Annual Report 2019
Centuria Capital Group
Contents
Joint Chief Executive’s Report
Centuria in the Community
Senior Executive Committee
About Centuria
Directors’ Report
Board of Directors
Chairman’s Report
01
03
06
16
18
20
25
39
40
90
91
98
99
100 Corporate directory
Disclaimers
Financial statements
Directors’ Declaration
Independent Auditor’s Report
Additional stock exchange information
Lead Auditor’s Independence Declaration
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
About Centuria
Centuria Capital Group is an established specialist investment manager that operates
under the ASX code CNI. With $6.2 billion of assets under management, Centuria Capital
Group provides investors with exposure to quality real estate and investment bond sectors.
Real estate funds management is the largest component of the Centuria Capital Group’s
platform with $5.3 billion of assets under management that is underpinned by listed
real estate investment trusts (AREITs) and a range of unlisted funds.
Centuria’s integrated property platform delivers expertise in origination, capital sourcing and
funds management along with asset and property management, facilities management and
property value add initiatives with a strong focus on identifying and meeting the needs of
our tenant customers whilst seeking opportunities to create value for our investors.
Centuria’s drive, knowledge and intimate understanding of the real estate and investment
bonds universe, allows them to transform opportunities into meaningful investments centred
around clients and their investment profiles.
Further information can be found on our website centuria.com.au
As at 31 July 2019 with pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
01
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Centuria Capital funds management platform
$6.2bn
Group AUM1
ASX:CNI
Market Capitalisation $746m2
$5.3bn
Real Estate AUM
$0.9bn
Investment Bonds AUM
$0.4bn
CNI Co-Investments
$2.7bn
Listed Property AUM
$2.6bn
Unlisted Property AUM
Centuria Life
Centuria
Metropolitan REIT
(CMA)
Centuria
Centuria
Industrial REIT
Industrial REIT
(CIP)
(CIP)
Centuria
Unlisted
Centuria Heathley
Healthcare real estate
Centuria LifeGoals
Guardian Friendly Society
Capital Guaranteed Funds
Existing Funds
Centuria
Metropolitan REIT
(CMA)
Centuria
Industrial REIT
(CIP)
$1.4bn
$1.3bn
$2.0bn
$0.6bn
Australia’s largest domestic
pure play office REIT
Australia’s largest domestic
pure play industrial REIT
• 14 fixed term funds
• Wholsesale relationships
• CDPF
CNI economic funds
63.06%
$251m3
$208m4
24.9%3
22.3%4
1 AUM as at 31 July 2019 with pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
2 Based on CNI closing price of $1.95 on 31 July 2019
3 Based on CMA closing price of $2.83 on 31 July 2019. Includes ownership by associates of Centuria Capital Group
4 Based on CIP closing price of $3.18 on 31 July 2019. Includes ownership by associates of Centuria Capital Group
Centuria
Metropolitan REIT
(CIP)
Strategic vision and objectives
Vision
Continue to build a leading funds management platform with quality strategic pillars
A clear
and simple
strategy
Deliver income and capital growth from compelling real estate and investment bond sectors
for a broad range of investor profiles
CNI is
An established, specialist
investment manager
Embedding larger recurring
revenue streams
Generating real estate fund
opportunities
Promoting contemporary
investment bond options
Key
objective
Support platform
expansion
Deliver recurring revenues,
Unlock performance fees
Capital origination
and deployment
Grow Centuria LifeGoals
Create growth opportunities
through select asset and
platform acquisitions
Sustainably underpin
distributions through diverse
recurring revenue streams
Establish quality wholesale
partnerships
Deliver new funds to our core
distribution network
Align to some of the best
fund managers in Australia and
the world who are specialists
in their field
02
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Chairman’s report
Chairman’s report
Dear Investors,
I am delighted to again be writing to you
as Chairman of Centuria Capital Group
(Centuria).
Your Board remains committed to
building a world class funds management
platform with high quality operating
divisions, each executing on a clear and
considered strategy in the real estate
funds management and investment bond
sectors.
In addition to working with management
to set strategy and define culture, the
Board closely supports the group’s
management team in assessing,
developing and implementing
opportunities to optimise the outcome
for Centuria and its stakeholders.
Performance
FY19 delivered strong organic and
inorganic growth and Centuria continues
to increase its investor relevance and
scale as a leading listed funds manager.
In FY16 our organisation had a market
capitalisation of just $79 million1 and
$1.9 billion of assets under management
(AUM) spread between our real estate
and the Investment Bonds divisions.
In FY19, with a market capitalisation
of $746 million2, $6.2 billion3 of AUM
spread across Centuria Metropolitan
REIT (ASX:CMA), Australia’s largest pure
play office REIT, Centuria Industrial REIT
(ASX:CIP), Australia’s largest domestic
pure play industrial REIT, our strongly
performing unlisted real estate division,
the newly formed healthcare sector
Centuria Heathley, our Investment Bond
division.
As Centuria’s platform expands, we
are experiencing growing support from
domestic and international equity fund
managers. Centuria’s strong security
price appreciation during FY19 leaves
the Group well positioned for continued
equity fund manager and general
market support, with the recent heavily
oversubscribed $100 million equity
raising providing good evidence of
this demand. Pleasingly, Centuria’s
combination of strong security price
appreciation and consistent distributions
generated a total securityholder return
(TSR4) of 34.4% for the FY19 year.
We have continued to see further
investor interest and growing market
presence with our market capitalisation
now over $830 million at the time of
writing and the recent inclusion of CNI
into the S&P/ASX 300 index along-side
CMA and CIP.
Management
Over the course of this year, there
have been some important structural
changes within the organisation.
Notably, Jason Huljich was promoted
to Joint CEO alongside, John McBain,
that was championed not only by the
Board but by John himself. Having
worked together for over 23 years,
one may consider the appointment an
obvious one. Nevertheless, the Board
considered carefully the advantages
and disadvantages of having joint
CEO’s. Ultimately, their shared history
of collegiate success not only gave us
great comfort but allowed the company
to make sure its next generation of
leadership was firmly secured.
Ross Lees has been promoted from
his role as CIP’s Fund Manager to
Head of Funds Management, reporting
through to Jason. Ross has done an
exceptional job in actively managing
CIP’s performance in recent years. His
promotion, consistent with Centuria’s
desire to develop talented employees
and promote from within the organisation
wherever possible, is again a part of our
future proofing the continued stable
growth and operation of your company.
You may have recently read about
Centuria’s acquisition of a 63%
economic interest in Heathley Limited.
Now renamed Centuria Heathley, this
business is one of Australia’s leading
real estate fund managers specialising in
healthcare property and has over $600
million of funds under management.
It gives me great pleasure to welcome
the Centuria Heathley family to our group,
in particular the chairman and directors
of their associated boards and their
CEO Andrew Hemming together with his
executive team.
Centuria Heathley is looking forward
to establishing compelling investment
opportunities for our investors within
the healthcare real estate markets as we
integrate their knowledge and operating
relationships with our own distribution
network.
Governance and Community Standards
The financial services industry is
operating in a transformed and
transformative regulatory environment
and, together with my fellow board
members and the management team ,
we are committed to not only keeping
abreast of the evolving requirements
within our industry but also adopting best
practices to ensure not only compliance
but adherence to community
expectations of Centuria as a responsible
and contributing corporate entity.
During FY19, the team took further
steps to enhance its governance
framework and resources as the scale
of our platform increases. Along with
increased staffing within our governance
and compliance team, we have
introduced a Senior Executive Non-
Financial Risk Committee, an Information
Communication Technology Committee,
to address cyber security issues, and
implemented new finance systems for
increased efficiency and efficacy.
I am also delighted to welcome Professor
Simon Rice OAM as an independent
member of our Conflicts Committee.
Commercial and legal conflicts regularly
arise in day to day transactions in a
growing group such as Centuria and
there is a community and regulatory
expectation that they be dealt with
ethically and properly matched equality
by the core belief from within. Professor
Rice, who is, inter alia, currently Professor
of Law and a Director of Professional
and Community Engagement at Sydney
University and a member of the Code of
Conduct Committee, Australian Council
for International Development, will bring
an independent and analytical rigour to
this important internal Committee.
Consistent with the abovementioned
community expectations and our own
internal ones, Centuria Life is currently
working on implementing an impact and
sustainable investment option in our
Life Goals product capacity. Further, in
1 Based on CNI closing price of $1.22 on 30 June 2017
2 Based on CNI closing price of $1.95 on 31 July 2019
3 AUM as at 31 July 2019 with pro forma adjustments to reflect Centuria Heathley transactions and assets held for settlement
4 Source: Moelis Australia. Based on movement in security price from ASX closing on 1 July 2018 to ASX closing on 30 June 2019 plus distributions paid during the respective
period(s) assuming re-investment of all distributions. Excludes non-cash dividend paid on 29 June 2019. Past performance is not a reliable indicator of future performance
03
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Chairman’s report
a more immediately practical example
of our environmental commitment, our
portfolio management team has recently
established an initiative to offer our
tenants solar panels for our industrial
properties, whereby they can activate
electrical supply savings from on-site
production of energy from roof top solar.
Conclusion
I would like to express my sincere thanks
to my fellow directors from both the group
and responsible entity boards for their
ongoing dedication towards ensuring
a strong performance throughout
FY19. Your commitment to exceptional
leadership and the expertise you bring
to Centuria sets the foundation for a
collegiate and dynamic framework in
which we continually challenge ourselves
and seek to deliver superior results whist
delivering as a good corporate citizen.
Finally, I would like to thank our
securityholders for their ongoing
support for Centuria Capital Group. We
remain highly focused on identifying
value generating opportunities across
the asset classes that form our funds
management platform and delivering the
results you expect of us. I look forward
to discussing our results with you at our
upcoming AGM.
GARRY CHARNY
Chairman, Centuria Capital Group
04
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Key financial metrics
OPERATING NET PROFIT AFTER TAX ($m)1
OPERATING NET PROFIT AFTER TAX ($m)
OPERATING EARNINGS PER SECURITY2 (cents)
OPERATING EARNINGS PER SECURITY (CENTS)
45.1
45.7
$50m
40
30
20
10
0
15.5
11.3
5.9
6.3
16c
12
8
4
0
16.3
14.8
12.7
10.3
7.6
8.1
FY14
FY15
FY16
FY17
FY18
FY19
FY14
FY15
FY16
FY17
FY18
FY19
STATUTORY NET PROFIT AFTER TAX ($m)
STATUTORY NET PROFIT AFTER TAX ($m)3
NET ASSETS PER SECURITY ($)
NET TANGIBLE ASSETS PER SECURITY ($)
$60m
50
40
30
20
10
0
54.8
$1.80
50.9
191
Increase in FY18
1.20
1.54
1.42
1.32
1.29
1.32
1.16
17.3
9.1
8.6
12.3
0.60
0
FY14
FY15
FY16
FY17
FY18
FY19
FY14
FY15
FY16
FY17
FY18
FY19 4
DISTRIBUTIONS PER SECURITY (CENTS)
DISTRIBUTIONS PER SECURITY (CENTS)
TOTAL SECURITYHOLDER RETURN5
9.25
8.20
7.50
4.75
5.25
10.0c
7.5
5.0
2.5
2.75
0
35.0%
30.0%
25.0%
20.0
15.0
10.0
5.0
0.0
34.4%
23.3%
22.2%
18.5%
24.3%
2.75c
4.75c
5.25c
7.50c
8.20c
3.60c
5.50c
3.90c
2.70c
FY14
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY18
FY14
FY15
FY16
FY17
FY18
TRUST DISTRIBUTION
DIVIDEND (FULLY FRANKED)
1 Operating NPAT of the Group comprises of the results of all operating segments and excludes non-operating items such as transaction costs, mark to market movements on
property and derivative financial instruments, the results of Benefit Funds, Controlled Property Funds and share of equity accounted net profit in excess of distributions received
2 Operating EPS is calculated based on the Operating NPAT of the Group divided by the weighted average number of securities
3 Attributable to securityholders
4 Number of securities on issue at 30 June 2019: 383,557,332 (at 30 June 2018: 304,793,174)
5 Source: Moelis Australia. Based on movement in security price from ASX closing on 1 July 2018 to ASX closing on 30 June 2019 plus distributions per security paid during the
respective period(s) assuming re-investment of all distributions. Excludes non cash dividend paid on 29 June 2019. Past performance is not a reliable indicator of future
performance.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 05
05
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Joint CEO Report
John McBain
JOINT CEO | Centuria Capital Group
Jason Huljich
JOINT CEO | Centuria Capital Group
Dear Investors,
It gives us great pleasure to present the 2019 Centuria Capital
Limited (Centuria) Annual Report to you. This year has been
another transformative one for Centuria, as we have continued
to grow both in terms of scale and market position.
The Centuria real estate funds management platform which,
to date, has specialised in the commercial office and industrial
sectors has now expanded to include the healthcare real estate
funds management sector with the recent acquisition of a major
interest in Heathley Limited. This is an established healthcare
property funds management business which has been renamed
Centuria Heathley Limited.
Headline metrics for FY19 include total group assets under
management (AUM) growing during FY19 from $4.9 billion to
$6.2 billion1, a year on year increase of 27% with further growth
experienced in the early stages of FY20.
In addition, total securityholder return (TSR2) for FY19
was 34.4% with significant security price accretion being
experienced both during FY19 and beyond FY19 close. It is
this pattern of growing securityholder distributions combined
with growth in scale and profitability which the Board and
management strive to deliver year on year.
In terms of market position, Centuria Capital recently joined
the S&P ASX 300 Index which is a significant milestone for the
group offering Centuria increased exposure to a wider range of
investors both globally and domestically.
Both Centuria REITs, Centuria Metropolitan REIT (ASX Code:
CMA) and Centuria Industrial REIT (ASX Code: CIP) are already
on the S&P/ASX 300 Index and it is our intention to continue to
grow these vehicles as well as Centuria Capital to a point where
they all qualify for inclusion in the S&P ASX 200 Index as a “next
step” goal.
While FY19 has been an active year for Centuria in terms of
scale, our platform is now broader offering an increased range
of quality investment opportunities across listed and unlisted
funds in the commercial, industrial and healthcare real estate
sectors. We have also bolstered our property team enabling
improved Capital Transactions capacity and end to end active
management of the Group’s assets.
We continue to reposition the Centuria Investment Bond
division, Centuria Life. During FY19 we launched the Centuria
Life Goals product which is gaining traction in its market and we
will discuss its progress later in this report.
We are pleased to report that Jason Huljich has been promoted
from Head of Real Estate and Funds Management to Joint Chief
Executive alongside John McBain. Jason and John established
the Centuria Group over twenty years ago and bring strong
complementary skills to the business. This appointment “future
proofs” Centuria to some extent and is an excellent working
example of the Board ensuring that the senior executive level is
refreshed whilst retaining valuable experience and relationships
within the team.
Post FY19, Centuria Capital successfully completed a $100
million equity raising by way of an institutional placement at
$2.10 per security and also initiated a Securityholder Purchase
Plan at the same price. The funds were used to coinvest in
CMA’s recent equity raising and for investment and capital
management initiatives. Separately we committed to retiring
$35.0m of 7.0%, 2021 fixed rate corporate bonds from existing
cash reserves due to past asset disposals.
1 AUM as at 31 July 2019 with pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
2 Source: Moelis Australia. Based on movement in security price from ASX closing on 1 July 2018 to ASX closing on 30 June 2019 plus distributions paid during the respective
period(s) assuming re-investment of all distributions. Excludes non-cash dividend paid on 29 June 2019. Past performance is not a reliable indicator of future performance
06
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Centuria platform grows 27% to $6.2bn1
Assets under management ($bn)
30%
CAGR2
FY17-FY19
$6.2bn1
$4.9bn
$3.8bn
$1.9bn
FY16
FY17
FY18
FY19
1 AUM as at 31 July 2019 with pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
2 Past performance is not indicative of future performance
1.7 billion3 of real estate aquisitions in FY19
CMA
$569m
CIP
Centuria Unlisted
Healthcare
$190m
$304m
$620m
•
•
Included Australia’s third largest
real estate transaction in CY18
Reduced CMA’s average asset
age, diversified tenant profile and
income
•
•
Eight assets acquired
Majority of acquisitions transacted
off market
•
•
Three assets and one JV with
Lederer Group
Strategy to increase institutional
partnering
•
•
New healthcare real estate initiative
Strong potential for institutional
mandates
1
3
Includes pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
07
Joint CEO Report
FINANCIAL RESULTS
During FY19 Centuria generated an operating net profit after
tax (NPAT3) of $45.7 million with operating earnings per
stapled security (EPS4) of 12.7 cents (FY19 operating NPAT
was $45.1 million).
Total distributions (DPS) of 9.25 cents per stapled security
were paid during FY19 which reflected a 12.8% increase on
FY18.
FY19 EPS was skewed relative to the FY18 Operating
EPS (16.3 cents per stapled security) arising from the
abnormally high performance fee generated by the sale of
10 Spring Street, Sydney during FY18. As total revenues
grow and the new accounting standard in relation to
performance fee treatment becomes embedded, we expect
that the level of ongoing performance fees in relative terms
to be less variable and more predictable.
Recurring revenues accounted for 77.1% of total Group
revenues in FY19 and Centuria’s co-investments
contributed $27.6 million towards FY19 recurring revenues,
while providing a total annualised return of 26.6%5. Property
funds management operating profit excluding performance
fees increased 13.1% to $25.1 million for the year, reflecting
the expansion of our real estate platform and underpinning
strong recurring revenue contributions.
Centuria’s balance sheet continues to strengthen with
$87.8 million of cash on hand as at 30 June 2019. Centuria
is utilising its cash surplus to fund the acquisition of
Heathley Limited securities, for deposits and
co-investments in relation to managed funds, and to fund
future growth opportunities.
AN ESTABLISHED PROPERTY FUNDS MANAGEMENT
PLATFORM
FY19 marked another period of strong growth for Centuria’s
property funds management platform. Property AUM expanded
33% to $5.3 billion and was underpinned by acquisitions in
both the listed and unlisted divisions.
The Group activated $1.7 billion6 of real estate transactions
in FY19 across the platform. This was spread across four
divisions including $569 million for CMA, $190 million for CIP,
$304 million for Centuria Unlisted and $620 million (settled
post FY19) through healthcare and the formation of Centuria
Heathley.
Centuria’s real estate platform is well positioned to unlock
attractive investments in a continuing low interest rate
environment. It is aligned to the strong office, industrial and
healthcare real estate sectors and enjoys a range of tenants
whose rent roll underpins our fee income streams. We believe
these are compelling asset sectors which all enjoy positive
demographic themes and we are confident that our operating
divisions will continue to thrive in this backdrop.
We continue to seek to broaden our range of capital sources,
in particular we aim to expand our institutional property
mandates, assisting our ability to unlock new acquisition
opportunities for the Group. The recent $500 million
healthcare real estate mandate Centuria Heathley has agreed
with Grosvenor Group and AXA IM Real Assets is a great
example of the type of mandate we wish to roll out over the
various asset sectors we operate in.
Finally, our investor distribution network continues to grow.
Aside from our financial adviser distribution capacity, Centuria
has built an extremely strong private investor network which
we believe to be one of the most extensive and sophisticated
in Australia.
UNLISTED REAL ESTATE DIVISION WELL POSITIONED TO
GENERATE NEW OPPORTUNITIES
Centuria operates one of Australia’s leading unlisted property
funds management businesses.
For over 20 years, we have established deep expertise in
identifying and delivering unlisted funds to our deep distribution
networks. Presently, Centuria’s unlisted division has $2.0 billion
of AUM across 14 fixed term funds7, institutional wholesale
relationships and the Centuria Diversified Property Fund
(CDPF).
During FY19, our open-ended diversified property fund, CDPF,
increased its AUM to $118.9 million, growing some 215% year
on year and recently this fund completed two commercial
property acquisitions with further acquisitions in due diligence
at present.
Since FY19, we have launched the Centuria 80 Flinders Street
Fund which is acquiring a high quality $127 million Adelaide
CBD asset. This fund has generated outstanding interest from
both our retail investor network and adviser channel and was
over-subscribed in record time.
We are extremely proud of our real estate team’s ability to
acquire and manage assets and add value. In the IPD/MSCI
quarterly fund index, 6 of our unlisted funds have held top 10
positions for the last 10 quarters8.
FY19 also provided another example of our active management
capabilities, culminating in the sale of 821 Pacific Highway,
Chatswood, NSW (The Zenith) owned in partnership with global
wholesale capital partner, Blackrock. The jointly owned A-Grade
asset was acquired for $279 million in 2016 and recently sold
for $438 million generating a strong capital gain for investors
and crystallising a performance fee of over $9 million for
Centuria.
FORMATION OF CENTURIA HEATHLEY
During the year, the Group entered the strongly performing
healthcare real estate sector acquiring a 63.06% economic
interest in Heathley Limited for $24.4 million.
Forming Centuria Heathley marks a new focus for our Group
and effectively adds a fourth “pillar” to our existing listed and
unlisted real estate funds business and with it an opportunity to
scale up property funds management AUM.
