2018 Annual Report
Cedar Woods Properties Limited ABN 47 009 259 081
About Cedar Woods
Cedar Woods Properties Limited (“Cedar Woods”) is a national developer of residential
communities and commercial properties. Established in 1987, Cedar Woods has grown to
become one of the country’s leading developers.
The company has established a reputation for delivering
long-term shareholder value underpinned by its disciplined
approach to acquisitions, the rigour and thoughtfulness of
its designs, and the creation of dynamic communities that
meet the evolving needs of its customers.
Cedar Woods’ diversified product mix ranges from land
subdivisions in emerging residential communities, medium
and high-density apartments and townhouses in vibrant
inner-city neighbourhoods and supporting retail and
commercial developments. Cedar Woods’ developments
epitomise the company’s long-standing commitment to
quality.
The successful delivery of Cedar Woods’ strategy to grow
its portfolio by geography, product type and price point, is
driven by the company’s Board and management team, led
by Chairman and co-founder, William Hames and Managing
Director, Nathan Blackburne. Cedar Woods’ approach
to investments, ability to unlock value across all product
types and its long-term vision for the business has enabled
the company to navigate changing market dynamics and
deliver consistent earnings for shareholders.
Cedar Woods’ track record of earnings growth has
delivered shareholders a consistent fully franked dividend
yield, while its strong balance sheet has placed the
company in a sound position to fund future growth.
2
Cover - Wattle Apartments, Jackson Green, Victoria
CEDAR WOODS PROPERTIES LIMITED Contents
Letter from the Chairman ............................................................................................................... 5
Letter from the Managing Director .................................................................................................. 7
Performance Highlights ................................................................................................................ 12
Our Business ............................................................................................................................... 15
Financial and Operating Review .................................................................................................... 23
Directors’ Report ......................................................................................................................... 44
Directors’ Report - Letter to Shareholders .................................................................................... 50
Directors’ Report - Remuneration Report ..................................................................................... 52
Auditor’s Independence Declaration ............................................................................................. 71
Financial Statements ............................................................................................................... 72
Consolidated Statement of Profit or Loss and Other Comprehensive Income ............................... 73
Consolidated Balance Sheet ....................................................................................................... 74
Consolidated Statement of Changes in Equity ............................................................................. 75
Consolidated Cash Flow Statement ............................................................................................. 76
Notes to the Financial Statements ......................................................................................... 77
Section A: Key Numbers .......................................................................................................... 78
Profit or Loss Information ............................................................................................................ 79
Balance Sheet Information .......................................................................................................... 81
Cash Flow Information ................................................................................................................ 92
Section B: Financial Risks ....................................................................................................... 94
Section C: Group Structure ................................................................................................... 102
Section D: Unrecognised Items ............................................................................................ 106
Section E: Other Information ................................................................................................ 110
Section F: Declaration and Independent Auditor’s Report ................................................. 126
Section G: Shareholders’ Information .................................................................................. 134
Corporate Directory ................................................................................................................... 139
2018 ANNUAL REPORT
3
44
Ellendale
Upper Kedron, Queensland
CEDAR WOODS PROPERTIES LIMITED Letter from the Chairman
Since co-founding Cedar Woods
more than 30 years ago, I continue to
take enormous pride in the company,
our achievements and the calibre of
people who have joined me on a truly
remarkable journey.
We’ve grown from a Western
Australian-focused company, to one
that has a substantial presence across
the country. Our business is supported
by dedicated teams who are
committed to creating communities that
offer our customers a unique lifestyle,
from tranquil neighbourhoods to high
density, inner city living.
The focus of the Board is to continue
leading and empowering our people to
grow the business and deliver superior
returns to our shareholders. Our
FY2018 net profit of $42.6 million, total
dividends of 30 cents, which represent
a 5 per cent yield at year end, and the
strong position with which we enter
FY2019, is testament to our capability
and disciplined approach to our
investments.
During the year, we made a significant
change to our management team
following the retirement of our
longstanding Managing Director, Paul
Sadleir. Paul led Cedar Woods for 14
years and oversaw our growth into a
national, diversified property company.
On behalf of the Board I thank Paul
for his tremendous contribution to
Cedar Woods and take this opportunity
to acknowledge our new Managing
Director, Nathan Blackburne.
Nathan stepped into the role after 15
years with the Company, and in his
first 12 months as Managing Director,
has proven himself to be an extremely
capable leader, committed to executing
our proven strategy of growing our
national portfolio by product mix, price
point and geography.
At a Board level we were delighted
to welcome Mrs Jane Muirsmith as
a Non-Executive Director in October
2017, bringing with her significant
experience in digital technologies
and transformation, marketing and
communications.
We enter FY2019 with a housing
sector that continues to be supported
by a low interest rate environment
and population growth in each of
our key markets. But as you know,
conditions vary from state-to-state. It’s
our diversified strategy that sets Cedar
Woods apart from its peers and helps
insulate our business from exposure to
a single property cycle.
Our strategy is certainly proving
effective, with all four states in which
we have a presence, expected to
contribute to revenue for the first time
in FY2019.
On behalf of the Board, I would like
to thank Nathan and the whole Cedar
Woods team for their contributions to
the company. With a strong pipeline
of projects in front of us, the Board is
confident Cedar Woods will continue
to generate outstanding returns for its
shareholders.
William Hames
Chairman
Cedar Woods has grown
to become a leading
national property company
with a proven, strategy of
diversification that sets us
apart from our peers.
2018 ANNUAL REPORT
5
66
Oxford Apartments
Williams Landing, Victoria
CEDAR WOODS PROPERTIES LIMITED Letter from the Managing Director
The past 12 months marked my first
year as Managing Director of Cedar
Woods, a position that I am very proud
to hold and one that I am enjoying
immensely. We have a great company,
a talented team, a robust strategy and
a strong pipeline of projects.
We can all be proud of our
performance in FY2018. Our proven
strategy of growing our national
portfolio by price point, geography
and product type is certainly proving
successful. We delivered a solid net
profit of $42.6 million for the 2018
financial year and generated earnings
per share of 53.9 cents.
Our performance demonstrates the
advantages of our diversified offering.
Our products continue to appeal to
a wide-range of customers and our
presence across four states ensures
we are not exposed to a single
property cycle.
We are well regarded among our
shareholders for disciplined growth,
and we have been living up to our
reputation by diligently buying and
delivering new projects in Perth,
Adelaide, Melbourne and Brisbane.
This heightened level of activity is
already bearing fruit, with Cedar Woods
entering FY2019 with presales of $320
million at 30 June 2018, a 23 per cent
increase over the previous year.
This exceptional result excludes the
$58 million presale of the Target
Headquarters in Williams Landing,
Victoria, which is also due to settle in
FY2019, and positions Cedar Woods
for solid growth.
We are working to four Strategic
Priorities aimed at ensuring Cedar
Woods will continue to deliver strong
shareholder returns:
• High Performance Culture:
Foster a progressive, high-
spirited work environment where
employees are empowered,
collaboration is encouraged, and
performance is rewarded.
• Operational Excellence:
Being operationally strong and safe
through renewed and integrated
systems and technologies, a
strong corporate brand and quality
projects.
• Financial Strength:
Optimise performance through
disciplined capital management,
a commercial focus, attention to
costs and a strong balance sheet.
Cedar Woods is entering an
exciting period of growth,
driven by a record level of
presales that have raised
expectations of a strong
increase in earnings in
• Earnings Growth:
FY2019.
Pursue earnings growth to achieve
our purpose of creating long term
value for our shareholders.
As we entered FY2019, we felt it
was vital that our brand captured
the essence of who we are and the
energy and passion that we bring
to our developments. It’s why we
introduced a refreshed corporate
brand and launched a new website,
which presents the company in a more
contemporary light.
In making our culture as strong as
possible, we have refreshed the values
that guide our behaviour internally and
our relationships with our partners,
customers and investors. You can
read about these on page 15. We
have also introduced new Human
Resources systems to help drive
strong performance and improve
accountability.
2018 ANNUAL REPORT
7
To support our growth ambitions,
we have commenced a process of
renewing our core technologies and
systems. This will give us a business
that is more easily scalable, creates
efficiencies, reduces costs, improves
collaboration and delivers a superior
customer experience. During the year
we implemented a new customer
relationship management system
which has already improved our lead
generation, sales, data analysis and
customer management.
Cedar Woods has a long history of
disciplined capital management. Our
strong balance sheet, supported by our
heightened focus on costs, corporate
governance and risk management, is
why we have long-held the trust of our
financiers and investors.
The pursuit of earnings growth is a key
driver in our business and consistent
with our purpose of generating long
term value for shareholders. We
continue to assess new opportunities
and we have the ability to move quickly
if needed. Importantly we don’t need
to make further acquisitions to achieve
earnings growth in FY2019 and
FY2020.
We move into FY2019 with a positive
outlook for our business, buoyed
by a record level of presales and a
number of exciting new projects,
such as Glenside in Adelaide and
Wooloowin in Queensland, which will
be strong contributors to growth in
coming years.
I would like to take this opportunity
to thank our Board and Management
team, with particular thanks to Paul
Freedman who stepped down from
the position as Chief Financial Officer
in June 2018 after 20 years in the
role and into a dedicated Company
Secretary role. We welcome Leon
Hanrahan as our new CFO.
I would also like to thank our
outstanding employees for their
ongoing commitment to Cedar Woods
and their contribution to another
successful year.
Nathan Blackburne
Managing Director
Cedar Woods’ positive outlook
is buoyed by a record level
of presales and a number
of exciting new projects,
including Glenside, Adelaide
(pictured).
Artist Impression
8
CEDAR WOODS PROPERTIES LIMITED Glenside, South Australia
2018 ANNUAL REPORT
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Cedar Woods builds communities from the
ground up, creating strong foundations for life.
10
Mariners Cove, Mandurah, Western Australia
CEDAR WOODS PROPERTIES LIMITED 2018 ANNUAL REPORT
11
Performance Highlights
Net Profit
$42.6m
Net profit of $42,603,000
Down 6.3 per cent
Total Revenue
$239.7m
Up 7.8 per cent
2017
2018
2017
2018
Full Year Dividends
30.0¢
Full year dividends of 30.0 cents per share
In line with previous year
2017
2018
Earnings Per Share
53.9¢
Earnings per share of 53.9 cents
Down 6.4 per cent
2017
2018
12
CEDAR WOODS PROPERTIES LIMITED
Return on Equity
12.1%
Return on equity above
company benchmark
Total Shareholder Return
16.5%
Strong total shareholder return
Net Bank Debt to Equity
30.9%
Net bank debt to equity at lower
end of target range
Presales
$320m
Up 23 per cent
2017
2018
2018 ANNUAL REPORT
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14
Oxford Apartments
Williams Landing, Victoria
CEDAR WOODS PROPERTIES LIMITED Our Business
a) Our History
b) Our Purpose, Vision & Values
Today, Cedar Woods is a
national developer of residential
communities and commercial
properties and has grown to
become one of Australia’s leading
property companies.
Cedar Woods was established in
1987 and listed on the Australian
Securities Exchange (ASX: CWP)
in 1994.
The company expanded beyond
Western Australia in 1997 when
it made its first acquisition in
Victoria. Cedar Woods’ successful
acquisition of Williams Landing
led to the establishment of a
Melbourne office in 2002.
The company’s growing portfolio,
steady growth in earnings and
strong balance sheet culminated
in its inclusion in the ASX 300 in
2013.
Cedar Woods’ experience, and
considerable success, in Western
Australia and Victoria positioned
the company well for further growth
and geographical expansion.
Adhering to its strategy of
developing its national portfolio,
diversified by geography, product
mix and price point, Cedar Woods
capitalised on opportunities in
South East Queensland with the
purchase of a major development
site in Brisbane in 2014.
Cedar Woods continued to
grow its national presence with
an expansion into the Adelaide
property market in 2016.
Our Purpose, Vision and Values
inform every decision we make,
guide our conduct internally and
our relationships with partners,
customers and investors. We
revisited our values in FY2018 to
ensure they reflect who we are and
what we stand for.
We are proud to be a leading
national property developer, and
with an ongoing commitment to
our strategy and our values, we
look forward to fulfilling our vision
of becoming the best Australian
property company, renowned for
performance and quality.
Purpose
Our purpose is to
create long term value
for shareholders through
the development of vibrant
communities.
Vision
Our vision is to be the best Australian
property company renowned for
performance and quality.
Values
• We do what we say we’ll do – We deliver what we say
we will for all our stakeholders.
• We think about tomorrow – We take a long-term view
of our performance and the product we deliver.
• We are people developers – We are committed to developing
our people so that they thrive in their careers.
• We strive to succeed – We are driven to succeed in all aspects
of our business.
2018 ANNUAL REPORT
15
c) Our Strategy
Our strategy is to grow 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.
Our diversity sets us apart from
our peers, with our developments
ranging from urban land subdivisions
in residential growth areas, medium
density apartments, town houses
in vibrant established suburbs, and
commercial and retail properties.
An ongoing focus on operational
excellence and a commitment to
quality, ensures our developments
are sought after by customers, and in
turn creates long-term value for our
shareholders.
Geography
Good geographic spread of well
located projects in 4 states.
Product Type
Range of housing lots, townhouses,
apartments and office products.
Price Point
Wide range of price points offered
with Western Australia, South
Australia and Queensland offering
good affordability.
16
CEDAR WOODS PROPERTIES LIMITED d) Value Creation Model
We deliver on our strategy via our
value creation model.
Our contracts are structured in a way
that minimise risk and optimise returns.
ensure our projects optimise quality,
functionality, sustainability and returns.
We have an appetite for growth but
rigorously assess all acquisitions.
As we move into development,
considerable care goes into design
and planning. We have a clear
understanding of our customers and
Marketing and sales is a vital step in this
process. Our projects are positioned
to maximise demand and are
generally pre-sold to help underwrite
developments.
Property Acquisitions
Disciplined approach to acquisitions
Tactical and research based decisions
to identify projects
Rigorous assessment and conservative
assumptions
Structure contracts to minimise risks
and optimise returns
Development
Research, design, planning and delivery
Sustainable designs that optimise quality,
functionality, environmental outcomes and
returns
Collaborative approach with community
and authorities
Negotiate deliverable and speedy approvals
Structure contracts to minimise risks
Manage construction closely
Marketing & Sales
Integrated approach to optimise results
Positioning projects to maximise demand
Pre-sell to underwrite projects
Quality brands and marketing material
Lead generation and sales conversion
Customer nurturing and referrals
2018 ANNUAL REPORT
17
e) Strategic Priorities
We optimise business performance through a focus on four strategic priorities.
High Performance Culture
Creating a progressive, high-spirited work environment with strong staff alignment
to values and objectives, where top talent work collaboratively
and high performance is rewarded.
Operational Excellence
Being operationally strong and safe through renewed and integrated systems and
technologies, and having a strong corporate brand with quality projects.
Financial Strength
Optimising performance through disciplined capital management, a commercial
focus, cost minimisation and maintaining a strong balance sheet.
Earnings Growth
Pursuit of earnings growth is the key metric to achieve our primary objective of
creating long-term value for our shareholders. This may be achieved organically, by
mergers and acquisitions or through new business areas.
Strategic actions have been determined under each of these priority areas and are currently being implemented
throughout the business.
f) Governance
The Board of Cedar Woods is committed to achieving and demonstrating the highest standards of corporate
governance. The Board continues to review the framework and practices to ensure they meet the interests of
shareholders.
Cedar Woods has taken the opportunity to publish the Corporate Governance statement on its website rather
than include in the annual report. A copy of the Corporate Governance statement and related documents can be
downloaded from the ‘Our Company’ section of the website. www.cedarwoods.com.au
Other information available under the Governance section of the website includes:
- Board Committee Charters
- Privacy Policy
- Risk Management Policy
- Primary Objectives and
and Internal Compliance and
Control System
Company Code of Conduct
- Securities Trading Policy
- Investor Communications Policy
- Diversity Policy
- Continuous Disclosure Policy
- Performance Evaluation Policy
18
CEDAR WOODS PROPERTIES LIMITED High Performance Culture
Creating a progressive, high-spirited work environment with strong staff alignment
to values and objectives, where top talent work collaboratively
and high performance is rewarded.
Operational Excellence
Being operationally strong and safe through renewed and integrated systems and
technologies, and having a strong corporate brand with quality projects.
Financial Strength
Optimising performance through disciplined capital management, a commercial
focus, cost minimisation and maintaining a strong balance sheet.
Earnings Growth
Pursuit of earnings growth is the key metric to achieve our primary objective of
creating long-term value for our shareholders. This may be achieved organically, by
mergers and acquisitions or through new business areas.
Glenside, South Australia
2018 ANNUAL REPORT
19
20
Oxford Apartments, Williams Landing, Victoria
CEDAR WOODS PROPERTIES LIMITED Cedar Woods is focused on growth
driven by leadership and long-term vision.
2018 ANNUAL REPORT
21
22
Artist Impression
Glenside, South Australia
CEDAR WOODS PROPERTIES LIMITED Financial and Operating Review
On behalf of the Board, we are pleased to present the financial and operating review of Cedar
Woods to shareholders.
Financial Review
The following summarises the results of operations during the year and the financial position of the consolidated entity at
30 June 2018:
a) 2018 financial highlights
• Strong net profit of $42,603,000, although down 6.3 per cent on the prior year
• Total dividends of 30.0 cents per share, in line with last year, generating a fully franked yield of 5.2 per cent
• Strong earnings per share of 53.9 cents, down 6.4 per cent on the prior year
• Low level of bank debt and strong interest cover
• Share price growth of 10.6 per cent
• Total shareholder return of 16.5 per cent.
b) Net Profit After Tax (NPAT) and Dividends paid
In FY2018, the company delivered a profit of $42.6 million, a decrease of 6.3 per cent from the prior year. This was
following seven years of consecutive profit growth for the company, with net profit after tax increasing from $28.1
million in FY2011 to $45.4 million in FY2017 and dividends declared growing from 23 cents to 30 cents per share over
the same period.
NPAT and Dividends declared for the past 8 years
s
n
o
i
l
l
i
M
$
50
45
40
35
30
25
20
15
10
5
0
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Net Profit After Tax
Dividends Declared
30
25
20
15
10
5
0
s
t
n
e
C
2018 ANNUAL REPORT
23
c) 2018 Financial Results Summary
Year ended 30 June
Revenue
Net profit after tax
Total assets
Net bank debt
Shareholders’ equity
d) Key Performance Indicators
Year ended 30 June
Basic earnings per share
Diluted 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
Net bank debt to total tangible assets (less cash)
Interest cover
Net asset backing per share – historical cost
2018
$’000
2017
$’000
% Change
239,661
222,269
7.8%
42,603
45,445
(6.3%)
601,516
505,624
19.0%
109,134
78,940
38.3%
353,186
330,234
7.0%
2017
% Change
¢
¢
¢
%
%
%
%
%
x
$
2018
53.9
53.7
30.0
12.1
14.1
16.5
30.9
18.9
8.5
4.44
57.6
57.4
30.0
13.8
16.5
29.7
23.9
15.9
13.9
4.19
(6.4)
(6.4)
0.0
(1.70)
(2.40)
(13.2)
7.0
3.0
(5.4)
6.0
0.8
11.4
10.6
Shares on issue – end of year
’000
79,517
78,892
Stock market capitalisation at 30 June
$’000
458,015
411,026
Share price at 30 June
$
5.76
5.21
24
CEDAR WOODS PROPERTIES LIMITED e) Financial Year Overview
During FY2018, buoyant conditions continued in the Victorian, Queensland and South Australian property markets,
while in Western Australia the market stabilised and is now showing signs of a modest recovery. The company
completed acquisitions at Bonnie Brook and North Melbourne in Victoria. The Bonnie Brook property was
subsequently sold in May 2018 for $8.3 million generating a profit contribution from this site of $3.5 million before tax.
Revenue was 8 per cent higher than the prior year due to a two per cent increase in product settled and a higher
proportion of apartments and townhouses, which have a higher price point than land lots. Gross margin reduced
by 4 per cent to 41 per cent reflecting the changing product mix, Western Australian market conditions and the
commencement of new projects, which typically have lower margins in the initial stages and improve over time.
Consequently, there was a 6.3 per cent decrease in NPAT for the year.
At 30 June 2018, net bank debt stood at a conservative $109 million. Net bank debt-to-equity at 30 June was 31 per
cent, with interest cover at 8.5 times for the year. During the year the corporate bank facility was increased by $65
million to $240 million to accommodate increased needs and growth ambition.
The year closed with a full year net profit of $42.6 million and basic earnings per share of 53.9 cents, a decrease
of 6.4 per cent on the previous year. The Board has declared a full year dividend of 30.0 cents per share. This is
consistent with the Board’s policy of distributing approximately 50 per cent of full year net profit to shareholders,
providing a high-yield return of approximately five per cent at year end.
