A N N U A L R E P O R T 2 0 0 7 Cedar Woods Properties Limited Level 4, 66 Kings Park Road West Perth WA 6005 P.O. Box 788 West Perth WA 6872 P (08) 9480 1500 F (08) 9480 1599 E email@cedarwoods.com.au W www.cedarwoods.com.au ABN 47 009 259 081 Contents Corporate directory A.B.N. 47 009 259 081 Directors MELBOURNE Robert Stanley Brown, MAICD, AIFS – Deputy Chairman William George Hames, BArch (Hons) MCU (Harvard) LFRAI, MPIA, FAPI (Econ) – Chairman Victoria Cedar Woods’ objective ............................................ 2 About Cedar Woods .................................................. 4 2007 highlights ............................................................ 6 Report to shareholders .............................................. 8 GEELONG PORT PHILLIP BAY Quality assets forming a diversified portfolio ........ 14 Review of operations ................................................ 16 Projects ...................................................................... 26 Corporate governance statement ........................... 31 Investors’ summary ................................................... 38 Corporate directory .......................Inside Back Cover Cedar Woods’ project locations in Western Australia and Victoria Dwane Patrick Buckland, BA (Econ), FAICD Ronald Packer, BCom (UWA), AAPI, FAICD, Solicitor Supreme Court of England & Wales Paul Stephen Sadleir, BE, MBA, AAPI, FAICD, MIE Aust – Managing Director Timothy Robert Brown, BA, LLB, M.Fin (Alternate for RS Brown) Company Secretary Paul Samuel Freedman, BSc, CA, GAICD Registered office and principal place of business Level 4, 66 Kings Park Road WEST PERTH WA 6005 Postal address: P.O. Box 788 West Perth WA 6872 Phone: Email: (08) 9480 1500 Fax: (08) 9480 1599 email@cedarwoods.com.au Website: www.cedarwoods.com.au Share registry Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St George’s Terrace PERTH WA 6000 Auditor PricewaterhouseCoopers QV1 250 St George’s Terrace PERTH WA 6000 Stock exchange listing Cedar Woods Properties Limited shares are listed on the Australian Stock Exchange Limited. ASX Code CWP Annual general meeting Venue: University Club of WA, entrance 1, off Hackett Drive, Crawley. Time: 10.00am Date: 26 October 2007 A N N U A L R E P O R T 2 0 0 7 Western Australia WANNEROO PERTH W e l l a r d ROCKINGHAM MANDURAH A N N U A L R E P O R T 2 0 0 7 Cedar Woods’ objective Cedar Woods’ primary objective is to create value for shareholders through growth in earnings. In meeting our primary objective we seek to:- • communicate the company’s progress to shareholders and the investment community; • satisfy customers’ expectations through excellence in property development; • align the interests of the company and its employees and provide employees with the opportunity of growth and development; • have our citizenship recognised by the communities in which we operate and be recognised as environmentally responsible; and • maintain the highest ethical standards. 2 A N N U A L R E P O R T 2 0 0 7 About Cedar Woods Cedar Woods Properties Limited is an Australian property development company. The company was established in 1987 and has been listed on the Australian Stock Exchange since 1994, trading under the security code ‘CWP’. Its market capitalisation is now approximately $285m. The company’s principal interests are in urban land subdivision and built form development for residential, commercial and industrial purposes. Its portfolio of assets is located in Western Australia and Victoria. The Board and management of Cedar Woods have extensive experience in the property industry with particular expertise in adding value to land holdings through the achievement of government and local authority approvals and the planning and design process. Cedar Woods has consistently generated profits and dividends for shareholders, whilst achieving excellence in product delivery as recognised by several national awards and many state awards, including the categories “Best Residential Estate” and “Environmental Excellence”. Cedar Woods’ projects are sensitively developed in consideration of environmental and community interests and built to a high quality that is renowned in the marketplace. Purchasers of the company’s land and developed products have enjoyed strong capital appreciation in their investments. Through the rapid expansion of its build form development portfolio, Cedar Woods has earned a reputation of delivering high quality apartments for both the owner- occupier and investor market. The company has a strong focus on shareholder returns and its record in delivering quality developments to the market has produced a strong earnings stream, providing high returns to shareholders. A N N U A L R E P O R T 2 0 0 7 2007 highlights • A record profit of $18.5m; • earnings per share increased 12%; • dividends per share increased 13%; • share price increased 16%; • Williams Landing achieves significant rezoning; and • the company is ready to launch 3 major projects in Melbourne. 2007 financial results summary Year ended 30 June Revenue Net profit after tax Total assets* Bank debt Net bank debt to equity - 30 June Interest cover Key shareholder information Year ended 30 June Basic earnings per share Dividends per share – fully franked Total shareholder return (1 year) Net asset backing per share Shares on issue – end of year Shareholders’ equity Stock market capitalisation at 30 June Share price 2007 90.0 18.5 155.6 64.9 89.0 7 2006 % Change 80.5 16.2 194.9 45.6 42.3 9 11.8 14.4 (20.2) 42.1 46.7 (22.2) 2007 2006 % Change 33.9 17.0 20 1.31 54.8 71.6 286.2 5.22 30.3 15.0 102 1.11 54.5 60.5 244.3 4.48 11.9 13.3 (82) 18.0 0.5 18.3 17.1 16.5 $m $m $m $m % x ¢ ¢ % $ m $m $m $ Return on equity of 26% exceeded the minimum was consolidated at that date. The company sold down acceptable return of 12% and return on capital achieved its interest in CWWL to 25% during the year and it is no of 23% exceeded the minimum benchmark of 14%. longer consolidated. Ignoring CWWL, total assets have *Total assets at 30 June 2006 included $48m in assets increased by 2.5%. owned by Cedar Woods Wellard Limited (CWWL) which A N N U A L R E P O R T 2 0 0 7 7 Report to shareholders 2007 annual result In 2007 Cedar Woods delivered a record profit of $18.5m. 2007 was another record year, with strong growth in profits and dividends. The company’s expansion and diversification of the property portfolio continued, with revenue growing to a record $90m, as new projects came on stream. Earnings per share growth exceeded the company’s target of 10% pa, increasing 12% to 33.9 cents, and a further 0.5 cents per share was realised from the asset revaluation reserve. Receipts from customers was a record of $99m which enabled the company to reinvest $76m in the purchase of new land and development of its projects. Gearing (net bank debt to equity) at 30 June 2007 was 89%, above the preferred range of 20-75% due to the impact of a number of built form projects. Interest cover (EBIT divided by interest expense) was 7, above the minimum target of 6. Strong share price gains continued in 2007, with the price appreciating 16%, reflecting buoyant times in Western Australia and market confidence in the company’s prospects. 2007 AIFRS 200 AIFRS 200 AGAAP 200 AGAAP 200 AGAAP 17.0 15.0 12.0 10.0 7.0 14.5 7,135 36,412 33.9 30.3 18,553 90,008 16,208 80,520 23.3 12,400 75,130 20.2 10,253 57,189 Dividend per share (cents) Earnings per share (cents) Net profit after tax ($’000) Revenue ($’000) 5 year comparison based on reported results Capital management and the 2007 dividend During the year the Dividend Reinvestment Plan (DRP) continued in operation. 268,711 shares were issued under the plan which provides shareholders the opportunity to acquire forecast growth of 3.75% for the Australian economy. State governments in WA and Victoria have forecast growth of 4.5% and 3.25% respectively. Population growth, strong immigration and employment growth generated by the resources boom are all underpinning housing demand. new shares at a 2.5% discount to the prevailing market price, The level of home starts in WA is expected to decrease in free of brokerage. The directors have declared a fully franked final dividend of 10 cents, bringing the full year pay out to 17 cents (15 cents in 2006) to be paid on 19 October 2007. Due to the company’s current expansion programme, the DRP will continue to operate for the foreseeable future. The housing sector and the economy FY2008 as the housing industry continues to compete with the resources and infrastructure sectors for labour. The level of demand is expected to be above the level of supply, providing support for prices despite the recent cooling in the market. In Victoria, housing starts in FY2008 are expected to be at a similar level to FY2007, but then increase sharply in FY2009 as the housing market enters a growth phase . After experiencing boom conditions over the last 3-4 years, The Australian economy continued growing in FY 2007 with growth in WA property has moderated in the first half of GDP increasing approximately 2.5% and in WA growth was 2007 as affordability of housing has become historically low. approximately 6%. In Victoria, price growth is expected to improve in line with Economic growth prospects for FY2008 remain strong, with stronger economic growth. A N N U A L R E P O R T 2 0 0 7 Report to shareholders Projects After a very bouyant first half, demand returned to more sustainable levels in the second half at the company’s residential estates, and development of new stages The company’s strategies are directed at delivery of earnings growth and in particular addressing key risk factors. Key strategy areas in the Corporate Plan were endorsed by the Board and are as follows: were completed at Mariners Cove, The Rivergums and • Ongoing development of existing projects. The Kestrels. The company’s core competency is in property At Rockingham, the first stage of the Nautilus Apartments development and the company continues to ensure project was successfully completed and significant design, delivery and marketing to maximise the return progress was achieved at Waterline Apartments and The the company receives. Fairways in Mandurah. • Diversification of the property portfolio. Details of progress at the projects commence on page 26. The company has entered into options or similar Corporate objectives and strategy The Corporate Plan guides the management team’s activities and once again was reviewed at a special board agreements for several exciting new projects in Western Australia and continues to seek ways to diversify and grow its portfolio. meeting which endorsed the plan’s key objectives and • Identification and acquisition of new projects. strategies. The plan provides a 5 year outlook for the In recent years the company has supplemented its company, projecting earnings growth and other key land bank with key acquisitions in WA and Victoria. performance indicators under various scenarios. These additions will contribute to earnings growth for We also undertook benchmarking against peer companies the next five years. as well as the listed industrial market. The focus remains on longer term prospects that often Consistent delivery of 10% pa growth in earnings per provide the potential to add greater value through share places a company in the upper half of listed rezoning and approvals than projects purchased for industrial companies and this target has been retained as immediate development. the company’s primary objective. • Using joint ventures and syndicates to leverage the In pursuit of this objective, there are a number of key company’s skill base. action items in the Corporate Plan that are adopted as The company is undertaking one joint venture and performance targets by senior executives, sales managers in 2006 established its first wholesale syndicate in and other employees. Perth, Cedar Woods Wellard Limited. The syndicate is Twice yearly our Audit and Risk Management committee progressing well and is expected to provide a steady assesses risk factors that may affect the company. In stream of management fees over a 5-8 year period. addition to specific risks affecting individual projects, The company expects to add additional syndicates in there are general risks affecting our business sector: due course. • changes in the level of demand in the property market; • Retaining ownership of income producing assets. • increases in interest rates; The company has started to build up a portfolio • reduction in Government support for the housing sector; of income producing assets that will provide a • increased construction costs for both land subdivision and buildings; and • increased competition and reducing affordability. recurring income stream. This portfolio is likely to be expanded with assets that the company will develop at Williams Landing and at other estates where sites are designated for commercial or retail buildings. 