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Centuria Capital Group – Annual Report 2020 | A
Contents
01
02
03
06
08
10
16
18
21
22
24
28
31
35
50
52
97
98
About Centuria
Vision & Strategy
Australasian Real Estate Platform
Chairman’s Report
Key Metrics
Joint CEO Report
Key Financial Metrics
Expanding our Funds Management Platform
Centuria’s Dual Growth Strategy
In-house Management & COVID-19
A Focus on Environmental, Social & Governance (ESG)
Board of Directors
Senior Executive
Directors’ Report
Lead Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
104 Additional Stock Exchange Information
105 Corporate Directory & Disclaimers
CIP: TELSTRA DATA CENTRE COMPLEX, CLAYTON, VIC
B | Centuria Capital Group – Annual Report 2020
About Centuria
Centuria Capital Group (ASX:CNI) is a leading Australasian funds manager
included in the S&P/ASX300 Index. (GICS code Diversified Real Estate).
CNI presently manages $9.4 billion of assets and offers a range of investment
opportunities, predominantly listed and unlisted real estate funds. Centuria’s
in-depth knowledge of the property sector and its intimate understanding of
its clients, allows it to transform opportunities into attractive investments.
For over twenty years, Centuria has
maintained a strong focus on its in-
house real estate expertise to identify,
transact, create and manage property
investment vehicles. Centuria’s
business is the management of
property funds and is classed as an
“external” manager.
Real estate funds management is
the largest component of Centuria’s
platform with $8.6 billion of assets under
management. Centuria is well-positioned
with deliberate exposure to the industrial,
healthcare and decentralised office real
estate markets throughout Australia and
New Zealand and has an extensive range
of property fund types ranging from listed
funds to unlisted fixed-term and open-
ended funds.
Centuria Capital is the manager of
Centuria Industrial REIT (ASX: CIP)
and Centuria Office REIT (ASX: COF),
Australia’s largest domestic pure-play
industrial and office REITs included
in the S&P/ASX 200 and 300 Indices,
respectively. Centuria Capital is also
responsible for a range of unlisted real
estate funds presently comprising 12
fixed-term office funds, 10 healthcare
funds, an institutional healthcare real
estate mandate and two multi-asset
open-ended funds.
In addition to its property funds
management activities, Centuria also
manages an $0.8 billion friendly society
investment bond portfolio on behalf of
numerous policyholders, this is a long-
standing business unit which has recently
launched a contemporary investment
product called “Centuria LifeGoals”.
Throughout FY20, Centuria has
maintained its dual strategy of growth
by both direct real estate transactions as
well as corporate acquisitions. The latter
most recently included the settlement
of a 63% interest in Heathley Limited
(September 2019), which has since
re-branded to Centuria Healthcare.
This year Centuria also completed a
full takeover of Augusta Capital Limited,
a leading New Zealand property funds
manager with $1.8 billion in assets
under management. Augusta Capital
was recently de-listed from the
New Zealand Exchange and is being
operated as a 100% subsidiary.
Centuria continues to realise its vision
of building a leading Australasian listed
external real estate funds management
platform and attaining a “top three
Australian ranking” amongst its peers.
CENTURIA CAPITAL FUNDS MANAGEMENT PLATFORM
$6.2bn
FY19 AUM
52%
AUM growth
on FY19
$9.4bn Current Group AUM1
$8.6bn Real Estate AUM
$4.3bn LISTED
$4.3bn UNLISTED
$0.8bn
Investment
Bonds AUM
Centuria
Life
Centuria
Office REIT
ASX:COF
$2.1bn
Centuria
Industrial REIT
ASX:COF
$2.1bn
Asset Plus Ltd
NZ:APL
NZ single
asset funds
NZ Industrial
Fund
$0.1bn
$1.4bn
$0.3bn
O P EN END ED FU ND
Centuria
Fixed Term
Office Funds
$1.7bn
CDPF: Centuria
Diversified
Property Fund
$0.2bn
O P EN END ED FU ND
Centuria
Healthcare
Real Estate
$0.7bn
Centuria
Investment Bonds
Guardian Friendly
Society
AU G U S TA CA P I TA L LIMI T ED, NZ
$0.6bn
CNI Co-Investments
on balance sheet
$191.2m2 (19.9%)
Centuria Office REIT
ASX:COF
$225.5m2 (17.3%)
Centuria Industrial REIT
ASX:CIP
$113.4m
Unlisted Property
and Debt Investments
$9.7m (18.85%)
