CENTURIA CAPITAL2016ANNUAL REPORT
Centuria Capital Limited ABN: 22 095 454 336.
Directors' report NICTA Building , Australian Technology Park , Eveleigh NSW
2
"" Contents
About Centuria .................................................................................................................................................................................2
Key Financial Metrics .....................................................................................................................................................................3
Chairman’s Report ..........................................................................................................................................................................4
Chief Executive's Report ..............................................................................................................................................................5
Unlisted Property .........................................................................................................................................................................11
Listed Property ..............................................................................................................................................................................14
Centuria Life ....................................................................................................................................................................................17
Centuria in the Community .....................................................................................................................................................19
Meet the Directors ......................................................................................................................................................................20
Directors' Report ..........................................................................................................................................................................21
Lead Auditor's Independence Declaration .....................................................................................................................38
Financial Statements ..................................................................................................................................................................39
Directors' Declaration ................................................................................................................................................................79
Corporate Directory ....................................................................................................................................................................84
1
About Centuria
203 Pacific Highway, St Leonards NSW
Centuria Capital’s Annual General
Meeting of Shareholders will be held:
Date:
Time:
Location:
Tuesday, 29 November 2016
10:00am
Sofitel Sydney Wentworth
Hobart Room, Lobby level
61-101 Phillip Street, Sydney
Centuria Capital Limited (ASX: CNI) is an ASX-listed
specialist investment manager with $1.9 billion in funds
under management. We are focused on creating
wealth for our investors and offer our clients a range
of investment opportunities including listed and
unlisted property funds as well as tax-effective
investment bonds.
Our in-depth knowledge of these sectors, together with
our intimate understanding of our clients, allows us to
transform opportunities into rewarding investments.
This, in turn, drives increased shareholder wealth and
produces consistent returns for investors.
Further information can be found on our
website www.centuria.com.au
2
Key Financial Metrics
Underlying Net Profit A(cid:15)er Tax ($m)
Underlying Earnings Per Share (cents)
Net Tangible Assets Per Share ($)
12
10
8
6
4
2
0
12
10
8
6
4
2
0
5.3
5.9
6.3
10.4
FY13
FY14
FY15
FY16
Statutory Profit A(cid:20)er Tax ($m)
7.3
9.1
8.6
10.5
FY13
FY14
FY15
FY16
15
12
9
6
3
0
6
5
4
3
2
1
0
1.0
0.8
0.6
0.4
0.2
0.0
0.54
0.65
0.86
0.97
FY13
FY14
FY15
FY16
6.8
7.6
8.1
13.7
FY13
FY14
FY15
FY16
Dividends Per Share (cents)
Funds Under Management ($bn)
2.0
1.5
1.0
0.5
0.0
1.76
1.63
1.59
1.92
30 June
2013
30 June
2014
30 June
2015
30 June
2016
3
1.25
2.75
4.75
5.25
FY13
FY14
FY15
FY16
Chairman’s Report
In my inaugural year as Chairman, it gives me
great pleasure to introduce the annual report of
Centuria Capital Limited.
Centuria has been demonstrably successful during
the financial year 2015–16. The Group achieved a net
profit after tax of $10.4 million, up from $6.3 million
in 2014-15, which is our best result to date and at the
upper end of our guidance.
That success naturally flows to our investors and has
allowed the Board to increase the total 2016 financial
year dividend by 11 per cent resulting in a fully franked
dividend of 5.25 cents per share. Still, we can do better.
Our target is growth in
distributions to shareholders
We expect to further increase the dividend per share as
Centuria’s recurring revenue grows - a task we are firmly
focused on. Our goal is to provide consistent growth in
earnings and distributions in future years.
Clear plans for improvement
in the 2017 financial year
Centuria is poised and ready for the next stage of
growth, both organically and, if possible, through
prudent corporate activity. Our Chief Executive’s report
outlines the Group’s strategy for achieving that growth,
both in funds under management and higher recurring
revenue. I recommend it to you as essential reading.
In particular, we will look for opportunities to expand
by acquiring fund managers when they align with our
strategy and have the potential to provide additional
value to our shareholders.
Board Retirements and Additions
It would be remiss of me not to offer the Board’s and my
personal, thanks to Roger Dobson, who resigned
as Chairman on 30 March 2016. Roger joined the
Centuria Board in 2007 and has been at the forefront
of repositioning the company and laying solid footings
for the future.
This year’s success is in great part his. We thank Roger
for his leadership and commitment, and hope that he
will continue to contribute to our ongoing successes in
the future.
It is also opportune to announce the appointment of our
new non-executive director, Susan Wheeldon-Steele.
Currently Industry Head – Performance Solutions at
Google, Susan will help future-proof both Centuria and
the Board, adding valuable input and experience in our
dealings with the digital environment we now exist in.
Finally, I must thank my fellow directors, our
indefatigable CEO, John McBain, and the entire Centuria
team for their hard work and contribution to the
Group’s success during the year.
We are well positioned to achieve these goals, with clear
plans to improve our business in the 2017 financial year.
Garry Charny
Chairman
Centuria Capital Limited
Chairman
Garry Charny
" The Group achieved a
net profit after tax of
$10.4 million, up from
$6.3 million last year,
which is our best result
to date..."
4
Chief Executive's Report
The 2016 financial year was exceptionally strong for
Centuria. The group achieved a record profit and
substantially increased funds under management.
This success provides a sound capital base to fund
near-term expansion.
Record FY16 result driven by an
exceptional year for Unlisted Property
Centuria reported an underlying net profit of $10.4m
for the 2016 financial year, an increase of 65% on the
previous corresponding period.
This strong growth was largely due to fees from the
significant profits on the sale of our Macquarie Park
assets and 175 Castlereagh Street, as outlined in the
Unlisted Property Division report.
Financial summary
Group CEO
John McBain
targeting a 25%
" In FY17 we are
increase in FUM."
Underlying net profit after tax
Underlying earnings per
share (basic)
Dividend per share
(fully franked)
Net assets per share
FY16
FY15
$10.4m $6.3m
8.1c
13.7c
5.25c
4.75c
$1.67
$1.55
This profit result was at the upper-end of our guidance
and underpinned an 11% increase in fully franked
dividends to 5.25 cents per share. Net assets per share
also increased by 8% to $1.67 per share.
Highlights for the year included a 21% increase in funds
under management (FUM), from $1.6bn to $1.9bn.
In FY17 we are targeting a 25% increase in FUM.
Unlisted Property acquired $265m of assets, including
the $104m purchase of three buildings in Australian
Technology Park (ATP) in Sydney and the $109m
acquisition of the remaining interest in the Seven
Group’s headquarters in the same park. Unlisted
Property has had a strong start to the 2017 financial
year having recently acquired a landmark office asset,
The Zenith in Chatswood, for $280m.
These acquisitions demonstrate the strength of our
integrated platform. Centuria co-invested with one of
the world’s largest asset managers, BlackRock, on The
Zenith acquisition. Partnering with a global institution
of BlackRock’s calibre is a validation of Centuria’s active
management model and our reputation within the
property market. In addition, we co-tendered with
leading Australian property group, Mirvac Group, on
the successful ATP bid.
FY16 marked the first full year of operation for our
listed property platform, Centuria Metropolitan REIT
(ASX: CMA). Distribution forecasts were met and the
Trust also partnered with our Unlisted Property Division
to acquire a 50% interest in 203 Pacific Highway,
St Leonards for $43m.
We are pleased that in FY16 CMA delivered on its
financial forecast distributing 17c per stapled
security. CMA's portfolio holdings grew by 9.3% to
approximately $400m and NTA increased by 21c to
$2.18 per stapled security. CMA utilises Centuria’s
capabilities in property management, development
and accounting.
5
Chief Executive's Report
It is particularly pleasing that during FY16 Centuria
achieved significant leasing success for CMA with
occupancy lifting to 97.2% from 96.7%.
Wealth. The division is targeting more white-labelling
opportunities, focusing specifically on boutique high
net worth advisers.
We will continue to focus on generating value in CMA
through our integrated business approach. This will be
achieved in part by maximising tenant retention,
initiating refurbishment and repositioning strategies
and identifying fit for purpose assets to complement
the existing portfolio. CMA is well positioned for
growth in income and capital.
Where appropriate, Centuria’s strategy is to co-invest
with our listed funds and provide balance sheet support
for our unlisted funds. We also will continue to partner
with leading domestic and global institutions.
Our Investment Bond division reported an
underlying profit of $4.7m (vs. $5.8m in the previous
corresponding period). Profit was down year-on-year
as a result of increased marketing and staff costs as we
reposition this business for growth. Total Investment
Bond FUM increased in FY16 and we are forecasting
further FUM growth in FY17 for the non-legacy book.
The steady growth in policy holders that we saw in FY15
continued in FY16, increasing from approximately 83.8k
in FY15 to 85.1k in FY16 and we expect this growth
trajectory to continue.
The four main unitised bonds ranked 1st or 2nd in the
Morningstar peer rankings and our Investment Bond
product suite is rated “Investment Grade” by Lonsec.
In FY16 the division successfully diversified its product
offering by launching its White Labelling strategy. The
first bond offering was co-branded with Providence
We continue to be excited about the medium and long
term growth prospects for this business. Its annuity
style profits fit well with our strategy of building a
portfolio with secure, stable income growth.
Strengthened balance sheet
Our strengthened balance sheet and modest gearing
has facilitated larger property fund acquisitions.
We recently participated in the Cash Alternative Facility
in the GMF takeover offer from Growthpoint Properties
Australia. The release of capital from our combined
16.1% interest in GPT Metro Office Fund (GMF) further
strengthens our balance sheet and leaves us in a strong
position to pursue future growth initiatives.
Platform acquisitions remain a strong focus for
the Group where scale and market position are
meaningfully enhanced. We will continue to
deploy capital with discipline and to the benefit of
all our investors.
Earnings quality to improve from strong
growth in recurring income streams
We expect the underlying profit result for the
2017 financial year to benefit from higher recurring
fee income as we continue to add to our funds
under management.
This anticipated improvement in earnings quality is
already well supported by the management fees to
come from the recent acquisition of The Zenith in
Chatswood and the first full year contribution from
the Centuria ATP Fund. We expect to augment this fee
income with targeted growth from our existing funds
under management.
Centuria has implemented a corporate restructure. The
change, introduces a new stapled entity and provides
a more efficient platform to support our current and
future property fund co-investments.
The restructure, in and of itself, does not change the
underlying business, however, the new structure will
potentially increase distributions to investors.
The restructure proposal was presented to shareholders
and approved by ordinary resolution at
an Extraordinary General Meeting held on Monday,
10 October 2016.
Centuria Stapled
Security holders
Centuria
Capital Limited
Stapled
Centuria
Capital Fund
Centuria
Fund Investments
6
Chief Executive's Report
Group Strategy predicated on
sustainable growth
Centuria’s unwavering goal is to provide shareholders
with consistent growth in earnings and distributions per
share, in the short and long term. We have developed,
and are executing on, our strategy to support this
primary goal. We have a solid foundation on which
to build our funds under management across both
property and investment bonds.
Our platform is unique and its success is the result of
a long history of consistently delivering solid returns
to our investors. We have unparalleled reach across
our large existing network of retail and high net worth,
financial advisors and institutions. Our high-net-worth
distribution model is unrivaled in property funds
management. It is the ability to raise funds across
this comprehensive and established network that
strengthens our position when competing for assets.
Our recent partnerships with BlackRock, Mirvac and
our Centuria Metropolitan REIT were complemented
by overwhelming support from our retail investor
network with the 203 Pacific Highway, ATP and Zenith
Funds closing fully subscribed.
We are very proud of our achievements to date and are
confident that we now have the foundations in place to
acquire larger and higher quality assets. This will have
a positive effect on recurring income as management
fees and distributions from future co-investments
generate a greater proportion of earnings.
The group is committed to providing strong parent
company support to Centuria Metropolitan REIT
(CMA) and our Unlisted Property Funds division and
Investment Bond division.
Integrated property model drives
outperformance
Our integrated business model and active asset
management approach has been a fundamental part
of why we have been able to consistently deliver solid
returns for our stakeholders.
What differentiates us is the diverse and deep
experience embedded in our property and asset
management teams that allows us to extract more
value from our assets. Asset performance is optimised
by having our own experienced team originate the right
investment opportunities, actively manage these assets
to add value as well as to take care of every aspect of
the management of these properties from leasing and
tenant administration to building services.
What this means is we capture margin across the whole
property value chain and, at the same time, maximise
the value of the assets we manage. We will continue
to implement this approach with our property funds
under management to drive outperformance for the
group and our investors.
Centuria’s Integrated Property Model
Fu n d s
Mana g e m e n t
Develop
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7
Chief Executive's Report
The strength of the Centuria brand and asset
management expertise has been a critical success
factor in attracting strong interest from global
institutional investors to partner in large acquisitions.
These partnerships will continue to be an important
component of Centuria’s strategy.
party distributers and selected aligned financial
advisers.
Investment bonds are a tax-effective means of
accumulating wealth and income and act as an
attractive supplement to superannuation.
Positive outlook for the 2017
financial year
The strong start to the 2017 financial year by our
Unlisted Property business means that we are confident
in our targeted 25% FUM growth having already
acquired more than half of the requisite growth.
The launch of the Centuria Diversified Property Fund
during this financial year by the Unlisted Property Funds
division will also add to our funds under management.
This fund will give Centuria access to a different capital
base via platforms and wraps and is aimed at attracting
investment through larger financial planners and dealer
groups. In addition, by being an open-ended fund, the
assets can be retained in the fund for a longer term.
Our Listed Property Funds division, CMA, is targeting
growth in the 2017 financial year by acquiring ‘fit for
purpose’ assets to complement the existing portfolio as
well as pursuing acquisition opportunities similar to the
GMF bid.
Growth in our Investment Bond Division is expected to
come from building long-term, sustainable relationships
in the retail advice market and positioning Centuria
Investment Bonds as the provider of choice for third-
Realising our plans to further benefit
shareholders
We are passionate about building our business and
have a clear vision of how to achieve our goals. It is our
clear intent to say what we do and do what we say. We
are pleased that in FY16 we were able to do just this
and we will continue to do so in FY17.
Strategy scorecard
In meeting these objectives, we strive to be more
focused and agile than our competitors. We have the
experience and expertise plus a scalable model, solid
balance sheet and a diverse distribution network. We
will use these attributes to build a more robust and
larger scale business underpinned by high-quality,
stable, recurring earnings.
Centuria has never been in a stronger position to
realise our growth strategies to the benefit of investors
and shareholders. We look forward to keeping the
market informed of our progress throughout the
2017 financial year (see Strategy Scorecard on
opposite page).
I consider it an honour to lead such an experienced
and motivated management team. Our considerable
achievements to date are due to their commitment and
that of our entire staff. I would like to extend my thanks
to the whole Centuria team for their efforts in FY16.
There have been significant changes to our Board in
FY16. I would like to echo our Chairman’s thanks to
Roger Dobson, who resigned as Chairman earlier this
calendar year. We have benefited greatly from the
guidance and support that Roger has given us and he
has contributed significantly to making Centuria what it
is today.
I wish to welcome our new Chairman, Garry Charny, to
the Board. Garry understands our business intimately
and we look forward to his guidance and insights in the
forthcoming period of growth.
The addition of our latest non-executive director,
Susan Wheeldon-Steele, rounds out the considerable
experience within Centuria’s Board. I would personally
like to acknowledge the counsel of my fellow Board
members and thank them for their continued
dedication to the growth of the business.
In conclusion, I would like to thank our shareholders
for their continued support. Our unflagging goal is
to reward their loyalty with steady growth in
shareholder returns.
John McBain
Group CEO
8
Strategy Scorecard
Disciplined commitment to set strategy
Expand and diversify product range
• Continued expansion of Centuria Metropolitan REIT (CMA) to gross assets above $400m
•
•
Successful launch of $280m Centuria Zenith Fund partnering with BlackRock
Launched “White Label” Investment Bond offering
Utilise and recycle balance sheet
• Enhanced balance sheet afforded:
0 participation in successful joint bid for ATP site with Mirvac;
0 acquisition of The Zenith (largest acquisition by Centuria); and
0 acquisition of stake in GPT Metro Office Fund (GMF)
Corporate activity
•
Stake taken in GMF supporting CMA takeover bid. CMA subsequently withdrew its bid and Centuria elected
to sell its total stake for cash to Growthpoint Properties Australia at an increased share price.
Delivering attractive returns to
third-party investors
• Realised significant total returns
0 175 Castlereagh Street, Sydney c.30% IRR (2.65 years)
0 80 Waterloo Road/16 Byfield Street, Macquarie Park c.20% IRR (9.08 years - post stapling)
Expansion of Investment Bond business
• Net FUM gain in FY16
• Expectation of net FUM gain in FY17
• Broadened distribution capabilities
Co-invest with clients
• Belmont Road, Mosman - development on target for successful completion (100% pre-sold) with
settlement due December 2016
• Modest balance sheet co-investments in property markets where CNI is experienced.
9
Centuria Capital Limited Overview*
Experienced specialist Fund Manager with proven and disciplined growth
Centuria Capital Limited
(ASX: CNI)
$1,919m
Total funds under management (FUM)
Centuria Property Funds FUM
Centuria Investment Bonds FUM
$783m
Unlisted Property
$416m
Listed Property
(ASX: CMA)
$350m
Centuria Life
Investment Bonds
$370m
Over Fifty Guardian
Friendly Society Bonds
10
* All figures as of 30 June 2016
Unlisted Property
Record profit for Unlisted Property
In 2015–16 the Unlisted Property achieved
strong growth, met guidance targets and produced
exceptionally high profits.
The positive results were supported by successful
asset sales that generated substantial performance
fees for Centuria.
How knowledge and skill improve
asset values
In FY16, the division realised significant profits on the
sale of three properties.
To attract buyers for 175 Castlereagh Street, Sydney,
which we bought for $56 million in April 2013,
we leased formerly vacant areas and created a
development scheme for a hotel and apartments.
We sold the property for $98 million.
In 2001−02 we purchased 80 Waterloo Road and
16 Byfield Street, Macquarie Park, in Sydney’s north-
203 Pacific Highway, St Leonards NSW
west, for $25 million. These Funds were subsequently
stapled together in July 2007. By skillfully managing
the assets we improved their value and devised a
development plan for 350 apartments on the site.
We sold the properties for $101 million.
Good buying continues to
support our goals
During the year we acquired assets that underpinned
two new investment funds. The Unlisted Property
acquired a 50-per-cent interest in 203 Pacific Highway,
St Leonards, on Sydney’s lower north shore, for
$43 million. The Division invested as equal partners
with Centuria Metropolitan Real Estate Investment
Trust (REIT), listed on the ASX as CMA.
This joint investment, established for the benefit
of investors, was enthusiastically received. After
some 450 expressions of interest, the fund closed
over-subscribed.
CEO Unlisted Property
Jason Huljich
profits on the sale of three
" ...we realised significant
properties."
11
Unlisted Property
Increasing strength in a
productive partnership
In the first joint bid of its kind, Centuria tendered in
partnership with Mirvac Group to acquire assets worth
$104 million in the Australian Technology Park, just
south-west of the Sydney CBD at Eveleigh. Centuria
purchased three commercial buildings within the Park.
Before settling on the properties, we added
considerable value for investors by negotiating a new
10-year lease with the major tenant at a significantly
increased rent. This extended the weighted average
lease expiry (WALE) from 2.5 years to 5.6 years.
Developing new products to meet
the demand
Our unrelenting goal is to meet our clients’ need
for quality investment products that offer strong,
stable yields. As we move into the new financial year,
we expect firm demand for well-managed property
investment products to continue amid current low
interest rates.
To date in FY17, Centuria has partnered with BlackRock
to acquire "The Zenith", an iconic $280 million
Chatswood office complex.
