Cedar Woods Properties Limited
Annual Report 2014

Plain-text annual report

Cedar Woods Properties Limited 2014 Annual Report ABN 47 009 259 081 Corporate Directory A.B.N. 47 009 259 081 Directors William George Hames, BArch (Hons) MCU (Harvard) LFRAIA, MPIA, FAPI (Econ) – Chairman Robert Stanley Brown, MAICD, AIFS – Deputy Chairman Ronald Packer, BCom (UWA), FAICD, Solicitor Supreme Court of England & Wales Stephen Thomas Pearce, BBus(ACC), Grad Dip (Admin), FCA, AGIA, MAICD Paul Stephen Sadleir, BE, MBA, AAPI, FAICD – Managing Director Timothy Robert Brown, BA, LLB, M.Fin, Post Grad Dip (Phil) (Alternate for R S Brown) Company Secretary Paul Samuel Freedman, BSc, CA, GAICD Registered office and principal place of business Ground Floor, 50 Colin Street WEST PERTH WA 6005 Postal address: P.O. Box 788 West Perth WA 6872 Phone: (08) 9480 1500 Fax: (08) 9480 1599 Email: email@cedarwoods.com.au Website: www.cedarwoods.com.au Share registry Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace PERTH WA 6000 Auditor PricewaterhouseCoopers 125 St Georges Terrace PERTH WA 6000 Securities exchange listing Cedar Woods Properties Limited shares are listed on the Australian Securities Exchange (ASX) ASX code: CWP Annual general meeting Venue: Kings Park Function Centre, Fraser Avenue, West Perth WA 6005 Time: 10.00am Date: Monday 10 November 2014 Table of Contents A Message from the Chairman .......................................................................................................................................... 3 Celebrating 20 Years ......................................................................................................................................................... 4 About Cedar Woods .......................................................................................................................................................... 6 New report format ............................................................................................................................................................. 6 Cedar Woods’ Charter ....................................................................................................................................................... 7 Our Business Model ........................................................................................................................................................ 10 Our Stakeholders ............................................................................................................................................................. 11 Community Development and Sponsorship ..................................................................................................................... 12 Report to Shareholders ................................................................................................................................................ 14 Financial and Operating Review ....................................................................................................................................... 14 Project Pipeline as at 30 June 2014 ................................................................................................................................. 20 Directors’ Report ............................................................................................................................................................. 22 Directors’ Report: Remuneration Report .......................................................................................................................... 26 Directors’ Report (continued) ........................................................................................................................................... 36 Auditor’s Independence Declaration ................................................................................................................................. 37 Financial Statements .................................................................................................................................................... 39 Consolidated Statement of Profit or Loss and Other Comprehensive Income .................................................................. 40 Consolidated Balance Sheet ............................................................................................................................................ 41 Consolidated Statement of Changes in Equity ................................................................................................................. 42 Consolidated Cash Flow Statement ................................................................................................................................. 43 Notes to the Financial Statements ............................................................................................................................. 44 Section A: How the Numbers are Calculated ............................................................................................................ 45 A1. Profit or Loss Information ........................................................................................................................................ 46 A2. Financial Assets and Financial Liabilities .................................................................................................................. 49 A3. Non-Financial Assets and Liabilities ........................................................................................................................ 54 A4. Equity ..................................................................................................................................................................... 60 A5. Cash Flow Information ............................................................................................................................................ 62 Section B: Financial Risks ........................................................................................................................................... 63 B1. Critical Estimates and Judgements ......................................................................................................................... 64 B2. Financial Risk Management .................................................................................................................................... 65 B3. Capital Management Objectives and Gearing ........................................................................................................ 70 Section C: Group Structure ......................................................................................................................................... 72 C1. Interests in Other Entities ........................................................................................................................................ 73 Section D: Unrecognised Items .................................................................................................................................. 76 D1. Contingent Liabilities ............................................................................................................................................... 77 D2. Commitments ......................................................................................................................................................... 78 Section E: Other Information ....................................................................................................................................... 79 E1. Related Party Transactions ..................................................................................................................................... 80 E2. Remuneration of Auditors ....................................................................................................................................... 81 E3. Employee Share Scheme ........................................................................................................................................ 82 E4. Summary of Accounting Policies ............................................................................................................................. 83 E5. Segment Information .............................................................................................................................................. 91 E6. Parent Entity Financial Information .......................................................................................................................... 92 Section F: Declaration and Independent Auditor’s Report ....................................................................................... 93 F1. Directors’ Declaration ............................................................................................................................................. 94 F2. Independent Auditor’s Report to the members of Cedar Woods Properties Limited ................................................ 95 Section G: Shareholders’ Information ........................................................................................................................ 97 G1. Investors Summary ................................................................................................................................................. 98 G2. Five Year Financial Performance ............................................................................................................................ 101 s t n e t n o C f o l e b a T 1 2014 ANNUAL REPORT A Message from the Chairman On behalf of the Board and management team, I am pleased to present to shareholders our Annual Report for 2014. From a financial perspective, the 2014 financial year saw Cedar Woods deliver its fourth straight year of record profit and enter 2015 well placed to continue to provide strong returns to its shareholders. The 2014 financial year was also an important one for the company in many other ways. Having listed in 1994 on the Australian Securities Exchange, this year Cedar Woods celebrates its twentieth anniversary as a public company. At our forthcoming Annual General Meeting and at a series of other events, the company will be looking back over the past twenty years to acknowledge the progress that has been made and to celebrate this important milestone. Reflecting on Cedar Woods’ history, we can be proud of what has been achieved to date and look forward to the future with a sense of purpose and confidence. The company’s origin as a private company dates back to 1987 and the period up to listing saw Cedar Woods involved with a land portfolio concentrated around canal development in Mandurah, Western Australia. Twenty years on, Cedar Woods has grown a significant and diversified portfolio across three state capitals and has also established a major presence in regional Western Australia. The company’s progress and growth was recognised late last year by its inclusion in the S&P ASX 300 index. Over the years, I have had the pleasure to work with an excellent Board, with directors who are engaged and enthusiastic about Cedar Woods. It was pleasing that in May 2014, Stephen Thomas Pearce joined the Board as another independent director. Stephen brings his financial knowledge and capital market experience to the Board and its Audit & Risk Management Committee. Your Board remains of the view that the company has a sound strategy and an exciting future. If I could summate what I believe to be Cedar Woods’ core strengths, they are persistence and commitment. We determine a long term strategy and remain committed to the purpose. View the 20th Anniversary video at: cedarwoods.com.au Cedar Woods is a well-managed company focused on growth and consistent improvement. Our Managing Director, Paul Sadleir, and his management team have taken a disciplined approach to executing the company’s strategy, which, just this year, has seen us deliver the first commercial buildings in the Williams Landing town centre, our first project in the Pilbara (Western Australia), and expansion into the State of Queensland. These strategic objectives were determined by the Board and the ground work was carefully laid by our management team over many years. This demonstrates the long term vision necessary to prosper in our industry. It is a credit to the entire Cedar Woods’ team that they have achieved so much in 2014 and, indeed, over the past twenty years. The Board acknowledges the hard work and commitment from management and staff - past and present - and thanks them for their efforts. In addition, the Board acknowledges the contribution of many of its loyal and longstanding shareholders, some of whom have been with the company since listing, and the many other stakeholders who have contributed to Cedar Woods’ story. I hope I have the opportunity to catch up with many of you to reflect on this story, as we look forward to the next twenty years. William Hames – Chairman n a m r i a h C e h t m o r f e g a s s e M A 3 2014 ANNUAL REPORT s r a e Y 0 2 g n i t a r b e e C l 4 Celebrating 20 Years 1994 Listed on Australian Stock Exchange IPO raised $8 million 1998 First Melbourne project acquired 1999 Launched Mariners Cove Port Mandurah wins third UDIA Award 2002 Established Victorian office Diversified into medium density developments 2004 10 years as an ASX listed company CEDAR WOODS PROPERTIES LIMITED 2006 Acquired two more Melbourne projects 2008 Nautilus Apartments wins UDIA Award for best high density development Won first two WA State Government tenders 2011 Launched first regional project in the Pilbara 2013 Entered ASX300 with a market cap of $550m Banbury Village wins two UDIA awards Brisbane 20 Years as an ASX Listed Company Perth Melbourne Expanded portfolio into Queensland 2014 s 6 r 0 a 0 e 2 Y 0 2 g n i t a r b e e C l 5 2014 ANNUAL REPORT 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 Securities Exchange since 1994, trading under the security code ‘CWP’. Its market capitalisation is approximately $550m. 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, Victoria and Queensland. 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, design and delivery 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” and most recently, “Best High Density Development”. In the investor relations arena, the company is a past winner of three ARA silver awards for its Annual Report. Cedar Woods’ projects are sensitively developed with consideration for environmental and community interests and built to a high quality that is renowned in the marketplace. Through the rapid expansion of its built 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 value and its record in delivering quality developments to the market has produced a strong earnings stream, providing consistently high returns to shareholders. New report format This report has been restructured in FY2014 to merge the annual and financial reports which were published separately in prior years. The notes to the annual report have also been reordered into a more user-friendly style. Information about specific aspects of Cedar Woods Properties Limited’s financial position and performance is presented together. For example there are separate sections for risks, the group structure and unrecognised items. Colour-coding helps finding relevant information quickly. Cedar Woods Properties has also taken the opportunity to publish the Corporate Governance statement on our website rather than include in this report. A copy of the 2014 Corporate Governance statement can be downloaded from www.cedarwoods.com.au s d o o W r a d e C t u o b A 6 CEDAR WOODS PROPERTIES LIMITED s d o o W r a d e C t u o b A Cedar Woods’ Charter We are Cedar Woods Properties, an ASX 300 company with a proud history of creating communities across Australia through high-quality property development. Our purpose is to create long-term value for our shareholders through the disciplined acquisition, development and marketing of properties that meet the needs of our customers. A significant part of our business involves creating vibrant residential communities, typically in capital city growth corridors, with supporting retail and commercial developments. We are also active in the redevelopment of major infill sites where we deliver medium and high density residential dwellings. Project visioning in collaboration with our key stakeholder groups to produce quality sustainable outcomes is one of our core values. Our customers are influenced by interest rates, the economic outlook and Government policies. Demand in the metropolitan and regional markets in which we operate is uneven and fluctuates in response to these factors. Our strategy is to grow and develop our national project portfolio, diversified by geography, product type and price point, so that it continues to hold broad customer appeal and performs well in a range of market conditions. Against this backdrop, we manage our portfolio with the aim of delivering consistent annual growth in profits and dividends. 2014 ANNUAL REPORT 7 l e d o M s s e n s u B i r u O 10 Our Business Model Acquisition of properties Development Marketing and Sales • Identify projects that meet defined criteria and fit with Corporate Strategy. • Undertake project visioning to fulfil company performance standards and ensure sustainable outcomes. • Assess in accordance with defined parameters and financial targets. • Conduct research. • Assess design against financial and • Prepare marketing and sales campaigns. • Launch projects and achieve sufficient pre-sales to underwrite each stage of project development. • Major risks are identified and non-financial objectives. • Regular monitoring of sales contracts structured to minimise risks. • Achieve required approvals. • Manage construction to meet conditions and buyer groups. • Manage settlements. • Joint ventures used where required annual budget. or appropriate. We have a disciplined approach to the acquisition of new projects ensuring fit with the Corporate Strategy, earnings forecast and defined project criteria. We have a well-established network of contacts to identify and present sites for assessment and an experienced team of staff ready to conduct due diligence on sites that meet our criteria. We seek projects with strong points of difference and continually evaluate opportunities, looking for the optimum portfolio mix. We have well established procedures for the research, design, planning and delivery of our projects as outlined in our annual Sustainability Report. The expertise of our professional staff, supplemented by the appointment of the best available consultants and contractors is a key part of getting the best project outcomes and managing project risks. We have strong relationships with various Government agencies and consider this an important part of successful property development. A strong sales and marketing function is an important part of the company’s business model. We have an experienced team fulfilling this function and a well-established approach to marketing projects. We understand how to position projects to maximise demand and create marketing campaigns that will ensure sales budgets are met or exceeded. The presentation of our projects and customer service underpin our sales results. Achievements Achievements Achievements Numerous projects were assessed in VIC, WA and more recently south east QLD, which is seen as an attractive geographical diversification to add to the portfolio. Acquisitions were made at Byford on the Scarp (WA), Clayton South (VIC) and Upper Kedron (QLD). We are in a strong presales position for FY15 due to the successful marketing and sales of stages in new and existing projects. The company has approximately 50 per cent of the necessary presales for FY15. Several new campaigns were launched including The Brook at Byford (WA), Clara (VIC) and apartments at Banbury Village (VIC). The company continued its community engagement and sponsorship program with several successful initiatives. Important planning, design and delivery outcomes achieved: Victoria • Rezoning of St Albans site • Completed Masters Home Improvements store (Williams Landing) • Delivery of numerous stages at Realm Camberwell, Williams Landing and Banbury Village Footscray • Commenced construction of the Williams Landing Shopping Centre. Western Australia • Elements project completed (Hedland). • Approvals advanced at Bushmead, Mangles Bay and Brabham. • New stages at Rivergums, Piara Central and Emerald Park. CEDAR WOODS PROPERTIES LIMITED Our Stakeholders We recognise the important role our stakeholder groups play in the implementation of our business model. We define successful relationships, together with the related measurement techniques, as follows: Shareholders and investors: • Shareholders support the company by way of their initial investment and participation in the dividend reinvestment plan, bonus share plan and share purchase plans offered from time to time. • The company delivers profit and earnings growth within safe gearing limits and growing dividend payments, measured against our Corporate Plan and Budget objectives. • The company delivers effective communication of its progress, measured by surveys of institutional shareholders, questions received at the AGM from shareholders, proxy advisor reports, website patronage and feedback from entries to Australian reporting awards. Employees: • Employees consider Cedar Woods a desirable employer with a high standard of integrity, able to offer personal development, career progression and a fair and safe workplace. Measures include low staff turnover compared to industry norms, development and career progression monitoring, company awards, participation in corporate social responsibility activities, safety record and progress with diversity objectives. Customers: • Our customers refer their friends and families to us. • Customer satisfaction is high and sales targets are reached. • Measures include pre-development workshops, customer surveys, monitoring of complaints. Consultants/contractors/suppliers: • The best groups want to work with us. • They assist the company in meeting its purpose. • Monitoring of consultants’ and contractors’ performance is assisted by way of bi-annual performance reviews, measured against set criteria. Local / State / Federal Governments and Agencies: • Cedar Woods is viewed as a competent and trustworthy company and joint venture partner. • Measures include monitoring of the quality and timing of approval outcomes and review against original feasibility criteria, internal performance assessment. Industry bodies: • Cedar Woods is viewed as a valuable partner by industry groups such as the Urban Development Institute of Australia, Housing Industry Association, Property Council of Australia, Australian Property Institute, Australian Institute of Company Directors and Committee for Perth • Measures include development awards issued by the industry bodies. Community and environmental groups: • We consult widely with these groups in the planning and delivery of all of our projects. Engagement with community groups also occurs with community based events and sponsorship initiatives. All Stakeholder groups: • Cedar Woods is seen as a responsible corporate citizen with strong ethics and a track record of environmental leadership. l s r e d o h e k a t S r u O 11 2014 ANNUAL REPORT i p h s r o s n o p S d n a l t n e m p o e v e D y t i n u m m o C 12 Community Development and Sponsorship Cedar Woods’ key objectives in Community Development Strategy are to: • Focus on creating community wellbeing • Nurture a strong sense of community in new and existing developments • Maximise social and environmental connectedness Cedar Woods recognises that the success of this program is largely reliant on the strength of the partnerships we develop with both local and state governments, the not-for-profit sector and the local/regional services and amenities available in each individual community. Cedar Woods strives to be facilitative and collaborative in our approach to community development and sponsorship in order to achieve these goals. Community Development Throughout FY2014, Cedar Woods has contributed to various not-for-profit organisations and has provided communities a range of engaging events. • One of the highlights during FY2014 was the Cubby House challenge, where Cedar Woods raised $6,000 for the Kids Under Cover Organisation and won the People’s Choice Award at the auction of their designer cubby. • Community focused events included The Rivergums Movie Night (WA), the Piara Central Easter Event (WA) and the Emerald Park Summer Living Event (WA) where current and future community residents were engaged through a range of family friendly entertainment and activities. Cedar Woods looks forward to continuing community engagement and development through a range of fund raising initiatives and events. Neighbourhood Grants At the heart of the Cedar Woods’ community development strategy is our