0 Triple bottom line objectives and reporting related sustainability initiatives will be consolidated into a Sustainability Report to be released in 2008. Last year we outlined our commitment to develop a The development of Sustainability-ART has led to the Sustainability or Triple bottom line assessment and reporting formulation of a comprehensive set of objectives which are framework to increase the uptake of sustainability initiatives now being used to set Triple bottom line strategic goals and in our projects and to monitor and measure our achievements headline indicators to measure performance on a project in creating sustainable vibrant communities. In fulfilment basis. These objectives also provide a framework for reporting of this commitment, we developed Sustainability-ART on a broader corporate basis. (Assessment and Reporting Tool) as a means of integrating In this report, headline environmental and community sustainability considerations into the whole life cycle of our development objectives combine with financial reporting to projects. An overview of Sustainability-ART, its objectives, provide Triple bottom line report cards. These are set out in criteria, methodology, outcomes achieved to date and the Review of Operations. A N N U A L R E P O R T 2 0 0 7 Report to shareholders People Outlook The company’s management team has been expanded This will be an exciting year for the company as it to provide a platform for future growth in the Perth and progresses its expansion in Melbourne and commences Melbourne offices. development at Williams Landing and its other two Continued emphasis was placed on broadening the Melbourne projects. company’s skill base through management and staff The company’s project portfolio has been expanded development. in recent years and with most approvals in place, the The company also supports various industry groups, company is well positioned to develop its projects to such as the Property Education Foundation of WA which meet future demand. focuses on improving the skill base of property The company remains focused on its primary objective of professionals on which the company relies. The company growth in earnings and has managed the project portfolio helps the Foundation in attracting graduate level to enable it to deliver consistent earnings growth into candidates to the development industry by participating the future. As a result, the company is able to be highly in the annual internship program. selective in making further acquisitions. Corporate governance and Board composition The Board aspires to the highest level of corporate governance and has ensured its governance principles and practice reflect the ASX requirements and are appropriate for the company and the business environment in which it operates. We were pleased to have Mr Ronald Packer join the Board as an independent non-executive director in June 2006. His experience with ASX listed entities, together with his With the successful first wholesale syndicate completed last year, the company is optimistic that further new syndicates will be added in the next 12 months. For FY2008 the company is forecasting continued growth in net profit and expects to meet its target of 10% growth in earnings per share and deliver a net profit of approximately $20m, with the majority of this profit expected to be delivered in the second half. We would like to thank our fellow directors and the management team for their dedication over the past year, in-depth property knowledge have made him a valuable and all shareholders for their support. addition to the Board. In October 2007 Mr Dwane Buckland will retire from the Board after 13 years of service as an independent director and as Chairman of various board commitees for most of that period. Our thanks and appreciation goes to Dwane and we wish him and his wife Lois a happy retirement. The Board is conscious of its duty to ensure the company meets its performance objectives. During the year the Board and its committees reviewed their respective charters and performance to ensure they were properly discharging their responsibilities. You will find a detailed corporate governance statement commencing on page 31. 2 W G HAMES CHAIRMAN P S SADLEIR MANAGING DIRECTOR A N N U A L R E P O R T 2 0 0 7 Quality assets forming a diversified portfolio State Purchased Developable Area (ha) Remaining Life (Years) Attributes 2007 Achievements Growth Opportunities Waterfront residential land - Mariners Cove, Mandurah WA 1993 - Port Mandurah (Sutton precinct) WA 1990 103 2.1 Residential smart growth - The Rivergums, Baldivis WA 2001 114.5 - The Kestrels, Tapping WA 2003 - Helena Valley Private Estate WA 2005 - Forrestdale WA 2005 - Wellard (25% owned) WA 2006 50 8 15 47 Mixed use/mixed density 5 2 8 5 2 2 Limited availability Successful launch of ‘The Landings’ Series of waterfront homes and other high waterfront homes density development. Waterfront appeal Progressed plans for development Medium density housing Established estate in southern growth corridor Established estate in northern growth corridor. Recognition of GreenSmart Initiatives Built form product. Neighbourhood shopping centre. City of Wanneroo Environmental Excellence Award Medium density housing Urban growth hot spot Approvals in place Niche foothills market Medium term project Planning progressed for development. Located in growth area 5-7 Syndicate established Progressed MRS rezoning of property. Southern growth corridor - Williams Landing, Laverton VIC 1998 220 15 Multi segment appeal Rezoning achieved. Leasehold and built form opportunities - Banbury Village, Footscray VIC 2006 - Carlingford, Lalor VIC 2006 - Cambridge Waters, Canning Vale WA 2002 Built form - Nautilus, Rockingham WA 2003 - Waterline, Halls Head WA 2005 - The Fairways, Mandurah Country Club WA 2005 - The Jetty, Palm Beach WA 2005 9 56 8.3 0.5 0.5 0.9 0.2 5 7 2-3 1 2 1 1 Remediated industrial site Strategic northern suburb site South east growth corridor Achieved rezoning for residential development Built form product Progressed rezoning Medium density development Launched second stage. Apartments. Prime waterfront village location Stage 1 completed. Stage 2 sold out and under construction. Leasing of retail units has commenced. Prime waterfront location Cashed up “baby boomer” purchasers Property under construction 30% presold. Stage 2 short stay units 80% presold. Niche golf market Waterfront location Planning progressed. Leasehold opportunity State Purchased Developable Area (ha) Remaining Life (Years) Attributes 2007 Achievements Growth Opportunities Waterfront residential land - Mariners Cove, Mandurah WA 1993 Limited availability Successful launch of ‘The Landings’ waterfront homes Series of waterfront homes and other high density development. - Port Mandurah (Sutton precinct) WA 1990 Waterfront appeal Progressed plans for development Medium density housing Residential smart growth - The Rivergums, Baldivis WA 2001 114.5 - The Kestrels, Tapping WA 2003 Established estate in southern growth corridor Established estate in northern growth corridor. Recognition of GreenSmart Initiatives Built form product. Neighbourhood shopping centre. City of Wanneroo Environmental Excellence Award Medium density housing - Helena Valley Private Estate WA 2005 Urban growth hot spot Approvals in place Niche foothills market - Forrestdale WA 2005 Medium term project Planning progressed for development. Located in growth area - Wellard (25% owned) WA 2006 5-7 Syndicate established Progressed MRS rezoning of property. Southern growth corridor Mixed use/mixed density Built form - Williams Landing, Laverton VIC 1998 220 15 Multi segment appeal Rezoning achieved. Leasehold and built form opportunities - Banbury Village, Footscray VIC 2006 Achieved rezoning for residential development Built form product - Carlingford, Lalor VIC 2006 Progressed rezoning Medium density development - Cambridge Waters, Canning Vale WA 2002 Launched second stage. Apartments. Remediated industrial site Strategic northern suburb site 2-3 South east growth corridor - Nautilus, Rockingham WA 2003 Prime waterfront village location Stage 1 completed. Stage 2 sold out and under construction. Leasing of retail units has commenced. - Waterline, Halls Head WA 2005 Prime waterfront location Property under construction 30% presold. Stage 2 short stay units - The Fairways, Mandurah Country Club WA 2005 80% presold. Niche golf market Cashed up “baby boomer” purchasers - The Jetty, Palm Beach WA 2005 Waterfront location Planning progressed. Leasehold opportunity 103 2.1 50 8 15 47 9 56 8.3 0.5 0.5 0.9 0.2 5 2 8 5 2 2 5 7 1 2 1 1 A N N U A L R E P O R T 2 0 0 7 Review of operations Pursuant to our initiative to introduce Triple bottom line reporting for our shareholders, the review of operations now incorporates a financial report, environmental performance report and community development report. Financial report Triple bottom line report card Financial objectives Earnings objective: Outcomes • To achieve annual growth in earnings per share of 10%. • The company achieved earnings per share growth of 12% during the 2007 financial year. Return on equity objective: • To achieve a minimum return on equity of 12% per • The company achieved return on equity of 26% during annum. Return on capital objective: the 2007 financial year. • To achieve a minimum return on capital of 14% per • The company achieved return on capital of 23% during annum. the 2007 financial year. Net bank debt to equity objective: • To maintain net bank debt to equity within the preferred range of 20-75%. • Whilst the company’s debt to equity fluctuated during the year, at 30 June 2007 the ratio was 89%, above the preferred range, due to the impact of built form projects (see below). Interest cover objective: • To achieve interest cover at a minimum level of 6 times. • Interest cover of 7 times was achieved during the year. Financial reporting objective: • To communicate the company’s progress to • The company was awarded a Silver Award for its 2006 shareholders and the investment community. Annual Report by the Australasian Reporting Awards Inc. Our growth orientated strategy resulted in: • 14% increase in net profit after tax to $18.5m; • 12% increase in earnings per share to 33.9 cents; • 