Australian Technology Park, Eveleigh NSW
The Zenith, Chatswood NSW
Funds continue to produce sound returns
Asset values and distributions are rising in our
existing unlisted funds. We continue to improve the
quality of our portfolio by acquiring larger and higher
quality assets.
Properties in New South Wales dominate the portfolio.
We are well placed to benefit from what we believe
will be rising demand for property amid significant
state infrastructure spending and the number of office
buildings being repurposed for residential occupation
and being withdrawn for the Sydney Metro rail project.
Through our only development fund, we have
constructed a residential property at Belmont Road in
the prestigious Sydney suburb of Mosman. The fund is
performing to forecast. We have sold all 62 townhouses
and units and at 30 June 2016 construction was on
track for completion late in 2016.
Belmont Road, Mosman NSW
12
Unlisted Property - Sale Case Studies
175 Castlereagh Street, Sydney
The Centuria team added significant value to the asset
utilising its strong asset management experience.
The team identified an asset strategy to reposition
the leasing profile of the property and capture market
rents. Additional growth was sought via a mixed-use
redevelopment scheme.
Under the management of Centuria, a total of
22 leasing transactions over c.13% of the total NLA
of the property were completed within 16 months to
quality tenants. The average rental in the property
increased by 23% during the 2.6 years Centuria
managed the property.
We completed a comprehensive mixed
use residential development scheme
Investment Returns
Purchase date
Combined Purchase Price
(prior to stapling)
Sale date
April 2013
$56.0 million
Sale price
December 2015
Capital Gain (pre fees)
IRR (post fees)
Average Income Return^
Performance and sale fees
$98.0m
75.0%
c.30.0%
9.5%
c.$7.2m
Purchase date
Purchase price
Sale date
Sale price
Capital Gain
IRR (Post Fees)
Average Income Return^
Performance and sale fees
175 Castlereagh Street, Sydney NSW
80 Waterloo Road and 16 Byfield St,
Macquarie Park, Sydney
Centuria’s asset strategy targeted a precinct with
future strategic significance and mixed use
development potential.
Centuria prepared a redevelopment scheme and
development proposal that maximised the future
residential redevelopment potential of the Property
and to enhance its sale, following the properties
being recognised as being of strategic significance and
benefiting from a significant rezoning in late 2015.
80 Waterloo Road & 16 Byfield Street, Macquarie Park NSW
2001 & 2002
$25.3 million
June 2016
$101.0m
310%
c.20.0%
3.5%
c.$9.6m
* Sold via a put and call option with settlement in July 2016.
^ Returns post stapling in July 2007.
13
Listed Property
CEO Listed Property
Nicholas Collishaw
" We expect that
distributions will increase
to 17.5 cents per stapled
security, a rise of three
per cent on the distribution
in the 2016 financial year."
14
producing a rise in Net Tangible Assets (NTA) of
11 per cent to $2.18 per security.
Despite the increased demand for properties, CMA
has still been able to secure value-based acquisitions,
demonstrated by the purchase of a 50-per-cent interest
in 203 Pacific Highway, St Leonards, for $43.0 million,
in partnership with a Centuria unlisted fund. The
investment aligns with CMA’s strategy to buy quality
buildings in metropolitan markets in which competing
supply is restrained.
CMA also endeavoured to acquire GPT Metro Office
Fund (GMF) during the year, however competitive
bidding increased the cost of the acquisition beyond
CMA’s fair value assessment resulting in a withdrawal of
its proposal and a sale of its initial investment in GMF.
CMA’s disciplined and conservative approach to the
use of debt has ensured its debt levels have remained
within its target band of 25-35 per cent. At
30 June 2016 CMA had debt facilities totalling
$150 million, drawn to $142 million, with a weighted
average expiry of 3.8 years. CMA’s total cost of debt is
calculated at 3.9 per cent, with 59 per cent of
debt hedged; gearing at financial year’s end was
33.2 per cent.
CMA meets targets in its first full year
Centuria Metropolitan REIT (ASX-listed as CMA) had
a successful first full year of operation. CMA met its
financial forecast, distributing 17.0 cents per stapled
security to investors in four equal instalments.
At 30 June 2016 CMA’s portfolio comprised
13 properties in Sydney, Brisbane, Canberra and
Adelaide with a combined value of $398.7 million.
The metropolitan location of CMA’s properties make
them attractive to many of Australia’s small to medium
enterprise (SME) tenants, as they are either close to a
skilled workforce or convenient for customer access.
CMA properties accommodate over 320 tenants.
Whilst small in occupancy area, three-quarters of
the portfolio’s tenants are ASX-listed companies,
multinationals or government agencies. This diversity
ensures that CMA does not rely too heavily on a single
occupier or industry grouping.
Demand for commercial property
is growing
Occupancy levels have grown in metropolitan markets.
The increase has come from higher occupier demand
and from the withdrawal of office buildings that are
being converted to residential and alternative uses.
These trends, together with growing investor demand
for metropolitan properties, have increased rents
and tightened capitalisation rates. As a result, CMA
properties have increased in value across the portfolio,
Listed Property
Keeping a clear focus on sound returns
CMA’s investment strategy and focus remain
unchanged. The Trust is conservatively managed and
has a strong tenancy base. This provides predictable
and growing returns with an expectation of capital
growth over the medium term.
The portfolio continues to be actively managed with an
emphasis on retaining tenants to maximise occupancy
and income. In addition, targeted asset repositioning
strategies designed to generate further capital growth
in the portfolio are applied to each asset.
For the 2017 financial year CMA’s distributable
earnings guidance range is 18.7 cents to 19.0 cents per
stapled security with distributions to investors targeted
to increase to 17.5 cents per stapled security, a rise
of three per cent over the distribution in the 2016
financial year. CMA will continue to pay distributions in
convenient quarterly instalments.
CMA has continued to benefit from the scale of
Centuria Capital’s vertically integrated platform with
much of the income and capital growth achieved in
the past financial year attributed to Centuria’s skills in
property and facility management, refurbishment and
development advice and importantly, active
lease management.
Centuria will continue to support
CMA’s growth
The Centuria Capital Group derives various fees for
managing CMA and its portfolio. These include: a
trust management fee of 0.55 percent of CMA’s gross
asset value, property management fees (generally
recoverable from tenants) and project fees for the
provision of leasing and development management
services. These fees generated revenue of $2.7m for
the Group during the financial year to 30 June 2016.
It is Centuria Capital’s intention to foster the continued
growth of CMA and it anticipates providing the market
with additional listed investment products when it
determines the investment climate is suitable. These
initiatives will build on Centuria’s strengths and widen
the range of product offerings to meet investors’
requirements.
Following a good performance in the 2016 financial
year, CMA is in a strong position to continue to deliver
predictable and growing returns to security holders in
the year ahead.
We will continue to seek opportunities to extract
additional value from the portfolio. From time to time
we may dispose of assets when, in our assessment,
forecast investment returns do not match the risks
associated with continued ownership.
Interior of 203 Pacific Hwy, St Leonards NSW
15
Listed Property
Key facts about CMA’s performance
Financial snapshot
Stapled security price at
30 June, 2016
FY17 distributable earnings
guidance1
FY17 distribution guidance
per stapled security1
Annualised distributable
earnings yield2
Annualised
distribution yield2
Total assets3
NTA per stapled security3
Gearing3
($)
2.14
(cps) 18.7 – 19.0
(cps)
17.5
(%)
8.7 – 8.9
(%)
8.2
($m)
$415.6
($)
(%)
2.18
33.2
CMA portfolio overview
Portfolio snapshot
Number of assets
Book value
Occupancy2
WALE2
(#)
($m)
(%)
(years)
FY16
13
398.7
97.2
4.4
FY15
12
323.1
96.7
4.8
1 Distributable earnings provide a financial measurement that is not
prescribed by Australian Accounting Standards (AAS). It represents the
profit under AAS, adjusted for specific non-cash and significant items.
The Directors consider that distributable earnings reflect the core
earnings of CMA.
2 Based on a closing price at 30 June 2016 of $2.14 per stapled security.
3 As at 30 June 2016.
16
NTA
21cps
+11%
$2.18
FY16 NTA movements ($ per stapled security)
Strong metropolitan office market fundamentals and valuation uplift driving NTA growth.
($0.02)
($0.02)
$0.27
$2.30
$2.25
$2.20
$2.15
$2.10
$2.05
$2.00
$1.95
$1.90
$1.85
$1.80
($0.02)
$1.97
FY15
203 Pac Hwy1
Acquisi(cid:5)on
Revalua(cid:5)on
MTM Hedge
Other2
FY16
1. Net transaction costs associated with the acquisition.
2. Other include movements in cash, payables, receivables and revaluation of GMF stake.
Centuria Life
Investment Bond Division Structure
Centuria Life Limited
Centuria Life Friendly Society
Over Fifty Guardian Friendly Society
• Manages total FUM of $350m
• Unitised Investment Bond Funds
0 Established in 1998
0 7 Investment options
0 Tax effective alternatives to superannuation
• Manages total FUM of $370m
• Prepaid Funeral Plans:
0 Strong growth 11% year on year
0 Prepaid funeral plan fund
0 Potential for further growth in sector.
• Capital Guaranteed Funds
0 Established in 1981
0 Legacy funds.
Centuria Life Limited (CLL) continued to grow during the
2016 financial year. Since 30 June 2015 we welcomed
1372 new policyholders, taking the total number of
primary policyholders from 83,814 to 85,186 over the
financial year to 30 June 2016.
$350m + $370m = $720m
Total FUM of Centuria
Life Investment Bonds
Total FUM of Over
Fifty Guardian Friendly
Society Bonds
Total FUM
30 June 2016 30 June 2015
Total FUM increased
$720m
$715m
Total policyholders
increased
Inflows increased
85.1k
83.8k
$67.0m
$46.8m
Redemptions
$95.8m
$70.9m
CLL remains the fourth-largest market
participant
CLL maintained its strong position as the fourth-largest
friendly society and insurance bond issuer in Australia,
with 10.4 per cent market share.
(Source: Plan for Life, June 2016).
17
General Manager Investment Bonds
Neil Rogan
" At 30 June 2016, CLL
had total funds under
management (FUM) of
$720 million. This compares
with FUM of $715 million at
30 June 2015."
Centuria Life
Centuria Life Limited is a wholly-owned subsidiary of
the Centuria Group, operating two friendly societies:
Centuria Life Friendly Society and the Over Fifty
Guardian Friendly Society. Both are regulated by APRA
and authorised to issue insurance bonds and prepaid
funeral plans.
Earning the confidence of financial
advisers and investors
In the retail financial services market, CLL continues
to build the confidence of financial advisers and direct
investors.
Increasing uncertainty about the proposed changes to
concessional and non-concessional contributions to
superannuation has increased the appeal of investment
bonds as a supplement to superannuation savings.
The bonds are internally taxed at a maximum rate of
30 per cent, and no personal tax is paid on withdrawals
after 10 years.
We remain focused on building long-term, sustainable
relationships in the retail advice market and to position
the Investment Bond Division as the investment bond
provider of choice for third party distributors, financial
advisors and direct investors.
18
Further confirmation of the strength and reliability of
CLL’s Australian Shares Investment Bond comes from
Morningstar’s assessment, under which the bond
retains its Five-Star Rating and is also rated first among
the 40 funds in the category for performance over one,
three and five years.
Expert reviewers confirm the quality
of our products
Among affirmations we received
during the year, CLL was a finalist in
the Plan for Life AFA Life Company
of the Year Awards for Investment
Bonds.
Lonsec Research awarded an Investment Grade Rating
to four of our funds: Australian Shares, Balanced,
Growth and High Growth.
In addition, 3 of our 4 unitised fund funds have been
recognised by Morningstar and rated number one for
their consistent performance over one, three and
five years.
Fund
Total Return
1 Yr
Total Return
3 Yr
Total Return
5 Yr
Morningstar Ranking(2)
Centuria High Growth
Centuria Australian Shares
Centuria Growth Bond
Centuria Balanced
4.00%
9.77%
7.92%
4.75%
After tax returns demonstrated in the table
7.80%
9.82%
8.47%
6.36%
8.92% High Growth Bond
9.86% Australian Shares Bond
7.78% Growth & Balanced Bonds
7.25% Growth & Balanced Bonds
1/23
1/38
1/88
2/88
TM
Morningstar
Rating
****
*****
****
****
1. The Changing Face of Financial Service Distribution, IFA
2. Performance rankings from the universe of investment/insurance providers as at 31 July 2016.
© 2016 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained
herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been
prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc,
without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.
com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement (Australian
products) or Investment Statement (New Zealand products) before making any decision to invest. Morningstar's publications, ratings and products
should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a
financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Some material is copyright
and published under licence from ASX Operations Pty Ltd ACN 004 523 782.
Centuria in the Community
The Centuria team are very
community focused and regularly take
part in fundraising events throughout
the year. FY16 saw funds raised for
Jeans for Genes Day, Daffodil Day and
Tour De PIF in aid of the Property
Industry Foundation. Centuria’s
participation in these events help
to raise a combined total of approximately $4000 for
these charities.
St Lucy’s School
Centuria continues to support St Lucy’s School. Staff
participate in a number of initiatives and events each
year. The Company continues to host an annual trivia
night to raise funds for the school. The FY16 event
attracted over 150 attendees and raised $36,600.
The funds raised by the event will go towards
St Lucy’s ‘Literacy for Life’ programme. The programme
focuses on intensive training of volunteers, parents
and other professionals who have day-to-day contact
with students who attend the School. Literacy for Life
involves the use of specific resources and ongoing
research to monitor best practice in teaching
students to read.
We would like to thank all our partners and volunteers
who supported this cause, and in particular, our thanks
to CBA who kindly donated their function space for the
event. We look forward to hosting the event
again in 2017.
In FY16, our staff continued to take part in volunteering
days at the School. Our staff participate in a wide
range of activities at the School ranging from assisting
with general maintenance, gardening and providing
administration help. The time spent at St. Lucy’s gives
our staff the opportunity to see the difference the
School makes to the lives of its students first hand.
19
Meet the Directors
From left to right: Chairman - Garry Charny, Nicholas Collishaw, Jason Huljich, John McBain, Peter Done and John Slater (Photo dated July '16, prior to the appointment of Susan Wheeldon-Steele on 31 August '16)
20
Directors' Report
For the year ended 30 June 2016
The directors present their report together with the consolidated financial statements of the Group comprising Centuria Capital Limited (the ‘Company’), and its controlled entities for the financial year
ended 30 June 2016 and the auditor’s report thereon.
The Company is the head entity of the Centuria Capital Limited Group, its shares are listed on ASX Limited under the code “CNI”.
Directors
The directors of the Company at any time during or since the end of the financial year are:
Name, qualifications and independence status
Experience, special responsibilities and other directorships
Mr Garry S. Charny, BA. LL.B
Chairman
Independent Non-Executive Director
Mr Roger W. Dobson, LL.B, LL.M
Independent Non-Executive Director
Mr Peter J. Done, B.Comm, FCA
Independent Non-Executive Director
Mr John R. Slater, Dip.FS (FP), F Fin
Independent Non-Executive Director
Garry was appointed to the Board on 23 February 2016, and appointed as Chairman of the Board on 30 March 2016. Garry is also
Chairman of the Nomination and Remuneration Committee and a member of the Audit, Risk Management and Compliance Committee.
Garry is the Managing Director and founder of Wolseley Corporate, an Australian corporate advisory and investment house. He has had
broad experience in both listed and unlisted companies across a diverse range of sectors including property, retail, technology
and media.
Roger was appointed to the Board in 2007 and was Chairman until his retirement on 30 March 2016. He was also Chairman of the
Nomination and Remuneration Committee and a member of the Audit, Risk Management and Compliance Committee.
Peter was appointed to the Board in 2007 and is the Chairman of the Audit, Risk Management and Compliance Committee. He is also a
member of the Nomination and Remuneration Committee and the Investment Committee. Peter was a partner of KPMG for
27 years until his retirement in June 2006. He has extensive knowledge in accounting, audit and financial management in the
property development and financial services industries, corporate governance, regulatory issues and Board processes through his
many senior roles.
John was appointed to the Board in 2013 having been an adviser to the Centuria Life Friendly Society Investment Committees
since 2011.
John was a senior executive in the KPMG Financial Services practice from 1989 to 1999 and acted as State director of the Brisbane
practice. He has also served on the Investment Committees of KPMG Financial Services, Berkley Group and Byron Capital.
In 2008, John founded boutique Financial Advisory firm Riviera Capital and has a wealth of financial services experience.
John is also a member of the Audit, Risk Management and Compliance Committee and the Nomination and Remuneration Committee.
21
For the year ended 30 June 2016 Directors' Report
For the year ended 30 June 2016
Name, qualifications and independence status
Experience, special responsibilities and other directorships
Mr John E. McBain, Dip. Urban Valuation
Chief Executive Officer
Mr Jason C. Huljich, B. Comm
Executive Director
Mr Nicholas R. Collishaw, SAFin, FAAPI, FRICS
Executive Director
John was a founding director and major shareholder in boutique property funds manager Century Funds Management, which was
established in 1999 and was acquired by the Over Fifty Group in July, 2006. He joined the Over Fifty Group Board on 10 July, 2006 and
was appointed Chief Executive Officer in 2008. In 2011 the company was renamed Centuria Capital.
John is also a director of QV Equities Limited, a licensed investment company listed on the ASX.
Prior to forming Century, in 1990 John founded Hanover Group, a specialist property investment consultancy and in 1995 he formed
Waltus Investments Australia, a dedicated property fund manager. John formerly held senior positions in a number of property
development and property investment companies in Australia, New Zealand and the United Kingdom.
John holds a Diploma in Urban Valuation (University of Auckland).
Jason was appointed to the Board in 2007.
As CEO – Unlisted Property Funds, Jason is responsible for providing strategic leadership and ensuring the effective operation and
growth of Centuria’s unlisted property portfolio. Jason has been involved in the unlisted property sector in Australia since 1996 and has
considerable expertise in investment property selection, fund feasibility and funds management.
Jason is the President of the National Executive Committee of the Property Funds Association of Australia, the peak industry body
representing the $125 billion direct property investment industry.
Nicholas was appointed CEO – Listed Property Funds at Centuria Property Funds on 1 May, 2013.
Prior to this role, Nicholas held the position of CEO and Managing Director at the Mirvac Group. During his time at Mirvac (2005-2012),
Nicholas was responsible for successfully guiding the business through the GFC and implementing a strategy of sustained growth for
the real estate development and investment company. During Nicholas’ 30 year career, he has held senior positions with James Fielding
Group, Paladin Australia, Schroders Australia and Deutsche Asset Management. He has extensive experience in all major real estate
markets in Australia and investment markets in the United States, United Kingdom and the Middle East.
Nicholas is Deputy Chair of the UNSW Built Environment Advisory Council.
The above named directors held office during the entire financial year and up to the date of this report, unless otherwise noted.
22
For the year ended 30 June 2016 Directors' Report
For the year ended 30 June 2016
Directors' meetings
The following table sets out the number of directors' meetings (including meetings of
committees of directors) held during the financial year and the number of meetings attended by
each director (while they were a director or committee member).
Directors’ interests
The following table sets out each director’s relevant interest in shares in the Company as at the
date of this report.
Director
Board
Meetings
Audit, Risk,
Management &
Compliance Committee
Meetings
Nomination &
Remuneration
Committee
Meetings
A
11
12
21
22
23
22
23
G. Charny
R. W.
Dobson
P. J. Done
J. R. Slater
J. E. McBain
J. C. Huljich
N. R.
Collishaw
B
11
14
23
23
23
23
23
A
1
2
6
6
#
#
#
B
1
4
6
6
#
#
#
A
1
2
3
3
#
#
#
B
1
2
3
3
#
#
#
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
# – Not a member of the committee
Directors
Number of Fully Paid Ordinary Shares
G. Charny
P. J. Done
J. R. Slater
J. E. McBain(i)
J. C. Huljich(i)
N. R. Collishaw(i)
1,627
500,000
1,700,000
4,604,549
2,342,715
850,051
(i) These directors have also been granted Performance Rights as detailed in the Remuneration
Report. Directors hold ordinary interests, with equal rights to other shareholders.