Whilst already a rapidly expanding sector globally, we anticipate
that healthcare will continue to emerge as an increasingly
established real estate sector domestically, underpinned
by strong fundamentals from Australia’s ageing population,
longer life expectancy, increased requirements for ongoing
Operating NPAT of the Group comprises of the results of all operating segments and excludes non-operating items such as transaction costs, mark to market movements
on property and derivative financial instruments, the results of Benefit Funds, Controlled Property Funds and share of equity accounted net profit in excess of distributions
received
Operating EPS is calculated based on the Operating NPAT of the Group divided by the weighted average number of securities
Calculated based on total revenue divided by average carrying value of investments for the year ended 30 June 2019. Excludes finance costs
Includes pro forma adjustments to reflect Centuria Heathley Transaction and assets held for settlement
Includes pro forma adjustments for assets held for settlement
Top 10 Property Council/IPD Australia Unlisted Core Retail Property Fund Index for the 12 months to 30 June 2019 and each quarter for the last ten quarters (overall
investment for the twelve months to the end of each quarter)
3
4
5
6
7
8
08
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Unlisted real estate funds continue to generate
robust demand
AUM1
$2.0bn
Wholesale
relationships & CDPF
Fixed term funds1
6 Funds in the top
10 index2
CDPF Gross AUM3 increase of 215% from FY18
Gross assets under
management ($m)
118.9m
37.8m
13.2m
0.7m
FY16
FY17
FY18
FY19
Established presence in the attractive, fragmented
healthcare real estate sector
$0.6bn4
AUM
46
ASSETS
9
UNLISTED FIXED-TERM
FUNDS
Includes pro forma adjustments for assets held for settlement
1
2 Top 10 Property Council/IPD Australia Unlisted Core Retail Property Fund Index
for the 12 months to 30 June 2019 and each quarter for the last ten quarters
(overall investment for the twelve months to the end of each quarter)
3
Includes debt and amortised acquisition costs
4 Settlement of Taringa occurred during April 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 09
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Joint CEO Report
healthcare and continued focus from the Federal Government
on preventative care.
With over $0.6 billion of assets under management, and an
active pipeline providing capacity for near term AUM growth to
approximately $1.0 billion, Centuria Heathley has the potential
to expand its asset footprint, increase recurring revenues
and offer investors strong and stable returns via a range of
wholesale and retail unlisted healthcare real estate funds.
During the Heathley Limited acquisition due diligence period, a
$500 million institutional healthcare real estate mandate was
agreed with AXA Investment Managers – Real Assets (AXA IM)
and Grosvenor Group (Grosvenor) was agreed.
Centuria Heathley will take a stake in ADHF, which has been
established with two seed assets, being the Mater Private
Hospital in Townsville QLD and The Westside Private Hospital
in Brisbane QLD. These assets have a combined value of $88
million.
ADHF represents the Group’s largest institutional mandate to
date and presents a new opportunity for us to work closely
with our partners to grow the portfolio while utilising our
transactional and active management capabilities.
CENTURIA’S A-REITS
During FY19, Centuria Metropolitan REIT (ASX:CMA) and
Centuria Industrial REIT (ASX:CIP) continued to increase in scale
and investor relevance. Both are included on the S&P/ASX300
index, and in total they comprise over 40% of Centuria’s total
AUM.
CMA - AUSTRALIA’S LARGEST PURE PLAY OFFICE REIT
CMA was launched by Centuria in an initial public offering in
December 2014. Since than the portfolio has transformed
from a relatively small diversified trust into an established pure
play office REIT. CMA has expanded its portfolio from 6 office
and two industrial assets to 20 office assets and as at FY19
close had reached a market capitalisation of over $1.0 billion
and an AUM of $1.4 billion.
CMA has reweighted from smaller suburban properties
to institutional grade office assets as it has improved its
geographic spread.
CMA has a clear and simple objective, to continue building
Australia’s leading pure play office REIT. CMA’s focus is on
generating predictable and quality income streams and
executing initiatives to create value across a portfolio of
Australian office assets including reducing the portfolios
average building age (by value) from 29.3 years to just 15.9
years.
During FY19, CMA acquired four high quality office properties
valued at approximately $520 million supported by a $276
million equity raising.
Additionally, CMA recorded a 12-month total unitholder return9
of 22.4% vs the S&P/ASX300 A-REIT Index of 19.4%.
Post 30 June 2019, CMA has conditionally exchanged
contracts to acquire two A-Grade, fringe Sydney and Perth
CBD assets for $380.5 million and completed a successful
$273 million equity raising. Subject to completion, the
acquisition will increase CMA’s AUM to $1.8 billion, improve
the portfolio WALE10 from 3.9 to 4.8 years and introduce new
tenants to its top 10 profile.
As part of the process, CNI will commit $37.5 million split
between a $7.5 million entitlement and $30 million conditional
placement, which is subject to CMA Unitholder approval. Post
completion of the transaction, CNI would hold approximately
22.6% of CMA’s units on issue (previously 24.9%).
CIP - AUSTRALIA’S LARGEST DOMESTIC PURE PLAY
INDUSTRIAL REIT
CIP has been under Centuria’s management since January
2017. CIP has a clear and simple objective, to continue
building Australia’s leading domestic pure play industrial REIT.
CIP continued to enhance the quality of its portfolio over FY19
with $203.7 million of transactions executed.
CIP’s high occupancy has been driven by another year
of strong leasing results with over 113,000 sqm leased.
Importantly, during FY19 all tenancies that expired were either
renewed or re-leased prior to the conclusion of FY19.
Additionally, CIP recorded a 12 month total unitholder return11
of 27.0% vs the S&P/ASX300 A-REIT Index of 19.4%.
CIP has commenced FY20 strongly and is well positioned for
further growth with:
•
•
•
•
•
AUM increasing to $1.3 billion
The settlement of 680 Boundary Road Richlands, QLD and
75-95 & 105 Corio Quay Road, VIC
Conditional exchange for the $19.5m acquisition of 32-34
Kaurna Avenue, Edinburgh Park SA
Portfolio occupancy10 increasing to 96.1% and a WALE12 of
4.3 years
A market capitalisation around $1.0 billion
CENTURIA LIFE LAUNCHES CENTURIA LIFEGOALS
Centuria Life is the fourth largest investment bond provider
in Australia’s $7.4 billion11 investment bond market. For more
than 35 years, Centuria Life has focused on offering flexible,
tax effective investment options.
In FY19, investment bonds represented $0.9 billion of AUM
across unitised bonds, Guardian prepaid funeral plans12 and
the recently launched Centuria LifeGoals.
With the official launch of Centuria LifeGoals in the early part
of 2H19 and with increased investment and a broader national
distribution team to service new product, we have seen an
increase in applications and strong interest from investor and
advisor groups for FY20.
Centuria LifeGoals utilises an active manager selection
process and features a menu of investment options to suit a
range of investment styles and risk appetites in a structure
that provides tax benefits, flexibility and importantly;
accessibility.
9 Source: Moelis Australia. Based on movement in security price from ASX closing on 1 July 2018 to ASX closing on 30 June 2019 plus distributions per security paid during the
respective period(s) assuming re-investment of distributions. Past performance is not a reliable indicator of future performance
10 By income
11 QDS Report March 2019
12 Centuria Life Limited (CLL) is the key service provider to Over 50 Guardian Friendly Society
10
CIP: Centuria management creating unitholder value
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 CMA: Centuria management creating unitholder
value since inception
CNI co-investment
24.9%
Market Capitalisation
$1.0 billion1
Included in the
S&P/ASX300
Index
Australia’s largest pure play
office REIT
Portfolio Value ($bn)
Y
T
R
E
P
O
R
P
D
E
T
S
I
L
44.3%
FY15-FY19
CAGR2
1.4
0.9
0.3
12 ASSETS
0.6
0.4
13 ASSETS
15 ASSETS
19 ASSETS
20 ASSETS
FY15
FY16
FY17
FY18
FY19
CIP: Centuria management creating unitholder value
CNI co-investment
22.3%
Market Capitalisation
$934 million3
Included in the
S&P/ASX300
Index
Australia’s largest domestic
pure play
Industrial REIT
Portfolio Value ($bn)
24%
FY15-FY19
CAGR2
1.34
0.9
0.9
1.0
0.5
22 ASSETS
37 ASSETS
38 ASSETS
37 ASSETS
45 ASSETS
FY15
FY16
FY17
FY18
FY19
1 Based on CMA closing price of $2.80 on 30 June 2019
2 Past performance is not indicative of future performance
3 Based on CIP closing price of $3.18 on 31 July 2019
4
Includes 75-95 & 105 Corio Quay Road North Geelong, and 680 Boundary Road,
Richlands, which exchanged, but not settled by 30 June 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
11
11
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Particular areas of focus include;
•
•
•
Growing our funds management platform both organically
and by complimentary corporate acquisitions
Continuing to grow recurring revenue as a proportion of all
revenues and to unlock ongoing performance fees from
our managed funds
Attracting further institutional capital partners in tandem
with growing our already extensive retail investor network
• Matching increased investor appetite for Centuria
property funds with increased asset origination, always
tempered by our firm commitment to high quality
investment real estate acquisitions
•
•
Expanding the Investment bond business including
Centuria LifeGoals
Increasing market awareness for the Centuria group
We want to take this opportunity to thank our extremely
committed and driven staff and our fellow senior managers for
their hard work and dedication during FY19.
In addition, we wish to thank the Chairmen and the directors of
both the Group and Responsible Entity boards both at Centuria
and Centuria Heathley. They are a highly committed and
experienced group who are extremely generous with their time
and expertise. We thank them sincerely for their dedication,
guidance and contribution to the Group.
Finally, we wish to thank securityholders sincerely for the
confidence you place in us and the un-ending support you
give us.
Joint CEO Report
There has been good progress on our dealer group awareness
with growing inclusion on dealer group approved product
lists. Additionally, Centuria LifeGoals recently achieved a
Recommended rating1 from Lonsec and Very Strong rating1
from Australia Ratings.
We remain committed to the expansion of our investment
bond business and believe that financial markets will continue
to support this product in a rapidly changing investment and
superannuation environment.
OUTLOOK
Centuria has commenced FY20 strongly and has issued FY20
distribution guidance of 9.7 cents per stapled security, an
increase of 4.9% over FY19.
Activity to date has been strong, including;
•
•
•
•
•
•
A successful equity raising for the $127 million unlisted
Centuria 80 Flinders Street Fund
Settling a 63% economic interest in Centuria Heathley
Establishing a $500 million healthcare real estate
institutional mandate with AXA IM Real Assets and
Grosvenor Group
Inclusion in the S&P/ASX 300 index
Completion of a $100 million equity raise within Centuria
Capital
Currently in due diligence for three additional unlisted
assets for consideration of ~$290m
In an increasingly uncertain global market, Australia remains
an attractive investment destination for offshore capital.
Domestic interest rates and deposit rates are expected to fall
and remain subdued for an extended period, and it seems
likely that commercial real estate yields may contract further.
In contrast, global real estate yields are in some cases
markedly lower again, underpinning a healthy level of offshore
demand in support of commercial property values. Whilst
there are differing views regarding how long interest rates
will remain low, our base case is for this to hold true for an
extended period, certainly in the two – four year range.
Accordingly, our business has strategies in place that respond
to these settings and investor returns from our funds should
be able to continue to provide attractive spreads against
domestic deposit rates and the risk-free rate generally.
We remain focused on building a strong funds management
platform aligned to the commercial, industrial and healthcare
real estate sectors as well as continuing to build its
investment bond business. We continue to assess transaction
opportunities that will complement the existing platform, using
our expanded balance sheet and increased scale to generate
further growth opportunities.
1 Refer to page 99 and page 100 for Lonsec and Australia Ratings disclaimers
12
JOHN MCBAIN
JASON HULJICH
Joint CEO, Centuria Capital Group
Joint CEO, Centuria Capital Group
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 32 MORROW STREET, TARINGA QLD
JASON HULJICH
Joint CEO, Centuria Capital Group
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
13
13
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Centuria Investment Bonds
Continued investment in Centuria Life
TOTAL AUM($m)
FY18
FY19
FY18 CHANGE
to FY19 (%)
FLOWS BREAKDOWN
($M)
CENTURIA
LIFEGOALS2
UNITISED
BONDS
CAP
GUAR
PRE-PAID
FUNERAL
PLANS
TOTAL
Prepaid funeral plans (Guardian)1
508.5
534.0
5.0
Applications
Capital Guaranteed (Centuria Life)
216.0
194.0
(10.2)
Redemptions
4.2
-
11.0
2.4
35.7
53.3
(7.6)
(24.8)
(37.4)
(69.8)
Unitised Bonds (Centuria Life)
141.9
137.8
(2.9)
Centuria LifeGoals2
-
4.2
866.4
870.0
-
0.4
38 ASSETS
37 ASSETS
45 ASSETS
The Centuria Life Investment Committee
has chosen
1 Centuria Life Limited (CLL) is the key service provider to Over 50 Guardian Friendly Society
2 Commencing February 2019
14
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CMA: 154 MELBOURNE STREET, SOUTH BRISBANE QLD
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
15
Centuria in the community
Centuria has a strong
commitment towards
positively contributing
in our community while
hoping to raise the profile
of organisations we
work with.
St Lucy’s School is a primary school for
students with disabilities. It provides
excellence in education that empowers
students with the values, knowledge,
attitudes and skills to flourish and
participate fully in society.
Centuria actively participated in
activities to support St Lucy’s School
during the year, including Centuria staff
volunteering at the school.
Our annual trivia night once again
generated significant interest and
support with over 220 attendees and
$115,000 raised resulting in our most
successful fundraising to date.
Monies raised will go to support the
school’s Psychological Support Program
and Family Support Program.
We sincerely thank all our partners
and volunteers whose generosity and
involvement supported the cause.
RECORD FUNDRAISING FOR
ST LUCY’S SCHOOL
As part of the Commonwealth
Government’s National and Affordable
Housing Agreement (NAHA) and the
NSW State Government’s Social and
Affordable Housing Fund 2 (SAHF2),
Centuria has partnered with Compass
Housing and Tetris Capital, providers
and owners of social and affordable
housing, to source, develop and deliver
192 dwellings across four separate
properties throughout the NSW Hunter
and Central Coast regions.
Centuria has agreed to contribute
circa $20 million of equity towards the
partnership, which is one of the largest
in NSW. The Social and Affordable
Housing sector is well positioned to
benefit from State and Commonwealth
Government commitments towards
providing affordable living solutions in
NSW and other states.
RECORD FUNDRAISING FOR
ST LUCY’S SCHOOL
We take great pride in developing strong
relationships and great results through
our Employee Volunteering Program,
which provides opportunities for staff
to enhance skills and raise awareness
of the challenges faced by charities and
community organisations.
16
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 CIP: 69 RIVERGATE PLACE, MURRARIE QLD
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
17
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Board of Directors
Garry Charny
John McBain
Peter Done
CHAIRMAN
EXECUTIVE DIRECTOR
GROUP JOINT CEO
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Peter was appointed to the Board
on 28 November 2007. Peter was a
partner of KPMG for 27 years until
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.
Garry was appointed to the Board
on 23 February 2016 and appointed
Chairman on 30 March 2016. Garry
is also Chairman of Centuria Life and
Over Fifty Guardian Friendly Society.
He is Managing Director and
founding principal of Wolseley
Corporate, an Australian based
corporate advisory and investment
house which transacts both
domestically and internationally.
He has had a broad range experience
in both listed and unlisted
companies across a diverse range
of sectors including property, retail,
technology and media. He formerly
practised as a barrister in the fields
of commercial and equity.
John was a founding director and
major shareholder in boutique
property funds manager Centry
Funds Management, which was
established in 1999 and was
acquired by 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.
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 United Kindgdom.
18
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 John Slater
Nicholas Collishaw
Susan Wheeldon-Steele
Jason Huljich
INDEPENDENT
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
EXECUTIVE DIRECTOR
GROUP JOINT CEO
John was appointed to the Board on
22 May 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
Campital, subsequently sold in 2016
and has a wealth of financial services
experience.
Nicholas was appointed CEO -
Listed Property Funds at Centuria
Property Funds on 1 May 2013 and
to the Board on 27 August 2013.
Effective 1 January 2018, Nicholas
resigned as CEO - Listed Property
Funds and became a Non-Executive
Director.
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 United
States, United Kingdom and the
Middle East.
Susan was appointed to the Board
on 31 August 2016.
Jason was appointed to the Board on
28 November 2007.
Susan is the Head of Agency at
Google where she works with major
national and global companies
to develop and deliver growth
startegies that future proof and
build clients’ businesses and
brands in a constantly changing
environment.
She has previous experience in
retail property asset management at
AMP Capital Shopping Centres, as
Head of Brand & Retail, responsible
for delivering alternative revenue
from 38 retail assets across Australia
and New Zealand with combined
annual sales in excess of $5 billion.
Jason leads Centuria’s Property
Funds Management business, which
is responsible for both listed and
unlisted property funds, the property
and debt opportunities. In this role
he provides strategic leadership,
ensuring the effective operation of
Centuria’s property business.
He has extensive experience in
the commercial property sector,
with specialist skills in property
investment and funds management.
He is also the immediate past
President of the Property Funds
Association (PFA), which represents
the $125 billion direct property
investment body in Australia, and
continues to serve on their national
executive.
19
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Senior Executive Committee
John McBain
Jason Huljich
Simon Holt
EXECUTIVE DIRECTOR
GROUP JOINT CEO
EXECUTIVE DIRECTOR
GROUP JOINT CEO
CHIEF FINANCIAL OFFICER
John joined the Centuria Board (formerly
Over Fifty Group) on 10 July 2006. He was
appointed as Chief Executive Officer of
the Over Fifty Group in April 2008. John
was also a founding director and major
shareholder in boutique funds manager
Century Funds Management, which was
established in 1999 and acquired by Over
Fifty Group in July 2006.
Prior to forming Century, John founded
property funds manager Waltus
Investments Australia Limited and
Hanover Group Pty Limited a specialised
property consultancy. Waltus was formed
in 1995 and was one of the first dedicated
property funds managers in Australia.
Prior to 1990 John 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 became the Centuria Group
Joint CEO in June 2019 after previously
leading Centuria’s Real Estate and
Funds Management business. Jason
was also a founding director and
major shareholder in boutique funds
manager Century Funds Management,
which was established in 1999 and
acquired by Over Fifty Group in July
2006. He is an Executive Director of
Centuria Capital Group. In his role
Jason provides strategic leadership,
ensuring the effective operation of
Centuria’s real estate business.
Jason has extensive experience in
the commercial property sector, with
specialist skills in property investment
and funds management. He is also a
past President of the Property Funds
Association (PFA), which represents
the $125 billion direct property
investment body in Australia, and
continues to serve on their national
executive.
Jason holds a Bachelor of Commerce
(Commercial Law) from the University
of Auckland, New Zealand.
Simon joined Centuria Capital as Chief
Financial Officer in May 2016. He brings
with him a wealth of local and global
experience covering the corporate,
treasury and listed securitisation areas.
He is accountable for financial and
treasury management of the Group
and, with the CEO, is also tasked with a
specific focus on expanding the parent
company, Centuria Capital.
Simon was most recently Chief Financial
Officer of WorleyParsons where he spent
eight years. Previously, he held a range
of senior Finance positions at Westfield
Group and Westfield Trust, again
spanning eight years.
Simon is a Chartered Accountant and
holds a degree in Business (major in
Accounting and Marketing). He is also
a Member of Australian Institute of
Company Directors.
20
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Anna Kovarik
Victor Georos
Michael Blake
GENERAL COUNSEL AND
COMPANY SECRETARY
HEAD OF PORTFOLIO
AND ASSET MANAGEMENT
HEAD OF CENTURIA LIFE
Anna joined Centuria in July 2018 in the
role of General Counsel and Company
Secretary. Prior to joining Centuria, Anna
held the position of Group Risk Manager
at Mirvac Group and was previously Head
of Group Insurance for AMP and General
Counsel and Company Secretary at AMP
Capital Brookfield.
Anna holds a Masters of Information
Technology, a BA (Hons) in Systems
Management, and was awarded a
distinction in the Global Executive MBA
program at the University of Sydney. She
is qualified as a solicitor in both the UK
and NSW and was a senior associate
at Allens law firm in Sydney where she
specialised in the areas of real estate
and funds management.
Victor joined Centuria as Senior Portfolio
Manager in April 2013 and was appointed
Head of Portfolio and Asset Management
in July 2015.
In his role he is responsible for
overseeing portfolio and asset
management of Centuria’s portfolio,
including the development and
implementation of strategies to enhance
value through active asset management
and development. Victor works closely
with the Funds Management team and
the Development team. In addition
Victor manages the Centuria Property
Fund’s Valuation program and is actively
involved with the constant review of best
practice policies and procedures.
Victor has extensive experience in
asset and investment management,
development and funds management,
across the office, retail and industrial
sectors, with a key focus on results
and ability to build high performance
teams across all sectors. Prior to joining
Centuria Victor held senior positions with
GPT Group and Lend Lease, including
Head of Industrial & Business Parks at
GPT.
Victor holds a Bachelor of Land Economy
and a Graduate Diploma of Finance and
Investment (FINSIA).
Head of Centuria Life. Michael commenced
his career with AAP Reuters Economic
Services. He went on to hold senior
positions with Heine Funds Management,
Mercantile Mutual, Zurich, HSBC Asset
Management and Cromwell Property
Group.
Michael holds a Bachelor of Financial
Administration, Diploma of Financial
Planning, Masters of Business
Administration and is a Graduate of the
Institute of Company Directors. Michael
has held board positions locally and
offshore.
21
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Senior exectutive team
Ross Lees
Andrew Essey
André Bali
HEAD OF FUNDS MANAGEMENT
HEAD OF TRANSACTIONS
HEAD OF DEVELOPMENT
Ross Lees is the Head of Centuria’s Real
Estate Funds Management business,
which is responsible for both listed and
unlisted property funds. This includes two
ASX listed REITs as well as 16 unlisted
funds.