Neighbourhood Grants program. Since launching the Neighbourhood Grants program in 2009, Cedar Woods has helped many grass roots community organisations in and around our developments, awarding over $100,000 in grants to date. This is a significant contribution that has been shared amongst over 70 community groups, who provide services directly to our communities and the surrounding areas. Grant recipients are chosen because: • They each have diverse interests enabling us to help a wide section of the community • They offer valuable services that Cedar Woods wants to help grow and provide residents and the wider community a chance to get involved, be active and socialise. Currently active at Emerald Park (WA), The Rivergums (WA) and Williams Landing (VIC), the Neighbourhood Grants program will continue into FY2015 to continue to assist residents and the surrounding community. Sponsorship Cedar Woods’ sponsorship activity in FY2014 saw a continuation of our long term involvement in a variety of community, industry and corporate sponsorships. In addition, we also gave our support to a number of worthy causes such as the Murdoch University “Discover Your Potential Scholarship’’ and the Perth International Arts Festival. In the 2015 financial year Cedar Woods will continue to support a range of community focused causes. CEDAR WOODS PROPERTIES LIMITED i p h s r o s n o p S d n a l t n e m p o e v e D y t i n u m m o C 13 2014 ANNUAL REPORT l s r e d o h e r a h S o t t r o p e R 14 Report to Shareholders On behalf of the Board, we are pleased to present the financial and operating review of Cedar Woods Properties to shareholders. Financial and Operating Review The following summarises the results of operations during the year and the financial position of the consolidated entity at 30 June 2014: a) 2014 financial highlights • Revenue of $214,465,000, up 24 per cent; • • record net profit of $40,313,000, up 11 per cent; full year dividends of 27.5 cents per share, up 6 per cent; • earnings per share of 54.4 cents, up 9 per cent; • low level of bank debt; • strong interest cover; • $135,000,000, three year bank facility extended to November 2016. b) 2014 financial results summary Year ended 30 June Revenue Net profit after tax Total assets Net bank debt Shareholders’ equity c) Key performance indicators Year ended 30 June Basic earnings per share Dividends per share – fully franked Return on equity * Return on capital * Total shareholder return (1 year) Net bank debt to equity – 30 June Interest cover Net asset backing per share – historical cost Shares on issue – end of year Stock market capitalisation at 30 June Share price at 30 June 2014 $’000 2013 $’000 % Change 214,465 172,751 40,313 36,337 409,948 301,024 32,602 37,762 261,601 207,744 24.1 10.9 36.2 (13.7) 25.9 2013 % Change ¢ ¢ % % % % x $ 2014 54.4 27.5 15.4 19.1 46.6 12.5 10.4 3.34 49.9 26.0 17.5 21.6 53.8 18.2 12.6 2.83 ’000 $’000 $ 78,336 73,360 572,639 379,269 7.31 5.17 9.0 5.8 (2.1) (2.5) (7.2) (5.7) (17.5) 18.0 6.8 51.0 41.4 * Return on equity and return on capital are based on the 30 June 2014 balance sheet, subsequent to the May / June 2014 equity raising. CEDAR WOODS PROPERTIES LIMITED d) Financial year overview The 2014 financial year was an exciting year for the company with a number of important milestones achieved. In the first half the company’s progress and growth was acknowledged when it was admitted into the S&P ASX 300 Index for the first time. The company also achieved completion of its first commercial development at the Williams Landing Town Centre in Melbourne, with the opening of the Masters Home Improvement store in December 2013. In the second half, the company conducted a $30m equity raising, comprising a $25m institutional placement and $5m share purchase plan which received a strong response from shareholders and closed oversubscribed. The company made its first land acquisition in Brisbane, marking its strategic entry into the Queensland property market. At the end of the year the company completed its first project in the Pilbara, with the development of the Elements estate in South Hedland. Significant progress was made with stages developed across the company’s property portfolio of active projects. In addition, plans and approvals were progressed for a number of developments anticipated to commence in future years, with important planning milestones achieved at the Bushmead, North Baldivis, Mangles Bay (WA) and St Albans (VIC) projects. Further details of achievements in the property portfolio follow in the next section. The year closed with a record full year net profit of $40.3m, being the fourth consecutive year of record profit and earnings, allowing the Board to declare a record full year dividend of 27.5 cents per share. As a result, earnings per share for FY2014 was 54.4 cents, providing an increase of 9 per cent on the previous year. Return on equity of 15.4 per cent and return on capital of 19.1 per cent were well above the company’s benchmarks of 12 per cent and 14 per cent respectively. e) Operational Review of Developments Dwelling sector indicators across the nation point to a pick-up in activity spurred by low interest rates, with the HIA economics group forecasting a 7 per cent increase in annual housing starts for calendar 2014, with solid demand continuing in 2015. The strong inbound migration and a shortage of supply continue to provide the underlying fundamentals to support growing demand for residential property. In Victoria, residential lot sales and new home sales were well above the September 2012 cyclical low point and demand remains strong for well located property close to transport infrastructure and other amenities. The shortage of supply in key precincts has led to solid price gains in 2014. In WA, strong ongoing population growth, relatively low unemployment and positive consumer confidence has underpinned the WA property market, with solid conditions over the last 12 months. Demand from first home buyers has levelled off with upgraders and investors now driving the middle – upper market. In Queensland, State Treasury is forecasting economic growth in FY2015 and FY2016 faster than every other State in Australia, with dwelling investment the main driver in FY2015. Queensland is at an earlier phase in the housing cycle than the other States and an upswing in activity is expected over the next three to four years. i. Western Australia Activity levels improved significantly at the company’s current Western Australian land estates, with price levels moderately increasing during the year. In August 2013, the portfolio of projects in WA was enhanced with the acquisition of 35.3 hectares of new land at Byford on the Scarp for $9.3m. This acquisition followed the purchase of 32.3 hectares in February 2013 (since launched as ‘The Brook at Byford’) giving a combined total landholding of some 68 hectares or over 670 residential lots in this fast growing corridor. The acquisition continued a strategy to acquire and develop land in corridors where the company has previously been unrepresented in recent years. Sales at the Byford projects have been encouraging, with these projects expected to contribute to earnings over a number of years. At The Rivergums Baldivis, strong activity levels continued after the opening of the Baldivis Secondary College with the company releasing lots in adjoining stages. Similarly high levels of activity were recorded at Emerald Park in Wellard with all available lots selling out during the year. The Carine Rise project, a co-development between LandCorp, Cedar Woods and the St Ives Group will transform the former TAFE site in Perth’s middle northern suburb of Carine, into a multi-use precinct incorporating residential aged care, a retirement village, residential lots, townhouses and apartments. The civil works were completed during the year with all but six of the titled lots sold and settled, which will enable the built form components to be undertaken in due course. l s r e d o h e r a h S o t t r o p e R 15 2014 ANNUAL REPORT l s r e d o h e r a h S o t t r o p e R 16 Elements at South Hedland is the first Cedar Woods project in the burgeoning Pilbara region consisting of over 130 lots on 11 hectares. Working with project partners, mining companies, builders and, importantly, local residents and businesses, Cedar Woods has completed the development and delivered the titled lots during the second half. Almost all of the lots are sold, helping to satisfy the strong housing demand in the area. The first settlements commenced in FY2014, continuing into FY2015. The company has invested, along with a private syndicate, in the Batavia Marina Apartments, on the waterfront in Geraldton in the State’s mid-west. The project comprises 50 luxury apartments and four retail tenancies, mostly with marina and ocean views. The development was completed in late 2013 and settlement of the sold apartments commenced in the first half and continued in the second half. However, the rate of sales has been slower than initially anticipated and although forecast income for the project has not changed significantly, the company took the decision in the first half to write down the carrying value of its interest by $700,000 to $7.4m, as realisation of its investment will be over a longer period than previously anticipated. Approval milestones were achieved at three projects in the portfolio that are expected to contribute significantly to the company’s future prospects. At Bushmead, the Town Planning Scheme amendment was approved by the City of Swan in May 2014. At North Baldivis, the City of Rockingham at its March Council meeting initiated an amendment to its town planning scheme to rezone the area of CWP’s landholding zoned Urban in the Metropolitan Region Scheme from Rural to Development Zone. The Mangles Bay Marina development in Rockingham has also recently received State Ministerial environmental approval. ii. Victoria The company’s major residential projects in Victoria performed well during the year, continuing to record strong pre- sales and good levels of enquiry. Several new residential stages were completed at the Williams Landing, Banbury Village and Camberwell developments, and strong pre-sales have already been recorded for delivery in FY2015. During the first half, the company completed construction of the new Masters Home Improvement store in the Williams Landing town centre, with the store opening for business before the busy Christmas trading period. Early in the second half, the company commenced the development of the first stage of the Williams Landing Shopping Centre. The 6,750m2 centre will comprise a Woolworths supermarket and 24 speciality shops and kiosks. The centre, which is expected to be completed by mid FY2015, will also incorporate 1,760m2 of office space on two storeys. These developments, together with the opening of a new 45 home builder display village, have boosted demand for the company’s residential lots and interest in the Williams Landing Town Centre. The company’s project at St Albans received a major boost in November when Brimbank City Council adopted an amendment to rezone the 6.8 hectare site from industrial to residential. Work on the site is expected to commence in mid-2015 with residents moving in halfway through 2016. In November 2013, the company acquired a 6.5 hectare infill site in Clayton South, 19 kms south east of Melbourne’s CBD for $25.3m. The site is approved for residential use and is expected to yield approximately 250 dwellings with a range of housing solutions, including townhouses and apartments. The acquisition will be settled in August 2014, with construction expected to commence in 2015 and first settlements planned for 2016. iii. Queensland In May 2014 the company made its first investment in Queensland with the purchase of 227 hectares of land at Upper Kedron, 13 kms west of Brisbane’s CBD. Cedar Woods will pay $68m plus GST over four and a half years for the project and will develop a master-planned residential community on the site, providing more than 1,000 lots over 10 years. The acquisition was funded by the May share placement and Cedar Woods’ corporate debt facilities. The project is close to transport infrastructure and other amenities and there are no other major master-planned development sites in the Brisbane City area – all factors which make Upper Kedron an attractive proposition and consistent with the company’s selection criteria. Cedar Woods plans to deliver a high-quality development at Upper Kedron to attract a mix of buyer segments, with particular focus on second and third home buyers. Planning for the site is underway and is expected to take six to nine months. Construction of the first stage is expected to take approximately nine months. CEDAR WOODS PROPERTIES LIMITED f) Corporate Objectives, Strategy and Risks Cedar Woods’ Corporate Plan guides management’s activities and provides a five year outlook for the company, projecting earnings and other key performance indicators. Cedar Woods’ primary objective is to create value for shareholders as it aims to deliver strong year on year growth in net profit and earnings per share and put the company in the top half of all listed industrial companies based on financial performance. This year, the company reported full year net profit growth of 11 per cent and dividend growth of 6 per cent. The Corporate Plan sets out a number of key action items and strategies focused on achieving delivery of earnings growth and addressing key risk factors. These key actions are implemented as performance targets by senior executives, sales managers and other employees. In addition, twice each year our Audit and Risk Management Committee assesses risk factors that may affect the company including specific risks affecting individual projects and more general risks affecting our business sector. The overarching strategic objective is to grow and develop our national project portfolio, diversified by geography, product type and price point, so that it continues to hold broad customer appeal and performs well in a range of market conditions. The company’s strategies, as set out in the Corporate Plan and shown in our business model on page 10 are: i. Acquisition of properties In the last year the company bolstered its land bank by completing a number of key acquisitions. New land was purchased at Byford in Perth, Clayton South in Melbourne and Upper Kedron in Brisbane. The focus on the project pipeline guides management’s activities by ensuring there is sufficient diversity of product to meet the company’s ongoing earnings objectives in the years ahead and influences the company’s acquisition strategy. A summary of the project pipeline may be found at the end of this Financial and Operating Review. Cedar Woods’ core competency is in property development and the company continues to achieve industry- leading design, delivery and marketing of projects to maximise returns. ii. Development The company has a strategically located and diverse residential portfolio in urban and regional growth areas in Victoria, WA and Queensland, offering a wide spectrum of dwelling product and price points to consumers. The company’s offerings include small affordable housing lots at its residential estates through to high-end luxury apartments at boutique waterfront developments. Cedar Woods utilises joint ventures and co-development arrangements to diversify the company’s revenue streams and efficiently manage its capital. This year, the company completed the Carine Rise project, an important co- development with LandCorp and has progressed development by Cedar Woods Wellard Limited, which generates ongoing revenue by way of management and selling fees. Cedar Woods will build a limited number of commercial and retail property assets at Williams Landing and at other estates, where the development of those buildings is consistent with the estate’s master plan objectives. The long term ownership of those assets will be balanced against the company’s capital management objectives and acquisition opportunities. Developments may be sold once they have achieved the amenity objectives and their valuations have matured, with disposals likely to become a regular component of the company’s future revenue stream. ii. Marketing and sales The company continually assesses the markets in which it operates in order to ensure it has a wide offering of product to meet customer demand. Achieving sufficient pre-sales underwrites each development and is an important performance indicator for management. The company has successfully launched new projects at Elements in South Hedland, Carine Rise and Byford on the Brook in Perth and at Clara, at Williams Landing in Melbourne during the year. l s r e d o h e r a h S o t t r o p e R 17 2014 ANNUAL REPORT l s r e d o h e r a h S o t t r o p e R 18 g) Risks The general risks to company performance include those relevant to the property market including government policy in relation to immigration and support for the housing industry generally, the environmental policy framework, monetary policy set by the Reserve Bank of Australia, the strength of the labour market and consumer confidence. The company is also exposed to the property cycles in the markets in which it operates, i.e. Western Australia (regional and metropolitan), Victoria (metropolitan) and Queensland (metropolitan). The fluctuations in demand in these markets represent a risk to achieving the company’s financial objectives. The company aims to mitigate this risk by operating in diverse geographical markets and offering a wide range of products and price points to consumers. There has been recent speculation in the media that future house price growth will be below the rate of inflation. Whilst house and land prices fluctuate, underlying demand will be driven by population growth. In the past, the company has achieved its profit objective by managing both prices and volumes through the property cycle. Individual projects are exposed to a number of risks including those related to obtaining the necessary approvals for development, construction risks and delays, pricing risks and competition. The company aims to balance its portfolio at any time in favour of mature projects where the project risks are generally diminished. h) Capital management The company enhanced its credit facilities during the year, increasing the corporate bank facility limit from $110m to $135m, and extending the tenure by a further year to November 2016. In addition, a new $23m bank facility was progressed to facilitate the development of the Williams Landing Shopping Centre. In June 2014, the company completed a $30m equity raising, comprising a $25m institutional placement and a $5m share purchase plan, considerably strengthening the balance sheet. The year concluded with a low net debt to equity of 12.5 per cent at year end, temporarily below the company’s target debt to equity range of 20-75 per cent. Interest cover was at a favourable 10.4 times. The dividend policy, which is to distribute approximately 50 per cent of the annual net profit, was maintained. The dividend reinvestment plan and bonus share plans remained in operation for both of the dividends paid during the year, although these have been suspended for the final dividend payable in October 2014 due to the company’s strong financial position. i) Sustainability Reporting and Corporate Governance Report These reports are available as separate downloadable documents on our website www.cedarwoods.com.au under the Corporate Governance and Shareholder reports pages. j) People Our management team continues to expand to support the growth in the business. Cedar Woods remains committed to an inclusive workplace that embraces and promotes diversity and during the year the company embellished its workplace policies to further those objectives. The diversity policy sets out a framework for the company’s diversity-related initiatives, strategies and programs. Commentary is provided in the Corporate Governance Statement on the company’s website. The company has continued to actively support a range of industry groups including the Property Education Foundation of WA which focuses on improving property professionals’ skills. In 2014, Cedar Woods participated in promotional activities with the Foundation to help attract graduates to the development industry. k) Board Matters 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. The charters were updated during the year as required and are published on the company’s website. During the year, the company undertook a director recruitment exercise, utilising a specialist recruitment firm. The Board’s skill matrix and Corporate Plan helped identify the required attributes for the new director. Mr Stephen Pearce was appointed on 16 May 2014 and his financial knowledge and capital market experience strengthens the Board and its Audit and Risk Management Committee. The Audit and Risk Management Committee now has a majority of independent directors. CEDAR WOODS PROPERTIES LIMITED l) Outlook The Australian economy is forecast to grow slightly below trend in FY2015 as the construction phase of the resources boom continues to wind down. However, the underlying fundamentals of the property market remain solid, particularly in Western Australia, Victoria and Queensland, where the company’s portfolio is located. Strong levels of inbound migration, and historically low interest rates are expected to continue to support the property market, to some extent tempered by the higher unemployment rate and softening consumer confidence. The medium-to-long term prospects of the residential property sector remain positive in the states in which the company operates. The Western Australian economy is forecast to grow at 2.75 per cent in FY2015 with population growth of 2.1 per cent. Victoria’s economy is expected to grow at a steady 2.5 per cent in FY2015, with population growth of 1.8 percent anticipated. The Queensland economy is expected to grow at 3.0 per cent in FY2015 with 2.0 per cent population growth. (State Treasury forecasts). Cedar Woods enters FY2015 with low debt, a strong balance sheet and a diverse portfolio in major growth regions in three States. The company has $139m of presales in place and a number of new projects commencing. Assuming the current level of sales activity continues, the company anticipates delivering a net profit after tax at least in line with last year’s record profit. With ample funding and approvals in place, your board remains positive about the company’s outlook. In FY2014, we have continued to actively engage with the investment and broking community to raise Cedar Woods’ profile and build awareness of the strength of the company’s portfolio, culminating in the company’s inclusion in the S&P ASX 300 index. We are pleased with the support of our existing shareholders and welcome the new institutional and retail investors onto our register, following the recent share placement. In August 2014, the company celebrates 20 years listed on the Australian Securities Exchange, looking back on a period that has been highly rewarding for the company’s shareholders and other stakeholders. We look forward to further building on the strength of the company in the years ahead. We would like to thank our fellow directors and staff for their dedication and hard work in 2014. Thanks also go to our shareholders for their ongoing support of Cedar Woods in 2014 and in the years ahead. William Hames Chairman Paul Sadleir Managing Director l s r e d o h e r a h S o t t r o p e R 19 2014 ANNUAL REPORT e n i l e p P i t c e o r j P 20 Project Pipeline as at 30 June 2014 PROJECT NAME CORRIDOR / LOCATION PROJECT TYPE LOTS / UNITS PROJECT LOTS / UNITS REMAIN FY15 FY16 FY17 FY18 FY19 PROJECT LIFE (As of 30/6/14) WESTERN AUSTRALIA - PERTH Sutton Farm - Mandurah South Canal Carine Rise - Carine North West Residential / Mixed Use Emerald Park - Wellard South West Residential Land Piara Central - Piara Waters South East Residential Land The Brook at Byford Byford on the Scarp South East Residential Land South East Residential Land Mariners Cove - Mandurah South Canal The Rivergums - Baldivis South West Residential Land Harrisdale Green - Harrisdale South East Residential / Mixed Use Brabham North East Residential Land Waterline - Halls Head Mangles Bay Marina - Rockingham South South Lots Marina / Tourist North Baldivis South West Residential Land Bushmead - Hazelmere Pinjarra East South Residential Land Residential Land WESTERN AUSTRALIA - REGIONAL Batavia Marina - Geraldton Mid-West Apartments Elements - South Hedland Western Edge - South Hedland Pilbara Pilbara Residential Land Residential Land VICTORIA - MELBOURNE Realm - Camberwell Clara Banbury Village - Footscray Carlingford Williams Landing Williams Landing Town Centre Clayton South St A - St Albans QUEENSLAND - BRISBANE Housing Residential Land Apartments & Housing Residential Land East West West North West West Retail / Mixed