Return on equity of 12.1 per cent and return on capital of 14.1 per cent were above the company’s benchmarks of 10
per cent and 12 per cent respectively.
The one-year total shareholder return was 16.5% per cent, with the company’s share price improving strongly.
f) Capital Management
The company reviewed its credit facilities during the year, increasing the corporate bank facility limit from $175 million
to $240 million, and extending the tenure by a further year to November 2020. The increase in the facility limit provides
funding for the ongoing growth of the company, its expansion into South Australia as well as the completion of the
Target Headquarters at Williams Landing in Victoria. The company also established a new $27 million project facility
late in the year to fund the development of its 111 Overton road strata office and apartment development. In addition,
the company has a facility of $30 million in place for the Williams Landing Shopping Centre, expiring in June 2021.
Together with stand-alone facilities for the Williams Landing Shopping Centre and the 111 Overton Road project,
finance facilities available to the Company stand at $297 million.
The year concluded with a net debt to equity of 30.9 per cent at year end, within the company’s target debt to equity
range of 20-75 per cent. Net debt to total tangible assets less cash was 18.9 per cent at year end and interest cover
was at a favourable 8.5 times.
The dividend reinvestment and bonus share plans were in reintroduced for the FY2018 interim dividend paid during
the year.
Operational Review
g) Operating Conditions
The Australian housing sector continues to be supported by a low interest rate environment and population growth in
each of the company’s key markets.
Conditions are positive in Queensland and South Australia where strong demand has been experienced for active
projects. Western Australia remains subdued with further improvement expected over FY2019. Market conditions in
Victoria remain strong but have moderated with a reduction in investors and foreign buyers particularly evident.
Cedar Woods’ projects in Victoria are predominantly moderately priced new housing product in high amenity
locations. These projects are located in established suburbs that have limited competition and strong appeal to owner
occupiers. The Company expects the Victorian projects will continue to trade relatively well.
2018 ANNUAL REPORT
25
h) Project pipeline chart as at 30 June 2018
PROJECT NAME
CORRIDOR /
LOCATION
PROJECT TYPE
LOTS / UNITS
PROJECT
LOTS / UNITS
REMAIN
FY19
FY20
FY21
FY22
FY23
FY24
PROJECT LIFE
WESTERN AUSTRALIA - PERTH
Mariners Cove, Mandurah
South
Residential Land
Ariella, Brabham
The Brook at Byford
Rivergums, Baldivis
Byford on the Scarp
North East
Residential Land
South East
Residential Land
South
Residential Land
South East
Residential Land
Karmara, Piara Waters
South East
Residential Land
Forrestdale
Bushmead
Millars Landing, North Baldivis
Pinjarra
South East
Residential Land
East
South
South
Residential Land
Residential Land
Residential Land
(As of 1/7/18)
25
229
241
380
227
88
295
817
1,582
1,080
982
492
423
1,414
312
128
295
954
1,610
1,080
WESTERN AUSTRALIA - REGIONAL
Elements South Hedland
Pilbara
Residential Land
136
14
WESTERN AUSTRALIA - “JV” PROJECTS
Cedar Woods Wellard (Emerald Park) South
Residential Land
Batavia Coast Marina Apartments
Mid-West
Apartments
Harrisdale Green
South East
Residential Land and Townhouses
Western Edge, South Hedland
Pilbara
Residential Land
VICTORIA - MELBOURNE
Carlingford, Lalor
St A, St Albans
North
Residential Land
North West
Townhouses
Jackson Green, Clayton South
South East
Townhouses and Apartments
North Melbourne
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
North West
Townhouses
Residential Land, Townhouses, Apartments
2,269
West
West
West
West
West
West
West
Target Head Office (12,919m2)
Oxford Apartments
Lancaster Apartments
111 Overton Road Strata Offices
Apartments
Commercial (20 hectares)
QUEENSLAND - BRISBANE
Bexley, Wooloowin
Inner North
Townhouses and Apartments
Ellendale, Upper Kedron
North West
Residential Land
665
54
482
600
580
268
513
15
1
103
42
47
382
279
480
SOUTH AUSTRALIA - ADELAIDE
Glenside
Inner South East Townhouses and Apartments
Port Adelaide (proposed)
North West
Townhouses and Apartments
1,018
502
TOTAL GROUP
26
82
25
280
600
5,965
67
268
432
15
265
1
57
42
47
325
1,519
279
255
534
1,018
502
1,520
9,538
CEDAR WOODS PROPERTIES LIMITED PROJECT NAME
CORRIDOR /
LOCATION
PROJECT TYPE
LOTS / UNITS
LOTS / UNITS
PROJECT
REMAIN
FY19
FY20
FY21
FY22
FY23
FY24
PROJECT LIFE
WESTERN AUSTRALIA - PERTH
Mariners Cove, Mandurah
South
Residential Land
Ariella, Brabham
The Brook at Byford
Rivergums, Baldivis
Byford on the Scarp
Forrestdale
Bushmead
Pinjarra
Millars Landing, North Baldivis
North East
Residential Land
South East
Residential Land
South
Residential Land
South East
Residential Land
South East
Residential Land
East
South
South
Residential Land
Residential Land
Residential Land
Karmara, Piara Waters
South East
Residential Land
1,414
982
492
423
312
128
295
954
1,610
1,080
665
54
482
600
580
268
513
15
1
103
42
47
382
279
480
(As of 1/7/18)
25
229
241
380
227
88
295
817
1,582
1,080
82
25
280
600
5,965
67
268
432
15
265
1
57
42
47
325
1,519
279
255
534
1,018
502
1,520
9,538
WESTERN AUSTRALIA - REGIONAL
Elements South Hedland
Pilbara
Residential Land
136
14
WESTERN AUSTRALIA - “JV” PROJECTS
Cedar Woods Wellard (Emerald Park) South
Residential Land
Batavia Coast Marina Apartments
Mid-West
Apartments
Harrisdale Green
South East
Residential Land and Townhouses
Western Edge, South Hedland
Pilbara
Residential Land
Jackson Green, Clayton South
South East
Townhouses and Apartments
VICTORIA - MELBOURNE
Carlingford, Lalor
St A, St Albans
North Melbourne
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
Williams Landing
North
Residential Land
North West
Townhouses
North West
Townhouses
West
West
West
West
West
West
West
Residential Land, Townhouses, Apartments
2,269
Target Head Office (12,919m2)
Oxford Apartments
Lancaster Apartments
111 Overton Road Strata Offices
Apartments
Commercial (20 hectares)
QUEENSLAND - BRISBANE
Bexley, Wooloowin
Inner North
Townhouses and Apartments
Ellendale, Upper Kedron
North West
Residential Land
SOUTH AUSTRALIA - ADELAIDE
Glenside
Inner South East Townhouses and Apartments
Port Adelaide (proposed)
North West
Townhouses and Apartments
1,018
502
TOTAL GROUP
Planning, Design & Rezoning
Development & Sales
Leasing, Development & Sales
2018 ANNUAL REPORT
27
i) Review of Developments
i. Victoria
The Victoria portfolio includes 11 projects (7 currently at Williams Landing) and approximately 1,500 lots, dwellings
and strata offices, comprising land subdivision, townhouses, apartments and commercial projects.
The Victorian projects continued to record strong sales and settlement results, underpinned by continuing strong
population growth within the State. The buoyant Victorian market has resulted in a peak of construction activity
and placed pressure on some of the project delivery programs. Prices grew strongly in the first half with price
growth exceeding cost increases across the Victorian portfolio.
Jackson Green’s first townhouses stages and first apartment building was completed and settled during FY2018.
Several new stages of townhouses and the second apartment building are now under construction with further
settlements expected during FY2019. Settlements are set to continue over the next few years.
St A’s first townhouse stage construction is well advanced with settlements set to occur in Q1 of FY2019.
Settlements at St A will continue over the next two years.
Williams Landing is continuing to deliver on the company’s long-term vision with several new projects of scale
advancing within the town centre precinct and the last residential neighbourhood taking shape.
Jackson Green
• Located in the eastern suburb of
Clayton South, 20 kilometres from
Melbourne’s CBD
• A 6.5 hectare site set to deliver
150 new town houses and 300
apartments
• Features include a central park
and nearby retail, public transport,
employment and education
opportunities
St. A
• A masterplanned estate 16
kilometres from Melbourne’s CBD
• Architecturally designed homes
and town houses
• A proposed landscaped park
includes children’s playground,
BBQ shelter and open grassed
areas
• Walking distance to schools, parks,
Victoria University, public transport
and the vibrant local village
28
Artist Impression
CEDAR WOODS PROPERTIES LIMITED Artist Impression - 107 Overton Road, Williams Landing, Victoria
Williams Landing
• A 275 hectare estate 20 kilometres
from Melbourne’s CBD
• Comprises four residential
neighbourhoods and a network of
parks
• A dynamic commercial and retail
hub, and its own transport hub
• 50 hectare state-of-the-art Town
Centre
• Major shopping centre at the heart
of the development
40km
20km
10km
5km
St. A
Williams Landing
Projects
Melbourne
CBD
Port Phillip Bay
Carlingford
Leveson Street
Jackson
Green
Geelong
Torquay
2018 ANNUAL REPORT
29
ii. Western Australia
The Western Australia portfolio consists of 15 projects and approximately 6,000 lots, comprising land subdivision
and townhouses. Several major new developments are starting to contribute.
Sales activity within the Western Australian portfolio has seen encouraging growth over the last year, this being
against a backdrop of soft market and economic conditions within the State.
The new estates of Karmara, within the inner south-east suburb of Piara, and Millars Landing, within the highly
competitive southern suburb of Baldivis have both achieved encouraging first year settlements. Karmara,
comprising 128 lots is expected to be fully sold over the course of FY2019 and Millars Landing, comprising 1,610
lots is expected to contribute over a 10-15 year timeframe.
Cedar Woods’ involvement in the Mangles Bay marina project in Rockingham came to an end in April following the
Minister for Planning’s refusal of the Metropolitan Regional Scheme (MRS) amendment. The Mangles Bay project
was being managed by Cedar Woods through a co-development arrangement with the WA Government’s land
development agency, LandCorp. The company expects to make a full recovery of its costs.
Karmara
• Boutique community in Piara
Waters, 30 kilometres from Perth’s
CBD
• Unique residential offering situated
next door to Piara Nature Reserve,
with retail, public transport and
education infrastructure just around
the corner
• A range of block sizes available for
a first home buyer or investment
property
Millars Landing
• North Baldivis location, a short
drive to the Rockingham foreshore,
south of Perth
• Large blocks, parks and family
friendly design
• Central to two town centres and
nearby transport options
• Land-only and house and land
packages, and lease-back lots
available
Artist Impression
30
Artist Impression
CEDAR WOODS PROPERTIES LIMITED Karmara, Piara Waters, Western Australia
40km
20km
10km
5km
Perth
CBD
Ariella Private Estate
Bushmead
Harrisdale Green
Karmara
The Brook at Byford
Byford on the Scarp
Emerald Park
Millars Landing
The Rivergums
Mariners Cove
2018 ANNUAL REPORT
31
Artist Impression - Bexley, Wooloowin, Queensland
iii. Queensland
The Ellendale project in Upper Kedron is continuing to progress well with the project showing strong sales results and
price growth through FY2018. Construction is well underway with several stages and the project’s major park nearing
completion. The project is expected to be a steady contributor to company earnings over the medium term. The
planning process for the balance of the site is well progressed and the company is confident of achieving a positive
outcome.
The company’s first Queensland medium density development known as Bexley has recently received a planning
permit for the development of 279 medium-density residential dwellings. The project is in the inner ring suburb of
Wooloowin in a sought-after location close to two train stations, shopping centres, schools and parks. The first release
of boutique townhouses is set to occur in Q1 FY2019 and construction is due to commence during FY2019.
Ellendale
• A new masterplanned community
just 12 kilometres from Brisbane’s
CBD
• Backs onto the South D’Aguilar
National Upper Kedron
• Comprises 91 hectares of natural
corridors and recreation space,
providing a spectacular backdrop
to the emerging community
• Unique address offers a range of
house and land lots
32
CEDAR WOODS PROPERTIES LIMITED Glenside Sales Office, South Australia
iv. South Australia
The company’s first South Australian project, Glenside was launched in H2 FY2018 and has been met with strong
demand. The first stages of townhouses sold quickly and achieved record pricing for a medium density project in
Adelaide. The 16-hectare site is well located, three kilometres south east of the Adelaide CBD, and is expected to
deliver around 1,000 apartments and townhouses. Construction of the initial stages of townhouses is underway with
the first settlements expected in late FY2019.
Planning for the Port Adelaide project is well underway with the first sales release and construction commencement
anticipated in FY2019. The site is 14 kilometres north-west of the Adelaide CBD, seven kilometres south of Adelaide’s
new submarine and frigate building precinct and only 1.5 kilometres from Semaphore Beach. The site is expected to
yield around 500 dwellings with the majority being two and three storey townhouses.
Glenside
• A prestigious new address in the
heart of Adelaide’s east
• Adjacent to the Adelaide Park
Lands and minutes from the CBD
• Comprises luxurious town
houses and beautifully appointed
apartments
• Offers a rare opportunity to secure
a new home or investment property
in one of Adelaide’s most sought-
after locations
Artist Impression
2018 ANNUAL REPORT
33
34
Pavillion at The Brook at Byford, Byford, Western Australia
CEDAR WOODS PROPERTIES LIMITED 2018 ANNUAL REPORT
35
j) Sustainability and Social Responsibility
At Cedar Woods, we do more than create vibrant
communities. We are proud of our reputation for being
an environmentally and socially responsible developer
and we continue to look for opportunities to reduce our
ecological footprint, save on energy and create safe and
healthy lifestyles for our customers.
Our commitment to sustainability, social outcomes and
stakeholder partnerships underlines our development
approach, in recognition of the direct impact our actions
have on environmental, economic and social outcomes.
Cedar Woods’ projects make a significant contribution
to the delivery of: affordable land supply; urban
renewal and revitalisation; environmental enhancement;
optimised use of state infrastructure; support to local
economies and job creation; diverse and vibrant
communities; and lifestyle enhancement for those who
choose to buy in a Cedar Woods estate.
This section summarises our performance over FY2018.
It provides updates and progress against targets
and outcomes identified in the company’s balanced
scorecard reporting and allows us to communicate our
sustainability achievements to our business, industry
and stakeholder partners.
Sustainability and Social Objectives
Cedar Woods seeks to integrate sustainability and
social considerations into all levels of decision making
and project outcomes.
Environment & Climate Change:
Enhance and rehabilitate environmental assets;
remediate contamination as an integral part of project
delivery; promote total water cycle management; and
promote energy efficiency.
Cedar Woods continued to build on its track record
of being an environmentally responsible developer by
minimising the impact on the natural environment across
all projects. All projects with identified conservation values
adopted measures to protect those values.
Highlights and Achievements
• Bushmead is Cedar Woods’ first project to achieve the
highest level ‘6 Leaf’ accreditation under the Urban
Institute of Australia’s EnviroDevelopment accreditation
tool. Initiatives include providing 187 hectares for
conservation, revegetation of 38 hectares of formerly
cleared or degraded land; and significant tree retention
in the approved urban area. Bushmead was awarded
the 2018 UDIA EnviroDevelopment Chairman’s
Choice Award for WA, in recognition of Cedar Woods’
outstanding environmental initiatives, designed to
reduce our environmental footprint.
• The Ellendale masterplan dedicates 40 per cent (90
hectares) of the site as a green-space corridor. The
project will result in overall environment enhancement,
including restored habitat linkages through significant
revegetation works being undertaken, and improved
wildlife movement networks, including fauna
underpasses, squirrel glider poles and nesting boxes
and ecological buffers. Significant environmental
enhancement continued throughout the year on stages
1 and 2 of the development.
• Jackson Green townhouses incorporate many
significant energy, water and conservation measures.
Many of the homes exceed a 6.5-star energy rating,
all homes incorporate “kill switches” and energy usage
display units, and the majority of construction material
(by weight) is recycled.
36
Artist Impression
CEDAR WOODS PROPERTIES LIMITED Optimising Land Use:
Deliver the best use of land by optimising land use mix
and product yield in the context of high quality urban
places that deliver safe and healthy lifestyles.
Housing Diversity & Affordability:
Promote equality of access to housing for all sectors of
the community.
By the nature of our business, a key outcome of our project
delivery is to assist with the residential and commercial
land supply in line with the Perth, Melbourne, Brisbane and
Adelaide strategic planning frameworks. The company has
developed a proven model for delivering quality, medium-
density projects in middle and inner suburbs.
Projects are strategically located near amenity and
infrastructure, with some 9,500+ lots / dwellings in the
pipeline, across 30 projects.
Highlights and Achievements
• Many of Cedar Woods’ projects transform urban
spaces into vibrant communities, focusing on urban
regeneration and strategic infill development. Williams
Landing continues to develop as a major commercial
centre serving Melbourne’s western corridor. The high-
quality amenities, including the shopping centre, train
station and direct freeway access offer an affordable
office precinct with high accessibility and convenience.
This year, Cedar Woods secured a long-term lease with
the Victorian State Government within the town centre.
More than 20 additional mixed use / commercial sites
remain at Williams Landing.
• Ellendale transforms underutilised rural land and
provides residential housing supply that complements
an established residential area, capitalising on existing
transport and service infrastructure.
• Bexley is close to two train stations and the future
northern bikeway extension, in keeping with Cedar
Woods’ history of delivering medium density housing
projects in locations that are proximate to transport
infrastructure.
Highlights and Achievements
• Tailored affordable housing initiatives are included in
partnership projects such as Harrisdale Green (WA)
and Glenside (SA). The Glenside project includes a
requirement for 15 per cent affordable housing.
• Williams Landing continues to provide housing
diversity, with Lancaster Apartments, offering 42 one
and two-bedroom apartments over 7 levels. Presales
of 100 per cent have been achieved and construction
is underway. Sales prices provided affordable product
in Melbourne’s buoyant market.
Artist Impression
Artist Impression
2018 ANNUAL REPORT
37
Heritage:
Recognising indigenous and cultural heritage.
Cedar Woods has continued to respect indigenous and
European cultural heritage across all of its project sites.
Highlights and Achievements
• A highlight for this financial year is the advancement
of Cedar Woods’ Bexley project, proposing 279
apartments and terrace homes. The site contains two
historic heritage-listed buildings:
- The former Holy Cross Convent building was built
in 1889 and is Queensland’s oldest recognisable
institutional laundry. The single-story brick and
timber building provides rare surviving evidence of
the workhouse tradition.
- The Holy Cross Laundry was built in 1912 and
is listed on the Brisbane City Council heritage
register and will also be preserved.
• Cedar Woods will protect the heritage significance of
the site and plans to convert the convent and laundry
building to residential uses as part of the master-
planned development. A detailed heritage impact
assessment has been undertaken by an award-
winning heritage architect and all the original heritage
elements will be carefully retained and preserved. In
recognition of indigenous heritage in the area, Cedar
Woods will include a heritage interpretation trail using
signage within the development.
Stakeholder Engagement:
Maintain Cedar Woods’ position as a competent and
trustworthy company and joint venture partner and a
valuable contributor to the property industry; and engage
with key stakeholders throughout project delivery.
Highlights and Achievements
• Cedar Woods has established itself as a valued and
trusted joint venture partner. The company’s corporate
objective is to reinforce these partnerships with
‘professionalism, transparency and quality outcomes’.
Current partnership projects include: Harrisdale Green,
(WA Department of Communities); and Glenside
(Renewal SA).
• Cedar Woods has remained committed to
collaborating with all levels of government, industry
and local community, customers and stakeholders to
achieve positive outcomes across its projects. Active
engagement strategies were undertaken for planning
at Ellendale and Wooloowin with the advancement
of planning approvals. At Glenside and Port Adelaide
in South Australia, Cedar Woods undertook
extensive community consultation in conjunction with
Renewal SA to inform and help shape the projects’
masterplans.
• Cedar Woods maintains membership and participation
with key industry advocacy groups.
38
CEDAR WOODS PROPERTIES LIMITED Community Investment, Development and
Integration:
Create vibrant communities by investing in their
wellbeing, nurturing a strong ‘sense of community’
and maximising social connectivity.
Occupational Health & Safety:
Providing a safe working environment for staff and
stakeholders.
Highlights and Achievements
Highlights and Achievements
• Cedar Woods has donated close to $500,000 to more
than 150 community groups nationally through its
Neighbourhood Grants Program, since its inception
in 2009. These grants assist with a wide range of
local community projects, including new equipment,
uniforms, community events, wildlife protection and
environmental improvement.