Asset Plus Ltd
NXZ:APL
$31.3m
Properties held
for development
Note: All figures above are in Australian
dollars (currency exchange ratio of
AU$1.000:NZ$1.0695). Numbers
presented may not add up precisely to
the totals provided due to rounding
1 Centuria AUM as at 30 June 2020, Augusta AUM as at 31 March 2020.
Includes CIP acquisitions announced post 30 June 2020. Excludes Centuria Healthcare Property Fund (CHPF)
2 Based on the respective close prices for COF and CIP at 31 July 2020. Includes ownership by associates of Centuria Capital Group
Centuria Capital Group – Annual Report 2020 | 01
V I S I O N
Build a leading listed external real estate
funds management platform and attain
“top three Australian ranking”
STRONG
BALANCE SHEET
To support platform
expansion e.g.
Centuria Healthcare
and Augusta Capital
LEVERAGE STRONG
DISTRIBUTION
NETWORK
Utilise Centuria’s
strong in-house
client base for
unlisted funds
Leverage growing
equity capital
markets presence
A I M S
DELIVER RECURRING
REVENUES, UNLOCK
PERFORMANCE FEES
Strong recurring
revenue fees underpin
distributions
Realise underlying
performance fees
embedded in
unlisted funds
GROWTH
OPPORTUNITIES
Establish further
wholesale real
estate mandates
Grow Centuria
LifeGoals
Investment Bond
Products
NEW
PLATFORMS
Grow new platform
acquisitions –
Centuria Healthcare
and Augusta Capital
(NZ) by deploying
skills, systems and
capital duplicating
successful
Centuria model
S T R A T E G Y
Deliver income and capital growth
from compelling real estate and
investment bond sectors for a
broad range of investor profiles
DUAL GROWTH
STRATEGY
Direct real estate
acquisitions
Corporate
expansion
SECURING
QUALITY
TRUSTED
CONSULTATION
Tenants
Assets
Investors
Tenants
Managers
Stakeholders
02 | Centuria Capital Group – Annual Report 2020
COF: 203 PACIFIC HIGHWAY, ST LEONARDS, NSW
Australasian real estate platform
Asset Sectors1,2
OFFICE | INDUSTRIAL | HEALTHCARE |
REAL ESTATE TOTAL 95%
Geographies1
81% AUSTRALIA
19% NEW ZEALAND
INDUSTRIAL
33%
OTHER
5%
SA
5%
QLD
22%
WA
8%
VIC
17%
ACT
6%
NSW
23%
OFFICE
53%
Other NZ
6%
Auckland NZ
13%
HEALTHCARE
9%
Fund Types1
I53+
23+
20+
50+
50% LISTED | 44% UNLISTED RETAIL
6% INSTITUTIONAL / WHOLESALE
50%
UNLISTED FUND
CATEGORIES
Centuria Fixed
Term Office Funds
20%
50%
LISTED FUND
CATEGORIES
Capital Sources1
Centuria Healthcare
9%
NZ Single
Asset Funds
16%
Centuria Diversified
Property Fund 1%
Centuria
Office REIT
24%
Unlisted
Retail
44%
Institutional
6%
Asset Plus
Ltd 2%
NZ Industrial Fund 4%
Centuria
Industrial REIT
24%
Listed
50%
1 Centuria AUM as at 30 June 2020, Augusta AUM as at 31 March 2020. Includes
CIP acquisitions announced post 30 June 2020. Excludes Centuria Healthcare
Property Fund (CHPF) and AUM from investment bonds
2 Other includes Augusta large format retail, supermarkets, shopping centres
and tourism
Centuria Capital Group – Annual Report 2020 | 03
16
+
9
+
4
+
1
+
2
+
24
+
24
+
I
22
+
17
+
13
+
8
+
6
+
6
+
5
+
33
+
9
+
5
+
I
44
+
6
+
I
Aligned to compelling sectors
with clear and simple themes
Office
Industrial
Healthcare
Investment Bonds
De-centralised, highly
connected and affordable
office space
Fit-for-purpose industrial
assets, infill locations and
close to key infrastructure
Specialist healthcare real
estate focused on cost
effective models of care
Tax-effective
investments oriented
around your life goals
$9.4bn ASSETS UNDER MANAGEMENT1
$8.6bn AUM
$8.6bn AUM
$0.8bn AUM
1 Centuria AUM as at 30 June 2020, Augusta AUM as at 31 March 2020. Includes CIP acquisitions announced post 30 June 2020.