Ross was previously the Fund Manager,
Centuria Industrial REIT (ASX:CIP), with
overall responsibility for the operation,
performance and strategy of the REIT.
The REIT is Australia’s largest domestic
only pure play industrial REIT, with a
portfolio of 45 assets and a value of
$1.3bn. Ross joined Centuria in 2017
and has over 15 years of industrial
investment management experience
having joined Centuria from Dexus where
he held senior transactional and portfolio
management roles. Prior experience
includes over six years at Stockland, and
four years at Logos Property Australia
having established and led their asset
management platform.
After joining Centuria Property Funds
in February 2013 as National Leasing
Manager, Andrew was appointed
Fund Manager in November 2015, and
transitioned to the role of Head of
Transactions in July 2017. As Head of
Transactions, Andrew is responsible
for originating and managing the
Group’s property transactions and
oversight of the Group’s acquisitions
team.
Prior to joining Centuria, Andrew
worked for DTZ in Sydney’s North
Shore Agency from 2007, most recently
holding the position of Director. While
at DTZ, Andrew’s focus was on leasing
and sales within Sydney’s North Shore
industrial and office park markets.
During his nearly six years with DTZ,
Andrew was directly involved in over
180 transactions while representing
both institutional and private
investors.
Ross holds a Master of Applied Finance
from Macquarie University and Bachelor
of Business (Property Economics) from
UWS.
Andrew holds a Bachelor of Business
Administration from Radford University,
Virginia, USA with a Major in marketing
and a Minor in economics.
André joined Centuria in 2007 and
oversees the Group’s project and
property development functions,
including development and debt funds.
In his role he is responsible for
overseeing both passive and active
management of Centuria’s portfolio
including capital works, planning,
strategic repositioning of assets to
maximise returns, commercial risk
management, joint ventures and
partnerships, and working closely with
Centuria’s leasing, capital transactions
and funds management teams to
enhance value for Centuria’s investors.
André has extensive experience
in development and investment
management across numerous sectors
including office, residential, industrial
and retail. Prior to Centuria Andre
founded and operated a specialised
property consulting and advisory
company, and prior to that held several
senior positions in a number of property
development companies.
André holds an Honors Degree in
Applied Science from UNSW, Masters
of Commerce (Land Economics) from
UWS, Graduate Certificate of Finance
from AGSM, and held non-executive roles
on several not-for-profit organisations
including Habitat for Humanity.
22
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
This Page has been left intentionally blank
23
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Contents
Centuria Capital Group comprises of Centuria Capital Limited
ABN 22 095 454 336 (the ‘Company’) and its subsidiaries
and Centuria Capital Fund ARSN 613 856 358 (‘CCF’) and its
subsidiaries. The Responsible Entity of CCF is Centuria Funds
Management Limited ACN 607 153 588, AFSL 479 873, a wholly
owned subsidiary of the Company.
The consolidated financial statements were authorised for
issue by the Directors on 13 August 2019.
Through the use of the internet, we have ensured that our
corporate reporting is timely and complete. All press releases,
financial reports and other information are available at our
Shareholder Centre on our website: www.centuria.com.au
Directors' report
Audited remuneration report
Lead auditor's independence declaration
Consolidated financial statements
Independent auditor's report
Additional stock exchange information
Page
25
31
39
40
91
98
These consolidated financial statements are the financial
statements of the consolidated entity consisting of Centuria
Capital Limited and its subsidiaries. A list of all subsidiaries is
included in note E3. The consolidated financial statements are
presented in the Australian currency.
Centuria Capital Limited is a company limited by shares,
incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Centuria Capital Limited
Level 41, Chifley Tower,
2 Chifley Square Sydney NSW 2000
24
24
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Director’s Report
The directors of Centuria Capital Limited (the ‘Company’)
present their report together with the consolidated financial
statements of the Company and its controlled entities (the
‘Group’) for the financial year ended 30 June 2019 and the
auditor’s report thereon.
Special responsibilities
Chairman of the Audit, Risk Management and Compliance
Committee
Member of the Nomination and Remuneration Committee
ASX listed Centuria Capital Group consists of the Company and
its controlled entities including Centuria Capital Fund (‘CCF’).
The shares in the Company and the units in CCF are stapled,
quoted and traded on the Australian Securities Exchange
(‘ASX’) as if they were a single security under the ticker code
‘CNI’.
Interests in CNI
Ordinary stapled securities: 1,300,412
MR JOHN R. SLATER, DIP.FS (FP), F FIN.
Independent Non-Executive Director
DIRECTORS AND DIRECTORS’ INTERESTS
MR GARRY S. CHARNY, BA. LL.B.
Independent Non-Executive Director and Chairman
Experience and expertise
Garry was appointed to the Board on 23 February 2016 and
appointed Chairman on 30 March 2016. Garry is also Chairman
of Centuria Life and Over Fifty Guardian Friendly Society.
He is Managing Director and founding principal of Wolseley
Corporate, an Australian based corporate advisory and
investment house which transacts both domestically and
internationally.
He has had a broad range experience in both listed and
unlisted companies across a diverse range of sectors including
property, retail, technology and media. He formerly practised as
a barrister in the fields of commercial and equity.
Other directorships
Garry is Chairman of Wolseley Corporate. He is also Chairman
of Spotted Turquoise Films, an international Film and Television
company based in Sydney and Los Angeles. He is Chairman of
Shero Investments, a Sydney based investment company.
Special responsibilities
Chairman of the Board
Chairman of the Conflicts Committee
Chairman of the Nomination and Remuneration Committee
Member of the Audit, Risk Management and Compliance
Committee
Interests in CNI
Ordinary stapled securities: 326,345
MR PETER J. DONE, B.COMM, FCA.
Independent Non-Executive Director
Experience and expertise
Peter was appointed to the Board on 28 November 2007. 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.
Other directorships
None.
Experience and expertise
John was appointed to the Board on 22 May 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, subsequently sold in 2016 and has a wealth of financial
services experience.
Other directorships
None.
Special responsibilities
Member of the Nomination and Remuneration Committee
Member of the Audit, Risk Management and Compliance
Committee
Interests in CNI
Ordinary stapled securities: 3,200,000
MS SUSAN WHEELDON-STEELE, MBA.
Independent Non-Executive Director
Experience and expertise
Susan was appointed to the Board on 31 August 2016.
Susan is the Head of Agency at Google where she works
with major national and global companies to develop and
deliver growth strategies that future proof and build clients’
businesses and brands in a constantly changing environment.
She has previous experience in retail property asset
management at AMP Capital Shopping Centres, as Head of
Brand & Retail, responsible for delivering alternative revenue
from 38 retail assets across Australia and New Zealand with
combined annual sales in excess of $5 billion.
Other directorships
None.
Special responsibilities
Member of the Conflicts Committee
Interests in CNI
Ordinary stapled securities: Nil.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 25
25
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Directors’ Report
MR NICHOLAS R. COLLISHAW, SAFIN, FAAPI, FRICS.
Non-Executive Director
MR JASON C. HULJICH, B. COMM.
Executive Director and Joint Chief Executive Officer
Experience and expertise
Jason was appointed to the Board on 28 November 2007.
Jason leads Centuria’s Property Funds Management business,
which is responsible for both listed and unlisted property
funds, the property services business, property acquisition and
disposal and special property and debt opportunities. In this
role he provides strategic leadership, ensuring the effective
operation of Centuria’s property business.
He has extensive experience in the commercial property
sector, with specialist skills in property investment and funds
management. He is also the immediate past President of
the Property Funds Association (PFA), which represents the
$125 billion direct property investment body in Australia, and
continues to serve on their national executive.
Other directorships
None.
Special responsibilities
Joint Chief Executive Officer
Interests in CNI
Ordinary stapled securities: 3,433,294
Performance rights granted: 1,077,789
Experience and expertise
Nicholas was appointed CEO - Listed Property Funds at Centuria
Property Funds on 1 May 2013 and to the Board on 27 August
2013. Effective 1 January 2018, Nicholas resigned as CEO - Listed
Property Funds and became a Non-Executive Director.
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.
Other directorships
Chairman of Redcape Hotel Group Management Ltd
Special responsibilities
None
Interests in CNI
Ordinary stapled securities: 3,586,227
Performance rights granted: 558,811
MR JOHN E. MCBAIN, DIP. URBAN VALUATION
Executive Director and Joint Chief Executive Officer
Experience and expertise
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 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.
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.
Other directorships
John is also a director of QV Equities Limited, a licensed
investment company listed on the ASX.
Special responsibilities
Joint Chief Executive Officer
Interests in CNI
Ordinary stapled securities: 5,865,404
Performance rights granted: 1,652,712
26
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
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).
Board Meetings
Audit, Risk, Management
& Compliance
Committee Meetings
Nomination &
Remuneration
Committee Meetings
Conflicts Committee
Meetings
A
23
24
24
21
24
23
21
B
24
24
24
24
24
24
24
A
6
6
5
#
#
#
#
B
6
6
6
#
#
#
#
A
2
2
2
#
#
#
#
B
2
2
2
#
#
#
#
A
10
#
#
8
#
#
#
B
10
#
#
10
#
#
#
Director
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon-Steele
Mr Nicholas R. Collishaw
Mr John E. McBain
Mr Jason C. Huljich
A = Number of meetings attended
B = Number of meetings held during the time the Director held office during the year
# = Not a member of committee
COMPANY SECRETARY
Anna Kovarik was appointed to the position of Company
Secretary on 5 July 2018.
Anna holds a Masters of Information Technology, a BA (Hons)
in Systems Management and was awarded a distinction in the
Global Executive MBA program at the University of Sydney. She
is qualified as a solicitor in both the UK and NSW and was a
senior associate at Allens law practice in Sydney.
Prior to joining Centuria, Anna held the position of Group
Risk Manager at Mirvac Group and was previously Head of
Group Insurance for AMP and General Counsel and Company
Secretary at AMP Capital Brookfield.
Mr James Lonie held the position of company secretary from
16 June 2017 until his resignation on 5 July 2018.
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 as well as direct interest in property funds
and other liquid investments.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Group during
the financial year, in addition to the operating and financial
review below were as follows:
– Contributed equity attributable to Centuria Capital
Group increased by $127,902,000 from $343,700,000
to $471,602,000 as a result of equity raisings, capital
reallocation and vesting of rights under the Employee
share scheme. Details of changes in contributed equity
are disclosed in Note C10 to the consolidated financial
statements.
– On 22 October 2018, the Group issued Tranche 3 of
secured notes to the value of $80,000,000 consisting of
$35,000,000 floating rate secured notes and $45,000,000
6.5% fixed rate secured notes. These notes mature on 21
April 2023.
– The Group increased its stake in Centuria Metropolitan REIT
and Centuria Industrial REIT (CIP) to greater than 20% and
these investments have been equity accounted in these
financial statements.
– The Group sold its strategic stake in Propertylink Group
(PLG) of 19.51% for $136,899,000 cash consideration.
– The Group announced the acquisition of a 63.06%
economic interest (50.0% voting interest) in Heathley
Limited’s property funds management platform for
$24,400,000. This transaction is due to be settled
following a Heathley shareholder vote post 30 June 2019
and satisfaction of certain other conditions precedent.
As the shareholder vote and the remaining conditions
precedent were not satisfied as at 30 June 2019, the
transaction was not completed and Group did not have
any economic interest in Heathley nor an entitlement to
any dividends. As a result, the Group has not consolidated
Heathley as at 30 June 2019.
Under the terms of the Heathley transaction, the Group will
seek to raise $61,700,000 by using its unlisted distribution
network to support funding requirements for two Heathley
funds. The Group will manage and underwrite any
shortfall in the fund raising to satisfy the overall funding
requirements of $61,700,000 in addition to a further
$11,000,000 committed post year-end.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 27
27
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW
The Group recorded a consolidated statutory net profit after tax for the year of $50,941,000 (2018: $56,190,000). Statutory
net profit after tax has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, which
comply with International Financial Reporting Standards.
The Group recorded an operating profit after tax of $45,706,000 (2018: $45,087,000). Operating profit after tax excludes non-
operating items such as transaction costs, fair value movements and share of net profit of equity accounted investments in excess
of distributions received.
The statutory net profit after tax includes a number of items that are not operating in nature, the table below provides a
reconciliation from statutory profit to operating profit.
Reconciliation of statutory profit to operating profit
Statutory profit after tax
2019
$’000
50,941
2018
$’000
56,190
Statutory earnings per security (EPS) (cents)
14.2
19.8
Less non-operating items:
Gain on fair value movements in derivatives and investments
Transaction and other costs
Impairment charges in relation to seed capital valuations
Loss/(profit) attributable to controlled property funds
Eliminations between the operating and non-operating segment
Share of equity accounted net profit in excess of distributions received
Tax impact of above non-operating adjustments
Operating profit after tax
(4,572)
6,625
-
7,390
(5,256)
(8,433)
(989)
45,706
(8,604)
230
380
(8,061)
5,761
-
(809)
45,087
Operating EPS (cents)
12.7
16.3
A summary of the Group’s operating segments is provided in Note A4 of the Financial Report. The Operating Profit after tax for the
Group comprise of the result of the divisions which report to the Joint CEOs and Board of Directors for the purpose of resource
allocation and assessment of performance.
Segment
Property Funds Management
Investment Bonds Management
Co-Investments
Corporate
Total
Operating profit after tax
$’000
2019
33,140
2,446
14,505
(4,385)
45,706
2018
34,221
3,473
11,717
(4,324)
45,087
Increase/
(Decrease)
$’000
(1,081)
(1,027)
2,788
(61)
Increase/
(Decrease)
%
Highlights
(3)
(30)
24
1
(A)
(B)
(C)
A detailed Segment Profit and Loss as well as a detailed Segment Balance Sheet are outlined in Notes B1 and C1 respectively.
28
28
28 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Operational highlights for the key segments were as follows:
(A) PROPERTY FUNDS MANAGEMENT
For the year ended 30 June 2019, excluding the after tax impact of performance fees the Property Funds Management segment
profit increased by $1,870,000 or 12% reflecting the growth in assets under management (AUM).
Operational highlights for the year included:
– Increase in recurring Property Funds Management fees of $10,166,000 or 31% from $32,649,000 for the year ended
30 June 2018 to $42,815,000 for the year ended 30 June 2019
– 29% increase in Listed AUM from $2.1 billion as at 30 June 2018 to $2.7 billion as at 30 June 2019
– Centuria Industrial REIT acquired eight properties with a total value of $147.4 million
– Centuria Metropolitan REIT acquired four properties with a total value of $0.5 billion
– Performance fees recognised of $22,552,000.
– Acquisition fees of $1,135,110 from Centuria Diversified Property fund which acquired two properties during the year with a
total value of $54.7 million.
For the year ended 30 June 2019, Property Funds Management operating profit after tax of $33,140,000 was lower than the prior
year ending 30 June 2018 by $1,081,000 primarily due to the impact of $22 552,000 performance fees recognised in the current
year in accordance with AASB 15 compared to $25,830,000 of performance fees earned on the sale of 10 Spring Street property in
the prior year.
(B) INVESTMENT BONDS MANAGEMENT
For the year ended 30 June 2019, the Investment Bonds Management segment’s operating profit after tax decreased by
$1,027,000 to $2,446,000 due to strategic review costs and launch of new and expanded range of 22 high-quality investment
bond, called Centuria LifeGoals.
Centuria’s Investment Bonds Management business is the fourth largest friendly society/insurance bond issuer in Australia.
(C) CO-INVESTMENTS
For the year ended 30 June 2019, the Co-Investments segment operating profit after tax increased by $2,788,000. This was
primarily due to a significant increase in Co-Investment holdings across Centuria’s listed REITS compared to the prior year.
During the year, the Group’s ownership stakes in Centuria Metropolitan REIT (CMA) and Centuria Industrial REIT (CIP) increased
to 20.76% and 24.15% respectively. As a result, the Group’s accounting treatment of these investments changed from being
recognised as financial assets held at fair value to equity accounted investments.
The operating profit after tax for the Co-Investments segment represents the distributions and returns generated from those
investments after the applicable financing costs.
EARNINGS PER SECURITY (EPS)
Basic EPS (cents/security)
Diluted EPS (cents/security)
2019
2018
Operating
Statutory
Operating
Statutory
12.7
11.9
14.2
13.2
16.3
14.9
19.8
18.1
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions paid or declared by the Group during the current financial year were:
Dividends/distributions paid during the year
Final 2018 dividend (100% franked)
Final 2018 Trust distribution
Interim 2019 dividend (100% franked)
Interim 2019 Trust distribution
Special non-cash divdend/capital reallocation
Dividends/distributions declared during the year
Final 2019 dividend (100% franked)
Final 2019 Trust distribution
Total amount
Cents
per security
Total amount
$’000
Date
paid/payable
1.00
3.10
0.85
3.40
7.80
0.50
4.50
21.15
3,048
9,449
3,260
13,038
30,000
1,918
17,262
77,975
27 July 2018
27 July 2018
4 February 2019
4 February 2019
29 June 2019
16 August 2019
16 August 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 29
29
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 EVENTS SUBSEQUENT TO THE REPORTING DATE
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 F4 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.
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 39.
ROUNDING OF AMOUNTS
The Group is an entity of a kind referred to in ASIC Legislative
Instrument 2016/191, related to the ‘rounding off’ of amounts in
the Directors’ Report and financial statements. Amounts in the
Directors’ Report and financial statements have been rounded
off, in accordance with the instrument to the nearest thousand
dollars, unless otherwise indicated.
Since the end of the financial year, the shareholders of
Heathley have convened a meeting and approved the proposed
acquisition of Heathley by the Group. There are still a number of
other conditions precedent outstanding which will need to be
satisfied prior to the completion of the transaction.
In addition, since the end of the financial year, the Group has
committed to a further $11,000,000 in addition to its original
commitment of $61,700,000 to support funding requirements
for Heathley funds. The Group will seek to raise these funds
by using its unlisted distribution network and will manage
and underwrite any shortfall in the fund raising to satisfy the
overall funding requirements. As at 30 June 2019, the Group
had already provided funding of $2,800,000 with a further
$2,100,000 invested since the end of the financial year.
Other than the above, there has not arisen in the interval
between 30 June 2019 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, that would
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.
30
30
30 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 AUDITED REMUNERATION REPORT
– Ensuring the overall cost of remuneration is managed and
The remuneration report provides information about the
remuneration arrangements for key management personnel
(KMP), which includes Non-executive Directors and the
Group’s most senior management, for the year to 30 June 2019
The report is structured as follows:
– Details of KMP covered in this report
– Remuneration policy and link to performance
– Remuneration of executive directors and senior
management
– Key terms of employment contracts
– Non-executive director remuneration
– Director and senior management equity holdings and other
transactions
DETAILS OF KMP COVERED IN THIS REPORT
The following persons are considered KMP of the Company
during or since the end of the most recent financial year:
Name
Role
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon-Steele
Independent Non-Executive
Director and Chairman
Independent Non-Executive
Director
Independent Non-Executive
Director
Independent Non-Executive
Director
Mr Nicholas R. Collishaw
Non-Executive Director
Mr John E. McBain
Mr Jason C. Huljich
Executive Director and Joint
Chief Executive Officer
Executive Director and Joint
Chief Executive Officer
Mr Simon W. Holt
Chief Financial Officer
The term ‘senior management’ is used in this remuneration
report to refer to the executive directors and the Chief
Financial Officer.
REMUNERATION POLICY AND LINK TO PERFORMANCE
The Group 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
Group must be able to attract, motivate and retain capable
individuals. The Group’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 senior
management, 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;
linked to the ability of the Group to pay; and
– Ensuring severance payments due to the Joint Chief
Executive Officers 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.
The main objective in rewarding the Group’s senior
management for their performances is to ensure that
shareholders’ wealth is maximised through the Group’s
continued growth. It is necessary to structure and strengthen
this focus to drive this strategy so that they are aligned with
the Group’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 Group’s performance for the year
in reference to specific Earnings per Security (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 and
non-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 senior management
depending on the extent to which they meet performance
requirements.
In accordance with the Group’s corporate governance, the
structure of non-executive director and senior management
remuneration is separate and distinct.
REMUNERATION OF SENIOR MANAGEMENT
Objective
The Group aims to reward senior management with a level and
mix of remuneration commensurate with their position and
responsibilities within the Group so as to:
– Reward senior management for company, business unit
and individual performance against targets set by
reference to appropriate benchmarks;
– Align the interests of senior management with those
of stakeholders;
– Link rewards with the strategic goals and performance
of the Group; and
– Ensure total remuneration is competitive by market
standards.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
31
31
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Structure
In determining the level and make-up of senior management
remuneration, the Joint Chief Executive Officers 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
for senior management (excluding the Joint Chief Executive
Officers) is established by the Joint Chief Executive Officers
and the Nomination & Remuneration Committee. The
proportion of fixed and variable remuneration for the Joint Chief
Executive Officers is established solely by the Nomination &
Remuneration Committee. While the allocation may vary from
period to period, the graph below details the approximate fixed
and variable components for senior management.
OTHER SENIOR
MANAGEMENT
JOINT
CEO
50%
30%
20%
36%
28%
36%
0%
20%
40%
60%
80%
100%
FIXED REMUNERATION
VARIABLE REMUNERATION (STI)
VARIABLE REMUNERATION (LTI)
(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. For senior
management excluding the Joint Chief Executive Officers,
this is reviewed annually by the Joint Chief Executive Officers
and the Nomination & Remuneration Committee. The process
consists of a review of Group, 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 Joint Chief Executive Officers.