• Cedar Woods is committed to providing a safe
workplace for staff and other stakeholders. The
company has adopted a new Work Health & Safety
System (WHS) to prepare for the introduction of the
Model Work Health and Safety Act as it is enacted
across Australia to harmonise workplace Health and
Safety law.
• Cedar Woods Neighbourhood Cinemas were once
again held across several of our communities. The
Brook at Byford, Byford on the Scarp and The
Rivergums enjoyed family and neighbours coming
together. The movie events were well attended, and
feedback was very positive.
• Williams Landing continues to support the local
business community through its primary sponsorship
of the Wyndham Business Awards. The City of
Wyndham has the highest incidence of business
registrations of any Victorian municipality, which bodes
well for the future of Williams Landing town centre.
• All staff have been inducted and undergo training.
• WHS plans are prepared for all construction projects,
which are subject to independent audit.
•
In FY2018, there was one WHS incident on a Cedar
Woods construction site.
• The WHS system continues to be refined to improve
the management of construction sites by Cedar
Woods’ contractors and consultants.
2018 ANNUAL REPORT
39
k) Corporate Objectives and Progress on Strategy
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 consistent 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 a full year net profit after tax of $42.6 million and total fully
franked dividends of 30.0 cents for FY2018.
The Corporate Plan sets out a number of key action items and strategies focused on achieving earnings growth and
addressing key risk factors. These key actions are implemented as performance targets by senior executives, sales
managers and other employees.
The overarching strategic objective, as illustrated on page 11, 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 strategy is delivered through operation of our value creation model, as illustrated on page 17, and
discussed further below.
i. Acquisition of properties
The focus on the project pipeline guides management’s activities by ensuring there is sufficient diversity by
geography and product to meet the company’s ongoing earnings objectives in the years ahead and influences the
company’s acquisition strategy. Consequently, in FY2018 the company continued to evaluate opportunities across
the country and with regard to a variety of housing types.
During the year the company completed the acquisition of two new projects. The first was an 11 hectare land
acquisition at Bonnie Brook, Victoria for a price of $4.2 million plus GST. The Bonnie Brook property was
subsequently sold in May 2018 for $8.25 million.
The second was an infill development site in North Melbourne acquired for $9.8 million on a GST exempt basis.
This site is approximately 1,390m2 and located two kilometres north of the Melbourne CBD. Both commercial and
residential designs are being explored for the project.
A summary of the project pipeline can be found at section h) on page 26.
ii. Development
The company has a strategically located and diverse residential portfolio in urban and regional growth areas in
Western Australia, Victoria, Queensland and South Australia 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 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 continued to manage development at Emerald Park on
behalf of Cedar Woods Wellard Limited, which generates ongoing revenue by way of management and selling
fees. In addition, the company continued development at Harrisdale Green, a co-development residential project
with the WA Department of Communities.
Cedar Woods will build a number of commercial and retail property assets at Williams Landing and at other
estates, where the development of those buildings is consistent with the estates’ 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. During the year the company signed an agreement to sell a third office building in Williams Landing,
Victoria, the 107 Overton Road office development. The building has been fully leased to the Victorian State
Government for 15-years with two five-year options and settlement of the completed project expected in FY2020.
40
CEDAR WOODS PROPERTIES LIMITED iii. 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 successfully launched and sold the first stages at
Karmara, within the inner south-east suburb of Piara, and Millars Landing, within the highly competitive southern
suburb of Baldivis, during the year and progressed approvals for a number of other projects across its portfolio
that will contribute in future years.
l) Risks
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 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 stance of other regulatory bodies such as APRA, 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), Queensland (metropolitan) and South Australia (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 various consumer segments.
Whilst house and land prices fluctuate, underlying demand will be driven by population growth and changing
demographics. 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.
m) People and Culture
We see our culture as a significant source of business advantage, and one that is inherently hard to copy. We view our
people as a strategic asset of the business and have created a positive, high-spirited work environment. Throughout
FY2017 and FY2018 significant activities have been undertaken to refine our business culture and Human Resources
(HR) practices. In refining our high-performance culture much work has been done in the following areas:
• Improving recruitment practices to ensure we secure top talent that fit with our culture;
• Refining accountability and delegation systems;
• Staff communications;
• People management training;
• Career development;
• Restructured reward systems;
• Implemented a range of HR policies including for parental leave and workplace flexibility; and
• Staff training.
We have a strong culture and HR systems that are working well in fulfilling our Vision and Purpose.
n) 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.
2018 ANNUAL REPORT
41
Following the resignation of independent director Mr Stephen Pearce in the prior year due to relocation to London,
the Nominations Committee reviewed the composition of the Board having regard to the skills, experience and
diversity of Board members.
Taking this into account and following an extensive search, in August 2017, the Board announced the appointment
of Mrs Jane Muirsmith, independent director, to the Board effective 2 October 2017. This appointment restores to
parity the number of independent and non-independent directors on the Board and provides 33 per cent female
representation, which satisfies the company’s diversity objective in that regard.
Mrs Muirsmith brings a range of skills and experience to the board, notably as a Fellow of Chartered Accountants
in Australia and New Zealand with an audit and accounting background together with deep expertise in digital
transformation.
In July 2017 the Board announced the retirement of long standing Managing Director Mr Paul Sadleir who stepped
down in September and has been replaced by former Chief Operating Officer (COO) Mr Nathan Blackburne.
Succession planning had been underway for some time and the Board was pleased to be able to recruit from within.
Mr Blackburne is well-known to our shareholders and business partners and, through the national COO role, is very
familiar with all our projects. Mr Blackburne brings consistency to the position, as well as a fresh perspective with a
strong focus on workplace culture, operations and performance.
Further details of the Board and governance changes are contained in this Annual Report and the Corporate
Governance Statement which is available on the company’s website and also on the ASX website.
o) Outlook
Cedar Woods is well positioned moving into FY2019 with strong pre-sales, low debt, substantial funding capacity and
a diverse portfolio of well-located developments in Melbourne, Brisbane, Perth and Adelaide.
A number of new projects are expected to contribute to earnings in FY2019, including the Target Headquarters office
at Williams Landing (Vic), 111 Overton Road and Lancaster Apartments (Vic), St. A (Vic) and Glenside (SA). A number
of other projects in the portfolio are expected to contribute earnings for the first time from FY2020. The contributions
from new projects and strong presales are expected to drive a strong uplift in net profit for FY2019 and provide a
positive medium-term growth outlook for the company.
William Hames
Chairman
Nathan Blackburne
Managing Director
42
CEDAR WOODS PROPERTIES LIMITED
Glenside, South Australia
2018 ANNUAL REPORT
43
Directors’ Report
Your directors present their report on the consolidated entity consisting of Cedar Woods Properties Limited (‘the
company’ or ‘Cedar Woods’) and the entities it controlled (together ‘the consolidated entity’ or ‘group’) at the end of, or
during, the year ended 30 June 2018.
a) Directors
The following persons were directors of Cedar Woods 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 (Lead Independent Director)
Valerie Anne Davies (Independent Director)
Jane Mary Muirsmith (Independent Director, appointed 2 October 2017)
Nathan John Blackburne (Managing Director, appointed 18 September 2017)
Paul Stephen Sadleir (Managing Director, retired 18 September 2017)
Timothy Robert Brown (Alternate for Robert Stanley Brown, resigned 11 August 2017)
The qualifications, experience and other details of the directors in office at the date of this report appear on page 46
of this report.
L-R: Paul S Freedman, Ronald Packer, Valerie A Davies, Nathan J Blackburne, William G Hames, Robert S Brown and Jane M Muirsmith
44
CEDAR WOODS PROPERTIES LIMITED b) Principal activities
The principal continuing activities of the consolidated entity in the course of the year ended 30 June 2018 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 2017
of 18.0 cents (2016 – 16.5 cents) per fully paid share, paid on 27 October 2017
(2016 – 28 October 2016)
Interim fully franked ordinary dividend for the year ended 30 June 2018
of 12 cents (2017 – 12.0 cents) per fully paid share, paid on 27 April 2018
(2017 – 28 April 2017)
2018
$’000
2017
$’000
14,200
13,017
9,182
9,467
23,382
22,484
Since the end of the financial year the directors have recommended the payment of a final fully franked ordinary dividend of
$14,312,982 (18.0 cents per share) to be paid on 26 October 2018 out of retained earnings at 30 June 2018.
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 23 of this annual report.
e) Business strategies and prospects for future financial years
The consolidated entity will continue property development operations in Western Australia, Victoria, Queensland and
South Australia.
Cedar Woods is well positioned moving into FY2019 with strong pre-sales, modest debt, substantial funding capacity
and a diverse portfolio of well-located developments in Melbourne, Brisbane, Perth and Adelaide.
f) Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the year.
g) Matters subsequent to the end of the financial year
No matters or circumstances have arisen since 30 June 2018 that have significantly affected or may significantly affect:
a. the consolidated entity’s operations in future financial years; or
b. the results of those operations in future financial years; or
c. 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.
2018 ANNUAL REPORT
45
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
Mr Hames is a co-founder of Cedar Woods. 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-eight 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 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 for twenty-nine years.
Other current listed company directorships and former listed company directorships in the last three years:
Luiri Gold Limited.
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 the lead independent director of the Board, bringing 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 twelve 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.
46
CEDAR WOODS PROPERTIES LIMITED Ms Valerie A Davies, FAICD
• Non-executive director
• Member of the Audit and Risk Management Committee
• Member of the Human Resources and Remuneration Committee
• Member of the Nominations Committee
Ms Davies, a leading communications advisor to numerous individuals and Tier 1 companies via her own consultancy
One.2.One Communications Pty Ltd, has in parallel, over the past 20 years established herself as one of Western
Australia’s most experienced non-executive directors.
She currently serves on the boards of major entertainment, hospitality and leisure operator, Event Hospitality &
Entertainment Ltd, as well as Tourism Western Australia.
Previous non-executive roles include HBF, Iluka Resources, ASG, and Integrated Group (now Programmed). She has
also held positions on the boards of government trading enterprises such as Tourism Australia, Gold Corporation and the
TAB (WA), as well as Screenwest and Fremantle Hospital & Health Service. A member of CEW and a previous winner of
the Telstra Businesswoman of the Year Award (WA) she has served as a Councillor and Vice President of the Australian
Institute of Company Directors (WA division).
Ms Davies is a non-executive, independent Director and has served on the board for three years.
Other current listed company directorships and former listed company directorships in the last three years:
Event Hospitality & Entertainment Ltd.
Mrs Jane M Muirsmith, B Com (Hons), FCA, MAICD
• Non-executive director
• Member of the Audit and Risk Management Committee
Mrs Muirsmith is an accomplished digital and marketing strategist, having held several executive positions in Sydney,
Melbourne, Singapore and New York.
She is Managing Director of Lenox Hill, a digital strategy and advisory firm and is a non-executive director of Australian
Finance Group Limited (AFG), Healthdirect Australia and the Telethon Kids Institute.
Mrs Muirsmith is a Graduate of the Australian Institute of Company Directors and a Fellow of Chartered Accountants
in Australia and New Zealand, with an audit and accounting background together with deep expertise in digital
transformation. Mrs Muirsmith is a member of the Ambassadorial Council UWA Business School and is a former President
of the Women’s Advisory Council to the WA Government.
Other current listed company directorships and former listed company directorships in the last three years:
Australian Finance Group Limited.
2018 ANNUAL REPORT
47
Mr Nathan J Blackburne, BB (Curtin), AMP (Harvard), GAICD
• Managing Director, executive director
Mr Blackburne has 25 years’ experience in various sectors of the property industry including valuations, asset
management, commercial leasing and property development.
He commenced his career with Cedar Woods in 2002 with the mandate to establish and grow the company in
Melbourne. Starting off as State Manager for Victoria, he later led the expansion of the company into Brisbane and
Adelaide to become State Manager for Victoria, Queensland and South Australia.
In 2016, Mr Blackburne was appointed as Chief Operating Officer for the company and in September 2017 was
appointed to the position of Managing Director.
Mr Blackburne has a Bachelor of Business degree majoring in Valuations and Land Economics and is a Graduate of
the Australian Institute of Company Directors. He is also a Graduate of Harvard Business School in Boston having
completed their Advanced Management Program.
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 over twenty years in financial
management in the property industry, preceded by employment in senior roles with major accountancy firms.
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 at the date of this report, as defined by sections 608 and 609 of
the Corporations Act 2001, are as follows:
Interest in ordinary shares
10,235,920
7,982,584
167,859
15,297
10,198
30,226
Director
William G Hames
Robert S Brown
Ronald Packer
Valerie A Davies
Jane M Muirsmith
Nathan J Blackburne
48
CEDAR WOODS PROPERTIES LIMITED 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
R Packer (Chairman)
V A Davies
J M Muirsmith
n) Meetings of directors
Human Resources and
Remuneration Committee
R Packer (Chairman)
R S Brown
V A Davies
Nominations Committee
R Packer (Chairman)
R S Brown
V A Davies
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 2018, 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
V A Davies
J M Muirsmith
P S Sadleir
N J Blackburne
T Brown (alternate director)
* Not a member of this committee.
10
10
10
10
10
8
2
8
-
4
*
2
4
4
2
*
*
-
5
*
5
5
5
*
*
*
-
4
*
4
4
4
1
*
*
-
R S Brown retired from the Audit and Risk Management Committee on 2 October 2017 and has attended all meetings
held up to that date.
J M Muirsmith was appointed to the Audit and Risk Management Committee on 2 October 2017 and has attended all
meetings held after that date.
P S Sadleir retired on 18 September 2017 and attended all Board meetings held up to that date.
N J Blackburne was promoted to Managing Director on 18 September 2017 and has attended all Board meetings
held after that date.
Timothy Robert Brown (Alternate for R S Brown) resigned on 11 August 2017.
2018 ANNUAL REPORT
49
Directors’ Report:
Chairman of the Human Resources and Remuneration
Committee’s Letter to Shareholders
Dear Shareholders,
I am pleased to provide this letter setting out the highlights in relation to remuneration matters for FY2018.The Financial
and Operating Review notes that Cedar Woods had another strong year, reporting solid profits and achievements across
the various areas within the company’s operations, as described in our “balanced scorecard” in section r) of this report.
The balanced scorecard sets out the company’s FY2018 objectives and records performance against targets as assessed
by the Board.
On 18 September 2017 our long-standing Managing Director Paul Sadleir stepped down and was replaced by Chief
Operating Officer Nathan Blackburne. Key details regarding Mr Blackburne’s new remuneration package were included in
the 27 July 2017 ASX release.
On 2 October 2017 Mrs Jane Muirsmith joined the Board as an independent non-executive director.
We continue to engage with shareholders and proxy advisors to ensure our policies and practices in relation to
remuneration matters are both well described and appropriate for the company and its shareholders.
Review of the
executive remuneration
framework
In 2015 the company engaged EY to provide advice on Cedar Woods’ executive
remuneration framework with the objective of improving the link between shareholder
returns and executive remuneration as well as a closer alignment of remuneration with the
corporate strategy. Aspects of the new executive remuneration framework applied from 1
July 2015 including transitioning to a greater emphasis on variable pay with the introduction
of a new long-term incentive program (as outlined below). The Human Resources and
Remuneration Committee is currently in the process of a subsequent review of executive
remuneration assisted by external consultants.
Fixed remuneration
The company identified where adjustments were appropriate, based on market
benchmarking information. For FY2018 the new Managing Director’s (MD’s) fixed
remuneration was limited to 60% of his total package and set at a lower base than the
retiring MD. Other executives’ in continuing roles had average fixed remuneration increases
of 4.5%. Patrick Archer and Leon Hanrahan were promoted during the year and their
remuneration packages were aligned with market remuneration levels in both listed and
non-listed property companies.
Short-term incentives
(“STIs”)
To ensure the STI’s were appropriately aligned to the corporate strategy, the company
continued with its balanced scorecard of measures for determining the STI awards for
FY2018.
Scorecard sections have been grouped into financial and non-financial categories.
50
CEDAR WOODS PROPERTIES LIMITED Long-term incentives
(“LTIs”)
The LTI plan introduced in 2015 continues to operate and has two vesting conditions a)
a three year service condition and b) two performance conditions measured over a three
year period: 50 per cent of the LTI grant will be tested against a relative total shareholder
return (“TSR”) hurdle (measured against the S&P / ASX Small Industrials Index) and 50 per
cent against earnings per share (“EPS”) growth targets, set in the context of the corporate
strategy.
The relative TSR performance condition was chosen as it offers a means of measuring
changes in shareholder value by comparing the company’s return to shareholders against
the returns of companies of a similar size and investment profile. The EPS performance
condition was chosen as it is a primary determinant of shareholder value in a listed
company context.
Non Executive Director
(”NED”) fees
The potential maximum aggregate NED remuneration for FY2018 was $750,000, as
approved by shareholders at the company’s FY2014 AGM. Chair and NED fees were
increased by 2% effective 1 July 2017 to provide an increase in line with CPI. Total NED
fees paid for FY2018 were $563,250.
Clawback policy
The company has implemented an incentive clawback policy for executives and other staff
that applies for FY2015 onwards. Under the policy, the Board may at its absolute discretion
claw back vested and unvested incentives in the case where an “inappropriate benefit” has
arisen, as may be the case in a material misstatement of financial results.
The Remuneration Report provides information on non-executive directors and executives and the remuneration
outcomes for FY2018.
It was pleasing to note that shareholders voted overwhelmingly in favour of the FY2017 Remuneration Report at the 2017
Annual General Meeting, with 98.9 per cent of votes cast in favour.
I look forward to answering any questions you may have at our 2018 Annual General Meeting in November.
Yours faithfully,
Ronald Packer
Chairman
Human Resources and Remuneration Committee
2018 ANNUAL REPORT
51
Directors’ Report:
Remuneration Report
The directors present Cedar Woods’ FY2018 Remuneration Report which sets out remuneration information for the
directors and other key management personnel (“KMP”) for the year ended 30 June 2018.
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations
Act 2001.
The Remuneration Report is presented under the following sections:
o)
Introduction
p) Remuneration governance
q) Executive remuneration policy and framework
r)
s)
Executive remuneration outcomes for FY2018 (including link to performance)
Executive contracts
t) Non-Executive Director fee arrangements
u) Additional statutory disclosures
o) Introduction
Page
52
53
54
60
66
66
68
The Remuneration Report details the remuneration arrangements for KMP who are defined as those persons having
authority and responsibility for planning, directing and controlling the major activities of the company, directly or
indirectly.
The table below outlines the KMP of the company during the financial year ended 30 June 2018. Unless otherwise
indicated, the individuals were KMP for the entire financial year. For the purposes of this report, the term “executive”
includes the managing director and senior executives of the company.
KMP
Position
Non-Executive directors (“NEDs”)
W G Hames
R S Brown
R Packer
V A Davies
Non-Executive Chair
Non-Executive Deputy Chair
Lead Independent Non-Executive Director
Independent Non-Executive Director
Term as KMP
Full year
Full year
Full year
Full year
J M Muirsmith
Independent Non-Executive Director – appointed 2 October 2017
Part year
Executive directors
N J Blackburne
Managing Director (“MD”) – promoted effective 18 September
2017
P S Sadleir
Managing Director (“MD”) – retired 18 September 2017
Full year
Part year
Senior executives
P Archer
L M Hanrahan
P S Freedman
B G Rosser
52
Chief Operating Officer (“COO”) – promoted effective 13 November
2017, previously State Manager – Victoria and South Australia
Full year
Chief Financial Officer (“CFO) – promoted effective 1 June 2018
Part year
Company Secretary (previously also CFO until 31 May 2018)
State Manager – Western Australia
Full year
Full year
CEDAR WOODS PROPERTIES LIMITED Changes since the end of the reporting period
There were no changes to KMP after the reporting date and before the date the annual report was authorised for
issue.
p) Remuneration governance
Role of the Human Resources and Remuneration Committee
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,
• NED fees,
• operation of incentive plans and key performance hurdles for the executive team, and
• remuneration levels of the MD and other executives.
The Human Resources and Remuneration Committee’s objective is to ensure 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 NED fees and
executive remuneration packages are appropriate and in line with the market.
The Corporate Governance Statement provides further information on the role of the Human Resource and
Remuneration Committee and may be found on the company’s website under the Investor Relations link.
Use of remuneration advisors
In FY2015 the Human Resources and Remuneration Committee appointed EY as its external remuneration advisor to
assist with the review of the overall executive remuneration framework.