18% increase in shareholders equity to $71.6m Revenue ($m) EBIT ($m) NPAT ($m) (excluding minority interest in 2006); and Earnings per share (cents) First half Second half 63.5 22.4 13.8 25.3 26.5 8.9 4.8 8.6 • 18% increase in Net Tangible Assets per share to $1.31. Benchmarked to its primary objective, the company exceeded its earnings growth target of 10% by delivering earnings per share growth of 12%. Net bank debt to equity was high as a result of the impact of several built form projects under way at that time, due for completion in FY2008. Debt finance for built form projects is typically arranged on a low or non-recourse The result in the first half of the financial year was stronger basis to the parent entity and secured over a high level than the second half, due to a larger number of settlements of pre-sales in the underlying project. As the company occurring in the first half of the year. In summary, the moves forward, built form projects will continue to be a results of the two half years were as follows: prominent feature of the company’s operations and the company is likely to continue to see debt to equity around the Reference should be made to the financial performance top end of the company’s target range. Based on the value of summary on page 44 of this annual report which tables the company’s underlying property portfolio and the high level financial performance of the company over the last 5 financial of interest cover, the company is comfortably able to service years. Commentary on the performance of the individual its borrowings. projects in the company’s portfolio is set out on pages 26 to 30 of this report. A N N U A L R E P O R T 2 0 0 7 7 Review of operations Cash flows at a glance Interest rates and foreign exchange A detailed cash flow statement is provided on page During the 2007 financial year the Reserve Bank increased 21 of the financial statements. A simplified summary of official interest rates by 0.5%. This was followed up by the major inflows and outflows is provided below with a further 0.25% rise in August 2007. The company has comparatives for the previous financial year. a low exposure to the ‘first home buyer’ market and $m Inflows Receipts from customers Proceeds from share issue Proceeds from share issue to minorities by subsidiary Net funds raised from financiers Outflows Payments to suppliers and employees Payments for new land and development expenditure Net borrowing costs Taxes paid Dividends paid to shareholders Cash outflow arising from part sale of Cedar Woods Wellard Limited resulting in surrender of control of subsidiary. Net change in cash FY2007 FY2006 hence was not unduly affected by the rate increases. 99 - - 19 118 27 76 6 7 7 11 134 (16) 88 5 8 7 108 19 53 4 6 9 - 91 17 Despite these moderate increases, the company anticipates that overall demand in the market will remain steady into FY2008. The company has put in place strategies to manage risk associated with interest rate increases over the next 5 years. The company’s activities are wholly conducted within Australia and hence the impact of foreign exchange fluctuations is minimal. Business risks and competition Business risk is addressed during the preparation of the 5 year Corporate Plan, and as part of the company’s risk management program. An integral part of the company’s procedures for the acquisition of new projects and the release of new product for sale in existing projects is careful analysis of prevailing economic and market conditions. The timing and pricing of new releases is carefully considered in the context of existing and foreseen competition. Annual reporting award The company increased operating inflows from its The company received a Silver Award from the Australasian customers by 12% as a response to increased revenue. Reporting Awards Inc. in recognition of the high quality of reporting in its 2006 Annual Report. This is the third consecutive year the company has received this award. A substantial investment was made in new land and development. This included over $40m in new land and over $35m in development expenditure on projects which will contribute to earnings in FY2008 onwards. Funds were raised from financiers to assist with financing the acquisitions. The company made tax payments of $7m and paid shareholders’ dividends of $7m. The company sold down its interest in Cedar Woods Wellard Limited from 50% to 25% and hence the net assets of CWWL, including cash on hand, were deconsolidated. Environmental performance report Triple bottom line report card Corporate objective Outcomes To be recognised as environmentally responsible. • Recognised through the receipt of two environment based Project ‘sustainable community’ objectives Environmental enhancement Objective: Actively seek to remediate, protect and enhance areas of environmental significance and protect biodiversity. Green estates & buildings Objective: Provide for resource efficient, comfortable and healthy buildings through energy efficient lot orientation and building controls. Urban water management Objective: Manage the total water cycle in a manner that promotes efficiency and preserves ecosystem health, reduces demand on potable water and improves ‘at source’ protection of water quality. Waste minimisation & recycling industry awards and nominated as ‘highly commended’ for water sensitive urban design. • Active foreshore protection, rehabilitation and management. • Protection of native vegetation. • Remediation of contaminated sites. • Maximised solar orientation of lots. • Promotion of passive solar home design through estate design guidelines. • Application of water sensitive urban design in all land subdivision projects. • Recognition of best practice in storm water management through the ‘snake’ drain initiative at Mariners Cove. • The company requires all building companies to submit a Objective: Reduce the amount of waste sent to landfill and waste management plan which requires waste materials promote efficient use of resources. being sent to a recycling facility. A headline achievement this year is the recognition the • retention of native and existing trees and vegetation; company received for its long term commitment to the • water conservation through water sensitive urban design Housing Industry Association (HIA) GreenSmart Code of principles and design guidelines for home owners; and Practice, which has been applied at The Rivergums, The Kestrels and Mariners Cove. This commitment was first recognised in 2003 when Mariners Cove won the inaugural HIA GreenSmart Development of the Year. This year the company was recognised for the collaborative partnerships it has formed over the years with state government agencies, local government, building companies and other project contractors, including landscapers and horticulturists, in its on-going commitment to GreenSmart. HIA GreenSmart involves implementing best practice in the areas of: • stormwater and nutrient management of runoff. Another significant achievement was The Kestrels taking out the 2006 City of Wanneroo Environmental Excellence Award. The Kestrels stood out from its competitors through site responsive innovation in the areas of environmental rehabilitation, vegetation protection through the strategic placement of open space and the relocation of native plant species, low water use landscaping and irrigation techniques, sustainable stormwater management achieving wetland and ecosystem enhancement through groundwater recharge, energy efficient lot and home building requirements and • energy efficiency through good solar orientation of lots and community education. The company has also committed to encouraging purchasers to build solar passive design homes construct an affordable, sustainable demonstration home, in through the use of design guidelines and incentives; partnership with the City of Wanneroo, at The Kestrels. • waste minimisation and recycling of waste material from site; A N N U A L R E P O R T 2 0 0 7 Review of operations The company was recognised for excellence in water management at the 2006 inaugural Water Awards. The joint Cedar Woods and City of Mandurah Snake Drain at Mariners Cove was ‘Highly Commended’ in the local government category and was a finalist in the Water Conservation and Efficiency category. Other environmental initiatives over the year include: • foreshore rehabilitation and management at Mariners Cove, where on-going management responsibilities for the Creery Wetlands have now been handed over to the Department of Environment and Conservation; • creation of a conservation management plan for the grasslands at Williams Landing, which provides for the salvage of local species prior to development and maintenance of reserves previously established by the company; and • remediation of a former industrial site in Footscray, Melbourne which will permit the future development of a landmark high density residential project. Our track record and growing identity as an ‘Award Winning Developer’ continues to be reinforced as our list of awards continues to grow. 2007 Cedar Woods HIA (WA) GreenSmart Partnership Award 2006 Mariners Cove WA Water Award: Highly Commended (Snake Drain) 2006 The Kestrels City of Wanneroo Environmental Excellence Award 2005 Mariners Cove UDIA National Best Residential Development 250 or More Lots Award 2004 Mariners Cove UDIA (WA) Best Residential Development 250 or More Lots Award 2004 Mariners Cove – The Islands Landscape, Design and Irrigation Excellence Award (Best parks, Recreational Areas and POS category) 2003 Mariners Cove HIA Inaugural GreenSmart Development of the Year 2003 Mariners Cove UDIA National Environmental Excellence Award 2002 Mariners Cove UDIA (WA) Environmental Excellence Award 2000 Leeward Port Mandurah UDIA National Best Residential Development under 250 Lots Award 1999 Port Mandurah Stage 3 UDIA (WA) Best Residential Development under 250 Lots Award 1997 Port Mandurah Stage 2 Civil Contractors’ Association – Case Earth Award 1997 Port Mandurah Stage 2 UDIA National President’s Award 1996 Port Mandurah Canals UDIA (WA) - Best Residential Development under 250 Lots Award 2 0 Community development report Triple bottom line report card Project ‘sustainable community’ objectives Outcomes Community development • Construction and sale of Charity Home to raise funds for Objective: To engage with existing and activate new the Paediatric Unit at the Peel Health Campus. communities by providing facilities, services and initiatives • Fundraising for Murdoch Community Hospice. which promote community cohesion, contribute to the local • On-going sponsorship of community events in all economy and provide opportunities for people to meet project areas. and gather. Cedar Woods recognises the important role it plays in Some of our 2007 initiatives are highlighted below. Community Development, which we define as being made • In conjunction with the Peel Health Foundation, Cedar up of community engagement and community activation. Woods sponsored the construction of a Charity Home Engagement is what we do to reach out and be responsive to in Mariners Cove. The beautiful 4 bedroom, 2 bathroom the needs and aspirations of existing communities affected home, constructed by Pindan, was completed in May by our projects and the partnerships we develop to bring 2007 and was recently sold, raising over $250,000 for the benefits to the broader community. Activation reflects what Foundation. Funds raised will go towards a specialised we do to foster the development of vibrant new communities Paediatric Unit at Peel Health Campus to ensure all within our project areas