23
Operating and financial review
The Group recorded a consolidated statutory net profit after tax for the year of $12.1 million
(FY15 $8.6 million). Underlying net profit after tax was $10.4 million (FY15 $6.3 million).
Underlying net profit after tax is the statutory net profit after tax adjusted for changes in the fair
value of financial instruments and significant items of a non-recurring nature.
Reconciliation of Statutory Profit to Underlying Profit
FY16
FY15
Statutory Profit after tax
Less non-recurring items:
Unrealised gain on fair value movements in derivatives
Impairment charges in relation to seed capital valuations
Accounting gains on sale of non-core assets
Unrealised profit on non-core investment (net of costs)
Tax impact of the above
Underlying Profit after tax
$ million
$ million
12.123
8.561
5.493
(2.779)
0.990
(1.998)
10.417
1.148
(1.795)
5.194
-
(2.266)
6.280
Directors' Report
For the year ended 30 June 2016
Company secretary
Mr James Lonie was appointed Company Secretary on 14 August 2015. James is a partner in the
Sydney office of HWL Ebsworth Lawyers and has extensive financial services experience with a
particular focus on:
•
funds management including advising on licensing issues;
• general securities/corporate transactions and advice; and
•
mergers and acquisitions including off-market takeover bids, schemes, capital
reductions and buy-backs and in preparing and negotiating offer, disclosure and shareholder
meeting documentation.
James’ experience includes addressing regulatory and compliance issues relating to, and
documenting transactions and investment vehicles regulated by, the Corporations Act.
James graduated from Sydney University and holds a Bachelor of Arts, a Bachelor of Laws and a
Masters of Laws.
Mr Matthew Coy was the previous Company Secretary, appointed on 21 October 2009 and
resigned effective 14 August 2015.
Principal activities
The principal activities of the Group during the financial year were the marketing and
management of investment products (including friendly society investment bonds and
property investment funds), management of Over Fifty Guardian Friendly Society Limited and
management of a reverse mortgage lending portfolio.
There were no significant changes in the nature of the activities of the Group during the
financial year.
24
Directors' Report
For the year ended 30 June 2016
Operational highlights for the year at a divisional level were as follows:
Property Funds Management
•
Underlying net profit after tax of $11.8 million was up 97% on the prior year
(FY15: $6.0 million). Earnings growth was driven by growth in fee income due to a number of
significant acquisitions and divestments during the year.
• The following acquisitions were completed during the year;
o
o
203 Pacific Highway, St Leonards - acquired in December 2015 as a co-investment between
Centuria’s unlisted funds and the Centuria Metropolitan REIT for $86 million.
Australian Technology Park, Eveleigh (ATP) – a $104 million stake in ATP was purchased in
April 2016 by an unlisted fund.
•
During the year the Group also realised value of its existing portfolio via the following
assets sales;
o
o
175 Castlereagh Street, Sydney – acquired by an unlisted fund in 2013 for $56 million, the
Group completed the sale of the asset for $98.0 million in December 2015.
80 Waterloo Road and 16 Byfield Street, North Ryde (“Macquarie Park”) – acquired for
$25.3 million in 2001 & 2002, the Group completed the sale of the assets for $101 million.
Investment Bonds Division
•
•
•
•
The Group’s key focus continues to be on growing Funds Under Management (“FUM”)
through creating new and innovative products that meet market demand, prudent investment
decision making and maintaining informative and regular policyholder communication.
Underlying net profit after tax of the division was $2.5 million compared with $3.4 million for
the prior year as a result of newer funds having lower fees than the older capital guaranteed
funds.
The number of primary policy holders under administration continued to steadily increase
throughout the year with 85,186 primary policyholders at 30 June 2016
(30 June 2015: 83,814).
FUM increased modestly during the year – up from $715.2 million at 30 June 2015 to $720
million at 30 June 2016.
Dividends
Dividends paid or declared by the Company during the current financial year were:
Declared and paid
during the current
financial year
Final 2015 dividend
Interim 2016 dividend
Total amount
Cents per share
Total amount
$’000
Date paid
2.75
2.25
5.00
18 September 2015
18 March 2016
2,111
1,724
3,835
Subsequent to year end, the following dividend was declared by the directors. The financial
effect of this dividend has not been brought to account in the consolidated financial statements
for the year ended 30 June 2016 and will be recognised in subsequent financial reports.
Declared after the
end of the current
financial year
Final 2016 dividend
Cents per share
Total amount
$’000
Date payable
3.00
2,299
14 September 2016
Events subsequent to the reporting date
a) Final Dividend
On 18 August 2016, the Company declared a dividend of 3.0 cents per share franked to 100%.
The dividend is expected to be paid on 14 September 2016.
b) Investment in GPT Metro Office Fund
In May 2016, the group announced the acquisition of a 12.6% stake in GPT Metro Office Fund
(GMF). On 24 May 2016, the Group’s subsidiary Centuria Property Funds Limited (CPFL) in its
capacity as responsible entity of the Centuria Metropolitan REIT (CMA) submitted a non-binding
proposal to merge CMA and GMF via a trust scheme. This was followed on 16 June 2016 with a
takeover bid for GMF via an off market takeover. At the same time the Company entered into a
number of agreements, including a Facilitation and Property Rights Deed with the GPT Group.
On 1 August 2016, GMF’s Independent Board Committee announced its support for a competing
offer. Also on 1 August 2016, CMA announced it would not be proceeding with its offer for GMF.
25
Directors' Report
For the year ended 30 June 2016
Events subsequent to the reporting date (continued)
As at the date of this report, the Group retains its 12.6% interest in GMF.
Other than the matters discussed above, there has not arisen in the interval between 30 June
2016 and the date hereof any item, transaction or event of a material and unusual nature likely,
in the opinion of the directors of the Company, to affect significantly the operations of the Group,
the results of those operations, or the state of affairs of the Group, in future financial years.
Likely developments
The Group continues to pursue its strategy of focusing on its core operations, utilising a
strengthened balance sheet to provide support to grow and develop these operations.
Further information about likely developments in the operations of the Group and the expected
results of those operations in future financial years has not been included in this report because
disclosure of the information would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group’s operations are not subject to any significant environmental regulation.
Indemnification of officers and auditors
The Company has agreed to indemnify all current and former directors and executive officers of
the Company and its controlled entities against all liabilities to persons (other than the Company
or a related body corporate) which arise out of the performance of their normal duties as a
director or executive officer unless the liability relates to conduct involving a lack of good faith.
The Company has agreed to indemnify the directors and executive officers against all costs and
expenses incurred in defending an action that falls within the scope of the indemnity and any
resulting payments.
The directors have not included details of the nature of the liabilities covered or the amount of
premium paid in respect of the Directors' and Officers' Liability and legal expenses insurance
contracts, as such disclosure is prohibited under the terms of the contracts. The Company has
not otherwise, during or since the end of the financial year, except to the extent permitted by
law, indemnified or agreed to indemnify an officer or auditor of the Company or any related body
corporate against a liability incurred as such an officer or auditor.
26
Non-audit services
During the financial year, KPMG, the Group’s auditor, has performed services in addition to the
audit and review of the financial statements. Details of amounts paid or payable to KPMG are
outlined in Note 20 to the financial statements.
The directors are satisfied that the provision of non-audit services during the year, by the auditor
(or by another person or firm on the auditor's behalf) is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in the financial statements do not
compromise the external auditor's independence, based on advice received from the Audit, Risk
Management & Compliance committee, for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact
the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as
set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by
the Accounting Professional & Ethical Standards Board, including reviewing or auditing the
auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
Lead auditor's independence declaration
The lead auditor's independence declaration is set out on page 38 and forms part of the
Directors’ Report for the year ended 30 June 2016.
Rounding of amounts to the nearest thousand dollars
The Group is an entity of a kind referred to in the “ASIC Corporations (Rounding in Financial/
Directors’ Report) Instrument 2016/191”. Amounts in the Directors’ Report and Financial Report
have been rounded off, in accordance with that Class Order, to the nearest thousand dollars,
unless otherwise indicated.
Directors' Report
For the year ended 30 June 2016
Remuneration Report - Audited
This Remuneration Report, which forms part of the Directors' Report, sets out information about
the remuneration of the Company’s directors and its senior management for the financial year
ended 30 June 2016. The prescribed details for each person covered by this report are detailed
under the following headings:
1. Director and senior management details;
2. Remuneration policy;
3.
Relationship between the remuneration policy and company performance;
4. Non-executive director remuneration;
5.
6.
7.
Remuneration of executive directors and senior management;
Key terms of employment contracts; and
Director and senior management equity holdings and other transactions.
1. Director and senior management details
The following persons acted as directors of the Company during or since the end of the financial year:
•
Mr G. S. Charny (Independent Chairman) appointed as Independent Director 23 February 2016
and appointed Chairman 30 March 2016.
2. Remuneration policy
The Company recognises the important role people play in the achievement of its long-term
objectives and as a key source of competitive advantage. To grow and be successful, the Company
must be able to attract, motivate and retain capable individuals. The Company's remuneration
policy focuses on the following:
•
•
•
•
•
•
Ensuring competitive rewards are provided to attract and retain executive talent;
Linking remuneration to performance so that higher levels of performance attract higher
rewards;
Aligning rewards of all staff, but particularly executives, to the creation of value to shareholders;
Making sure the criteria used to assess and reward staff include financial and non-financial
measures of performance;
Ensuring the overall cost of remuneration is managed and linked to the ability of the Company
to pay; and
Ensuring severance payments due to the Chief Executive Officer on termination are limited
to pre-established contractual arrangements which do not commit the Group to making any
unjustified payments in the event of non-performance.
•
Mr R. W. Dobson (Independent Chairman) retired 30 March 2016
3. Relationship between the remuneration policy and company performance
• Mr P. J. Done (Independent Director)
• Mr J. R. Slater (Independent Director)
•
•
•
Mr J. E. McBain (Group CEO - Centuria Capital and Executive Director)
Mr J. C. Huljich (CEO – Unlisted Property Funds and Executive Director)
Mr. N. R. Collishaw (CEO - Listed Property Funds and Executive Director)
The term 'senior management' is used in this remuneration report to refer to the following persons
in addition to the directors listed above:
•
Mr S. W. Holt (Chief Financial Officer), appointed 4 May 2016.
The main objective in rewarding the Company executives for their performances is to ensure
that shareholders' wealth is maximised through the Company's continued growth. It is necessary
to structure and strengthen this focus to drive this strategy so that they are aligned with the
Company's objectives and successes.
Under the remuneration policy, senior management's remuneration includes a fixed remuneration
component, short-term and long-term incentive arrangements. The long-term incentives are based
on the Company‘s performance for the year
27
Directors' Report
For the year ended 30 June 2016
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management
in reference to specific Earnings per Share (EPS) hurdles and Key Strategic Goals being met. The
Group‘s remuneration is directly related to the performance of the Group through the linking of
short and long-term incentives to these financial measures.
The short-term incentives are based on the individual's performance in the preceding 12 months
compared to pre-agreed goals.
Where senior management is remunerated with shares, the Remuneration Policy places no
limitations to their exposure to risk in relation to the shares. Target incentive remuneration
refers to the incentive pay provided for meeting performance requirements. Actual incentive
remuneration can vary for executive directors and senior management depending on the extent
to which they meet performance requirements.
In accordance with the Company's corporate governance, the structure of non-executive director
and executive remuneration is separate and distinct.
4. Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level that provides the Company with
the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is
acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-
executive directors shall be determined from time to time by a general meeting. An amount not
exceeding the amount determined is then divided between the directors as agreed. Clause 63.2 of
the Constitution provides an aggregate maximum amount of not more than $750,000 per year.
Directors' Fees
Each director receives a fee for being a director of Group companies and an additional fee is paid
to the Chairman and to the Chairman of each Board Committee. The payment of the additional
fees to each Chairman recognises the additional time commitment and responsibility associated
with the position.
Objective
The Company aims to reward executives with a level and mix of remuneration commensurate
with their position and responsibilities within the Company so as to:
•
Reward executives for company, business unit and individual performance against targets set
by reference to appropriate benchmarks;
• Align the interests of executives with those of stakeholders;
•
•
Link rewards with the strategic goals and performance of the Company; and
Ensure total remuneration is competitive by market standards.
Structure
In determining the level and make-up of executive remuneration, the CEO and Board have regard
to market levels of remuneration for comparable executive roles.
Remuneration packages include a mix of fixed and variable remuneration and short and long-
term performance-based incentives. The proportion of fixed and variable remuneration
is established for each executive by the CEO after consultation with the Nomination &
Remuneration Committee. While the allocation may vary from period to period, the table below
details the approximate fixed and variable components for the executives.
Executive directors
Mr J. E. McBain
Mr J. C. Huljich
Mr N. R. Collishaw
Senior management
Mr S. W. Holt
% of Total Target Annual Remuneration
Fixed remuneration
Variable remuneration
80%
80%
80%
80%
20%
20%
20%
20%
28
Directors' Report
For the year ended 30 June 2016
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
(a) Fixed Remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis
and includes any FBT charges related to employee benefits including motor vehicles), as well
as employer contributions to superannuation funds. This is reviewed annually by the CEO and
the Nomination & Remuneration Committee. The process consists of a review of Company,
business unit and individual performance as well as relevant comparative remuneration in
the market. The same process is used by the Nomination & Remuneration Committee when
reviewing the fixed remuneration of the CEO.
The CEO and senior management are given the opportunity to receive their fixed (primary)
remuneration in a variety of forms including cash and salary sacrifice items such as motor
vehicles, motor vehicle allowances and/or additional superannuation contributions.
(b) Variable Remuneration
Under the Company’s Senior Management Remuneration Policy, long and short-term
performance incentives may be made under the Company’s incentive plans. These are
discussed further below.
(i) Short-term Incentives (STI)
The objective of the STI program is to link the achievement of the Group's operational and
financial targets with the remuneration received by the executives charged with meeting
those targets. The total potential STI available is set at a level so as to provide sufficient
incentive to the executive to achieve operational targets and such that the cost to the Group
is reasonable in the circumstances.
At the Board’s absolute discretion, employees may be provided with the opportunity to
receive an annual, performance-based incentive, either in the form of cash or the issue of
shares in the Company, or a combination of both.
During the current financial year, the Company issued Nil (FY15 320,000) ordinary shares to
employees in addition to cash bonuses provided to employees.
(ii) Long-term incentive (LTI)
The Company has an Executive Incentive Plan (“LTI Plan”) which forms a key element of the
Company’s incentive and retention strategy for senior executives under which Performance
Rights (“Rights”) are issued.
The primary objectives of the Plan include:
•
•
•
focusing executives on the longer term performance of the Group to drive long term
shareholder value creation;
ensure executive remuneration outcomes are aligned with shareholder interests, in
particular, the strategic goals and performance of the Group; and
ensure remuneration is competitive and aligned with general market practice by ASX
listed companies.
Rights issued under the LTI Plan are issued in accordance with the thresholds approved at the
2013 AGM.
A summary of the key terms of the Performance Rights are set out below.
Term
Detail
Performance
Rights
(“Rights”)
Each Right is a right to receive a fully paid ordinary share in the Company
(“Share”), subject to meeting the Performance Conditions.
Upon meeting the Performance Conditions, the Rights vest and Shares
are allocated.
Rights do not carry a right to vote or to dividends or, in general, a right to
participate in other corporate actions such as bonus issues.
Vesting
conditions
The Rights will vest to the extent that the board determines that:
• The Performance Conditions that apply to the Rights were satisfied; and
• The employee was continuously employed by the Company until the end
of the Performance Period.
Vesting date
Performance
Conditions
The date on which the Board determines the extent to which the
Performance Conditions are satisfied and the Rights vest.
The Performance Conditions set out in the LTI Plan relate to:
• Growth in Earnings Per Share (“EPS hurdle”);
• Growth in property and friendly society funds under management
(“Growth in FUM Hurdle”); and
• Absolute Total Shareholder Return Performance (“Absolute TSR Hurdle”).
29
Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
The Performance Conditions and their associated weighting applicable to each tranche is
summarised in the following table:
There have been three tranches of Rights granted under the LTI plan to date:
EPS Hurdle
Tranche
Grant Date
Performance Period
1
2
3
1 January 2014
1 July 2013 to 30 June 2016
1 February 2015
1 July 2014 to 30 June 2017
1 February 2016
1 July 2015 to 30 June 2018
The percentage of Rights subject to the EPS Hurdle that vest, if any, will be determined
as follows:
Compound
Annual
Growth Rate
Portion of
Rights
that vest
Compound
Annual
Growth Rate
Portion of
Rights
that vest
Tranche 1 (70%)
Tranches 2 and 3 (45%)
Maximum % or above
12.5% or
greater
100%
10% or greater
100%
Between threshold %
and maximum %
More than
7.5%,
less than 12.5%
Pro-rata
between
50% to 100%
More than 6%,
less than 10%
More than 4%,
less than 6%
Threshold %
Less than the
threshold %
7.5%
50%
4%
Less than 7.5% 0%
Less than 4%
Pro-rata
between
50% to 100%
Pro-rata
between
25% to 50%
25%
0%
The Board has discretion to adjust the EPS performance hurdle to ensure that participants are
neither advantaged nor disadvantaged by matters outside managements’ control that affect EPS
(for example, by excluding one-off non-recurrent items or the impact of significant acquisitions
or disposals).
30
For the year ended 30 June 2016
Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
Growth in FUM Hurdle
The percentage of Rights subject to the Growth in FUM Hurdle that vest, if any, will be
determined as follows:
Compound Annual
Growth Rate
Portion of Rights
that vest
Compound
Annual Growth
Rate
Portion of Rights
that vest
Tranche 1 (15%)
Tranches 2 and 3 (15%)
25% or greater
100%
18% or greater
100%
More than 15%,
less than 25%
Pro-rata between
50% to 100%
More than 14%,
less than 18%
Pro-rata between
50% to 100%
Maximum %
or above
Between
threshold
% and
maximum %
Maximum %
or above
Between
threshold
% and
maximum %
Threshold %
15%
Less than the
threshold %
Less than 15%
50%
0%
More than 10%,
less than 14%
Pro-rata between
25% to 50%
10%
25%
Less than 10%
0%
Threshold %
12%
Less than the
threshold %
Less than 12%
50%
0%
Absolute TSR Hurdle
The percentage of Rights subject to the Absolute TSR Hurdle that vest, if any, will be
determined as follows:
Compound Annual
Growth Rate
Portion of Rights
that vest
Compound
Annual Growth
Rate
Portion of Rights
that vest
Tranche 1 (15%)
Tranches 2 and 3 (40%)
18% or greater
100%
18% or greater
100%
More than 12%,
less than 18%
Pro-rata between
50% to 100%
More than 15%,
less than 18%
Pro-rata between
50% to 100%
More than 12%,
less than 15%
Pro-rata between
25% to 50%
12%
25%
Less than 12%
0%
31
For the year ended 30 June 2016 Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
Rights Granted
The following Rights were granted to key management personnel.