EY’s terms of engagement included specific measures designed to protect its independence. The Human Resources
and Remuneration Committee recognises that, to effectively perform its role, it is necessary for EY to interact
with members of Cedar Woods’ management. However, to ensure EY remained independent, members of Cedar
Woods’ management were precluded from requesting services that would be considered to be a ‘remuneration
recommendation’ as defined by the Corporations Amendment (improving Accountability on Director and Executive
Remuneration) Act 2011.
No remuneration recommendations were provided to the Human Resources and Remuneration Committee by EY or
any other advisor during the reporting period. Following FY2018 year end, the Human Resources and Remuneration
Committee has since commenced a process of reviewing the executive remuneration framework assisted by external
consultants.
Clawback of remuneration
For FY2015 and subsequent years, vested and unvested STI’s & LTI’s are subject to potential clawback based on the
Board’s judgment.
The Board may exercise its judgment in relation to STI or LTI outcomes:
STI
LTI
at the end of the financial year when assessing performance against scorecard objectives to determine the STI
payments, when determining if there are any matters impacting the initial performance assessment.
at any time prior to, or at, the final vesting date of the performance rights and will take account of factors such
as any material misstatements of financial results or individual instances of non-compliance with Cedar Woods’
policies.
The clawback policy also provides that the Board can recover an STI or LTI award previously paid to an
employee.
Remuneration Report approval at FY2017 Annual General Meeting (“AGM”)
At the company’s 2017 AGM, 98.9 per cent of eligible votes cast were in favour of the Remuneration Report for
FY2017.
2018 ANNUAL REPORT
53
q) Executive remuneration policy and framework
The information contained within this section outlines the details pertaining to the executive remuneration policy and
framework for FY2018.
i. Principles and strategy
To create long-term value for shareholders through the development of vibrant communities
Company objective
Remuneration strategy linkages to company objective
The Board of directors ensures our approach to
executive reward satisfies the following key criteria for
good reward governance practices:
• Competitiveness and reasonableness
Attract, motivate and retain high performing individuals:
• The remuneration offering rewards capability and
experience
• Reflects competitive reward for contribution to
• Acceptability to shareholders
growth in shareholder wealth
• Alignment of executive remuneration to company
performance
The framework is aligned to shareholders’ interests by
having:
• Transparency of the link between performance
• STIs linked to current year performance and subject
and reward
to clawback
• LTIs linked to both long term external (relative total
shareholder return (“TSR”)) and internal (earnings
per share (“EPS”) growth) performance. Unvested
LTIs also subject to clawback
Component
Vehicle
Purpose
Link to performance
Fixed
remuneration
Comprises base salary,
superannuation and non-
monetary benefits
STIs
Paid in cash
To provide competitive
fixed remuneration set with
reference to role, market
and skills and experience of
individuals
Rewards executives for their
contribution to achievement
of company outcomes
LTIs
Equity based LTI grants
awarded in Performance
Rights
Rewards executives for their
contribution to the creation
of shareholder value over the
longer term
)
”
R
T
“
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
Group and individual
performance are considered
during the annual
remuneration review process
No guaranteed fixed
remuneration increases
included in executives’
contracts
Linked to the Corporate Plan
and achievement of personal
objectives established at the
start of the year
Vesting of grants is
dependent on TSR
performance relative to
S&P / ASX Small Industrials
Index and annual compound
growth rate in EPS, both
over a three-year period
Performance related outcomes are determined each year following the audit of the annual results. Outcomes may be
adjusted up or down in line with over and under achievement against the target performance levels, at the discretion
of the Board (based on a recommendation from the Human Resources and Remuneration Committee).
The Human Resources and Remuneration Committee also considers issues of succession planning, career
development and staff retention.
54
CEDAR WOODS PROPERTIES LIMITED
ii. Approach to setting remuneration
In FY2018, the executive remuneration framework consisted of fixed remuneration and short and long-term incentives
as outlined below.
The company aims to reward executives with a level and mix of remuneration appropriate to their position,
responsibilities and performance within the organisation and aligned with market practice.
The company’s approach is generally to position total remuneration between the median and upper quartile of our
direct industry peers, both listed and unlisted, and other Australian listed companies of a similar size and complexity.
Based on performance and experience, individuals have the potential to move from median to upper quartile over a
period of time.
Remuneration levels are reviewed annually through a process that considers market data, insights into remuneration
trends, the performance of the company and the individual, and the broader economic environment.
The “at risk” components (STI’s and LTI’s) ensure a proportion of remuneration varies with performance of both the
individual and the company. In recent years the Board has made gains in restructuring executive remuneration to
provide a greater weighting of “at risk” components within the total remuneration opportunity (remuneration mix)
particularly for the MD and introduced an equity based LTI plan. In making this transition, the Board endeavoured to
keep total remuneration increases at modest levels, with the majority of increases directed into LTI’s. Some variations
may occur year to year due to influencing factors such as changing market conditions.
The graph below illustrates the remuneration mix for FY2018. The FY2018 bars show the remuneration mix for the
individual in the role for the majority of the year.
Managing Director - remuneration mix
FY18
60%
20%
20%
COO - remuneration mix
FY18
68%
18%
14%
CFO and Company Secretary – remuneration mix
FY18
78%
14%
8%
State Managers - remuneration mix
FY18
69%
18%
13%
Fixed remuneration
Max STI opportunity
Max LTI opportunity
* The CFO and Company Secretary role was split into two positions from 1 June 2018.
STI and LTI are based on the maximum opportunity when remuneration levels are determined by the HR&R
Committee.
2018 ANNUAL REPORT
55
iii. Details of incentive plans
Short-term incentives (STI)
STI Plan effective up to and including FY2018
Who participates?
Executives and key staff
How is the STI delivered?
Cash
What is the STI opportunity? Each executive has a target STI opportunity depending on the accountabilities of the
role and impact on organisational performance. The company seeks to deliver steady
annual growth and accordingly the maximum STI opportunity is the target opportunity.
The maximum STI opportunity for KMP’s is detailed in section r) Executive remuneration
outcomes.
What are the performance
conditions for FY2018?
Actual STI payments to each executive depend on the extent to which specific targets
set at the beginning of the financial year are met with regard to both company and
individual performance criteria.
The weightings that applied in FY2018 to components of the company’s business
model are set out in the table below:
Weighting (%)
MD
COO
State
Managers
CFO and Company
Secretary
Financial
Developments
Sales and customer
experience
Financial performance and
risk management
Non-financial
Business development
People and culture
Shareholder engagement
and satisfaction
Sustainability
20%
20%
15%
20%
20%
20%
20%
20%
15%
15%
10%
10%
5%
20%
15%
5%
5%
15%
20%
5%
5%
0%
5%
40%
15%
20%
20%
0%
Refer to section r) Executive remuneration outcomes for further details of performance
outcomes for FY2018, and STI awards to KMP.
The categories of “Developments” and “Sales and customer experience” involve
close monitoring of revenues and financial expenditure and together with “Financial
performance and risk management” provide a significant weighting to overall financial
performance.
On an annual basis, after consideration of performance against set balanced scorecard
objectives, the Chairman and Chair of the Human Resource and Remuneration Committee
recommends to the Board the amount of STI to be paid to the MD.
For senior executives, the Human Resource and Remuneration Committee will seek
recommendations from the MD before making its determination.
The Human Resources and Remuneration Committee has the discretion to determine STI
outcomes in the light of personal and company performance.
How is performance
assessed?
What happens if an Executive
leaves Cedar Woods?
Executives who leave prior to the end of the financial year generally forego their
entitlement. The Human Resources and Remuneration Committee has discretion in this
regard.
56
CEDAR WOODS PROPERTIES LIMITED STI Plan effective from 1 July 2018
The company introduced a new STI plan, effective 1 July 2018. Key features of the new STI plan are set out below:
Why have a new STI plan?
Whilst the current STI Plan has been effective, it could be further refined to reward staff
for overachievement, limit the reward payable for underperformance and link better to
the annual staff performance review process. Maintaining a high-performance culture is
a Strategic Priority and the revised STI plan better serve this.
Who participates?
Executives and key staff
How is the STI delivered?
Cash
What STI’s are available and
what are the performance
conditions for FY2019?
Each executive has a target STI opportunity depending on the accountabilities of the
role and impact on organisational performance.
The STI system will be refined as follows:
a) Up to 75% of the bonus based on personal performance, with the actual
percentage awarded based on the overall manager rating as determined in the
annual performance review and using categories and percentages set out in the
table below:
Overall Rating
5. Exceeded Expectations
4. Overly Met Expectations
3. Met Expectations
2. Nearly Met Expectations
1. Below Expectations
Incentive
125% - 150%
100% - 125%
80% - 100%
50% - 80%
0%
b) Up to 25% of the cash incentive awarded based on the HR&R Committee’s
assessment of the company’s overall performance using the Balanced Scorecard
system.
In essence the personal / company split changes from 50/50 to 75/25.
Actual STI payments to each executive depend on the extent to which specific targets
set at the beginning of the financial year are met with regard to both company and
individual performance criteria.
On an annual basis, after consideration of performance against set balanced scorecard
objectives, the Chairman and Chair of the Human Resource and Remuneration Committee
recommends to the Board the amount of STI to be paid to the MD.
For senior executives, the Human Resource and Remuneration Committee will seek
recommendations from the MD before making its determination.
The Human Resources and Remuneration Committee has the discretion to determine STI
outcomes in the light of personal and company performance.
How is performance
assessed?
What happens if an Executive
leaves Cedar Woods?
Executives who leave prior to the end of the financial year generally forego their
entitlement. The Human Resources and Remuneration Committee has discretion in this
regard.
Long-term incentives (LTI)
Previous LTI plan effective up to FY2015
The company operated a long-term incentive plan, which first commenced in FY2012 with the final grants made
in FY2015. The incentive was 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 company for
the remaining two years. The FY2015 LTI awards were based on the same criteria used for FY2015 STI awards, with
KMP amounts detailed in section r) Executive remuneration outcomes.
If the employee left the company before the vesting date no bonus was paid, although the Board may waive this
restriction at its discretion, for example when an employee retires. If an employee was made redundant after the award
but before the vesting date then the bonus would be paid out. The total awarded under the FY2015 plan which vested
on 1 July 2017 was $283,420.
2018 ANNUAL REPORT
57
Current LTI plan effective 1 July 2015
The company has introduced a new LTI plan, effective 1 July 2015. Key features of the new LTI plan are as follows:
Why have a LTI plan?
To encourage a greater alignment of the interests of executives and shareholders, focus
on sustainable long-term growth and attract and retain key executives.
Who participates?
Executives and key staff. NEDs are not eligible to participate in the LTI plan.
What LTI’s are available?
Each executive has a maximum LTI opportunity depending on the accountabilities of
the role and impact on organisational performance.
How is the LTI delivered
How are the number of rights
determined for each LTI
grant?
When does the LTI vest?
The maximum LTI for each KMP is detailed in section r) Executive remuneration
outcomes.
Awards under the LTI plan are made in the form of performance rights, which provide,
when vested, one share at nil cost (provided the specified performance hurdle is
met). No dividends are paid on unvested LTI awards. A new share will be issued for
each vested performance right. At the discretion of the Board the LTI awards may be
satisfied in cash rather than shares by payment of the cash equivalent value
The number of performance rights allocated for each executive is calculated by reference to
the maximum LTI opportunity outlined in the prior section.
Allocations are made based on a face value approach using the Volume Weighted Average
Price of Cedar Woods’ shares over the first five trading days of the 2018 financial year. This
fixes the maximum number of shares and the actual number will vest in accordance with
the performance conditions set out below.
The Board will determine the outcomes at the end of the three-year performance period
(1 July 2017 to 30 June 2020), with vesting, if any, occurring once results are released
and within a trading window. Once vested, there are no restrictions on trading the
shares, subject to the company’s Securities Trading Policy.
What happens if an Executive
leaves Cedar Woods?
If cessation of employment occurs, the following treatment will apply in respect of
unvested rights:
•
•
If the participant ceases employment with Cedar Woods on resignation or on
termination for cause, unvested rights will normally be forfeited.
If the participant ceases employment in other circumstances (for example, due
to illness, total or permanent disablement, retirement, redundancy or other
circumstances determined by the Board), unvested rights will stay ‘on foot’ and
may vest at the end of the original performance period to the extent performance
conditions are met. The Board may determine in its discretion that the number of
rights available to vest will be reduced pro-rata for time at the date employment
ceases.
The Board will retain discretion to allow for accelerated vesting (pro-rated for
performance and/or time) in special circumstances (as opposed to allowing unvested
rights to remain ‘on foot’ on cessation of employment).
What happens in the event of
change of control
Unless the Board determines otherwise, a pro-rata number of the participant’s unvested
rights will vest based on the proportion of the performance period that has passed at
the time of the change of control. Vesting will also be subject to the achievement of
pro-rata performance conditions at the time of the change of control.
Do participants receive
dividends on LTI grants?
Not prior to any vesting.
Can a participant deal with
or trade their performance
rights before vesting?
A participant cannot enter into any scheme, arrangement or agreement (including
options and derivative products) under which the participant may alter the economic
benefit to be derived from any unvested rights.
Is performance retested if
performance hurdles are not
exceeded?
Do clawback provisions
apply to LTI’s?
58
No, there are no further retests of the performance conditions.
The company has an incentive claw back policy in place for executives and other
staff. Under the policy, the Board may at its absolute discretion claw back vested and
unvested incentives in the case of an “inappropriate benefit” arising.
CEDAR WOODS PROPERTIES LIMITED How is performance
assessed and rewarded
against these hurdles?
The awards are subject to two equally weighted performance conditions which operate
independently, so that awards can be made under either or both categories.
Relative TSR hurdle (50%): The relative TSR hurdle provides a comparison of external
performance. The ASX Small Industrials Index is comprised of the companies included
in the S&P/ASX 300 (excluding companies in the S&P/ASX 100) who have a Global
Industry Classification Standard (GICS) classification other than Energy or Metals &
Mining, with Cedar Woods ranked approximately 134th of 159 companies in this index
at year end. TSR (Total Shareholder Return) measures changes to share price and
dividends paid to show the total return and is widely used in the investment community
and is an appropriate hurdle it aligns the experience of shareholders and executives.
This index was chosen, rather than a peer group, as there are a limited number of
companies with similar operations and in recent years the number of these has reduced
even further through takeovers (e.g. Australand & CIC) and changes to business models
and operations (e.g. Aveo, Devine & Port Bouvard).
Executives will only derive value from this component of the LTI if the company’s TSR
performance is greater than the Index. Maximum vesting of the TSR hurdle at or above
15% of the Index recognises significant out-performance of the company over 3 years.
The vesting schedule is as follows:
Relative TSR performance outcome
Percentage of TSR-tested rights vesting
< Index
At the Index
Nil
50%
> Index and up to 15% above the Index
Pro-rata between 50% and 100%
> = 15% above the Index
100%
EPS compound annual growth rate (50%): EPS is a method of calculating the
performance of an organisation, capturing information regarding an organisation’s
earnings in proportion to the total number of shares issued by the organisation. The
EPS calculation is:
EPS = Statutory net profit after tax
Weighted number of shares on issue
Where:
Statutory net profit after tax:
Weighted number of shares on issue:
as reported by a company at the most
recent financial-year end preceding the
calculation date.
The weighted number of shares on issue
for the financial year.
The relevant inputs when setting the EPS target range are generally:
• The earnings and EPS targets contained in the Corporate Plan, particularly with
reference to the most recent internal five-year forecasts;
• The level of stretch associated with those Corporate Plan targets;
• Any earnings guidance that has been provided to the market;
• Shareholder and analyst (individual and consensus) expectations.
The vesting schedule for this component of the LTI is as follows:
EPS compound annual growth rate
Percentage of EPS-tested rights vesting
<5%
5%
Nil
50%
Between 5% - 10%
Pro-rata between 50% and 100%
> = 10%
100%
2018 ANNUAL REPORT
59
r) Executive remuneration outcomes for FY2018 (including link to performance)
Performance against STI balanced scorecard objectives
The table below outlines FY2018 STI objectives and performance against target outcomes as assessed by the Board. This
performance measurement framework provides a close alignment to the company’s overriding objective of providing long
term value to shareholders and links to our value creation model as described on page 17.
Objectives
Measures
Outcomes
Business development
To build and replenish
the portfolio by acquiring
quality assets
Undertake due diligence
investigations for new acquisitions
consistent with approved checklist
and reporting measures in a
thorough and disciplined manner
Acquire at least two strong margin
projects each year, consistent with
the corporate growth strategy
Pursue joint venture
opportunities and business
partnerships forged
Deepen relationships with
business partners acting with
professionalism, transparency and
with quality outcomes
Detailed assessment of numerous
properties across four states. The
acquisitions environment continues
to be highly competitive in VIC &
QLD, and to a lesser extent in WA
and SA.
New properties secured in
Port Adelaide (SA), and North
Melbourne (VIC). No large projects
secured.
Existing joint ventures (or
development agreements) in WA
with LandCorp (Western Edge)
and Department of Housing
(Harrisdale) progressed. Mangles
Bay cancelled. Builder relationships
being created & nurtured.
Performance
assessment
Partially
Achieved
Partially
Achieved
Achieved
Developments
Maximise value, minimise
risk with project delivery on
time and on budget
Planning and engineering
approvals achieved in time
Manage expenditure diligently,
seeking opportunities to reduce
costs and be in line with budget
Create quality communities
which embrace innovation
and sustainability
Innovation and quality in projects
Sales and customer experience
Position projects to meet
market and customer
demand
Settlements
Sales volumes and revenue
Most of the FY2018 delivery
projects met budget timelines.
Slippage on some projects in WA,
VIC, and QLD. Efforts underway to
regain program.
Development costs predominantly
kept within budget. Delayed
expenditure at some future projects
due to project approvals behind
schedule. Significant improvement
in forecasting accuracy.
Innovation and quality
demonstrated in many projects.
Projects well regarded in industry.
Partially
Achieved
Achieved
Achieved
Settlements achieved under
budget.
Budgeted sales not achieved,
primarily due to weaknesses in the
WA market. WA average prices
in line with budget, VIC and QLD
average prices above budget.
Not Achieved
Not Achieved
Enquiry
Enquiry levels exceeded budget.
Achieved
Customer satisfaction
Net promoter scores across
several projects were received with
good results across most projects
surveyed.
Partially
Achieved
60
CEDAR WOODS PROPERTIES LIMITED Objectives
Measures
Outcomes
Financial performance and risk management
Continued growth in a
risk-controlled manner
Growth in NPAT and EPS
Satisfactory ROE and ROC
Gearing (debt/equity)
Risk management framework in
place
No growth in NPAT & EPS in
FY2018.
ROE 12% (vs 10% min) and ROC
14% (vs 12% min), both above
company benchmarks.
Gearing at 30 June was 31%, at
the lower end of the target range.
Six monthly risk management
reviews performed and reported
to the Audit & Risk Management
Committee in August and February.
Only minor exceptions noted.
People and culture
Attract, motivate and retain
staff
Be a preferred employer
• Employee satisfaction is high.
Succession planning and training
• New dress code, flexible working
and new maternity leave policy
implemented.
• Employee turnover for FY2018
was within the accepted range.
• A number of staff were promoted
across the Melbourne & Perth
offices during the year.
• Staff attended numerous group
and individual training courses
and industry events in FY2018.
Performance
assessment
Not Achieved
Achieved
Achieved
Achieved
Achieved
Achieved
Achieved
Achieved
Achieved
Staff productivity
Shareholder engagement and satisfaction
Support the company
Participation in share issues
• An internally designed people
Achieved
manager development program
was implemented.
• Pro-active efforts and systems
are in place to closely manage
career development.
Cost levels were consistent with
the budget and corporate plan.
The dividend reinvestment plan and
bonus share plan were reactivated
in FY2018 and a high level of
participation was achieved.
Achieved
Achieved
Company investor relations
program
Regular roadshows and investor
briefings held during the year.
Achieved
Total Shareholder Return (TSR)
Support for AGM resolutions
Proxy advisors support Board
resolutions
One-year TSR for CWP of 16.5%,
while strong was slightly lower
than the Small Industrials Index’s
TSR of 18.4%. The TSR for 3 and
5 years of 29.9% and 43.1% are
strong, however under the Small
Industrials Index’s TSR of 44.0%
and 74.4% over the same periods.
All resolutions were overwhelmingly
supported by shareholders at 2017
AGM.
All resolutions were supported by
proxy advisors and ASA at 2017
AGM.
Not Achieved
Achieved
Achieved
2018 ANNUAL REPORT
61
Objectives
Measures
Outcomes
Sustainability & WHS
Environment; Optimising
land use; Housing
Diversity; Heritage
Create vibrant
communities
Rehabilitate contaminated sites
and conservation land
Environment assessments are
undertaken for all projects.
Remediation undertaken at
Glenside and St A. during the year.