Senior management are given the opportunity to receive their
fixed 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 Group’s Senior Management Remuneration Policy,
long and short-term performance incentives may be made under
the Group’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 non-financial and financial targets with the
remuneration received by senior management charged with
meeting those targets. The total potential STI available is
set at a level so as to provide sufficient incentive to senior
management 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 Group, or a combination of both.
During the current financial year, the Group issued Nil (2018:
Nil) STI ordinary securities to employees in addition to cash
bonuses provided to employees.
(ii) Long-term Incentives (LTI)
The Group has an Executive Incentive Plan (“LTI Plan”) which
forms a key element of the Group’s incentive and retention
strategy for senior management 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 senior management 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 entities.
Rights issued under the LTI Plan are issued in accordance with
the thresholds approved at the Annual General Meeting (AGM).
32
32
32 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 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 stapled security in the Group (“Security”), subject
to meeting the Performance Conditions.
Upon meeting the Performance Conditions, the Rights vest and securities 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
The date on which the Board determines the extent to which the performance conditions are
satisfied and the Rights vest.
Performance Conditions
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 (“FUM Hurdle”); and
– Absolute Total Securityholder Return Performance (“Absolute TSR Hurdle”).
Unvested rights
Subject to the Board’s discretion, unvested Rights lapse upon the earliest of ceasing employment,
corporate restructuring, divestment of material business or subsidiary, change of control, clawback
and lapse for fraud and breach, failure to satisfy the Performance Conditions and the 15th anniversary
of the date of the grant.
The Group currently operates three tranches of the Executive Incentive Plan (“Plan”) as below.
Tranche
Grant Date
Performance Period
4
5
6
1 January 2017
1 November 2017
1 February 2019
1 July 2016 to 30 June 2019
1 July 2017 to 30 June 2020
1 July 2018 to 30 June 2021
The performance objectives for performance rights granted under Tranche 4 were met in full by 30 June 2019. As a result, these
rights will vest on 14 August 2019.
The Group’s overall objective is to reward executive directors and senior management based on the Group’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.
5 year summary
Statutory profit after tax attributable to Centuria Capital
Group securityholders ($'000)
Operating profit after tax ($'000)
Share price at start of year
Share price at end of year
Interim dividend
Final dividend
Special non-cash dividend
30 June
2019
30 June
2018
30 June
2017
30 June
2016
30 June
2015
50,795
45,706
$1.40
$1.77
4.25cps
5.0cps
7.8cps
54,765
45,087
$1.23
$1.40
4.1cps
4.1cps
17,323
15,489
$1.05
$1.23
2.3cps
5.2cps
-
17.27cps
12,303
11,344
$0.93
$1.05
8,566
6,280
$0.80
$0.93
2.25cps
2.0cps
3.0cps
2.75cps
-
15.8cps
14.8cps
-
11.0cps
8.1cps
Statutory basic earnings per Centuria Capital Group security
14.2cps
19.8cps
11.5cps
Operating basic earnings per Centuria Capital Group security
12.7cps
16.3cps
10.3cps
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 33
33
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019
EPS Hurdle
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
Tranche 4 (30% of rights granted)
Maximum % or above
10% or greater
100%
Between threshold % and maximum %
More than 6%, less than 10%
Pro-rata between 50% and 100%
More than 4%, less than 6%
Pro-rata between 25% and 50%
Threshold %
Less than the threshold %
4%
Less than 4%
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). Tranche 5 and Tranche 6 did not include an EPS hurdle.
FUM Hurdle
The percentage of Rights subject to the growth in FUM 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
Compound annual
growth Rate
Portion of Rights
that vest
Tranche 4 (20% of rights granted)
Tranche 5 (25% of rights granted)
Tranche 6 (25% of rights granted)
15% or greater
100%
20% or greater
100%
20% or greater
100%
More than 12%,
less than 15%
More than 10%,
less than 12%
Pro-rata vesting
between 50% to
100%
Pro-rata vesting
between 25% to
50%
More than 10%,
less than 20%
Pro-rata vesting
between 25% to
100%
More than 10%,
less than 20%
Pro-rata vesting
between 25% to
100%
Threshold %
10%
Less than the
threshold %
Less than 10%
25%
0%
10%
Less than 10%
25%
0%
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
Compound annual
growth Rate
Portion of Rights
that vest
Tranche 4 (50% of rights granted)
Tranche 5 (75% of rights granted)
Tranche 6 (75% of rights granted)
18% or greater
100%
15% or greater
100%
15% or greater
100%
More than 15%
less than 18%
More than 12%,
less than 15%
Pro-rata vesting
between 50% to
100%
Pro-rata vesting
between 25% to
50%
More than 10% less
than 15%
Pro-rata vesting
between 25% to
100%
More than 10%
less than 15%
Pro-rata vesting
between 25% to
100%
Threshold %
12%
Less than the
threshold %
Less than 12%
25%
0%
10%
Less than 10%
25%
0%
10%
Less than 10%
25%
0%
34
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34 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Rights Granted
The following Rights were granted to senior management:
Key management personnel
Tranche 4 (grant date of 1 January 2017) (i)
Mr John E. McBain
Mr Jason C. Huljich
Mr Nicholas R. Collishaw
Mr Simon W. Holt
Total
No. of Rights
granted
Vesting conditions
Fair value at
Grant Date
153,409
102,273
255,682
76,875
51,250
128,125
76,875
51,250
128,125
35,642
23,761
59,403
1,142,670
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
$0.88
$0.88
$0.16
$0.88
$0.88
$0.16
$0.88
$0.88
$0.16
$0.88
$0.88
$0.16
(i) The performance objectives for performance rights granted under Tranche 4 were met in full by 30 June 2019. As a result, these rights will vest on 14 August 2019.
Key management personnel
Tranche 5 (grant date of 1 November 2017)
No. of Rights
granted
Vesting conditions
Fair value at
Grant Date
Mr John E. McBain
Mr Jason C. Huljich
Mr Nicholas R. Collishaw
Mr Simon W. Holt
Total
Key management personnel
Tranche 6 (grant date of 1 February 2019)
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Total
125,762
377,287
79,055
237,165
75,640
226,921
43,834
131,502
1,297,166
No. of Rights
granted
159,575
478,724
126,330
378,989
57,624
172,872
1,374,114
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
$1.24
$0.62
$1.24
$0.62
$1.24
$0.62
$1.24
$0.62
Vesting conditions
Fair value at
Grant Date
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
$1.11
$0.19
$1.11
$0.19
$1.11
$0.19
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 35
35
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Statutory remuneration table
The following table discloses total remuneration of executive directors and senior management in accordance with the
Corporations Act 2001:
Short-term
employee benefits
Post
employment
benefits
Other
long-term
benefits
Share-
based
payments
Mr John E. McBain
2019
1,179,469
Mr Jason C. Huljich
Mr Nicholas R. Collishaw
Note (i)
Mr Simon W. Holt
Total
Year
Salaries
($)
Bonus
($)
Super-
annuation
($)
804,951
934,469
900,000
1,118,750
850,000
679,076
1,025,000
-
345,340
629,469
459,201
-
-
422,500
412,500
2018
2019
2018
2019
2018
2019
2018
2019
2,743,407
2,172,500
2018
2,288,568
2,556,250
20,531
20,049
20,531
20,049
-
8,160
20,531
20,049
61,593
68,307
Long
service
leave
($)
121,136
33,495
(93,160)
(38,845)
-
-
-
-
$
Total
$
367,324
2,588,460
620,019
2,597,264
226,523
1,938,363
187,742
1,873,022
152,267
184,229
111,878
63,926
152,267
537,729
1,184,378
955,676
27,976
857,992
5,863,468
(5,350)
1,055,916
5,963,691
Note (i) Mr Collishaw’s role changed from Executive Director and CEO - Listed Property Funds to Non-Executive Director effective 1 January 2018. Mr
Collishaw’s share based payment amount relates to expense recognised on performance rights granted to him under Tranche 4 and Tranche 5 while he
was still employed as an Executive Director.
KEY TERMS OF EMPLOYMENT CONTRACTS
Group Joint Chief Executive Officers
Mr John E. McBain, was appointed as Chief Executive Officer of the Group in April 2008. Mr Jason C. Huljich, was appointed as Joint
Chief Executive Officer of the Group in June 2019. Mr John E. McBain and Mr Jason C. Huljich are employed under contract. The
summary of the major terms and conditions of their employment contracts 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 Group may terminate this employment contract by providing six months written notice or provide payment in lieu of
the notice period plus an additional six months. Any payment in lieu of notice will be based on the total fixed compensation
package; and
– The Group may terminate the employment contract at any time without notice if serious misconduct has occurred. When
termination with cause occurs the Joint Chief Executive Officers are only entitled to remuneration up to the date of
termination.
Other senior management (standard contracts)
All senior management are employed under contract. The Group may terminate their employment agreement by providing three
months written notice or providing payment in lieu of the notice period (based on the total fixed compensation package).
NON-EXECUTIVE DIRECTOR REMUNERATION
Objective
The Board seeks to set aggregate remuneration at a level that provides the Group 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 aggregate amount determined is then divided
between the directors as agreed. An aggregate maximum amount of not more than $2,000,000 per year was approved at the 2017
Annual General Meeting.
36
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36 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ Fees
Each director receives a fee for being a director of Group companies and an additional fee is paid to the Chairman and to the
Chairman of each Board Committee. The payment of the additional fees to each Chairman recognises the additional time
commitment and responsibility associated with the position.
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon-Steele
Mr Nicholas R. Collishaw
Total
Short-term benefits Post employment benefits
Bonus
($)
215,753
205,479
182,220
164,384
124,658
118,722
92,055
87,671
115,068
54,795
729,754
631,051
Superannuation
($)
20,497
19,521
6,780
15,616
11,842
11,278
8,745
8,329
10,932
5,205
58,796
59,949
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Total
$
236,250
225,000
189,000
180,000
136,500
130,000
100,800
96,000
126,000
60,000
788,550
691,000
Director and senior management equity holdings and other transactions
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.
Name
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon-Steele
Mr Nicholas R. Collishaw
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Balance at
1 July 2018
Movement
Balance at
30 June 2019
Changes prior
to signing
Balance at
signing date
237,314
1,083,676
2,889,075
-
3,086,227
5,191,995
3,133,294
301,021
89,031
216,736
310,925
-
500,000
673,409
300,000
76,923
326,345
1,300,412
3,200,000
-
3,586,227
5,865,404
3,433,294
377,944
–
–
–
–
–
–
–
326,345
1,300,412
3,200,000
-
3,586,227
5,865,404
3,433,294
377,944
37
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
37
37
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 DIRECTOR AND SENIOR MANAGEMENT EQUITY HOLDINGS AND OTHER TRANSACTIONS
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 Group and key management personnel:
– Wolseley Corporate Pty Ltd, a related party of Mr Garry S. Charny, was paid $588,500 (inclusive of GST) (2018: $611,796) for
corporate advisory fees.
– Tailwind Consulting Pty Ltd, a related party of Mr John R. Slater was paid a total of $279,836 (inclusive of GST) (2018:
$198,000) for consultancy services. In addition, Tailwind Consulting paid the Group $4,840 for rental of office space (2018:
$5,280).
– Mr Nicholas R. Collishaw was paid a total of $66,000 (inclusive of GST) (2018: $62,570) for consultancy services.
This report is made in accordance with a resolution of Directors.
Mr Garry S. Charny
Director
Sydney
Mr Peter J. Done
Director
Sydney
13 August 2019
38
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38 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019
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 of Centuria Capital Group
for the financial year ended 30 June 2019 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.
PAR_SIG_01
KPMG
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
Nigel Virgo
Partner
Sydney
13 August 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 39
39
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Financial statements
40
40
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Financial statements
30 June 2019
Contents
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
A About the report
A1 General information
A2 Significant accounting policies
A3 Use of judgements and estimates
A4 Segment summary
B Business performance
B1 Segment profit and loss
B2 Revenue
B3 Expenses
B4 Finance costs
B5 Taxation
B6 Earnings per security
B7 Dividends and distributions
C Assets and liabilities
C1 Segment balance sheet
C2 Receivables
C3 Financial assets
C4 Investment properties held for sale
C5 Investment properties
C6 Intangible assets
C7 Payables
C8 Borrowings
C9 Commitments and contingencies
C10 Contributed equity
D Cash flows
D1 Operating segment cash flows
D2 Cash and cash equivalents
D3 Reconciliation of profit for the period to net cash flows from operating activities
E Group Structure
E1 Interests in associates and joint ventures
E2 Business combination
E3 Interests in material subsidiaries
E4 Parent entity disclosure
F Other
F1 Share-based payment arrangements
F2 Guarantees to Benefit Fund policyholders
F3 Financial instruments
F4 Remuneration of auditors
F5 Adoption of new accounting standards and interpretations
F6 Other new Accounting Standards and Interpretations
F7 Events subsequent to the reporting date
Directors' declaration
Independent auditor’s report
Page
42
43
44
46
47
47
47
47
47
48
49
49
54
56
57
57
60
60
61
61
63
63
66
66
68
69
69
70
71
72
72
73
73
74
74
75
75
77
78
78
79
79
87
87
89
89
90
91
41
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Consolidated statement of comprehensive
Revenue
Share of net profit of equity accounted investments
Net movement in policyholder liability
Fair value movements of financial instruments and property
Expenses
Finance costs
Profit before tax
Income tax expense
Profit after tax
Profit after tax is attributable to:
Centuria Capital Limited
Centuria Capital Fund (non-controlling interests)
External non-controlling interests
Profit after tax
Other comprehensive income
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Centuria Capital Limited
Centuria Capital Fund (non-controlling interests)
External non-controlling interests
Total comprehensive income
Profit after tax attributable to:
Centuria Capital Limited
Centuria Capital Fund (non-controlling interests)
Profit after tax attributable to Centuria Capital Group securityholders
Earning per Centuria Capital Group security
Basic (cents per stapled security)
Diluted (cents per stapled security)
Earnings per Centuria Capital Limited share
Basic (cents per share)
Diluted (cents per share)
Notes
B1, B2
E1
B3
B4
B5
2019
$’000
115,977
30,213
17,370
(2,262)
(80,692)
(20,262)
60,344
(9,403)
50,941
19,611
31,184
146
50,941
-
50,941
19,611
31,184
146
50,941
19,611
31,184
50,795
2018
$’000
134,513
-
9,053
10,103
(67,617)
(15,989)
70,063
(13,873)
56,190
24,540
30,225
1,425
56,190
-
56,190
24,540
30,225
1,425
56,190
24,540
30,225
54,765
B6
B6
Cents
Cents
14.2
13.2
5.5
5.1
19.8
18.1
8.9
8.1
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
42
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42 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Consolidated statement of financial position
As at 30 June 2019
Cash and cash equivalents
Receivables
Income tax receivable
Financial assets
Other assets
Investment properties held for sale
Equity accounted investments
Investment properties
Intangible assets
Total assets
Payables
Liability to 360 Capital Group
Provisions
Borrowings
Interest rate swaps at fair value
Benefit Funds policyholder's liability
Provision for income tax
Deferred tax liabilities
Total liabilities
Net assets
Equity
Equity attributable to Centuria Capital Limited
Contributed equity
Reserves
Retained earnings
Total equity attributable to Centuria Capital Limited
Equity attributable to Centuria Capital Fund (non-controlling interests)
Contributed equity
Retained earnings
Total equity attributable to Centuria Capital Fund (non-controlling interests)
Total equity attributable to Centuria Capital Group securityholders
Equity attributable to external non-controlling interests
Contributed equity
Retained earnings
Total equity attributable to external non-controlling interests
Total equity
Notes
D2
C2
C3
C4
E1
C5
C6
C7
C8
B5(b)
B5(c)
C10
C10
2019
$’000
124,673
69,862
-
356,114
5,741
-
386,713
177,500
157,663
2018
$’000
101,914
21,164
161
644,832
2,036
63,400
-
147,100
157,663
1,278,266
1,138,270
42,232
-
1,878
303,110
28,814
339,557
813
10,494
726,898
551,368
128,164
2,101
12,438
142,703
343,438
19,067
362,505
505,208
32,927
13,233
46,160
551,368
32,405
41,161
1,597
245,739
23,411
349,677
-
3,119
697,109
441,161
98,770
1,896
28,005
128,671
244,930
18,183
263,113
391,784
32,927
16,450
49,377
441,161
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 43
43
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Consolidated statement of changes in equity
For the year ended 30 June 2019
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44
44
44 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 45
45
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Consolidated statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Management fees received
Performance fees received
Rent received
Interest received
Distributions received
Interest paid
Income taxes paid
Payments to suppliers and employees
Applications - Benefits Funds
Redemptions - Benefits Funds
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from sale of related party investments
Purchase of investments in related parties
Loans to related parties for purchase of properties
Repayment of loans by related parties
Purchase of other investments
Loans provided to other parties
Loans repaid by other parties
Proceeds from sale of investment property
Payments in relation to investment properties
Benefit Funds disposals of investments in financial assets
Collections from reverse mortgage holders
Payments for property, plant and equipment
Cash contribution to related party
Purchase of equity accounted investments
Proceeds from sale of investments
Return of investment to external non-controlling interests
Deconsolidation of controlled property funds cash balance
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of securities to securityholders of Centuria Capital Group
Equity raising costs paid
Proceeds from borrowings
Repayment of borrowings
Capitalised borrowing costs paid
Distributions paid to securityholders of Centuria Capital Group
Distributions paid to external non-controlling interests
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
Notes
2019
$’000
2018
$’000
D3
46,330
1,361
20,775
6,863
34,628
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(1,052)
(64,906)
17,160
(32,494)
12,904
50,322
23,768
23,349
9,985
22,760
(14,162)
(16,817)
(53,440)
21,942
(30,777)
36,930
3,552
62,494
(173,294)
(123,760)
-
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(5,925)
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(20,000)
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136,899
(5,865)
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(52,723)
(25,980)
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(8,840)
13,202
2,113
(788)
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(96,299)
100,119
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(1,725)
(29,111)
(3,363)
121,036
22,759
101,914
124,673
98,639
(3,710)
37,748
(14,185)
(446)
(24,310)
(6,835)
86,901
27,532
74,382
101,914
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
46
46
46 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 A About the report
A1
GENERAL INFORMATION
A2
SIGNIFICANT ACCOUNTING POLICIES
The shares in Centuria Capital Limited, (the ‘Company’) and
the units in Centuria Capital Fund (‘CCF’) are stapled to trade
together as a single stapled security (‘Stapled Security’) on
the ASX as ‘Centuria Capital Group’ (the ‘Group’) under the
ticker code ‘CNI’.
The Group is a for-profit entity and its principal activities
are the marketing and management of investment products,
including property investment funds and friendly society
investment bonds and co-investment in property investment
funds.
STATEMENT OF COMPLIANCE
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with Australian Accounting Standards 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).
The consolidated financial statements of the Group
comprising the Company (as ‘Parent’) and its controlled
entities for the year ended 30 June 2019 were authorised for
issue by the Group’s Board of Directors on 13 August 2019.
BASIS OF PREPARATION
The consolidated financial statements have been prepared on
the basis of historical cost, except for financial assets at fair
value through profit and loss, other financial assets, investment
properties and derivative financial instruments 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.
Assets and liabilities have been presented on the face of the
statement of financial position in decreasing order of liquidity
and do not distinguish between current and non-current items.
ROUNDING OF AMOUNTS
The Group is an entity of a kind referred to in ASIC Legislative
Instrument 2016/191, related to the ‘rounding off’ of amounts in
the Directors’ Report and financial statements. Amounts in the
Directors’ Report and financial statements have been rounded
off, in accordance with the instrument to the nearest thousand
dollars, unless otherwise indicated.
The accounting policies and methods of computation in the
preparation of the consolidated financial statements are
consistent with those adopted in the previous financial year
ended 30 June 2018 with the exception of the adoption of
new accounting standards outlined below or in the relevant
notes to the consolidated financial statements.
When the presentation or classification of items in the
consolidated financial statements has been amended,
comparative amounts are also reclassified, unless it is
impractical. Accounting policies are selected and applied
in a manner that ensures that the resulting financial
information satisfies the concepts of relevance and
reliability, thereby ensuring that the substance of the
underlying transactions or other events are reported.
The Group has now applied equity accounting to its
investments in Centuria Metropolitan REIT (CMA) and
Centuria Industrial REIT (CIP) as the Group’s ownership
in these entities exceeded 20% during the year and
significant influence was established. These investments
were previously recognised as financial assets at fair
value. Details of the accounting policy on equity accounted
investments are included in Note E1.
The Group has applied new accounting standards and their
impact is disclosed in Note F5. These financial statements
contain all significant accounting policies that summarise
the recognition and measurement basis used and which
are relevant to provide an understanding of the financial
statements. Accounting policies that are specific to a note to
the financial statements are described in the note to which
they relate.
A3
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 expense that are not readily apparent from other sources.
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.
Information about critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the consolidated financial statements is included
in the following notes:
– Note C5 Investment properties
– Note C6 Intangible assets
– Note F3 Financial instruments
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
47
47
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 A About the report
A4
SEGMENT SUMMARY
As at 30 June 2019 the Group has four reportable operating segments. These reportable operating segments are the divisions
which report to the Group’s Joint Chief Executive Officers and Board of Directors for the purpose of resource allocation and
assessment of performance.
The reportable operating segments are:
Operating Segments
Description
Property Funds Management
Investment Bonds Management
Co-Investments
Corporate
Management of listed and unlisted property funds and rendering of services
in social and affordable housing developments.