and to integrate new residents into children will receive excellent treatment in a facility existing social networks. designed specifically for children. A N N U A L R E P O R T 2 0 0 7 2 Review of operations Peel Health Campus Charity Home at Mariners Cove. • 2007 saw the seventh year of Cedar Woods being involved with the City of Mandurah Crab Fest, as the major sponsor of the Red Hot Strings concert, providing patrons with a new look at classical music. Our association with this fine performing arts centre goes back to its inception as Cedar Woods was a major donor towards the funding of the centre’s construction. • Cedar Woods again sponsored the 2007 Musselfest Research, development, technology and new innovations The company considers itself a leader in market research and embracing new technology within its developments. From the highest standards of canal and civil construction to leading edge apartment construction, all of which services a market which has an increasing expectation that it will be offered the latest in environmentally-friendly, energy-efficient, leading edge technology. in support of Tourism Rockingham, which saw an estimated 40,000 people attend over the weekend of Technology in the home 21 and 22 April. • Cedar Woods was again proud to be a supporter of the Peter Evans Memorial Golf Day to raise money for the Murdoch Community Hospice. A total of $22,000 was raised to go towards the only stand alone Palliative Care community facility in Western Australia. ‘E-Wire’ technology continues to be implemented at Mariners Cove, Port Mandurah and The Kestrels to ‘future- proof’ these estates. E-Wire is a reticulated underground communications system which provides high speed broadband internet and television services. It also has capacity to provide telephone and video on demand. • In support of the local Baldivis community, Cedar Affordable housing Woods is proud to sponsor the Baldivis Children’s Housing affordability declined to a historical low in Forest where students of nearby Baldivis Primary Western Australia, a result of three consecutive years of School and Tranby College have planted more than strong property price growth. In response, the company 10,000 native trees on the site. researched a number of small lot housing products which • Within the Wanneroo district, Cedar Woods optimise lot size and home cost efficiencies to produce contributed to many community initiatives including more affordable house and land packages, without the City Of Wanneroo Golf Day, sponsorship of the diminishing project profitability. On Stage Performing Arts Competition. 2 2 Cedar Woods joined forces with HomeStart to offer the ‘Y- Victoria Rent’ house and land package specifically for first home The growth of metropolitan Melbourne is guided by buyers at The Rivergums in April 2007. The ‘Y-Rent’ package is ‘Melbourne 2030’. The main thrust of the policy is to continue comprised of houses of 3 or 4 bedrooms with 2 bathrooms and to protect the liveability of the established areas and to double lock up garages, floor coverings, window treatments, increasingly concentrate major new development in strategic boundary fencing and front landscaping on 300m2 lots at development sites, such as in and around activity centres. prices around $300,000. Purchasers had to be eligible for the Key elements of Melbourne 2030 include the establishment First Home Owners Grant, meet specified income criteria and of an urban growth boundary, concentrating urban expansion had to build an approved home with Homestart. All available to strategic outer growth areas, promoting consolidation house and land packages sold in the first weekend. of existing urban areas and facilitating efficient public Sustainable homes transport between activity centres to reduce reliance on In response to the growing government push for improved motor vehicles. Melbourne 2030 actively promotes the household savings in water and energy consumption, the development of the company’s Williams Landing site in the company has researched latest initiatives in energy efficient lot fulfilment of its objectives. orientation, housing design, use of energy and water saving devices and appliances and use of government concessions and rebates, to deliver an integrated best practice response. This work adds to our range of tools for creating green buildings and estates. Impact of government policies Western Australia The State Government held a land summit in mid 2006 to respond to the residential land supply crisis which resulted from rapid increases in demand arising from Western Australia’s strong economic growth. Outcomes of the summit saw the appointment of a ‘Land Release Co-ordinator’ to fast-track existing land subdivision proposals and to make recommendations for on-going improvements to the subdivision process and to identify and address other delays in releasing land to the market. The company met with the Land Release Coordinator and identified a number of regulatory issues to be addressed. The Western Australian Planning Commission prepared a draft policy to regulate the orientation of new residential lots to improve the opportunities for designing passive solar homes. The company is already a strong performer in providing lots with good solar orientation, required under HIA GreenSmart, and participated in various workshops to influence the development of this new policy initiative. A N N U A L R E P O R T 2 0 0 7 2 Review of operations Organisation structure Board of Directors William G Hames - Chair Robert S Brown - Deputy Dwane P Buckland Ronald Packer Paul S Sadleir Managing Director Paul Sadleir Human Resources & Renumeration Committee Audit & Risk Management Committee Ronald Packer - Chair Ronald Packer - Chair Robert S Brown Dwane P Buckland Dwane P Buckland Robert S Brown Nominations Committee Ronald Packer - Chair Dwane P Buckland William G Hames Robert S Brown Chief Financial Officer/Company Secretary WA General Manager Victorian State Manager Perth Accounting/ Perth Victorian Administration Development Development Staff Staff Staff Personnel issues People The company has continued to develop policies and programs during the year that seek to enhance the productiveness, education, safety and fulfilment of employees. The company seeks to provide appropriate training and development programs for its employees which are of benefit to the company. The company participates in a number of property industry related training programs including the HIA GreenSmart Training and Accreditation course. The company assists a number of staff with tertiary employment activities leading to degree qualifications and is an accredited employer with the Institute of Chartered Accountants in Australia for the CA Program. and residents as paramount to its operations. Health and safety plans for safe working environments for these stakeholders have been implemented in accordance with occupational health and safety regulations. As a property developer where large, heavy machinery is used by contractors on its various sites, safety is always a priority. To date the company has not had any significant safety incidents on any of its sites and is continually reviewing its contractors’ methodology to ensure that the possibility for such an incident is minimised. A risk assessment and appropriate management plan for each site is prepared prior to any works being carried out. The company has implemented Occupational Health and Safety policies and procedures which it requires its staff, its consultants and contractors to adhere to. These measures have minimised on site accidents and lost time The company holds safety for its employees, contractors from injuries. 2 The company has established a Code of Conduct which must be observed by all employees. The overriding principles contained in the Code of Conduct are that all employees, including Directors, shall: • conduct their duties fairly and honestly; • treat other stakeholders fairly and without discrimination; • conduct business on an arms length basis free of any influences which are inconsistent with the company’s objectives; • conduct themselves in accordance with the law, the listing rules of the Australian Stock Exchange, the company Constitution, local by-laws and other relevant rules or obligations imposed by organisations which govern the markets or jurisdictions in which the company operates; • strive to the highest possible levels of personal conduct; and • maintain a safe working environment. Selection of employees is made such that no discrimination will be made on the basis of ethnicity, religion, gender or age. Salaries for employees are benchmarked to the relevant market and independent reviews held regularly. Employees may select any complying superannuation fund for the purpose of the Superannuation Guarantee Scheme. Certain employees are invited to participate in the employee share plan. For details of the plan please refer to note 37 of the financial statements. The company has a range of processes in place relating to performance evaluation of employees. The annual per- formance planning and review of employees involves each employee being evaluated by the Managing Director (or in the case of the Managing Director, the Board). The employee’s performance is evaluated against objectives that were set at the commencement of the year. Periodic reviews are held during the year to assess progress and a final review is performed at the completion of the year. A N N U A L R E P O R T 2 0 0 7 2 Projects Western Australia – land development Mariners Cove, Mandurah Mariners Cove is a unique waterfront development located just minutes from the centre of Mandurah comprising of a mix of superb canal lots with their own water frontage, traditional parkland lots and estuary view lots. Mariners Cove also boasts a spectacular 230-acre wildlife reserve complete with raised walkways, bird hides as well as interpretive signage to educate the community. This reserve protects the Creery Wetlands, an internationally recognised waterbird habitat that is home to migrating birds from around the world. The upon market demand, further stages will commence later in the year with up to 20 townhouses developed for settlement in the 2009 Financial Year. If successful, two further townhouse developments of similar size will be developed in future island stages. The last parkland stage in Mariners Cove, Stage 10, saw the release of 70 lots in early 2007 and the remainder of these are expected to sell in the 2008 Financial Year. In all, 550 parkland lots will then have been created and sold at Mariners Cove, and a thriving community has now been established. Sutton Heritage site, Port Mandurah With integration of the original farm buildings, which have been restored as part of an initiative between Cedar Woods and the Heritage Council, Cedar Woods anticipates the creation of a medium density residential waterfront development on the historic Sutton Heritage site at Port Mandurah. Plans continue to be progressed for this widely anticipated development with marketing of the first units expected in late 2008. company undertook significant revegetation of this area The Rivergums, Baldivis over the past seven years. More information is available at www.creerywetlands.info. Booming market conditions in the first half of the financial year continued to provide demand for the premium canal lots at Mariners Islands. The third island stage, Stage 5CA, was completed during the year and approximately half of the canal lots in this stage have now been sold. ‘The Landings’ is Cedar Woods first luxury townhouse development