Employee
No. of Rights Granted
Vesting Conditions
Fair value at Grant Date
Tranche 1 (grant date of 1 January 2014)
Mr J.E. McBain
Mr J.C. Huljich
Mr N. R. Collishaw
Total
Tranche 2 (grant date of 1 February 2015)
Mr J.E. McBain
Mr J.C. Huljich
Mr N. R. Collishaw
Mr M. J. Coy
Mr D. B. Govey
Other executives
Total
32
376,903
80,765
80,765
231,837
49,679
49,680
231,837
49,679
49,680
1,200,825
216,496
72,165
192,441
135,000
45,000
120,000
135,000
45,000
120,000
60,037
20,012
53,366
44,270
14,757
39,350
233,564
77,855
207,613
1,831,926
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
$0.73
$0.73
$0.18
$0.73
$0.73
$0.18
$0.73
$0.73
$0.18
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
For the year ended 30 June 2016 Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
Rights Granted
During the year ended 30 June 2016, the following rights lapsed due to the resignation of the
Tranche 2 – lapsed grants (grant date of 1 February 2015)
Mr M. J. Coy
Mr D. B. Govey
Other executives
60,037
20,012
53,366
44,270
14,757
39,350
94,143
31,381
83,683
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
Total
440,999
Tranche 3 (grant date of 1 February 2016)
Mr J.E. McBain
Mr J.C. Huljich
Mr N. R. Collishaw
Other executives
216,496
72,165
192,441
135,000
45,000
120,000
135,000
45,000
120,000
317,976
105,993
282,645
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
EPS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
PS Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
Total
1,787,715
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.81
$0.81
$0.28
$0.87
$0.87
$0.19
$0.87
$0.87
$0.19
$0.87
$0.87
$0.19
$0.87
$0.87
$0.19
relevant employee:
Subject to the Boards’ overriding discretion, unvested Rights lapse upon the earliest of ceasing
employment, corporate restructuring, divestment of a material business or subsidiary, change of
control, clawback and lapse for fraud and breach, failure to satisfy the Performance Conditions
and the 7th anniversary of the date of the grant.
The Company’s overall objective is to reward senior management based on the Company's
performance and build on shareholders' wealth but this is subject to market conditions for the
year. The table below sets out summary information about the Group's earnings for the past
five years.
30 June 2016
$’000
30 June 2015
$’000
30 June 2014
$’000
30 June 2013
$’000
30 June 2012
$’000
12,123
8,561
9,078
7,338
1,967
$0.93
$0.80
$0.82
$0.42
$0.57
$1.05
$0.93
$0.80
$0.82
$0.42
2.25cps
2.0cps
1.25cps
1.25cps
1.25cps
3.00cps
2.75cps
1.50cps
-
-
15.8cps
11.0cps
11.6cps
9.4cps
2.5cps
15.1cps
10.8cps
11.6cps
9.4cps
2.5cps
5 year
summary
Net profit
after tax
Share price
at start of
year
Share price
at end of
year
Interim
dividend
Final
dividend
Basic
earnings per
share
Diluted
earnings per
share
33
For the year ended 30 June 2016 Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
Remuneration for the year ended 30 June 2016
Short-term employee benefits
Post employment
benefits
Other long-term
benefits
Share-based
payments
Bonus
$
Superannuation
$
Long service leave
$
Directors
G. Charny
R.W. Dobson
P.J. Done
J.R. Slater
J.E. McBain
J.C. Huljich
N.R. Collishaw (i)
Sub-total
Senior management
S.W. Holt
Sub-total
Grand total
Salaries
$
-
-
-
-
621,000
530,692
530,692
Fees
$
53,308
113,400
129,600
97,200
-
-
-
1,682,384
393,508
66,576
66,576
-
-
1,748,960
393,508
-
-
-
-
375,000
250,000
110,000
735,000
20,000
20,000
755,000
5,064
10,773
12,312
9,005
24,000
19,308
19,308
99,770
3,218
3,218
-
-
-
-
30,947
17,763
-
48,710
-
-
Total
$
58,372
124,173
141,912
106,205
1,308,615
977,620
819,857
3,536,754
89,794
89,794
$
-
-
-
-
257,668
159,857
159,857
577,382
-
-
102,988
48,710
577,382
3,626,548
(i) As part of his employment agreement, Mr Collishaw is entitled to receive a one-off $500,000 incentive payment upon successful listing of a listed property fund once the fund reaches $500 million of assets under management.
Mr Collishaw is not currently entitled nor has any remuneration been paid in relation to this incentive.
34
For the year ended 30 June 2016
Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
No directors or senior management person appointed during the period received a payment as part of his or her consideration for agreeing to hold the position.
Remuneration for the year ended 30 June 2015
Short-term employee benefits
Post employment
benefits
Other long-term
benefits
Share-based
payments
Directors
R.W. Dobson
P.J. Done
J.R. Slater
J.E. McBain
J.C. Huljich
N.R. Collishaw (i)
Sub-total
Senior management
M.J. Coy (ii)
D.B. Govey
Sub-total
Grand total
Salaries
$
-
-
-
541,199
490,431
493,716
Fees
$
140,000
120,000
90,000
-
-
-
1,525,346
350,000
359,967
321,286
681,253
-
-
-
2,206,599
350,000
Bonus
$
Superannuation
$
Long service leave
$
-
-
-
150,000
100,000
100,000
350,000
-
30,000
30,000
380,000
13,300
11,400
8,550
24,000
18,783
18,783
94,817
18,783
25,000
43,783
138,600
-
-
-
11,549
10,505
-
22,054
7,137
7,144
14,282
36,336
Total
$
153,300
131,400
98,550
942,134
753,018
745,797
2,824,199
431,136
403,040
834,176
$
-
-
-
215,387
133,298
133,298
481,983
45,248
19,610
64,858
546,841
3,658,376
(i) As part of his employment agreement, Mr Collishaw is entitled to receive a one-off $500,000 incentive payment upon successful listing of a listed property fund once the fund reaches $500 million of assets under management.
Mr Collishaw is not currently entitled nor has any remuneration been paid in relation to this incentive.
(ii) Mr Coy was awarded 20,000 shares during the year as a short-term incentive in recognition of the achievement of a strategic objective of the Group to monetise a large portion of the reverse mortgage portfolio. The expense is
included in the share-based payment amount disclosed in the table above.
35
For the year ended 30 June 2016
Directors' Report
Remuneration Report – Audited (continued)
5. Remuneration of executive directors and senior management (continued)
6. Key terms of employment contracts
CEO
Mr John McBain, was appointed as CEO of the Company in April 2008. He is also an executive
director of the Company. Mr McBain is employed under contract. The summary of the major terms
and conditions of Mr McBain's employment contract are as follows:
• Fixed Compensation plus superannuation contributions;
• Car parking within close proximity to the Company’s office;
•
•
•
Eligible to participate in the bonus program determined at the discretion of the Board;
The Company may terminate this employment contract by providing 6 months written notice
or provide payment in lieu of the notice period. Any payment in lieu of notice will be based
on the Total Fixed Compensation Package; and
The Company may terminate the employment contract at any time without notice if serious
misconduct has occurred. When termination with cause occurs the CEO is only entitled to
remuneration up to the date of termination.
7. Director and senior management equity holdings and other transactions
Other executives (standard contracts)
All executives are employed under contract. The Company may terminate the executive's
employment agreement by providing between 1 and 6 months written notice or providing
payment in lieu of the notice period (based on the Total Fixed Compensation package).
(a) Director and senior management equity holdings
Set out below are details of movements in fully paid ordinary shares held by directors and
senior management as at the date of this report.
36
Number of
shares
2016
G. Charny
P.J. Done
J.R. Slater
J.E. McBain
J.C. Huljich
N.R. Collishaw
2015
R.W. Dobson
P.J. Done
J.R. Slater
J.E. McBain
J.C. Huljich
N.R. Collishaw
M.J. Coy
D.B. Govey
Balanced at
1 July
Shares purchased
/Issued as Part of
Renumeration
Shares sold
Balance at
30 June
-
500,000
1,630,000
4,600,040
2,342,715
850,051
997,728
400,000
1,402,297
4,590,286
2,387,715
850,051
583,311
715,272
1,627
-
70,000
4,509
-
-
201,614
100,000
227,703
9,754
-
-
37,360
-
-
-
-
-
-
-
-
-
-
-
(45,000)
-
-
-
1,627
500,000
1,700,000
4,604,549
2,342,715
850,051
1,199,342
500,000
1,630,000
4,600,040
2,342,715
850,051
620,671
715,272
(b) Transactions with key management personnel
As a matter of Board policy, all transactions with directors and director-related entities are
conducted on arms-length commercial or employment terms.
During the financial year, the following transactions occurred between the Company and key
management personnel:
•
•
•
Wolseley Corporate Pty Ltd, a related party of G. Charny, was paid $88,000 (inclusive of
GST) for corporate advisory fees.
Henry Davis York, a related party of R. Dobson, was paid $16,374 (inclusive of GST) (2015:
$806,856) for legal consultancy fees.
Mr J. R. Slater (personally) and Riviera Capital Pty Ltd, a related party of Mr. Slater, were paid
a total of $141,840 (inclusive of GST) (2015: $141,643) for consultancy services.
For the year ended 30 June 2016 Directors' Report
This Directors' Report is signed in accordance with a resolution of the Directors.
G. Charny
Chairman
Sydney
18 August 2016
P. J. Done
Director
Chairman - Audit, Risk Management &
Compliance Committee
37
For the year ended 30 June 2016
Lead Auditor's Independence Declaration
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Centuria Capital Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPMG
Nigel Virgo
Partner
Sydney
18 August 2016
38
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity. Professional Standards Legislation
22
Centuria Capital Limited and Controlled Entities
Consolidated Statement of Comprehensive Income
Profit attributable to shareholders
Revenue
Gains on sales of non-core assets
Unrealised gain arising from fair value
movements of derivative financial instruments
Expenses
Finance costs
Profit before tax attributable to shareholders
Income tax expense (i)
Benefit funds
Revenue attributable to Benefit Funds(ii)
Expenses attributable to Benefit Funds(ii)
Income tax expense relating to Benefit
Funds(i), (ii)
Note
6(a)
6(b)
2016
$'000
2015
$'000
46,009
-
37,201
5,194
23(c)(iv)
5,493
1,148
8
(29,252)
(24,930)
(2,707)
19,543
(3,890)
14,723
9(a)
(7,420)
(6,162)
16(a)
16(a)
16(a)
20,927
22,015
(19,578)
(20,395)
(1,349)
(1,620)
Benefit funds contribution to profit, net of tax
-
-
Profit after tax for the period
12,123
8,561
Other comprehensive income:
Gain on cash flow hedges taken to equity
Income tax expense on other comprehensive
income
Other comprehensive income for the year
(net of tax)
-
-
-
54
(16)
38
Total comprehensive income for the period
12,123
8,599
Profit attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
From continuing operations:
Basic (cents per share)
Diluted (cents per share)
Note
2016
$'000
12,303
(180)
12,123
12,303
(180)
12,123
2015
$'000
8,566
(5)
8,561
8,604
(5)
8,599
10
10
15.8
15.1
11.0
10.8
(i) Total consolidated income tax expense including the benefit funds is $8.8 million (FY15: $7.8 million).
(ii) A subsidiary of the Company, Centuria Life Limited (CLL), is a friendly society in accordance with the Life
Insurance Act 1995 (“the Act”). The funds operated by CLL, and any trusts controlled by those funds,
are treated as statutory funds in accordance with the Act. These statutory funds are required to be
consolidated in accordance with accounting standards and are shown separately from shareholder funds
in the financial statements.
Notes to the consolidated financial statements are included on pages 43 to 78.
39
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Consolidated Statement of Financial Position
Assets
Cash and cash equivalents
Trade and other receivables
Assets classified as held for sale
Prepayments
Income tax receivable
Financial assets at fair value
Property held for development
Reverse mortgages at fair value
Plant and equipment
Deferred tax assets
Intangible assets
Note
22(a)
11
21(d)(iii)
9(b)
12
12
9(c)
13
30 June
2016
$'000
13,157
19,656
-
1,054
-
47,194
35,716
51,561
863
-
30 June
2015
$'000
25,487
8,619
1,040
797
1,804
5,456
23,011
43,754
1,134
819
53,025
53,025
222,226
164,945
Equity
Contributed equity
Retained earnings
Share-based payment reserve
Equity attributable to equity holders of the
Company
Non-controlling interests
Total equity
Note
30 June 2016
$'000
30 June 2015
$'000
17
88,058
28,452
1,459
88,112
19,982
784
117,969
108,878
9,698
9,973
127,667
118,851
The consolidated financial statements include the financial position of the Benefit Funds of
Centuria Life Limited (refer to the footnote on page 39).
Notes to the consolidated financial statements are included on pages 43 to 78.
Assets in respect of benefit fund policy holders
16(b)
353,528
386,401
Total assets
Liabilities
Trade and other payables
Provisions
Borrowings
Interest rate swap at fair value
Income tax payable
Deferred tax Liability
14
15
23(c)(iv)
9(b)
9(c)
575,754
551,346
9,190
1,155
59,951
20,778
985
2,500
94,559
6,343
1,264
20,912
17,576
-
-
46,095
Liabilities in respect of Benefit Funds policy
holders
16(b)
353,528
386,401
Total liabilities
Net assets
40
448,087
432,496
127,667
118,851
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Consolidated Statement of Changes in Equity
Balance at 30 June 2014
Profit for the year
Other comprehensive income for the period
Total comprehensive income for the period
Acquisition of subsidiary with NCI
Share-based payment
Employee share scheme
Dividends paid
Share buy-back/shares cancelled
Balance at 30 June 2015
Balance at 1 July 2015
Profit for the year
Total comprehensive income for the period
Fund Establishment costs
Share-based payment
Employee share scheme
Dividends paid
Share buy-back/shares cancelled
Balance at 30 June 2016
Contributed
equity
$'000
89,167
Retained
earnings
$'000
14,151
Cash flow
hedge reserve
$'000
(38)
Share-based
payment reserve
$'000
164
Attributable to equity
holders of the parent
$'000
103,444
Non-controlling
interests
$'000
-
-
-
-
-
-
284
-
(1,339)
88,112
88,112
-
-
-
-
57
-
(111)
88,058
8,566
-
8,566
-
-
-
(2,735)
-
19,982
19,982
12,303
12,303
-
-
-
(3,833)
-
28,452
-
38
38
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
620
-
-
-
784
784
-
-
-
675
-
-
-
1,459
8,566
38
8,604
-
620
284
(2,735)
(1,339)
108,878
108,878
12,303
12,303
-
675
57
(3,833)
(111)
117,969
(5)
-
(5)
9,978
-
-
-
-
9,973
9,973
(180)
(180)
(95)
-
-
-
-
9,698
Notes to the consolidated financial statements are included on pages 43 to 78.
Total
equity
$'000
103,444
8,561
38
8,599
9,978
620
284
(2,735)
(1,339)
118,851
118,851
12,123
12,123
(95)
675
57
(3,833)
(111)
127,667
41
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Consolidated Statement of Cash Flows
Note
2016
'000
2015
'000
Note
2016
'000
2015
'000
Cash flows from operating activities
Management fees received
Rent, trust distributions and other income
received
Payments to suppliers and employees
Interest received
Payments for property held for development
Income tax paid
Benefit Funds net cash used in operating
activities
25,310
1,275
29,734
2,392
(21,771)
(25,424)
1,089
776
(12,705)
(23,011)
(3,199)
(10,001)
(35,572)
(6,819)
(22,352)
(27,855)
Cash flows from financing activities
Payment for shares (buy-back)/issued
Collections from reverse mortgage holders
Repayment of borrowings (reverse mortgages)
Interest paid on reverse mortgage borrowings
Proceeds from partial sale of reverse mortgage
loan portfolio
Repayment of borrowings on sale of reverse
mortgages loan portfolio
Repayment of borrowings (corporate)
Proceeds from borrowings (corporate)
Net cash used in operating activities
22(b)
(45,573)
(50,207)
Proceeds from borrowings (development)
Cash flows from investing activities
Benefit Funds net cash provided by investing
activities
Payments for plant and equipment
Acquisition of investments in managed funds
Net proceeds from sale of insurance subsidiary
Net cash provided by investing activities
Proceeds from non-controlling interests
Dividends paid
90,903
5,408
Financing costs paid on corporate borrowings
(59)
(539)
(38,574)
(6,154)
-
52,270
4,873
3,588
Net cash provided by financing activities
Net (decrease)/increase in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the financial year
Less cash attributable to benefit funds
Cash and cash equivalents attributable to
shareholders at 30 June
16(b)
22(a)
(111)
3,446
(1,503)
(2,208)
-
-
-
26,750
13,792
-
(1,339)
12,994
(8,395)
(3,765)
126,566
(94,864)
(12,000)
-
9,609
9,696
(3,833)
(2,735)
(28)
36,304
776
36,543
43,001
(10,076)
41,324
51,400
84,325
71,168
13,157
41,324
15,838
25,487
Notes to the consolidated financial statements are included on pages 43 to 78.
42
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
1. General information
Centuria Capital Limited (the ‘Company’) is a public company listed on the Australian Stock Exchange
(trading under the symbol CNI), incorporated and operating in Australia. These consolidated financial
statements comprise the Company and its controlled entities (together referred to as the ‘Group’).
The Company is a for-profit entity and its principal activities are the marketing and management
of investment products (including friendly society investment bonds and property investment
funds), management of Over Fifty Guardian Friendly Society Limited and management of a reverse
mortgage lending portfolio.
The Company is required by AASB 10 Consolidated Financial Statements to recognise the assets,
liabilities, income, expenses and equity of the Benefit Funds of its subsidiary, Centuria Life Limited
(the “Benefit Funds”). The assets and liabilities of the Benefit Funds do not impact the net profit
after tax or the equity attributable to the shareholders of the Company and the shareholders of
the Company have no rights over the assets and liabilities held in the Benefit Funds.
The Company’s registered office is Level 39, 100 Miller Street, Sydney NSW 2060.
2. Basis of accounting
The consolidated financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB). They were authorised for issue by the directors on
18 August 2016.
3. Basis of preparation
The financial statements have been prepared on the basis of historical cost, except for derivative
financial instruments, financial assets at fair value through profit and loss and other financial
assets, which have been measured at fair value at the end of each reporting period. Cost is based
on the fair values of the consideration given in exchange for assets. All amounts are presented in
Australian dollars, which is the company’s functional currency, unless otherwise noted.
The Company is an entity of a kind referred to in the “ASIC Corporations (Rounding in Financial/
Directors’ Report) Instrument 2016/191”. Amounts in the consolidated financial statements have
been rounded off, in accordance with that Class Order, to the nearest thousand dollars, unless
otherwise indicated.
4. Use of judgements and estimates
In preparing these consolidated financial statements, management has made judgements,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. The judgements, estimates and
assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
estimates are recognised prospectively.
(i) Key judgements
Information about critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the financial statements is included in the
following notes:
• Note 13 – Intangible Assets
• Note 23 – Financial Instruments
5. Operating Segments
The Group has four reportable segments. These reportable segments are the divisions used to
report to the Group's CEO and Board for the purpose of resource allocation and assessment of
performance.
The operations of the reportable segments are:
•
•
Property Funds Management: management of listed and unlisted property funds through
Centuria Property Funds Limited and Centuria Strategic Property Limited.
Investment Bonds: management of the Benefit Funds of Centuria Life Limited and
management of the Guardian Over Fifty Friendly Society Limited. The Benefit Funds include
a range of financial products, including single and multi-premium investments.
•
Reverse Mortgages: management of a reverse mortgage lending portfolio.
•
Corporate: includes returns from investment activities.
The accounting policies of reportable segments are the same as the Group's accounting policies.
Following is an analysis of the Group's revenue and results by reportable segment in a format
consistent with that presented to the Group’s CEO and Board.