Use / Residential South East Apartments & Housing North West Housing Residential Land & Housing 2,400 1,172 Upper Kedron West Residential Land > 1,000 > 1,000 6 43 627 481 367 323 973 1,365 427 480 9 TBC 850 750 920 54 139 600 78 40 431 648 4 6 209 358 367 313 97 526 262 480 9 TBC 850 750 920 33 91 600 9 40 175 185 600 250 250 600 250 250 CEDAR WOODS PROPERTIES LIMITED PROJECT NAME CORRIDOR / LOCATION PROJECT TYPE LOTS / UNITS LOTS / UNITS PROJECT REMAIN FY15 FY16 FY17 FY18 FY19 PROJECT LIFE (As of 30/6/14) Planning & Design Development & Sales Leasing, Development & Sales WESTERN AUSTRALIA - PERTH Sutton Farm - Mandurah South Canal Carine Rise - Carine North West Residential / Mixed Use Emerald Park - Wellard South West Residential Land Piara Central - Piara Waters South East Residential Land The Brook at Byford Byford on the Scarp South East Residential Land South East Residential Land Mariners Cove - Mandurah South Canal The Rivergums - Baldivis South West Residential Land 1,365 Harrisdale Green - Harrisdale South East Residential / Mixed Use Brabham North East Residential Land Waterline - Halls Head Lots Mangles Bay Marina - Rockingham Marina / Tourist North Baldivis South West Residential Land Bushmead - Hazelmere Pinjarra Residential Land Residential Land WESTERN AUSTRALIA - REGIONAL Batavia Marina - Geraldton Mid-West Apartments Elements - South Hedland Western Edge - South Hedland Pilbara Pilbara Residential Land Residential Land VICTORIA - MELBOURNE Realm - Camberwell Clara Banbury Village - Footscray Carlingford Williams Landing Clayton South St A - St Albans QUEENSLAND - BRISBANE Housing Residential Land Apartments & Housing Residential Land South East Apartments & Housing North West Housing South South East South East West West North West West Williams Landing Town Centre Retail / Mixed Use / Residential Residential Land & Housing 2,400 1,172 Upper Kedron West Residential Land > 1,000 > 1,000 6 43 627 481 367 323 973 427 480 9 TBC 850 750 920 54 139 600 78 40 431 648 600 250 250 4 6 209 358 367 313 97 526 262 480 9 TBC 850 750 920 33 91 600 9 40 175 185 600 250 250 e n i l e p P i t c e o r j P 21 2014 ANNUAL REPORT t r o p e R ’ s r o t c e r i D 22 Directors’ Report Your directors present their report on the consolidated entity consisting of Cedar Woods Properties Limited (‘the company’) and the entities it controlled (together ‘the consolidated entity’ or ‘group’) at the end of, or during, the year ended 30 June 2014. a) Directors The following persons were directors of Cedar Woods Properties Limited during the whole of the financial year and up to the date of this report, except where stated: William George Hames (Chairman) Robert Stanley Brown (Deputy Chairman) Ronald Packer Stephen Thomas Pearce (appointed on 16 May 2014) Paul Stephen Sadleir (Managing Director) Timothy Robert Brown (Alternate for R S Brown) b) Principal activities The principal continuing activities of the consolidated entity in the course of the year ended 30 June 2014 were that of property developer and investor and no significant change in the nature of those activities took place during the year. c) Dividends Dividends paid to members during the financial year were as follows: Final fully franked ordinary dividend for the year ended 30 June 2013 of 15.0 cents (2012 - 14.0 cents) per fully paid share, paid on 30 October 2013 (2013 – 31 October 2012) Interim fully franked ordinary dividend for the year ended 30 June 2014 of 12.0 cents (2013 – 11.0 cents) per fully paid share, paid on 30 April 2014 (2013 – 30 April 2013) 2014 $’000 2013 $’000 10,668 9,859 8,709 19,377 7,830 17,689 Since the end of the financial year the directors have recommended the payment of a final fully franked ordinary dividend of $12,142,138 (15.5 cents per share) to be paid on 31 October 2014 out of retained earnings at 30 June 2014. d) Financial and operating review Information on the operations and financial position of the group and its business strategies and prospects is set out in the financial and operating review, commencing on page 14 of this annual financial report. e) Business strategies and prospects for future financial years The consolidated entity will continue property development operations in Western Australia, Victoria and Queensland. It is planned to make further additions to the property portfolio, which may include additional property joint ventures. Subject to market conditions continuing at current levels, the group anticipates delivering a net profit at least in line with the 2014 result, underpinned by a significant bank of presales already in place at the date of this report. CEDAR WOODS PROPERTIES LIMITED f) Significant changes in the state of affairs Significant changes in the state of affairs of the consolidated entity during the year were as follows: Contributed equity increased by $32,921,000 (from $83,795,000 to $116,716,000) as a result of the institutional placement, the share purchase plan and the issue of shares under the dividend reinvestment plan and bonus share plan. Details of changes in contributed equity are set out in note A4(a) of the financial statements. The net cash received from the issue of contributed equity was applied to debt reduction, and the group makes redraws on its debt facility to fund new acquisitions and develop new estates on existing landholdings. g) Matters subsequent to the end of the financial year No matters or circumstances have arisen since 30 June 2014 that have significantly affected or may significantly affect: a. b. c. the consolidated entity’s operations in future financial years; or the results of those operations in future financial years; or the consolidated entity’s state of affairs in future financial years. h) Likely developments and expected results of operations Beyond the comments at items (d) and (e), further information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. i) Environmental regulation To the best of the directors’ knowledge, the group complies with the requirements of environmental legislation in respect of its developments, and obtains the planning approvals required prior to clearing or development of land under the laws of the relevant states. There have been no instances of non-compliance during the year and up to the date of this report. j) Information on directors Mr William G Hames, B Arch (Hons) MCU (Harvard) LFRAIA, MPIA, FAPI (Econ) • Chairman of the Board of directors, non-executive director • Member of the Nominations Committee Mr Hames is a co-founder of Cedar Woods Properties Limited. He is an architect and town planner by profession, and received a Masters Degree in City Planning and Urban Design from the Harvard Graduate School of Design, at Harvard University in Boston. He worked in the US property development market before returning to Australia in 1975 and establishing Hames Sharley Australia, an architectural and town planning consulting company. Mr Hames brings substantial property experience to the Board upon which he has served as a director for twenty-four years. Other current listed company directorships and former listed company directorships in the last three years: None. Mr Robert S Brown, MAICD, AIFS • Deputy Chairman of the Board of directors, non-executive director • Member of the Audit and Risk Management Committee • Member of the Human Resources and Remuneration Committee • Member of the Nominations Committee Mr Brown is Executive Chairman of Westland Group Holdings Pty Ltd, with responsibilities in mining, agribusiness, biotechnology and venture capital. He is a past president of the Federation of Building Societies of WA and has participated in and chaired various Western Australian government advisory committees related to the housing industry. Mr Brown brings to the Board his diversified experience as a director of these companies and other listed entities and has served as a director of Cedar Woods Properties Limited for twenty-six years. Other current listed company directorships and former listed company directorships in the last three years: Luiri Gold Limited. t r o p e R ’ s r o t c e r i D 23 2014 ANNUAL REPORT t r o p e R ’ s r o t c e r i D 24 Mr Ronald Packer, BCom (UWA), FAICD, Solicitor Supreme Court of England & Wales • Non-executive director • Chairman of the Audit and Risk Management Committee • Chairman of the Human Resources and Remuneration Committee • Chairman of the Nominations Committee Mr Packer is an independent director who brings to the Board a wide range of property experience in the public and private arena. He is the former Managing Director of PA Property Management Limited, the responsible entity for the PA Property Trust and is currently the Chairman of Terrace Properties and Investments Pty Ltd. Mr Packer has served as a director for eight years and chairs all of the Board’s committees. Other current listed company directorships and former listed company directorships in the last three years: None. Mr Stephen T Pearce, BBus (ACC), Grad Dip (Admin), FCA, AGIA, MAICD • Non-executive director • Member of the Audit and Risk Management Committee Mr Pearce is an independent director with almost 30 years’ senior executive and directorship experience at publicly-listed companies in the resources, oil and gas, energy and utilities sectors and has significant expertise across all areas of finance and capital markets. He is currently the Chief Financial Officer of Fortescue Metals Group Ltd. Mr Pearce previously held the position of Managing Director and CEO of Southern Cross Electrical Engineering Limited and, before that, was Chief Financial Officer of Alinta Limited. He is currently non-executive Chairman of the Lions Eye Institute and was previously a member of the Salvation Army’s Business and Industry Committee. He was appointed a director on 16 May 2014. Other current listed company directorships and former listed company directorships in the last three years: None. Mr Paul S Sadleir, BE, MBA, AAPI, FAICD • Managing Director, executive director Mr Sadleir has extensive experience in the property sector including strategic planning, portfolio management, acquisition analysis, equity and finance raising and investor relations management. Mr Sadleir holds Masters of Business Administration and Bachelor of Engineering degrees from the University of Western Australia. Prior to joining Cedar Woods, he was manager of the Bunnings Warehouse Property Trust and previously held roles with Wesfarmers Limited, Western Power and Barrack Mines. He is currently a Board member of the Bridgewater care group, one of the largest providers of residential aged care in Western Australia, a Division Councillor at the WA Division of the Australian Institute of Company Directors and a Senate member of Murdoch University. Other current listed company directorships and former listed company directorships in the last three years: None. Mr Timothy R Brown, BA, LLB, M. Fin, Post Graduate Diploma (Phil) • Alternate director for Mr Robert S Brown Mr Brown is a director of Westland Group Holdings Pty Ltd, with responsibilities in mining, agribusiness, biotechnology and venture capital. His qualifications include a Bachelor of Laws from Notre Dame Australia and a Masters of Finance from Curtin University. Mr Brown was admitted to the Supreme Court of Western Australia as a barrister and solicitor in 2004. Other current listed company directorships and former listed company directorships in the last three years: None. Company Secretary The Company Secretary is Mr Paul S Freedman, BSc, CA, GAICD. Mr Freedman was appointed to the position in 1998. He is a member of the Institute of Chartered Accountants in Australia and is a member of the Australian Institute of Company Directors. He brings to the company a background of twenty years in financial management in the property industry, preceded by employment in senior roles with major accountancy firms. CEDAR WOODS PROPERTIES LIMITED k) Shares issued on the exercise of options No share options were in existence during the year and none have been issued up to the date of this report. l) Directors’ interests in shares Directors’ relevant interests in shares of Cedar Woods Properties Limited at the date of this report, as defined by sections 608 and 609 of the Corporations Act 2001, are as follows: Director William G Hames Robert S Brown* Ronald Packer Stephen T Pearce Paul S Sadleir Timothy R Brown* Interest in ordinary shares 9,778,488 7,970,135 166,782 15,000 1,045,445 4,639,980 *R S Brown and T R Brown have a shared interest in 4,639,980 shares. m) Committees of the Board As at the date of this report Cedar Woods Properties Limited had the following committees of the Board: Audit and Risk Management Committee Human Resources and Remuneration Committee Nominations Committee R Packer (Chairman) R Packer (Chairman) R Packer (Chairman) R S Brown S T Pearce R S Brown - R S Brown W G Hames n) Meetings of directors The following table sets out the numbers of meetings of the company’s directors (including meetings of committees of directors) held during the year ended 30 June 2014, and the numbers of meetings attended by each director: Board Meetings Meetings of Committees Audit and Risk Management Human Resources and Remuneration Nominations Number of meetings held: W G Hames R S Brown R Packer S T Pearce (1) P S Sadleir T Brown (alternate director) * Not a member of this committee 10 10 9 10 2 10 1 5 * 5 5 1 * - 3 * 3 3 * * - 4 4 4 4 * * - (1) S T Pearce was appointed on 16 May 2014 and attended the Board and Audit and Risk Management Committee meetings for which he was eligible. t r o p e R ’ s r o t c e r i D 25 2014 ANNUAL REPORT t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 26 Directors’ Report: Remuneration Report. The directors present Cedar Woods Properties Limited’s 2014 remuneration report which sets out remuneration information for the directors and other key management personnel. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The key management personnel of the company and the group are the directors, whose details appear on pages 23-24 above and the following executive officers: Nathan Blackburne – Victorian & Queensland State Manager Stuart Duplock – West Australian State Manager (ceased employment with the company 14 August 2014) Paul Freedman – Chief Financial Officer o) Remuneration governance The Human Resources and Remuneration Committee is a committee of the Board. It is responsible for making recommendations to the Board on: • • • • the over-arching executive remuneration framework non-executive director fees operation of incentive plans and key performance hurdles for the executive team, and remuneration levels of the managing director and other key management personnel. The committee’s objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the company. The Human Resources and Remuneration Committee periodically obtains independent remuneration information to ensure directors’ fees and executive remuneration packages are appropriate and in line with the market (see section t) v – Use of Remuneration Consultants below). The Corporate Governance Statement provides further information on the role of this committee, and may be found on the company’s website under the Investor Relations link. p) Non-executive director remuneration policy On appointment to the Board, all non-executive directors enter into a service agreement with the company in the form of a letter of appointment. The letter details the terms, including remuneration, relevant to the office of director. Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of the directors. Directors’ remuneration is inclusive of additional fees paid to directors who sit on committees, with an additional fee payable for chairing committees. Fees take into account the memberships of directors on subsidiary Boards. Non-executive directors’ fees and payments are reviewed from time to time by the Human Resources and Remuneration Committee, taking into account comparable roles and market data. Non-executive directors do not receive performance based pay. q) Directors’ fees Non-executive directors’ base remuneration was last reviewed from 1 July 2010 and again with effect from 1 July 2013. Remuneration of non-executive directors is determined by the Board, after receiving recommendations from the Human Resources and Remuneration Committee, within the maximum amount approved by the shareholders from time to time (currently $500,000). CEDAR WOODS PROPERTIES LIMITED The following annual fees (inclusive of superannuation) have applied: Chair Deputy Chair Other non-executive directors Committee chair 2014 $ 148,000 114,000 80,000 12,000 2013 $ 130,000 100,000 70,000 10,000 r) Executive remuneration policy and framework Our purpose is to create long-term value for shareholders with the aim of delivering consistent annual growth in profits and dividends. Our performance measures align with our purpose. Our business model and key achievements for FY2014 are set out on page 10. The objective of the group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive rewards with achievement of strategic objectives and the creation of value for shareholders. The Board of directors ensures that executive reward satisfies the following key criteria for good reward governance practices: • Competitiveness and reasonableness • Acceptability to shareholders • Alignment of executive compensation to group performance • Transparency • Capital management. The framework is aligned to shareholders’ interests by having profitability and return on equity as core components of plan design. The framework is aligned to program participants’ interests as follows: • Rewards capability and experience • Reflects competitive reward for contribution to growth in shareholder wealth • Provides a clear structure for earning rewards • Provides recognition for contribution. The framework provides a mix of fixed and variable pay, including appropriate incentives. Performance related components are available to certain executives based on the earnings performance of the group measured against the objectives set in the Corporate Plan and achievement of personal objectives established at the start of the year. Performance related components are awarded each year following the audit of the annual results. These may be adjusted up or down in line with under or over achievement against the target performance levels, at the discretion of the Human Resources and Remuneration Committee. The Human Resources and Remuneration Committee also considers issues of succession planning, career development and staff retention. t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 27 2014 ANNUAL REPORT t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 28 s) FY2014 performance measurement and assessment Company objectives and accountability measures for key management personnel were as follows: Objective Measures Outcomes Acquisition of properties: • Fit with current portfolio • To enhance the portfolio • Exceeds stock sold each year Developments: • On time, on budget • Product/price/geographic diversification • Forecast to meet required hurdle rate • Rezonings and approvals achieved versus budget (timeframes and permitted development) • Monthly reporting of actual vs budget development costs • Acquired one new project in each state, each with point of difference • Bolsters portfolio and strong returns forecast • Rezonings and approvals received on most projects • Some delays and cost overruns on projects but more than compensated by strong outcomes on balance of portfolio Marketing and Sales: • Monthly reporting of sales and • Met sales targets to ensure profit • Achieve premium prices and consistent sales in varying market conditions settlements vs budget guidance was achieved • Actual prices vs budget • Prices generally at a premium and • Marketing spend • Customer satisfaction above budget • Positive referrals and feedback Financial Performance and Health: • Growth in NPAT and EPS • NPAT up 11% and EPS up 9% • Continued growth in a risk • Satisfactory ROE and ROC • ROE 15.4%, ROC 19.1% controlled manner • Gearing (debt/equity) • Gearing 12.5%, marginally below • Capital management • Risk management framework in place bottom of target range • Successful raising funded Queensland entry • Risks identified and mitigated People: • Staff productivity • Key company objectives achieved • Committed personnel in a safe • Staff development • Competencies improved working environment • Staff turnover • OH&S • Minimal turnover • OH&S systems managed and improvements underway Shareholders and Investors: • Participation in share issues • Successful capital raising • Support the company • Company investor relations • Positive feedback including program external survey of institutional investors This performance measurement framework is being further developed for financial year 2015 and will provide a closer alignment to the company’s overriding objective of providing long term value to shareholders. t) Pay of Managing Director and other executives The executive pay and reward framework has the following components:: • Base pay and benefits • Short-term and long term performance incentives • Other remuneration such as superannuation. The combination of these comprises the executive’s total remuneration. CEDAR WOODS PROPERTIES LIMITED i. Base pay Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-monetary benefits at the executives’ discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. From time to time external remuneration consultants provide analysis and advice to ensure that remuneration is set to reflect the market for a comparable role. Base pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market. There are no guaranteed base pay increases included in any executives’ contracts. ii. Non – monetary benefits Some executives receive benefits including parking and membership of certain professional organisations. iii. Short-term incentives (STI) Each executive has a target STI opportunity depending on the accountabilities of the role and impact on organisational performance. For senior executives, key accountabilities relate to operating, financial and employee management activities within their areas of control. Operating measures include progress with planning and development of current projects, identification and acquisition of new projects, product positioning as well as ensuring compliance and risk management processes are operating effectively. Financial measures include performance against budget and corporate plan targets, including sales revenues achieved, control of operating and capital costs and capital management. Employee measures include recruitment, retention, training and development of staff, thereby ensuring the company is well resourced and positioned for growth. The bonus opportunities for each executive are set annually by the Human Resources and Remuneration Committee. In FY2014, the company achieved NPAT of $40.3m which exceeded the $39m hurdle set at the beginning of the year, at which point: • 50% of executives’ incentives were available, with the actual amount paid based on individual accountabilities and performance. • 25% of executives’ incentives were awarded based on exceeding the $39m hurdle. A further 25% was awarded by the Human Resources and Remuneration Committee based on the company meeting its earnings guidance. The Human Resources and Remuneration Committee has the discretion to adjust STI awards in the light of personal performance and the final profit result. iv. Long-term incentives (LTI) The company operates a retention incentive plan, which first commenced in FY2012, for executives and other managers. The retention incentive is designed as a cash bonus opportunity that vests three years after award, based on company and individual performance criteria assessed in the first year and ongoing employment with the group for the remaining two years. The LTI is only available if the group meets the pre-determined profit target in the first year. In FY2014 the profit target was a minimum net profit of $39m. In financial year 2015, it is intended that the STI and LTI awards will be based on the performance measurement framework on page 28 which encompasses a broader set of objectives than has been used in past years. If the employee leaves the company before the vesting date no bonus is paid, although the Board may waive this restriction at its discretion, for example when an employee retires. If an employee is made redundant after the award but before the vesting date then the bonus is paid out. In FY2014 a total of $335,750 was awarded under the retention incentive plan for executives and other staff, which will vest on 1 July 2016. The total awarded under the plan in previous years which has yet to vest is $287,000. The company moved to a cash based incentive plan following the period of pronounced share price volatility associated with the global financial crisis and its aftermath. t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 29 2014 ANNUAL REPORT The Human Resources and Remuneration committee continues to monitor trends in the area of long term incentives, recognising that staff retention is an important issue, whilst at the same time ensuring remuneration levels are reasonable. The operating, financial and employee measures used in awarding LTI’s are the same as those used in STI awards. v. Use of remuneration consultants In FY2012 the Human Resources and Remuneration Committee employed KPMG as remuneration consultant to the Board to review the amount and elements of the remuneration of the Managing Director and other executives and provide recommendations in relation thereto. In FY2013 and FY2014 no remuneration consultants were utilised. u) Details of remuneration Details of the remuneration of each director of Cedar Woods Properties Limited and each of the other key management personnel of the consolidated entity are set out in the following tables. Cash bonuses are dependent upon the satisfaction of performance conditions as set out in the section Short-term incentives and Long-term incentives above. All other elements of remuneration in the tables are fixed. t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 30 CEDAR WOODS PROPERTIES LIMITED Directors of Cedar Woods Properties Limited 2014 Name W G Hames R S Brown R Packer S T Pearce* P S Sadleir Total Short-term benefits Post employment Long-term benefit Cash salary and fees $ Cash bonus $ Non-monetary benefits $ Super- Annuation $ Cash bonus $ 135,469 104,348 82,270 9,312 772,270 1,103,669 - - - - - - - - 427,500 427,500 7,268 7,268 12,531 9,652 33,730 861 23,730 80,504 - - - - - - * Mr Pearce was appointed on 16 May 2014. 