Management of the Benefit Funds of Centuria Life Limited and management
of the Over Fifty Guardian Friendly Society Limited. The Benefit Funds
include a range of financial products, including single and multi-premium investments.
Direct interest in property funds and other liquid investments
Overheads for supporting the Group’s operating segments and management of a reverse
mortgage lending portfolio
In addition, the Group also provides disclosures in relation to a further four non-operating segments, which are:
Non-operating segments
Description
Non-operating items
Benefit Funds
Controlled Property Funds
Eliminations
Comprises transaction costs, mark-to-market movements on property and
derivative financial instruments, share of equity accounted net profit in excess of
distributions received and all other non-operating activities
Represents the operating results and financial position of the Benefit Funds
which are required to be consolidated in the Group’s financial statements in accordance
with accounting standards
Represents the operating results and financial position of property funds
which are controlled by the Group and consolidated under accounting standards
Elimination of transactions between the operating segments and the other
three non-operating segments above
Where relevant, comparative financial information has been restated to ensure consistency in presentation of financial information
across the applicable comparative periods.
The accounting policies of reportable segments are the same as the Group’s accounting policies.
Refer below for an analysis of the Group’s segment results:
– Note B1 Segment profit and loss
– Note C1 Segment balance sheet
– Note D1 Operating segment cash flows
48
48
48 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
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49
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 49
49
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
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50
50
50
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 50
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
B Business performance
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
51
51
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
B Business performance
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52
52 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
This Page has been left intentionally blank
53
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 53
53
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
B2
REVENUE
(A) RECOGNITION AND MEASUREMENT
Revenue is recognised over time if:
– the customer simultaneously receives and consumes the benefits as the entity performs;
– the customer controls the asset as the entity creates or enhances it; or
– the seller’s performance does not create an asset for which the seller has an alternative use and there is a right to payment for
performance to date.
Type of revenue
Description
Management fees The Group provides:
Revenue
recognition policy
under AASB 118
Revenue
recognition policy
under AASB 15
a) fund management services to property funds in accordance with
the fund constitutions. The services are provided on an ongoing
basis and revenue is calculated and recognised in accordance with
the relevant constitution. The fees are invoiced and paid monthly in
arrears.
Recognised on
accruals basis
based on the
contract terms.
Over-time
b) property management services to the owners of property assets
in accordance with property services agreements. The services
are utilised on an ongoing basis and revenue is calculated and
recognised in accordance with the specific agreement. The fees
are invoiced monthly with variable payment terms depending on the
individual agreements.
c) lease management service to the owners. The revenue is
recognised when the specific service is delivered (e.g. on lease
execution) and consideration is due 30 days from invoice date.
d) short-term development management services to the owners
of property assets in accordance with development management
agreements. Revenue is calculated in accordance with the specific
agreement and invoiced in accordance with the contract terms.
Consideration is due from the customer based on the specific terms
agreed in the contract and is recognised when the Company has
control of the benefit.
Over-time
Recognised on
an accruals basis
based on the
contract terms.
Point-in-time
Point-in-time
Recognised in the
period in which
the services are
rendered.
Recognised in the
period in which
the services are
rendered.
Performance
fees
The Group receives a performance fee for providing management
services where the property fund outperforms a set IRR benchmark at
the time the property is sold.
Over-time
Recognised in the
period in which
the services are
rendered.
The consideration is due upon successful sale of the investment
property if the performance hurdles are satisfied. In assessing the
timing and measurement of performance fees to be recognised,
consideration is given to the facts and circumstances with respect
to each investment property including external factors such as its
current valuation, passage of time and outlook of the property market.
Performance fees are only recognised when they are deemed to be
highly probable and the amount of the performance fees will not result
in a significant reversal in future periods.
The Group recovers the costs associated with general building and
tenancy operation from lessees in accordance with specific clauses
within lease agreements. These are invoiced monthly based on an
annual estimate. The consideration is due 30 days from invoice date.
Should any adjustment be required based on actual costs incurred,
this is recognised in the statement of financial performance within the
same reporting period and billed annually.
Recoverable
outgoings
Over-time
Recognised on
an accruals basis
based on the
contract terms.
Property
acquisition fees
The Group provides property acquisition related services to property
funds and the revenue is based on a fixed percentage included in the
PDS issued at the establishment of the fund. The consideration is due
upon successful settlement of the investment property.
Recognised in the
period in which
the services are
rendered.
Point-in-time
54
54
54 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
Type of revenue
Description
Property sales
fees
The Group provides sales services to the owners of property
assets in accordance with property management agreements. The
consideration is due upon successful sale of the investment property.
Revenue
recognition policy
under AASB 118
Revenue
recognition policy
under AASB 15
Point-in-time
Recognised in the
period in which
the services are
rendered.
Development
revenue
The Group provides property development services to customers in
accordance with development agreements. The input method is used
to recognise development revenue over-time on an expected cost
plus margin approach.
Recognised in the
period in which
the services are
rendered.
Over-time
The recognition and measurement of revenue outside the scope of AASB 15 are as follows:
(i) Interest revenue
Interest revenue is accrued on a time basis, by reference to the principal outstanding using the effective interest rate method.
(ii) Distribution/dividend reve nue
Distribution/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) Rental income
Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease.
(B) TRANSACTION PRICE ALLOCATED TO THE REMAINING PERFORMANCE OBLIGATIONS
The following table includes revenue expected to be recognised in the future related to performance obligations that are
unsatisfied (or partially unsatisfied) at the reporting date.
Property performance fees*
Development revenue
Management fees**
Balance of
unrecognised
performance
obligations
$’000
1,989
66,617
46,830
Recognised
in 2019
$’000
22,522
7,278
38,566
* The underlying property funds managed by the Group have recognised a total performance fee of $56,905,000, the Group has recognised $22,522,000 of this
amount, with a total constrained amount being $24,511,000.
** Only relates to unlisted property funds management fees which have defined fund terms.
(C) TRANSACTIONS WITH RELATED PARTIES
Management fees are charged to related parties in accordance with the respective trust deeds and management agreements.
Management fees from Property Funds managed by Centuria
Distributions from Property Funds managed by Centuria
Property acquisition fees from Property Funds managed by Centuria
Performance fees from Property Funds managed by Centuria
Management fees from Over Fifty Guardian Friendly Society
Sales fees from Property Funds managed by Centuria
Interest income on loans to Property Funds managed by Centuria
Fees from Debt funds managed by Centuria
Distributions and interest from Debt Funds managed by Centuria
2019
$
2018
$
38,566,046
29,704,620
2,121,706
1,135,110
14,467,430
4,070,177
22,522,000
26,737,500
3,574,208
1,354,000
36,958
1,209,583
202,062
3,552,177
2,970,550
501,525
1,054,857
108,825
70,721,673
83,167,661
55
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 55
55
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
(i) Terms and conditions of transactions with related parties
Investments in property funds 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 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.
B2
EXPENSES
Employee benefits expense
Consulting and professional fees
Property outgoings and fund expenses
Transaction costs
Administration fees
Impairment of seed capital
Cost of sales - development
Claims - discretionary participation features only
Property management fees paid
Other expenses
2019
$’000
26,084
3,805
7,992
5,934
2,019
-
848
24,985
1,336
7,689
80,692
2018
$’000
21,260
3,966
8,531
230
2,316
380
-
23,144
-
7,790
67,617
(A) TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
(i) Transactions with directors
For transactions with directors, refer to details included in the Audited remuneration report on page 31.
(ii) 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
Detailed information on key management personnel is included in the Audited remuneration report.
2019
$
2018
$
5,645,160
5,475,869
120,390
115,816
857,992
6,739,358
128,256
(5,350)
1,055,916
6,654,691
56
56
56
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
56
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
B4
FINANCE COSTS
Operating interest charges
Bank loans in Controlled Property Funds interest charges
Reverse mortgage facility interest charges
(Gain)/loss on derivatives on fair value hedges
Loss/(gain) on financial assets fair value hedges
Other finance costs
RECOGNITION AND MEASUREMENT
The Group’s finance costs include:
– Interest expense recognised using the effective interest method.
– The net gain or loss on hedging instruments that are recognised in profit or loss.
B5
TAXATION
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
2019
$’000
13,003
4,636
1,888
(6,909)
6,909
735
20,262
2019
$’000
2,542
(514)
2,028
7,375
9,403
2017
$’000
8,567
5,490
1,738
1,115
(1,115)
194
15,989
2018
$’000
13,203
(102)
13,101
772
13,873
(A) RECONCILIATION OF INCOME TAX EXPENSE
The prima facie income tax expense on profit before income tax reconciles to the income tax expense in the consolidated financial
statements as follows:
Profit before tax
Less: profit not subject to income tax
Income tax expense calculated at 30%
Add/(deduct) tax effect of amounts which are not deductible/(assessable):
Tax offset for franked dividends
Non-allowable expenses - seed capital impairment
Non-allowable expenses - other
Recognition of previously unbooked capital losses
Adjustments to current tax in relation to prior years
Income tax expense
2019
$’000
60,344
(27,211)
33,133
9,940
(617)
-
594
-
(514)
9,403
2018
$’000
70,063
(20,222)
49,841
14,952
(1,032)
114
181
(240)
(102)
13,873
The tax rate used in the above reconciliation 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.
57
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 57
57
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
B Business performance
(B) CURRENT TAX ASSETS AND LIABILITIES
Current tax assets/(liabilities) attributable to:
Benefit Funds
Securityholders
(C) MOVEMENT OF DEFERRED TAX BALANCES
Financial year ended 30 June 2019
Deferred tax assets
Provisions
Revenue tax losses
Capital losses
Deferred tax liabilities
Indefinite life management rights
Accrued performance fees
Transaction costs
Accrued income
Unrealised gain/(loss) on financial assets
Prepayments
Fair value measurements in mortgage assets
Other
Financial year ended 30 June 2018
Deferred tax assets
Provisions
Capital losses
Transaction costs
Deferred tax liabilities
Indefinite life management rights
Accrued income
Unrealised gain/(loss) on financial assets
Prepayments
Fair value measurements in mortgage assets
2019
$’000
2018
$’000
(738)
(75)
(813)
Movement
$’000
(1,083)
4,021
(22)
690
(529)
161
Closing
balance
$’000
1,560
4,021
26,792
-
(27,638)
(6,115)
(5,079)
-
1,097
-
(62)
(132)
(6,115)
(4,733)
(290)
(1,432)
(6)
(2,521)
(132)
(7,375)
(10,494)
Movement
$’000
436
(826)
(28)
-
-
(1,522)
-
1,141
(799)
Closing
balance
$’000
2,643
26,814
346
(27,638)
(290)
(2,529)
(6)
(2,459)
(3,119)
Opening
balance
$’000
2,643
-
26,814
(27,638)
-
346
(290)
(2,529)
(6)
(2,459)
-
(3,119)
Opening
balance
$’000
2,207
27,640
374
(27,638)
(290)
(1,007)
(6)
(3,600)
(2,320)
(D) CAPITAL TAX LOSSES
At 30 June 2019, the Group has no unrecognised capital tax losses (2018: $nil).
58
58
58
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
58
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
RECOGNITION AND MEASUREMENT
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.
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.
(ii) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities and the corresponding
tax bases.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all
deductible temporary differences, unused tax losses and tax offsets, to the extent that it is probable that sufficient future taxable
profits will be available to utilise them.
However, deferred tax assets and liabilities are not recognised for:
– taxable temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a
business combination which affects neither taxable income nor accounting profit;
– taxable temporary differences relating to investments in subsidiaries, associates and joint ventures to the extent that the
Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in
the foreseeable future; and
– taxable temporary differences arising from goodwill
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.
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 companies 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 their
separate financial statements using a ‘standalone tax payer’ approach. Under the tax funding arrangement between members of
the tax-consolidated group, amounts are recognised as payable to or receivable by each member in relation to the tax contribution
amounts paid or payable between Company and the members of the the tax-consolidated group.
Centuria Capital Fund (CCF) and its subsidiaries are not part of the tax-consolidation group. Under current Australian income tax
legislation, Trusts are not liable for income tax, provided their securityholders are presently entitled to the taxable income of the
Trust including realised capital gains each financial year.
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
Income taxes relating to items recognised directly in equity are recognised directly in equity and not in the statement of comprehensive
income. In the case of a business combination, the tax effect is included in the accounting for the business combination.
59
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 59
59
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 B Business performance
B6
EARNINGS PER SECURITY
Basic (cents per stapled security)
Diluted (cents per stapled security)
2019
Cents
14.2
13.2
2018
Cents
19.8
18.1
The earnings used in the calculation of basic and diluted earnings per security is the profit for the year attributable to Centuria
Capital Group securityholders as reported in the consolidated statement of comprehensive Income.
The weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security is as
follows:
Weighted average number of ordinary securities (basic)
Weighted average number of ordinary securities (diluted) (i)
2019
2018
358,809,337
277,224,977
383,381,274
301,789,890
(i) The weighted average number of ordinary securities used in the calculation of diluted earnings per security is determined:
- as if 30 June 2019 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 2019 was the
end of the performance period are deemed to have been issued at the start of the financial year.
- as if 20,098,470 unexercised options with an exercise price of $1.30 per option have been converted to ordinary securities at the start of the financial year.
B7
DIVIDENDS AND DISTRIBUTIONS
Dividends/distributions paid during the year
Final year-end dividend (fully franked)
Final year-end distribution
Interim dividend (fully franked)
Interim distribution
Special non-cash dividend/capital reallocation
Dividends/distributions declared during the year
Final dividend (fully franked) (i)
Final distribution (i)
2019
2018
Cents per
security
Total
$’000
Cents per
security
1.00
3.10
0.85
3.40
7.80
0.50
4.50
3,048
9,449
3,260
13,038
30,000
1,918
17,262
2.40
2.80
1.70
2.40
-
1.00
3.10
Total
$’000
5,453
6,361
5,184
7,314
-
3,048
9,449
Dividends/distributions paid/declared to Centuria Capital
Group securityholders (iii)
21.15
77,975
13.40
36,809
(i) The Group declared a final dividend/distribution in respect of the year ended 30 June 2019 of 5.0 cents per stapled security which included a dividend
of 0.50 cents per share and a distribution of 4.50 cents per security. The final dividend had a record date of 28 June 2019 and to be subsequently paid
on 16 August 2019. The total amount payable of $19,180,000 (2018: $12,497,000) has been provided as a liability in these financial statements.
(ii) On 29 June 2019, a special non-cash dividend was paid by Centuria Capital Limited of $30,000,000 which was reinvested as capital into Centuria
Capital Fund.
(iii) In addition to the dividends and distributions paid to Centuria Capital Group securityholders, the Group paid distributions of $3,363,000 (2018: $6,880,000)
to external non-controlling interests.
(A) FRANKING CREDITS
Amount of franking credits available to shareholders of the Company
for subsequent financial years(i)
(i) Before taking into account the impact of the final dividend payable on 16 August 2019.
2019
$’000
2018
$’000
337
15,682
60
60
60
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
60
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 61
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
62
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
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C Assets and liabilities
C3
RECEIVABLES
Receivables from related parties
Other receivables
Contract assets - Development
Notes
C2(a)
2019
$’000
51,708
10,846
7,308
69,862
2018
$’000
11,682
9,482
-
21,164
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.
(A) RECEIVABLES FROM RELATED PARTIES
The following amounts were owed by related parties of the Group at the end of the financial year:
Management fees owing from property funds managed by Centuria
Sales fees owing from property funds managed by Centuria
Performance fees owing from property funds managed by Centuria
Acquisition fee receivable from Centuria 80 Grenfell Fund
Distribution receivable from Centuria Industrial REIT
Recoverable expenses owing from property funds managed by Centuria
Distribution receivable from Centuria Metropolitan REIT
Receivable from Over Fifty Guardian Friendly Society
Distribution receivable from Centuria Diversified Property Fund
Distribution receivable from Centuria Scarborough House Fund
Redemption funds receivable from Centuria Diversified Property Fund
Receivables from debt funds managed by Centuria
Interest receivable from Centuria 80 Grenfell Fund
2019
$
4,324,197
985,000
22,296,386
-
2,958,601
1,404,810
2,814,461
435,035
110,393
699
16,000,000
378,571
-
2018
$
3,126,289
-
357,000
1,765,177
2,346,074
1,486,241
1,250,856
758,951
28,378
613
435,781
64,000
62,799
51,708,153
11,682,159
RECOGNITION AND MEASUREMENT
Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method,
less an allowance for impairment. Due to the short-term nature of these financial rights, their carrying amounts are estimated to
represent their fair values.
(i) Contract balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable (trade receivables) and
unbilled receivables (contract assets) on the consolidated statement of financial position.
In respect to the Social Affordable Housing Developments within the Property Funds Management segment, billing occurs
subsequent to revenue recognition, resulting in contract assets.
C3
FINANCIAL ASSETS
Investments in trusts, shares and other financial instruments at fair value
Investment in related party unit trusts at fair value
Loans receivable from related parties
Loans receivable(i)
Reverse mortgage receivables(ii)
Reverse mortgages - hedged item
Notes
C3(a)
C3(b)
2019
$’000
281,757
14,571
-
6,066
26,702
27,018
356,114
2018
$’000
362,799
228,109
5,865
-
28,289
19,770
644,832
(i) This is an unsecured loan to a third party that accrues interest at 10% per annum.
(ii) Whilst some mortgages are likely to be repaid during the next 12 months, the Group does not control the repayment date.
63
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 63
63
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
C Assets and liabilities
(A) INVESTMENTS IN RELATED PARTY UNIT TRUSTS CARRIED AT FAIR VALUE THROUGH PROFIT OR LOSS
The following table details related party investments carried at fair value through profit and loss.
Fair value
$
2019
Units
held
Ownership
%
Fair value
$
2018
Units
held
Ownership
%
Financial assets held by the Group
Centuria Industrial REIT*
Centuria Metropolitan REIT*
-
-
-
-
0%
0%
124,317,757
48,372,668
68,555,158
27,643,209
Centuria Diversified Property Fund
11,591,312
8,060,718
14.92%
7,050,751
5,250,001
Centuria Bottleyard Fund
Centuria Rouse Hill Debt Fund
-
-
-
-
0%
0%
1,548,500
1,630,000
1,515,527
1,515,527
Centuria Scarborough House Fund
102,826
102,826
0.22%
102,826
102,826
11,694,138
203,090,519
Financial assets held by the Benefit Funds
Centuria Metropolitan REIT*
Centuria Industrial REIT*
-
-
-
-
0%
0%
17,454,984
7,038,300
2,601,467
1,012,244
Centuria Iskia Development Fund
1,850,000
1,850,000
15.83%
1,850,000
1,850,000
Centuria Bottleyard Fund
Centuria SOP Fund
-
-
0%
1,425,000
1,500,000
1,026,800
1,000,000
3.28%
951,400
1,000,000
Centuria Rouse Hill Debt Fund
-
-
0%
735,716
735,716
19.48%
11.39%
18.88%
14.17%
18.20%
0.22%
2.90%
0.41%
15.83%
13.04%
3.28%
8.83%
2,876,800
14,570,938
25,018,567
228,109,086
* These investments which were previously held as related party investments are equity accounted for the year ended 30 June 2019. See Note E1 for details.
Also, see below for a movement of the related party unit trusts during the year.
Opening balance
Investment purchases
Return of investment
Disposal
Fair value gain
Carrying value transferred to equity accounted investments
30 June 2019
$’000
228,109
139,424
(5,895)
(16,000)
2,693
(333,760)
14,571
(B) LOANS RECEIVABLE FROM RELATED PARTIES
The following short-term loans were receivable from related parties of the Group at the end of the financial year:
Centuria 80 Grenfell Street Fund
2019
$
2018
$
-
5,865,000
64
64
64 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
RECOGNITION AND MEASUREMENT
Policy application at 30 June 2018
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.
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 remeasurement
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.
Reverse mortgage loan receivable financial assets are recognised at FVTPL.
Policy application from 1 July 2018
AASB 9 contains three principal classification categories for financial assets:
– measured at amortised cost;
– fair value through other comprehensive income (FVOCI); and
– fair value through profit and loss (FVTPL).
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash
flows.
(i) Financial assets at amortised cost
Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate
method less any allowance under the ECL model.
(ii) Recoverability of loans and receivables
At each reporting period, the Group assesses whether financial assets carried at amortised cost are ‘credit-impaired’. A financial
asset is ‘credit-impaired’ when one or more events that has a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
The Group recognises loss allowances at an amount equal to lifetime ECL on trade and other receivables. Loss allowances for
financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of the trade receivables and are a
probability-weighted estimate of credit losses. Credit losses are measured as the difference between cash flows due to the Group
in accordance with the contract and the cash flows that the Group expects to receive.
The Group analyses the age of outstanding receivable balances and applies historical default percentages adjusted for other
current observable data as a means to estimate lifetime ECL, including forecasts of interest rates and inflation, as well as the
financial stress of counterparties and their ability to operate as a going concern. Debts that are known to be uncollectable are
written off when identified.
(iii) Financial assets at fair value through profit and loss
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This
includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVOCI or at FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the
transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to
its acquisition.
Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income,
are recognised in profit or loss.
Financial assets recognised at FVTPL include reverse mortgage loan receivables, reverse mortgage derivatives and investments in
trusts.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 65
65
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
C4
INVESTMENT PROPERTIES HELD FOR SALE
In June 2018, the Group Group decided to sell the investment properties within Centuria Retail Fund. Windsor Marketplace,
Windsor NSW was sold during December 2018 for $22,600,000, however City Centre Plaza Rockhampton QLD was taken off the
market and is no longer held for sale and has been reclassified as an investment property.