on The Islands with the release of 8 The Rivergums is located 40 minutes south of Perth townhouses going to market in May. The Landings CBD and is only ten minutes away from the beaches in will set a new benchmark for waterside living with Rockingham. canal-front views, incorporating style and intelligent design with luxurious interiors, designed by architects Donaldson & Warn. The development is one of the first HIA GreenSmart Accredited estates in Western Australia. The orientation of the lots has been carefully designed to optimize the Construction has now commenced and will take ease for project homebuilders to design passive solar approximately 15 months to complete. Dependent homes with the minimum of change needed. To date all 2 lots have been created so that they are either east-west or Future stages in the estate will be increasingly elevated and north-south orientation. provide the potential for views of the Joondalup townsite and Central to the development of The Rivergums is a network Lake Joondalup. Cambridge Waters, Canning Vale of lakes, wetlands, and beautiful landscaped parks and a harmonious community environment. The company has embarked upon the revegetation of the adjoining Tramway reserve as well as a wetland which were both significantly degraded before the development commenced in 2003. Since then these areas have improved substantially and now provide important habitat for wildlife. With over 450 lots sold in The Rivergums estate since its launch in 2002, the estate has matured into a thriving residential community. Early in the year the company completed the acquisition of a parcel of land to the south of the estate which The company’s Cambridge Waters mixed density residential will provide a further 125 lots and it is anticipated that this land project at Canning Vale in Perth’s inner south eastern will soon be under development to provide a further entry suburbs aims to provide a wider choice of lifestyles for the point from Baldivis Road and access to additional stages. maturing Canning Vale community. With the first two stages Further stages in this estate are likely to include a community shopping village, high density residential development, lake side townhouses and rural lifestyle lots. of residential lots almost sold out, the company will consider a further release of lots in this popular estate. Plans for high density development will be considered over the coming year, as an alternative to a final residential lot stage. The Kestrels, Tapping P r i v a t e E s t a t e . T a p p i n g . New projects arriving soon Helena Valley Private Estate This development, another HIA GreenSmart estate, focuses around the existing prominent bird life in the area. Maximizing parkland space and introducing extra trees to assist in The long awaited expansion of the highly successful Helena fostering an attractive environment for the many bird species, Valley Private Estate is expected to be marketed during the the development recently won the 2006 City of Wanneroo 2008 financial year. With subdivision approvals now in place, Environmental Excellence Award. The Kestrels estate now this estate is expected to contribute to earnings in FY2009 contains over 100 homes and during the summer hosted and beyond. its inaugural residents’ event which themed environmental protection and attracted over 150 residents and guests. A N N U A L R E P O R T 2 0 0 7 2 7 Projects Wellard moved in to their new homes in December 2006. Each apartment offers residents access to the private pool, Cedar Woods Wellard Limited, an investment syndicate a private gym and undercover parking, all within easy managed by Cedar Woods, owns 47 hectares of land in access to the beach. the suburb of Wellard. The land, adjacent to the Kwinana Freeway some 33 kilometres south of Perth, is zoned urban. Subdivision approval for Stage 1 will follow the structure plan process and should be finalized by late 2007. The program is on target for development of the first stage of the project in early 2008. Nautilus 2, comprising a further 24 apartments nestled immediately behind Nautilus Stage 1 is well underway with all apartments sold in this stage. Stage 2 is expected to be completed by the end of 2007, completing this highly successful development. Nautilus has set the benchmark for high-rise property in the Rockingham Forrestdale and Pinjarra beachfront locality. The company’s landholdings in Forrestdale and Pinjarra in Perth’s south east corridor provide prospects for the medium to longer term. The Forrestdale land lies proximate to land under development by other developers Also included in the project are 4 commercial tenancies on the ground floor. Nautilus Apartments, and the company’s predecessor development, Aria Apartments have provided a stimulus for the rejuvenation of the Rockingham beach foreshore and boldly promoted modern apartment living and will soon be ready for development, whereas the in this beautiful beachside locality. Pinjarra land requires considerable planning and rezoning from its current rural status, the reward being a new major Waterline Apartments, Halls Head project in the longer term. Western Australia – built form Nautilus Apartments, Rockingham Cedar Woods has commenced construction of this 4 storey luxury apartment development located directly opposite Doddi’s Beach at Halls Head, Mandurah. This beachside development will comprise 15 two and three bedroom apartments and 3 penthouses rivalling any apartment development in WA in terms of quality and exclusivity. The development will also incorporate a boutique café on the ground floor. Nautilus Apartments are positioned just moments from the beach, parks, cafes and restaurants in Rockingham. The 62 apartments in Stage 1 of Nautilus enjoy views across parklands to the beach and Mangles Bay. These apartments are complete and the first residents 2 The Fairways, Mandurah Country Club Victoria – land development Williams Landing, Laverton In joint venture with the Mandurah Country Club, the company is developing 25 prestigious townhouses overlooking the eighth green and ninth tee at The Mandurah Country Club golf course in Halls Head. These homes have been architecturally designed to blend in with the surrounding natural environment. Retention of significant trees and vegetation on site as well as views from adjoining properties was of paramount importance with regard to the design. The townhouses have been selling quickly, with more than half sold before construction even begun and only five remaining for sale. Construction is due to be completed in early to mid 2008. New project arriving soon The Jetty, Palm Beach In early 2007 the company announced that it had received approval for redevelopment of the former RAAF Williams Airfield at Laverton in Melbourne, to enable the construction of a major residential and town centre project with an expected end value of $1 billion. The project will officially be known as Williams Landing, after the name favoured by Cedar Woods received 72 per cent support in a community survey. Williams Landings will be a 275-hectare development of four neighbourhoods comprising 2000 residential dwellings, retail and commercial space, and 16 hectares of parks and sporting facilities. A rail station announced by the Victorian Government last year will also be built within the project, with each neighbourhood being in walking distance of the town centre and rail station, or have ready access to bus services that will go directly to the town centre and rail station. Construction on the project is expected to begin in early 2008. The rezoning of the property to a major activity centre was a major milestone for the company with this project expected to provide an earnings stream for 15 years, offering This beachfront development site, located at Palm Beach, the potential for substantial built form development and Rockingham will ultimately comprise of 15 luxury apartments, leasehold opportunities. all with spectacular ocean views and a beachfront cafe. Launch of The Jetty apartments will commence in 2008. A N N U A L R E P O R T 2 0 0 7 2 Projects Banbury Village, Footscray Carlingford, Lalor The Banbury Village site, acquired during 2006, is located Cedar Woods new project in the northern suburbs of in Footscray some 6 kilometres from the Melbourne Melbourne, named Carlingford, will comprise 600 housing CBD. The property received rezoning approval from lots, and will be the first land released for development the city of Maribyronong in May 2007 for a 250 dwelling in the Lalor area in over a decade. It will boast excellent development expected to include a range of townhouses, transport links to Melbourne CBD and is within easy apartments and single lots. The 9 hectare parcel of land, reach of popular shopping precincts, the Hume Highway the former site of South Pacific Tyres’ factory, has already and Western Ring Road. Design work is underway and been substantially remediated and the company expects project commencement is scheduled for 2008. The 55 to commence subdivision of the development in 2008. hectacre project is expected to be developed over a 6 The development will be undertaken in several stages year timeframe. over a 4 year period. Banbury Village will not only look to the future for energy efficiency and sustainability but also embrace the past by retaining and converting current art deco buildings on the property. By ensuring the future of the historic buildings, the proposal meets the principles of the Maribyronong Council’s 2006-2010 Plan for urban renewal and the reuse of industrial land to support population growth while protecting existing heritage in the Footscray area. Enquiries regarding the availability of lots or units in the company’s developments may be directed to the company using the contact methods shown at the rear of the annual report. Shareholders may also make use of the shareholder discount scheme, details of which are on the company website, with brief a summary on page 38 of the annual report. 