Excludes Centuria Healthcare Property Fund (CHPF)
Centuria’s deep real estate expertise and
integrated management capabilities
TRANSACTION
MANAGEMENT
Integrated
management
capabilities
PROPERTY
MANAGEMENT
FUNDS
MANAGEMENT
LEASING
MANAGEMENT
DEVELOPMENT
MANAGEMENT
FACILITIES
MANAGEMENT
ASSET
MANAGEMENT
CENTURIA HEALTHCARE: 32 MORROW STREET, TARINGA, QLD
04 | Centuria Capital Group – Annual Report 2020
Trans-Tasman exposure
WA
NT
SA
QLD
NSW
ACT
VIC
TAS
North
Island
South
Island
$6.8bn
OF AUSTRALIAN REAL ESTATE
ACCOUNTS FOR ~80% OF AUM1
$1.8bn
OF NEW ZEALAND REAL ESTATE
ACCOUNTS FOR ~20% OF AUM2
New South Wales
ACT
North Island
$1,965m ACROSS 39 PROPERTIES
$463m ACROSS 6 PROPERTIES
$1,299m ACROSS 43 PROPERTIES
Queensland
South Australia
South Island
$1,804m ACROSS 54 PROPERTIES3
$417m ACROSS 7 PROPERTIES
$217m ACROSS 10 PROPERTIES
Victoria
Tasmania
$1,445m ACROSS 24 PROPERTIES
$6m ACROSS 1 PROPERTY
Western Australia
$717m ACROSS 21 PROPERTIES
Note: All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.067). Numbers presented may not add up precisely to the totals provided due to rounding
1 As at 30 June 2020. Includes cash and other financial assets. Includes CIP acquisitions announced 5 August 2020
2 Augusta AUM as at 31 March 2020. Includes cash and other financial assets and Anglesea asset
3
Includes Augusta Capital Limited assets
Centuria Capital Group – Annual Report 2020 | 05
Chairman’s report
GARRY CHARNY
Chairman
06 | Centuria Capital Group – Annual Report 2020
Dear Investor,
With deference to Dickens, it has been
the best of times, it has been the worst of
times. Nonetheless, it is still my pleasure
to write to you and introduce Centuria
Capital Group’s 2020 annual report.
Your Board remains committed to
delivering value for all investors and
FY20 has been a year of expansion for
the group despite the COVID-19 backdrop
to Australia’s first recession in 29 years.
The first half of the year was exceptional and yet nothing could
have adequately prepared us for the arrival of COVID-19. It is
trite to say that when global economic dislocations such as
experienced due to COVID-19 occur, the strategies set between
board and management become a crucial factor in maintaining
earnings and also providing a stable platform from which to
continue to grow - perhaps when others are distracted. That of
course requires an additional level of commitment from both
Board and staff.
Accordingly, it would be remiss of me not to mention the
contribution of all - from additional weekly and sometimes daily,
board briefings and meetings, through to across the board
periodic wage and fee reductions of up to 15% and, ultimately,
preparing for a return to the office in a COVID safe way. Our
senior management team and all of the staff and my fellow
board members have been outstanding.
Despite all that has happened, FY20 has been a year of strong
growth for Centuria where the group expanded through a
significant real estate platform acquisition as well as recording
a record level of asset acquisitions by our managed funds.
Centuria Capital is now included in the S&P/ASX300 index and
our substantial growth necessitates ongoing evolution as we
mature. Accordingly, as our market presence grows the board,
together with management, seek to continually redefine and
communicate our aims, values and capabilities, many of which
are shared in this report. These aims are not solely financial.
Centuria acknowledges our social contract with the community
and towards the markets we operate in and the obligations we
hold to all our staff to make Centuria, and what it represents, a
place where people want to come to work.
PERFORMANCE
Over FY20, Centuria grew its assets under management (AUM)
to $8.8 billion or over 40%. So far in FY21, Centuria’s platform
has increased by a further $0.6 billion bringing total funds
under management to $9.4 billion. This represents an increase
of over 50% since the commencement of FY20.
As at the date of this report, real estate AUM represent $8.6
billion of total AUM, with an even balance of $4.3 billion each
between listed and unlisted funds.
The Group continues to expand its product offering and while
Centuria remains aligned to the industrial and de-centralised
office asset classes its healthcare subsidiary – Centuria
Healthcare has successfully marketed its first substantial
healthcare real estate fund.
During FY20, Centuria Metropolitan REIT (ASX: CMA) was
rebranded to Centuria Office REIT (ASX: COF) now the largest
domestic pure-play office REIT. Centuria Industrial REIT (ASX:
CIP), is now part of the S&P/ASX 200 index and represents the
markets largest pure rent-collecting industrial REIT.