Sustainability outcomes across all
projects
Strong sustainability outcomes
achieved across all projects.
Delivering the best use of land
by optimising land use mix and
product yield
Recognising indigenous and
cultural heritage
Appropriate densities embraced
across infill developments. Diverse
product mix being delivered across
the portfolio.
Heritage assessments undertaken
for projects as required. Heritage
building adaption promoted at
several new projects.
Create and support communities Neighbourhood grants schemes
Achieved
Performance
assessment
Achieved
Achieved
Achieved
Achieved
WHS
Providing a safe working
environment
in place across many projects with
significant financial contributions.
Facilitated many community events
across the portfolio.
New system working well. Some
reportable incidents, injuries and
near misses, but none involving
serious injury.
Achieved
The following table outlines the proportion of maximum STI earned and forfeited in relation to FY2018 and the
maximum STI that was available.
Total earned %
Total earned $
Total forfeited %
Total forfeited $
Proportion of maximum STI earned in FY2018
MD
85%
COO
85%
CFO
82%
Company
Secretary
81%
State
Manager WA
82%
$158,860
$88,725
$28,700
$56,350
$65,600
15%
15%
$29,140
$16,275
18%
$6,300
$35,000
19%
$13,650
$70,000
18%
$14,400
$80,000
Max STI opportunity
$188,000
$105,000
Performance against LTI objectives
The equity based LTI scheme plan has two vesting conditions a) a 3 year service condition and b) two performance
conditions measured over a 3 year period: 50 per cent of the LTI grant will be tested against a relative total
shareholder return (“TSR”) hurdle (measured against the S&P / ASX Small Industrials Index) and 50 per cent against
earnings per share (“EPS”) growth compared with the Corporate plan targets.
The relative TSR performance condition was chosen as it offers a relevant indicator of measuring changes in
shareholder value by comparing the company’s return to shareholders against the returns of companies of a similar
size and investment profile.
The EPS performance condition was chosen as it is a primary determinant of shareholder value in a listed company
context.
62
CEDAR WOODS PROPERTIES LIMITED The following table outlines the proportion of maximum LTI that were granted to KMP during FY2018.
LTI awards in FY2018
MD
COO
CFO
Company
Secretary
State Manager
WA
Value granted
(max LTI opportunity)
$188,000
$85,000
$18,000
$40,000
$55,000
The COO and CFO were promoted to these positions during FY2018 and their LTI awards were set in relation to their
previous positions and not subsequently changed. The LTI awards earned vest on 31 August 2020 subject to the two
vesting conditions.
Terms and conditions of the share-based payment arrangements
The terms and conditions of each grant of rights affecting remuneration in the current or a future reporting period are
as follows:
Incentive Plan
Grant
date
Performance
period
Vesting
date
Value
at start of
performance
period
Value
per share
right at
grant date
Performance
achieved
%
Vested
FY2016 –
Award 1
(Employees)
28/08/2015
FY2016 -
Award 2 (MD)
9/11/2015
FY2017 –
Award 1
(Employees)
25/08/2016
FY2017 -
Award 2 (MD)
10/11/2016
FY2018 –
Award 1
(Employees)
25/08/2017
FY2018 -
Award 2 (MD)
9/11/2017
1/7/15 to
30/6/18
1/7/15 to
30/6/18
1/7/16 to
30/6/19
1/7/16 to
30/6/19
1/7/17 to
30/6/20
1/7/17 to
30/6/20
31/08/2018
$5.33
31/08/2018
$5.33
31/08/2019
$4.35
31/08/2019
$4.35
31/08/2020
$5.16
Performance
hurdle
EPS Growth
Relative TSR
EPS Growth
Relative TSR
EPS Growth
Relative TSR
EPS Growth
Relative TSR
EPS Growth
Relative TSR
$4.12
$2.04
$3.43
$0.96
$4.29
$2.75
$4.15
$2.87
$4.62
$2.68
No
No
to be
determined
to be
determined
to be
determined
n/a
n/a
n/a
n/a
n/a
n/a
31/08/2020
$5.16
EPS Growth
Relative TSR
$4.92
$2.81
to be
determined
The number of share rights granted to key management personnel under the LTI scheme during FY2018 is shown in
the table below. Rights granted will only vest upon satisfaction of the Performance Conditions which are measured
over the Performance Period. The number of rights granted has been determined by dividing the FY2018 LTI grant
opportunity by the market value of shares at the beginning of the performance period, which is the volume weighted
average price of the company’s shares over the first five trading days in FY2018 ($5.16). The market value of the
shares is not discounted.
Upon vesting, each right is convertible into one fully paid ordinary share in the company. The executives do not receive
any dividends in relation to the rights during the vesting period. If an executive ceases employment before the rights
vest, the rights will normally be forfeited, except in limited circumstances that are approved by the Board on a case-
by-case basis.
The fair value of the rights has been determined using the amount of the grant date fair value.
2018 ANNUAL REPORT
63
Reconciliation of share rights held by KMP
The following table shows how many share rights were granted, vested and forfeited during the year for KMP.
Name &
grant dates
Balance at
start of year
Number
Granted
during year
Number
Vested
Number
Vested
%
Forfeited
Number
Forfeited
%
Executive director
N J Blackburne
22 Aug 2017
-
36,434
25 Aug 2016
28 Aug 2015
29,885
15,009
-
-
Senior executives
P Archer
22 Aug 2017
-
16,473
25 Aug 2016
18,391
28 Aug 2015
8,443
-
-
L M Hanrahan
22 Aug 2017
-
3,488
25 Aug 2016
28 Aug 2015
P S Freedman
2,759
2,251
-
-
22 Aug 2017
-
7,752
25 Aug 2016
9,195
28 Aug 2015
7,505
-
-
B G Rosser
22 Aug 2017
-
10,659
25 Aug 2016
11,494
28 Aug 2015
9,381
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
end of year
(unvested)
Number
Maximum
value yet
to vest *
36,434
$127,914
29,885
$83,034
15,009
$15,309
16,473
$54,648
18,391
$51,099
8,443
$8,612
3,488
2,759
2,251
7,752
9,195
7,505
$11,571
$7,666
$2,296
$25,717
$25,548
$7,655
10,659
$35,361
11,494
$31,936
9,381
$9,569
* The LTI awards granted in FY2018 vest on 31 August 2020 subject to the two vesting conditions. The maximum value of
the deferred shares yet to vest has been determined as the amount of the grant date fair value of the rights.
Performance of shareholder return metrics
In FY2018, the company delivered a profit of $42.6 million, a decrease of 6.3 per cent from the prior year. This was
following seven years of consecutive record profits for the company.
The returns to shareholders of Cedar Woods over the last 1, 3 and 5 years are detailed in the table below:
Returns to shareholders over 1, 3 and 5 years (%)
EPS growth
Share price growth
Dividend growth (paid dividend)
CWP TSR (change in share price and dividends)
S&P Small Industrials Index (XSIAI)
1 year
(6.4)
10.6
5.3
16.46
18.35
3 years
5 years
(0.2)
3.1
2.9
29.88
43.97
1.6
2.2
3.7
43.05
74.41
64
CEDAR WOODS PROPERTIES LIMITED The total shareholder return in FY2018 was 16.46 per cent which was similar to the S&P Small Industrials Index total
return of 18.35 per cent over the same period. The returns over 3 and 5 years did not compare favourably to the returns
of the S&P Small Industrials Index. Management is focused on delivering consistent earnings per share and dividend
growth. The company’s share price is subject to market factors that are beyond the company’s control. The measures of
the company’s financial performance over the last five years as required by the Corporations Act 2001 are shown in the
table below. However, these are not necessarily consistent with the measures used in determining the variable amounts of
remuneration awarded to KMP, the basis for which is outlined above. As a consequence, there may not always be a direct
correlation between the statutory key performance measures and the variable remuneration awarded.
Profit for the year ($’000)
Basic earnings per share (cents)
Dividends per share (cents)
Increase (decrease) in share price (%)
2018
42,603
53.9
30.0
10.6
2017
45,445
57.6
30.0
19.8
2016
43,602
55.3
28.5
(17.3)
2015
42,585
54.3
28.0
(28.0)
2014
40,313
54.4
27.5
41.4
Executive remuneration for the years ended 30 June 2018 and 30 June 2017
Details of the remuneration of each executive of Cedar Woods is set out below.
Short-term benefits
Post
Employment
Long-term benefits
Financial
year
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Share based
payment #
$
Long-
service
leave
$
Termination
Benefit
$
Total
$
Performance
related
%
Name
Executive director
N J Blackburne*
2018
511,680 158,860
6,643
23,974
57,953
43,614
2017
410,384 110,500
6,813
19,616
23,555
11,942
-
-
802,724
582,810
27%
23%
P S Sadleir**
2018
396,502
-
2,347
10,633
29,146
-
74,523
513,151
6%
2017
765,198 346,000
7,151
33,699
17,085
13,338
Senior executives
P Archer ***
2018
369,866
88,725
2017
345,384
67,600
L M Hanrahan****
2018
226,514
28,700
P S Freedman
2018
363,700
56,350
2017
348,520
58,100
B G Rosser
2018
280,126
65,600
2017
260,884
59,625
7,448
7,886
1,507
1,141
1,098
-
-
20,049
32,819
13,958
19,616
14,685
11,833
20,049
6,205
25,000
17,068
35,000
6,559
20,049
22,239
19,616
8,199
9,794
8,957
8,656
3,502
1,552
-
-
-
-
-
-
-
-
1,182,471
31%
532,865
467,004
292,769
472,216
457,933
391,516
349,876
23%
18%
12%
16%
14%
22%
19%
Total
2018 2,148,388 398,235
19,086
119,754 165,430
79,825
74,523 3,005,241
2017 2,130,370 641,825
22,948
127,547
70,083
47,321
-
3,040,094
* N J Blackburne was promoted from Chief Operating Officer to Managing Director effective 18 September 2017.
** P S Sadleir retired from the position of Managing Director on 18 September 2017.
*** P Archer was promoted from the role of State Manager - Victoria and South Australia to Chief Operating Officer
effective 13 November 2017. P Archer joined the senior executive group on 1 September 2017 as State Manager -
Victoria and South Australia. Amounts shown above include P Archer’s total FY2017 remuneration. P Archer’s total
remuneration of $467,004 disclosed above includes $77,834 relating to the period prior to joining the senior executive
group.
**** L M Hanrahan was promoted from the role of Group Financial Controller to Chief Financial Officer effective 1 June
2018 and joined the senior executive group on this date. Amounts shown above include L M Hanrahan’s total FY2018
remuneration. L M Hanrahan’s total remuneration of $292,769 disclosed above includes $268,371 relating to the
period prior to joining the senior executive group.
2018 ANNUAL REPORT
65
# Equity-settled share-based payments relate to the component of the fair value of awards from the 2016, 2017 and
2018 LTI schemes attributable to the year measured in accordance with AASB 2 Share Based Payments. No awards
vested in FY2018. When determining the remuneration mix for executives, the Human Resources and Remuneration
committee used the maximum STI and LTI opportunities contained in the tables on page 62, which differ from the
amounts calculated in the table above.
s) Executives contracts
Remuneration arrangements and other terms of employment for executives are formalised in employment agreements.
Details of executive service contract for the Managing Director
The Managing Director, Mr N J Blackburne is employed under an ongoing contract.
Mr Blackburne’s total remuneration package for FY2018 was as follows:
• Fixed remuneration of $564,000 per annum
• Maximum STI opportunity of 20% of total remuneration
• Maximum LTI opportunity of 20% of total remuneration.
Other executives
The agreements for the executives provide for performance related cash bonuses and other benefits. The agreements
are reviewed annually by the Human Resources and Remuneration Committee for each KMP and details are as
follows:
Executive director
N J Blackburne
Contract term
Notice required to
terminate contract
Termination benefit*
No fixed term
6 months
Either party may terminate
with 6 months’ notice
Other senior executives
No fixed term
Up to 3 months
Up to 3 months base salary
* For treatment of STI and LTI awards upon cessation of employment please refer to iii. Details of incentive plans
section of the Directors Report.
Nathan Blackburne became the company’s Managing Director on 18 September 2017. Further details of Mr
Blackburne’s new remuneration package were included in the ASX release on 27 July 2017.
t) NED fee arrangements
Determination of fees and maximum aggregate NED fee pool
On appointment to the Board, all NEDs enter into a service agreement with the company in the form of a letter of
appointment. The letter details the terms, including fees, relevant to the office of the NED. Fees and payments to
NEDs reflect the demands which are made on, and the responsibilities of the NEDs.
NEDs’ receive an additional fee for chairing committees (no additional fees are paid for committee membership or for
memberships of directors on subsidiary Boards). NEDs do not receive performance-based remuneration.
Remuneration of NEDs is determined by the Board, after receiving recommendations from the Human Resources and
Remuneration Committee, within the maximum aggregate amount approved by the shareholders from time to time
(currently set at $750,000). The total of NED fees paid in FY2018 was $563,250. The Board will not seek any increase
for the NED maximum aggregate fee pool at the FY2018 AGM.
66
CEDAR WOODS PROPERTIES LIMITED Fee policy
NEDs’ annual fees were last reviewed from FY2018 (effective date: 1 July 2017).
The annual fees (inclusive of superannuation) for FY2018 and FY2017 are set out in the table below:
Chair
Deputy Chair
Other NEDs
Committee Chair
Committee member
FY2018
$
161,000
124,000
87,000
13,000
Nil
FY2017
$
157,800
121,600
85,300
12,800
Nil
NED remuneration for the years ended 30 June 2018 and 30 June 2017
The table below outlines fees paid to NEDs for FY2018 and FY2017 in accordance with statutory rules and applicable
accounting standards.
Name
W G Hames
R S Brown
R Packer
V A Davies
J M Muirsmith *
S T Pearce **
Total
Short-term
benefits Post employment
Board and
committee fees
Superannuation
$
147,032
144,110
113,242
111,050
102,301
90,002
79,452
77,900
59,589
43,444
501,616
466,506
$
13,968
13,690
10,758
10,550
23,699
33,698
7,548
7,400
5,661
4,127
61,634
69,465
Financial year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Total
$
161,000
157,800
124,000
121,600
126,000
123,700
87,000
85,300
65,250
47,571
563,250
535,971
* Mrs J M Muirsmith was appointed on 2 October 2017.
** Mr S T Pearce resigned effective 20 January 2017.
2018 ANNUAL REPORT
67
u) Additional statutory disclosures
Equity instrument disclosures relating to KMP
The numbers of ordinary shares in the company held during the financial year by each director and other KMP of Cedar
Woods, including their personally-related parties, are set out below. There were no shares granted during the period as
remuneration.
2018
NEDs
W G Hames†
R S Brown*
R Packer
V A Davies
J M Muirsmith
Executive directors
N J Blackburne
Senior executives
P Archer
L M Hanrahan
P S Freedman
B G Rosser
2017
NEDs
W G Hames†
RS Brown*
R Packer
S T Pearce
V A Davies
T S Brown (alternate for R S Brown)*
Executive directors
P S Sadleir
Senior executives
N J Blackburne
P S Freedman
P Archer
B G Rosser
Number of
shares at the
start of the year
Other changes
during the year
Number of
shares at the
end of the year
10,195,091
148,229
10,343,320
7,985,584
167,859
15,000
0
0
0
297
10,198
7,985,584
167,859
15,297
10,198
38,283
4,587
42,870
20,262
11,398
105,912
0
15
0
1,671
0
20,277
11,398
107,583
0
Number of
shares at the
start of the year
Other changes
during the year
Number of
shares at the
end of the year
10,195,091
7,985,584
167,859
20,000
15,000
4,596,980
1,091,529
38,283
105,912
20,262
0
0
0
0
0
0
0
0
0
0
0
0
10,195,091
7,985,584
167,859
20,000
15,000
4,596,980
1,091,529
38,283
105,912
20,262
0
† Includes 2,014,439 (2017 – 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 KMP.
68
CEDAR WOODS PROPERTIES LIMITED 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 and the use of these services increased in FY2018 as a result of the higher levels of
development activity across the group. Accordingly, the company has a high level of knowledge regarding commercial
rates for these 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. The value of services provided was higher than in the previous year as a result of
architectural and design work performed on the Williams Landing Town Centre and the Glenside project in Adelaide. The
Glenside project was introduced to the company by Hames Sharley.
During the year creative design services were provided by Axiom Design, an entity associated with the family of Mr
W G Hames. Mr Hames has no beneficial interest in Axiom Design. The services were performed on normal commercial
terms and conditions and the level of services decreased compared with 2017.
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. At the estates where Westland
Settlement Services was engaged, the number of lots that settled in FY2018 was significantly higher than that of the
previous year and as a result the value of transactions with Westland Settlement Services Pty Ltd increased.
Cedar Woods has for many years been a member of the Australian Institute of Company Directors (AICD). During the
2015 year Mr P S Sadleir became a council member of AICD WA. The annual subscriptions paid in 2017 and 2018 were
based on normal commercial terms and conditions.
In 2018 a payment was made for sponsorship of the Property Education Foundation Inc. of which Mr R Packer is a
trustee with no beneficial interest. The transaction was based on normal commercial terms and conditions.
Aggregate amounts of each of the above types of other transactions with key management personnel of Cedar Woods or
their related entities:
Amounts recognised as expense
Creative design services
Architectural fees
Settlement fees
Subscriptions
Sponsorships
Amounts recognised as inventory / investment property
Architectural fees
2018
$
2017
$
26,240
-
181,985
10,000
3,182
221,407
578,016
578,016
31,001
5,000
107,450
10,000
-
153,451
455,468
455,468
Total amounts recognised in year
799,423
608,919
Aggregate amounts of assets at balance date relating to the above types of other
transactions with directors of Cedar Woods or their related entities:
Inventory
Investment property
571,316
6,700
578,016
445,668
9,800
455,468
There are no aggregate amounts payable to directors of Cedar Woods at balance date. There are no amounts payable to
related entities at balance date relating to the above types of other transactions.
2018 ANNUAL REPORT
69
At 30 June 2018, an amount of $5,365 (2017 - $11,217) was outstanding on a loan to a key management personnel
employee issued under the former employee share plan. Under the now discontinued plan, certain employees were
granted shares funded by interest free loans from the company and with the loans repaid by dividends. There are no
other amounts owing from related entities at balance date.
v) Independent audit of remuneration report
The remuneration report has been audited by PricewaterhouseCoopers (PwC). See page 128 of this annual report for
PwC’s report on the remuneration report.
w) Retirement, election and continuation in office of directors
Mr R Packer and Ms V A Davies retire by rotation at the forthcoming Annual General Meeting and being eligible, will
offer themselves for re-election.
x) Insurance of officers
During the financial year, Cedar Woods 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 and the Company Secretary. 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.
y) 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 35 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.
z) 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 71.
aa) Rounding of amounts
The company is of a kind referred to in AISC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the
directors’ report. Amounts in the directors’ report have been rounded off in accordance with the instrument to the nearest
thousand dollars, or in certain cases, to the nearest dollar.
The directors reporting including the remuneration report is signed in accordance with a resolution of the directors of Cedar
Woods.
N J Blackburne
Managing Director
21 August 2018
70
CEDAR WOODS PROPERTIES LIMITED Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Cedar Woods Properties Limited for the year ended 30 June 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Cedar Woods Properties Limited and the entities it controlled during
the period.
Helen Bathurst
Partner
PricewaterhouseCoopers
Perth
21 August 2018
Pr i cew a t er h ou seCoop er s, ABN 52 78 0 433 757
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
Liability limited by a scheme approved under Professional Standards Legislation.
2018 ANNUAL REPORT
71
46
S
T
N
E
M
E
T
A
T
S
Financial Statements
I
L
A
C
N
A
N
F
I
Consolidated Statement of Profit or Loss and Other Comprehensive Income .................................. 73
Consolidated Balance Sheet ............................................................................................................... 74
Consolidated Statement of Changes in Equity ................................................................................... 75
Consolidated Cash Flow Statement .................................................................................................... 76
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 27.
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 21 August 2018. The directors
have the power to amend and reissue the financial statements.
72
CEDAR WOODS PROPERTIES LIMITED
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 30 June 2018
Note
Consolidated
2018
$’000
2017
$’000
Revenue from operations
Sale of land and buildings
Development services
Rent from properties
Interest revenue
Other Income
Expenses
Cost of sales of land and buildings
Cost of providing development services
Other expenses from ordinary activities:
Project operating costs
Occupancy
Administration
Other
Finance costs
Share of net profit of joint ventures accounted for using the
equity method
Profit before income tax
Income tax expense
231,495
210,165
1,401
6,086
679
6,611
4,555
938
239,661
222,269
2,946
127
(137,431)
(691)
(114,457)
(5,332)
(21,165)
(708)
(17,282)
(40)
(4,020)
(122)
61,148
(18,545)
(16,929)
(694)
(16,133)
(1,514)
(2,947)
109
64,499
(19,054)
1
1
31a
2
Profit for the year
20 & 3
42,603
45,445
Total comprehensive income for the year
Total comprehensive income attributable to members of
Cedar Woods Properties Limited
42,603
42,603
45,445
45,445
Earnings per share for profit attributable to the ordinary
equity holders of the company:
Basic earnings per share
Diluted earnings per share
3
3
53.9 cents
53.7 cents
57.6 cents
57.4 cents
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.