0 Corporate governance statement The Board of Cedar Woods Properties Limited is committed of the company to the Managing Director. The company’s to achieving and demonstrating the highest standards of strategic plan is prepared by management and is reviewed corporate governance. The Board continues to review the annually by the Board at a special Board meeting. framework and practices to ensure they meet the interests of The Board operates in accordance with the broad principles shareholders. set out in its charter which is available on the company A description of the company’s main corporate governance website. The Charter details the Board’s composition and practices is set out below. All these practices, unless otherwise responsibilities. stated, were in place for the entire year. Listed entities are required to disclose the extent to which they have followed the Best Practice Recommendations set by the Australian Stock Exchange Corporate Governance Composition of the Board The charter states: • the Board should comprise between 3 and 10 directors; Council during the reporting period. Where the company’s • the Board should comprise directors with a broad range procedures are not in compliance with the Best Practice of skills and experience that are relevant to the property Recommendations for part or all of the year, this is referred to development industry and so that it has a proper below. It is noted that the Best Practice Recommendations are understanding of, and competence to deal with, the not compulsory for listed companies but that an explanation current and emerging issues of the business; is required where compliance is not achieved. • a majority of the Board should be non-executive; and The Board of Directors • the Chairman is elected by the full Board. The Board is accountable to shareholders for the performance of the company. The Board sets the company’s strategic direction and delegates responsibility for the management At present, having regard to the size of the company and the present composition of the Board, the Board does not consider it necessary for a majority of the directors, including Front Row (left to right): Robert Brown (Deputy Chairman) William Hames (Chairman) Ronald Packer Back Row (left to right): Dwane Buckland Paul Sadleir (Managing Director) Paul Freedman (Company Secretary) A N N U A L R E P O R T 2 0 0 7 Corporate governance statement the Chairman, to be independent, as required by Best Board members Practice Recommendations 2.1 and 2.2. However, future appointments to the Board and to the position of Chairman will be made having regard to these recommendations. The company’s constitution specifies that all directors (with the exception of the Managing Director) must retire from office no later than the third annual general meeting following their last election. Where eligible, a director may stand for re-election. Board responsibilities Details of the members of the Board, their experience, expertise, qualifications, term of office and independence status are set out in the directors’ report starting on page 3 of the financial statements. There are 4 non-executive directors, one of whom is deemed independent under the principles set out below. There is one executive director who is the Managing Director. In addition there is one non-executive alternate director, although he has not acted during the year. The responsibilities of the Board include: Directors’ independence • setting the company’s values and standards of conduct The Board has adopted the definition of independence and ensuring these are adhered to in the interests of from the Australian Stock Exchange Principles of all stakeholders; Good Corporate Governance and Best Practice • approving policies, strategies, budgets, and plans; Recommendations. These stipulate that an independent • assessing performance against strategies to monitor director is a non-executive director and: both the suitability of those strategies and the • is not a substantial shareholder of the company or performance of management and the Board itself; an officer of, or otherwise associated directly with, • reviewing operating information to understand the company’s position, and approving financial and other reporting; • identifying areas of significant business risk and ensuring systems and procedures are in place to manage those risks; • considering management recommendations on key issues – including acquisitions, funding and significant capital expenditure; • ensuring that the company acts legally and responsibly on all matters and that the highest ethical standards are maintained; • appointing, terminating and reviewing the performance of the Managing Director; • ratifying the appointment and, where appropriate, removal of the Chief Financial Officer and the Company Secretary; and • reporting to shareholders. a substantial shareholder of the company, where substantial shareholder is defined by section 9 of the Corporations Act; • within the last three years has not been employed in an executive capacity by the company or group, or been a director after ceasing to hold any such employment; • within the last three years has not been a principal of a material professional advisor or a material consultant to the company or group, or an employee associated with the service provided; • is not a material supplier or customer of the company or group, or an officer of or otherwise associated directly with a material supplier or customer; • has no material contractual relationship with the company or another group member other than as a director of the company; • has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company; and 2 • is free from any interest and any business or other performance assessment of Board members also addresses relationship which could, or could reasonably be perceived this issue. to, materially interfere with the director’s ability to act in Conflict of interests the best interests of the company. Materiality for these purposes is determined on both quantitative and qualitative bases. An amount of $100,000 in any one financial year is considered material for the purposes of contracts or commercial transactions listed above. Purchases of the company’s products by directors under normal terms and conditions, and director’s fees, shall ordinarily be ignored Should entities connected with the directors have business dealings with the economic entity during the year, the directors concerned declare their interests in those dealings and take no part in decisions relating to them. Such business dealings are disclosed in note 37 of the financial statements. Independent professional advice for the purpose of the materiality test. Directors have the right, in connection with their duties and Recent thinking on corporate governance has introduced responsibilities as directors, to seek independent professional the view that a director’s independence may be perceived to advice at the company’s expense. Prior written approval of the be impacted by lengthy service on the Board. To avoid any Chairman is required, which will not be unreasonably withheld. potential concerns, the Board has determined that a director will not be considered independent if he or she has served on the Board for a period exceeding 12 years. For this reason, Mr Buckland, although meeting other criteria and bringing independent judgement to bear in his role, is no longer defined as an independent director. Chairman and Managing Director Performance assessment The Board undertakes an annual self-assessment of its performance and that of its committees. The assessment includes a review of the Board charter, Board composition, committee structure and functions of the Board. Each Board committee also undertakes an annual self-assessment of its performance and achievement of committee objectives. The Chairman is responsible for leading the Board, ensuring Part of the performance evaluation of the Board is to that Board activities are organised and efficiently conducted review the independence of directors and ensure directors and for ensuring directors are properly briefed for meetings. collectively have the appropriate mix of skills required to The Managing Director is responsible for implementing maximise their effectiveness and ensure the company is able strategies and policies. The Board charter specifies that to meet its goals and objectives. The Board is satisfied that the Chairman cannot be the Managing Director or a former it is discharging its obligations and that the company is well Managing Director of the company. positioned to continue to meet its goals and objectives. The Chairman meets regularly with the Managing Director. Details of policies in relation to the Board and senior executive Commitment performance assessment are available on the company The Board held 9 Board meetings during the year, including a special meeting to consider the Corporate Plan. website www.cedarwoods.com.au. Board Committees In addition, all of the non-executive directors are members The Board has established a number of committees to assist in of Board committees and the number of Board committee the execution of its duties and to allow detailed consideration meetings attended is shown in the directors’ report. of complex issues. During the year the following committees Prior to appointment, non-executive directors are required to were in operation: acknowledge that they will have time available to properly discharge their responsibilities to the company. The annual • • • Nomination Committee; Human Resources & Remuneration Committee ; and Audit & Risk Management Committee. A N N U A L R E P O R T 2 0 0 7 Corporate governance statement Nomination Committee The Nomination Committee consists of the following non-executive directors: R Packer (Chairman from 1 January 2007) DP Buckland (Chairman until 31 December 2006) RS Brown WG Hames When the need for a new director is identified or an existing director is required to stand for re-election, the Nomination Committee reviews the range of skills, experience and expertise on the Board, identifies its needs and if required prepares a short list of candidates with appropriate skills and experience. Where necessary, independent search consultants may be engaged. The full Board will make appointments to the Board, At present, having regard to the size of the company and and these candidates must stand for re-election at the the present composition of the Board, the Board does not next annual general meeting. Notices of meetings for consider it necessary for this committee to be comprised the election of directors comply with the ASX Corporate of a majority of independent directors, as required by Governance Council’s Best Practice Recommendations. Best Practice Recommendation 2.4. New directors are provided with a letter of appointment Mr Dwane Buckland, who was the Chairman of this setting out the responsibilities, rights and the terms and committee until 31 December 2006, is not regarded conditions of their employment. They are also provided as independent in order to satisfy Best Practice with a copy of the Corporate Governance framework Recommendation 2.4. However, Mr Ronald Packer, an including the Code of Conduct. A formal induction is held independent director, assumed the role of Chairman for new non-executive directors which covers financial, of this committee on 1 January 2007, satisfying the operational and risk management issues. requirement for an independent director to chair the committee from that date. Human Resources and Remuneration Committee Details of these directors’ qualifications, experience and attendance at committee meetings are set out in the The Human Resources and Remuneration Committee consists of the following non-executive directors: directors’ report. The main responsibilities of the committee are: • assessing the skills required on the Board; R Packer (Chairman from 1 January 2007) DP Buckland (Chairman until 31 December 2006) RS Brown • from time to time assessing the extent to which the required skills are represented on the Board.; • establishing processes for the identification of candidates for appointment to the Board; At present, having regard to the size of the company and the present composition of the Board, the Board does not consider it necessary for there to always be at least 3 members of this committee, with a majority of • establishing eligibility requirements for candidates the directors independent, as required by Best Practice for appointment to the Board including a policy with Recommendation 9.2. respect to other commitments; Mr Dwane Buckland, who was the Chairman of this • proposing candidates for board vacancies; committee until 31 December 2006, is not regarded • review of Board succession plans; and as independent in order to satisfy Best Practice • implementing processes for the induction of new non- executive Directors to the company and processes for continuing education of Directors. Recommendation 9.2. However, Mr Ronald Packer, an independent director, assumed the role of Chairman of this committee on 1 January 2007, satisfying the requirement for an independent director to chair the committee from that