43
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
Property Funds Management
$'000
Investment Bonds
$'000
Reverse Mortgages
$'000
Corporate
$'000
101
29,538
78
29,716
16,911
11,823
174
9,513
31
9,718
4,677
2,516
2,318
-
17
2,335
(260)
(182)
1,879
75
2,285
4,239
(5,489)
(3,740)
Group
$'000
4,472
39,126
2,411
46,009
15,839
10,417
5,493
(2,779)
990
(1,998)
12,123
(15)
(8,966)
-
(2)
(1,418)
(2,779)
(1,949)
(174)
-
(741)
(3,820)
-
(2,707)
(14,378)
(2,779)
5. Operating Segments (continued)
Financial year ended 30 June 2016
Revenue
Interest, dividends and distribution revenue
Fee income
Commissions, other income and gains
Total segment revenue
Underlying profit before tax
Underlying profit after tax
Reconciliation to Statutory Profit after tax
Unrealised gains of fair value movements in derivatives
Impairment charges in relation to seed capital valuations
Unrealised gains on non-core investments
(net of costs)
Tax impact of above
Statutory Profit after tax
Additional segment information
Finance costs
Employee benefits expense
Impairment of related party receivable
44
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
5. Operating Segments (continued)
Financial year ended 30 June 2015
Revenue
Interest, dividends and distribution revenue
Fee income
Commissions, other income and gains
Total segment revenue
Underlying profit before tax
Underlying profit after tax
Reconciliation to Statutory Profit after tax
Unrealised gains of fair value movements in derivatives
Impairment charges in relation to seed capital valuations
Accounting gains on sale of non-core assets
Tax impact of above
Statutory Profit after tax
Additional segment information
Finance costs
Employee benefits expense
Impairment of related party receivable
Property Funds Management
$'000
Investment Bonds
$'000
Reverse Mortgages
$'000
Insurance
$'000
Corporate
$'000
139
20,324
154
20,617
8,774
5,977
213
9,856
9
10,078
5,803
3,420
5,194
-
402
5,596
777
612
-
-
287
287
244
170
838
-
4,979
5,817
(5,422)
(3,899)
Group
$'000
6,384
30,180
5,831
42,395
10,176
6,281
1,148
(1,795)
5,194
(2,266)
8,561
(113)
(8,360)
-
415
(969)
(2,218)
(3,662)
(230)
-
48
-
-
(578)
(2,905)
-
(3,890)
(12,464)
(2,218)
45
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
7. Expenses
Employee benefits
Impairment of related party receivable
Rental expense (operating leases)
Depreciation and amortisation
8. Finance costs
Corporate working capital facility
Reverse mortgage facility
Unwinding of discount) on non-current related party
receivable
Other finance costs
2016
$'000
14,378
2,779
806
330
2016
$'000
730
1,949
-
28
2,707
2015
$'000
12,464
2,218
760
341
2015
$'000
473
3,662
(423)
178
3,890
6. Revenue
(a) Group revenue (excluding Benefit Funds)
Interest revenue - from reverse mortgages
Interest revenue - from other sources
Distribution revenue
Management fees from property funds
Sales fees
Incentive fees
Property acquisition fees
Management fees from Benefit Funds
Unrealised gain on listed investment
Other income
(b) Gains on sale of non-core assets
Gain on sale of Over Fifty Insurance Pty Ltd
Gain on sale of reverse mortgage loan portfolio
In October 2014, the Group announced:
2016
$'000
2,300
1,089
1,083
9,541
1,143
15,813
3,041
9,513
2,232
254
46,009
2016
$'000
-
-
-
2015
$'000
5,144
776
464
9,161
3,880
4,741
2,542
9,856
-
637
37,201
2015
$'000
4,873
321
5,194
the sale of its subsidiary, Over Fifty Insurance Pty Ltd for $5.2 million; and
the sale of a large portion of its reverse mortgage portfolio, releasing $31.7 million cash to
the Group (before transaction costs and taxation). The Group sold its variable rate reverse
mortgages with a balance of $124.4 million and retained a $27.0 million portfolio of fixed
rate reverse mortgages.
•
•
46
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
9. Income taxes
The Company is the head entity of the tax consolidated group, which includes Centuria Life
Limited and the Benefit Funds. As a result of tax consolidation, the Company recognises current
tax related receivables and corresponding payables from its subsidiaries and the Benefit Funds.
The tax rate used in the reconciliation following is the corporate tax rate of 30% payable by
Australian corporate entities on taxable profits under Australian tax law. There has been no
change in the corporate tax rate when compared with the previous reporting period.
(a) Income tax recognised in profit or loss
(b) Current tax assets and liabilities
Current tax assets /(liabilities) attributable to:
Benefit Funds
Shareholders
2016
$'000
841
(1,826)
(985)
2015
$'000
1,998
(194)
1,804
Profit before tax
2016
$'000
19,543
2015
$'000
14,723
Income tax expense calculated at 30%
5,863
4,417
Add/(deduct) tax effect of amounts which are not
deductible/(assessable)
- Non-allowable expenses - seed capital impairment
- Non-allowable expenses - other
- Adjustments to current tax in relation to
prior years
Income tax expense
Current tax expense in respect of the current year
Adjustments to current tax in relation to prior years
Deferred tax expense relating to the origination and
reversal of temporary differences
Income tax expense
834
723
-
7,420
4,100
-
4,100
3,320
7,420
665
1,091
(11)
6,162
5,444
(11)
5,433
729
6,162
47
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
Opening balance
$'000
Charged to income
$'000
Utilised
$'000
Closing balance
$'000
9. Income taxes (continued)
(c) Deferred tax balances
Financial year ended 30 June 2016
Deferred tax assets
Provisions
Financial derivatives
Capital losses
Deferred tax liabilities
Accrued income
Deferred capital gain on financial assets
Prepayments
Fair value movements in mortgage assets
1,211
3,396
92
(525)
(25)
(75)
(3,255)
819
584
(666)
111
(1,984)
(669)
69
(765)
(3,320)
Financial year ended 30 June 2015
Opening balance restated
$'000
Charged to income
$'000
Deferred tax assets
Provisions
Financial derivatives
Capital losses
Deferred tax liabilities
Accrued income
Deferred capital gain on financial assets
Prepayments
Fair value movements in mortgage assets
Other
48
1,211
3,719
2,258
-
(189)
(171)
(3,208)
(17)
3,603
-
(323)
(111)
(525)
164
96
(47)
17
(729)
-
-
-
-
-
-
-
-
Utilised
$'000
-
-
(2,055)
-
-
-
-
-
(2,055)
1,795
2,730
203
(2,509)
(694)
(5)
(4,020)
(2,500)
Closing balance restated
$'000
1,211
3,396
92
(525)
(25)
(75)
(3,255)
-
819
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
10. Earnings per share
12. Financial assets
Basic earnings per share
Diluted earnings per share
2016
cents
15.8
15.1
2015
cents
11.0
10.8
The earnings used in the calculation of basic and diluted earnings per share is the profit for
the year attributable to owners of the Company as reported in the Consolidated Statement of
Comprehensive Income.
The weighted average number of ordinary shares used in the calculation of basic and diluted
earnings per share is as follows:
Weighted average number of ordinary
shares (basic)
2016
No. '000
76,650
2015
No. '000
77,855
Weighted average number of ordinary
shares (diluted)(i)
(i) The weighted average number of ordinary shares used in the calculation of diluted earnings per share
is determined as if 30 June 2016 was the end of the performance period of the grants of Rights under
the LTI plan. All Rights that would have vested if 30 June 2016 was the end of the performance period
are deemed to have been issued at the start of the financial year in accordance with the applicable
accounting standard.
80,115
79,024
Financial assets at fair value
Unit trusts (current)
Unit trusts (related party) (non-current) (refer to
Note 21(d)(ii))
Reverse mortgages at fair value
Reverse mortgage receivables (i)
Reverse mortgages (hedged item fair value
adjustment) (refer to Note 23 (c) (iv)) (i)
2016
$'000
40,516
6,678
47,194
26,507
25,054
2015
$'000
26
5,430
5,456
26,552
17,202
Reverse mortgages at fair value
(i) Whilst some mortgages are likely to be repaid during the next 12 months, Centuria does not control the
51,561
43,754
repayment date and accordingly all amounts are treated as non-current.
11. Trade and other receivables
Amount owing by related entities (current) (refer
to Note 21(d)(i))
Sundry debtors (current)
2016
$'000
18,853
803
19,656
2015
$'000
8,384
235
8,619
The Group does not hold any collateral or other credit enhancements over these balances nor
does it have a legal right of offset against any amounts owed by the Group to the counterparty.
49
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
13.
Intangible assets
Sensitivity to changes in assumptions
Goodwill (non-current)
2016
$'000
53,025
2015
$'000
53,025
There was no movement in the carrying value of goodwill during the current or prior
reporting period.
Goodwill is solely attributable to the Property Funds Management business with recoverability
determined by a value in use calculation using profit and loss projections covering a five-year
period, with a terminal value determined after 5 years.
The key assumptions used in the value in use calculations for the property funds management
cash-generating unit are as follows:
Assumptions used in value
in use calculation
Rate required for
recoverable amount to
equal carrying value
As at 30 June 2016, the estimated recoverable amount of goodwill relating to the property funds
management business exceeded its carrying amount by $49.7 million
(2015: $15.3 million). The table below shows the key assumptions used in the value in use
calculation and the amount by which each key assumption must change in isolation in order for
the estimated recoverable amount to be equal to its carrying value:
Revenue growth
rate (average)
Pre-tax
discount rate
7.50%
2.40%
10.68%
18.10%
Expenses
growth rate
5.00%
11.33%
Revenue:
Revenues in 2017 are based on the budget for FY2017 and are assumed to increase at a rate of
7.5% (2015: 7.5%) per annum for the years 2017-2020. The directors believe this is a prudent
and achievable growth rate based on past experience.
14. Trade and other payables
Expenses:
Expenses in 2017 are based on the budget for FY2017 and are assumed to increase at a rate
of 5.0% (2015: 5.0%) per annum for the years 2017-2020. The directors believe this is an
appropriate growth rate based on past experience.
Sundry creditors (current) (i)
Accrued expenses (current)
Tax payable to Benefit Funds (current) (refer to Note
16(b))
2016
$'000
3,391
4,958
841
9,190
2015
$'000
2,120
2,225
1,998
6,343
Post-tax discount rate:
Discount rates are determined to calculate the present value of future cash flows.
A pre-tax rate of 10.68% (2015: 11.24%) is applied to cash flow projections. In determining the
appropriate discount rate, regard has been given to relevant market data as well as Company
specific inputs.
Terminal growth rate:
Beyond 2020, a growth rate of 3% (2015: 3%), in line with long term economic growth, has
been applied to determine the terminal value of the asset.
50
(i) Sundry creditors are non-interest bearing liabilities, payable on commercial terms of 7 to 60 days.
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
15. Borrowings
Corporate working capital facility (current)
Development facility (current)
Reverse mortgage bill facilities and notes - secured
(non-current)
(a) Terms and conditions
2016
$'000
26,750
23,401
9,800
2015
$'000
-
9,609
11,303
59,951
20,912
(iii) Reverse mortgage bill facilities and notes – secured
At reporting date, the Group has $9.8 million (30 June 2015: $11.3 million) non-recourse
notes on issue to the ANZ, secured over the remaining reverse mortgages held in Senex
Warehouse Trust No.1 (a subsidiary of the Group) maturing on 30 September 2017.
The facility limit is $15.0 million (30 June 2015: $18.0 million) and is reassessed every 6
months with a view to reducing the facility in line with the reduction in the reverse mortgage
book. Under the facility agreement, surplus funds (being mortgages repaid (including interest)
less taxes, administration expenses and any hedge payments) are required to be applied
against the facility each month. During the year ended 30 June 2016, $1.5 million surplus
funds have been applied against the facility (30 June 2015: $8.4 million).
The terms and conditions relating to the above facilities are set out below.
(b) Available facilities
(i) Corporate working capital facility
The Group has access to the following lines of credit(i):
The Company entered into a new revolving cash advance facility with National Australia Bank
during the reporting period to replace its previous working capital facility. As at 30 June 2016,
the total facility limit was $30.0 million (including $3.25 million of bank guarantees). $5.0
million of the facility matures 30 November 2016, with the remaining $25.0 million due to
mature 28 February 2017.
(ii) Development facility - secured
Centuria Belmont Road Management Pty Limited has entered into a facility agreement with
Commonwealth Bank of Australia. The facility is $38.75 million across three tranches, maturing
31 August 2017. The facility is recourse only to the underlying property assets of the Belmont
Road Development Fund.
Corporate working capital facility
Amount used at reporting date
Amount unused at reporting date
Reverse mortgage bill facilities and notes (secured)
Amount used at reporting date
Amount unused at reporting date
(i) Excludes the undrawn portion of the development facility.
2016
$'000
26,750
26,750
-
15,000
9,800
5,200
2015
$'000
12,000
-
12,000
18,000
11,303
6,697
51
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
(a) Contribution to profit or loss of benefit funds
Income
Interest and dividends
Realised gains
Unrealised gains / (losses)
Premiums (Discretionary Participation Features only)
Other income
Expenses
Claims (Discretionary Participation Features only)
Net movement in policyholder liabilities
Management fee expense
Bad debts - mortgage loans
Profit before tax
Income tax expense
Profit after tax attributable to benefit funds
2016
$'000
11,152
682
3,330
5,762
1
20,927
2016
$'000
41,705
(29,539)
7,199
213
19,578
1,349
(1,349)
-
2015
$'000
11,414
3,784
2,500
4,315
2
22,015
2015
$'000
36,559
(26,265)
7,735
2,366
20,395
1,620
(1,620)
-
16. Policyholders’ funds
Policyholder liabilities for benefit funds, other than the Funeral Benefit Fund, are valued using
the accumulation method and are equal to the contributions made by members, net of fees,
together with bonus additions to date. The balance of each fund is the unvested policyholder
benefit liabilities (or surplus). Each year’s bonus declaration results in a movement from unvested
policyholder benefit liabilities to the vested policy liability. The bonus rate is limited to ensure
that the amount vesting is no more than the distributable portion of unvested policyholder
benefit liabilities.
For the Funeral Benefit Fund, the policyholder liability has been taken to be the value of assets of
the fund net of other liabilities less the value of the current period bonus. This liability represents
the present value of guaranteed benefits (pre-bonus) plus the present value of future bonuses.
Following declaration of the bonus, there would then be no surplus under this arrangement.
The main variables that determine the bonus rate for a Benefit Fund are the value of the net assets
of each benefit fund at the end of the year, the amounts standing to the credit of each investment
account through the previous year and the investment return (net of fees and taxes where
applicable) earned by the fund throughout the year. The excess of the net assets of the benefit
fund over the liabilities after meeting the prudential capital requirements is the surplus that is
generally able to be distributed to members as a bonus.
There is no provision in the funds’ rules for any surplus to be transferred to the Management Fund.
The Management Fund receives specified fee transfers from the funds to cover expenses. All
remaining assets are to be used to provide benefits to members.
Changes in economic conditions and demographics will alter the unallocated surplus. The Capital
Requirements, as set by APRA, aim to ensure there is sufficient unallocated surplus to cover the
effect of these changes.
Transactions with the benefit funds are shown gross on the basis that the shareholders of the
company do not have access nor are exposed to the revenue, expenses, assets and liabilities of the
benefit funds other than the requirement to maintain capital in the Centuria Capital Guaranteed
Bond fund and the Income Accumulation Fund.
52
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
16. Policyholders' funds (continued)
(c) Movement in benefit fund policyholder’s funds
The composition and balances of the assets and liabilities held by the Benefit Funds are as follows:
(b) Benefit fund policyholder’s assets and liabilities
Cash
Trade and other receivables
Financial assets at fair value
Income tax receivable
Total assets
Trade and other payables
Policyholders' funds (i)
Deferred tax liabilities
Total liabilities
2016
$'000
71,168
3,971
277,548
841
353,528
27
349,878
3,623
353,528
2015
$'000
15,838
11,184
357,381
1,998
386,401
-
382,914
3,487
386,401
(i) Included within policyholders' funds at 30 June 2016 is $35.2 million (30 June 2015: $25.2 million) of
reserves of which $6.2 million (30 June 2015: $6.2 million) is seed capital repayable to Centuria Life
Limited. This seed capital receivable by Centuria Life Limited has been impaired and discounted to present
value. The carrying value of the receivable in the books of Centuria Life Limited (and therefore the Group)
at 30 June 2016 is $0.4 million (30 June 2015: $2.8 million).
Bonus Rated Benefit Funds (with Discretionary
Participation Features)
Opening balance
Movement in seed capital
Applications received
Redemptions paid
Current period income
Closing balance
Unitised Benefit Funds (with non
Discretionary Participation Features)
Opening balance
Applications received
Redemptions paid
Current period income
Closing balance
Total policyholders' funds
2016
$'000
297,513
-
5,762
(41,705)
1,303
262,873
85,401
17,186
(20,681)
5,099
87,005
349,878
2015
$'000
328,616
370
4,315
(36,559)
771
297,513
80,661
5,472
(5,909)
5,177
85,401
382,914
53
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
16. Policyholders’ funds (continued)
(d) Guarantees to Benefit Fund policyholders
Centuria Life Limited (CLL) provides a guarantee to policyholders of two of its Benefit Funds,
Centuria Capital Guaranteed Bond Fund and Centuria Income Accumulation Fund as follows:
"If, when CLL, in right of the Bonds, is required under the Bond rules to pay Policy Benefits to a
Policy Owner as a consequence of the termination of the Bond or the Maturity or Surrender of a
Policy, and CLL determines that the sums to be paid to the Policy Owner from the Bonds shall be
less than the amounts standing to the credit of the relevant Accumulation Account Balance, (or in
the case of a partial surrender, the relevant proportion of the Accumulation Account Balance), CLL
guarantees to take all action within its control, including making payment from its Management
Fund to the Policy Owner to ensure that the total sums received by the Policy Owner as a
consequence of the termination, Maturity or Surrender equal the relevant Accumulation Account
Balance, (or) in the case of a partial surrender, the relevant proportion thereof."
No provision has been raised in respect of these guarantees at this time for the following reasons:
17. Issued Capital
Balance at beginning of
financial year
Employee share scheme
Share buy-back/shares
cancelled
Balance at end of
financial year
2016
2015
No. of shares
$'000
No. of shares
$'000
76,756,929
88,112
78,130,764
89,167
-
(125,230)
57
(111)
-
284
(1,373,835)
(1,339)
76,631,699
88,058
76,756,929
88,112
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Unless otherwise stated, ordinary shares have the right to receive dividends as declared and, in
the event of winding up the Company, to participate in the proceeds from the sale of all surplus
assets in proportion to the number and amounts paid up on shares held. Ordinary shares entitle
their holder to one vote, either in person or by proxy, at a meeting of the Company.
The funds follow an investment strategy that is appropriate for the liabilities of the fund. The
Fund cannot alter their investment strategy without the approval of the members and APRA,
following a report from the Appointed Actuary;
18. Dividends
•
•
The funds must meet the Capital Adequacy standards of APRA which results in additional
reserves being held within the funds to enable the funds to withstand a "shock" in the
market value of assets. If the Funds can withstand a shock in asset values and still meet
their liabilities from their own reserves, then this further reduces the likelihood of the Funds
calling on the guarantee provided; and
Recognised amounts
Interim dividend (fully franked)
Final dividend (fully franked)
2016
2015
Cents
per share
Total
$'000
Cents
per share
Total
$'000
2.25(i)
2.75(ii)
5.00(ii)
1,724
2,109
3,833
2.00(iii)
1.50(iv)
3.50(ii)
1,563
1,172
2,735
(i) The Company declared an interim dividend in respect of the year ended 30 June 2016 of 2.25 cents fully
franked to 100% with a record date of 26 February 2016 which was paid on 18 March 2016.
(ii) The Company declared a final dividend in respect of the year ended 30 June 2015 of 2.75 cents fully franked
to 100%. The final dividend had a record date of 28 August 2015 and was paid on 18 September 2015.