2018 ANNUAL REPORT
73
FINANCIAL STATEMENTS Consolidated Balance Sheet
As at 30 June 2018
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
Property, plant and equipment
Investment properties
Lease incentives
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial instruments
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
Note
4
5
6
7
5
6
7
8
9
10
11
12
14
15
16
13
14
15
16
17
18
19
20
Consolidated
2018
$’000
2017
$’000
23,692
13,689
183,108
2,182
222,671
69
314,731
9,309
3,028
7,688
42,561
1,459
378,845
601,516
46,376
121
38,454
16,515
8,103
109,569
132,826
63
1,224
77
4,571
138,761
248,330
353,186
123,018
442
229,726
353,186
8,400
5,882
95,145
831
110,258
16
326,969
14,893
4,125
5,122
43,425
816
395,366
505,624
24,175
-
4,065
9,701
9,330
47,271
87,340
407
37,412
73
2,887
128,119
175,390
330,234
119,525
210
210,499
330,234
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
74
FINANCIAL STATEMENTSCEDAR WOODS PROPERTIES LIMITED Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2018
Consolidated
Balance at 1 July 2016
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Transfers from reserves to retained profits
Dividends provided for or paid
Employee share plan reserve
26
19
Contributed
equity
$’000
Reserves
$’000
Retained
profits
$’000
Note
Total
$’000
119,525
159
187,504
307,188
-
-
-
-
-
-
-
-
45,445
45,445
45,445
45,445
(34)
-
85
51
34
-
(22,484)
(22,484)
-
85
(22,450)
(22,399)
Balance at 30 June 2017
119,525
210
210,499
330,234
Balance at 1 July 2017
119,525
210
210,499
330,234
Profit for the year
Total comprehensive income for the year
-
-
-
-
42,603
42,603
42,603
42,603
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
Employee share plan reserve
18
26
19
3,493
-
-
-
3,493
-
(6)
-
238
232
-
6
3,493
-
(23,382)
(23,382)
-
238
(23,376)
(19,651)
Balance at 30 June 2018
123,018
442
229,726
353,186
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
2018 ANNUAL REPORT
75
FINANCIAL STATEMENTS Consolidated Cash Flow Statement
For the Year Ended 30 June 218
Cash flows from operating activities
Receipts from customers (incl. GST)
Payments to suppliers and employees (incl. GST)
Payments for land and development
Interest received
Borrowing costs paid
Income taxes paid
Note
Consolidated
2018
$’000
2017
$’000
265,092
(62,703)
(191,633)
407
(7,682)
(10,026)
239,677
(56,175)
(161,588)
363
(4,977)
(16,812)
Net cash (outflows) inflows from operating activities
22
(6,545)
488
Cash flows from investing activities
Proceeds from capital return from joint venture
Cash acquired in business combinations
Payments for investment properties
Payments for property, plant and equipment
975
-
(1,129)
(3,736)
-
66
(4,762)
(1,895)
Net cash outflows from investing activities
(3,890)
(6,591)
Cash flows from financing activities
Proceeds from borrowings
Dividends paid
26
45,600
(19,873)
35,284
(22,478)
Net cash inflows from financing activities
25,727
12,806
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
4
15,292
8,400
23,692
6,703
1,697
8,400
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
76
FINANCIAL STATEMENTSCEDAR WOODS PROPERTIES LIMITED I
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
E
H
T
O
T
S
E
T
O
N
I
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 27.
The notes are set out in the following main sections:
A Key numbers:
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, explains 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.
2018 ANNUAL REPORT
77
S
R
E
B
M
U
N
Y
E
K
Section A:
Key Numbers
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.
Profit or Loss Information .......................................................................................................... 79
1.
2.
3.
Expense items .................................................................................................................. 79
Income tax ........................................................................................................................ 80
Earnings per share ............................................................................................................ 80
Balance Sheet Information ........................................................................................................ 81
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Cash and cash equivalents ................................................................................................ 81
Trade and other receivables .............................................................................................. 81
Inventories ........................................................................................................................ 82
Deferred development costs.............................................................................................. 82
Investments accounted for using the equity method .......................................................... 83
Property, plant and equipment........................................................................................... 83
Investment properties ........................................................................................................ 83
Lease incentives ............................................................................................................... 84
Trade and other payables .................................................................................................. 84
Borrowings ....................................................................................................................... 85
Derivative financial instruments .......................................................................................... 86
15. Other financial liabilities ..................................................................................................... 87
16.
17.
18.
19.
20.
21.
Provisions ......................................................................................................................... 87
Deferred tax ...................................................................................................................... 88
Equity ............................................................................................................................... 90
Reserves ........................................................................................................................... 90
Retained profits ................................................................................................................. 91
Categories of financial assets and financial liabilities ........................................................... 91
Cash Flow information ............................................................................................................... 92
22.
Reconciliation of profit after income tax to net cash inflows from operating activities .......... 92
78
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED
Profit or Loss Information
1. Expense items
Profit before income tax expense includes the following specific expenses:
Finance costs
Interest and finance charges
Interest – other financial liabilities
Unrealised financial instrument (gains) losses
Less: amount capitalised
Finance costs expensed
a. Capitalised borrowing costs
Notes
a
Consolidated
2017
$’000
4,872
2,857
(321)
(4,461)
2,947
2018
$’000
7,239
2,585
(223)
(5,581)
4,020
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 2.9% (2017 – 3.28%) per annum. Where qualifying assets are
financed by specific facilities, the applicable borrowing costs of those facilities are capitalised.
Net loss on disposal of property, plant and equipment
Rental expense relating to operating leases
Minimum lease payments
Provision for customer rebates
Provision for impairment of trade receivables
Superannuation
Depreciation of property, plant and equipment
Depreciation of investment properties
Employee benefits expense
Notes
16a
5
9
10
Other
Write-down of inventory
Impairment of lease incentives and capitalised lease costs
10
Consolidated
2017
$’000
295
826
4,631
191
895
678
1,083
10,753
1,336
178
1,514
2018
$’000
159
793
3,798
(107)
987
948
1,072
11,550
38
2
40
2018 ANNUAL REPORT
79
KEY NUMBERS 2. 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.
a. Income tax expense
Consolidated
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax expense attributable to profit
Deferred income tax expense (revenue) included in income tax
expense comprises:
Decrease (Increase) in deferred tax assets
Increase (Decrease) in deferred tax liabilities
Notes
17
17
b. Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax
2018
$’000
16,971
1,684
(110)
18,545
356
1,328
1,684
2018
$’000
61,148
2017
$’000
20,744
(1,390)
(300)
19,054
(1,323)
(67)
(1,390)
Consolidated
2017
$’000
64,499
Tax at the Australian tax rate of 30% (2017– 30%)
18,344
19,350
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
- Interest revenue
- Employee share scheme
- Share of net loss (profit) of joint venture
- Sundry items
Adjustments for current tax of prior periods:
- Research and development
Income tax expense
3. Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
Net profit attributable to the ordinary owners of the company
($’000)
Weighted average number of ordinary shares used as the
denominator in the calculation of earnings per share
Weighted average number of ordinary shares used as the
denominator in the calculation of diluted earnings per share
182
71
36
22
311
(110)
(110)
-
25
(34)
13
4
(300)
(300)
18,545
19,054
2018
53.9
53.7
2017
57.6
57.4
42,603
45,445
79,001,250
78,891,681
79,338,868
79,110,619
The calculation of diluted earnings per share includes performance rights that may vest under the company’s LTI plan.
80
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED Balance Sheet Information
4. Cash and cash equivalents
Cash at bank and in hand
Consolidated
2018
$’000
23,692
23,692
2017
$’000
8,400
8,400
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 1.8% (2017: 0 – 2.1%) per annum depending on the balances.
The Group’s exposure to interest rate risk is discussed in note 24 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.
5. Trade and other receivables
Current
Trade receivables
Provision for impairment
Other receivables
Prepayments
Non-Current
Prepayments
Notes
a & b
a & b
a & b
Loans – employee share scheme (discontinued)
36
Consolidated
2017
$’000
4,549
(539)
278
1,594
5,882
-
16
16
2018
$’000
11,162
(432)
142
2,817
13,689
60
9
69
a. 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 37(k) and 37(y).
b. Current trade and other receivables
Current trade and other receivables include interest and non-interest bearing receivables (see note 24 Financial risk
management). Trade receivables are initially recorded at fair value and subsequently carried at amortised cost. A
provision for impaired trade receivables of $432,000 was in place at 30 June 2018 (2017 – $539,000) for Williams
Landing Shopping Centre rental that is past due, where there is low probability of recovery in full. Other receivables
include GST receivable in relation to the payment of Other financial liabilities - Current in note 15.
The fair values of non-current receivables of the group approximate the carrying values.
Other non-current receivables and loans under the discontinued employee share scheme are non-interest bearing.
None of these are impaired, or past due but not impaired.
2018 ANNUAL REPORT
81
KEY NUMBERS 6. Inventories
Total Inventory
Current inventory
Non-current inventory
Aggregate carrying amount
Current
Property held for resale
- at cost
- at valuation 30 June 1992
- capitalised development costs
Notes
a & b
a & b
2018
$’000
183,108
314,731
497,839
Consolidated
2017
$’000
95,145
326,969
422,114
Consolidated
2018
$’000
2017
$’000
43,352
-
139,756
183,108
38,061
11
57,073
95,145
The 1992 valuations were independent valuations which were based on current market values at that time.
Non-Current
Property held for resale
- at cost
- at valuation 30 June 1992
- capitalised development costs
- at net realisable value
Consolidated
2018
$’000
2017
$’000
226,167
91
83,264
5,209
314,731
251,055
91
70,666
5,157
326,969
The 1992 valuations were independent valuations which were based on current market values at that time.
a. Current and non-current assets pledged as security
Refer to note 13 for information on current assets pledged as security by the parent entity or its controlled entities.
b. Accounting for inventory
Refer to note 37(g) for the recognition and classification of inventory.
7. Deferred development costs
Current
Deferred development costs
Non-Current
Deferred development costs
Consolidated
2017
$’000
831
831
14,893
14,893
2018
$’000
2,182
2,182
9,309
9,309
Development costs incurred by the group for the development of land not held as inventory by the group are recorded
as deferred development costs in the balance sheet.
82
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED 8. Investments accounted for using the equity method
Unlisted securities
Shares in joint ventures
a. Cedar Woods Wellard Limited
Consolidated
2018
$’000
3,028
2017
$’000
4,125
The consolidated entity owns a 32.5% (2017: 32.5%) interest in Cedar Woods Wellard Limited, a property
development company incorporated in Australia. Refer to note 28.
9. Property, plant and equipment
Consolidated
Plant and Equipment at Cost
At start of the year
Consolidation of subsidiary
Additions
Assets disposed
At end of the year
Accumulated depreciation on Plant and Equipment
At start of the year
Consolidation of subsidiary
Charge for year
Assets disposed
At end of the year
Net book value
Non-current assets pledged as security
2018
$’000
7,236
-
3,736
(550)
10,422
2,114
-
948
(328)
2,734
7,688
2017
$’000
6,634
195
1,896
(1,489)
7,236
2,554
40
678
(1,158)
2,114
5,122
Refer to note 13 for information on non-current assets pledged as security by the parent entity or its controlled entities.
10. Investment properties
Non-current assets – at cost
Opening balance at the start of the year
Capitalised expenditure
Depreciation
Impairment of capitalised lease costs
Closing balance at the end of the year
Represented by:
Completed investment property
Closing balance at the end of the year
Consolidated
2017
$’000
41,542
2,998
(1,083)
(32)
43,425
43,425
43,425
2018
$’000
43,425
210
(1,072)
(2)
42,561
42,561
42,561
2018 ANNUAL REPORT
83
KEY NUMBERS a. Amounts recognised in profit or loss for investment properties
Rental income
Direct operating expenses from property that generated rental income
Impairment of lease incentives and capitalised lease costs
b. Fair value of investment property
Consolidated
2018
$’000
5,357
(3,110)
(2)
2017
$’000
4,005
(3,079)
(178)
The fair value of the Williams Landing Shopping Centre which makes up completed investment property at 30
June 2018 is $70.0m (2017 - $66.5m) exclusive of GST, based on an independent valuation. This includes land
surrounding the shopping centre for future development which is on the same title.
c. Leasing arrangements
Investment properties are leased to tenants under long term operating 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
d. Non-current assets pledged as security
Consolidated
2017
$’000
3,453
12,834
25,681
41,968
2018
$’000
4,471
16,333
30,107
50,911
Refer to note 13 for information on non-current assets pledged as security by the parent entity or its controlled entities.
11. Lease incentives
Lease incentives
Amortisation of lease incentives
Impairment of lease incentives
Non-current assets pledged as security
Consolidated
2017
$’000
1,665
(344)
(505)
816
2018
$’000
2,516
(552)
(505)
1,459
Refer to note 13 for information on non-current assets pledged as security by the parent entity or its controlled entities.
12. Trade and other payables
Trade payables
Accruals
GST payable
Other payables
Consolidated
2017
$’000
9,885
9,670
3,839
781
24,175
2018
$’000
12,985
24,061
8,365
965
46,376
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.
84
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED 13. Borrowings
Non-Current
Bank loans – secured (Corporate facilities)
Bank loan – secured (Williams Landing Shopping Centre facility)
Facility fees capitalised (amortised over the period of facility)
Amortisation of facility fees
The fair value of non-current borrowings equals their carrying amount.
a. Security for borrowings
2018
$’000
104,000
29,193
(546)
179
132,826
Consolidated
2017
$’000
58,400
29,193
(429)
176
87,340
All of the consolidated entity’s assets are pledged as security for the group’s finance facilities.
Bank loans totalling $104,000,000 (2017 - $58,400,000) provided by two major banks $52,000,000 each (2017
- $29,200,000 each) each 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 and applicable
subsidiary entities. Cedar Woods has provided first registered charges over its assets and undertakings in relation
to the corporate loan facility (see below).
The Williams Landing Shopping Centre facility is secured by a first registered mortgage over the Williams Landing
Shopping Centre disclosed in investment properties at note 10.
b. Financing arrangements
Unrestricted access was available to the following lines of credit at balance date:
Corporate facilities
Total facilities (loan and guarantees)
Used at balance date
Unused at balance date
Williams Landing Shopping Centre facility
Total facility
Used at balance date
Unused at balance date
111 Overton Road facility
Total facility
Used at balance date
Unused at balance date
Total Facilities
Used at balance date
Unused at balance date
Consolidated
2018
$’000
2017
$’000
240,000
120,942
119,058
30,000
29,193
807
27,070
-
27,070
297,070
150,135
146,935
175,000
73,838
101,162
30,000
29,193
807
-
-
-
205,000
103,031
101,969
2018 ANNUAL REPORT
85
KEY NUMBERS The consolidated entity has total corporate finance facilities of $240,000,000 (2017 - $175,000,000), with
$120,000,000 (2017 - $87,500,000) each provided by two major banks. The facilities expire on 30 November
2020. The conditions of the facilities impose certain covenants including 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 interest on the corporate loan facilities is variable and at 30 June 2018 was an
average rate of 3.37% per annum (2017 - 3.04%).
The corporate facilities include bank guarantee facilities of $20,000,000 (2017 - $20,500,000) subject to similar
terms and conditions, which were drawn to a total amount of $16,941,000 at 30 June 2018 (2017 - $15,438,000).
The consolidated entity has a facility of $30,000,000 (2017 - $30,000,000) in place for the Williams Landing
Shopping Centre investment property. The conditions of the facility impose certain covenants including loan-to-
valuation ratio and interest cover ratio. The facility extends to June 2021. The interest on the Williams Landing
Shopping Centre loan facility is variable and at 30 June 2018 was an average rate of 3.29% (2017 – 2.97%) per
annum.
The company also established a new $27,000,000 project facility in May 2018 to fund the development of its 111
Overton road strata office and Lancaster apartment development. The conditions of the facility impose certain
covenants including loan-to-valuation ratio and Loan-to-cost ratio. The facility extends to November 2019 and was
undrawn at 30 June 2018.
Details of the group’s exposure to risk arising from current and non-current borrowings are set out in note 24.
Financial risk management.
14. Derivative financial instruments
Current liabilities
Interest rate swap contracts
Non-current liabilities
Interest rate swap contracts
a. Instruments used by the group
Consolidated
2017
$’000
-
407
407
2018
$’000
121
63
184
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 loans currently bear an average variable interest rate of 3.37% per annum (2017 – 3.04% 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 part of the consolidated entity’s
projected borrowings are protected for the period from 1 July 2018 to 30 June 2020.
The swaps effectively fix interest rates applicable to bank bills issued with duration of 1 month (BBSY Bid) at
certain levels between 2.070% - 2.495% per annum (2017 – 2.070% - 2.495% per annum). Swaps currently
in place cover approximately 41% (2017 – 63%) of the variable loans outstanding at balance date, with terms
expiring in 2019 and 2020. 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.
86
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED 15. Other financial liabilities
Current
Due to vendors of properties under contracts of sale
Non-Current
Due to vendors of properties under contract of sale
Other payables
16. Provisions
Current
Employee benefits
Customer rebates
Non-current
Employee benefits
a. Movements in customer rebate provisions
Carrying amount at start of year
Charged to profit or loss
Payments
Carrying amount at end of year
Notes
a
Consolidated
2017
$’000
4,065
4,065
36,188
1,224
37,412
Consolidated
Consolidated
2017
$’000
1,415
7,915
9,330
2017
$’000
73
73
Consolidated
2017
$’000
5,809
4,631
(2,525)
7,915
2018
$’000
38,454
38,454
-
1,224
1,224
2018
$’000
1,024
7,079
8,103
2018
$’000
77
77
2018
$’000
7,915
3,798
(4,634)
7,079
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.
2018 ANNUAL REPORT
87
KEY NUMBERS 17. Deferred tax
a. Assets
Consolidated
Notes
The balance comprises temporary differences
attributable to:
Inventory
Provision for customer rebates
Special Unit in the BCM Apartment Trust
Provision for employee benefits
Other
Receivables
Derivative financial instruments
Share issue expenses
Borrowing costs
Other
Sub-total other
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
(Decrease) increase in deferred tax assets (debited) credited
to income tax expense
2
Deferred tax assets at the end of the year
Deferred tax assets expected to be recovered within
12 months
Deferred tax assets expected to be recovered after more
than 12 months
2018
$’000
3,414
1,949
1,858
504
7,725
286
75
53
68
94
576
8,301
(8,301)
-
8,657
(356)
8,301
4,404
3,897
8,301
Movements
At 1 July 2016
(Charged) / credited
- to profit or loss
At 30 June 2017
(Charged) / credited
- to profit or loss
At 30 June 2018
Provision for
customer
rebates
$’000
Special Unit
in the BCM
Apartment
Trust
$’000
Provision for
employee
benefits
$’000
Inventory
$’000
2,328
1,743
1,858
619
2,947
467
3,414
611
2,354
(405)
1,949
-
1,858
-
1,858
776
(13)
763
(259)
504
Other
$’000
629
106
735
(159)
576
2017
$’000
2,947
2,354
1,858
763
7,922
296
122
51
80
186
735
8,657
(8,657)
-
7,334
1,323
8,657
4,883
3,774
8,657
Total
$’000
7,334
1,323
8,657
(356)
8,301
88
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED b. Liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Notes
Inventory
Deferred development costs
Prepayments
Investment Property
Other
Lease incentives
Revaluation reserve
Other
Sub-total other
Total deferred tax liabilities
Set off of deferred tax assets pursuant to set-off provisions
Net deferred tax liabilities
Consolidated
2017
$’000
5,958
4,633
370
305
2018
$’000
8,266
3,130
656
348
12,400
11,266
438
26
8
472
245
24
9
278
12,872
11,544
(8,301)
4,571
(8,657)
2,887
Deferred tax liabilities at the start of the year
11,544
11,611
(Increase) decrease in deferred tax liabilities debited (credited)
to income tax expense
2
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
1,328
12,872
4,549
8,323
12,872
(67)
11,544
3,123
8,421
11,544
Movements
At 1 July 2016
Charged / (credited)
- to profit or loss
At 30 June 2017
Charged / (credited)
- to profit or loss
At 30 June 2018
Deferred
development
costs
$’000
Inventory
$’000
5,212
5,372
746
5,958
2,308
8,266
(739)
4,633
(1,503)
3,130
Prepayments
$’000
Investment
Property
$’000
439
(69)
370
286
656
367
(62)
305
43
348
Other
$’000
221
Total
$’000
11,611
57
278
194
472
(67)
11,544
1,328
12,872
2018 ANNUAL REPORT
89
KEY NUMBERS
18. Equity
Movement in ordinary share capital
2018
Shares
2017
Shares
2018
$’000
2017
$’000
Start of the year
78,891,681
78,891,681
119,525
119,525
Shares issued pursuant to the dividend
reinvestment plan:
Ordinary shares issued on 27 April 2018 at $6.06
577,860
Shares issued pursuant to the bonus share plan:
Ordinary shares issued on 27 April 2018
Transaction costs arising on share issues
47,026
-
624,886
-
-
-
-
3,502
-
(9)
3,493
-
-
-
-
End of the year
79,516,567
78,891,681
123,018
119,525
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.
a. 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.
b. 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.