2013 Name W G Hames R S Brown R Packer P S Sadleir Total Short-term benefits Post employment Long-term benefit Cash salary and fees $ Cash bonus $ Non-monetary benefits $ Super- Annuation $ Cash bonus $ 119,266 91,743 76,238 726,548 1,013,795 - - - 380,000 380,000 - - - 7,199 7,199 10,734 8,257 23,762 23,452 66,205 - - - - - Other key management personnel Short-term benefits Post employment Long-term benefit Cash salary and fees $ Cash bonus $ Non-monetary benefits $ Super- Annuation $ Cash bonus $ 2014 Name N Blackburne P Freedman S Duplock Total 2013 Name N Blackburne P Freedman S Duplock Total 362,225 320,000 305,000 987,225 100,000 12,754 57,000 42,000 1,236 1,732 199,000 15,722 17,775 25,000 25,000 67,775 40,000 23,750 - 63,750 1,333,472 Short-term benefits Post employment Long-term benefit Cash salary and fees $ Cash bonus $ Non-monetary benefits $ Super- Annuation $ Cash bonus $ 323,530 305,000 288,530 917,060 90,000 50,000 60,000 11,611 1,217 1,702 200,000 14,530 16,470 25,000 16,470 57,940 40,000 25,000 30,000 95,000 Total $ 481,611 406,217 396,702 1,284,530 Total $ 148,000 114,000 116,000 10,173 1,230,768 1,618,941 Total $ 130,000 100,000 100,000 1,137,199 1,467,199 Total $ 532,754 426,986 373,732 t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 31 2014 ANNUAL REPORT t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 32 The relative proportions of remuneration for the executives that are linked to performance and those that are fixed are as follows: Fixed Remuneration % 2014 At risk – STI % At risk – LTI % Fixed Remuneration % 65 73 81 89 35 19 13 11 0 8 6 0 66 73 82 77 2013 At risk – STI % 34 19 12 15 At risk – LTI % 0 8 6 8 Name P Sadleir N Blackburne P Freedman S Duplock Terms of employment for the Managing Director and other executives The terms of employment for Mr P Sadleir provide for an annual base salary inclusive of superannuation and the provision of annual performance-related short-term bonuses. Benefits comprise payment of certain professional memberships, provision of car parking and previously, when in operation, participation in the Cedar Woods’ Employee Share Scheme. In addition, Mr Sadleir is entitled to payment of a benefit on termination by the employer following significant restructure or takeover, equal to his total remuneration package for one year plus normal accrued entitlements. The terms of employment for the other specified executives provide for an annual base salary inclusive of superannuation, the provision of annual performance-related short-term and long-term cash bonuses, and the payment of certain professional memberships. N Blackburne was also provided car parking in addition to his annual base salary. Notice periods for the executives other than the Managing Director do not exceed 3 months, and no other termination benefits apply other than statutory entitlements. Senior executives hold salaried positions with no fixed terms. Mr Duplock ceased employment with the company on 14 August 2014 and received a payment of $82,754 being his notice period and accrued entitlements. The remuneration for directors and specified executives is set by the Human Resources and Remuneration Committee for each financial year ending 30 June and is reviewed annually. Bonuses vested and forfeited For each cash bonus included in the above tables, the percentage of the available bonus or grant available to the specified executives based on their individual performances and that of the group, that was vested in the financial year, and the percentage that was forfeited because the service and performance criteria were not met in full, is set out below. The 2014 STI bonuses will be paid in FY2015 and the 2014 LTI bonuses will be paid in FY2017 if the service requirements are met. Name P S Sadleir N Blackburne P Freedman S Duplock * 2014 STI and LTI bonus vested % 2014 STI and LTI bonus forfeited % 2013 STI and LTI bonus vested % 2013 STI and LTI bonus forfeited % 95 100 95 60 5 0 5 40 95 100 100 100 5 0 0 0 * Vesting percentages relate to STI only as S Duplock’s employment ceased 14 August 2014 and no LTI accrues. The company does not have a policy for the clawback of performance-based remuneration of key management personnel that would apply in the event of serious misconduct or a material misstatement in the group’s financial statements, however it is monitoring developments in this governance area and intends to implement a policy going forward. CEDAR WOODS PROPERTIES LIMITED v) Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term employee benefits 2014 $ 2013 $ 2,740,384 2,532,584 148,279 63,750 124,145 95,000 2,952,413 2,751,729 w) Equity instrument disclosures relating to key management personnel The numbers of ordinary shares in the company held during the financial year by each director of Cedar Woods Properties Limited and each of the other key management personnel, including their personally-related parties, are set out below. There were no shares granted during the period as compensation. 2014 Name Number of shares at the start of the year Other changes during the year Number of shares at the end of the year Directors of Cedar Woods Properties Limited William G Hames† Robert S Brown* Ronald Packer Stephen T Pearce Paul S Sadleir Timothy S Brown (alternate for R S Brown) 9,708,448 7,951,808 160,586 - 1,077,087 4,639,980 Other key management personnel of the consolidated entity 196,958 21,327 6,196 15,000 (27,558) - (42,626) (118,753) (5,576) 9,905,406 7,973,135 166,782 15,000 1,049,529 4,639,980 103,619 17 0 146,245 118,770 5,576 Number of shares at the start of the year Other changes during the year Number of shares at the end of the year Directors of Cedar Woods Properties Limited William G Hames† Robert S Brown* Ronald Packer Paul S Sadleir Timothy S Brown (alternate for R S Brown) 9,419,838 8,822,431 151,746 1,059,790 5,027,176 Other key management personnel of the consolidated entity Paul S Freedman Nathan J Blackburne Stuart A Duplock 145,855 118,539 5,269 288,610 (870,623) 8,840 17,297 (387,196) 390 231 307 9,708,448 7,951,808 160,586 1,077,087 4,639,980 146,245 118,770 5,576 † Includes 2,014,439 (2013 - 2,014,439) shares over which W G Hames has voting rights and a first right of refusal to purchase. * Interest of T R Brown relates to shares also shown under R S Brown. The interests shown above comply with AASB124 Related Party Disclosures and differ to those shown at item l of the directors’ report which comply with the requirements of sections 608 and 609 of the Corporations Act 2001. The table above includes the shares held by related parties of the key management personnel. Paul S Freedman Nathan J Blackburne Stuart A Duplock 2013 Name t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 33 2014 ANNUAL REPORT t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 34 x) Other transactions with key management personnel The consolidated entity uses a number of firms for architectural, urban design and planning services, creative design services and settlement services. Where entities related to directors are able to fulfil the requisite criteria to provide the services at competitive rates, they may be engaged by the company to perform the services. Should entities connected with the directors be engaged, the directors declare their interests in those dealings and take no part in decisions relating to them. During the year planning, architectural and consulting services were provided by Hames Sharley Architects of which Mr W G Hames is a principal. The transactions were performed on normal commercial terms and conditions and fees paid were consistent with market rates. During the year creative design services were provided by Axiom Design, an entity associated with the family of Mr W G Hames. W G Hames has no beneficial interest in Axiom Design. The services were performed on normal commercial terms and conditions. Property settlement charges were paid to Westland Settlement Services Pty Ltd, a company associated with the family of Mr R S Brown. The charges were based on normal commercial terms and conditions. During the 2013 and 2014 year a donation was paid to a scholarship fund of Murdoch University, of which Mr P S Sadleir is a Senate member, with no beneficial interest. The transaction was performed on normal commercial terms and conditions. Payments were made for sponsorship of the Warren Jones Foundation Inc. (in 2013 and 2014) and the Property Education Foundation Inc. (in 2013 only), organisations for which Mr R Packer is a trustee with no beneficial interest. The transactions were performed on normal commercial terms and conditions. Aggregate amounts of each of the above types of other transactions with key management personnel of Cedar Woods Properties Limited or their related entities: Amounts recognised as expense Creative design services Settlement fees Donations Sponsorships Amounts recognised as inventory Architectural fees Aggregate amounts of assets at balance date relating to the above types of other transactions with directors of Cedar Woods Properties Limited or their related entities: Inventory 2014 $ 34,178 66,835 2,500 7,650 2013 $ 19,475 98,907 2,500 11,286 111,163 132,168 187,903 187,903 129,236 129,236 187,903 187,903 129,236 129,236 There are no aggregate amounts payable to directors of Cedar Woods Properties Limited, or their related entities, at balance date relating to the above types of other transactions. y) Voting and comments made at the company’s 2013 Annual General Meeting (AGM) At the company’s 2013 AGM, 87.9 per cent of eligible votes cast were in favour of the remuneration report for the 2013 financial year. The company received no questions at the AGM in relation to its remuneration report. CEDAR WOODS PROPERTIES LIMITED z) Performance of Cedar Woods Properties Limited In FY2014, the group delivered a record profit of $40.3 million, an increase of 10.9 per cent. This was the fourth consecutive record profit for the company. The returns to shareholders of Cedar Woods Properties Limited over the last 1, 3 and 5 years is reflected in the table below: Returns to shareholders over 1, 3 and 5 years (%) 1 year 3 years 5 years Earnings per share growth Share price growth Dividend growth (paid dividend) Total shareholder return (change in share price and dividends) 9.0 41.4 8.0 46.6 5.9 22.3 12.4 28.7 27.4 38.8 22.0 45.9 The total shareholder return in FY2014 was 46.6 per cent which compared favourably with the All Ordinaries total return of 17.6 per cent over the same period. Management is focussed on delivering earnings per share and dividend growth. The company share price is subject to market factors that are beyond the company’s control. t r o p e R n o i t a r e n u m e R : t r o p e R ’ s r o t c e r i D 35 2014 ANNUAL REPORT ) d e u n i t n o c ( t r o p e R ’ s r o t c e r i D Directors’ Report (continued) aa) Retirement, election and continuation in office of directors Mr Ron Packer retires by rotation at the forthcoming Annual General Meeting and being eligible, will offer himself for re-election. Mr Stephen T Pearce was appointed a director on 16 May 2014. In accordance with the constitution, Mr Pearce retires as a director at the annual general meeting and, being eligible, offers himself for re-election. bb) Insurance of officers During the financial year, Cedar Woods Properties Limited paid a premium in respect of directors’ and officers’ liabilities that indemnifies certain officers of the company and its controlled entities. The officers of the company covered by the insurance policy include the directors, W G Hames, R S Brown, R Packer, S T Pearce, P S Sadleir and the Company Secretary, P S Freedman. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the company and its controlled entities. The directors have not included more specific details of the nature of the liabilities covered or the amount of the premium paid in respect of the policy, as such disclosure is prohibited under the terms of the contract. cc) Non-audit services The group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or group are important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out in note E2 in the other information section of this report. The Board of directors has considered the position and, in accordance with the advice received from the Audit and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • All non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the impartiality and objectivity of the auditor • None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. dd) Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 forms part of this directors’ report and is set out on page 37. ee) Rounding of amounts The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that class order to the nearest thousand dollars, or in certain cases, to the nearest dollar. This report is made in accordance with a resolution of the directors. P S Sadleir Managing Director 19 August 2014 36 CEDAR WOODS PROPERTIES LIMITED Auditor’s Independence Declaration Auditor’s Independence Declaration relation to the audit; and As lead auditor for the audit of Cedar Woods Properties Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been: Auditor’s Independence Declaration a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in As lead auditor for the audit of Cedar Woods Properties Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been: b) no contraventions of any applicable code of professional conduct in relation to the audit. a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in This declaration is in respect of Cedar Woods Properties Limited and the entities it controlled during the period. b) no contraventions of any applicable code of professional conduct in relation to the audit. relation to the audit; and This declaration is in respect of Cedar Woods Properties Limited and the entities it controlled during the period. Douglas Craig Partner PricewaterhouseCoopers Douglas Craig Partner PricewaterhouseCoopers Perth 19 August 2014 Perth 19 August 2014 PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 Liability limited by a scheme approved under Professional Standards Legislation. T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. l n o i t a r a c e D e c n e d n e p e d n I s ’ r o t i d u A 37 2014 ANNUAL REPORT l n o i t a r a c e D e c n e d n e p e d n I s ’ r o t i d u A Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income .................................................................... 40 Consolidated Balance Sheet .............................................................................................................................................. 41 Consolidated Statement of Changes in Equity ................................................................................................................... 42 Consolidated Cash Flow Statement ................................................................................................................................... 43 These financial statements are consolidated financial statements for the group consisting of Cedar Woods Properties Limited and its subsidiaries. A list of major subsidiaries is included in note C1(a). The financial statements are presented in the Australian currency. Cedar Woods Properties Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Ground Floor, 50 Colin Street WEST PERTH WA 6005. The financial statements were authorised for issue by the directors on 19 August 2014. The directors have the power to amend and reissue the financial statements. 39 Financial Statements2014 ANNUAL REPORTConsolidated Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2014 Revenue from operations Sale of land and buildings Services Other revenue Other Income Expenses Cost of sales of land and buildings Cost of providing services Other expenses from ordinary activities: Project operating costs Occupancy Administration Other Finance costs Share of net profit (loss) of joint ventures accounted for using the equity method Profit before income tax Income tax expense Note A1(a) Consolidated 2014 $’000 195,631 15,908 2,926 214,465 2013 $’000 161,816 6,364 4,571 172,751 A1(b) 166 1,034 (121,473) (11,167) (13,258) (581) (13,312) 359 (606) 973 55,566 (15,253) (91,805) (3,872) (12,405) (577) (11,296) (43) (1,661) (684) 51,442 (15,105) A1(b) C1(d)i A1(c) Profit for the year A4(c) & A1(d) 40,313 36,337 Total comprehensive income for the year 40,313 36,337 Total comprehensive income attributable to members of Cedar Woods Properties Limited 40,313 36,337 Earnings per share for profit attributable to the ordinary equity holders of the company: Basic and diluted earnings per share A1(d) 54.4 cents 49.9 cents The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 40 Financial StatementsCEDAR WOODS PROPERTIES LIMITED Consolidated Balance Sheet As at 30 June 2014 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Deferred development costs Total current assets Non-current assets Receivables Inventories Deferred development costs Investments accounted for using the equity method Available-for-sale financial assets Property, plant and equipment Investment properties Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Other financial liabilities Derivative financial instruments Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Other financial liabilities Deferred tax liabilities Provisions Derivative financial instruments Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity Note A2(a) A2(b) A3(a) A3(b) A2(b) A3(a) A3(b) A2(d) A2(c) A3(c) A3(d) A2(e) A2(h) A2(f) A3(f) A2(g) A2(h) A3(e) A3(f) A2(f) A4(a) A4(b) A4(c) Consolidated 2014 $’000 2013 $’000 8,796 10,057 80,895 134 99,882 4,618 249,698 8,854 2,902 7,397 1,668 34,929 310,066 409,948 26,306 34,316 644 5,998 6,810 74,074 41,398 30,241 2,185 449 - 74,273 148,347 261,601 116,716 309 144,576 261,601 3,017 3,409 76,009 11,037 93,472 6,674 174,864 3,412 1,929 8,073 1,299 11,301 207,552 301,024 20,951 11,603 93 8,006 6,630 47,283 40,779 - 3,436 310 1,472 45,997 93,280 207,744 83,795 496 123,453 207,744 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 41 Financial Statements2014 ANNUAL REPORT Consolidated Statement of Changes in Equity For the Year Ended 30 June 2014 Consolidated Note Contributed equity $’000 Reserves $’000 Retained profits $’000 Total $’000 Balance at 1 July 2012 79,325 597 104,704 184,626 Profit for the year Total comprehensive income for the year - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs and tax Transfers from reserves to retained profits Dividends provided for or paid B3(b) A4(a) 4,470 - - - (101) 36,337 36,337 36,337 36,337 - 101 4,470 - - (17,689) (17,689) Balance at 30 June 2013 4,470 83,795 (101) 496 (17,588) (13,219) 123,453 207,744 Balance at 1 July 2013 83,795 496 123,453 207,744 Profit for the year Total comprehensive income for the year - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs and tax Transfers from reserves to retained profits Dividends provided for or paid B3(b) A4(a) 32,921 - - - (187) 40,313 40,313 40,313 40,313 - 187 32,921 - - (19,377) (19,377) - - - - 32,921 (187) (19,190) 13,544 Balance at 30 June 2014 116,716 309 144,576 261,601 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 42 Financial StatementsCEDAR WOODS PROPERTIES LIMITED Consolidated Cash Flow Statement For the Year Ended 30 June 2014 Cash flows from operating activities Receipts from customers (incl. GST) Payments to suppliers and employees (incl. GST) Note Consolidated 2014 $’000 231,610 (52,179) 2013 $’000 186,104 (43,483) Payments for land and development (158,149) (135,209) Interest received Borrowing costs paid Income taxes paid 589 (5,400) (18,265) 578 (4,179) (18,586) Net cash outflows from operating activities A5(a) (1,794) (14,775) Cash flows from investing activities Proceeds from sale of investment properties Proceeds from sale of property, plant and equipment - 3 1,205 5 Repayments of loan by Cedar Woods Wellard Limited 6,000 3,500 Advance of loan to BCM Apartment Trust Payments for investment properties Payments for property, plant and equipment (1,855) (9,781) (699) - (10,265) (388) Net cash outflows from investing activities (6,332) (5,943) Cash flows from financing activities Proceeds from borrowings Proceeds from share placement Proceeds from share purchase plan Payment of share issue expenses 600 25,030 5,036 (822) 36,572 - - - Dividends paid B3(b) (15,939) (13,203) Net cash inflows from financing activities 13,905 23,369 Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year 5,779 3,017 2,651 366 Cash and cash equivalents at the end of the year A2(a) 8,796 3,017 The above consolidated cash flow statement should be read in conjunction with the accompanying notes. 43 Financial Statements2014 ANNUAL REPORT Notes to the Financial Statements These are the consolidated financial statements of Cedar Woods Properties Limited and its subsidiaries. A list of major subsidiaries is included in note C1. The financial statements are presented in the Australian currency. The notes are set out in the following main sections: A How the numbers are calculated: Provides a breakdown of those individual line items in the financial statements that the directors consider most relevant in the context of the operations of the group, or where there have been significant changes that required specific explanations; the section further explains what accounting policies have been applied to determine these line items and how the amounts were affected by significant estimates and judgements made in calculating the final numbers. B Financial risks: Discusses the group’s exposure to various financial risks, explain how these affect the group’s financial position and performance and what the group does to manage these risks. C Group structure: Explains significant aspects of the group structure and how changes have affected the financial position and performance of the group. D Unrecognised items: Provides information about items that are not recognised in the financial statements, but could potentially have a significant impact on the group’s financial position and performance. E Other information: Information that is not immediately related to individual line items in the financial statements, such as related party transactions, share based payments and a full list of the accounting policies applied by the entity. F Declaration and independent auditor’s report Contains the director’s declaration and the independent auditor’s report. s t n e m e t a t S l i a c n a n F i e h t o t s e t o N 44 CEDAR WOODS PROPERTIES LIMITED Section A: How the Numbers are Calculated This section provides a breakdown of those individual line items in the financial statements that the directors consider most relevant in the context of the operations of the group, or where there have been significant changes that required specific explanations, what accounting policies have been applied to determine these line items and how the amounts were affected by significant estimates and judgements made in calculating the final numbers. A1. Profit or loss Information ................................................................................................................................... 46 a) b) c) d) Revenue .............................................................................................................................................................. 