Property
City Centre Plaza, Rockhampton QLD
Windsor Marketplace, Windsor NSW
2019
$’000
-
-
-
2018
$’000
40,000
23,400
63,400
The fair values listed above do not include estimated selling costs which are expected to be incurred upon disposal.
RECOGNITION AND MEASUREMENT
Investment properties are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use and a sale is considered highly probable. These investment properties are carried at fair
value. The valuation techniques to determine the fair value of investment properties held for sale are the same as the valuation
techniques of investment properties described in Note C5(a).
C5
INVESTMENT PROPERTIES
Opening balance
Capital improvements and associated costs
Loss on fair value
Change in deferred rent and lease incentives
Deconsolidation of Havelock House Fund
Sale of investment property
Transfer from/(to) investment properties held for sale
Closing balance ^
2019
$’000
147,100
1,726
(10,705)
(621)
-
-
40,000
177,500
2018
$’000
257,100
3,985
(3,041)
2,456
(28,000)
(22,000)
(63,400)
147,100
^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to
$12,000,000 (30 June 2018: $9,387,000).
Property
111 St George Terrace, Perth WA
City Centre Plaza, Rockhampton Qld
Total fair value
KEY ESTIMATE AND JUDGEMENTS
2019
$’000
150,000
27,500
177,500
2018
$’000
147,100
-
147,100
2019
Capitalisation
rate %
7.00%
8.75%
2018
Discount
rate %
7.25%
8.75%
2018
Valuer
Colliers
Urbis
(A) VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS
The fair value of the investment properties were determined by the Directors of the Responsible Entity of the relevant funds or
by an external, independent valuer having an appropriate recognised professional qualification and recent experience in the
location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a
property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after
proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
The valuations were prepared by considering the following valuation methodologies:
– Capitalisation approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property’s
66
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66 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the
general characteristics of the property.
– Discounted cash flow approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by
reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs.
The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net
present value for the property.
– Direct comparison approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and
compares the equivalent rates to the property being valued to determine the property’s market value.
The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments
or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness;
the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the
property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all
notices and, where appropriate, counter notices have been served validly and within the appropriate time.
The most significant unobservable input used in the above valuation techniques and its relationship with fair value measurement is
the capitalisation rate. The higher/lower the rate, the lower/higher the fair value.
(B) FAIR VALUE MEASUREMENT
The fair value measurement of investment properties has been categorised as a Level 3 fair value as it is derived from valuation
techniques that include inputs that are not based on observable market data (unobservable inputs).
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
67
67
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
C6
INTANGIBLE ASSETS
Indefinite life management rights
Goodwill
Balance at the beginning of the period
Acquired goodwill
Acquired management rights
2019
$’000
92,128
65,535
157,663
2019
$’000
2018
$’000
92,128
65,535
157,663
2018
$’000
157,663
157,663
-
-
-
-
157,663
157,663
Goodwill and management rights are solely attributable to the Property Funds Management cash generating unit 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 five years.
RECOGNITION AND MEASUREMENT
(i) Indefinite life management rights
Management rights acquired in a business combination are initially measured at fair value and reflect the right to provide asset
and fund management services in accordance with the management agreements.
(ii) Goodwill
Goodwill acquired in a business combination is measured at cost and subsequently measured at cost less any impairment losses.
The cost represents the excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and
contingent liabilities acquired.
(iii) Impairment
Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment, or more frequently if events
or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the
purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows
that are largely independent of the cash inflows from other assets or groups of assets (cash generating units or CGUs). Non-
financial assets other than goodwill that were previously impaired are reviewed for possible reversal of the impairment at each
reporting date.
KEY ESTIMATES AND JUDGEMENTS
The key assumptions used in the value in use calculations for the Property Funds Management cash-generating unit are as
follows:
REVENUE
Revenues in 2020 are based on the Board approved budget for 2020 and are assumed to increase at a rate of 7.5% (2018: 7.5%)
per annum for years 2021-2023. The directors believe this is a prudent and achievable growth rate based on past experience.
EXPENSES
Expenses in 2020 are based on the budget for 2020 and are assumed to increase at a rate of 5.0% (2018: 5.0%) per annum for
the years 2021-2023. The directors believe this is an appropriate growth rate based on past experience.
DISCOUNT RATE
Discount rates are determined to calculate the present value of future cash flows. A pre-tax rate of 9.53% (2018: 10.28%) 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 2023, a growth rate of 3.0% (2018: 3.0%), in line with long term economic growth, has been applied to determine the
terminal value of the asset.
68
68
68 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
C Assets and liabilities
SENSITIVITY TO CHANGES IN ASSUMPTIONS
As at 30 June 2019, the estimated recoverable amount of intangibles including goodwill relating to the Property Funds
Management cash-generating unit exceeded its carrying amount by $188.1 million (2018: $175.2 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.
Assumptions used in value in use calculation
Rate required for recoverable amount to equal carrying value
7.50%
(0.40)%
9.53%
17.55%
5.00%
12.63%
Revenue growth
rate (average)
Pre-tax
discount rate
Expenses
growth rate
C7
PAYABLES
Sundry creditors (i)
Dividend/distribution payable
Accrued expenses
2019
$’000
13,869
19,180
9,183
42,232
2018
$’000
10,880
12,813
8,712
32,405
(i) Sundry creditors are non-interest bearing liabilities and are payable on commercial terms of 7 to 60 days.
RECOGNITION AND MEASUREMENT
Payables are recognised when the Group becomes obliged to make future payments resulting from the purchase of goods and
services. Due to the short-term nature of these financial obligations, their carrying amounts are estimated to represent their fair
values.
C8
BORROWINGS
Fixed rate secured notes
Floating rate secured notes
Reverse mortgage bill facilities and notes
Bank loans in Controlled Property Funds
Borrowing costs capitalised
Notes
C8(a)
C8(a)
C8(b)
C8(c)
2019
$’000
128,000
75,000
8,194
94,309
(2,393)
303,110
2018
$’000
83,000
40,000
8,429
115,758
(1,448)
245,739
The terms and conditions relating to the above facilities are set out below.
(A) SECURED NOTES
The Group issued Tranche 1 of secured corporate notes to the value of $100,000,000 on 21 April 2017. This consisted of an issue
of $40,000,000 floating rate secured notes and $60,000,000 7% fixed rate secured notes. The Group issued Tranche 2 to the
value of $23,000,000 7% fixed rate secured notes on 11 September 2017. These notes mature on 21 April 2021 and are secured
against assets within certain subsidiaries of the Centuria Capital Fund Group.
The Group issued Tranche 3 of secured corporate notes to the value of $80,000,000 on 22 October 2018. This consisted of an
issue of $35,000,000 floating rate secured notes and $45,000,000 6.5% fixed rate secured notes. These notes mature on 21 April
2023 and are secured against assets within certain subsidiaries of Centuria Capital Fund.
(B) REVERSE MORTGAGE BILL FACILITIES AND NOTES (SECURED)
As at 30 June 2019, the Group had $8,194,000 (2018: $8,429,000) non-recourse notes on issue to ANZ Bank, secured over the
remaining reverse mortgages held in Senex Warehouse Trust No.1 (a subsidiary of the Group) due to mature on 30 September
2020.
The facility limit as at 30 June 2019 is $9,100,000 (2018: $10,000,000) 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.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 69
69
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
C Assets and liabilities
Facility
Amount used at reporting date
Amount unused at reporting date
2019
$’000
9,100
(8,194)
906
2018
$’000
10,000
(8,429)
1,571
(C) BANK LOANS - CONTROLLED PROPERTY FUNDS (SECURED)
Each controlled property fund has debt facilities secured by first mortgage over each of the fund’s investment property and a first
ranking fixed and floating charge over all assets of each of the funds. Details of the amounts drawn and the maturity of each facility
are as follows:
Fund
30 June 2019
Centuria 111 St Georges
Terrace Fund
Centuria Retail Fund
30 June 2018
Centuria 111 St Georges
Terrace Fund
Centuria Retail Fund
Current/
non-current
classification
Maturity
date
Facility
limit
$’000
Funds
available
$’000
Draw
down
$’000
Borrowing
costs
$’000
Draw
down
$’000
Non-current
30 June 2022
90,000
10,521
Current 31 December 2019
14,938
-
79,479
14,938
(107)
79,372
(1)
14,937
94,309
Current
30 June 2019
83,800
4,320
79,480
(130)
79,350
Current
31 July 2018
37,400
992
36,408
-
36,408
115,758
RECOGNITION AND MEASUREMENT
Borrowings are initially recognised at fair value, net of transaction costs. They are subsequently measured at amortised cost using
the effective interest rate method.
C9
COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASES
(i) Group as a leasee
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
Longer than 5 years
(ii) Group as a lessor
The Group leases out its investment properties under operating leases.
The future minimum lease payments receivable under non-cancellable leases are as follows:
2019
$’000
2,241
10,023
14,691
26,955
2018
$’000
865
158
-
1,023
70
70
70
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 C Assets and liabilities
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2019
$’000
10,201
42,376
63,631
116,208
2018
$’000
13,574
39,120
27,176
79,870
(B) COMMITTMENT AND CONTINGENCIES
The Group has provided bank guarantees of $3,279,301 for commercial leases with respect to its Sydney and Melbourne office
premises. These bank guarantees are cash collateralised.
The above guarantees are issued in respect of the Group and do not constitute an additional liability to those already existing in
interest bearing liabilities on the statement of financial position.
As at 30 June 2019, the Group has outstanding commitments of $58.9 million in relation to the proposed funding support for
Heathley funds. The Group will seek to raise these funds by using its unlisted distribution network and will manage and underwrite
any shortfall in the fund raising to satisfy the overall funding requirements. This is in addition to the Group’s agreed acquisition
price of $24.4 million which will be payable on successful completion of the Heathley transaction.
The Directors of the Group are not aware of any other contingent liabilities in relation to the Group, other than those disclosed in
the financial statements, which should be brought to the attention of securityholders as at the date of completion of this report.
RECOGNITION AND MEASUREMENT
When the terms of a lease transfer substantially all the risks and rewards of ownership to the Group, the lease is classified as a
finance lease. All other leases are classified as operating leases.
(i) Group as a leasee
Operating lease payments are recognised as an expense on a straight-line basis over the term of the lease, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
(ii) Group as a lessor
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.
C10
CONTRIBUTED EQUITY
Centuria Capital Limited
Balance at beginning of the period
Equity settled share based payments expense
Stapled securities issued
Cost of equity raising
Balance at end of period
Centuria Capital Fund (non-controlling interests)
2019
2018
No. of
securities
304,793,174
1,747,653
77,016,505
-
$’000
No. of
securities
98,770
229,815,736
966
29,425
(997)
875,401
74,102,037
-
383,557,332
128,164
304,793,174
2019
2018
No. of
securities
$’000
No. of
securities
$’000
77,323
535
21,494
(582)
98,770
$’000
Balance at beginning of the period
304,793,174
244,930
229,815,736
170,672
Equity settled share based payments expense
Cost of equity raising
Stapled securities issued
Special non-cash dividend/capital reallocation(i)
1,747,653
-
77,016,505
-
-
875,401
(2,186)
70,694
30,000
-
74,102,037
-
-
(2,888)
77,146
-
Balance at end of the period
383,557,332
343,438
304,793,174
244,930
Fully paid ordinary securities carry one vote per security and carry the right to distributions.
On 29 June 2017, the Group issued 20,098,470 options to subscribe for stapled securities. The options have an exercise price of
$1.30 per stapled security and expire on 29 June 2022.
(i) On 29 June 2019, a special non-cash dividend was paid by Centuria Capital Limited of $30,000,000 which was reinvested as
capital into Centuria Capital Fund.
RECOGNITION AND MEASUREMENT
Incremental costs directly attributed to the issue of ordinary shares are accounted for as a deduction from equity, net of any
tax effects.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
71
71
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 D Cash flows
D1
OPERATING SEGMENT CASH FLOWS (I)
Cash flows from operating activities
Management fees received
Performance fees received
Distributions received
Interest received
Payments to suppliers and employees
Income tax paid
Interest paid
Net cash provided by operating activities
Cash flows from investing activities
Repayment of loans by related parties
Collections from reverse mortgage holders
Purchase of investments in related parties
Purchase of other investments
Payments for plant and equipment
Loans provided to other parties
Cash contribution to related party
Purchase of equity accounted investments
Proceeds from sale of related party investments
Loans to related parties for purchase of properties
Proceeds from sale of investments
Loans repaid by other parties
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of securities
Proceeds from borrowings
Repayment of borrowings
Distributions paid
Capitalised borrowing costs paid
Equity raising costs paid
Net cash provided by financing activities
Net increase in operating cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
2019
$’000
2018
$’000
55,406
1,361
27,246
1,509
(56,420)
(242)
(11,261)
17,599
5,865
952
(173,487)
(72,262)
(3,713)
(5,925)
(20,000)
(23,960)
3,552
-
136,899
-
54,632
26,738
15,529
2,268
(36,342)
(15,353)
(9,281)
38,191
4,650
2,113
(123,762)
(52,723)
(788)
(25,980)
-
-
64,009
(5,865)
-
25,980
(152,079)
(112,366)
100,119
80,000
(235)
(29,111)
(1,744)
(3,179)
145,850
11,370
76,389
87,759
98,639
25,375
(718)
(24,310)
(446)
(3,710)
94,830
20,655
55,734
76,389
(i) (i) The operating segment cash flows support the segment note disclosures of Centuria Capital Group and provide details in relation to the Operating Segment
cash flows performance of the Group. The Operating Segment cash flows exclude the impact of cash flows attributable to Benefit Funds and Controlled
Property Funds. Refer to page 46 of the consolidated financial statements for the full statutory cash flow statement of the Group.
72
72
72
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 D
Cash Flows
D2
CASH AND CASH EQUIVALENTS
Included in cash and cash equivalents of $124,673,000 attributable to shareholders is $39,359,000 (2018: $27,268,000) relating
to amounts held by Centuria Life Limited, Senex Warehouse Trust No.1 and the Benefit Funds which is not readily available for use
by the Group.
D3
RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year
Add (deduct) non-cash items:
Depreciation and amortisation
Impairment of seed capital
Share-based payment expense
Amortisation of borrowing costs
Profit on sale of investment property
Fair value movement of financial assets
Interest revenue from reverse mortgages
Interest expense reverse mortgage facility
Contract asset- development
Non-cash performance and sales fees
Equity accounted profit in excess of distribution paid
Unrealised gain on investment properties
Amortisation of lease incentives
Costs paid for debt issuance
Provision for doubtful debts
Changes in net assets and liabilities:
(Increase)/decrease in assets:
Receivables
Prepayments
Increase/(decrease) in liabilities:
Other payables
Tax provision
Deferred tax liability
Provisions
Policyholder liability
Net cash flows provided by operating activities
2019
$’000
50,941
460
-
966
799
-
(8,434)
(2,530)
1,495
(7,278)
(22,270)
(10,415)
10,695
1,602
1,744
-
(1,406)
(452)
(2,699)
975
7,375
1,454
(10,118)
12,904
2018
$’000
56,190
370
380
662
58
(2,000)
(13,894)
(2,453)
-
-
-
-
5,790
1,650
446
100
(7,526)
(67)
(2,660)
(3,113)
820
515
1,662
36,930
RECOGNITION AND MEASUREMENT
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks. 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.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
73
73
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
E Group Structure
E1
INTERESTS IN ASSOCIATES AND JOINT VENTURES
During the year, the Group’s investment in Centuria Metropolitan REIT (CMA) and Centuria Industrial REIT (CIP) exceeded 20% and
significant influence was established. As a result, these investments which were previously recognised as financial assets at fair
value are now accounted for using the equity method.
Set out below are the associates of the Group as at 30 June 2019 which, in the opinion of the Directors, are material to the Group
and are accounted for using the equity method. The entities listed below have share capital consisting solely of ordinary units,
which are held directly by the Group. The country of incorporation or registration is Australia which is also their principal place of
business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Name of entity
Centuria Metropolitan REIT
Centuria Industrial REIT
Total equity accounted investments
% of ownership interest
30 June 2019
%
Principal activity
Quoted fair value
30 June 2019
$’000
Carrying amount
30 June 2019
$’000
20.76 Property investment
24.15 Property investment
207,104
200,138
407,242
203,435
183,278
386,713
(A) SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATES AND JOINT VENTURES
The tables below provide summarised financial information for those associates. The information disclosed reflects the amounts
presented in the consolidated financial statements of the relevant associates and not the Group share of those amounts.
Summarised balance sheet (excluding intangibles)
Centuria
Metropolitan REIT
30 June 2019
$’000
Centuria
Industrial REIT
30 June 2019
$’000
Total
30 June 2019
$’000
Cash and cash equivalents
Investment properties held for sale
Other current assets
Total current assets
Investment properties
Total tangible non-current assets
Other current liabilities
Total current liabilities
Borrowings
Other non-current liabilities
Total non-current liabilities
Net tangible assets
Group share in %
Group share
Goodwill
Carrying amount
Movements in carrying amounts of equity accounted investments
Opening balance
Carrying value transferred from financial assets
Investment
Share of net profit after tax
Distributions received/receivable
Closing balance
17,546
78,500
5,544
101,590
1,321,475
1,321,475
30,451
30,451
497,222
7,180
504,402
888,212
20.76
184,392
19,043
203,435
-
179,736
20,000
13,369
(9,670)
203,435
9,348
11,400
9,144
29,892
1,209,850
1,209,850
28,724
28,724
468,431
3,541
471,972
739,046
24.15
178,544
4,734
183,278
-
154,024
23,960
16,844
(11,550)
183,278
26,894
89,900
14,688
131,482
2,531,325
2,531,325
59,175
59,175
965,653
10,721
976,374
1,627,258
362,936
23,777
386,713
-
333,760
43,960
30,213
(21,220)
386,713
74
74
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
74
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 E Group Structure
Summarised statement of comprehensive income
Revenue
Interest income
Other income
Net gain on fair value of investment properties
Loss on fair value of derivative financial instruments
Finance costs
Other expenses
Centuria
Metropolitan REIT
30 June 2019
$’000
Centuria
Industrial REIT
30 June 2019
$’000
Total
30 June 2019
$’000
108,859
93,863
202,722
334
8
7,143
(6,752)
(22,110)
(33,910)
195
602
53,808
(3,581)
(21,496)
(34,563)
529
610
60,951
(10,333)
(43,606)
(68,473)
Profit from continuing operations
53,572
88,828
142,400
Profit for the year
Other comprehensive income
Total comprehensive income
53,572
-
53,572
88,828
-
88,828
142,400
-
142,400
RECOGNITION AND MEASUREMENT
Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case
where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity
method of accounting, after initially being recognised at cost.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in
other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates
and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any
other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment.
E2
BUSINESS COMBINATION
(A) CURRENT YEAR
During the current year, there were no business combinations.
(B) PRIOR YEAR
During the prior year, there were no business combinations.
E3
INTERESTS IN MATERIAL SUBSIDIARIES
The Group’s principal subsidiaries at 30 June 2019 are set out below. Unless otherwise stated, they have issued capital consisting
solely of ordinary shares or units that are held directly by the Group, and the proportion of ownership interests held equals the
voting rights held by the Group. The subsidiaries of the Group were incorporated in Australia which is also their principal place of
business. The parent entity of the Group is Centuria Capital Limited.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
75
75
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 E Group Structure
Name of subsidiary
Centuria Capital Fund (refer to Note A1)
A.C.N. 062 671 872 Pty Limited
Belmont Road Development Pty Limited
Belmont Road Management Pty Limited
Centuria Belmont Road Development Fund
Centuria Canberra No. 3 Pty Limited
Centuria Capital No. 2 Fund
Centuria Capital No. 2 Industrial Fund
Centuria Capital No. 2 Office Fund
Centuria Capital No. 3 Fund
Centuria Capital No. 4 Fund
Centuria Capital No. 5 Fund
Centuria Capital No. 7 Fund
Centuria Capital Private Limited
Centuria Developments (Cardiff) Pty Limited
Centuria Developments (Mann Street) Pty Limited
Centuria Developments (Mayfield) Pty Limited
Centuria Developments (Young Street) Pty Limited
Centuria Developments Pty Limited
Centuria Employee Share Fund Pty Ltd
Centuria Finance Pty Ltd
Centuria Funds Management Limited
Centuria Industrial Property Services Pty Limited
Centuria Institutional Investments No. 3 Pty Limited
Centuria Investment Holdings Pty Limited
Centuria Investment Management (CDPF) Pty Ltd
Centuria Investment Services Pty Limited
Centuria Lane Cove Debt Fund
Centuria Life Limited
Centuria Nominees No. 3 Pty Limited
Centuria Platform Investments Pty Limited
Centuria Properties No. 3 Limited
Centuria Property Funds Limited
Centuria Property Funds No. 2 Limited
Centuria Property Services Pty Limited
Centuria Strategic Property Limited
Centuria SubCo Pty Limited
Over Fifty Capital Pty Ltd
Over Fifty Funds Management Pty Ltd
Over Fifty Investments Pty Ltd
Over Fifty Seniors Equity Release Pty Ltd
Senex Warehouse Trust No. 1
76
76
76
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
Ownership interest %
2019
2018
0% (100% NCI)
0% (100% NCI)
100%
100%
100%
-%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
27%
100%
100%
100%
100%
100%
0%
0%
0%
100%
0%
0%
0%
0%
0%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
76
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 E Group Structure
RECOGNITION AND MEASUREMENT
(i) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company. 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.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
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 securityholders of the Company and the shareholders
of the Company have no rights over the assets and liabilities held in the Benefit Funds.