(iii) The Company declared an interim dividend in respect of the year ended 30 June 2015 of 2.00 cents fully
franked to 100% with a record date of 5 March 2015 which was paid on 26 March 2015.
(iv) The Company declared a final dividend in respect of the year ended 30 June 2014 of 1.50 cents fully franked
to 100%. The final dividend had a record date of 12 September 2014 and was paid on 29 October 2014.
•
CLL also continues to meet the ongoing capital requirements set by APRA.
54
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
18. Dividends (continued)
(a) Franking credits
Franking credits available at 30% (2015: 30%) are:
Amount of franking credits available to shareholders of the
Company for subsequent financial years (i)
2016
$'000
8,417
2015
$'000
7,704
(i) Before taking into account the impact of the dividend declared on 18 August 2016.
19. Commitments and contingencies
Operating leases
The Group has commercial leases with respect to its Sydney and Melbourne office premises.
Future minimum rentals payable under operating leases
are as follows:
Not longer than 1 year
Longer than 1 year and not longer than 5 years
2016
$'000
770
1,769
2,539
2015
$'000
739
2,539
3,278
20. Remuneration of auditors
Amounts received or due and receivable by KPMG:
Audit and review of the financial report
Investigating Accounts Report in respect of Centuria
Metropolitan REIT
Other services(i)
Taxation services
2016
$'000
381
-
93
96
570
2015
$'000
361
300
630
72
1,363
(i) Other advisory services in the prior year include costs incurred for services provided in relation to the sale
of the insurance agency and a large portion of the variable rate reverse mortgage portfolio. Refer to Note
6(b) for further details.
55
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
21. Related party transactions
(a) Equity interests in related parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed below:
Name of subsidiary
Centuria Capital Limited
Over Fifty Capital Pty Ltd
Centuria Life Limited
Over Fifty Seniors Equity Release Pty Ltd
Over Fifty Investments Pty Ltd
OFM Direct Property Trust No. 2 "Dominion"
Over Fifty Funds Management Pty Ltd
OFM Direct Property Trust No. 3 Chisholm
National Leisure Trust
OFM Bluegums Leisure Trust
Senex Warehouse Trust No. 1
Centuria Property Funds Limited
Centuria Strategic Property Limited
Centuria Investment Holdings Pty Limited
Centuria Investment Management Services Pty Ltd
Centuria Investment Services Pty Limited
Centuria Property Services Pty Limited
Centuria SPC West Gosford Pty Ltd
Centuria SPV Pty Limited
Country of
incorporation
Ownership
interest %
2016
2015
Name of subsidiary
Country of
incorporation
Ownership
interest %
2016
2015
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Centuria Bulky Goods SPV Pty Limited
Centuria 4-8 Woodville Street Pty Limited
Centuria 100 Bennelong Road Pty Limited
Centuria 110 Pacific Highway Pty Limited
Centuria 519 Cross Keys Road Pty Limited
Centuria Opportunity Fund 2 Pty Limited
Centuria 601 Bourke Street Pty Limited
Centuria 339 Military Road Pty Ltd
Centuria DPF Pty Ltd
Centuria Employee Share Fund Pty Ltd
Strategic Property Holdings Pty Ltd
Strategic Property Holdings No3 Pty Limited
Strategic Property Holdings No. 5 Pty Ltd
Strategic Property Holdings No. 7 Pty Limited
30A Nominees Pty Ltd
Centuria Capital Private Limited
Belmont Road Management Pty Limited
Belmont Road Development Pty Limited
Centuria Belmont Road Development Fund
Centuria Special Opportunities Fund
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
0%
0%
0%
0%
0%
100%
0%
0%
0%
100%
0%
0%
0%
100%
0%
100%
100%
100%
27%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
27%
0%
All subsidiaries with a 0% ownership interest as at 30 June 2016 were deregistered during the year.
56
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
21. Related party transactions (continued)
(b) Transactions with key management personnel
As a matter of Board policy, all transactions with directors and director-related entities are
conducted on arms-length commercial or employment terms.
The Company and its related parties entered into transactions, which are insignificant in
amount, with directors and their director-related entities in their domestic dealings and are
made in arm's length transactions at normal market prices and on normal commercial terms.
The Group pays some expenses on behalf of related entities and receives a reimbursement for
these payments.
During the financial year, the following transactions occurred between the Company and key
management personnel:
(d) Related party balances
•
•
•
Wolseley Corporate Pty Ltd, a related party of G. Charny, was paid $88,000 (inclusive of GST)
for corporate advisory fees.
Henry Davis York, a related party of R. Dobson, was paid $16,374 (inclusive of GST) (2015:
$806,856) for legal consultancy fees.
Mr J. R. Slater (personally) and Riviera Capital Pty Ltd, a related party of Mr. Slater, were paid
a total of $141,840 (inclusive of GST) (2015: $141,643) for consultancy services.
(c) Transactions with other related parties
Management fees are charged to related parties in accordance with the respective trust deeds
and management agreements.
Management fees:
Centuria Life Limited Benefit Funds
Over Fifty Guardian Friendly Society
Property funds managed by Centuria
2016
$'000
7,199
2,314
29,538
39,051
2015
$'000
7,735
2,121
20,324
30,180
(i) Terms and conditions of transactions with related parties
Investments in property trusts and benefit funds held by certain directors and director-related
entities are made on the same terms and conditions as all other persons. Directors and
director-related entities receive the same returns on these investments as all other investors
and policyholders.
The following balances were outstanding at the end of the financial period between the Group
and other related parties:
(i) Trade and other receivables
Monthly management fees owing from Benefit Funds
Monthly management fees owing from Property Trusts
Acquisition fee, loan receivable and cost recoveries owing from
Centuria 8 Central Avenue Fund No. 2
Sales Fee receivable Opportunity Fund No. 2
Receivable from Centuria Zenith Fund
Receivable from Over Fifty Guardian Friendly Society Limited
Distribution receivable from Centuria Metropolitan REIT
Present value of $5.800m seed capital investment in Centuria Income
Accumulation Fund
Short-term loan receivable from Property Trust
Present value of $0.370m seed capital investment in Centuria Capital
Guaranteed Bond Fund
2016
$'000
561
923
2015
$'000
630
673
-
3,534
9,600
7,072
216
110
-
-
370
-
-
191
106
2,779
101
370
18,853
8,384
57
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
21. Related party transactions (continued)
(ii) Financial assets carried at fair value through profit or loss.
The following table details related party investments carried at fair value through profit and loss.
2015
Units held
Ownership
%
2016
Units held
Fair value
$'000
Ownership
%
503
5,544
74
500
-
-
-
22
17
18
6,678
141,531
2,590,837
75,452
500,000
-
-
18
10,000
9,821
10,000
764
1,327
357,143
1,458,635
0.69%
2.17%
0.48%
0.81%
0.00%
0.00%
0.00%
0.22%
0.11%
0.27%
0.30%
7.69%
Fair value
$'000
146
5,231
-
-
0
1
-
20
15
17
5,430
141,531
2,539,382
-
-
3,765
395
-
10,000
9,000
10,000
736
1,307
357,143
1,458,635
0.69%
2.13%
0.00%
0.00%
0.01%
0.03%
0.00%
0.22%
0.13%
0.28%
0.30%
7.69%
10,142
4,739,200
3.97%
9,763
4,739,200
3.98%
Financial assets held by the Group
Centuria Opportunity Fund 2
Centuria Metropolitan REIT
Centuria 19 Corporate Drive Fund
Centuria ATP Fund
Centuria Diversified Direct Property Fund
Centuria Australian Property and Mortgage Bond Fund
Centuria 2 Wentworth Street Fund
Centuria Australian Shares Bond
Centuria Balanced Bond
Centuria High Growth Bond
Financial assets held by the Benefit Funds
Centuria Balanced Bond
Centuria Metropolitan REIT
Centuria 8 Australia Avenue Fund
Centuria Growth Bond Fund
Centuria Metropolitan REIT
58
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
21. Related party transactions (continued)
(b) Reconciliation of profit for the period to net cash flows from operating activities
(iii) Assets classified as held for sale
During the prior reporting period the Company acquired 100% of the acquisition units in
Centuria 2 Wentworth Street Fund (“the Fund”) to seed the Fund and enable the acquisition of
the underlying investment property.
Acquisition units rank equally with Ordinary Units, except that the proceeds from the allotment
of Ordinary Units may be used to redeem any Acquisition Units.
As at 30 June 2015, the Company held 1,040,018 Acquisition Units which were value at
$1,040,018.
All Acquisition Units in the Fund (except for 18 units to be retained) were redeemed on
1 July 2015.
22. Notes to the statement of cash flows
(a) Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on
hand and in banks. Cash and cash equivalents at the end of the reporting period as shown in the
statement of cash flows are reconciled to the related items in the statement of financial position
as follows:
Cash and cash equivalents
2016
$'000
13,157
2015
$'000
25,487
Included in cash and cash equivalents attributable to shareholders is $7.2 million
(2015: $9.6 million) relating to amounts held by Centuria Life Limited and Senex Warehouse
Trust No.1 which is not readily available for use by the Group.
Profit for the year
Add (deduct) non-cash items:
Depreciation and amortisation
Impairment of related party receivable
Share-based payment expense
Gross proceeds on disposals
Fair value gain on interest rate swap
Loss on disposal of property, plant and equipment
Fair value gain on unit trusts
Interest revenue - from reverse mortgages
Interest expense- reverse mortgage facility
Unwinding of discount on non-current related party receivable
Unrealised foreign exchange loss
Changes in net assets and liabilities:
(Increase)/decrease in assets:
Trade receivables
Prepayments
Investment in Associates
Decrease in deferred income tax assets
Property held for development
Increase/(decrease) in liabilities:
Trade and other liabilities
Tax provision
Increase in Deferred Tax Liability
Provisions
Policyholder liability
Net cash flows used in operating activities
2016
$'000
12,123
330
2,779
732
-
(5,493)
-
(2,219)
(2,300)
1,949
-
28
(13,816)
(256)
-
2,623
2015
$'000
8,561
341
2,218
904
(7,050)
(1,148)
95
(57)
(5,144)
3,662
(423)
178
(17)
(313)
668
1,507
(12,705)
(23,011)
4,004
(172)
2,500
(109)
(3,403)
-
-
79
(35,572)
(27,855)
(45,573)
(50,207)
59
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments
These consolidated results comprise the assets and liabilities of the Group, including the Benefit
Funds as required by AASB 10 Consolidated Financial Statements. The assets and liabilities of the
Benefit Funds do not impact the net profit after tax or the equity attributable to the shareholders
of the Company and the shareholders of the Company have no rights over the assets and
liabilities held in the Benefit Funds. As a result, this note does not include disclosures in respect
of those financial assets and liabilities held by the Benefit Funds (as set out in Note 16).
The only risk to the shareholders of the Company in respect to the Benefit Funds is limited to
capital reserving. Centuria Life Limited, (CLL), being a subsidiary of the Company, acts in the
capacity of manager for two capital guaranteed benefit funds as described in Note 16(c). To
mitigate the risk of these guarantees being called upon, the Benefit Funds set aside prescribed
reserving which is determined upon a “1 in 400 year event” stress testing scenario. The reserving
calculations are performed by an independent actuary appointed by CLL.
The Benefit Funds at 30 June 2016 have set aside the requisite reserving as determined by the
investment profile of the two respective funds. If the required reserving under the “Capital
Adequacy Test” increases, CLL may be required to inject additional seed capital.
Seed capital is later repaid to CLL when reserving is returned to a normal sustainable level.
The expected recovery of, or future injection of, seed capital into the Society’s Benefit Funds is
dependent on the underlying performance of the Funds’ assets.
(a) Management of financial instruments
The Board is ultimately responsible for the Risk Management Framework of the Group.
The Group employs a cascading approach to managing risk, facilitated through delegation to
specialist committees and individuals within the Group.
CLL has also established an Investment Committee. The Investment Committee’s function
is to manage and oversee the Benefit Fund investments in accordance with the investment
objectives and framework. Specifically, it has responsibility for setting and reviewing strategic
asset allocations, reviewing investment performance, reviewing investment policy, monitoring
and reporting on the performance of the investment risk management policy and performing risk
management procedures in respect of the investments.
The Group is exposed to a variety of financial risks as a result of its activities. These risks include
market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group's
60
risk management and investment policies, approved by the Board, seek to minimise the potential
adverse effects of these risks on the Group's financial performance. These policies may include
the use of certain financial derivative instruments.
The Group outsources the investment management of the Benefit Funds to specialist investment
managers, who provide services to the Group, co-ordinate access to domestic and international
financial markets, and manage the financial risks relating to the operations of the Group in
accordance with an investment mandate set out in the Group's constitution and the Benefit
Funds' product disclosure statements. The Benefit Funds' investment mandates are to invest in
equities and fixed interest securities via unit trusts, discount securities and may also invest in
derivative instruments such as futures and options.
The Group uses interest rate swaps to manage interest rate risk and not for speculative purposes
in any situation. Hedging is put in place where the Group is either seeking to minimize or
eliminate cash-flow variability, i.e., converting variable rates to fixed rates, or changes in the fair
values of underlying assets or liabilities, i.e., to convert fixed rates to variable rates.
Derivative financial instruments of the Benefit Funds, consolidated into the financial statements
of the Group under AASB 10 Consolidated Financial Statements, are used only for hedging of
actual or anticipated exposures relating to investments. The use of financial derivatives in respect
of Benefit Funds is governed by the Fund's investment policies, which provide written principles
on the use of financial derivatives.
(b) Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as
going concerns while maximising the return to stakeholders through the optimisation of debt
and equity capital. This overall strategy remains unchanged from the prior year.
The Group's capital structure consists of net debt (borrowings, offset by cash and cash
equivalents) and equity of the Group (comprising issued capital, reserves and retained earnings).
The Group carries on business throughout Australia, primarily through subsidiary companies
that are established in the markets in which the Group operates. The operations of Centuria
Life Limited are regulated by APRA and the Management Fund of the Society has a minimum
Prescribed Capital Amount (PCA) that must be maintained at all times. It is calculated monthly
and these results are reported to the Board each month. The current level of share capital of
Centuria Life Limited meets the PCA requirements.
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(b) Capital risk management (continued)
In addition, Centuria Property Funds Limited and Centuria Strategic Property Limited have AFSL
licences so as to operate registered property trusts. Regulations require these entities to hold a
minimum net asset amount which is maintained by way of bank guarantees. Where necessary,
the bank guarantees will be increased to ensure the net asset requirement is always met.
Operating cash flows are used to maintain and, where appropriate, expand the Group's funds
under management as well as to make the routine outflows of tax, dividends and repayment of
maturing debt. The Group reviews regularly its anticipated funding requirements and the most
appropriate form of funding (capital raising or borrowings) depending on what the funding will
be used for.
The capital structure of the Benefit Funds (and management fund) consists of cash and cash
equivalents, bill facilities and mortgage assets. The Benefit Funds also hold a range of financial
assets for investment purposes including investments in unit trusts, equity and floating rate
notes. The Investment Committee aims to ensure that there is sufficient capital for possible
redemptions by unit holders of the Benefit Funds by regularly monitoring the level of liquidity in
each fund.
The Benefit Funds have no restrictions or specific capital requirements on the application and
redemption of units. The Benefit Fund's overall investment strategy remains unchanged from the
prior year.
(c) Fair value of financial instruments
(i) Valuation techniques and assumptions applied in determining fair value
The fair values of financial assets and financial liabilities with standard terms and conditions
and traded on active liquid markets are determined with reference to quoted market prices
(includes listed redeemable notes, bills of exchange, debentures and perpetual notes).
The fair values of other financial assets and financial liabilities (excluding derivative
instruments) are determined in accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current market transactions and
dealer quotes for similar instruments. Discount rates are determined based on market rates
applicable to the financial asset or liability.
The valuation technique used to determine the fair value of the Group's reverse mortgage
loan book is as follows:
• the weighted average reverse mortgage holders’ age is 79 years;
• the future cash flows calculation is related to borrowers' mortality rates and mortality
improvements. The data is sourced from mortality tables provided by the actuary;
• fixed or variable interest rates charged to borrowers are used to project future cash flows;
• a redemption rate, which is based on historical loan redemption experience, applies to
future cash flow forecast; and
• year-end yield curve is used to discount future cash flows back to 30 June 2016 to
determine the fair value.
(ii) Valuation techniques and assumptions applied in determining fair
value of derivatives
The fair values of derivative instruments are calculated using quoted prices. Where such
prices are not available, discounted cash flow analysis is performed using the applicable yield
curve for the duration of the instruments for non-optional derivatives, and option pricing
models for optional derivatives.
The valuation technique used to determine the fair value of the Fixed for Life interest rate
swaps is as follows:
• the weighted average reverse mortgage holders’ age is 79 years;
• the expected future cash flows in relation to the swaps are based on reverse mortgage
borrowers' expected life expectancy sourced from mortality tables provided by the actuary;
and the difference between the fixed swap pay rates and forward rates as of 30 June 2016 is
used to calculate the future cash flows in relation to the swaps; and year-end yield curve plus
a credit margin is used to discount future cash flows back to 30 June 2016 to determine the
fair value.
61
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(c) Fair value of financial instruments (continued)
(iii) Fair value measurements recognised in the statement of financial position
The following table shows the carrying amounts and fair values of financial assets and
financial liabilities, including their levels in the fair value hierarchy for financial instruments
measured at fair value.
The table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair
value is observable.
30 June 2016
Financial assets
Measurement
basis
Fair value
hierarchy
Carrying
amount
$'000
Cash and cash equivalents
Amortised cost
Not applicable
13,157
Trade and other receivables
Amortised cost
Not applicable
19,656
Financial assets at fair value
Financial assets at fair value
Reverse mortgages at fair value
Fair value
Fair value
Fair value
Level 1
5,544
Level 2
41,650
Level 3
51,561
Fair
value
$'000
13,157
19,656
5,544
41,650
51,561
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Financial liabilities
131,568
131,568
• Level 2 fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Trade and other payables
Amortised cost
Not applicable
8,349
Borrowings
Amortised cost
Not applicable
59,951
Interest rate swaps
Fair value
Level 3
20,778
• Level 3 fair value measurements are those derived from valuation techniques that
include inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
30 June 2015
Financial assets
89,078
8,349
59,951
20,778
89,078
There were no transfers between Level 1, 2 and 3 in the period.
Cash and cash equivalents
Amortised cost
Not applicable
25,487
25,487
Trade and other receivables
Amortised cost
Not applicable
Assets classified as held for sale
Fair value
Financial assets at fair value
Reverse mortgages at fair value
Fair value
Fair value
Level 2
Level 1
8,619
1,040
5,456
8,619
1,040
5,456
Level 3
43,754
43,754
84,356
84,356
Financial liabilities
Trade and other payables
Amortised cost
Not applicable
4,345
Borrowings
Amortised cost
Not applicable
20,912
Interest rate swaps
Fair value
Level 3
17,576
42,833
4,345
20,912
17,576
42,833
62
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(c) Fair value of financial instruments (continued)
(iv) Reconciliation of Level 3 fair value measurements of financial assets
and liabilities
(iii) Fair value measurements recognised in the statement of financial
position (continued)
The Group determines Level 2 fair values for financial assets and liabilities without an active
market based on broker quotes and other observable market data. Level 2 fair values for
simple over-the-counter derivatives are also based on broker quotes. Those quotes are
tested for reasonableness by discounting expected future cash flows using market interest
rates for a similar instrument at the measurement date. Fair values reflect the credit risk of
the instrument and include adjustments to take account of the credit risk of the entity and
counterparty where appropriate.
Set out below is a reconciliation of Level 3 fair value movements of financial assets and
liabilities. The Level 3 financial asset held by the Group is the fair value of the reverse
mortgage receivables attributable to interest rate risk. The Level 3 financial liability held by
the Group is the fixed-for-life interest rate swaps.