46 Other income and expense items ......................................................................................................................... 46 Income tax ........................................................................................................................................................... 48 Earnings per share ............................................................................................................................................... 48 A2. Financial assets and financial liabilities ............................................................................................................ 49 a) b) c) d) e) f) g) h) Cash and cash equivalents .................................................................................................................................. 50 Trade and other receivables ................................................................................................................................. 50 Available-for-sale financial assets ......................................................................................................................... 51 Investments accounted for using the equity method ............................................................................................ 51 Trade and other payables ..................................................................................................................................... 51 Derivative financial instruments ............................................................................................................................ 52 Borrowings .......................................................................................................................................................... 52 Other financial liabilities ........................................................................................................................................ 53 A3. Non-Financial assets and liabilities .................................................................................................................. 54 a) b) c) d) e) f) Inventories ........................................................................................................................................................... 54 Deferred development costs ................................................................................................................................ 55 Property, plant and equipment ............................................................................................................................. 55 Investment properties .......................................................................................................................................... 55 Deferred tax ......................................................................................................................................................... 57 Provisions ............................................................................................................................................................ 59 A4. Equity ................................................................................................................................................................. 60 a) b) c) Movement in ordinary share capital ...................................................................................................................... 60 Reserves .............................................................................................................................................................. 61 Retained profits .................................................................................................................................................... 61 A5. Cash flow information ........................................................................................................................................ 62 a) Reconciliation of profit after income tax to net cash outflows from operating activities .......................................... 62 45 A – How the Numbers are Calculated2014 ANNUAL REPORT l d e t a u c a C e r a l s r e b m u N e h t w o H – 1 A 46 A1. Profit or Loss Information a) Revenue From operations Sales revenue Sale of land and buildings Services Other revenue Interest Lease income Total revenue Note i. i. Consolidated 2014 $’000 2013 $’000 195,631 15,908 211,539 1,631 1,295 2,926 161,816 6,364 168,180 4,235 336 4,571 214,465 172,751 i. Recognition of revenue from operations See note E4(c) for the recognition and measurement of revenue b) Other income and expense items This note provides a breakdown of the items included in other income and certain expenses by nature. Other income Net gain on disposal of investment properties Sundry income Note i. i. Other income See note E4(c) for the recognition and measurement of other income Profit before income tax expense includes the following specific expenses: Finance costs Interest and finance charges Calculated using effective interest method Unrealised financial instrument gains Less: amount capitalised Finance costs expensed Note ii. Consolidated 2014 $’000 - 166 166 Consolidated 2014 $’000 5,458 1,330 (920) (5,262) 606 2013 $’000 382 652 1,034 2013 $’000 4,325 609 (600) (2,673) 1,661 CEDAR WOODS PROPERTIES LIMITED Net loss on disposal of property, plant and equipment Rental expense relating to operating leases Minimum lease payments Other provisions Employee benefits Customer rebates Superannuation funds – defined contribution Depreciation of property, plant and equipment Depreciation of investment property Employee benefits expense Write down of assets / (reversal of provision) Available for sale financial assets Inventory Reversal of provision for impairment of loan to Cedar Woods Wellard Limited ii. Capitalised borrowing costs Consolidated 2014 $’000 43 2013 $’000 79 664 740 255 2,450 704 282 314 306 2,713 583 246 - 9,697 8,268 676 - (1,035) - 43 - Where qualifying assets have been financed by the entity’s corporate facility, the capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s corporate facility during the year, in this case 6.09% (2013 – 7.18%) per annum. Where qualifying assets are financed by specific facilities, the applicable borrowing costs of those facilities are capitalised. l d e t a u c a C e r a l s r e b m u N e h t w o H – 1 A 47 2014 ANNUAL REPORT l d e t a u c a C e r a l s r e b m u N e h t w o H – 1 A 48 c) Income tax This note provides an analysis of the group’s income tax expense and how the tax expense is affected by non- assessable and non-deductible items. i. Income tax expense Current tax Deferred tax Adjustments for current tax of prior periods Income tax expense attributable to profit Notes Deferred income tax expense (revenue) included in income tax expense comprises: (Increase) in deferred tax assets (Decrease) increase in deferred tax liabilities A3(e) A3(e) Consolidated 2014 $’000 17,421 (1,004) (1,164) 15,253 (143) (861) (1,004) 2013 $’000 15,398 247 (540) 15,105 (241) 488 247 ii. Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax 55,566 51,442 Tax at the Australian tax rate of 30% (2013 – 30%) 16,670 15,433 Tax effect of amounts which are not deductible in calculating taxable income: - Share of net (profit) loss of joint venture - Sundry items Adjustments for current tax of prior periods: - Research and development - Sundry items Income tax expense d) Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) Net profit attributable to the ordinary owners of the company ($’000) Weighted average number of ordinary shares used as the denominator in the calculation of earnings per share and diluted earnings per share (292) 39 (253) (1,164) - (1,164) 205 7 212 (463) (77) (540) 15,253 15,105 2014 54.4 54.4 2013 49.9 49.9 40,313 36,337 74,150,376 72,813,872 CEDAR WOODS PROPERTIES LIMITED A2. Financial Assets and Financial Liabilities This note provides information about the group’s financial instruments, including: i. Specific information about each type of financial instrument ii. Accounting policies iii. Information about determining the fair value of the instruments, including judgements and estimation uncertainty involved The group holds the following financial instruments: Financial Assets 2014 Cash and cash equivalents Trade and other receivables* Share in joint venture Available-for-sale financial assets Total 2013 Cash and cash equivalents Trade and other receivables* Share in joint venture Available-for-sale financial assets Total *Excluding prepayments Financial Liabilities 2014 Trade and other payables Borrowings Derivative financial instruments Other financial liabilities Total 2013 Trade and other payables Borrowings Derivative financial instruments Other financial liabilities Total Notes A2(a) A2(b) A2(d) A2(c) A2(a) A2(b) A2(d) A2(c) Investments accounted for using the equity method Financial assets at amortised cost Available for sale $’000 $’000 - - - 7,397 7,397 - - - 8,073 8,073 - - 2,902 - 2,902 - - 1,929 - 1,929 $’000 8,796 12,425 - - 21,221 3,017 8,622 - - Total $’000 8,796 12,425 2,902 7,397 31,520 3,017 8,622 1,929 8,073 11,639 21,641 Notes Derivatives used for hedging Liabilities at amortised cost A2(e) A2(g) A2(f) A2(h) A2(e) A2(g) A2(f) A2(h) $’000 - - 644 - 644 - - 1,565 - 1,565 $’000 26,306 41,398 - 64,557 132,261 20,951 40,779 - 11,603 73,333 Total $’000 26,306 41,398 644 64,557 132,905 20,951 40,779 1,565 11,603 74,898 l d e t a u c a C e r a l s r e b m u N e h t w o H – 2 A 49 2014 ANNUAL REPORT l d e t a u c a C e r a l s r e b m u N e h t w o H – 2 A 50 a) Cash and cash equivalents Cash at bank and in hand Consolidated 2014 $’000 8,796 8,796 2013 $’000 3,017 3,017 The above figure reconciles to the amount of cash shown in the statement of cash flows at the end of the year. Cash at bank includes cash held in day to day bank transaction accounts and deposit accounts earning interest from 0 to 2.8% (2013: 0 – 2.75%) per annum depending on the balances. The Group’s exposure to interest rate risk is discussed in note B2. Financial risk management. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above. b) Trade and other receivables Current Trade receivables Other receivables Prepayments Non-Current Loans – employee share scheme Loan to BCM Apartment Trust Loan to Cedar Woods Wellard Limited Provision for impairment on loan to Cedar Woods Wellard Limited Notes i & ii i & ii E3 iv iii Consolidated 2014 $’000 7,759 48 2,250 10,057 34 1,974 2,610 - 4,618 2013 $’000 1,470 478 1,461 3,409 40 - 7,669 (1,035) 6,674 i. Classification as trade and other receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Loans and other receivables are non-derivative financial assets with fixed or determinable payments and are not quoted in an active market. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. The group’s impairment and other accounting policies for trade and other receivables are outlined in note E4(k). ii. Current trade and other receivables Current trade and other receivables include interest and non-interest bearing receivables (see B2. Financial risk management). Trade receivables are initially recorded at fair value and subsequently carried at amortised cost. There are no past due or impaired trade receivables at 30 June 2014 (2013 – $nil). The fair values of non-current receivables of the group approximate the carrying values. Other non-current receivables and loans under the employee share scheme are non-interest bearing. None of these are impaired, or past due but not impaired. iii. Loan to Cedar Woods Wellard Limited A mezzanine loan facility has been provided to the joint venture entity, Cedar Woods Wellard Limited. The loan has been assessed for impairment and a provision of $nil (2013: $1,035,000) recorded. CEDAR WOODS PROPERTIES LIMITED iv. Loan to BCM Apartment Trust In February 2014, a mezzanine finance facility was provided by Cedar Woods Properties Limited to BCM Apartment Trust. The interest rate on the facility is 22.5% per annum. c) Available-for-sale financial assets Unlisted securities Special unit in unit trust i. Unlisted securities Consolidated 2014 $’000 2013 $’000 7,397 8,073 Refer to B2. Financial risk management for further information about the methods used and assumptions applied in determining fair value of unlisted securities. For the purposes of the Batavia Coast Marina Apartments project in Geraldton, WA the consolidated entity acquired 100 ordinary units for $1 each and 1 special unit (class B) for $6,000,000 in the BCM Apartment Trust (BCM), on 30 March 2012. The ordinary units are disclosed as an interest in joint venture in note A2(d) and the 1 special unit (class B) is disclosed as an available-for-sale financial asset above. ii. Non-current assets pledged as security Refer to note A2(g) for information on non-current assets pledged as security by the parent entity or its controlled entities. d) Investments accounted for using the equity method Unlisted securities Shares in joint ventures i. Cedar Woods Wellard Limited Consolidated 2014 $’000 2013 $’000 2,902 1,929 The consolidated entity owns a 32.5% (2013: 32.5%) interest in Cedar Woods Wellard Limited, a property development company incorporated in Australia. See note C1(b). ii. BCM Apartment Trust The consolidated entity owns 100 ordinary units for $1 each (a 50% interest in the ordinary units) in the BCM Apartment Trust. The consolidated entity’s interests in the ordinary units do not entitle it to a share of the revenue, profit/loss and net assets of BCM. Refer to note A2(c) for details. The consolidated entity also owns 10 ordinary shares for $1 each (a 50% interest) in Champion Bay Nominees Pty Ltd, the trustee of BCM. e) Trade and other payables Trade payables Accruals GST payable Other payables Consolidated 2014 $’000 11,992 11,731 2,381 202 26,306 2013 $’000 9,145 11,353 449 4 20,951 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values due to their short-term nature. l d e t a u c a C e r a l s r e b m u N e h t w o H – 2 A 51 2014 ANNUAL REPORT l d e t a u c a C e r a l s r e b m u N e h t w o H – 2 A 52 f) Derivative financial instruments Current liabilities Interest rate swap contracts Non-current liabilities Interest rate swap contracts i. Instruments used by the group Consolidated 2014 $’000 644 - 644 2013 $’000 93 1,472 1,565 The group is party to derivative financial instruments in the normal course of business in order to manage exposure to fluctuations in interest rates in accordance with the group’s financial risk management policies. Interest rate swap contracts The bank loan currently bears a variable interest rate of 4.44% per annum (2013 – 4.82% per annum). It is the group’s policy to protect part of the loans from exposure to fluctuations in interest rates. Accordingly the consolidated entity has entered into interest rate swap contracts under which a significant part of the consolidated entity’s projected borrowings are protected for the period from 1 July 2014 to 2 June 2015. The swaps effectively fix interest rates applicable to bank bills issued with a duration of 1 month (BBSY Bid) at certain levels between 5.5% - 6.0% per annum (2013 - 4.06% - 6.0% per annum). Swaps currently in place cover approximately 72% (2013 – 98%) of the variable loans outstanding at balance date, with terms expiring in 2015. The group is not applying hedge accounting to these derivatives. The gain or loss from re-measuring the derivative financial instruments at fair value is recognised in profit or loss. g) Borrowings Bank loans – secured Facility fees capitalised (amortised over the period of facility) Amortisation of facility fees The fair value of non-current borrowings equals their carrying amount. i. Security for borrowings Consolidated 2014 $’000 41,687 (1,285) 996 41,398 2013 $’000 41,087 (1,125) 817 40,779 All of the consolidated entity’s assets are pledged as security for the group’s finance facilities. Bank loans of $20,843,601 provided by ANZ Bank (2013 - $20,543,601) and $20,843,601 provided by Commonwealth Bank trading as Bankwest (2013 - $20,543,601) are secured by first registered mortgages over some of the consolidated entity’s land holdings, and first registered charges, guarantees and indemnities provided by Cedar Woods Properties Limited and applicable subsidiary entities. Cedar Woods Properties Limited has provided first registered charges over its assets and undertakings in relation to the corporate loan facility (see below). CEDAR WOODS PROPERTIES LIMITED ii. Financing arrangements Unrestricted access was available to the following lines of credit at balance date: Bank facilities Total facilities (loan and guarantees) Used at balance date Unused at balance date Consolidated 2014 $’000 2013 $’000 135,000 54,307 80,693 110,000 52,498 57,502 The consolidated entity has total finance facilities of $135,000,000, with $67,500,000 each provided by ANZ Bank and Commonwealth Bank trading as Bankwest. The facilities expire on 30 November 2016. The conditions of the facilities impose certain covenants as to the consolidated entity’s revenue, interest cover and loan-to-valuation ratio. The corporate facilities provide funding for the consolidated entity’s existing operations, ongoing development and future acquisitions. The funding structure has been set up as a club facility with a security trustee, providing the flexibility for other banks to enter, should the group’s requirements grow and more lenders are required. The combined facilities include bank guarantee facilities of $15,000,000 (2013 - $14,000,000) subject to similar terms and conditions, which were drawn to a total amount of $12,620,000 at 30 June 2014 (2013 - $11,411,000). The interest on the corporate loan facilities is variable and at 30 June 2014 was an average rate of 4.44% per annum (2013 – 4.82%). Details of the group’s exposure to risk arising from current and non-current borrowings are set out in note B2. Financial risk management. h) Other financial liabilities Current Due to vendors of properties under contracts of sale Non-Current Due to vendors of properties under contract of sale Consolidated 2014 $’000 34,316 34,316 30,241 30,241 2013 $’000 11,603 11,603 - - l d e t a u c a C e r a l s r e b m u N e h t w o H – 2 A 53 2014 ANNUAL REPORT A3. Non-Financial Assets and Liabilities a) Inventories i. Current assets pledged as security Current Property held for resale - land at cost - at valuation 30 June 1992 - capitalised development costs Consolidated 2014 $’000 2013 $’000 23,570 327 56,998 80,895 24,157 287 51,565 76,009 Refer to note A2(g) for information on current assets pledged as security by the parent entity or its controlled entities. ii. Non-current assets pledged as security Non-Current Property held for resale - land at cost - at valuation 30 June 1992 - capitalised development costs - at net realisable value Consolidated 2014 $’000 2013 $’000 200,370 122,699 226 44,069 5,033 552 46,643 4,970 249,698 174,864 The 1992 valuations were independent valuations which were based on current market values at that time. Refer to note A2(g) for information on non-current assets pledged as security by the parent entity or its controlled entities. Total Inventory Current inventory Non-current inventory Aggregate carrying amount Notes i ii Consolidated 2014 $’000 80,895 249,698 330,593 2013 $’000 76,009 174,864 250,873 l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 54 CEDAR WOODS PROPERTIES LIMITED b) Deferred development costs Current Deferred development costs Non-Current Deferred development costs c) Property, plant and equipment Plant and Equipment at Cost At start of the year Additions Assets disposed At end of the year Accumulated depreciation on Plant and Equipment At start of the year Charge for year Assets disposed At end of the year Net book value Consolidated 2014 $’000 134 134 8,854 8,854 Consolidated 2013 $’000 11,037 11,037 3,412 3,412 2013 $’000 2014 $’000 2,850 699 (63) 3,486 1,551 282 (15) 1,818 1,668 2,598 389 (137) 2,850 1,357 246 (52) 1,551 1,299 Non-current assets pledged as security Refer to note A2(g) for information on non-current assets pledged as security by the parent entity or its controlled entities. d) Investment properties Non-current assets – at cost Opening balance at the start of the year Capitalised expenditure Transfer from inventory Depreciation Closing balance at the end of the year Represented by: Property under construction Completed investment property Closing balance at the end of the year Notes i Consolidated 2014 $’000 11,301 9,781 14,161 (314) 34,929 18,405 16,524 34,929 2013 $’000 - 10,265 1,036 - 11,301 11,301 - 11,301 l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 55 2014 ANNUAL REPORT i. Investments properties under construction For investment properties that are under construction at 30 June 2014; depreciation has not yet commenced. ii. Amounts recognised in profit or loss for investment properties Rental income Direct operating expenses from property that generated rental income Direct operating expenses from property that did not generate rental income iii. Measuring investment property at fair value Consolidated 2014 $’000 769 17 - 2013 $’000 - - - Investment properties include both completed developments and property that was under construction at the year end. Management considers the fair value of the investment property under construction at 30 June 2014 equates to cost. The fair value of the completed investment property is $28.2m exclusive of GST, based on a recent independent valuation by CBRE Valuations Pty Ltd. iv. Leasing arrangements Investment properties are leased to tenants under long term leases. Minimum lease payments under non-cancellable leases are receivable as follows: Within one year Later than one year but not later than 5 years Later than 5 years Consolidated 2014 $’000 2,171 9,356 44,501 56,028 2013 $’000 1,127 9,087 49,610 59,824 v. Non-current assets pledged as security Refer to note A2(g) for information on non-current assets pledged as security by the parent entity or its controlled entities. l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 56 CEDAR WOODS PROPERTIES LIMITED e) Deferred tax i. Assets The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Provision for customer rebates Employee benefits Borrowing Costs Inventory Change in value of derivative financial instruments Provision for impairment on loan to joint venture Other Amounts recognised directly in equity Share issue expenses Total deferred tax assets Set-off of deferred tax assets pursuant to set-off provisions Net deferred tax assets Deferred tax assets at the start of the year Increase in deferred tax assets (credited) to income tax expense Increase in deferred tax assets (credited) to equity Deferred tax assets at the end of the year A1(c) A4(a) Deferred tax assets expected to be recovered within 12 months Deferred tax assets expected to be recovered after more than 12 months Notes Consolidated 2014 $’000 2013 $’000 1,774 1,755 772 640 507 193 - 30 314 4,230 (4,230) - 3,840 143 247 4,230 2,984 1,246 4,230 644 387 - 532 311 32 179 3,840 (3,840) - 3,594 241 5 3,840 2,721 1,119 3,840 l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 57 2014 ANNUAL REPORT ii. Liabilities The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Deferred development costs Borrowing costs Research and development Interest receivable Prepaid commissions Other Amounts recognised directly in equity Revaluation reserve Total deferred tax liabilities Set off of deferred tax assets pursuant to set-off provisions Net deferred tax liabilities Deferred tax liabilities at the start of the year (Decrease) increase in deferred tax liabilities (credited) debited to income tax expense A1(c) Deferred tax liabilities at the end of the year Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after more than 12 months Notes Consolidated 2014 $’000 2013 $’000 2,694 2,606 469 361 115 33 3,209 2,933 - 564 328 30 6,278 7,064 137 6,415 (4,230) 2,185 7,276 (861) 6,415 1,509 4,906 6,415 212 7,276 (3,840) 3,436 6,788 488 7,276 4,295 2,981 7,276 l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 58 CEDAR WOODS PROPERTIES LIMITED f) Provisions Current Employee benefits Dividends Customer rebates i. Movements in Current Provisions Carrying amount at start of year Charged to profit or loss Payments Carrying amount at end of year Consolidated 2014 $’000 893 3 5,914 6,810 2013 $’000 777 2 5,851 6,630 Consolidated 2014 $’000 5,851 2,450 (2,387) 5,914 2013 $’000 4,451 2,713 (1,313) 5,851 Customers are generally entitled to customer rebates within 12 months of balance date, however in some instances claims and payments may not be made within 12 months of balance date. Non-current Employee benefits Carrying amount at end of year Consolidated 2014 $’000 893 449 2013 $’000 310 310 l d e t a u c a C e r a l s r e b m u N e h t w o H – 3 A 59 2014 ANNUAL REPORT l d e t a u c a C e r a l s r e b m u N e h t w o H – 4 A 60 A4. Equity a) Movement in ordinary share capital 2014 Shares 