The dividend reinvestment plan and bonus share plan were in place during the 2018 financial year.
19. Reserves
The following table shows the composition and movement in reserves during the year. A description of the nature and
purpose of reserves is provided below the table.
Consolidated
Composition
a) Asset revaluation reserve (pre 1992)
b) Employee share plan reserve
Movements
a) Asset revaluation reserve
Balance at the beginning of the year
Transfer to retained profits
Balance at the end of the year
b) Share-based payments reserve
Balance at the beginning of the year
Share-based payments expense
Balance at the end of the year
90
Notes
20
2018
$’000
49
393
442
55
(6)
49
155
238
393
2017
$’000
55
155
210
89
(34)
55
70
85
155
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED The asset revaluation reserve was used until 1992 to record increments and decrements on the revaluation of non-
current assets. Refer to note 37(g).
The share-based payments reserve is used to recognise the grant date fair value of the rights issued to employees
adjusted for those rights not expected to vest. Refer to note 36.
20. Retained profits
Retained profits at the start of the year
Net profit attributable to members of Cedar Woods
Transfers from reserves
Dividends provided for or paid
Retained profits at the end of the year
Notes
19
26
2018
$’000
210,499
42,603
6
(23,382)
229,726
Consolidated
2017
$’000
187,504
45,445
34
(22,484)
210,499
21. Categories of financial assets and financial liabilities
Notes 4, 5, 12, 13, 14, and 15 provide information about the group’s financial instruments, including:
a. Specific information about each type of financial instrument
b. Accounting policies
c. Information about determining the fair value of the instruments, including judgements and estimation uncertainty
involved
The group holds the following financial instruments:
Financial Assets
Notes
Financial assets at
amortised cost
2018
Cash and cash equivalents
Trade and other receivables*
Total
2017
Cash and cash equivalents
Trade and other receivables*
Total
* Excluding prepayments
4
5
4
5
$’000
23,692
10,881
34,573
8,400
4,304
12,704
Financial Liabilities
Notes
Derivatives
used for hedging
Liabilities at
amortised cost
2018
Trade and other payables
Borrowings
Derivative financial instruments
Other financial liabilities
Total
2017
Trade and other payables
Borrowings
Derivative financial instruments
Other financial liabilities
Total
12
13
14
15
12
13
14
15
$’000
-
-
184
-
184
-
-
407
-
407
$’000
46,376
132,826
-
39,678
218,880
24,175
87,340
-
41,477
152,992
Total
$’000
23,692
10,881
34,573
8,400
4,304
12,704
Total
$’000
46,376
132,826
-
39,678
218,880
24,175
87,340
407
41,477
153,399
2018 ANNUAL REPORT
91
KEY NUMBERS Cash Flow Information
22. a) Reconciliation of profit after income tax to net cash (outflows) inflows from operating activities
Consolidated
Profit after income tax
Depreciation
Amortisation of lease incentives
Write down of assets – investment property and lease incentives
Write down of inventory
Write down/ loss on sale of non-current assets
Fair value gain on derivative financial instrument
Non-cash share-based payments expense
Accrued interest on receivables
Share of loss (profit) in equity accounted investment
Changes in operating assets and liabilities
Decrease in provisions for employee benefits
(Decrease) increase in provisions
(Increase) in inventories
Decrease in other deferred development costs
Decrease (Increase) in deferred tax assets
Increase in current income tax payable
Increase (Decrease) in deferred tax liability
(Increase) in capitalised borrowing costs
(Increase) Decrease in debtors
Increase in creditors
(Decrease) in other financial liabilities
Net cash (outflows) inflows from operating activities
2018
$’000
42,603
2,020
208
2
37
159
(223)
238
-
122
(387)
(836)
(75,725)
4,233
356
6,807
1,328
(114)
(7,867)
22,293
(1,799)
(6,545)
2017
$’000
45,445
1,761
158
178
-
295
(321)
85
(412)
(109)
(99)
2,106
(44,447)
2,647
(1,323)
3,631
(67)
(114)
406
11,925
(21,279)
466
92
KEY NUMBERSCEDAR WOODS PROPERTIES LIMITED b) Net debt reconciliation
This section sets out an analysis of net debt and the movements in debt for each of the periods presented.
Net debt
Consolidated
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year
Net debt
Cash and cash equivalents
Gross debt – fixed interest rates
Gross debt – variable interest rates
Net debt
2018
$’000
23,692
-
(132,826)
(109,134)
23,692
-
(132,826)
(109,134)
Net debt as at 1 July 2016
Cash flows
Other non-cash movements
Net debt as at 30 June 2017
Cash flows
Other non-cash movements
Other Assets
Liabilities from financing activities
Cash
$’000
1,697
6,703
-
8,400
15,292
-
Borrowings due
within 1 year
$’000
Borrowings due
after 1 year
$’000
(52,041)
(35,284)
(15)
(87,340)
(45,600)
114
-
-
-
-
-
2017
$’000
8,400
-
(87,340)
(78,940)
8,400
-
(87,340)
(78,940)
Total
$’000
(50,344)
(28,581)
(15)
(78,940)
(30,308)
114
Net debt as at 30 June 2018
23,692
-
(132,826)
(109,134)
2018 ANNUAL REPORT
93
KEY NUMBERS 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.
23. Significant estimates and judgements .................................................................................. 95
24. Financial risk management .................................................................................................... 96
a)
b)
c)
d)
Market risk .................................................................................................................................. 96
Credit risk .................................................................................................................................. 98
Liquidity risk ............................................................................................................................... 98
Fair value measurement ............................................................................................................. 99
Capital management ........................................................................................................................ 100
25.
Capital management objectives and gearing ........................................................................ 100
26. Dividends ............................................................................................................................... 101
94
CEDAR WOODS PROPERTIES LIMITEDFINANCIAL RISKS Significant 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 inaccurate. Detailed
information about each of these estimates and judgements is presented below.
23. 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.
a. 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.
b. 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 significantly impaired. Refer also to note 37(g).
There were no critical judgements other than those involving estimates referred to above, that management made in
applying the group’s accounting policies.
2018 ANNUAL REPORT
95
FINANCIAL RISKS 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.
24. Financial Risk Management
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
Credit risk
Cash and cash equivalents,
trade and other receivables
and derivative financial
instruments
Aging analysis
Credit ratings
Management of deposits
Contractual arrangements
Interest rate swaps
Ongoing checks by
management
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
Financial liabilities
Trade and other payables
Other financial liabilities
Borrowings
Derivative financial instruments
a) Market risk
i. Price risk
2018
$’000
23,692
13,689
37,381
46,376
39,678
132,826
184
219,064
2017
$’000
8,400
5,882
14,282
24,175
41,477
87,340
407
153,399
The consolidated entity has no foreign exchange exposure or 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.
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.
96
CEDAR WOODS PROPERTIES LIMITEDFINANCIAL RISKS 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 part of the
consolidated entity’s projected borrowings are protected for the period from 1 July 2018 to 30 June 2020.
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 2.070% - 2.495% (2017 – 2.070% - 2.495%) per annum. Swaps currently in
place cover 41% (2017 - 63%) of the variable loan outstanding at balance date, with terms expiring in 2019 and 2020.
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 41% of the bank
loan at balance sheet date of $133,193,000 (2017 - $87,593,000).
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
Interest bearing liabilities
Bank loans
Other financial liabilities
Interest
bearing
- variable
$’000
2018
Non-
interest
bearing
$’000
Interest
bearing
- variable
$’000
Total
$’000
-
-
-
13,689
13,689
9
9
13,698
13,698
-
-
-
Interest
bearing
- fixed
$’000
2018
Interest
bearing
- variable
$’000
Interest
bearing
- fixed
$’000
Total
$’000
2017
Non-
interest
bearing
$’000
5,882
16
5,898
2017
Interest
bearing
- variable
$’000
-
133,193
133,193
-
87,593
Total
$’000
5,882
16
5,898
Total
$’000
87,593
36,188
38,454
38,454
-
38,454
133,193
171,647
36,188
36,188
-
87,593
123,781
The weighted average interest rate at year end is 3.37% (2017: 3.04%)
An analysis by maturity is provided in 24(c) below.
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 financial assets is not significant. Refer to comments above for further information on the
impact of changes in interest rates upon the group.
2018 ANNUAL REPORT
97
FINANCIAL RISKS b) Credit risk
The consolidated entity has minimal exposure to credit risk from customers as title to lots or units in the consolidated
entity’s developments does not generally pass to customers until funds are received.
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.
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 2018 the group had undrawn committed facilities of $146,935,000 (2017 - $101,969,000) and cash of
$23,692,000 (2017 - $8,400,000) to cover short term funding requirements. Refer to 13(b) for details.
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 2018
Non-derivatives
Non-interest bearing
Fixed rate
Variable rate
Derivatives
Total
Group – at 30 June 2017
Non-derivatives
Non-interest bearing
Fixed rate
Variable rate
Derivatives
Total
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
47,600
39,000
-
121
86,721
-
-
-
63
63
-
-
47,600
39,000
47,600
38,454
147,297
147,297
132,826
-
184
184
147,297
234,081
219,064
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
25,399
4,065
-
-
29,464
-
39,000
30,757
335
70,092
-
-
64,109
72
25,399
43,065
94,866
407
25,399
40,253
87,340
407
64,181
163,737
153,399
98
CEDAR WOODS PROPERTIES LIMITEDFINANCIAL RISKS 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 on 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 liabilities measured and recognised at fair value at 30 June 2018
and 30 June 2017:
As at 30 June 2018
Notes
Liabilities
Derivatives used for hedging
14
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
184
184
-
-
As at 30 June 2017
Notes
Liabilities
Derivatives used for hedging
14
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
407
407
-
-
ii. Valuation techniques used to determine fair values
Total
$’000
184
184
Total
$’000
407
407
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.
2018 ANNUAL REPORT
99
FINANCIAL RISKS Capital Management
25. 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
13
4
2018
$’000
132,826
(23,692)
109,134
353,186
30.9%
2017
$’000
87,340
(8,400)
78,940
330,234
23.9%
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.
a. Loan Covenants
Under the terms of the major borrowing facilities, the group has complied with covenants throughout the reporting
period. Debt covenants are disclosed in note 13 and include requirements in relation to a maximum loan to
valuation ratio and a minimum interest cover ratio.
100
CEDAR WOODS PROPERTIES LIMITEDFINANCIAL RISKS 26. Dividends
a. Ordinary shares
Fully franked based on tax paid at 30%
Final dividend for the year ended 30 June 2017 of 18.0 cents (2016 –
16.5 cents) per fully paid share
- Paid in cash
- Applied to the employee share loans
Interim dividend for the year ended 30 June 2018 of 12.0 cents (2017 –
12.0 cents) per fully paid share
- Paid in cash
- Satisfied by shares under the dividend reinvestment plan
- Applied to the employee share loans
Total
b. Dividends not recognised at the year end
Consolidated
2018
$’000
2017
$’000
14,196
4
5,677
3,502
3
23,382
13,014
3
9,464
-
3
22,484
In addition to the above dividends, since year end the directors have recommended the payment of a final dividend
of 18.0 cents per fully paid ordinary share (2017 – 18.0 cents), fully franked based on the tax paid at 30%. The
aggregate amount of the proposed dividend expected to be paid on 26 October 2018 out of retained profits at 30
June 2018, but not recognised as a liability at year end is below:
Dividends not recognised at year end
c. Franked Dividends
Consolidated
2018
$’000
14,313
2017
$’000
14,201
The franked portions of the final dividend proposed at 30 June 2018 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% (2017 – 30%)
Consolidated
2018
$’000
2017
$’000
88,952
82,211
The above amounts represent the franking accounts at the end of the financial year, adjusted for:
i. Franking credits that will arise from the payment of the current tax liability;
ii. Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
iii. 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 $6,134,000 (2017 - $6,086,000).
2018 ANNUAL REPORT
101
FINANCIAL RISKS 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.
Interests in Other Entities .................................................................................................................... 103
27. Subsidiaries ................................................................................................................................ 103
28.
Interests in joint arrangements .................................................................................................. 104
29. Commitments and contingent liabilities in respect of the joint ventures ................................. 104
30. Summarised financial information for joint ventures ................................................................. 104
102
CEDAR WOODS PROPERTIES LIMITEDGROUP STRUCTURE Interests in Other Entities
27. Subsidiaries
The group’s operating subsidiaries at 30 June 2018 are set out below. Unless otherwise stated, they have share
capital consisting solely of ordinary shares or units 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 37(b).
Company
Notes
Equity Holding
BCM Apartment Trust
Champion Bay Nominees Pty Ltd
Cedar Woods Properties Finance 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
a.
b.
Cranford Pty Ltd
Daleford Property Pty Ltd
Dunland Property Pty Ltd
Esplanade (Mandurah) Pty Ltd
Eucalypt Property Pty Ltd
Flametree Property Pty Ltd
Galaway Holdings Pty Ltd
Gaythorne 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
Williams Landing Home Improvement Pty Ltd
Williams Landing Home Improvement Trust
Williams Landing Shopping Centre Pty Ltd
Williams Landing Shopping Centre Trust
Williams Landing Town Centre Pty Ltd
Woodbrooke Property Pty Ltd
Yonder Property Pty Ltd
Zamia Property Pty Ltd
2018
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2017
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
a. The forecast profits of BCM Apartment Trust not expected to be sufficient to make a return to the other ordinary
unit holder that ranks behind the consolidated entity for trust distributions. Accordingly, the consolidated entity has
not recognised a non-controlling interest.
b. The net assets of Champion Bay Nominees Pty Ltd are not material to the consolidated entity.
2018 ANNUAL REPORT
103
GROUP STRUCTURE 28. Interests in joint arrangements
Set out below are the joint ventures of the group as at 30 June 2018. The principal place of business and country of
incorporation (or origin) is Australia for all entities.
Name of entity
Cedar Woods Wellard Limited
% of ownership
interest
2018
%
32.5
2017
%
32.5
Nature of relationship
Measurement
method
Carrying amount
2018
$’000
2017
$’000
Joint Venture
Equity method
3,028
4,125
The carrying amount represents the amount attributable to the group.
Cedar Woods Wellard Limited is developing the Emerald Park residential estate at Wellard, WA.
29. Commitments and contingent liabilities in respect of the joint ventures
Cedar Woods Wellard Limited has no commitments for expenditure at 30 June 2018 (2017: $23,022) and
has provided no bank guarantees (2017: $2,047,433) to various local authorities supporting development and
maintenance commitments.
30. Summarised financial information for joint ventures
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’ share of those amounts.
2018
$’000
1,019
2,875
3,894
7,685
11,579
275
-
275
11,304
32.5%
3,674
2017
$’000
2,843
5,451
8,294
6,713
15,007
329
-
329
14,678
32.5%
4,770
Cedar Woods Wellard Limited
Current assets
Cash
Other current assets
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Group’s share in %
Group’s share in $
104
CEDAR WOODS PROPERTIES LIMITEDGROUP STRUCTURE a. Movements in carrying amounts – Cedar Woods Wellard Limited
At start of the year
Share of (loss) profit after income tax
Capital return
At end of the year
Share of profit before income tax
Income tax expense
Share of profit after income tax
Share of joint venture’s revenue, assets, liabilities and
contingent liabilities
Revenue
Assets
Liabilities
Contingent liabilities (bank guarantees)
2018
$’000
4,125
(122)
(975)
3,028
(52)
(70)
(122)
1,324
3,763
(89)
-
2017
$’000
4,016
109
-
4,125
271
(162)
109
2,495
4,877
(107)
(665)
The consolidated entity owns a 32.5% (2017 – 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.
2018 ANNUAL REPORT
105
GROUP STRUCTURE 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.
Contingent Liabilities .......................................................................................................................... 107
31. Bank Guarantees ..................................................................................................................... 107
32. Commitments ........................................................................................................................... 108
33. Events occurring after the reporting period ............................................................................ 109
106
CEDAR WOODS PROPERTIES LIMITEDUNRECOGNISED ITEMS Contingent Liabilities
At 30 June 2018 the group had contingent liabilities in respect of:
31. Bank guarantees
At 30 June 2018 bank guarantees totalling $16,941,000 (2017 - $15,438,000) had been provided to various state and
local authorities supporting development and maintenance commitments.
2018 ANNUAL REPORT
107
UNRECOGNISED ITEMS Commitments
32. 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
2018
$’000
745
1,099
1,844
2017
$’000
759
830
1,589
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.
b) Capital commitments
At 30 June 2018 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 $5,597,000 (2017 - $9,809,000), for building
construction was $103,331,000 (2017 - $98,079,000) and for landscaping construction was $6,426,000 (2017 -
$2,945,000). This work will be substantially completed in the next 12 months.
108
CEDAR WOODS PROPERTIES LIMITEDUNRECOGNISED ITEMS
Events occurring after the reporting period
33. Events occurring after the reporting period
No matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly
affect, the operations of the Company, the results of those operations or the state of affairs of the Company or
economic entity in subsequent financial years.
2018 ANNUAL REPORT
109
UNRECOGNISED ITEMS 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.
34. Related Party Transactions ...................................................................................................... 111
35. Remuneration of Auditors ........................................................................................................ 113
36. Employee Share Scheme ......................................................................................................... 114
37. Summary of Accounting Policies ............................................................................................ 115
38. Segment Information ............................................................................................................... 124
39. Parent Entity Financial Information ......................................................................................... 125
110
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION Related Party Transactions
34. 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
Termination benefit
Consolidated
2018
$
2017
$
3,067,325
3,261,649
181,388
245,255
74,523
197,012
117,404
-
3,568,491
3,576,065
At 30 June 2018, an amount of $5,365 (2017 - $11,217) was outstanding on a loan to a key management
personnel employee issued under the former employee share plan. Under the now discontinued plan, certain
employees were granted shares funded by interest free loans from the company and with the loans repaid by
dividends.
b) Group
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 27.
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 $378,896 (2017 - $684,191) from Cedar Woods Wellard Limited.
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. The value of services provided was higher than in the previous
year as a result of architectural and design work performed on the Williams Landing Town Centre and the Glenside
project in Adelaide. The Glenside project was introduced to the company by Hames Sharley.
During the year creative design services were provided by Axiom Design, an entity associated with the family of
Mr W G Hames. Mr Hames has no beneficial interest in Axiom Design. The services were performed on normal
commercial terms and conditions and the level of services decreased compared with 2017.
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. At the estates
where Westland Settlement Services was engaged, the number of lots that settled in FY2018 was significantly
higher than that of the previous year and as a result the value of transactions with Westland Settlement Services
Pty Ltd increased.
Cedar Woods has for many years been a member of the Australian Institute of Company Directors (AICD). During
the 2015 year Mr P S Sadleir became a council member of AICD WA. The annual subscriptions paid in 2018 and
2017 were based on normal commercial terms and conditions.
2018 ANNUAL REPORT
111
OTHER INFORMATION In 2018 a payment was made for sponsorship of the Property Education Foundation Inc. of which Mr R Packer is a
trustee with no beneficial interest. The transaction was based 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
Architectural fees
Settlement fees
Subscriptions
Sponsorships
Amounts recognised as inventory/ investment property
Architectural fees
2018
$
26,240
-
181,985
10,000
3,182
221,407
578,016
578,016
2017
$
31,001
5,000
107,450
10,000
-
153,451
455,468
455,468
Total amounts recognised in year
799,423
608,919
Aggregate amounts of assets at balance date relating to the above types of
other transactions with directors of Cedar Woods or their related entities:
Inventory
Investment property
571,316
6,700
578,016
445,668
9,800
455,468
There are no aggregate amounts payable to directors of Cedar Woods at balance date. There are no amounts payable
to related entities at balance date relating to the above types of other transactions.