In order to reflect the assets and liabilities pertaining to the benefit funds an equal and offsetting policyholder liability is
recognised on consolidation. On a consistent basis, on consolidation of the various income and expenses attributable to benefit
funds an equal and opposite net change in policyholder liabilities is recorded in the statement of comprehensive income.
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.
E4
PARENT ENTITY DISCLOSURE
As at, and throughout the current and previous financial year, the parent entity of the Group was Centuria Capital Limited.
Result of parent entity
Profit or loss for the year
Total comprehensive income for the year
Financial position of parent entity at year end
Total assets
Total liabilities
Net assets
2019
$’000
43,386
43,386
180,847
(50,557)
130,290
2018
$’000
13,147
13,147
104,332
(11,830)
92,502
The parent entity presents its assets and liabilities in order of liquidity. The assets of the parent entity mainly consist of cash, short
term receivables, investments in subsidiaries and deferred tax assets. The liabilities of the parent entity mainly consist of short
term payables.
Total equity of the parent entity comprising of:
Share capital
Share-based incentive reserve
Retained earnings/(loss)
Total equity
128,143
2,102
45
130,290
98,770
1,896
(8,164)
92,502
(A) GUARANTEES ENTERED INTO BY THE PARENT ENTITY
The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries during
the financial year.
(B) COMMITMENTS AND CONTINGENT LIABILITIES OF THE PARENT ENTITY
The parent entity has bank guarantees of $3,279,301 for commercial leases with respect to its Sydney and Melbourne office
premises. These bank guarantees are cash collateralised.
The above guarantees are issued in respect of the parent entity and do not constitute an additional liability to those already
existing in interest bearing liabilities on the statement of financial position.
The Directors of the Company are not aware of any other contingent liabilities in relation to the parent entity, other than those
disclosed in the financial statements.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 77
77
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
F1
SHARE-BASED PAYMENT ARRANGEMENTS
(A) LTI PLAN DETAILS
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 securities of the Group 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 Group 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 Group.
Further details of the LTI Plan are included in the Audited remuneration report from page 32 to page 35.
Performance rights outstanding at the beginning of the year
Performance rights granted during the year
Performance rights lapsed during the year
Performance rights vested during the year
Performance rights outstanding at the end of the year
2019
Number
5,368,687
2,276,559
(288,868)
2018
Number
5,103,963
2,113,780
(458,129)
(1,629,244)
(1,390,927)
5,727,134
5,368,687
The performance objectives for 1,529,430 of the performance rights issued under Tranche 4 were met in full at 30 June 2019. As a
result, these rights will vest on 14 August 2019.
(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
Share price at the grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Tranche 4
Tranche 5
Tranche 6
14 August 2019
31 August 2020
31 August 2021
$1.02
2.7 years
20%
1.94%
5.7%
$1.46
$1.32
2.8 years
2.6 years
20%
1.96%
5.7%
18%
1.75%
6.5%
The following table sets out the fair value of the rights at the respective grant date:
Performance Condition
Tranche 4
Tranche 5
Tranche 6
EPS
Growth in FUM
Absolute TSR
$0.88
$0.88
$0.16
N/A
$1.24
$0.62
N/A
$1.11
$0.19
During the year, share based payment expenses were recognised of $1,172,048 (2018: $1,478,291).
RECOGNITION AND MEASUREMENT
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 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.
78
78
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
F2
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 light 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:
– 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;
– 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
– CLL also continues to meet the ongoing capital requirements set by APRA.
F3
FINANCIAL INSTRUMENTS
(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.
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 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.
Centuria Life Limited (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.
From time to time, the Group outsources certain parts of the investment management of the Benefit Funds to specialist
investment managers including co-ordinating access to domestic and international financial markets, and managing 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 minimise 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 factual or anticipated exposures relating to investments. The use of
financial derivatives in respect of Benefit Funds is governed by the Funds’ 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.
In addition, Centuria Property Funds Limited, Centuria Funds Management Limited and Centuria Property Fund No.2 Limited have
AFS 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 cash term deposits and listed liquid investments.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 79
79
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
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
Funds’ 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 80 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 plus a credit margin is used to discount future cash flows back to 30 June 2019 to determine the fair
value.
(ii) Valuation techniques and assumptions applied in determining fair value of derivatives
TThe 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 80 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 2019 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 2019 to determine the fair value.
(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.
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
– 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).
– 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).
There were no transfers between Level 1, 2 and 3 in the period.
80
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
(iii) Fair value measurements recognised in the statement of financial position (continued)
30 June 2019
Financial assets
Cash and cash equivalents
Receivables
Financial assets
Financial assets
Financial assets - mortgage backed assets
Reverse mortgages receivables
Financial liabilities
Payables
Benefit Funds policy holders' liability
Borrowings (net of borrowing costs)
Interest rate swaps - controlled property funds
Interest rate swaps - reverse mortgage fixed-for-life
30 June 2018
Financial assets
Cash and cash equivalents
Receivables
Financial assets
Financial assets
Financial assets - mortgage backed assets
Measurement
basis
Fair value
hierarchy
Amortised cost
Not applicable
Amortised cost
Not applicable
Fair value
Fair value
Fair value
Fair value
Level 1
Level 2
Level 3
Level 3
Amortised cost
Not applicable
Amortised cost
Not applicable
Amortised cost
Not applicable
Fair value
Fair value
Level 2
Level 3
Measurement
basis
Fair value
hierarchy
Amortised cost
Not applicable
Amortised cost
Not applicable
Fair value
Fair value
Fair value
Level 1
Level 2
Level 3
Level 3
Level 3
Reverse mortgages receivables
Amortised cost
Reverse mortgages - hedged item fair value adjustment
Fair value
Financial liabilities
Payables
Liability to 360 Capital Group
Benefit Funds policy holders' liability
Borrowings (net of borrowing costs)
Interest rate swaps - controlled property funds
Interest rate swaps - reverse mortgage fixed-for-life
Amortised cost
Not applicable
Amortised cost
Not applicable
Amortised cost
Not applicable
Amortised cost
Not applicable
Fair value
Fair value
Level 2
Level 3
Carrying
amount
$’000
124,673
69,862
252,883
48,296
1,215
53,720
Fair value
$’000
124,673
69,862
252,883
48,296
1,215
53,720
550,649
550,649
42,232
339,557
303,110
731
28,083
713,713
Carrying
amount
$’000
101,914
21,164
495,837
99,721
1,215
28,289
19,770
767,910
32,405
41,161
349,677
245,739
472
22,939
692,393
42,232
339,557
309,624
731
28,083
720,227
Fair value
$’000
101,914
21,164
495,837
99,721
1,215
28,289
19,770
767,910
32,405
41,161
349,677
246,854
472
22,939
693,508
The Group determines Level 2 fair values for financial assets and liabilities without an active market based on broker quotes. 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.
The Level 3 financial asset held by the Group is the fair value of the residential 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 items are designated in a
fair value hedging relationship, with the fair value movements on the swaps offset by the fair value movements in the mortgage
receivables. 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 credit risk movements.
81
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
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81
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
(iv) Reconciliation of Level 3 fair value measurements of financial assets and liabilities
Year ended 30 June 2019
Balance at 1 July 2018
Loan repaid
Accrued interest
Attributable to interest rate and other risk
Attributable to credit risk
Balance at 30 June 2019
Year ended 30 June 2018
Balance at 1 July 2017
Loan repaid
Accrued interest
Attributable to interest rate and other risk
Attributable to credit risk
Balance at 30 June 2018
Other
mortgage
backed assets
at fair value
$’000
Reverse
mortgages
fair value
$’000
Fixed-for-life
interest rate
swaps
$’000
1,215
-
-
-
-
1,215
48,059
(1,379)
2,956
5,061
(977)
53,720
(22,939)
227
(1,495)
(7,211)
3,335
(28,083)
Other
mortgage
backed assets
at fair value
$’000
Reverse
mortgages
fair value
$’000
Fixed-for-life
interest rate
swaps
$’000
1,215
-
-
-
-
46,187
(1,695)
2,453
1,114
-
(18,191)
471
(1,466)
(1,114)
(2,639)
1,215
48,059
(22,939)
Total
$’000
26,335
(1,152)
1,461
(2,150)
2,358
26,852
Total
$’000
29,211
(1,224)
987
-
(2,639)
26,335
KEY ESTIMATES AND JUDGEMENTS
The fair value of the 50-year residential mortgage loans and 50-year 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. A discounted cash flow model is used for 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 and to reflect the average remaining life expectancy of the borrowers.
Assumptions and inputs used for valuation of reverse mortgage loan receivables:
– The loan interest compounding period is the expected remaining life of the borrower;
– Mortality rates for males and females are based on portfolio-adjusted 2013-2015 Life Tables;
– The compounding interest rate is the fixed rate of loan for the period from day 1 up to the point of time when loan carrying
amount equals the property value. After that point of time, the loan compounding rate will be reduced to the same as long term
residential property growth rate determined by Management, on the grounds that any fixed rate exceeds the property growth
rate will not be recovered after that point of time;
– For 30 June 2019 valuation, the property growth rates are -5% for FY2020, -3% for FY2021, then reverted back to 3% flat rate
from FY22 onwards;
– Discount factors are calculated based on the market quoted long term rates on 30 June 2019;
– The 1% flat credit risk premium, reflecting the portfolio default profile on 30 June 2019, is added to the monthly cash flow
discount factors to discount future cash flows generated by the reverse mortgage loans.
Assumptions and inputs used for valuation of the 50-year interest rate swaps:
– Mortality rates for males and females based on portfolio-adjusted 2013-2015 Life Tables. 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;
– 46% of the residential mortgage loan portfolio consists of joint lives;
– Discount factors are calculated based on the market quoted long term rates on 30 June 2019;
– The 1.881% flat credit risk premium, reflecting the business default profile on 30 June 2019, is added to the monthly cash flow
discount factors to discount future cash flows generated by the reverse mortgage loans.
82
82
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82
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
RECOGNITION AND MEASUREMENT
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. The hedge is considered ineffective if it falls outside the range of 80% to 125%.
(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 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 2019,
the highest loan to value ratio (LVR) of a loan in the reverse mortgage loan book is 103% (2018: 107%), and there are 63 out of 212
(2018: 58 out of 222) reverse mortgage loans where the LVR is higher than 50%.
(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.
(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 table summarises 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.
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 83
83
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
Non-derivative financial liabilities
2019
Borrowings
Payables
Benefit Funds policyholder's liability
Total
2019
Borrowings
Payables
Liability to 360 Capital Group
Benefit Funds policyholder's liability
Total
On
demand
$’000
Less than
3 months
$’000
3 months
to 1 year
$’000
1-5 years
$’000
5+ years
$’000
Total
$’000
-
-
339,557
339,557
-
-
-
349,677
349,677
1,141
42,232
-
29,603
317,172
-
-
-
-
43,373
29,603
317,172
38,213
32,405
-
-
90,160
148,460
-
41,161
-
-
-
-
70,618
131,321
148,460
-
-
-
-
-
-
-
-
-
347,916
42,232
339,557
729,705
276,833
32,405
41,161
349,677
700,076
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.
Derivative financial liabilities
2019
Interest rate swaps
Total
2018
Interest rate swaps
Total
On demand
$’000
Less than
3 months
$’000
3 months
to 1 year
$’000
1-5 years
$’000
5+ years
$’000
-
-
-
-
39
39
-
-
789
789
393
393
1,446
1,446
1,214
1,214
49,182
49,182
46,588
46,588
Total
$’000
51,456
51,456
48,195
48,195
(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.
(i) Interest rate risk management
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.
84
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84 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 84
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
The tables below detail the Group’s interest bearing financial assets and liabilities.
2019
Financial assets
Cash and cash equivalents
Other financial assets held by Benefit Funds
Other interest bearing loans
Reverse mortgage receivables
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
Net interest bearing financial assets/(liabilities)
2018
Financial assets
Cash and cash equivalents
Other financial assets held by Benefit Funds
Reverse mortgage receivables
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
Net interest bearing financial assets/(liabilities)
Weighted
average
effective
interest rate
%
1.31%
2.93%
10.00%
8.73%
5.24%
Weighted
average
effective
interest rate
%
1.63%
2.91%
8.72%
13.26%
5.23%
Variable
rate
$’000
Fixed
rate
$’000
Total
$’000
104,462
124,120
-
1,158
229,740
(175,110)
(175,110)
54,630
Variable
rate
$’000
75,522
205,035
1,316
281,873
(162,739)
(162,739)
119,134
20,211
5,065
6,066
52,562
83,904
(128,000)
(128,000)
(44,096)
Fixed
rate
$’000
26,392
26,229
26,973
79,594
(83,000)
(83,000)
(3,406)
124,673
129,185
6,066
53,720
313,644
(303,110)
(303,110)
10,534
Total
$’000
101,914
231,264
28,289
361,467
(245,739)
(245,739)
115,728
(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.
Pay fixed for floating
contracts designated as
effective in fair value hedge
Average
contracted rate
Notional principal
amount
Fair value
2019
2018
2019
2018
2019
2017
%
%
$'000
$'000
$'000
$'000
Controlled property funds interest rate swaps
Benefit funds interest rate swaps
50 years swaps contracts
1.36%
-%
7.48%
2.33%
2.02%
7.48%
84,815
-
10,402
95,217
99,600
3,000
10,677
113,277
(731)
-
(472)
5
(28,083)
(22,939)
(28,814)
(23,406)
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 85
85
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
F Other
(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 balance
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.
At reporting date, if variable interest rates had been 100 (2018: 100) basis points higher or lower and all other variables were held
constant, the impact to the Group would have been as follows:
Consolidated
Interest rate risk
Interest rate risk
Change in
variable
+1%
-1%
Effect on profit after tax
2019
$’000
631
(537)
2018
$’000
568
(405)
The methods and assumptions used to prepare the sensitivity analysis have not changed in the year. The sensitivity analysis takes
into account interest-earning assets and interest-bearing liabilities attributable to the shareholders only, and does not take into
account the bank bill facility margin changes.
(iv) Fair value hedges
The Group held the following instruments to hedge exposures to changes in interest rates.
Interest rate swaps - as at 30 June 2019
Net exposure ($'000)
Average fixed interest rate
Interest rate swaps - as at 30 June 2018
Net exposure ($'000)
Average fixed interest rate
Maturity
1-6 months
6-12 months
-
-
-
-
-
-
-
-
More than
one year
10,402
7.48%
10,677
7.48%
The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows.
Interest rate swaps
30 June 2019
Nominal
Amount
10,402
30 June 2018
10,677
Assets
Liabilities
-
-
(28,083)
(22,939)
Line item in the
statement of
financial position
where the hedging
instrument is
included
Interest rate
swaps at
fair value
Interest rate
swaps at
fair value
Hedge
ineffectiveness
recognised in
profit or loss
Line item in
profit or loss that
includes hedge
ineffectiveness
37
Finance costs
144
Finance costs
86
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86 CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
F Other
F4
REMUNERATION OF AUDITORS
Amounts received or due and receivable by KPMG:
Audit and review of the financial report
Other services including AFSL and compliance plan audits
Non-audit services
2019
$
479,218
64,831
84,837
628,886
2018
$
347,165
52,275
89,175
488,615
F5
ADOPTION OF NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
New and amended accounting standards relevant to the Group as well as their impact on the Group’s consolidated financial
statements that are effective for the period are as follows:
(A) AASB 9 FINANCIAL INSTRUMENTS
AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces
new rules for hedge accounting and a new impairment model for financial assets. This standard replaces AASB 139 Financial
Instruments: Recognition and Measurement.
(i) Classification - Financial assets
AASB 9 contains a new classification and measurement approach for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics.
AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other
comprehensive income (FVOCI) and fair value through profit and loss (FVTPL). The standard eliminates the existing AASB 139
categories of held to maturity, loans and receivables and available for sale.
On transition to AASB 9, the new classification requirements do not have an impact on the Group’s accounting for all receivables
and financial assets (which are already carried at fair value with the exception of reverse mortgage loan receivables and trade
receivables).
Reverse mortgage loan receivables were previously recorded at amortised cost using the effective interest method less
impairment. On transition to AASB 9, these receivables have been be reclassified to FVTPL as the criteria for solely payments of
principal and interest (SPPI) criteria was not satisfied. There is no material change in their measurement and as a result there is
no impact on the Group’s equity at 1 July 2018.
The implication of the change from amortised cost to FVTPL could result in increased volatility in the Group’s results as gains or
losses arising from changes in fair value measurement assumptions are reported through the profit and loss.
(ii) Impairment - Receivables
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward-looking ‘expected credit loss’ (ECL) model. This will require
considerable judgement about how changes in economic factors affect ECLs, determined on a probability-weighted basis.
The new impairment model applies to the Group’s receivables which continue to be measured at amortised cost. The new
impairment model does not apply to the Group’s reverse mortgage loan receivables which are now classified as FVTPL under
AASB 9.
On transition to AASB 9, the new impairment model does not have a material impact on the Group’s equity as at 1 July 2018 and
no material impact during the year ended 30 June 2019.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019
87
87
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
The following table shows the changes in classification, if any, as at 1 July 2018, between AASB 139 and AASB 9. There is no
material impact to retained earnings at 1 July 2018.
Financial assets
Cash and cash equivalents
Receivables
Financial assets
Financial assets
Financial assets - mortgage backed assets
Reverse mortgages receivables
Reverse mortgages - hedged item
Total financial assets
Original
classification
under AASB 139
New
Classification
under AASB 9
Original carrying
amount under
AASB 139
$’000
New carrying
amount under
AASB 9
$’000
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Fair value
Fair value
Fair value
Amortised cost
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
101,914
21,164
495,837
99,721
1,215
28,289
19,770
767,910
101,914
21,164
495,837
99,721
1,215
28,289
19,770
767,910
Original
classification
under AASB 139
New
Classification
under AASB 9
Original carrying
amount under
AASB 139
$’000
New carrying
amount under
AASB 9
$’000
Financial liabilities
Payables
Liability to 360 Capital Group
Benefit Funds policy holders' liability
Borrowings (net of borrowing costs)
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Interest rate swaps - controlled property funds
Interest rate swaps - reverse mortgage fixed-for-life
Fair value
Fair value
Fair value
Fair value
32,405
41,161
349,677
245,739
472
22,939
32,405
41,161
349,677
245,739
472
22,939
Total financial assets
692,383
692,393
(iii) Classification - Financial liabilities
There is no impact on the Group’s accounting for financial liabilities, as AASB 9 requirements only affect the accounting for
financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The
derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not
been changed.
(iv) Hedge accounting
The new hedge accounting rules generally allow for more hedge relationships to be eligible for hedge accounting, as the standard
introduces a more principles-based approach. The Group does not have a significant impact as a result of the hedging changes on
transition on 1 July 2018.
The Group has made an election under AASB 9 to continue to apply the hedge accounting requirements in AASB 139 instead of
AASB 9 for its fair value hedges.
(v) Transition
Changes in accounting policies resulting from the adoption of AASB 9 have been applied retrospectively, however as there is
no material impact on carrying amounts of financial assets and financial liabilities, there are no transitional implications on the
Group’s equity at 1 July 2018 nor it’s comparatives.
(B) AASB 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
AASB 15 Revenue from customers applies to all contracts with customers to deliver goods or services as part of the entity’s
ordinary course of business excluding insurance contracts, financial instruments and leases which are addressed by other
standards. It replaces existing revenue recognition guidance, including AASB 118 Revenue and AASB 111 Construction Contracts.
AASB 15 replaces the considerations of risks and rewards under AASB 118 to the concept of when control passes to the customer
as the trigger point for the recognition of revenue.
The Group’s revenue streams which are in scope under the new standard include management fees from property funds, property
acquisition fees, property sales fees, recoverable outgoings and property performance fees. Rental income, interest income,
distribution and dividend income and fair value movements in investment properties are excluded from the scope of this standard.
88
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019 F Other
(i) Impact
The Group has adopted AASB 15 using the cumulative effect method and as a result, there has been no impact on the Group’s
previously reported financial position.
In accordance with AASB 15, based on the Group’s assessment of when performance obligations are satisfied there is no change
to the classification, measurement or timing of revenue recognition (other than property performance fees) when comparing to
the previous accounting policy, other than the change in terminology.
Performance fees were previously recognised upon satisfaction of all conditions precedent to the sale of an investment property
and when significant risks and rewards have transferred. There is no transitional impact from adoption of AASB 15, however future
performance fees will be recognised over-time. In assessing the timing and measurement of performance fees to be recognised,
consideration is given to the facts and circumstances with respect to each investment property including external factors such
as its current valuation, passage of time and outlook of the property market. Performance fees are only recognised when they are
deemed to be highly probable and the amount of the performance fees will not result in a significant reversal in future periods.
In accordance with AASB 15, the Group has recognised $22,522,000 of property performance fees for the year ended 30 June
2019. Under AASB 118, performance fees of $11,133,735 would be recognised for the year ended 30 June 2019. On transition to
AASB 15, there is no material impact on the Group’s equity as at 1 July 2018 and no other material impact for the year ended 30
June 2019.
Refer to Note B2 for a summary of the changes in terminology with respect to the timing of revenue recognition between AASB 111
and AASB 118 compared to AASB 15 and the new revenue recognition policies under AASB 15.
F6
OTHER NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 reporting
periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and
interpretations is set out below.