2013 Shares 2014 $’000 2013 $’000 Start of the year 73,359,551 72,189,514 83,795 79,325 Shares issued pursuant to the dividend reinvestment plan: Ordinary shares issued on 31 October 2012 at $3.88 Ordinary shares issued on 30 April 2013 at $5.14 Transaction costs arising on share issues Ordinary shares issued on 31 October 2013 at $6.95 Ordinary shares issued on 30 April 2014 at $7.21 Transaction costs arising on share issues Share issued pursuant to the bonus share plan: Ordinary shares issued on 31 October 2012 Ordinary shares issued on 30 April 2013 Ordinary shares issued on 31 October 2013 Ordinary shares issued on 30 April 2014 Share issued pursuant to the capital raising: Ordinary shares issued under institutional placement on 13 May 2014 Shares issued under shareholder purchase plan on 18 June 2014 Transaction costs arising on share issues - - - 324,751 162,834 - - - 48,381 19,327 3,680,941 740,586 - 794,591 271,917 - - - - 63,688 39,841 - - - - - - - - 2,257 1,174 (11) - - - - 25,030 5,036 (565) 3,083 1,398 (11) - - - - - - - - - - End of the year 78,336,371 73,359,551 116,716 83,795 4,976,820 1,170,037 32,921 4,470 Holders of ordinary shares are entitled to participate in dividends and the proceeds on any winding up of the company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. i. Dividend reinvestment plan The company has established a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend satisfied by the issue of new ordinary shares rather than being paid in cash. Shares may be issued under the plan at a discount to the market price, at the discretion of the Directors. ii. Bonus share plan The company has established a bonus share plan under which holders of ordinary shares may elect not to receive dividends but to receive instead additional fully paid shares issued as ‘Bonus Shares’ to the equivalent value of the dividend foregone. The entitlement for shares issued under the plan is calculated based on the same pricing mechanism as the dividend reinvestment plan, including any discount. CEDAR WOODS PROPERTIES LIMITED b) Reserves The following table shows a breakdown of the balance sheet item ‘reserves’ and the movement in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table. Composition a) Asset revaluation reserve (pre 1992) Movements a) Asset revaluation reserve Balance at the beginning of the year Transfer to retained profits Balance at the end of the year Notes A4(c) Consolidated 2014 $’000 309 309 496 (187) 309 2013 $’000 496 496 597 (101) 496 The asset revaluation reserve was used until 1992 to record increments and decrements on the revaluation of non- current assets. Refer to note E4(g). c) Retained profits Retained profits at the start of the year Net profit attributable to members of Cedar Woods Properties Limited Transfers from reserves Dividends provided for or paid Retained profits at the end of the year Notes A4(b) B3(b) Consolidated 2014 $’000 2013 $’000 123,453 104,704 40,313 187 (19,377) 144,576 36,337 101 (17,689) 123,453 l d e t a u c a C e r a l s r e b m u N e h t w o H – 4 A 61 2014 ANNUAL REPORT A5. Cash Flow Information a) Reconciliation of profit after income tax to net cash outflows from operating activities Consolidated Profit after income tax Depreciation Loss on sale of non-current assets Gain on sale of investment properties Reversal of provision for impairment of loan to Cedar Woods Wellard Limited Fair value gain on derivative financial instrument Accrued interest on receivables Share of (profit) loss in equity accounted investment Changes in operating assets and liabilities Increase in provisions for employee benefits Increase in provisions Increase in inventories Transfer from inventories to investment properties Decrease (increase) in other deferred development costs Decrease (increase) in available-for-sale financial assets Increase in deferred tax assets (Decrease) in current income tax payable (Decrease) increase in deferred tax liability Decrease in capitalised borrowing costs Increase in debtors Increase in creditors Increase in other financial liabilities Net cash outflows from operating activities 2014 $’000 40,313 596 43 - (1,035) (920) (1,060) (973) 255 64 (79,720) (14,162) 5,461 676 (143) (2,008) (861) 19 (6,648) 5,355 52,954 (1,794) 2013 $’000 36,337 246 79 (382) - (600) (1,675) 684 306 1,400 (42,577) (1,036) (6,946) (1,883) (241) (3,728) 488 3 (631) 4,772 609 (14,775) l d e t a u c a C e r a l s r e b m u N e h t w o H – 5 A 62 CEDAR WOODS PROPERTIES LIMITED Section B: Financial Risks This section of the notes discusses the group’s exposure to various risks and shows how these could affect the group’s financial position and performance. B1. Critical estimates and judgements ................................................................................................................ 64 a) Significant estimates and judgements ................................................................................................................. 64 B2. Financial risk management ............................................................................................................................. 65 a) b) c) d) Market risk ...........................................................................................................................................................65 Credit risk ............................................................................................................................................................67 Liquidity risk ........................................................................................................................................................ 67 Fair value measurement ...................................................................................................................................... 68 B3. Capital management objectives and gearing ............................................................................................... 70 a) b) Capital management objectives and gearing ....................................................................................................... 70 Dividends ............................................................................................................................................................ 71 s k s R i l i a c n a n F i – B 63 2014 ANNUAL REPORT B1. Critical Estimates and Judgements The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and judgements turning out to be wrong. Detailed information about each of these estimates and judgements is presented below. a) Significant estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity. The judgements that have a significant risk of causing a material adjustment to the carrying amounts or presentation of assets and liabilities within the next financial year are discussed below. i. Inventory - classification Judgement is exercised with respect to estimating the classification of inventory between current and non-current assets. Inventory is classified as current only when sales are expected to result in realisation of cash within the next twelve months, based on management’s sales forecasts. ii. Inventory - valuation The recoverable amount of inventory is estimated based on an assessment of net realisable value including future development costs. This requires judgement as to the future cash flows likely to be generated from the properties included in inventory, including in some cases, judgement regarding the likelihood and timing of obtaining development approvals. If the approvals are not received when anticipated the recoverable amount of inventory may be substantially impaired. Refer also to note E4(g). iii. Accrued interest income Interest income is accrued on the 1 special unit (class B) in the BCM Apartment Trust, disclosed as an available for sale financial asset. Judgement is required to determine the term over which a fixed amount of interest is earned and thus the amount recognised in each financial year. The term of repayment is forecast based on estimated cash flows of the project for which the financial asset relates. There were no critical judgements other than those involving estimates referred to above, that management made in applying the group’s accounting policies. s k s R i l i a c n a n F i – 1 B 64 CEDAR WOODS PROPERTIES LIMITED B2. Financial Risk Management This note explains the group’s exposure to financial risks and how these risks could affect the group’s future financial performance. Current year profit and loss information has been included where relevant to add further context. The group’s activities expose it to a variety of financial risks: Risk Exposure arising from Measurement Management Market risk – interest rate risk Long term borrowings at variable rates Cash flow forecasting Sensitivity analysis Interest rate swaps Credit risk Cash and cash equivalents, trade and other receivables, available-for-sale financial assets and derivative financial instruments Ageing analysis Credit ratings Ongoing checks by management Management of deposits Contractual arrangements Liquidity risk Borrowings and other liabilities Forecast and actual cash flows Flexibility in funding arrangements Financial risk management is considered part of the overall risk management program overseen by the Audit and Risk Management committee. Further detail on the types of risks to which the group is exposed and the way the group manages these risks is set out below. The group holds the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets Financial liabilities Trade and other payables Other financial liabilities Borrowings Derivative financial instruments a) Market risk i. Price risk 2014 $’000 8,796 14,675 7,397 30,868 26,306 64,557 41,398 644 132,905 2013 $’000 3,017 10,083 8,073 21,173 20,951 11,603 40,779 1,565 74,898 The consolidated entity has no foreign exchange exposure and minimal exposure to price risk on equity securities. ii. Cash flow and fair value interest rate risk As the consolidated entity does not have a significant portfolio of interest-bearing assets, the income and operating cash inflows are not materially exposed to changes in market interest rates. s k s R i l i a c n a n F i – 2 B 65 2014 ANNUAL REPORT s k s R i l i a c n a n F i – 2 B 66 The group has issued a loan to Cedar Woods Wellard Limited that bears an interest rate of 16% (2013 – 16%). The group has also issued a loan to the BCM Apartment Trust that bears an interest rate of 22.5%. Loans issued at fixed rates or at a fixed range of rates expose the group to fair value interest rate risk. Interest rate risk arises from exposures to long term borrowings, where those borrowings are issued at variable interest rates. Borrowings issued at variable interest rates expose the group to cash flow interest rate risk. The consolidated entity reviews the potential impact of variable interest rate changes and considers various interest rate management products in the context of prevailing monetary policy of the Reserve Bank and economic conditions. Accordingly the consolidated entity has entered into interest rate swap contracts under which a significant part of the consolidated entity’s projected borrowings are protected for the period from 1 July 2014 to 2 June 2015. There is an indirect exposure to interest rate changes caused by the impact of these changes upon the property market. The group addresses this risk by virtue of managing its pricing, product offer and planned development programs. iii. Instruments used by the group Interest rate swap contracts effectively fix interest rates applicable to bank bills issued with a duration of 1 month (BBSY Bid) at certain levels between 5.5% - 6.0% (2013 - 4.06% - 6.0%) per annum. Swaps currently in place cover 72% (2013 - 98%) of the variable loan outstanding at balance date, with terms expiring in 2015. The consolidated entity’s policy is to limit a significant proportion of its borrowings to a maximum fixed rate using interest rate swaps or caps to achieve this when necessary. The swaps described above covered 72% of the bank loan at balance sheet date because the balance of the loan was $41,687,000 (2013 - $41,087,000), being at the lower end of the company’s available facilities. The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for receivables and borrowings is set out below. Receivables Other receivables Employee share loans Loan to BCM Apartment Trust Loan to joint venture Interest bearing - variable $’000 2014 Non- interest bearing $’000 Interest bearing - variable $’000 Total $’000 2013 Non- interest bearing $’000 Total $’000 - - 1,974 2,610 4,584 10,057 10,057 34 - - 34 1,974 2,610 10,091 14,675 - - - 7,669 7,669 3,409 3,409 40 - - 40 - 7,669 3,449 11,118 The weighted average interest rate is 18.8% (2013: 16%) Interest bearing - fixed $’000 2014 Interest bearing - variable $’000 Interest bearing - fixed $’000 Total $’000 2013 Interest bearing - variable $’000 Total $’000 Interest bearing liabilities Bank loans - 41,687 41,687 - 41,087 41,087 Other financial liabilities 64,557 - 64,557 11,603 - 11,603 64,557 41,687 106,244 11,603 41,087 52,690 The weighted average interest rate is 4.44% (2013: 4.82%) An analysis by maturity is provided in B2(c) below. CEDAR WOODS PROPERTIES LIMITED iv. Summarised interest rate sensitivity analysis The potential impact of a change in bank interest rates of +/-1% is not significant to the group’s net profit and equity. The potential impact on financials assets is not significant. Refer to comments above for further information on the impact of changes in interest rates upon the group. b) Credit risk The consolidated entity has minimal exposure to credit risk as title to lots or units in the consolidated entity’s developments does not generally pass to customers until funds are received. In limited circumstances title is allowed to pass on certain lot sales in return for a substantial deposit and security held by way of a registered mortgage on the title. In other limited circumstances, title is allowed to pass unsecured where a credit rating by management has taken place, and which has assessed the customer to be of high creditworthiness. Policies and procedures are in place to manage credit risk including management of deposits and review of the financial capacity of customers. Ongoing checks are performed by management to ensure that settlement terms detailed in individual contracts are adhered to. For land under option the consolidated entity secures its rights by way of encumbrances on the underlying land titles. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised above. Derivative counterparties and cash deposits are placed with high credit quality financial institutions, such as major trading banks. Credit risk may arise in relation to bank guarantees given to certain parties. These guarantees are supported by contractual arrangements that bind the counterparty, providing security against inappropriate presentation of the bank guarantees. For the purposes of the Batavia Coast Marina Apartments project in Geraldton, WA the consolidated entity acquired 100 ordinary units for $1 each and 1 special unit (class B) for $6,000,000 in BCM Apartment Trust (BCM) on 30 March 2012. The ordinary units are disclosed as an interest in joint venture in note A2(d) and the 1 special unit (class B) is disclosed as an available-for-sale financial asset in note A2(c). Under the BCM trust deed the 1 special unit (class B) entitles the consolidated entity to a fixed return upon the repurchase of the 1 special unit (class B) at cost. The fixed return is preferential to any return being received by the other ordinary unit holder and the consolidated entity is represented on the board of the trustee company. The maximum exposure to credit risk at the reporting date is the carrying amount of the available-for-sale financial asset. In relation to the loan to BCM Apartment Trust, the terms of the loan provide that the loan takes priority over payment of any return to the special units (class B and class C) and entitlement to a second mortgage over land held by BCM Apartment Trust. In relation to the loan to Cedar Woods Wellard Limited as set out in note A2(b), the company has secured the loan by way of a second mortgage over land held by Cedar Woods Wellard Limited and a second ranked charge over the assets of Cedar Woods Wellard Limited. The mortgage and charge are subordinated to those held by Cedar Woods Wellard Limited’s bankers, via a deed of priority and subordination in favour of Cedar Woods Wellard Limited’s bankers. Management estimates the fair value of the mortgaged land at balance date to be $14,301,745 (2013 - $24,120,000) and the balance of the first ranked bank loan is $4,468,000 (2013 - $5,320,000), leaving surplus security in excess of the balance of the loan. c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and available credit facilities to manage the consolidated entity’s financial commitments. The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the group aims at maintaining flexibility in funding by keeping committed credit lines available. At 30 June 2014 the group had undrawn committed facilities of $80,690,000 (2013 - $57,500,000) and cash of $8,796,000 (2013 - $3,017,000) to cover short term funding requirements. s k s R i l i a c n a n F i – 2 B 67 2014 ANNUAL REPORT s k s R i l i a c n a n F i – 2 B 68 i. Maturities of financial liabilities The tables below analyse the group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table for non-interest bearing liabilities are the contractual undiscounted cash flows. For variable interest rate liabilities the cash flows have been estimated using interest rates applicable at the reporting date. Group – at 30 June 2014 Non-derivatives Non-interest bearing Fixed rate Variable rate Derivatives Total Group – at 30 June 2013 Non-derivatives Non-interest bearing Fixed rate Variable rate Derivatives Total Carrying amount $’000 26,306 64,557 41,687 644 Less than 1 year $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Total contractual cash flows $’000 26,306 35,042 - 644 61,992 - - - - - - 39,000 47,213 - 26,306 74,042 47,213 644 86,213 148,205 133,194 Less than 1 year $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Total contractual cash flows $’000 Carrying amount $’000 20,951 12,060 - 999 34,010 - - - 600 600 - - 47,065 - 47,065 20,951 12,060 47,065 1,598 81,674 20,951 12,060 41,087 1,565 75,663 d) Fair value measurement This note provides information on the judgements and estimates made by the group in determining the fair values of the financial instruments. i. Fair value hierarchy To provide an indication about the reliability of the inputs used in determining fair value, the group classifies its financial instruments into three levels prescribed under the accounting standards. An explanation of each level follows underneath the table. The following table presents the group’s financial assets and financial liabilities measured and recognised at fair value at 30 June 2014 and 30 June 2013: As at 30 June 2014 Notes Assets Derivatives used for hedging A2(f) Available-for-sale financial assets A2(c) Total assets Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 - - - 644 - 644 - 644 7,397 7,397 7,397 8,041 CEDAR WOODS PROPERTIES LIMITED As at 30 June 2013 Notes Assets Derivatives used for hedging A2(f) Available-for-sale financial assets A2(c) Total assets Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 - - - 1,565 - 1,565 - 1,565 8,073 8,073 8,073 9,638 ii. Valuation techniques used to determine fair values Level 1 – The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted (unadjusted) market prices at the end of the reporting period. The quoted market price used for the financial assets held by the group is the current bid price. These instruments are included in level 1. Level 2 – The fair value of financial instruments that are not traded in an active market (such as derivatives provided by trading banks) is determined using market valuations provided by those banks at reporting date. These instruments are included in level 2. Level 3 – If one or more of the significant inputs is not based on observable market data, the instruments is included in level 3. This is the case for unlisted equity securities (classified as available-for-sale financial assets in the balance sheet). The unlisted equity securities provide a fixed return and the fair value of the securities is determined based on management’s estimate of the period over which the return will be received and the performance of the issuer entity. iii. Fair value measurements using significant unobservable inputs (level 3) The following table presents the changes in level 3 instruments for the year ended 30 June 2014: Opening balance 30 June 2013 Decrease Closing balance 30 June 2014 Available For sale $’000 8,073 (676) 7,397 Total $’000 8,073 (676) 7,397 The reduction in fair value of the equity securities in the table above reflects the extended period over which the return is now expected to be received. s k s R i l i a c n a n F i – 2 B 69 2014 ANNUAL REPORT s k s R i l i a c n a n F i B3. Capital Management Objectives and Gearing – 3 B a) Capital management objectives and gearing The consolidated entity’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group will consider a range of alternatives which may include: • raising or reducing borrowings • adjusting the dividend policy • • • issue of new securities return of capital to shareholders sale of assets. Gearing is a measure used to monitor the levels of debt used in the business to fund operations. The gearing ratio is calculated as interest bearing bank debt net of cash and cash equivalents divided by shareholders’ equity. Gearing is managed by reference to a guideline which sets the desirable upper and lower limits for the gearing ratio. The group’s gearing is then addressed by utilising capital management initiatives as discussed above. The gearing ratios were as follows: Total interest bearing bank debt Less: cash and cash equivalents Net debt Shareholders’ equity Gearing ratio Note A2(g) A2(a) 2014 $’000 41,687 (8,796) 32,891 2013 $’000 41,087 (3,017) 38,070 261,601 12.6% 207,744 18.3% The group’s guideline is to target gearing generally within the range of 20-75% although periods where the gearing is outside of this range are acceptable, depending upon the timetable for acquisition payments and the construction and settlement of developments. i. Loan Covenants Under the terms of the major borrowing facilities, the group has complied with covenants throughout the reporting period. Key covenants include requirements in relation to a maximum loan to valuation ratio and a minimum interest cover ratio. 70 CEDAR WOODS PROPERTIES LIMITED b) Dividends i. Ordinary shares Fully franked based on tax paid at 30% Final dividend for the year ended 30 June 2013 of 15.0 cents (2012 – 14.0 cents) per fully paid share - Paid in cash - Satisfied by shares under the dividend reinvestment plan - Applied to the employee share loans Interim dividend for the year ended 30 June 2014 of 12.0 cents (2013 – 11.0 cents) per fully paid share - Paid in cash - Satisfied by shares under the dividend reinvestment plan - Applied to the employee share loans Total ii. Dividends not recognised at the year end s k s R i l i a c n a n F i Consolidated 2014 $’000 2013 $’000 – 3 B 8,407 2,258 3 7,532 1,174 3 19,377 6,773 3,083 3 6,430 1,398 2 17,689 In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of 15.5 cents per fully paid ordinary share (2013 – 15 cents), fully franked based on the tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 31 October 2014 out of retained profits at 30 June 2014, but not recognised as a liability at year end is below: Dividends not recognised at year end iii. Franked Dividends Consolidated 2014 $’000 12,142 2013 $’000 11,004 The franked portions of the final dividend proposed at 30 June 2014 will be franked from existing franking credits or from franking credits arising from the payment of income tax in the next financial year. Franking credits available for the subsequent financial year on a tax-paid basis of 30% (2013 – 30%) Consolidated 2014 $’000 2013 $’000 57,458 50,979 The above amounts represent the franking accounts at the end of the financial year, adjusted for: (a) Franking credits that will arise from the payment of the current tax liability; (b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; (c) Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $5,204,000 (2013 - $4,716,000). 71 2014 ANNUAL REPORT Section C: Group Structure This section provides information which will help users understand how the group structure affects the financial position and performance of the group as a whole. C1. Interests in Other Entities ............................................................................................................................... 73 a) b) c) d) Subsidiaries ........................................................................................................................................................ 