The Responsible Entity boards are now comprised as follows:
CPFL
Peter Done
(Chairman)
Nicholas Collishaw
(Non-Executive Director)
You may be aware that Centuria has recently acquired leading
New Zealand real estate investment platform, Augusta Capital
Limited. Through this acquisition Centuria has expanded its
unlisted managed funds by $1.7 billion as well as gaining an
18.85% interest in the NZX listed Asset Plus Limited REIT, adding
a further $0.1 billion in listed AUM to the total property platform.
Matthew Hardy
Darren Collins
CPF2L
(Non-Executive Director)
(Non-Executive Director)
The expansion into New Zealand enables Centuria to increase
its exposure to a new, mature commercial real estate market.
We have grown from being a domestic operation to now being
a significant Trans-Tasman platform. This Australasian focus
will enhance growth opportunities for the group and while our
asset portfolios will always be weighted in favour of Australia,
the opportunities available in New Zealand are seen as too
significant to dismiss.
MANAGEMENT
In our last Annual Report, I had the pleasure of welcoming
the Heathley team to Centuria. Fully integrated, with its new
nomenclature Centuria Healthcare, it is currently completing a
new $130 million Centuria Healthcare Property Fund thereby
creating a fresh vertical for Centuria.
This year I am delighted to welcome the Augusta Capital
team to Centuria. Mark Francis and Bryce Barnett have joined
Centuria’s senior executive team with Mark remaining in
charge of the New Zealand operation as was always intended.
With full board support, the Board and management have
set aggressive targets to grow Centuria’s presence in both
countries creating a major Trans-Tasman real estate platform.
Congratulations are also due to Jason Huljich and Ross Lees
on a successful first year in their new positions as Joint
CEO and Head of Funds Management, respectively. Their
appointments were announced at Year End FY19.
GOVERNANCE
Further governance improvements include a reorganisation
of Centuria’s responsible entity boards to ensure greater
independence and aid with any potential conflicts, both real
or perceived. The Centuria Property Funds Limited (CPFL) and
Centuria Property Funds No.2 Limited (CPF2L) Boards have been
reconstituted to assist with these important governance issues
and to reflect the substantial growth in the business, particularly
in the industrial and healthcare sectors. Peter Done continues to
chair CPFL and Roger Dobson, a name familiar to many of you, has
returned to the fold as Independent Chairman of CPF2L.
We also welcome Natalie Collins to the Boards of CPF2L, Centuria
Life Limited (CLL) and the Over Fifty Guardian Friendly Society
Limited as a new independent director. Natalie began her career
in audit for PWC and she is currently Head of Emerging Ventures
and Co-Founder of Amatil X at Coca-Cola Amatil. Natalie brings a
diverse range of talents and perspectives to the boards she will sit
on and I am personally delighted she was prepared to take up the
offer to join us.
Roger Dobson
(Chairman)
Nicholas Collishaw
(Non-Executive Director)
Peter Done
Natalie Collins
(Non-Executive Director)
(Non-Executive Director)
ESG
The Boards and Centuria’s Management team have made a
concerted effort to refine our existing Environmental, Social and
Governance (ESG) framework throughout FY20 as well as to
explore fresh initiatives.
The Conflicts committee continues to add valuable protocols to
the good order of our business.
Further, an ESG committee has been established to assess and
implement pragmatic and sensible policies and practises that
align Centuria’s organisation with ESG commitments across the
community it operates within.
Whether these are in sustainability, social and affordable housing
or general corporate citizenship, they continue to be a touchstone
not only of our investment decisions and stakeholder engagement
but also of how we want Centuria to be defined.
CONCLUSION
Let me conclude by thanking you, our investors, for your
commitment and support throughout FY20. I also thank my fellow
directors from the Group, and responsible entity boards, for your
leadership and guidance, which has placed Centuria on good
footing for the coming financial year.
Whilst COVID-19 and its after effects will remain with us for the
foreseeable future, as global economies, including Australia and
New Zealand, begin to emerge from the pandemic, Centuria is
well-positioned to face any potential headwinds and to take
advantage of opportunities that will inexorably arise. I look forward
to welcoming you all to our upcoming virtual AGM to discuss
Centuria’s results and plans for the future further.
GARRY CHARNY
Chairman
Centuria Capital Group – Annual Report 2020 | 07
Key metrics: Delivering strong growth
and creating value
$9.4bn
Group AUM1
52% growth on FY19
1 Centuria AUM as at 30 June 2020,
Augusta AUM as at 31 March 2020.