(A) AASB 16 LEASES
(i) Nature of change
AASB 16 Leases was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the
distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item)
and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
(ii) Impact
The new standard will primarily impact the accounting for the Group’s operating leases. As at the reporting date, the Group has
only one material operating lease commitments at Level 41 Chifley Square, Sydney NSW. The application of the new standard will
result in the recognition of a right of use asset along with a lease liability in the consolidated statement of financial position.
The adoption of the new standard will also require reclassifications on the consolidated statement of profit or loss and other
comprehensive income with the lease repayments expense associated with this lease replaced with depreciation expense on
the leased asset and in interest charge with respect to the lease liability. The changes on first time adoption of the new standard
are not expected to have a material impact on retained earnings, and the consolidated statement of profit or loss and other
comprehensive income in future periods.
Upon adoption of the new leasing standard effective 1 July 2019, management estimate that the lease assets would increase by
approximately $20,000,000 offset by a corresponding increase in lease liabilities amounting to approximately $20,000,000, with
no material impact to net profit.
(iii) Mandatory application date
It is mandatory for financial years commencing on or after 1 January 2019, but available for early adoption. The Group will adopt this
standard in the year ending 30 June 2020.
There are no other standards that are not yet effective and that would expect to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
F7
EVENTS SUBSEQUENT TO THE REPORTING DATE
Since the end of the financial year, the shareholders of Heathley have convened a meeting and approved the proposed acquisition
of Heathley by the Group. There are still a number of other conditions precedent outstanding which will need to be satisfied prior
to the completion of the transaction.
In addition, since the end of the financial year, the Group has committed to a further $11,000,000 in addition to its original
commitment of $61,700,000 to support funding requirements for Heathley funds. The Group will seek to raise these funds by using
its unlisted distribution network and will manage and underwrite any shortfall in the fund raising to satisfy the overall funding
requirements. As at 30 June 2019, the Group had already provided funding of $2,800,000 with a further $2,100,000 invested since
the end of the financial year.
Other than the above, there has not arisen in the interval between 30 June 2019 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.
CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 89
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019Notes to the consolidated financial statementsFor the year ended 30 June 2019
Directors’ declaration
For the year ended 30 June 2019
In the opinion of the Directors’ of Centuria Capital Limited:
(a) the consolidated financial statements and notes set out on pages 40 to 89 and the Remuneration Report set out on pages 31
to 38 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the financial
year ended on that date, 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.
Note A1 confirms that the consolidated financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A
of the Corporations Act 2001.
This declaration is made in accordance with a resolution of Directors.
Mr Garry S. Charny
Director
Sydney
Mr Peter J. Done
Director
Sydney
13 August 2019
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Independent Auditor’s Report
To the stapled security holders of Centuria Capital Group
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Centuria Capital Limited (the Company) as
the deemed parent presenting the stapled
security arrangement of the Centuria
Capital Group (the Stapled Group Financial
Report).
In our opinion, the accompanying Stapled
Group Financial Report is in accordance
with the Corporations Act 2001, including:
•
•
giving a true and fair view of the
Stapled Group’s financial position as
at 30 June 2019 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report of the Stapled Group comprises:
• Consolidated statement of financial position as at 30
June 2019
• Consolidated statement of comprehensive income,
Consolidated statement of changes in equity, and
Consolidated statement of cash flows for the year
then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Stapled Group consists of the Company and the
entities it controlled at the year-end or from time to time
during the financial year and Centuria Capital Fund and
the entities it controlled at the year-end or from time to
time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Stapled Group and Company in accordance with the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the
Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional
Standards Legislation.
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Key Audit Matters
The Key Audit Matters we identified for
the Stapled Group are:
• Recognition of performance fee
income
• Value of equity accounted
investments
• Recoverable amount of goodwill and
indefinite life intangible assets
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
Recognition of performance fee income ($22.5m)
Refer to Note B2 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Stapled Group, in its capacity as a property
fund manager, earns performance fees based on
agreements with some of its managed property
funds. Performance fees are triggered when
underlying funds internal rate of return exceeds
the agreed hurdle rate.
Recognition of performance fee income is
considered a key audit matter due to the:
• Quantum of performance fee income,
•
representing 19% of the Stapled Group’s
total revenue; and
Significant judgement exercised by us in
assessing the amount of performance fees
recognised by the Stapled Group. The key
assumptions impacting the amount of
performance fees, are subject to estimation
uncertainty, bias and inconsistent application.
This increases the risk of inaccurate forecasts
or a wider range of possible outcomes for us
to consider. Increased time and effort is
spent by the audit team in assessing these
key assumptions.
The amount of performance fees recognised are
impacted by key assumptions including:
•
Fair value of underlying investment
properties held by the funds. The valuation of
investment properties contains assumptions
with estimation uncertainty such as expected
capitalisation rates and market rental yields.
This leads to additional audit effort due to the
differing assumptions based on asset
•
•
In performing our procedures, we:
• Read the Stapled Group’s agreements with
managed property funds to understand the
key terms related to performance fees,
including hurdle rates.
Evaluated the Stapled Group’s accounting
policies regarding the recognition of
performance fee income against accounting
standard requirements. This included
assessing the Stapled Group’s policies for
constraining performance fee income and
valuing investment properties against
accounting standard requirements.
Assessed the scope, competence and
objectivity of the funds external experts and
their internal valuers to fair value the
underlying investment properties held by the
funds.
•
• With the assistance of our real-estate
valuation specialists, challenged specific
property fair value assumptions such as
capitalisation rates and market rental yields
by comparing to market analysis published
by industry experts, recent market
transactions, inquiries with the Stapled
Group, historical performance of the
underlying investment properties and using
our industry experience.
Assessed the Stapled Group’s determination
of the forecast fund end date based on the
underlying managed property fund
agreements, the fair value of underlying
investment properties, the Stapled Group’s
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 •
•
fund strategy and history of extending fund
term end dates.
Recalculated the Stapled Group’s
performance fee recognised against hurdles
in the underlying performance fee
agreements with managed property funds.
Challenged the constraints applied in
determining the amount of performance
fees that are highly probable to be received
by the Stapled Group, based on the Stapled
Group’s estimate of current and forecast
property fund performance. We used our
knowledge of the Stapled Group, their past
performance, business, and our industry
experience.
•
•
classes, geographies and characteristics of
individual investment properties.
Forecast fund end date. The fund end date
impacts the level of returns that can be
achieved over the course of the funds life
and may change depending on
management’s view of when maximum
value can be obtained for unitholders of the
fund.
Constraint. This is impacted by the Stapled
Group’s expectations of how much of the
performance fee is highly probable to be
received in accordance with the
requirements of the accounting standards.
In the financial year the Stapled Group adopted
AASB 15 Revenue from Contracts with
Customers (AASB 15). This required the Stapled
Group to assess their accounting policies against
the revenue recognition requirements of this
accounting standard. This required additional
audit effort for us to assess the Stapled Group’s
performance fee income in the current year.
In assessing this Key Audit Matter, we involved
our real-estate valuation specialists, who
understand the Group’s investment profile and
business.
Value of equity accounted investments ($386.7m)
Refer to Note E1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Stapled Group holds equity accounted
investments in Centuria Industrial REIT (CIP)
and Centuria Metropolitan REIT (CMA), the
value of which is underpinned by investment
property valuations.
The value of equity accounted investments is
a key audit matter as they are significant in
value (being 30% of total assets) and the
valuation of underlying investment properties
contain assumptions with estimation
uncertainty.
This leads to additional audit effort due to the
differing assumptions based on asset classes,
geographies and characteristics of individual
investment properties.
In performing our procedures, we:
• Obtained an understanding of the Stapled
Group’s process regarding the valuation of their
equity accounted investments, in particular for
the investment properties within.
• Assessed the methodologies used in the
valuations of their equity accounted
investments, in particular the investment
properties within, for consistency with
accounting standards, industry practice and the
Stapled Group’s policies.
• Assessed the scope, competence and
objectivity of the funds external experts and
their internal valuers.
• Worked with our real estate valuation specialists
to read published reports and industry
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 The Underlying investment properties held by
CIP and CMA, making up the majority of the
equity accounted investees, are valued at fair
value. The fair value is determined by CIP and
CMA using internal methodologies and
through the use of external valuation experts.
The valuations of CIP and CMA’s property
assets include a number of significant
assumptions:
•
capitalisation rates;
• market rental yield;
• weighted average lease expiry and
vacancy levels;
capital adjustments; and
leasing incentives.
•
•
In assessing this Key Audit Matter, we
involved our real-estate valuation specialists,
who understand the Group’s investment
profile and business and the economic
environment it operates in.
commentary to gain an understanding of
prevailing property market conditions.
• On a portfolio basis, took into consideration
asset classes, geographies and characteristics
of individual investment properties, challenged,
with reference to published reports or industry
commentary, capitalisation rates.
• With the assistance of our real-estate valuation
specialists, assessed a sample of key valuation
assumptions for individual investment
properties. These assumptions included
capitalisation rates, market rental yields,
weighted average lease expiry and vacancy
levels, capital adjustments and leasing
incentives. We did this by comparison to
market analysis published by industry experts,
recent market transactions, inquiries with the
Stapled Group, historical performance of the
investment properties and using our industry
experience.
Recoverable amount of goodwill and indefinite life intangible assets ($157.7m)
Refer to Note C6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter was the Group’s annual
testing of goodwill and indefinite life intangible
assets for impairment, given the size of the
balance and sensitivity of the forward looking
assumptions to small changes. We focussed
on the significant forward-looking
assumptions the Stapled Group applied in
their value in use model, including:
•
forecast operating cash flows, growth
rates and terminal growth rates (taking
into consideration future growth in funds
under management and transactional
fees). The Group’s model is sensitive to
small changes in these assumptions,
which may reduce available headroom.
This drives additional audit effort specific
to their feasibility and consistency of
application to the Group’s strategy.
discount rate – this is complicated in
nature and varies according to the
conditions and environment the specific
•
In performing our procedures, we:
• Considered the appropriateness of the value in
use method applied by the Stapled Group, to
perform the annual test of goodwill and
indefinite life intangible assets for impairment,
against the requirements of the accounting
standards.
• Compared the forecast cash flows contained in
the value in use model to the Board approved
forecast.
• Assessed the accuracy of previous Stapled
Group’s forecasts to inform our evaluation of
forecasts incorporated in the model.
• Challenged the Group’s significant forecast cash
flow and growth assumptions:
-
Challenged the Group’s significant forecast
cash flow by comparing baseline cash flows
to actual historic cash flows and comparing
key events to the Board approved plan and
strategy.
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Cash Generating Unit (CGU) is subject to
from time to time.
We involved valuation specialists in assessing
this key audit matter.
- With the assistance of our valuation
specialists, compared terminal growth rates
to published studies of industry trends and
expectations, and considered differences
for the Stapled Group’s operations. We
used our knowledge of the Stapled Group,
their past performance, business and
customers, and our industry experience.
Checked the consistency of the forecast
growth rates to the Stapled Group’s stated
plan and strategy and our experience
regarding the feasibility of these in the
economic environment in which they
operate.
-
• Worked with our valuation specialists to
independently develop a discount rate range
considered comparable using publicly available
market data for comparable entities, adjusted by
risk factors specific to the Stapled Group and
the industry it operates in.
• Considered the sensitivity of the model by
varying key assumptions, such as forecast
growth rates, terminal growth rates and
discount rates, within a reasonably possible
range. We did this to identify those assumptions
at higher risk of bias or inconsistency in
application and to focus our further procedures.
• Assessed the disclosures in the financial report
using our understanding of any issues obtained
from our testing and against the requirements
of the accounting standards.
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Other Information
Other Information is financial and non-financial information in Centuria Capital Group’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors
of the Company are responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s
Report. The Key Financial Metrics, Chairman’s Report, Chief Executive’s Report, Unlisted
Property, Listed Property, Centuria Life and Centuria in the Community are expected to be made
available to us after the date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
•
implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error
assessing the Stapled Group’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Stapled Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our Auditor’s
Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Centuria Capital Limited (the Company) for
the year ended 30 June 2019, complies with
Section 300A of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included
in pages 10 to 20 of the Directors’ report for the
year ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPM_INI
AR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Nigel Virgo
Partner
Sydney
13 August 2019
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Additional stock exchange information
The securityholder information set out below was applicable as at 31 July 2019.
DISTRIBUTION OF SECURITIES
Analysis of numbers of securityholders by size of holding:
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
There were 184 holders of less than a marketable parcel of securities holding 18,705 securities.
TOP 20 SECURITYHOLDERS
The names of the twenty largest holders of securities are listed below:
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
THE TRUST COMPANY (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
HWM (NZ) HOLDINGS LIMITED
GH 2016 PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS (NZ) LTD
RESOLUTE FUNDS MANAGEMENT
ERSKINE IMPORT PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CICERONE CAPITAL PTY LTD
PARITAI PTY LIMITED
BRYSHAW MANAGEMENT PTY LTD
BNP PARIBAS NOMS PTY LTD
PARSONAGE PROVIDENT P/L
MR ROGER WILLIAM DOBSON
ONE MANAGED INVESTMENT FUNDS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSI EDA
SUBSTANTIAL HOLDERS
Substantial holders in the Group are set out below as at 19 July 2019.
ESR Pte. Ltd
Magic TT Pty Ltd including Moelis Australia Limited
Investment Administration Services Pty ltd
BlackRock, Inc.
VOTING RIGHTS
All ordinary securities carry one vote per security without restriction.
Number
of holders
Number
of securities
906
4,026
895
1,090
450,430
9,891,118
6,230,035
31,026,683
150
335,959,066
7,067
383,557,332
Number held
62,994,692
56,973,253
56,834,761
28,415,438
27,037,714
10,020,000
9,536,034
7,839,171
6,251,937
4,230,079
4,076,238
3,627,629
3,512,057
3,206,531
2,925,002
2,849,812
2,200,830
1,576,050
1,500,000
1,467,696
Percentage
of issued
securities
16.42
14.85
14.82
7.41
7.05
2.61
2.49
2.04
1.63
1.10
1.06
0.95
0.92
0.84
0.76
0.74
0.57
0.41
0.39
0.38
297,074,924
77.44
Number held
Percentage
56,834,761
42,677,495
21,625,155
26,239,552
147,376,963
14.82%
11.13%
7.10%
6.84%
39.89%
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 Disclaimers
DISCLAIMER
This annual report is provided for general information purposes only. It is not a prospectus,
product disclosure statement, pathfinder document or any other disclosure document for the
purposes of the Corporations Act and has not been, and is not required to be, lodged with the
Australian Securities & Investments Commission. It should not be relied upon by the recipient
in considering the merits of CNI or the acquisition of securities in CNI. Nothing in this annual
report constitutes investment, legal, tax, accounting or other advice and it is not to be relied
upon in substitution for the recipient’s own exercise of independent judgment with regard to
the operations, financial condition and prospects of CNI.
The information contained in this annual report does not constitute financial product advice.
Before making an investment decision, the recipient should consider its own financial situation,
objectives and needs, and conduct its own independent investigation and assessment of the
contents of this annual report, including obtaining investment, legal, tax, accounting and such
other advice as it considers necessary or appropriate.
This annual report has been prepared without taking account of any person’s individual
investment objectives, financial situation or particular needs. It is not an invitation or offer to
buy or sell, or a solicitation to invest in or refrain from investing in, securities in CNI or any other
investment product. The information in this annual report has been obtained from and based
on sources believed by CNI to be reliable. To the maximum extent permitted by law, CNI and the
members of the Centuria Capital Group make no representation or warranty, express or implied,
as to the accuracy, completeness, timeliness or reliability of the contents of this annual
report. To the maximum extent permitted by law, CNI does not accept any liability (including,
without limitation, any liability arising from fault or negligence) for any loss whatsoever arising
from the use of this annual report or its contents or otherwise arising in connection with it.
This annual report may contain forward-looking statements, guidance, forecasts, estimates,
prospects, projections or statements in relation to future matters (‘Forward Statements’).
Forward Statements can generally be identified by the use of forward looking words such
as “anticipate”, “estimates”, “will”, “should”, “could”, “may”, “expects”, “plans”, “forecast”,
“target” or similar expressions. Forward Statements including indications, guidance or outlook
on future revenues, distributions or financial position and performance or return or growth in
underlying investments are provided as a general guide only and should not be relied upon as
an indication or guarantee of future performance. No independent third party has reviewed the
reasonableness of any such statements or assumptions.
Neither CNI nor any member of Centuria Capital Group represents or warrants that such
Forward Statements will be achieved or will prove to be correct or gives any warranty, express
or implied, as to the accuracy, completeness, likelihood of achievement or reasonableness of
any Forward Statement contained in this annual report. Except as required by law or regulation,
CNI assumes no obligation to release updates or revisions to Forward Statements to reflect any
changes. The reader should note that this annual report may also contain pro-forma financial
information. Distributable earnings is a financial measure which is not prescribed by Australian
Accounting Standards (”AAS”) and represents the profit under AAS adjusted for specific non-
cash and significant items. The Directors of CFML consider that distributable earnings reflect
the core earnings of the Centuria Capital Fund. All dollar values are in Australian dollars ($ or
A$) unless stated otherwise.
LONSEC RATINGS DISCLAIMER:
The Lonsec Rating (assigned August 2019) presented in this presentation is published
by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445. The Rating is limited
to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely
on consideration of the investment merits of the financial product(s). Past performance
information is for illustrative purposes only and is not indicative of future performance. It is
not a recommendation to purchase, sell or hold Centuria LifeGoals product(s), and you should
seek independent financial advice before investing in this product(s). The Rating is subject to
change without notice and Lonsec assumes no obligation to update the relevant document(s)
following publication. Lonsec receives a fee from the Fund Manager for researching the
product(s) using comprehensive and objective criteria. For further information regarding
Lonsec’s Ratings methodology, please refer to our website at: http://www.lonsecresearch.
com.au/research-solutions/our-ratings.
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CENTURIA CAPITAL GROUP ANNUAL REPORT 2019 AUSTRALIA RATINGS - RATING REPORT DISCLAIMER:
This report has been prepared solely by Australia Ratings Analytics Pty Ltd. under Australian
Financial Services Licence No. 494552. This report is for information purposes only. It is neither
an offer to sell nor a solicitation of any offer to purchase any securities in an investment product
or managed investment scheme. Any investment in a financial product or fund involves a degree
of risk. It is important to note that past performance is not an indication of future performance.
An investment fund rating reflects Australia Ratings’ current opinion of a fund or investment’s
ability to achieve its stated investment objectives in the near term. The rating expresses a view
on the expected consistency of the fund or investment’s performance within the peer/style
groups and the ability of the manger to produce superior performance amongst its peers in the
near term with due regard to the medium-term consensus view of the asset class to which the
product is benchmarked.
A superannuation fund or investment bond rating reflects Australian Ratings’ current opinion
of the quality and utility to investors of the product offer. It takes into account the structure
of the product, including fees and ease of use, the diversity and the selection process for the
investment options, and the strength, compliance, and support provided by the Trustee or Issuer.
The rating and research report will maintain current, unless amended, until the anniversary date
of the report. The investment rating and research report reflects the research methodology
published on the website of Australia Ratings Analytics. Ratings are assigned according
to Australia Ratings Analytics investment scale which ranges from Superior to Weak and is
described on the website.
Australia Ratings Analytics has made every effort to ensure the reliability of the views and rating
expressed in this report and those published on its website. Australia Ratings research is based
upon information provided by the investment manager that which is known to us or which was
obtained from sources which we believed to be reliable and accurate at time of publication. All
opinions and views expressed constitute judgment as of the date of the report and may change
at any time without notice and without obligation. Such information may be based on certain
assumptions and involve elements of subjective judgment and analysis. Australia Ratings
Analytics Pty Ltd has received a fee paid by either the fund manager or investment product
sponsor for the rating and this report.
This report is prepared for general information only, and individual financial positions, objectives
and circumstances have not been taken into consideration. Individuals should therefore
discuss, with their financial planner or advisor, the merits of each rating for their own specific
circumstances and realise that not all investments will be appropriate for all subscribers.
Investment returns can go up and down. Past performance is not necessarily indicative of future
performance.
To the extent permitted by law, Australia Ratings Analytics Pty Ltd and its employees, agents
and authorised representatives exclude all liability for any arising from the use of, or reliance on,
any information within the report whether or not caused by any negligent act or omission. If the
law prohibits the exclusion of such liability, Australia Ratings Analytics Pty Ltd hereby limits its
liability, to the extent permitted by law, to the resupply of the said information.
Corporate
directory
CONTACT US
Shareholder Enquiries
1800 182 257
HEAD OFFICE
Level 41, Chifley Tower,
2 Chifley Square
SYDNEY NSW 2000
Telephone: (02) 8923 8923
Facsimile: (02) 9460 2960
contactus@centuria.com.au
SHAREHOLDER ENQUIRIES
Boardroom Pty Limited
Centuria Capital Limited,
GPO Box 3993
Sydney NSW 2001
Telephone: 1800 182 257
Email:
CNI.Enquiry@CenturiaInvestor.com.au
FRIENDLY SOCIETY
INVESTOR ENQUIRIES
Centuria Life Limited,
Level 32, 120 Collins Street
Melbourne VIC 3000
Telephone: 1300 50 50 50
contactus@centuria.com.au
COMPANY SECRETARY
Anna Kovarik
Level 41, Chifley Tower,
2 Chifley Square
SYDNEY NSW 2000
Telephone: (02) 8923 8923
Facsimile: (02) 9460 2960
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Directors’ ReportCENTURIA CAPITAL GROUP ANNUAL REPORT 2019