These two items are designated in a fair value hedging relationship, with the fair value
movements on the swaps, offset by the fair value movements attributable to interest
rate risk in the mortgage receivables (refer to Note 23(c)(iv). However, as the Group has
only designated the fair value movements attributable to interest rate risk in the hedging
relationship, any other fair value movements impact the profit and loss directly, such as
movements attributable to credit risk.
Year ended 30 June 2016
Balance at 1 July 2015
Total gains in profit or loss:
Accrued interest
Attributable to interest rate risk
Attributable to credit risk
Balance at 30 June 2016
Reverse mortgages
fair value
Interest rate swaps
at fair value
$'000
17,202
114
7,738
-
25,054
$'000
(17,576)
(957)
(7,738)
5,493
(20,778)
Total
$'000
(374)
(843)
-
5,493
4,276
Year ended 30 June 2015
$'000
$'000
$'000
Balance at 1 July 2014
Total gains in profit or loss:
Accrued interest
Attributable to interest rate risk
Attributable to credit risk
13,130
(14,075)
(945)
184
3,888
-
(761)
(3,888)
(577)
-
1,148
1,148
Balance at 30 June 2015
17,202
(17,576)
(374)
63
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(c) Fair value of financial instruments (continued)
(v) Significant assumptions used in determining fair value
The fair value of the 50 year reverse mortgage loans and 50 years swaps are calculated using a
valuation technique based on assumptions that are not supported by prices from observable
current market transactions in the same instrument and not based on available observable
market data due to the illiquid nature of the instruments. Use is made of discounted cash
flow analysis using the applicable yield curve out to 20 years, with the yield curve at 20 years
employed as the best proxy for subsequent rates due to non-observable market data.
Mortality rates for males and females have been assumed to be consistent with 2013 Life
Tables. Mortality improvements of 3% p.a. are assumed starting at age 70. The improvement
factor tapers down to 1% p.a. at age 90 and then zero at age 100. Joint life mortality is
calculated based on last death for loans with joint borrowers. 53% of reverse mortgage loan
portfolio consists of joint lives.
Adjusting the yield curve by an increase/(decrease) of 100 basis points as at 30 June
2016 would cause the fair value of the 50 year swaps to (decrease)/increase by
$(4,686,814)/$5,587,039 (2015: ($781,885)/$943,428).
Additionally, the valuations have been calculated with an assumption of deaths (as opposed
to early voluntary repayment) of mortgagees during the life of the interest rate swaps. The
swap agreements provide that in the event of death of a mortgagee there is no further cost
associated with the prepayment.
Accordingly, the assumption on the number of deaths and timing of such deaths will
impact the valuation. If the assumption of the death rate was to increase/(decrease) by
10%, the fair value of fixed for life swaps at 30 June 2016 would (decrease)/increase by
$(781,885)/$943,428 (2015: $(665,804)/$813,657).
(d) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in financial loss to the Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral or other security, where
64
appropriate, as a means of mitigating risk of financial loss from default. The credit risk on
financial assets of the Group and the parent recognised in the statement of financial position is
generally the carrying amount, net of allowance for impairment loss.
Concentration of risk may exist when the volume of transactions limits the number of
counterparties.
(i) Credit risk of reverse mortgages
Concentration of credit risk in relation to reverse mortgage loans is minimal, as each
individual reverse mortgage loan is secured by an individual residential property. The loan
is required to be paid off from the proceeds of disposal of the secured property after the
borrower's death.
Individual property valuations are conducted at least every 3 years in accordance with
financier's requirements. At 30 June 2016, the highest loan to value ratio (LVR) of a loan in the
reverse mortgage loan book is 82% (2015: 74%), and there are only 41 out of 247 (2015: 32
out of 263) reverse mortgage loans where the LVR is higher than 50%.
There are no reverse mortgage loans that are impaired.
(ii) Credit risk on other financial assets
Credit risk on other financial assets such as investments in floating rate notes, standard
discount securities and unit trusts is managed through strategic asset allocations with
creditworthy counterparties and the on-going monitoring of the credit quality of investments,
including the use of credit ratings issued by well-known rating agencies. The exposure of
credit risk in respect of financial assets is minimal.
The Group does not have any significant credit risk exposure to any single entity in other
financial assets or any group of counterparties having similar characteristics.
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(e) Liquidity risk
The Group's approach to managing liquidity is to ensure that it will always have sufficient
liquidity to meet its liabilities.
The liquidity risk is managed for the Group at a corporate level. Bank account balances across all
entities, current and future commitments, and expected cash inflows are reviewed in detail when
the monthly cash flow projection is prepared for management purposes and presented to the
Board at its regular monthly meetings. By comparing the projected cash flows with the assets
and liabilities shown in the individual and consolidated statements of financial position, which
are also prepared on a monthly basis for management purposes and presented to the Board,
liquidity requirements for the Group can be determined. Based on this review, if it is considered
that the expected cash inflows plus liquidity on hand, may not be sufficient in the near term to
meet cash outflow requirements, including repayment of borrowings, a decision can be made to
carry out one or more of the following:
•
•
renegotiate the repayment terms of the borrowings;
sell assets that are held on the statement of financial position; and/or
• undertake an equity raising.
This, combined with a profitable business going forward, should ensure that the Group continues
to meet its commitments, including repayments of borrowings, as and when required.
The Group's overall strategy to liquidity risk management remains unchanged from the prior year.
The following tables summarise the Group's remaining contractual maturity for its non-derivative
financial liabilities with agreed repayment periods. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on which the Group
and the parent can be required to pay. The tables include both interest and principal cash flows.
To the extent that interest flows are at floating rate, the undiscounted amount is derived from
interest rate curves at the end of the reporting period.
The policy holders in the Benefit Funds are able to redeem their policies at any time and the
Benefit Funds are therefore exposed to the liquidity risk of meeting policyholders' withdrawals
at any time. The Investment Committee aims to ensure that there is sufficient capital for possible
redemptions by policyholders of the Benefit Funds by regularly monitoring the level of liquidity
in each fund.
On
Demand
$'000
Less than 3
months
$'000
3 months
to 1 year
$'000
1-5 years
5+ years
Total
$'000
$'000
$'000
-
-
-
-
-
-
26,850
23,851
9,250
8,349
-
-
35,199
23,851
9,250
1,040
4,345
5,384
2,724
17,962
-
-
2,724
17,962
-
-
-
-
-
-
59,951
8,349
68,300
21,725
4,345
26,070
Non-derivative
financial liabilities
Consolidated
2016
Borrowings
Other payables
Total
2015
Borrowings
Other payables
Total
The following table summarises the maturing profile of derivative financial liabilities. The table
has been drawn up based on the undiscounted net cash flows on the derivative instruments that
settle on a net basis.
On
Demand
$'000
Less than
3 months
$'000
3 months to
1 year
$'000
1-5 years
5+ years
Total
$'000
$'000
$'000
Derivative
financial liabilities
Consolidated
2016
Interest rate swaps
Total
2015
Interest rate swaps
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48,405
48,405
48,405
48,405
45,552
45,552
45,552
45,552
65
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(i) Interest rate risk management
(f) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises interest rate risk and
price risk. Due to the nature of assets held by the Group (excluding the Benefit Funds), there is
an asset and liability management process which determines the interest rate sensitivity of the
statement of financial position and the implementation of risk management practices to hedge
the potential effects of interest rate changes. The Group manages the market risk associated
with its Benefit Funds by outsourcing its investment management. The Investment Manager
manages the financial risks relating to the operations of the Benefit Funds in accordance with an
investment mandate set out in the Benefit Funds’ constitution and product disclosure statement.
There has been no change to the Group's exposure to market risks or the manner in which it
manages and measures the risk.
The Group is exposed to interest rate risk because entities in the Group borrow funds at
floating interest rates. Management of this risk is evaluated regularly and interest rate swaps
are used accordingly.
The tables below detail the Group's interest bearing financial assets and liabilities.
2016
Financial assets
Cash and cash equivalents
Reverse mortgage receivables
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
Net interest bearing financial
(liabilities)/assets
2015
Financial assets
Cash and cash equivalents
Reverse mortgage receivables
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
Net interest bearing financial
(liabilities)/assets
Weighted
average effective
interest rate
%
Variable
rate
Fixed
rate
Total
$'000
$'000
$'000
1.51%
8.75%
13,157
-
1,130
25,377
14,287
25,377
4.12% (59,951)
(59,951)
-
-
(45,664)
25,377
13,157
26,507
39,664
(59,951)
(59,951)
(20,287)
Weighted
average effective
interest rate
%
Variable
rate
Fixed
rate
Total
$'000
$'000
$'000
2.06%
8.72%
9,771
1,664
11,435
15,717
25,488
24,888
40,605
26,552
52,040
3.82%
(20,912)
(20,912)
(9,477)
-
-
(20,912)
(20,912)
40,605
31,128
66
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
23. Financial instruments (continued)
(f) Market risk (continued)
(ii) Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to exchange the difference between
fixed and floating rate interest amounts calculated on agreed notional principal amounts.
Such contracts enable the Group to mitigate the risk of changing interest rates on the fair
value of fixed rate financial assets held and the cash flow exposures on the issued variable
rate debt.
The following table details the notional principal amounts and remaining expiry of the Group's
outstanding interest rate swap contracts as at reporting date. These swaps are at fair value
through profit and loss.
At reporting date, if variable interest rates had been 100 (2015: 100) basis points higher or
lower and all other variables were held constant, the impact to the Group would have been
as follows:
Change in variable
Profit after tax
Effect On
Consolidated
Interest rate risk
Consolidated
Interest rate risk
+1%
-1%
2016
$'000
2015
$'000
(2,196)
(1,117)
2,647
1,410
Average contracted
rate
Notional principal
amount
2016
2015
2016
2015
%
%
$'000
$'000
Fair value
2016
$'000
2015
$'000
The methods and assumptions used to prepare the sensitivity analysis have not changed
in the year. The sensitivity analysis takes into account interest-earning assets and interest-
bearing liabilities attributable to the shareholders only, and does not take into account the
bank bill facility margin changes.
Pay fixed for
floating contracts
designated as
effective in fair
value hedge
50 years swaps
contracts
7.47%
7.48%
11,913
12,745
(20,778)
(17,576)
11,913
12,745
(20,778)
(17,576)
(iii) Interest rate sensitivity
The sensitivity analysis below has been determined based on the parent and the Group's
exposure to interest rates at the reporting date and the stipulated change taking place at the
beginning of the financial year and held constant throughout the reporting period, in the case
of financial assets and financial liabilities that have variable interest rates. A 100 basis point
(1%) increase or decrease represents management's assessment of the reasonably possible
change in interest rate.
24. Key management personnel compensation
The aggregate compensation paid to key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term employment benefits
Share-based payments
2016
$
2,897,468
102,988
48,710
577,382
3,626,548
2015
$
2,936,599
138,600
36,336
546,841
3,658,376
Detailed information on key management personnel is included in the Remuneration Report.
67
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
25. Share-based payment arrangements
(a) Description
The Company has an Executive Incentive Plan (“LTI Plan”) which forms a key element of the
Company’s incentive and retention strategy for senior executives under which Performance
Rights (“Rights”) are issued.
Each employee receives ordinary shares of the Company on vesting of the performance rights. No
amounts are paid or payable by the recipient on receipt of the performance rights or on vesting.
The performance rights carry neither rights to dividends nor voting rights prior to vesting.
It is expected that future annual grants of performance rights will be made, subject to the
Board’s determination of the overall performance of the Company and market conditions.
The vesting of any performance rights awarded will be subject to attainment of appropriate
performance hurdles and on the basis of continuing employment with the Company.
Performance rights granted under the plan carry no dividend or voting rights. All plans are
equity-settled.
The primary objectives of the Plan include:
•
•
•
focusing executives on the longer term performance of the Group to drive long term
shareholder value creation;
ensure executive remuneration outcomes are aligned with shareholder interests, in
particular, the strategic goals and performance of the Group; and
ensure remuneration is competitive and aligned with general market practice by ASX
listed companies.
Rights issued under the LTI Plan are issued in accordance with the thresholds approved at the
2013 AGM.
There have been three tranches of Rights granted under the LTI plan to date:
Tranche
Grant date
Performance period
1
2
3
1 January 2014
1 July 2013 to 30 June 2016
1 February 2015
1 July 2014 to 30 June 2017
1 February 2016
1 July 2015 to 30 June 2018
The following table summarises the number of rights granted for each tranche:
Tranche
# of rights granted
# of rights lapsed
# of rights outstanding
1
2
3
1,200,825
1,831,926
1,787,715
-
440,999
-
1,200,825
1,390,927
1,787,715
The Performance Conditions and their associated weighting applicable to each tranche is
summarised in the following table:
EPS Hurdle
The percentage of Rights subject to the EPS Hurdle that vest, if any, will be
determined as follows:
Maximum %
or above
Between
threshold
% and
maximum %
Compound Annual
Growth Rate
Portion of
Rights that vest
Compound Annual
Growth Rate
Portion of
Rights that vest
Tranche 1 (70%)
Tranche 2 and 3 (45%)
12.5% or greater
100%
10% or greater
100%
More than 7.5%,
less than 12.5%
Pro-rata
between 50%
and 100%
More than 6%, less
than 10%
More than 4%, less
than 6%
Pro-rata
between 50%
and 100%
Pro-rata
between 25%
and 50%
Threshold % 7.5%
Less than 7.5%
Less
than the
threshold %
50%
0%
4%
Less than 4%
25%
0%
68
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
25. Share-based payment arrangements (continued)
(a) Description (continued)
The Board has discretion to adjust the EPS performance hurdle to ensure that participants are
neither advantaged nor disadvantaged by matters outside managements’ control that affect EPS
(for example, by excluding one-off non-recurrent items or the impact of significant acquisitions
or disposals).
Growth in FUM Hurdle
The percentage of Rights subject to the Growth in FUM Hurdle that vest, if any, will be determined
as follows:
Compound Annual
Growth Rate
Portion of
Rights that vest
Compound Annual
Growth Rate
Portion of
Rights that vest
Tranche 1 (15%)
Tranche 2 and 3 (15%)
25% or greater
100%
18% or greater
100%
More than 15%,
less than 25%
Pro-rata
between 50%
and 100%
More than 14%,
less than 18%
Pro-rata between
50% and 100%
Maximum %
or above
Between
threshold
% and
maximum %
Threshold %
15%
Less than the
threshold %
Less than 15%
50%
0%
More than 10%,
less than 14%
Pro-rata between
25% and 50%
10%
Less than 10%
25%
0%
Absolute TSR Hurdle
The percentage of Rights subject to the Absolute TSR Hurdle that vest, if any, will be determined
as follows:
Maximum %
or above
Between
threshold
% and
maximum %
Compound Annual
Growth Rate
Portion of
Rights that vest
Compound Annual
Growth Rate
Portion of
Rights that vest
Tranche 1 (15%)
Tranches 2 and 3 (40%)
18% or greater
100%
18% or greater
100%
More than 12%,
less than 18%
Pro-rata
between 50%
and 100%
More than 15%,
less than 18%
More than 12%,
less than 15%
Pro-rata
between 50%
and 100%
Pro-rata
between 25%
and 50%
Threshold %
12%
Less than the
threshold %
Less than 12%
50%
0%
12%
Less than 12%
25%
0%
69
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
26. Parent entity disclosure
As at, and throughout the current and previous financial year, the parent entity of the Group was
Centuria Capital Limited.
25. Share-based payment arrangements (continued)
(b) Measurement of fair values
The fair value of the Rights was calculated using a binomial tree valuation methodology for the
Rights with non-market vesting conditions and a Monte-Carlo simulation for the Rights with
market vesting conditions.
The inputs used in the measurement of the fair values at grant date of the Rights
were as follows:
Expected vesting date
31 August 2016
31 August 2017
31 August 2018
Tranche 1
Tranche 2
Tranche 3
Share price at the grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
$0.80
2.7 years
25%
2.85%
3.4%
$0.91
2.6 years
25%
1.94%
4.3%
$0.96
2.6 years
20%
1.85%
5.4%
Result of parent entity
Profit for the period
Total comprehensive income for the year
Financial position of parent entity at
year end
Total assets
Total liabilities
Total equity of the parent entity
comprising of:
Share capital
The following table sets out the fair value of the rights at the respective grant date:
Share-based incentive reserve
Performance condition
Tranche 1
Tranche 2
Tranche 3
EPS
Growth in FUM
Absolute TSR
$0.73
$0.73
$0.18
$0.81
$0.81
$0.28
$0.87
$0.87
$0.19
During the year, share based payment expenses were recognised of $0.675 million
(FY15 $0.620 million).
Profits reserve
Retained earnings
Total equity
70
2016
$ '000
3,399
3,399
118,938
34,213
88,033
1,459
2,601
(7,368)
84,725
2015
$ '000
843
843
87,316
2,610
88,146
784
2,601
(6,825)
84,706
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
27. Events subsequent to the reporting date
(a) Final Dividend
On 18 August 2016, the Company declared a dividend of 3.00 cents per share franked to 100%.
The dividend is expected to be paid on 14 September 2016.
(b) Investment in GPT Metro Office Fund
In May 2016, the group announced the acquisition of a 12.6% stake in GPT Metro Office Fund
(GMF). On 24 May 2016, the Group’s subsidiary Centuria Property Funds Limited (CPFL) in its
capacity as responsible entity of the Centuria Metropolitan REIT (CMA) submitted a non-binding
proposal to merge CMA and GMF via a trust scheme. This was followed on 16 June 2016 with a
takeover bid for GMF via an off market takeover. At the same time the Company entered into a
number of agreements, including a Facilitation and Property Rights Deed with the GPT Group. On
1 August 2016, GMF’s Independent Board Committee announced its support for a competing offer.
Also on 1 August 2016, CMA announced it would not be proceeding with its offer for GMF. As at the
date of this report, the Group retains its 12.6% interest in GMF.
Other than the matters discussed above, there has not arisen in the interval between 30 June 2016
and the date hereof any item, transaction or event of a material and unusual nature likely, in the
opinion of the directors of the Company, to affect significantly the operations of the Group, the
results of those operations, or the state of affairs of the Group, in future financial years.
28. Significant accounting policies
The Group has consistently applied the following accounting policies to all periods presented in
these consolidated financial statements.
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company
and entities controlled by the Company (subsidiaries). The Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The financial statements of
subsidiaries are included in the consolidated financial statements from the date on which control
commences until the date on which control ceases.
The Company is required by AASB 10 Consolidated Financial Statements to recognise the assets,
liabilities, income, expenses and equity of the benefit funds of its subsidiary, Centuria Life Limited
(the “Benefit Funds”). The assets and liabilities of the Benefit Funds do not impact the net profit
after tax or the equity attributable to the shareholders of the Company and the shareholders
of the Company have no rights over the assets and liabilities held in the Benefit Funds. The
Company has majority representation on the Board of the Over Fifty Guardian Friendly Society
Limited (Guardian). However, as Guardian is a mutual organisation, the Company has no legal
rights to Guardian's net assets, nor does it derive any benefit from exercising its power and
therefore does not control Guardian.
Intra-group balances and transactions, and any unrealised income and expenses arising from
intra-group transactions, are eliminated in preparing the consolidated financial statements. This
excludes transactions with the Centuria Life Limited benefit funds. Transactions with the benefit
funds continue to be shown gross on the basis that the shareholders of the company do not have
access nor are exposed to the revenue, expenses, assets and liabilities of the benefit funds other
than the requirement to maintain capital in the Centuria Capital Guaranteed Bond fund and the
Income Accumulation Fund.
Unrealised gains arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence
of impairment.
(b) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method when
control is transferred to the Group. The consideration for each acquisition is measured at
the aggregate of the fair values (at the date of acquisition) of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred.