73 Interests in joint ventures ..................................................................................................................................... 74 Commitments and contingent liabilities in respect of the joint ventures ................................................................ 74 Summarised financial information for Cedar Woods Wellard Limited .................................................................... 75 72 C – Group StructureCEDAR WOODS PROPERTIES LIMITEDC1. Interests in Other Entities a) Subsidiaries The group’s subsidiaries at 30 June 2014 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group and the proportion of ownership interest held equals the voting rights held by the group. The subsidiaries are incorporated or established in Australia. The consolidated financial statements incorporate the assets, liabilities and results in accordance with the accounting policy described in note E4(b). Company Equity Holding Cranford Pty Ltd Daleford Property Pty Ltd Dunland Property Pty Ltd Esplanade (Mandurah) Pty Ltd Eucalypt Property Pty Ltd Flametree Property Pty Ltd Gaythorne Pty Ltd Galaway Holdings Pty Ltd Geographe Property Pty Ltd Huntsman Property Pty Ltd Jarrah Property Pty Ltd Kayea Property Pty Ltd Lonnegal Property Pty Ltd Osprey Property Pty Ltd Silhouette Property Pty Ltd Terra Property Pty Ltd Upside Property Pty Ltd Vintage Property Pty Ltd Woodbrooke Property Pty Ltd Yonder Property Pty Ltd Zamia Property Pty Ltd Cedar Woods Properties Harrisdale Pty Ltd Cedar Woods Properties Investments Pty Ltd Cedar Woods Properties Management Pty Ltd Cedar Woods Property Sales Pty Ltd Williams Landing Town Centre Pty Ltd Williams Landing Home Improvement Pty Ltd Williams Landing Home Improvement Trust Williams Landing Shopping Centre Pty Ltd Williams Landing Shopping Centre Trust 2014 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2013 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - e r u t c u r t S p u o r G – 1 C 73 2014 ANNUAL REPORT b) Interests in joint ventures Set out below are the joint ventures of the group as at 30 June 2014. The country of incorporation and principal place of business is Australia for both entities. Name of entity % of ownership interest Nature of relationship Measurement method 2014 % 2013 % Carine Joint Venture 50 50 Joint Operation Share of assets, liabilities, income and expenses Carrying amount 2014 $’000 2013 $’000 1,554 4,110 Cedar Woods Wellard Limited 32.5 32.5 Joint Venture Equity method 2,902 1,929 The carrying amount represents the amount attributable to the group. Carine Joint Venture (CJV) is a joint venture with an aged care and retirement living provider, to develop a mixed use precinct including an aged care facility, retirement living and residential housing development on State land in Carine, Western Australia. The subsidiary has a 50% participating interest in the CJV and is entitled to 50% of its revenue and assets. The consolidated entities interest in the assets employed in the CJV are included in the balance sheet in accordance with the accounting policy described in note E4(b). Cedar Woods Wellard Limited is developing the Emerald Park residential estate at Wellard, WA. The consolidated entity owns 100 ordinary units for $1 each (a 50% interest in the ordinary units) in the BCM Apartment Trust, which owns the Batavia Coast Marina Apartments project in Geraldton. The consolidated entity’s interest in the ordinary units does not entitle it to a share of the revenue, profit/loss or net assets of BCM. Refer to note A2(c) for details. The consolidated entity also owns 10 ordinary shares for $1 each (a 50% interest) in Champion Bay Nominees Pty Ltd, the trustee of BCM. c) Commitments and contingent liabilities in respect of the joint ventures Carine Joint Venture has no commitments for expenditure or contingent liabilities at 30 June 2014 (2013: nil). Cedar Woods Wellard Limited has no commitment for expenditure at 30 June 2014 (2013: nil) and provided $102,766 (2013: $66,919) bank guarantees to various local authorities supporting development and maintenance commitments. e r u t c u r t S p u o r G – 1 C 74 CEDAR WOODS PROPERTIES LIMITED d) Summarised financial information for Cedar Woods Wellard Limited The following table provides summarised financial information for those joint ventures that are material to the group. The information disclosed reflects the amounts presented in the financial statements of the relevant joint ventures and not Cedar Woods Properties Limited’s share of those amounts. Cedar Woods Wellard Limited Current assets Cash Other current assets Total current assets Total non-current assets Total assets Total current liabilities Non-current liabilities Total liabilities Net assets Group’s share in % Group’s share in $ i. Movements in carrying amounts – Cedar Woods Wellard Limited At start of the year Share of profit / (losses) after income tax At end of the year Share of profit / (loss) before income tax Income tax benefit / (expense) Share of profit / (loss) after income tax Share of joint venture’s revenue, assets, liabilities and contingent liabilities Revenue Assets Liabilities Contingent liabilities (bank guarantees) 2014 $’000 3,316 6,093 9,409 10,351 19,760 1,871 6,975 8,846 10,914 32.5% 3,547 2014 $’000 1,929 973 2,902 369 604 973 6,080 6,422 (2,875) (33) 2013 $’000 961 11,812 12,773 11,153 23,926 16,007 - 16,007 7,919 32.5% 2,574 2013 $’000 2,613 (684) 1,929 (327) (357) (684) 7,303 7,776 (5,202) (22) The consolidated entity owns a 32.5% (2013 – 32.5%) interest in Cedar Woods Wellard Limited, a property development company incorporated in Australia. The directors have determined that they do not control Cedar Woods Wellard Limited as no one investor can direct the activities without the co-operation of the others. e r u t c u r t S p u o r G – 1 C 75 2014 ANNUAL REPORT Section D: Unrecognised Items This section of the notes provides information about items that are not recognised in the financial statements as they do not satisfy the recognition criteria. D1. Contingent liabilities ...................................................................................................................................... 77 D2. Commitments ................................................................................................................................................. 78 76 D – Unrecognised ItemsCEDAR WOODS PROPERTIES LIMITEDD1. Contingent Liabilities At 30 June 2014 the group had contingent liabilities in respect of: a) Bank Guarantees At 30 June 2014 bank guarantees totalling $12,620,000 (2013 - $11,411,000) had been provided to various state and local authorities supporting development and maintenance commitments. s m e t I i d e s n g o c e r n U – 1 D 77 2014 ANNUAL REPORT D2. Commitments a) Non-cancellable operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities are payable as follows: Within 1 year Later than 1 year but not later than 5 years Consolidated 2014 $’000 692 1,151 1,843 2013 $’000 842 1,878 2,720 The group leases various offices under non-cancellable operating leases expiring within 5 years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. At 30 June 2014 the consolidated entity had commitments under civil works, building construction and landscaping construction for development of its projects in the ordinary course of business. The total amount contracted for work yet to be completed for civil works was $12,079,000 (2013 - $19,461,000), for building construction was $26,810,000 (2013 - $20,808,000) and for landscaping construction was $3,069,000 (2013 - $3,537,000). This work will be substantially completed in the next 12 months. s m e t I i d e s n g o c e r n U – 2 D 78 CEDAR WOODS PROPERTIES LIMITED Section E: Other Information Section E contains information that is not immediately related to individual line items in the financial statements, such as related party transactions, share based payments and a full list of the accounting policies applied by the entity. E1. Related party transactions ............................................................................................................................ 80 E2. Remuneration of auditors .............................................................................................................................. 81 E3. Employee share scheme ................................................................................................................................ 82 E4. Summary of accounting policies ................................................................................................................... 83 E5. Segment information ...................................................................................................................................... 91 E6. Parent entity financial information ................................................................................................................ 92 n o i t a m r o f n I r e h t O – E n o i t a m r o f n I r e h t O – E 79 2014 ANNUAL REPORT n o i t a m r o f n I r e h t O – 1 E 80 E1. Related Party Transactions a) Key management personnel compensation Additional disclosures relating to key management personnel are set out in the Directors’ Report. Short-term employee benefits Post-employment benefits Long-term employee benefits b) Group Consolidated 2014 $ 2013 $ 2,740,384 2,532,584 148,279 63,750 124,145 95,000 2,952,413 2,751,729 The group consists of Cedar Woods Properties Limited and its controlled entities. A list of these entities and the ownership interests held by the parent entity are set out in note C1. c) Parent entity The parent entity within the group is Cedar Woods Properties Limited. d) Transactions with other related parties Cedar Woods Properties Management Pty Ltd and Cedar Woods Property Sales derived management and selling fees totalling $1,749,173 (2013 - $2,101,285) from Cedar Woods Wellard Limited. e) Terms and conditions Management and selling fees are derived according to management agreements in place between the parties. These are based on normal terms and conditions, at market rates at the time of entering into the agreements. f) Guarantees Cedar Woods Properties Limited has provided a performance guarantee in respect of the bank facility provided to Cedar Woods Wellard Limited (CWWL), a joint venture entity owned 32.5% (2013 – 32.5%) by the group. The guarantee has been given in relation to performance undertakings given by CWWL. No amount (2013 – nil) was advanced in relation to this guarantee during the year as part of an interest bearing loan to CWWL, with interest charged at 16% (2013 – 16%-17%). g) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current receivables (sales of goods and services) Cedar Woods Wellard Limited h) Loans to related parties Loan to Cedar Woods Wellard Limited Beginning of the year Loan repayments received Interest charged End of year 2014 $ 2,060 2,060 2014 $ 2013 $ 1,425 1,425 2013 $ 7,668,823 9,493,741 (6,000,000) (3,500,000) 941,331 2,610,154 1,675,082 7,668,823 CEDAR WOODS PROPERTIES LIMITED E2. Remuneration of Auditors During the year the following fees were paid or payable to the auditor of the parent entity: PricewaterhouseCoopers – Australian firm Assurance services 2014 $ 2013 $ - Audit and review of the financial statements of the parent entity, controlled entities and co-development projects 176,929 172,383 Non-audit services - Accounting advisory services - Research and development advice - Other taxation advice and reviews Total fees for non-audit services - 259,209 63,900 323,109 500,038 8,000 66,257 22,600 96,857 269,240 The statutory audit requirements for the group vary from year to year and can have an impact on the level of audit fees. The consolidated entity may decide to engage the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the consolidated entity is important. These assignments relate to accounting advice, tax advice and reviews, research and development advice and other advice. All non-audit services are reviewed and approved by the Audit and Risk Management Committee to ensure they do not adversely impact the independence and objectivity of the auditor. n o i t a m r o f n I r e h t O – 2 E 81 2014 ANNUAL REPORT E3. Employee Share Scheme The employee share plan has been discontinued. Under the plan, certain employees were granted shares funded by interest free loans from the company and repaid by dividends. At 30 June 2014, $34,000 (2013 - $40,000) remained outstanding from employees in relation to loans granted in financial years prior to 2010. No amounts were due from former employees. n o i t a m r o f n I r e h t O – 3 E 82 CEDAR WOODS PROPERTIES LIMITED E4. Summary of Accounting Policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Cedar Woods Properties Limited and its subsidiaries. a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Cedar Woods Properties Limited is a for-profit entity for the purpose of preparing the financial statements. i. Compliance with International Financial Reporting Standards (IFRS). The financial statements of the Cedar Woods Properties Limited group also comply with IFRS as issued by the International Accounting Standards Board (IASB). ii. Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and derivative financial instruments. iii. Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in B1. iv. Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is the functional and presentation currency of Cedar Woods Properties Limited. b) Principles of consolidation i. Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Cedar Woods Properties Limited (parent) as at 30 June 2014 and the results of all subsidiaries for the year then ended. Cedar Woods Properties Limited and its subsidiaries together are referred to in these financial statements as the consolidated entity or the group. Subsidiaries are those entities over which the parent has the power to govern the financial and operating policies, generally accompanying a shareholding of one-half or more of the voting rights. The acquisition method of accounting is used to account for business combinations by the group. Subsidiaries are fully consolidated from the date on which control is transferred to the parent. They are de-consolidated from the date that control ceases. All inter-company balances and transactions between companies within the consolidated entity are eliminated upon consolidation. ii. Joint arrangements Joint arrangements – Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. The consolidated entity has both joint operations and joint ventures. Joint operations – The consolidated entity recognises its direct right to assets, liabilities, revenues and expenses of joint operations, which have been incorporated in the financial statements under the appropriate headings. Joint ventures – Interest in joint ventures are accounted for using the equity method (see below), after initially being recognised at cost in the consolidated balance sheet. Details of the joint ventures are set out in note C1(b). n o i t a m r o f n I r e h t O – 4 E 83 2014 ANNUAL REPORT n o i t a m r o f n I r e h t O – 4 E 84 iii. Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of movements in other comprehensive income. c) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and is recognised net of discounts and taxes paid. The following specific recognition criteria must also be met before revenue is recognised: i. Sale of land and buildings Revenue arising from the sale of land and buildings held for resale is recognised at settlement. ii. Interest Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. iii. Dividends Dividends are recognised as revenue when the right to receive payment is established. iv. Lease income Income from operating leases is recognised on a straight line basis over the period of each lease. v. Commissions and fees Commission and fee income is recognised when the right to receive the income has been earned in accordance with contractual arrangements. d) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the income tax rate in Australia adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses, if any. The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the end of the reporting period. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Cedar Woods Properties Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit and loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. CEDAR WOODS PROPERTIES LIMITED e) Earnings per share i. Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to owners of Cedar Woods Properties Limited by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares issued during the year. ii. Diluted earnings per share Diluted earnings per share adjusts the earnings used in the determination of basic earnings per share to take account of any effect on borrowing costs associated with the issue of dilutive potential ordinary shares. The weighted average number of ordinary shares is adjusted to reflect the conversion of all dilutive potential ordinary shares. f) Cash and cash equivalents For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, and deposits at call which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. g) Inventories and options over land i. Property held for development and resale Since 1 July 1992, property purchased for development and sale is valued at the lower of cost and net realisable value. Cost includes acquisition and subsequent development costs, and applicable borrowing costs incurred during development. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. All property held for development and sale is regarded as inventory and is classified as such in the balance sheet. Property is classified as current inventory only when sales are expected to result in realisation of cash within the next twelve months, based on management’s sales forecasts. Borrowing costs incurred prior to active development and after development is completed, are expensed as incurred. Prior to 1 July 1992 the consolidated entity’s land assets were classified on acquisition as non-current investments and initially recorded at cost with regular independent valuations being undertaken. Increments or decrements were reflected in the balance sheet and also recognised in equity. The balance of this land is stated at 1992 valuation, which is its deemed cost. The amount remaining in the Asset Revaluation Reserve represents the balance of the net revaluation increment for land revalued prior to 1 July 1992 which is now classified as inventory and which is still held by the consolidated entity. When revalued assets are sold, it is policy to transfer any amounts included in reserves in respect of those assets to retained earnings. The acquisition of land is recognised when an unconditional purchase contract exists. When property is sold, the cost of the land and attributable development costs, including borrowing costs, is expensed through cost of sales. h) Deferred development costs Development costs incurred by the group for the development of land not held as an asset by the group are recorded as deferred development costs in the balance sheet. They are included in current assets, except for those which are not expected to be reimbursed within 12 months of the reporting period, which are classified as non-current assets. In instances when the deferred development costs are reimbursed by the land owner, they are expensed in the profit or loss. n o i t a m r o f n I r e h t O – 4 E 85 2014 ANNUAL REPORT n o i t a m r o f n I r e h t O – 4 E 86 i) Assets classified as held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of carrying amount and fair value, less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal) to fair value less costs to sell. A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal) is recognised at the date of derecognition. Non-current assets are not depreciated or amortised while they are classified as held for sale. Non-current assets classified as held for sale are presented separately from the other assets in the balance sheet. j) Business combinations The acquisition method of accounting is used to account for all business combinations. Cost is measured as the fair value of the assets given, or liabilities undertaken at the date of acquisition. Acquisition related costs are expensed as incurred. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present values at the date of acquisition. The discount rate used is the incremental borrowing rate applied by the consolidated entity’s financiers for a similar borrowing under comparable terms and conditions. k) Impairment of assets Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash generating units, which is generally the project level. Assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. l) Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation. Depreciation is calculated on a straight line or diminishing value basis to write off the net cost of each item of property, plant and equipment, including leased equipment, over its expected useful life to the consolidated entity. The expected useful lives of items of property, plant and equipment and the depreciation methods used are: • Buildings – 17 years (straight line method) • Plant and equipment – 3 to 15 years (straight line and diminishing value methods) The assets’ residual values and useful lives are reviewed for impairment and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss. m) Investments and other financial assets The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available for sale financial assets. The classification depends on the purpose for which investments were acquired. Management determines the classification of its investments at initial recognition. i. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designed as hedges. Assets in this category are classified as current assets if they are expected to be settled within 12 months, otherwise they are classified as non-current. CEDAR WOODS PROPERTIES LIMITED ii. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in non-current assets, except for those with maturities less than 12 months after the reporting period which are classified as current assets. Loans and receivables are included in receivables in the balance sheet. Loans and receivables are carried at amortised cost using the effective interest method. iii. Available-for sale financial assets Available-for-sale financial assets, comprising marketable equity securities and other securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non- current assets as management does not intend to sell them within 12 months. Available-for-sale financial assets are carried at fair value. Changes in the fair value not arising from impairment or interest are recognised in other comprehensive income. The group assesses at the end of each reporting period whether there is objective evidence that a financial asset is impaired. If there is evidence of impairment, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. In the case of loans and receivables, the cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in profit or loss. n) Investment property Investment property, principally comprising retail property, is held for long term rental yields and is not occupied by the consolidated entity. Investment property includes properties under construction for future use as investment property and is stated at historical cost less depreciation. Depreciation is calculated on a straight line basis to write off the net cost of each investment over its expected useful life to the consolidated entity. The expected useful life of investment property is 40 years. When the company elects to dispose of investment property, it is presented as assets classified as held for sale in the balance sheet where it meets the relevant criteria. o) Employee benefits i. Short term obligations Liabilities for wages and salaries, bonuses and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. All other short-term employee benefit obligations are presented as payables. ii. Other long term employee benefit obligations The liability for long service leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match, as closely as possible, the estimated future cash flows. iii. Bonus plans The group recognises a liability and expense for bonuses earned during the financial year where contractually obliged or where past practice has created a constructive obligation. iv. Superannuation Contributions by the consolidated entity to employees’ superannuation funds are charged to the profit or loss when they are payable. The consolidated entity does not operate any defined benefit superannuation funds. n o i t a m r o f n I r e h t O – 4 E 87 2014 ANNUAL REPORT n o i t a m r o f n I r e h t O – 4 E 88 p) Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. These amounts are unsecured and are usually paid within 30 to 60 days of recognition. q) Leases Leases of property, plant and equipment in which a significant portion of the risks and rewards of ownership are not transferred to the consolidated entity as lessee are classified as operating leases. Operating lease payments are charged to the profit or loss in the periods in which they are incurred as this represents the pattern of benefit derived from the leased assets. Lease income from operating leases where the group is a lessor is recognised in income on a straight line basis over the lease term. The respective leased assets are included in the balance sheet as investment properties. r) Borrowings and borrowing costs Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case the fee is deferred until the commencement of the facility when draw down occurs. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets during the period when the asset is being prepared for its intended use or sale. s) Provisions i. Provision for customer rebates Provision is made for the estimated liability arising from obligations in existence at balance date to customers for the provision of landscaping and fencing rebates and other incentives, to which customers are generally entitled within 12 months of balance date. t) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. u) Maintenance Routine operating maintenance and repairs are charged as expenses as incurred. v) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. w) Segment reporting Management has determined the operating segment based on the reports reviewed by the Managing Director that are used to make strategic decisions. The Managing Director has been identified as the chief operating decision maker. x) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within one year. Collectability of trade receivables is reviewed regularly. Receivables that are uncollectable are written off by reducing the carrying amount directly. Receivables include prepayments and loans made under the discontinued employee share scheme. CEDAR WOODS PROPERTIES LIMITED y) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Changes to fair value are taken to profit or loss and are included in other income or expenses. z) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, taxation authorities, are presented as operating cash flows. aa) New accounting standards and interpretations The group has applied the following standards and amendments for the first time for the annual reporting period commencing 1 July 2013: AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments which provides an exemption from the requirement to disclose the impact of the change in accounting policy on the current period. AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 cycle, and AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities The adoption of AASB 10, AASB 13 and AASB 119 explained and summarised below. The other standards only affected the disclosures in the notes to the financial statements. i. Consolidated financial statements and joint arrangements AASB 10 Consolidated Financial Statements was issued in August 2011 and replaces the guidance on control and consolidation in AASB127 Consolidated and Separate Financial Statements and in interpretation 112 Consolidation – Special Purpose Entities. The group has reviewed its investment in other entities to assess whether the conclusion to consolidate is different under AASB 10 than under AASB 127. No differences were found and therefore no adjustments to any of the carrying amounts in the financial statements are required as a result of the adoption of AASB 10. AASB 11 Joint Arrangements, introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. The groups accounting for its interest in joint ventures was not affected by the adoption of the new standard since the group had already applied the equity method in accounting for these interests. AASB 12 Disclosure of Interests in Other Entities, sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11 and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of this standard by the group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the groups investments. n o i t a m r o f n I r e h t O – 4 E 89 2014 ANNUAL REPORT ii. Fair value measurement AASB 13 Fair Value Measurement aims to provide consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across Australian Accounting Standards. The standard does not extend the use of fair value accounting but provides guidance on how it should be applied where its use is already required or permitted by other Australian Accounting Standards. Previously the fair value of financial liabilities was measured on the basis that the financial liability would be settled or extinguished with the counterparty. The adoption of AASB 13 has clarified that fair value is an exit price notion, and as such, the fair value of financial liabilities should be determined based on transfer value to a third party market participant. The group currently has few assets measured at fair value and therefore the adoption of this standard has not had any material impact on the financial statements. iii. Employee benefits The adoption of the revised AASB 119 Employee Benefits changed the accounting for the group’s annual leave obligations. Where the entity does not expect all annual leave to be taken within 12 months of the respective service being provided, annual leave obligations are now classified as long-term employee benefits in their entirety. This changes the measurement of these obligations, as the entire obligation is now measured on a discounted basis and no longer split into short term and long term portion. However, the impact of this change was immaterial since the majority of the leave is still expected to be taken within a short period after the end of the reporting period. iv. New accounting standards not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2014 reporting periods. The group’s assessment of the impact of these new standards and interpretations is set out below. Title of Standard Nature of change Impact AASB 9 Financial Instruments AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. Since December 2013, it also sets out new rules for hedge accounting. The application of the standard at the operative date is not expected to have a significant impact on the group’s accounting for financial assets and liabilities as the new requirements only affects the accounting for assets or liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. Mandatory application date / Date of adoption by group Must be applied for financial years commencing on or after 1 January 2017. The group is considering the introduction of hedge accounting for derivatives and may adopt AASB 9 before its operative date. There are no other standards that are not yet effective and that are expected to have a material impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions. bb) Rounding of amounts The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. n o i t a m r o f n I r e h t O – 4 E 90 CEDAR WOODS PROPERTIES LIMITED E5. Segment Information The board has determined the operating segment based on the reports reviewed by the Managing Director that are used to make strategic decisions. The board has considered the business from both a product and a geographic perspective and has determined that the group operates a single business in a single geographic area and hence has one reportable segment. The group engages in property investment and development which takes place in Australia. The group has no separate business units or divisions. The internal reporting provided to the Managing Director includes key performance information at a whole of group level. The Managing Director uses the internal information to make strategic decisions, based primarily upon the expected future outcome of those decisions on the group as a whole. Material decisions to allocate resources are generally made at a whole of group level. The group sells products to the public and is not reliant upon any single customer for 10% or more of the group’s revenue. All of the group’s assets are held within Australia. The Managing Director assesses the performance of the operating segment based on the net profit after tax, earnings per share and net tangible assets per share. n o i t a m r o f n I r e h t O – 5 E 91 2014 ANNUAL REPORT n o i t a m r o f n I r e h t O – 6 E 92 E6. Parent Entity Financial Information The financial information for the parent entity, Cedar Woods Properties Limited, has been prepared on the same basis as the consolidated financial statements, except as detailed in notes (i) and (ii) below. The individual financial statements for the parent entity show the following aggregate amounts: Balance sheet Current assets Total assets Current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Retained earnings Profit for the year Total comprehensive income i. Investments in subsidiaries and joint venture entities 2014 $’000 2013 $’000 53,893 301,445 (61,687) (103,530) 197,915 116,716 81,199 197,915 32,040 32,040 38,435 241,570 (46,680) (89,240) 152,330 83,795 68,535 152,330 27,584 27,584 Investments in subsidiaries and joint venture entities are accounted for at cost in the financial statements of Cedar Woods Properties Limited. Such investments include both investments in shares issued by the subsidiary and other parent entity interests that in substance form part of the parent entity’s investment in the subsidiary. These include investments in the form of interest free loans which have no fixed repayment terms and which have been provided to subsidiaries as an additional source of long term capital. Dividends received from joint ventures are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments. ii. Tax consolidation legislation Cedar Woods Properties Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Cedar Woods Properties Limited, and the controlled entities in the tax-consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax-consolidated group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, Cedar Woods Properties Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax-consolidated group. The entities have also entered into a tax funding agreement under which the 100% subsidiaries fully compensate the parent for any current tax payable assumed and are compensated by the parent for any current tax receivable and deferred tax assets relating to unused tax losses that are transferred to the parent under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the 100% subsidiaries’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity when it is issued. The head entity may require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the group. CEDAR WOODS PROPERTIES LIMITED Section F: Declaration and Independent Auditor’s Report F1. Directors’ Declaration .................................................................................................................................... 94 F2. Independent Auditor’s Report to the Members of Cedar Woods Properties Limited .............................. 95 t r o p e R s ’ r o t i d u A t n e d n e p e d n I d n a n o i t a r a c e D – l F 93 2014 ANNUAL REPORT F1. Directors’ Declaration In the directors’ opinion: a) the financial statements and notes set out on pages 39 to 92 are in accordance with the Corporations Act 2001, including: i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the financial year ended on that date; and b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Note E4(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. P S Sadleir Managing Director Perth, Western Australia 19 August 2014 t r o p e R s ’ r o t i d u A t n e d n e p e d n I d n a n o i t a r a c e D – l 1 F 94 CEDAR WOODS PROPERTIES LIMITED F2. Independent Auditor’s Report to the members of Cedar Woods Properties Limited Independent auditor’s report to the members of Cedar Woods Properties Limited Report on the financial report Independent auditor’s report to the members of Cedar Woods We have audited the accompanying financial report of Cedar Woods Properties Limited (the Properties Limited company), which comprises the balance sheet as at 30 June 2014, the statement of profit or loss and other comprehensive income, statement of changes in equity and cash flow statement for the year Report on the financial report ended on that date, a summary of significant accounting policies, other explanatory notes and the We have audited the accompanying financial report of Cedar Woods Properties Limited (the directors’ declaration for Cedar Woods Properties Limited (the consolidated entity). The consolidated company), which comprises the balance sheet as at 30 June 2014, the statement of profit or loss and entity comprises the company and the entities it controlled at year’s end or from time to time during other comprehensive income, statement of changes in equity and cash flow statement for the year the financial year. ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Cedar Woods Properties Limited (the consolidated entity). The consolidated Directors’ responsibility for the financial report entity comprises the company and the entities it controlled at year’s end or from time to time during The directors of the company are responsible for the preparation of the financial report that gives a the financial year. true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the Directors’ responsibility for the financial report financial report that is free from material misstatement, whether due to fraud or error. In Note E4, the The directors of the company are responsible for the preparation of the financial report that gives a directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 Statements, that the financial statements comply with International Financial Reporting Standards. and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note E4, the Auditor’s responsibility directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Our responsibility is to express an opinion on the financial report based on our audit. We conducted Statements, that the financial statements comply with International Financial Reporting Standards. our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to Auditor’s responsibility obtain reasonable assurance whether the financial report is free from material misstatement. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply An audit involves performing procedures to obtain audit evidence about the amounts and disclosures with relevant ethical requirements relating to audit engagements and plan and perform the audit to in the financial report. The procedures selected depend on the auditor’s judgement, including the obtain reasonable assurance whether the financial report is free from material misstatement. assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the consolidated An audit involves performing procedures to obtain audit evidence about the amounts and disclosures entity’s preparation and fair presentation of the financial report in order to design audit procedures in the financial report. The procedures selected depend on the auditor’s judgement, including the that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of In making those risk assessments, the auditor considers internal control relevant to the consolidated entity’s preparation and fair presentation of the financial report in order to design audit procedures accounting policies used and the reasonableness of accounting estimates made by the directors, as well that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the as evaluating the overall presentation of the financial report. effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for as evaluating the overall presentation of the financial report. our audit opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for Independence our audit opinion. In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au PricewaterhouseCoopers, ABN 52 780 433 757 Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840 Liability limited by a scheme approved under Professional Standards Legislation. T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. t r o p e R s ’ r o t i d u A t n e d n e p e d n I d n a n o i t a r a c e D – l 2 F 95 2014 ANNUAL REPORT t r o p e R s ’ r o t i d u A t n e d n e p e d n I d n a n o i t a r a c e D – l 2 F 96 Independent auditor’s report to the members of Cedar Woods Properties Limited (continued) Auditor’s opinion In our opinion: (a) the financial report of Cedar Woods Properties Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2014 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note E4. Report on the Remuneration Report We have audited the remuneration report included in pages 20 to 28 of the directors’ report for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion, the remuneration report of Cedar Woods Properties Limited for the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Douglas Craig Partner Perth 19 August 2014 CEDAR WOODS PROPERTIES LIMITED Section G: Shareholders’ Information This section provides information for shareholders on distributions and other shareholder benefits, the composition of the share register and past financial performance. G1. Investors’ Summary .......................................................................................................................................... 98 a) b) c) d) e) f) Dividend and dividend policy ................................................................................................................................ 98 Shareholder discount scheme .............................................................................................................................. 98 Electronic payment of dividends ........................................................................................................................... 98 Dividend re-investment plan and Bonus share plan .............................................................................................. 98 Shareholders’ timetable ....................................................................................................................................... 98 Shareholder information ....................................................................................................................................... 99 G2. Five year financial performance .................................................................................................................... 101 n o i t a m r o f n I l ’ s r e d o h e r a h S – G 97 2014 ANNUAL REPORT G1. Investors’ Summary a) Dividend and dividend policy The dividend policy is to distribute approximately 50% of the full year net profit after tax. The final dividend for the 2014 financial year is 15.5 cents per share, fully franked. The dividend will be paid on 31 October 2014. b) Shareholder discount scheme The group operates a shareholder discount scheme which entitles shareholders to a 5% discount off the listed price of any residential lot, or 2.5% off the listed price of houses or apartments at the group’s developments. A summary of the main terms and conditions follows: • Shareholders must hold a minimum number of 5,000 shares for at least 12 months before purchasing a lot or dwelling to qualify for the discount; • There is no limit to the number of lots or dwellings which a shareholder may purchase under the scheme, subject to any statutory restrictions; and • The shareholder discount scheme does not apply to lots or dwellings at joint venture projects. The above is a summary of the main conditions and shareholders should apply to the company or visit the website for the full terms and conditions. c) Electronic payment of dividends The group 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 credited on the dividend payment date and confirmed by mailed advice. Shareholders wishing to take advantage of this facility for the first time should contact the company’s share registrar, Computershare Investor Services Pty Ltd, by visiting www.computershare.com.au. d) Dividend re-investment plan and Bonus share plan The dividend re-investment plan and bonus share plan are operated from time to time as part of measures to manage the group’s capital. Shareholders can change their participation status in the plans by completing an election form in accordance with the rules of each plan. The dividend re-investment plan and bonus share plan have been suspended for the final dividend for the 2014 financial year. e) Shareholders’ timetable Dividend announcement Share register closes for dividend (Record date) Final dividend payment date First quarter update Annual General Meeting Half-year result announcement Interim dividend payment date Third quarter update Full year result and dividend announcement 20 August 2014 3 October 2014 31 October 2014 October 2014 10 November 2014 February 2015 30 April 2015 May 2015 August 2015 n o i t a m r o f n I l ’ s r e d o h e r a h S – 1 G 98 CEDAR WOODS PROPERTIES LIMITED f) Shareholder Information The shareholder information set out below was applicable at 31 August 2014. i) Distribution of ordinary shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 and over There were 154 holders of less than a marketable parcel of shares. ii) Twenty largest shareholders of ordinary shares National Nominees Limited JP Morgan Nominees Australia Limited Hamsha Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Westland Group Holdings Pty Ltd Zero Nominees Pty Ltd Australian Foundation Investments Company Limited Australian Executor Trustees Limited Beach Corporation Pty Ltd Helen Kaye Poynton Citicorp Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited (NT - Commonwealth Super Corp A/C) BNP Paribas Noms Pty Ltd Mr Paul Sadleir Citicorp Nominees Pty Ltd (Colonial First State Inv A/C) ESA Securities Pty Ltd Netwealth Investments Limited Leblon Holdings Pty Ltd R S & J P Brown Super Fund A/C Ramneg Pty Ltd Number of holders 782 1,133 362 407 57 Number of shares 336,636 2,882,037 2,634,516 10,380,766 62,102,416 2,741 78,336,371 Number of shares Percentage of shares 8,184,801 7,090,024 6,285,957 5,833,980 4,639,980 4,119,503 4,060,216 2,802,231 2,772,159 1,677,095 1,437,957 1,336,799 1,129,249 1,045,445 752,698 680,221 657,544 654,024 554,996 537,031 10.45 9.05 8.02 7.45 5.92 5.26 5.18 3.58 3.54 2.14 1.84 1.71 1.44 1.33 0.96 0.87 0.84 0.83 0.71 0.69 56,251,910 71.81 n o i t a m r o f n I l ’ s r e d o h e r a h S – 1 G 99 2014 ANNUAL REPORT iii) Substantial shareholders of ordinary shares As disclosed in substantial shareholder notices lodged with the ASX at 31 August 2014. Number of shares Percentage of shares 1 9,314,668 7,967,627 4,493,661 4,174,479 4,054,462 3,371,170 3,210,743 12.90 10.87 6.13 5.33 5.18 5.80 5.29 William George Hames and related entities Robert Stanley Brown and related entities Westoz Funds Management Pty Ltd Acorn Capital Limited Westpac Banking Corporation Australian Foundation Investment Company Limited Invesco Australia Limited 1 Percentage of issued capital held as at the date notice provided. iv) 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. n o i t a m r o f n I l ’ s r e d o h e r a h S – 1 G 100 CEDAR WOODS PROPERTIES LIMITED G2. Five Year Financial Performance All figures in $’000 except where stated Financial Year Financial Performance Revenue from operations 2014 2013 2012 2011 2010 214,465 172,751 170,474 131,839 108,415 Earnings before interest and tax 56,172 53,022 53,092 42,106 26,771 Finance costs Operating profit before tax Income tax expense Net profit after tax Financial Position Total assets Total liabilities 606 55,566 15,253 40,313 1,580 51,442 15,105 36,337 3,819 49,273 15,023 34,250 1,866 40,240 12,180 28,060 2,036 24,735 7,494 17,241 409,948 301,024 238,314 233,595 205,657 148,347 93,280 53,688 104,046 96,867 Shareholders’ equity 261,601 207,744 184,626 129,549 108,790 Number of shares on issue – end of year (‘000) 78,336 73,360 72,190 61,818 60,565 Key Performance Measures Earnings per share (cents) Dividend per share, fully franked EBIT Margin Interest cover (times) Return on Equity 54.4 27.5 49.9 26.0 53.2 25.0 45.8 23.0 29.0 13.0 26.2% 30.7% 31.1% 31.9% 24.7% 10.4 12.6 8.8 9.1 15.4% 17.5% 18.6% 21.7% 6.4 15.8% 56,338 1.80 39,716 36.5% 2.45 Investment in inventory during year 158,149 145,474 97,401 102,348 Net tangible assets backing per share ($) Net bank debt Net bank debt to equity Share price – end of year ($) 3.34 32,602 12.5% 7.31 2.83 37,762 18.2% 5.17 2.56 3,822 2.1% 3.56 2.10 55,100 42.5% 4.00 Stock Market capitalisation at 30 June 572,639 379,269 256,995 247,272 148,383 Number of employees at 30 June 56 54 48 41 35 Returns to shareholders over 1, 3, & 5 years 1 Year 3 Year 5 Year Earnings growth % Share price growth % Dividend growth % (paid dividend) Total shareholder return % 9.0 41.4 8.0 46.6 5.9 22.3 12.4 28.7 27.4 38.8 22.0 45.9 n o i t a m r o f n I l ’ s r e d o h e r a h S – 2 G 101 2014 ANNUAL REPORT www.cedarwoods.com.au 

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