Includes CIP acquisitions announced
post 30 June 2020. Excludes Centuria
Healthcare Property Fund (CHPF)
12.00cps
FY20 Operating
earnings per security2
Delivered ahead of 11.50cps
FY20 guidance
2 Operating EPS is calculated based on the
Operating NPAT of the Group divided by the
weighted average number of securities
$1.2bn
FY20 Group real
estate acquisitions
08 | Centuria Capital Group – Annual Report 2020
$1.8bn
9.70cps
86%
6.1%
Augusta Capital
Limited AUM
FY20 Distribution
per security
4.9% growth on FY19
FY20 Group
operating recurring
revenues
12 Month total
securityholder return1
S&P/ASX300 Index (-7.6%)
S&P/ASX300 AREIT Index (-20.7%)
1 Source: Moelis Australia. Based
on movement in security price
from ASX closing on 1 July 2019
to ASX closing on 30 June 2020
plus distributions per security paid
during the respective period(s)
assuming re-investment of all
distributions. Past performance
is not a reliable indicator of future
performance
CIP: ARNOTT’S, 23-41 GALWAY AVENUE, MARLESTON, SA
Centuria Capital Group – Annual Report 2020 | 09
Joint CEO Report
JOHN MCBAIN
JASON HULJICH
Joint CEO
Joint CEO
Dear Investors,
It gives us great pleasure to present
the 2020 Centuria Capital Limited (CNI
or Centuria) Annual Report to you. The
FY20 financial year was comprised of
two distinct periods. During the first half
we experienced record growth in assets
under management (AUM) of $1.2 billion
followed by a second half where much of
Australia experienced severe bushfires,
followed by significant flooding on the
East coast. Shortly afterwards the full
lock-down impact of the COVID-19
pandemic was experienced throughout
Australia.
Despite this unfortunate backdrop, we are pleased to report
that Centuria performed well on a “whole of year” FY20
basis due in great part to extremely strong first half trading.
Operating earnings came in above guidance at 12.0 cents per
security and we maintained our forecast distribution of 9.7
cents per security.
Despite the global economic environment and including
post FY20 acquisitions, Centuria’s platform has expanded to
$9.4 billion1 of assets under management, a substantial 52%
increase on FY19 with listed and unlisted real estate funds
comprising $8.6 billion of this total.
Our business model has been extremely resilient and our
dual strategy of direct asset acquisitions, in combination
with corporate expansion, has resulted in FY20 and FY21 to
date being a transformational period. As mentioned, Centuria
acquired $1.2 billion of direct real estate acquisitions in
FY20 in addition to completing the acquisition of Augusta
Capital Limited, a $1.8 billion New Zealand real estate funds
management platform.
This strategy has generated over $5 billion of initiatives in
the past few years, remaining focussed on compelling asset
sectors and producing a blended growth profile which has
accelerated earnings and scale for our securityholders.
Centuria has taken a significant step towards creating a
leading Australasian funds management platform, expanding
our Group’s footprint in attractive asset classes, along with
providing a wider suite of investment options for retail and
institutional investors, and the equity capital markets.
1 Centuria AUM as at 30 June 2020, Augusta AUM as at 31 March 2020. Includes CIP acquisitions announced 5 August 2020
10 | Centuria Capital Group – Annual Report 2020
We have a special focus on integrating acquired businesses
into our platform. Along with fully integrating the Heathley
business into Centuria, we have now commenced the
integration of Augusta into our platform as part of our
Australasian expansion.
Additionally, we have implemented technology to future-
proof our business. We recently launched our “VISION
2020” property management and finance software platform
providing an integrated solution that will provide efficiency and
scalability for the future.
Despite market volatility, we are also pleased to report
12-month, FY20 total securityholder returns2 of positive 6.1%,
outperforming the S&P/ASX 300 index at negative 7.6% and
S&P/ASX300 AREIT accumulation index of negative 20.7%.
Last year, CNI qualified for the S&P/ASX 300 Index. Our
continued strong growth and increasing market relevance has
positioned CNI well for potential S&P/ASX200 Index inclusion
and it has been rewarding to see trading volumes in CNI
securities respond positively to the much awaited Standard
and Poors re-categorization of Centuria Capital to a “REIT”
code under its global “GICS” classification standard.