71
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(e) Goods and services tax
(c) Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control
is achieved (the acquisition date). Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree, and the
fair value of the acquirer previously held equity interest in the acquiree (if any) over the net
of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed.
Goodwill is reviewed for impairment at least annually. For the purpose of impairment testing,
goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the
synergies of the combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit
may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying
amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a
subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Revenues, expenses and assets are recognised net of the amount of goods and services tax
(GST), except:
•
where the amount of GST incurred is not recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
•
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part
of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of
cash flows arising from investing and financing activities which is recoverable from, or payable to,
the taxation authority is classified within operating cash flows.
(f) Revenue
Revenue is measured at the fair value of the consideration received or receivable to the extent
it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured.
(d) Investments in associates
(i) Management fees
An associate is an entity over which the Group has significant influence and that is neither a
subsidiary nor an interest in a joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
The results and assets and liabilities of associates are incorporated in these financial statements
using the equity method of accounting, except when the investment is classified as held for sale,
in which case it is accounted for in accordance with AASB 5 Non-current Assets Held for Sale and
Discontinued Operations. Under the equity method, investments in associates are initially carried
in the consolidated statement of financial position at cost and subsequently adjusted for post-
acquisition changes in the Group's share of the net assets of the associate, less any impairment
in the value of individual investments.
Management fees are recognised on an accruals basis when the Group has the right to
receive payment.
(ii) Distribution revenue
Dividend revenue from investments is recognised when the shareholder’s right to receive
payment has been established (provided that it is probable that the economic benefits will
flow to the Group and the amount of revenue can be measured reliably).
(iii) Interest revenue
Interest revenue is accrued on a time basis, by reference to the principal outstanding using
the effective interest rate method.
72
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(f) Revenue (continued)
The Group's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
(iv) Property acquisition fees, sale and performance/incentive fees
(ii) Deferred tax
Property acquisition fees are recognised when an investment property has been acquired in a
fund managed by the Group.
Sales and performance/incentive fees derived from managed funds are recognised upon
satisfaction of all conditions precedent to the sale of an investment property and when
significant risks and rewards have transferred.
(v) Commission and application fee income
All insurance agency commissions and application fee income is recognised on an accruals
basis when the Group has the right to receive the payment.
(vi) Sale of development properties
Revenue from the sale of apartments is recognised at the fair value of the consideration
receivable when the significant risks and rewards of ownership have been transferred to
the purchaser and where there is no continuing management involvement, which normally
coincides with settlement of the contract for sale.
(g) Finance costs
The Group's finance costs include:
•
•
•
Interest expense;
The net gain or loss on hedging instruments that are recognised in profit or loss; and
The unwinding of the discount on the non-current receivables.
Interest expense is recognised using the effective interest method.
(h) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
(i) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from
profit as reported in the consolidated profit or loss because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible.
Deferred tax is recognised on temporary differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred
tax assets are generally recognised for all deductible temporary differences to the extent that
it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised.
Deferred tax liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the
Group is unable to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such investments and interests are
only recognised to the extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
in the period in which the liability is settled or the asset realised, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the reporting period. The
measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
73
For the year ended 30 June 2016
Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(h) Taxation (continued)
(ii) Deferred tax (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
(iii) Tax consolidation
The Company and all its wholly-owned Australian resident entities are part of a tax-
consolidated group under Australian taxation law. The Company is the head entity in the
tax-consolidated group. Tax expense/benefit, deferred tax liabilities and deferred tax assets
arising from temporary differences of the members of the tax-consolidated group are
recognised in the separate financial statements of the members of the tax-consolidated group
using a 'stand-alone' approach based on the allocation specified in the tax
funding arrangement.
The Benefit Funds are part of the tax consolidated group, and they are allocated a share of
the income tax liability attributable to Centuria Life Limited equal to the income tax liability
that would have arisen to the Benefit Funds had they been stand-alone.
(iv) Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in profit or loss, except
when they relate to items that are recognised outside profit or loss (whether in other
comprehensive income or directly in equity), in which case the tax is also recognised outside
profit or loss, or where they arise from the initial accounting for a business combination.
In the case of a business combination, the tax effect is included in the accounting for the
business combination.
(i) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash, which are subject to
an insignificant risk of changes in value and have a maturity of three months or less at the date of
acquisition. Bank overdrafts are shown within borrowings in the statement of financial position.
74
(j) Financial assets
All financial assets are recognised and derecognised on trade date where the purchase or sale
of a financial asset is under a contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are initially measured at fair value plus
transaction costs, except for those financial assets classified as at fair value through profit or loss,
which are initially measured at fair value.
(i) Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt
instrument and of allocating interest income over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts (including all fees paid
or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the debt instrument, or (where
appropriate) a shorter period, to the net carrying amount on initial recognition.
(ii) Financial assets at fair value through profit and loss
Financial assets are classified as financial assets at fair value through profit or loss when the
financial asset is either held for trading or it is designated as at fair value through profit or loss.
Financial assets at fair value through profit and loss are stated at fair value, with any gains or
losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised
in profit or loss incorporates any dividend or interest earned on the financial asset and is
included in the statement of comprehensive income.
(iii) Other financial assets
Other financial assets include reverse mortgage loans. Reverse mortgage loans are held
directly at amortised cost using the effective interest method except for commercial mortgage
loans held by the Benefit Funds which are measured at fair value through profit and loss.
An allowance for impairment loss is made at year end for specific amounts when there is
objective evidence that collection of the full amount is no longer probable. Bad debts are
written off when identified.
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(j) Financial assets (continued)
(iv) Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows
from the asset expire, or it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Group continues to recognise the financial
asset and also recognises a collateralised borrowing for the proceeds received.
(v) Impairment of financial assets
Financial assets, other than those at fair value through profit and loss, are assessed for
indicators of impairment at the end of each reporting period. Financial assets are considered
to be impaired where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of
the investment have been affected.
(ii) Lease incentives
Lease incentives received to enter into operating leases are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-
line basis, except where another systematic basis is more representative of the time pattern
in which economic benefits from the leased asset are consumed. Lease incentives granted as
part of operating leases are recognised as a reduction of rental income on a straight line basis
over the life of the lease.
(l) Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries,
annual leave and long service leave when it is probable that settlement will be required and they
are capable of being measured reliably.
Contributions to defined contribution retirement benefit plans are recognised as an expense
when employees have rendered service entitling them to the contributions.
(i) Short-term employee benefits
Liabilities recognised in respect of short-term employee benefits, are measured at their
nominal values using the remuneration rate expected to apply at the time of settlement.
When an event occurring after the impairment was recognised causes the amount of impairment
loss to decrease, the decrease in impairment loss is reversed through the profit and loss.
(ii) Long-term employee benefits
(vi) Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are
not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are
measured at amortised cost using the effective interest method less impairment.
(k) Leasing
Leases are classified as finance leases when the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
(i) Group as a lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease
term, except where another systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
Liabilities recognised in respect of long-term employee benefits, are measured as the present
value of the estimated future cash outflows to be made by the Group in respect of services
provided by employees up to reporting date.
(iii) Share-based payment transactions
Equity-settled share-based payments to employees and others providing similar services are
measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of
equity instruments that will eventually vest. At the end of each reporting period, the Group
revises its estimate of the number of equity instruments expected to vest. The impact of the
revision of the original estimates with respect to non-market vesting conditions, if any, is
75
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(l) Employee benefits (continued)
(iii) Share-based payment transactions (continued)
recognised in profit for the year such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are
measured at the fair value of the goods and services received, except where that fair value
cannot be estimated reliably, in which case they are measured at the fair value of the equity
instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
(m) Financial liabilities and equity instruments issued by the Group
(i) Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with AASB 132 Financial Instruments.
(ii) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by the Group are recognised at
the proceeds received, net of direct issue costs.
(iii) Other financial liabilities
Other financial liabilities, including borrowings and trade and other payables, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective yield basis. The effective
interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments through the expected life of the
financial liability, or (where appropriate) a shorter period, to the net carrying amount on
initial recognition.
(n) Derivative financial instruments
The Group enters into derivative financial instruments such as interest rate swaps to manage its
exposure to interest rate risk.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into
and are subsequently remeasured to their fair value at each reporting period. The resulting gain
or loss is recognised in profit or loss immediately unless the derivative is designated and effective
as a hedging instrument, in which event, the timing of the recognition in profit or loss depends
on the nature of the hedge relationship.
(i) Hedge accounting
At the inception of the hedge relationship, the Group documents the relationship between
the hedging instrument and hedged item, along with its risk management objectives and
its strategy for undertaking the hedge. Furthermore, at the inception of the hedge and on
an ongoing basis, the Group documents whether the hedging instrument that is used in a
hedging relationship is highly effective in offsetting changes in cash flows of the hedged item.
The Group designates certain derivatives as either hedges of fair value of recognised assets
or liabilities (fair value hedges) or hedges of highly probable forecast transactions (cash
flow hedges).
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss, and is included in the other
expenses or other income line item. Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to profit or loss in the periods when
the hedged item is recognised in profit or loss, in the same line of the statement of
comprehensive income as the recognised hedged item. However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously accumulated in equity are transferred from equity
and included in the initial measurement of the cost of the non-financial asset or non-financial
liability. Hedge accounting is discontinued when the Group revokes the hedging relationship,
when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer
76
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
28. Significant accounting policies (continued)
(n) Derivative financial instruments (continued)
qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains
in equity and is recognised when the forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated
in equity is recognised immediately in profit or loss.
(iii) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges
are recorded in profit or loss immediately, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk. The change in the fair value of
the hedging instrument and the change in the hedged item attributable to the hedged risk are
recognised in the line of the statement of comprehensive income relating to the hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the
hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies
for hedge accounting. The fair value adjustment to the carrying amount of the hedged item
arising from the hedged risk is amortised to profit or loss from that date.
(o) Product classification
The accounting treatment of certain transactions varies depending on the nature of the contract
underlying the transaction. The major contract classifications are insurance contracts and
investment contracts.
(i) Insurance contracts
Insurance contracts are those containing significant insurance risk at the inception, or those
where at the inception of the contract there is a scenario with commercial substance where
the level of insurance risk may be significant. Once a contract has been classified as an
insurance contract, it remains an insurance contract for the remainder of its lifetime, even if
the insurance risk reduces significantly during the period.
(ii) Investment contracts
Contracts not considered insurance contracts are classified as investment contracts. The
accounting treatment of investment contracts depends on whether the investment has a
Discretionary Participation Feature. A Discretionary Participation Feature (DPF) means a
contractual right to receive, as a supplement to guaranteed benefits, additional benefits:
(a) that are likely to be a significant portion of the total contractual benefits;
(b) whose amount or timing is contractually at the discretion of the issuer; and
(c) that are contractually based on:
•
the performance of a specified pool of contracts or a specified type of contract;
•
realised and/or unrealised investment returns on a specified pool of assets held by the
issuer; or
•
the profit or loss of the Company, fund or other entity that issues the contract.
Applications and redemptions on investment contracts with a DPF are accounted for through
profit or loss. The gross change in the liability to these policyholders for the period, which
includes any participating benefits vested in policyholders and any undistributed surplus
attributed to policyholders, is also recognised through profit or loss.
Applications and redemptions on investment contracts without a DPF are accounted for through
the statement of financial position as a movement in policyholder liabilities. Distributions
on these contracts are charged to profit or loss as a movement in the policyholder liability.
Premiums and claims relating to the investment component are accounted for as a deposit
through the statement of financial position.
(p) Policyholders' funds
Assets and liabilities held by the Benefit Funds are included in the statement of financial position
of the Group.
The liability to bonus fund policyholders is closely linked to the performance and value of the
assets (after tax) that back those liabilities. The fair value of such liabilities is therefore the
same as the fair value of those assets after tax. In accordance with the rules of the funds, any
remaining surplus is attributed to the policyholders of the fund. In accordance with applicable
accounting standards, applications to these funds are recorded as income, redemptions from
these funds and amounts distributable to policyholders are recorded as expenses.
The policyholders' funds liability for unit linked funds is equal to the number of units held,
multiplied by the unit redemption price based on market value of the fund's investments as at the
valuation date. Applications to these funds are not recorded
77
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Notes to the Consolidated Financial Statements
AASB 15 Revenue from Contracts with Customers and the relevant amending standards
are effective for annual reporting periods beginning on or after 1 January 2018. AASB 15 will be
mandatory for the Group’s 30 June 2019 financial statements.
AASB 15 establishes a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. AASB 15 will replace AASB 118 Revenue, AASB 111
Construction Contracts and the related Interpretations when it becomes effective. The model
features a contract-based five-step analysis of transactions to determine whether, how much and
when revenue is recognised.
The Group is currently considering the financial impact of this accounting standard change.
AASB 16 Leases is effective for annual reporting periods beginning on or after 1 January 2019.
Early application is permitted, provided the new revenue standard, AASB 15, has been applied, or
is applied at the same date as AASB 16.
The Group is currently considering the financial impact of this accounting standard change.
28. Significant accounting policies (continued)
(p) Policyholders' funds (continued)
as income, redemptions from these funds are not recorded separately as expenses, but amounts
distributable to policyholders are recorded as an expense. No guarantees are provided by the
Society in respect of the unit linked funds.
Claims incurred in respect of the Benefit Funds represent investment withdrawals (redemptions)
and are recognised as a reduction in policyholder liabilities. Redemptions in respect of bonus
funds are also disclosed as an expense as set out above.
Benefit Fund expenses which are directly attributable to an individual policy or product are
allocated directly to the benefit fund within which that class of business is conducted. The
apportionment basis has been made in line with the principles set out in the Life Insurance
Actuarial Standards Board (LIASB) Valuation Standard (Actuarial Standard AS1.04) and the
apportionment is in accordance with Division 2 of Part 6 of the Life Act.
(q) Property held for development
Properties held for development in the ordinary course of business are carried at the lower
of cost and net realisable value. Cost includes, where applicable, the cost of acquisition,
construction, interest, rates, taxes and other expenses directly related to the development.
(r) New Accounting Standards and Interpretations
AASB 9 Financial Instruments and the relevant amending standards are effective for annual
reporting periods beginning on or after 1 January 2018. AASB 9 will be mandatory for the Group’s
30 June 2019 financial statements.
AASB 9 is a new Standard which will replace AASB 139 Financial Instruments: Recognition
and Measurement.
AASB 9 includes revised guidance on the classification and measurement of financial
instruments, however it carries over the existing derecognition requirements from AASB 139.
The Group is currently considering the financial impact of this accounting standard change.
78
For the year ended 30 June 2016 Centuria Capital Limited and Controlled Entities
Directors' Declaration
In the opinion of the directors of Centuria Capital Limited:
(a) the consolidated financial statements and notes that are set out on pages 39 to 78 and the
Remuneration Report set out on pages 27 to 36 in the Directors’ report, are in accordance
with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its
performance, as represented by the results of its operations, changes in equity and its
cash flows, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and
when they become due and payable.
The directors have been given the declarations required by Section 295A of the Corporations Act
2001 from the chief executive officer and chief financial officer for the financial year ended on
30 June 2016.
The directors draw attention to Note 2 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors.
For and on behalf of the Board
G. Charny
Chairman
Sydney
18 August 2016
P. J. Done
Director
Chairman - Audit, Risk Management &
Compliance Committee
79
For the year ended 30 June 2016
Independent Auditor's Report
ABCD
Independent auditor’s report to the members of Centuria Capital Limited
Report on the financial report
We have audited the accompanying financial report of Centuria Capital Limited (the Company)
and its controlled entities (the Group), which comprises the consolidated statement of financial
position as at 30 June 2016, and consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 28 comprising a summary of significant accounting policies and other
explanatory information and the directors’ declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility 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 the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether
due to fraud or error. In note 2, the directors also state, in accordance with Australian
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
80
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity. Professional Standards Legislation
72
For the year ended 30 June 2016
Independent Auditor's Report
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) The financial report of Centuria Capital Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as
at 30 June 2016 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 9 to 20 of the directors’ report for
the year ended 30 June 2016. 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Centuria Capital Limited for the year ended 30 June
2016, complies with Section 300A of the Corporations Act 2001.
KPMG
Nigel Virgo
Partner
Sydney
18 August 2016
73
81
For the year ended 30 June 2016
Annual Stock Exchange Information
As at 30 September 2016
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in
this report is set out below.
Distribution of holders of ordinary shares
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Holding less than a marketable parcel
Number of holders
Number of ordinary shares
845
4,742
818
636
72
7,113
426
429,090
11,632,525
5,582,017
16,085,836
43,465,265
77,194,733
122,568
On-market share buy-back
The company bought-back 125,230 shares (2015; 1,373,835 shares) during the current financial
year. All of the shares bought-back were settled by 30 June 2016.
Substantial shareholders
Ordinary shareholders
J P MORGAN NOMINEES AUSTRALIA LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY
LIMITED
RESOLUTE FUNDS MANAGEMENT PTY LTD
Number of ordinary shares held
7,385,583
5,233,237
4,283,440
82
Annual Stock Exchange Information
As at 30 September 2016
Top 20 Shareholders
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
J P MORGAN NOMINEES AUSTRALIA LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
RESOLUTE FUNDS MANAGEMENT PTY LTD
PARITAI PTY LIMITED
AVANTEOS INVESTMENTS LIMITED <2412987 JRSWJH A/C>
NATIONAL EXCHANGE PTY LTD
NATIONAL NOMINEES LIMITED
AVANTEOS INVESTMENTS LIMITED <1259738 PARSONS A/C>
AVANTEOS INVESTMENTS LIMITED <1703553 JOHNSON A/C>
BRYSHAW MANAGEMENT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
STERLING GRACE CAPITAL MANAGEMENT LP
STERLING GRACE INTERNATIONAL LLC
AVANTEOS INVESTMENTS LIMITED <2469707 N SLATER A/C>
PHILIP CAIRNS DIXON + JACQUELINE PATRICIA DIXON + STEPHEN THOMAS WRIGHT
16. MR ROGER WILLIAM DOBSON
17.
VEXDAT PTY LTD
18. NATIONAL EXCHANGE PTY LTD
19.
STRATEGIC VALUE PTY LTD
20. MRS ROSINA ANNA BLAKE
Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Ordinary Shares
Number
Percentage
7,385,583
5,233,237
4,283,440
2,044,266
1,700,000
1,401,563
1,140,265
1,107,822
1,063,608
1,046,568
853,356
802,550
802,550
800,000
750,000
748,651
714,390
500,000
466,832
405,658
9.57
6.78
5.55
2.65
2.20
1.82
1.48
1.44
1.38
1.36
1.11
1.04
1.04
1.04
0.97
0.97
0.93
0.65
0.60
0.53
33,250,339
43.07
83
Corporate Directory
Contact Us
Shareholder Enquiries call: ............................ 1800 11 29 29
Investor Enquiries call: .................................. 1300 50 50 50
www.centuria.com.au
Shareholder Enquiries
Centuria Capital Limited,
Share Registry,
GPO Box 2975
Melbourne VIC 3001
Call ................................................................ 1800 11 29 29
Company Secretary
James Lonie
Level 39, 100 Miller Street
Sydney NSW 2060
Call ............................................................... (02) 8923 8910
Fax .................................................................02) 9460 2960
Head Office
Level 39, 100 Miller Street
Sydney NSW 2060
Call .................................................................. 1300 50 50 50
Fax .................................................................(02) 9460 2960
enquiries@centuria.com.au
Friendly Society Investor Enquiries
Centuria Life Limited,
Level 32, 120 Collins Street
Melbourne VIC 3000
Call .................................................................1300 50 50 50
enquiries@centuria.com.au
Mail to
Centuria Capital Limited
Reply Paid 695, Melbourne VIC 8060
(no stamp required)
84
CENTURIA CAPITAL2016ANNUAL REPORT
CA-CNI-22/07/16-00344