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) Outstanding balances arising from sales / purchases of goods and services
There were no balances outstanding at the end of the reporting period in relation to transactions with related parties
(2017 – Nil).
112
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION Remuneration of Auditors
35. 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
- Audit and review of the financial statements of the parent entity,
controlled entities and co-development projects
Non-audit services
- Other taxation advice and reviews
Total fees for non-audit services
Total assurance and non-audit services
2018
$
2017
$
243,680
209,383
27,540
27,540
271,220
47,430
43,430
256,813
2018 ANNUAL REPORT
113
OTHER INFORMATION
Employee Share Scheme
36. Employee Share Scheme
The current Long Term Incentive (LTI) plans effective from 1 July 2015 for FY2016, from 1 July 2016 for FY2017 and
from 1 July 2017 for FY2018 will continue in FY2019.
The current LTI plan has two vesting conditions a) a 3 year service condition and b) two performance conditions
measured over a 3 year period: 50 per cent of the LTI grant will be tested against a relative total shareholder return
(“TSR”) hurdle (measured against the S&P / ASX Small Industrials Index) and 50 per cent against earnings per share
(“EPS”) growth targets, set in the context of the Corporate plan.
Full details of the operation of the current LTI plan are set out in the remuneration report on pages 58 to 59 of this
annual report.
114
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION Summary of Accounting Policies
37. 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. Where
necessary, comparative information is reclassified and restated for consistency with current period disclosures. The
financial statements are for the consolidated entity consisting of Cedar Woods 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 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 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 note 23.
iv. Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is the functional and
presentation currency of Cedar Woods.
b) Principles of consolidation
i. Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Cedar
Woods (parent) as at 30 June 2018 and the results of all subsidiaries for the year then ended. Cedar Woods
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.
2018 ANNUAL REPORT
115
OTHER INFORMATION 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.
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 28.
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 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.
116
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION 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 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.
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 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
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.
2018 ANNUAL REPORT
117
OTHER INFORMATION 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.
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 of disposal 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 substantially made up of furniture, fittings and equipment and 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:
• 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, other financial assets and other financial liabilities
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.
118
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION 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.
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.
iv. Other financial liabilities
Other financial liabilities at fair value through profit or loss are financial liabilities due to vendors of properties under
contracts of sale and other payables. 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.
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 buildings 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. Net gains or losses on sale are disclosed in the profit or loss.
o) Lease incentives
Lease incentives provided under an operating lease by the group as lessor are recognised on a straight line basis
against rental income over the lease period.
p) 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.
2018 ANNUAL REPORT
119
OTHER INFORMATION 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 corporate 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.
q) 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.
r) 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.
s) 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.
t) Provisions 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.
120
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION u) 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.
v) Maintenance
Routine operating maintenance and repairs are charged as expenses as incurred.
w) 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.
x) 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.
y) 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.
z) 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.
aa) 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.
bb) 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 2017:
AASB 2014-1 Amendments to Australian Accounting Standards
The amended standards only affected the disclosures in the notes to the financial statements.
New accounting standards not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018
reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new
standards and interpretations is set out below.
2018 ANNUAL REPORT
121
OTHER INFORMATION Title of
Standard
AASB 9
Financial
Instruments
Nature of change
Impact
AASB 9 addresses the
classification, measurement and
derecognition of financial assets and
financial liabilities, introduces new
rules for hedge accounting and a
new impairment model for financial
assets.
AASB 15
Revenue
from
Contracts
with
Customers
The AASB has issued a new
standard for the recognition of
revenue. This will replace AASB 118
which covers revenue arising from
the sale of goods and the rendering
of services and AASB 111 which
covers construction contracts.
The new standard is based on the
principle that revenue is recognised
when control of a good or service
transfers to a customer.
The standard permits either a
full retrospective or a modified
retrospective approach for the
adoption.
122
Mandatory application
date / Date of
adoption by group
Must be applied
for financial years
commencing on
or after 1 January
2018.
Date of adoption by
the group: 1 July
2018.
Mandatory for
financial years
commencing on
or after 1 January
2018.
Date of adoption by
the group: 1 July
2018.
The group intends
to adopt the
standard using
the retrospective
method.
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.
Upon the adoption of AASB 9, the new
impairment model requires the recognition
of impairment provisions based on expected
credit losses (ECL) rather than on incurred
credit losses as is the case under AASB139
Financial Instruments: Recognition and
Measurement. For Cedar Woods, the new ECL
model applies to its trade receivables. Based
on the assessments undertaken to date, the
group doesn’t expect a significant change to
the level of provision for impairment of trade
receivables.
The group does not adopt hedge accounting
and does not have the categories of financial
assets proposed to be removed from the
standard’s application, no significant changes
to its existing accounting are expected as a
result of the implementation of AASB9.
The application of the standard at the operative
date is not expected to have a significant
impact on the group’s annual results.
The vast majority of the group’s revenue relates
to the sale of land and buildings which will
continue to be recognised upon settlement at
which time control of the asset passes to the
purchaser.
Management is advanced in its assessment of
the effects of applying the new standard on the
group’s financial statements and has identified
the following area that will be affected:
• Customer rebates – obligations to deliver
goods and services to customers after
residential lot settlements such as the
provision of fencing and landscaping are
recognised as provisions at settlement.
Under the new standard settlement revenue
relating to this component of sales revenue
will be deferred to the time the good or
service is delivered. The corresponding
expense relating to delivering the customer
rebate will also be deferred, this change will
not impact the timing of profit recognition.
Under the new standard, recognition of revenue
from development services for development
of land not held as an asset by the group, is
recognised when the benefit of the service can
be controlled or consumed by the customer.
AASB 15 may bring forward the recognition of
certain service revenue, however this will not
have a significant impact on profit for the group.
Revenue from development services accounted
for less than 1% of total revenue in FY2018
(less than 3% in FY2017).
Revenue from property rental is not expected to
be impacted by the new standard.
The application of AASB 15 is not expected
to result in restatement of balances at 1 July
2018.
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION Title of
Standard
AASB 16
Leases
Nature of change
Impact
AASB 16 was issued in February
2016. For lessees, it will result in
almost all leases being recognised
on the balance sheet, as the
distinction between operating and
finance leases is removed. Under
the new standard, an asset (the
right to use the leased item) and a
financial liability to pay rentals are
recognised. The only exceptions are
short-term and low-value leases.
The accounting for lessors will not
significantly change.
The application of the standard at the operative
date is not expected to have a material impact
on the group’s annual results.
The standard will affect primarily the accounting
for the group’s operating leases. As at the
reporting date, the group has operating
lease commitments over the next 5 years of
$1,844,000. Some of the commitments may
relate to arrangements that will not qualify as
leases under AASB 16.
Mandatory application
date / Date of
adoption by group
Mandatory for
financial years
commencing on
or after 1 January
2019.
Expected date of
adoption by the
group: 1 July 2019.
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.
cc) Rounding of amounts
The company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts
in the financial statements.
Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand
dollars, or in certain cases, to the nearest dollar.
2018 ANNUAL REPORT
123
OTHER INFORMATION Segment Information
38. 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.
124
CEDAR WOODS PROPERTIES LIMITEDOTHER INFORMATION
Parent Entity Financial Information
39. Parent Entity Financial Information
The financial information for the parent entity, Cedar Woods, 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
Reserves
Retained earnings
Profit for the year
Total comprehensive income
i.
Investments in subsidiaries and joint venture entities
2018
$’000
2017
$’000
69,854
452,073
(92,930)
(196,836)
255,237
123,018
393
131,826
255,237
28,876
28,876
52,930
405,678
(106,070)
(164,684)
240,994
119,525
155
121,314
240,994
28,521
28,521
Investments in subsidiaries and joint venture entities are accounted for at cost in the financial statements of
Cedar Woods. 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 and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Cedar Woods, 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 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.
2018 ANNUAL REPORT
125
OTHER INFORMATION Section F:
Declaration and Independent Auditor’s Report
Directors’ Declaration ..................................................................................................................... 127
Independent Auditor’s Report ........................................................................................................ 128
126
CEDAR WOODS PROPERTIES LIMITEDDECLARATION & AUDITOR’S REPORT
Directors’ Declaration
In the directors’ opinion:
a) the financial statements that are set out in the financial statements section and notes on pages 72 to 125 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 2018 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 37(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.
Nathan Blackburne
Managing Director
Perth, Western Australia
21 August 2018
2018 ANNUAL REPORT
127
DECLARATION & AUDITOR’S REPORT Independent Auditor’s Report
Independent auditor’s report
To the members of Cedar Woods Properties Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Cedar Woods Properties Limited (the Company) and its
controlled entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
W h a t w e h a v e a u d i t ed
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 30 June 2018
the consolidated statement of changes in equity for the year then ended
the consolidated cash flow statement for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies; and
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
I n d ep en d en ce
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
128
Pr i cew a t er h ou seCoop er s, ABN 52 78 0 433 757
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
Liability limited by a scheme approved under Professional Standards Legislation.
103
CEDAR WOODS PROPERTIES LIMITEDDECLARATION & AUDITOR’S REPORT Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Cedar Woods Properties Limited is an Australian property development company. The Group’s
principal interests are in urban land subdivision and built form development for residential,
commercial and retail purposes. Its portfolio of assets is located in Western Australia, Victoria,
Queensland and South Australia.
M a t er i a l i t y
Au d i t scop e
K ey Au d i t M a t t er s
•
•
Amongst other relevant topics,
we communicated the
following key audit matters to
the Audit & Risk Management
Committee:
-
-
Valuation of inventory
Recognition of revenue
These are further described in
the Key audit matters section
of our report.
Our audit focused on where the
Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
The accounting processes are
structured around a Group
finance function at its head
office in Perth. Our audit
procedures were predominately
performed at the Group head
office, along with a number of
property and development site
visits being performed across
the year.
•
•
•
For the purpose of our audit we
used overall Group materiality
of $3.1 million, which
represents approximately 5% of
the Group’s profit before tax.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose Group profit before
tax because, in our view, it is
the benchmark against which
the performance of the Group
is most commonly measured.
• We utilised a 5% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable thresholds.
104
2018 ANNUAL REPORT
129
DECLARATION & AUDITOR’S REPORT Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Management Committee.
K ey a u d i t m a t t er
H ow ou r a u d i t a d d r essed t h e k ey a u d i t m a t t er
Va l u a t i on of I n v en t or y
(Refer to note 6) $498m
At 30 June 2018, the Group recognised total inventory
of property held for resale of $498m.
Inventory is valued at the lower of cost and net
realisable value.
This was a key audit matter as the valuation of
inventory includes significant judgements made by the
Group on projected future cash flows, including future
development costs, in determining net realisable value.
We obtained an understanding and evaluated the
design of relevant controls in relation to inventory
valuation.
We applied a risk-based assessment to determine those
development projects where there is a greater risk that
the carrying value of the inventory may in excess of net
realisable value.
Our risk based selection criteria incorporates our
knowledge of the life cycle of each project from prior
years, site visits and our understanding of current
economic conditions relevant to individual project
locations. In addition to these risk conditions we focus
on specific projects for testing which have been
previously impaired, are large contributors to revenue
and profit in the year or declining gross margins.
For the selected projects we performed a combination
of one or more of the following audit procedures:
• We obtained management’s net realisable value
assessment on the project.
• We obtained the cash flow analysis performed by
management and assessed the key assumptions
including; compared development expenditure and
forecast sales value for each project to actuals
known from the prior period and comparable
projects. We also performed a sensitivity analysis
on the project as well as assessing mathematical
accuracy of the cash flow analysis.
• We compared the carrying value of inventory to
the cash flows to assess whether carrying value was
the lower of cost or net realisable value.
130
105
CEDAR WOODS PROPERTIES LIMITEDDECLARATION & AUDITOR’S REPORT K ey a u d i t m a t t er
H ow ou r a u d i t a d d r essed t h e k ey a u d i t m a t t er
• We assessed recent comparable sales and re-
calculated the expected cash inflows for these
projects based upon their pre-approved lots and
zoning.
In addition and where available for a project, we
obtained the external third party prepared valuation
reports, not older than 12 months. We compared the
valuation in the external third party prepared valuation
report to the carrying value of the project inventory.
Recogn i t i on of Rev en u e
$240m
Revenue was the most significant amount in the
consolidated statement of profit or loss and other
comprehensive income. Revenue of $240m was
comprised of a number of streams, including the
following streams:
Sale of land and buildings
We obtained confirmations from settlement agents and
lawyers for land and buildings settled during the year,
and compared the sales price and settlement date on
the confirmation to the Group’s accounting records. We
vouched total revenue from sale of land and buildings
to settlement proceeds received in the bank account.
•
•
Sales of land and buildings $231.5m
Rent from properties $6.1m
Sale of land and buildings was a key audit matter due to
the financial significance of these sales to the Cedar
Woods Properties Group results and the complexity
around the timing of recognition of revenue. Rent from
properties was a key audit matter due to the complexity
in accounting arising as a result of the different terms
and conditions in the rental agreements.
For all settlements, we recalculated the net settlement
amount by excluding rates, GST and other taxes from
the sales price and compared the net settlement
amount to the recorded revenue.
Rent from properties
For a sample of rental properties, we compared the rent
received as per the accounting records to the
statements received by the Group from the external
Property Managers and the cash received to relevant
bank statements. For the same, we further agreed
rental income amounts to rental agreements.
We have evaluated a sample revenue transactions
recorded for the month of June 2018 and July 2018 to
supporting third party evidence, to determine whether
they were recorded in the correct period based on the
terms in the relevant rental agreement.
106
2018 ANNUAL REPORT
131
DECLARATION & AUDITOR’S REPORT Other information
The directors are responsible for the other information. The other information comprises the
information included in the Group's annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report,
the other information we obtained included About Cedar Woods, Letter from the Chairman, Letter
from the Managing Director, Performance Highlights, Our Business, Financial and Operating Review,
Directors’ Report, Directors’ Report – Letter to Shareholders and the Corporate Directory. We expect
the remaining other information to be made available to us after the date of this auditor's report,
including Shareholder Information.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
132
107
CEDAR WOODS PROPERTIES LIMITEDDECLARATION & AUDITOR’S REPORT A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 28 to 44 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Cedar Woods Properties Limited for the year ended
30 June 2018 complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
Helen Bathurst
Partner
Perth
21 August 2018
108
2018 ANNUAL REPORT
133
DECLARATION & AUDITOR’S REPORT 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.
Investors’ Summary ........................................................................................................................... 135
40. Dividend and dividend policy ................................................................................................... 135
41. Shareholder discount scheme................................................................................................. 135
42. Electronic payment of dividends ............................................................................................. 135
43. Dividend re-investment plan and Bonus share plan .............................................................. 135
44. Shareholders’ timetable ........................................................................................................... 135
45. Shareholder Information .......................................................................................................... 136
Five Year Financial Performance ...................................................................................................... 138
134
CEDAR WOODS PROPERTIES LIMITEDSHAREHOLDER’S INFORMATION
Investors’ Summary
40. 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
2018 financial year is 18.0 cents per share, fully franked. The dividend will be paid on 26 October 2018.
41. 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 1,000 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.
42. 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.
43. 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 are in operation for the
final dividend for the 2018 financial year.
44. 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
22 August 2018
27 September 2018
26 October 2018
October 2018
13 November 2018
February 2019
April 2019
May 2019
August 2019
2018 ANNUAL REPORT
135
SHAREHOLDER’S INFORMATION 45. Shareholder Information
The shareholder information set out below was applicable at 31 August 2018.
a. 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 273 holders of less than a marketable parcel of shares.
b. Twenty largest shareholders of ordinary shares as disclosed in the share register
Number
of holders
1,083
1,331
444
460
50
3,368
Number
of shares
461,630
3,651,174
3,358,978
11,201,759
60,821,365
79,494,906
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Hamsha Nominees Pty Ltd (The Nowra Projects Unit Fund A/C)
Westland Group Holdings Pty Ltd
Zero Nominees Pty Ltd
Citicorp Nominees Pty Ltd
Beach Corporation Pty Ltd
Helen Kaye Poynton
National Nominees Limited
Joia Holdings Pty Ltd
Australian Executor Trustees Limited (No 1 Account)
Mr Paul Sadleir
Beach Corporation Pty Ltd
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Netwealth Investments Limited (Wrap Services A/C)
Dr A Gerraty & Mrs P Gerraty (A & P Gerraty S/F A/C)
BNP Paribas Nominees Pty Ltd (DRP A/C)
BNP Paribas Nominees Pty Ltd (HUB24 Custodial Serv Ltd DRP)
Leblon Holdings Pty Ltd (William Hames Super Fund A/C)
Mr JH Tucker & Mrs KJ Tucker (Tucker Family Super Fund A/C)
Number
of shares
12,277,067
10,889,854
Percentage
of shares
15.44
13.70
5,040,216
4,596,980
4,311,992
2,665,800
2,384,963
1,677,095
1,440,585
1,305,188
1,297,905
1,066,147
997,641
974,101
615,802
600,000
594,864
556,216
478,551
475,002
6.34
5.78
5.42
3.35
3.00
2.11
1.81
1.64
1.63
1.34
1.25
1.23
0.77
0.75
0.75
0.70
0.60
0.60
54,245,969
68.21
136
CEDAR WOODS PROPERTIES LIMITEDSHAREHOLDER’S INFORMATION c. Substantial shareholders of ordinary shares
As disclosed in substantial shareholder notices lodged with the ASX at 31 August 2018.
Number
of shares
9,314,668
7,967,627
4,133,714
4,025,000
Percentage
of shares 1
12.90
10.87
5.24
5.10
William George Hames and related entities
Robert Stanley Brown and related entities
AustralianSuper Pty Ltd
Westoz Funds Management Pty Ltd
1 Percentage of issued capital held as at the date notice provided.
d. 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.
2018 ANNUAL REPORT
137
SHAREHOLDER’S INFORMATION
Five Year Financial Performance
All figures in $’000 except where stated
Financial Year
Financial Performance
Revenue from operations
Proceeds from investment Properties
Earnings before interest and tax
Finance costs
Operating profit before tax
Income tax expense
Net profit after tax
Financial Position
Total assets
Total liabilities
Shareholders’ equity
2018
2017
2016
2015
2014
239,661
222,269
175,159
178,637
214,465
-
-
-
65,168
67,446
65,587
4,020
61,148
18,545
42,603
2,947
64,499
19,054
45,445
3,755
61,832
18,230
43,602
36,000
61,220
3,397
57,823
15,238
42,585
-
56,172
606
55,566
15,253
40,313
601,516
505,624
452,729
383,330
409,948
248,330
175,390
145,541
97,725
148,347
353,186
330,234
307,188
285,605
261,601
Number of shares on issue – end of year (‘000)
79,517
78,892
78,892
78,892
78,336
Basic earnings per share (cents)
53.9
57.6
55.3
54.3
54.4
Key Performance Measures
Dividend per share, fully franked (cents)
30.0
30.0
28.5
28.0
27.5
EBIT Margin
Interest cover (times)
Return on Equity
27.2%
30.3%
37.4%
34.3%
26.2%
8.5
13.9
16.6
9.9
10.4
12.1%
13.8%
14.2%
14.9%
15.4%
Investment in inventory during year
191,633
161,588
112,887
120,620
158,149
Net tangible assets backing per share ($)
4.44
4.19
3.89
3.62
3.34
Net bank debt
Net bank debt to equity
Share price – end of year ($)
109,134
78,940
50,344
27,908
32,602
30.9%
23.9%
16.4%
5.76
5.21
4.35
9.8%
5.26
12.5%
7.31
Stock Market capitalisation at 30 June
458,015
411,026
343,179
414,970
572,639
Number of employees at 30 June
90
79
67
62
56
Returns to shareholders over 1, 3, & 5 years
Earnings per share growth %
Share price growth %
Dividend growth % (paid dividend)
Total shareholder return %
1 Year
(6.4)
10.6
5.3
3 Year
(0.2)
3.1
2.9
5 Year
1.6
2.2
3.7
16.46
29.88
43.05
138
CEDAR WOODS PROPERTIES LIMITEDSHAREHOLDER’S INFORMATION 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
Valerie Anne Davies, FAICD
Jane Mary Muirsmith, FCA, GAICD
Nathan John Blackburne, BB, AMP, GAID – Managing Director
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
Email: email@cedarwoods.com.au
Website: www.cedarwoods.com.au
Share registry
Computershare Investor Services Pty Ltd
Level 11
172 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: Tuesday 13 November 2018
2018 ANNUAL REPORT
139
cedarwoods.com.au