declare to the best of my knowledge and belief, there have been:
Opinion on the Remuneration Report
Auditor’s Independence Declaration to the Directors of AVJennings
Auditor’s Independence Declaration to the Directors of AVJennings
We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2020.
Limited
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
Limited
b) no contraventions of any applicable code of professional conduct in relation to the audit.
June 2020, 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 2020, complies with
As lead auditor for the audit of the financial report of AVJennings Limited for the financial year ended 30
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
section 300A of the Corporations Act 2001.
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:
relation to the audit; and
June 2019, I declare to the best of my knowledge and belief, there have been:
Responsibilities
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
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
This declaration is in respect of AVJennings Limited and the entities it controlled during the financial year.
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Ernst & Young
Standards.
b) no contraventions of any applicable code of professional conduct in relation to the audit.
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.
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
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1 September 2020
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1 September 2020
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5 September 2019
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5 September 2019
1 September 2020
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AVJennings Limited - 32
30 June 2020
A member firm of Ernst & Young Global Limited
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A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
AVJennings Limited - 32
30 June 2020
AVJennings Limited - Annual Report 2020
Shareholder Information.
99
As at 8 September 2020.
1. NUMBER OF SHAREHOLDERS AND DISTRIBUTION OF EQUITY SECURITIES
Range of Holdings of Ordinary Shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Total number of holders
Number of holders of less than a marketable parcel
2. SUBSTANTIAL SHAREHOLDERS
As disclosed by latest notices received by the Company:
Name
SC Global Developments Pte Ltd
Australian Securities
Exchange
Singapore
Exchange
630
807
316
767
171
2,691
561
266
580
185
205
26
1,262
259
Total
896
1,387
501
972
197
3,953
820
Ordinary
Shares
219,112,839
%
53.94
AVJennings Limited - Annual Report 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 100
Shareholder Information.
As at 8 September 2020.
3. TWENTY LARGEST SHAREHOLDERS ON THE AUSTRALIAN REGISTER
Name
The Central Depository (Pte) Ltd
Brazil Farming Pty Ltd
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Gillcorp Pty Ltd
Pacific Custodians Pty Ltd AVJ Def Emp Share Trust
John E Gill Operations Pty Ltd
John E Gill Trading Pty Ltd
JP Morgan Nominees Australia Pty Ltd
Horrie Pty Ltd
Luton Pty Ltd
Jamplat Pty Ltd
Ago Pty Ltd
Dr D R M Gill and Mrs J M Gill
Mr Bradley John Newcombe
Anchorfield Pty Ltd
Di Iulio Homes Pty Ltd
Carlcorp Pty Ltd
Hillmorton Custodians Pty Ltd
Ordinary
Shares
225,231,604
16,967,100
16,923,556
14,750,135
8,608,591
6,343,003
6,021,520
5,609,105
5,598,712
5,127,973
3,747,931
3,085,853
2,500,000
2,182,342
1,958,511
1,588,565
1,500,000
1,401,472
1,368,609
1,293,054
%
55.44
4.18
4.17
3.63
2.12
1.56
1.48
1.38
1.38
1.26
0.92
0.76
0.62
0.54
0.48
0.39
0.37
0.34
0.34
0.32
Total
331,807,636
81.68
AVJennings Limited - Annual Report 2020 Shareholder Information.
As at 8 September 2020.
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
Vesmith Investments Pte Ltd
Raffles Nominees (Pte) Ltd
Pansbury Investments Pte Ltd
Citibank Nominees Singapore Pte Ltd
Hexacon Construction Pte Ltd
UOB Kay Hian Pte Ltd
Teo Chiang Long
OCBC Nominees Singapore Pte Ltd
Ng Poh Cheng
Wee Kim Choo @ Elizabeth Sam
Chng Bee Suan
Chua Hung Koon Edmond
Total
101
%
47.38
2.96
0.44
0.39
0.35
0.22
0.21
0.20
0.17
0.16
0.13
0.11
0.09
0.07
0.07
0.06
0.06
0.05
0.05
0.05
Ordinary
Shares
192,463,638
12,011,389
1,782,618
1,570,170
1,408,420
899,283
857,972
804,175
681,796
655,710
532,828
453,267
368,480
294,414
269,172
261,537
233,131
224,820
224,220
216,873
216,213,913
53.22
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 2020COMPANY OVERVIEWDIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 102
Company Particulars.
DIRECTORS
Mr Simon Cheong
Mr Jerome Rowley
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
DBS Bank Ltd
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 $0.015 for FY19 paid on
20 September 2019
Interim Dividend of $0.012 for FY20 paid on
27 March 2020
AVJennings Limited - Annual Report 2020
Building
on our past.
Shaping
your future.
Your
community
developer.