date. Under Australian Stock Exchange listing rule 12.7 the company Details of these directors’ qualifications, experience and attendance is not required to comply with the structure requirements of at committee meetings are set out in the directors’ report. The committee operates in accordance with its charter which is available on the company website. The Human Resources and Remuneration Committee makes recommendations to the full Board on remuneration packages and other terms of employment for directors and senior executives. Executive remuneration and other terms of employment are reviewed annually by the committee having regard to personal and corporate performance, relevant comparative information and independent expert advice. Remuneration packages which include base salary, superannuation and fringe benefits are set at levels that are intended to attract and retain executives capable of managing the consolidated entity’s specialised operations. Performance related bonuses are available to executives based on the performance of the Audit Committees as it is not included in the S&P ASX 300. Nevertheless, the company has assessed its procedures against the requirements set out in the Best Practice Recommendations as they relate to Audit Committees. At present, having regard to the size of the company and the present composition of the Board, the Board does not consider it necessary for this committee to be comprised of a majority of independent directors, as required by Best Practice Recommendation 4.3. Mr Dwane Buckland, who was the Chairman of this committee until 31 December 2006, is not regarded as independent in order to satisfy Best Practice Recommendation 4.3. However, Mr Ronald Packer, an independent director, assumed the role of Chairman of this committee on 1 January 2007, satisfying the requirement for an independent director to chair the committee from that date. company and satisfaction of personal objectives established Details of these directors’ qualifications, experience and at the start of the financial year. Certain employees are eligible attendance at committee meetings are set out in the to participate in the Employee Share Scheme as part of the directors’ report. performance related bonus. The Audit and Risk Management Committee collectively has Remuneration of non-executive directors is determined by appropriate financial expertise and a working knowledge of the Board within the maximum amount approved by the the property industry. shareholders from time to time. The committee operates in accordance with its charter which The committee is also charged with the responsibility of is available on the company website. setting the recruitment and termination policies and practices The main responsibilities of the committee are to: of the company and making contributions in regard to • review and report to the Board on the annual and half- executive succession, planning and promotions. year report and financial statements and supporting Further information on directors’ and executives’ remuneration management commentary; is set out in section 16 of the directors’ report. • review the accounting policies of the consolidated entity; Audit and Risk Management Committee The Audit and Risk Management Committee consists of the following non-executive directors: R Packer (Chairman from 1 January 2007) DP Buckland (Chairman until 31 December 2006) RS Brown • review the effectiveness of the control environment including risk management, safe practices policies, environmental policies and policies in respect to the disbursement of funds; • review the adequacy of information provided by management to the Board of Directors; • review the compliance with statutory and regulatory requirements; A N N U A L R E P O R T 2 0 0 7 Corporate governance statement • review risk management information prepared by the Audit and Risk Management Committee and then management and the annual and half yearly risk presented to the full Board. Recommendations are management reports; implemented upon approval. • administer the appointment and terms of engagement In addition the Board requires that each major proposal of the external auditor and review the scope and quality submitted to the Board for a decision is accompanied by of the audit, and the independence and competence a comprehensive risk assessment and, where required, of the auditor; and management’s proposed mitigation strategies. • report to the Board on matters relevant to the Each year the Managing Director and the Chief Financial committee’s roles and responsibilities. Officer provide a written statement to the Board that In fulfilling its responsibilities the committee meets with the company’s financial reports present a true and fair the external auditors at least twice a year, more frequently view, in all material respects, of the company’s financial if necessary. During these meetings the auditors also condition and operating results are in accordance with meet with the committee without the presence of senior relevant accounting standards. They also confirm that management. The company’s auditors have a clear line of direct communication at any time to either the Chairman of the Audit and Risk Management Committee or the Chairman of the Board. the statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the company’s risk management and internal compliance control system is operating efficiently and effectively in all The committee has authority, within the scope of its responsibilities, to: material respects. External auditors • seek any information it requires from any employee or The company and Audit and Risk Management external party; and • obtain external legal or other independent professional advice. The committee reports to the full Board and relevant papers and minutes are provided to all directors. Committee policy is to appoint external auditors who demonstrate competence and independence. The performance of the external auditor is reviewed annually. PricewaterhouseCoopers were appointed as the external auditors in 1991. It is PricewaterhouseCoopers policy to rotate audit engagement partners on listed companies Risk assessment and management at least every 5 years. A new engagement partner was The Board ultimately has responsibility for internal introduced for the year ended 30 June 2003, and his compliance and control. The Board has established the tenure will conclude at the 2007 annual general meeting. Audit and Risk Management Committee as responsible An analysis of fees paid to the external auditors, including for oversight and ensuring that internal control systems a break down of fees for non-audit services, is provided in are in place to monitor and manage risk. note 39 in the financial statements. It is a legal requirement Each half-year management is required to prepare a report that the external auditors provide an annual declaration of the current and future risks facing the consolidated of their independence to the Board. entity, and the strategies or controls in place to mitigate The external auditor is requested to attend the annual those risks. A review is made of the performance of those general meeting and be available to answer shareholder controls over the half-year, and an assessment made of questions about the conduct of the audit and the their effectiveness. Where required, improvements in preparation and content of the audit report. controls are recommended. This report is reviewed by The company’s continuous disclosure policy is available on the company website. All shareholders are entitled to receive a copy of the company’s annual report and half-year newsletter. In addition the company seeks to provide opportunities for shareholders to participate through electronic means. Please refer to the Investors’ summary on page 38. Code of conduct The company has developed a statement of values and a Code of Conduct (the Code). The Code is regularly updated to ensure it reflects the high standards of behaviour and professionalism and the practices necessary to maintain the company’s integrity. A summary of the main provisions of the Code is available on the company website. The Code contains details of the company’s policy with respect to trading of the company’s securities by directors or employees. A summary of the trading policy as it applies to directors is also contained in the Board charter which is also available on the company website. Continuous disclosure and shareholder communication The company is committed to complying with its continuous disclosure obligations and seeks to provide relevant and timely information to shareholders and investors through ASX releases, written reports and the company’s website. The company secretary has been appointed as the person responsible for communications with the Australian Stock Exchange (ASX). This person is also responsible for ensuring compliance with the continuous disclosure requirements in the ASX listing rules and overseeing and coordinating information disclosure to the ASX, brokers, shareholders, media and the public. The company has policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the company and its controlled entities that a reasonable person would expect to have a material effect on the price of the company’s securities. Such policies and procedures include mechanisms for ensuring relevant matters are communicated and that the information is released in a timely and balanced manner. All information disclosed to the ASX is posted on the company’s website as soon as possible. When analysts are briefed on aspects of the company’s operations the material used in the presentations is first released to the ASX. A N N U A L R E P O R T 2 0 0 7 7 Investors’ summary Shareholder value Cedar Woods’ primary objective is to create value for • the shareholder discount scheme does not apply to combined house and land packages. shareholders through growth in earnings. The above is a summary of the main conditions and The table on page 44 provides a five-year summary of the shareholders should apply to the company or visit the company’s key financial results. website for the full terms and conditions. Below is a table showing returns to shareholders over 1, Shareholder enquiries 3 and 5 years. 