In other indices news, during FY20, Centuria Industrial REIT
(ASX code: CIP) entered for the S&P/ASX 200 Index and
Centuria Office REIT (ASX code: COF) remains well positioned
for potential S&P/ASX200 Index inclusion in the future.
OUR SOCIAL CONTRACT
Part of the obligation we owe to our stakeholders lies in our
community obligations. Our securityholders have a right to
understand how Centuria discharges its responsibilities in a
number of non-financial areas and this report together with
future Annual Reports will disclose some of the initiatives
we are taking in relation to our environmental, social and
governance obligations.
This year, we have continued to focus on sustainability with
initiatives that included solar panel rollouts, improvements in
waste management and retaining a high NABERS Energy rating
as part of our focus on efficiently operated assets. Socially, we
have focused our efforts towards reputable volunteering and
fundraising programs, becoming a member of the Diversity
Council of Australia and increasing our exposure to asset
classes that are critically important to the community –
healthcare real estate and social & affordable housing.
Turning to governance, we have continued to enhance our
corporate governance framework. In particular, we have
restructured our responsible entity boards, which are now led
by separate Chairmen. We are pleased to welcome both Roger
Dobson as new Chair, and Natalie Collins as an independent
non-executive director of, CPF2L Limited the responsible
entity board governing both the Centuria Industrial REIT and
our unlisted Centuria Healthcare funds. As Head of Emerging
Ventures at Coca Cola Amatil, Natalie’s corporate skills lend
added depth and diversity of experience to the group.
FINANCIAL RESULTS
Statutory profit3 of $21.1 million was recorded for FY20 and
operating net profit after tax (NPAT4) of $53.3 million generated
an operating earnings per security (EPS5) of 12.0 cents, ahead of
11.5cps FY20 guidance. Distributions of 9.70cps were delivered
on guidance, reflecting a 4.9% increase on FY19.
FY20 has seen a 37.4% increase in property funds management
earnings excluding the impact of performance fees, a reflection
of the Group’s sustained growth in recurring revenue in recent
years. Recurring revenues accounted for 86% of total Group
revenues in FY20, underpinned by increased property funds
management fees and co-investment income.
Centuria booked cash of $37.2 million (including GST) from
performance fees in relation to the sales of the Zenith Tower,
50% of 8 Central Avenue and 2 Wentworth Street, with an
additional $32.6 million6 of latent unrecognised performance
fees embedded within our remaining unlisted funds.
Centuria retains a strong operating balance sheet with cash
on hand of $149.5 million as at 30 June 2020, a proportion of
which has since been utilised for the successful cash and scrip
takeover bid for Augusta Capital Limited (“AUG or Augusta”).
Group net asset value continued to strengthen to $1.44 per
security7. Balance sheet gearing reduced following the $35
million repayment of fixed rate secured notes during the
year. Tenure for $32.1 million of corporate bonds was also
extended by four years from April 2021. An operating gearing
ratio8 of 3.1% at period end reflected a significant reduction
in net borrowings while an interest cover ratio of 6.3 times9
strengthened with strong property funds management
revenue growth.
It is very much business as usual for the Centuria group.
Centuria Capital Limited has issued FY21 operating earnings
guidance of 10.5-11.5 cents per security and FY21 distribution
guidance of 8.5 cents per security.
2 Source: Moelis Australia. Based on movement in security price from ASX closing on 1 July 2019 to ASX closing on 30 June 2020 plus distributions per security paid during
the respective period(s) assuming re-investment of all distributions. Past performance is not a reliable indicator of future performance
3 Attributable to securityholders
4 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
5 Operating EPS is calculated based on the Operating NPAT of the Group divided by the weighted average number of securities
6 The underlying property funds managed by Centuria Capital Group have accrued total performance fees of $40.4m as at 30 June 2020. $7.7m of this amount has been
recognised life to date with the latent unrecognised performance fee being $32.6m
7 Number of securities on issue at 30 June 2020: 509,998,482 (at 30 June 2019: 383,557,332)
8 Gearing ratio is calculated based on (operating borrowings less cash) divided by (operating total assets less cash)
9 Operating interest cover ratio is calculated based on operating finance costs divided by operating profit before tax excluding finance costs (excluding reverse mortgages)
Centuria Capital Group – Annual Report 2020 | 11
TRANS-TASMAN EXPANSION:
AUGUSTA CAPITAL LIMITED, A NEW GROWTH OPPORTUNITY
Augusta is a leading New Zealand (NZ) real estate funds
manager with a $1.8 billion platform that includes NZX-listed REIT,
Asset Plus Limited, the NZ$345 million Augusta Industrial Fund,
and a number of core open-ended single asset unlisted property
funds.
The full acquisition, delisting and integration of the Augusta
business will deliver a number of benefits to Centuria
securityholders. Combining these two complementary
funds management businesses not only increases scale
and relevance, it also creates an expanded platform with a
significant Australasian presence.
Augusta possesses a market leading distribution network
servicing retail and wholesale investors and features an
attractive fee card across its listed and unlisted funds.
Approximately 72% of Augusta’s assets under management
align to office and industrial sectors, which we favour and
where much of our expertise lies.
The NZ real estate market is mature, well regarded and has
many similarities to the Australian market. It also possesses
unique regulatory advantages, for example, no real estate
stamp duty, the absence of an enshrined capital gains tax
regime and a flexible takeover code.
Augusta Capital now operates as a 100% subsidiary within the
Centuria group. Managing Director, Mark Francis, continues to
manage the New Zealand business alongside Bryce Barnett
and the broader management team, which remains in place.
Augusta has a highly experienced and capable team that
foster a culture similar to Centuria and share our aspiration to
establish a leading Australasian real estate platform.
Augusta is operating effectively during COVID-19 and recently
launched the new multi-asset Augusta Property Fund including
the NZ$55 million Anglesea Medical Centre seed asset. The
fund launch was the team’s first during COVD-19 and the offer
was oversubscribed in nine days.
With appropriate capital and underwriting support and, given
the COVID-19 recovery underway in New Zealand, Augusta’s
return to profitability is anticipated to be ahead of schedule.
On behalf of the Centuria organisation, we welcome Mark,
Bryce and the Augusta team.
CENTURIA PLATFORM POSITIONED FOR GROWTH
During FY20, CNI’s platform expanded AUM to $8.8 billion, a
42% increase on FY19. This strong growth was supported by
$1.2 billion of direct real estate acquisitions and $0.1 billion of
revaluations.
As mentioned, this growth was predominantly executed
throughout the first half of FY20. This record period of
acquisitions eclipsed our Group’s previous 12-month record.
$1.2 billion of organic AUM growth was generated through
20 separate real estate transactions and was aided by
contributions from across the whole real estate platform. This
strong performance culminated in Centuria being recognised
as the second largest acquirer of Australian industrial and
fourth largest acquirer of Australian commercial real estate in
calendar year 2019.
The Augusta platform acquisition is the most recent example
of Centuria steadily increasing the number of investment
vehicles that can contribute to the ongoing growth of our
listed and unlisted real estate funds.
Excluding Augusta’s assets, Centuria manages over 140 assets
and 600 tenants in Australia. Our top ten tenants are highly
concentrated towards Federal and State Governments, ASX
listed or multinational tenants. Throughout the April to June
2020 period Centuria secured an average 91% rent collection
across the platform.
This range of high-quality tenants and their resilient cashflows
has meant all our funds have continued to distribute through
the COVID-19 period and our integrated, internal asset and
property management platform has created strong tenant
relationships which have provided a superior basis to enable
us to transition through the COVID-19 period and maintain
these relationships which are crucial to our success.
Turning to the investment vehicles across CNI’s platform, our
two listed A-REITs provide sector specific exposure to the
commercial and industrial markets.
Centuria Office REIT (ASX: COF) is Australia’s largest pure play
office REIT listed on the ASX and is included in the S&P/ASX 300
Index. With $2.1 billion of AUM and 23 high quality commercial
assets, COF’s portfolio provides exposure to highly connected
and affordable office space in decentralised markets. COF
expanded its portfolio with $637 million of acquisitions in FY20
and approximately 80% of the portfolio income is derived from
Government, ASX listed of multinational tenants.
Centuria Industrial REIT (ASX: CIP) is Australia’s largest
domestic pure play industrial REIT listed on the ASX and is
included in the S&P/ASX 200 Index. With $2.1 billion of AUM
and 53 high quality industrial assets, CIP’s portfolio provides
exposure to fit-for-purpose industrial assets in infill locations
and in close proximity to key infrastructure. CIP expanded its
portfolio with over $300 million of acquisitions in FY20 and
approximately 52% of portfolio income is derived from tenant
customers directly linked to the production, packaging and
distribution of consumer staples and pharmaceuticals.