1YR 3YR 5YR information by any of the following methods: Shareholders with enquiries are welcome to access Earnings growth % Share price growth % Dividend growth % Total shareholder return % Share liquidity 12 16 13 20 19 45 19 52 37 59 28 67 During the 2007 financial year 5.26m (2006 – 3.93m) shares were traded on the Australian Stock Exchange representing approximately 10% (2006 – 7%) of the weighted average number of shares on issue during the year. Dividend and dividend policy The current dividend policy is to distribute approximately 50% of the sum of the full year net profit after tax plus realised reserves. Having paid an interim dividend of 7 cents per share in April 2007, the final dividend for the 2007 financial year is 10 cents per share, fully franked. The dividend will be paid on 19 October 2007. Shareholder discount scheme • by contact with our share registry: Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth WA 6000 Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033 Please quote your Security Reference Number (SRN) or Holder Identification Number (HIN) when dealing with the share registry. • via the Cedar Woods web site www.cedarwoods.com.au. • by contact with the company. Shareholders are welcome to contact the company at any time and speak to the Managing Director, Paul Sadleir or the Company Secretary, Paul Freedman. Telephone: (08) 9480 1500 Facsimile: (08) 9480 1599 • shareholders are welcome to contact the company by The company operates a shareholder discount scheme which entitles shareholders to a 5% discount off the listed purchase price of any residential lot at the company’s email on email@cedarwoods.com.au Stock exchange listing developments. A summary of the main terms and Cedar Woods Properties Limited shares are listed on the conditions follows: Australian Stock Exchange and reported in the “Industrial” • shareholders must hold a minimum number of 5,000 section of daily newspapers – code CWP. shares for at least 12 months before purchasing a lot Electronic payment of dividends to qualify for the discount; • there is no limit to the number of lots which a shareholder may purchase under the scheme, subject to any statutory restrictions; and The company continues to offer the electronic payment of dividends, which is now in use by the majority of our shareholders. Shareholders may nominate a bank, building society or credit union account for the payment of dividends by direct credit. Payments are electronically • access to annual and half year reports. The annual report credited on the dividend payment date and confirmed by can be downloaded as a ‘pdf’ electronic file; mailed advice. Shareholders wishing to take advantage of • access to information on the company’s major projects this facility for the first time should complete and return the including the availability and price of land currently form included with this Annual Report. for sale; and Dividend re-investment plan • feedback service to enhance communication between The dividend re-investment plan continues in operation as part the company and its shareholders. of measures to manage the company’s capital. Shareholders Shareholders’ timetable wishing to change their participation status must complete an election form in accordance with the plan rules. Share register closes for dividend Company web site www.cedarwoods.com.au Record date : 5 October 2007 Dividend payment date : 19 October 2007 The company web site offers the following features: First quarter update : October 2007 • investor relations page, enabling shareholders to access Annual General Meeting : 26 October 2007 share price and corporate governance information, Location: University Club of WA, – 10.00 am browse company announcements, download financial statements and link to the company’s share registry. In order to obtain and update information in relation to their shareholdings, shareholders can go to the share registry link and by entering the shareholder name, address and SRN or HIN at the prompt, shareholders will gain access to this service; • news service providing up to date information on recent company activities and items of interest; entrance 1, off Hackett Drive, Crawley. Half-year result announcement : February 2008 Third Quarter update : April 2008 Full year result and dividend announcement : August 2008 * Based on the register closing date, it is anticipated that shares will trade ex-dividend on 28 September 2007. Shareholders should check with their broker prior to trading. A N N U A L R E P O R T 2 0 0 7 Investors’ summary Shareholder information The shareholder information set out was applicable at 31 August 2007. DISTRIBUTION OF ORDINARY SHARES 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over There were 15 holders of less than a marketable parcel of shares. TWENTY LARGEST SHAREHOLDERS OF ORDINARY SHARES Name National Nominees Limited Australian Executor Trustees Limited Beach Corporation Pty Ltd Westland Group Holdings Pty Ltd Hamsha Nominees Pty Ltd Australian Foundation Investments Company Limited Helen Kaye Hames Ventrade (Asia) Pte Ltd JP Morgan Nominees Australia Limited Citicorp Nominees Pty Ltd Cwlth Bank Off Super A/C Paul Sadleir Golden Years Holdings Pty Ltd (AW Lennon A/C) Colbern Fiduciary Nominees Pty Ltd Golden Years Holdings Pty Ltd (GE Lennon A/C) Joia Holdings Pty Ltd Dane Nigel Gorn & Maureen Theresa Gorn JDV Limited Ent investment fund Croftwell Pty Limited Ramneg Pty Ltd William George Hames Number of holders Number of shares 132 468 260 331 39 1,230 74,599 1,395,256 2,048,043 8,549,062 42,757,172 54,824,132 Number of shares Percentage of shares 6,120,579 5,972,164 5,120,433 4,755,776 4,497,864 2,569,449 2,379,055 2,233,378 1,397,598 835,603 755,459 731,575 534,106 497,484 481,506 407,739 395,572 378,529 325,281 258,758 11.16% 10.89% 9.34% 8.67% 8.20% 4.69% 4.34% 4.07% 2.55% 1.52% 1.38% 1.33% 0.97% 0.88% 0.88% 0.74% 0.72% 0.69% 0.59% 0.47% 40,647,908 74.11% 0 SUBSTANTIAL SHAREHOLDERS OF ORDINARY SHARES Name Number of shares Percentage of shares Entities related to RS, SJ & TR Brown - - Beach Corporation Pty Ltd - Westland Group Holdings Pty Ltd - RS & JP Brown Superfund A/C - Stanley James Brown - Robert Brown - Joan Brown - Dorothy Margaret Brown Entities related to WG Hames - - Hamsha Nominees Pty Ltd - Helen Kaye Hames - Helen Kaye Hames Superfund - Joia Holdings Pty Ltd - William George Hames Acorn Capital Limited Australian Executor Trustees Limited 5,120,433 4,755,776 250,000 50,000 3,000 3,000 3,000 10,185,209 18.58% 4,497,864 2,374,055 40,384 481,506 258,758 7,652,567 6,107,750 5,923,493 13.96% 11.14% 10.80% A N N U A L R E P O R T 2 0 0 7 Investors’ summary VOTING RIGHTS The voting rights attaching to each class of equity securities are set out below; Ordinary shares On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote. Stock exchange announcements The following table summarises the company announcements made to the Australian Stock Exchange (ASX) during the 12 months up to the date of this report. Full details are available through the ASX or Cedar Woods websites. 22 August 2007 Results Presentation 21 August 2007 Preliminary Final Report 2 July 2007 24 May 2007 30 April 2007 20 April 2007 Change of Alternate Director Third Quarter Update Change of Directors’ Interest Notice x 3 Appendix 3B for Dividend Reinvestment Plan 28 February 2007 Receives approval for new town at Laverton 19 February 2007 Half Year Results Presentation 19 February 2007 Half Yearly Report & Half Year Accounts 27 October 2006 Results of AGM 27 October 2006 Change of Directors’ Interest Notice 27 October 2006 AGM Presentation 27 October 2006 Change of Directors’ Interest Notice 27 October 2006 First Quarter Activities Report 25 October 2006 Director Retirement & Appendix 3Z 20 October 2006 Appendix 3B for Dividend Reinvestment Plan 19 October 2006 Change in substantial holding 18 October 2006 Ceasing to be a substantial holder 4 October 2006 Appendix 3B for Dividend Reinvestment Plan 20 September 2006 Annual Report 20 September 2006 Notice of Annual General Meeting 12 September 2006 Change of Directors’ Interest Notice 2 A N N U A L R E P O R T 2 0 0 7 Investors’ summary 5 year financial performance summary – as reported. All figures in $’000 unless shown otherwise FINANCIAL YEAR 2007 AIFRS 2006 AIFRS 2005 2004 2003 AGAAP AGAAP AGAAP Financial performance Revenue Earnings before interest and tax Finance costs Operating profit before tax Income tax expense Net profit after tax Realised reserve 90,008 31,304 4,515 26,789 8,236 18,553 271 80,520 25,864 2,750 75,130 19,191 1,549 23,114 17,642 6,906 16,208 404 5,242 12,400 447 57,189 15,988 1,314 14,674 4,421 10,253 646 Net Profit after tax plus realised reserve 18,824 16,612 12,847 10,899 36,412 11,080 188 10,892 3,757 7,135 1,435 8,570 Financial position Total assets* Total liabilities* Shareholders’ equity Number of shares on issue - end of year (‘000) Key performance measures Earnings per share (cents) Dividend per share-fully franked (cents) EBIT Margin Interest cover (times) Return on Equity Investment in inventory during year Net tangible assets backing per share ($) Net bank debt Net bank debt to equity* Share price - end of year ($) 155,561 196,365 130,470 94,717 66,818 83,918 127,917 75,513 71,643 54,824 68,448 54,536 54,957 53,253 23.3 12.0 25.5% 12 22.6% 48,866 1.03 33.9 17.0 30.3 15.0 34.8% 32.1% 9 23.7% 52,952 1.11 7 25.9% 73,799 1.31 63,735 89.0% 5.22 28,974 37,463 42.3% 4.48 68.2% 2.31 46,885 47,832 53,228 20.2 10.0 28.0% 12 21.4% 56,026 0.90 23,157 48.4% 1.70 29,992 36,826 49,420 14.5 7.0 30.4% 43 19.4% 25,278 0.75 5,818 15.8% 0.97 Stock Market capitalisation at 30 June 286,181 244,321 123,014 90,488 47,937 Number of employees at 30 June 26 27 25 20 18 Financial performance, financial position and all key was consolidated at that date. The company sold down performance measures shown in the above table up to its interest in CWWL to 25% during the year and it is no the year ended 30 June 2005 are shown as previously longer consolidated. Ignoring CWWL, total assets have reported, based on financial accounting under Australian increased by 2.5%. Generally Accepted Accounting Practice (AGAAP). Data Similarly, total liabilities included $32m in respect of Cedar for the years ended 30 June 2007 and 2006 is based on Woods Wellard Limited. Ignoring CWWL, total liabilities Australian equivalents to International Financial Reporting have reduced by 11.7%. Net bank debt /equity excluding Standards (AIFRS). CWWL was 72% in 2006. * Total assets at 30 June 2006 included $48m in assets Certain changes have been made to comparative amounts owned by Cedar Woods Wellard Limited (CWWL) which to reflect changes in classifications in the current year. Contents Corporate directory A.B.N. 47 009 259 081 Directors MELBOURNE Robert Stanley Brown, MAICD, AIFS – Deputy Chairman William George Hames, BArch (Hons) MCU (Harvard) LFRAI, MPIA, FAPI (Econ) – Chairman Victoria Cedar Woods’ objective ............................................ 2 About Cedar Woods .................................................. 4 2007 highlights ............................................................ 6 Report to shareholders .............................................. 8 GEELONG PORT PHILLIP BAY Quality assets forming a diversified portfolio ........ 14 Review of operations ................................................ 16 Projects ...................................................................... 26 Corporate governance statement ........................... 31 Investors’ summary ................................................... 38 Corporate directory .......................Inside Back Cover Cedar Woods’ project locations in Western Australia and Victoria Dwane Patrick Buckland, BA (Econ), FAICD Ronald Packer, BCom (UWA), AAPI, FAICD, Solicitor Supreme Court of England & Wales Paul Stephen Sadleir, BE, MBA, AAPI, FAICD, MIE Aust – Managing Director Timothy Robert Brown, BA, LLB, M.Fin (Alternate for RS Brown) Company Secretary Paul Samuel Freedman, BSc, CA, GAICD Registered office and principal place of business Level 4, 66 Kings Park Road WEST PERTH WA 6005 Postal address: P.O. Box 788 West Perth WA 6872 Phone: Email: (08) 9480 1500 Fax: (08) 9480 1599 email@cedarwoods.com.au Website: www.cedarwoods.com.au Share registry Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St George’s Terrace PERTH WA 6000 Auditor PricewaterhouseCoopers QV1 250 St George’s Terrace PERTH WA 6000 Stock exchange listing Cedar Woods Properties Limited shares are listed on the Australian Stock Exchange Limited. ASX Code CWP Annual general meeting Venue: University Club of WA, entrance 1, off Hackett Drive, Crawley. Time: 10.00am Date: 26 October 2007 A N N U A L R E P O R T 2 0 0 7 A N N U A L R E P O R T 2 0 0 7 Cedar Woods Properties Limited Level 4, 66 Kings Park Road West Perth WA 6005 P.O. Box 788 West Perth WA 6872 P (08) 9480 1500 F (08) 9480 1599 E email@cedarwoods.com.au W www.cedarwoods.com.au ABN 47 009 259 081