12 | Centuria Capital Group – Annual Report 2020
AUGUSTA SINGLE ASSET FUND: 33 BROADWAY, NEWMARKET, AUCKLAND
We have completed the integration of Heathley into the Centuria
platform and it has been rebranded to Centuria Healthcare. The
division oversees 45 assets, 10 unlisted funds and $0.7 billion
AUM. The team remains focused on progressing its $300
million acquisition pipeline and delivering growth through the
$500 million mandate with AXA Investment Managers and
Grosvenor Group, and CHPF.
Our Investment Bond division represents the fourth largest
investment bond manager in Australia with $0.8 billion in
AUM and 11%11 total market share. Our fund options under the
recently launched Centuria LifeGoals have expanded by 31% to
29 funds. The team continue to expand their market exposure
and now have access to over 3,900 active financial planners
along with representation on 28 approved product lists (APLs),
an increase of 64% on FY19.
Centuria remains the largest investor in COF and CIP with
holdings of 19.9% and 17.3%, respectively. These co-
investments contribute to the Group’s ongoing real estate
recurring revenues and provide strong alignment to the
unitholders in both Trusts.
Our unlisted real estate division continued to evolve over FY20.
We have deliberately expanded the number of investment
vehicles in our unlisted division, creating further opportunities
to broaden CNI revenues as well as providing our long
serving and deep unlisted investor network with compelling
investment opportunities in attractive asset classes.
Fixed-term office funds continued to perform strongly during
FY20. We presently oversee 12 fixed term funds worth a
collective $1.7 billion AUM. We added two unlisted funds for
$216 million through the year. Strong performance has also
been highlighted with four to six funds included in the MSCI/
PCA Top 10 Australian Unlisted Retail Quarterly Property Fund
Index10 for 16 consecutive quarters. We expect strong demand
through our unlisted network as investors seek higher yielding
investment opportunities relative to historically low term
deposit rates.
Open ended/multi-asset unlisted funds have expanded with
Centuria Diversified Property Fund (CDPF) increasing to $205
million of AUM, the recent launch of the of the $133 million
Centuria Healthcare Property Fund (CHPF) and addition of
the Augusta Industrial Fund (AIF) and Augusta Property Fund
(APF). These funds provide a suite of options for advisers
and unlisted investors.
10 At least four funds in the Top 10 in The Property Council of Australia/MSCI Australia Unlisted Retail Quarterly Property Fund Index to 30 June 2020 each previous quarter for
the last sixteen quarters (overall investment for the twelve months to the end of each quarter)
11 QDS Report 30 March 2020
QDS Report 30 March 2020
Centuria Capital Group – Annual Report 2020 | 13
A STRONG START TO FY21
Centuria has commenced FY21 strongly and we continue to
focus on executing our strategy in a prudent and methodical
manner as we navigate decidedly choppy markets.
Notable FY21 activity to date includes:
• $0.7 billion of direct real estate acquisitions including
the $416.7 million Telstra Data Centre, Clayton VIC.
• Launch of the $133 million Centuria Healthcare Property
Fund (CHPF) with six seed assets combined with a
successful $80 million capital raising.
• De-listing of Augusta Capital Limited from the NZX to
operate the business as a 100% subsidiary.
• Augusta Property Fund launch with NZ$55 million
Anglesea Medical Centre seed asset marking the first
post COVID-19 property fund launch for the business
(oversubscribed in nine days).
•
Asset Plus (NZX:APL) $60m equity raise provides
funding for the Munroe Lane, Albany, Auckland
development.
º Estimated value on completion NZ$140 million.
º Centuria, via Augusta Capital is seeking to increase
its Asset Plus co-investment from 18.85% to 19.99%.
• S&P Dow Jones Indices and MSCI reclassification of
CNI’s Global Industry Standard Classification (GICS) Code
from Asset Management & Custody Banks to Diversified
REITs, more appropriately reflecting CNI’s activities,
and providing investors with a transparent and efficient
means for comparing CNI to its closest peers.
• FY21 Operating EPS guidance of 10.50-11.50cps and
distribution guidance of 8.50cps.
In an increasingly uncertain global market, we remain
focused on executing CNI’s strategy and providing clear,
simple investment themes across compelling sectors.
Industrial and healthcare sectors provide opportunities
to expand our platform and we remain of the opinion that
de-centralised office markets should outperform other
office sectors.
We believe our strong balance sheet, deep distribution
network, high recurring revenues, and an expanded
investment platform all contribute to maximise Centuria’s
strength moving into FY21. Additional measures such as a
base salary freeze for FY21 and the wage and fee reductions
mentioned by our Chairman were put in place to further
insulate security holders in the event FY21 market conditions
become more subdued. I want to thank our staff and
directors for participating so willingly in these economies.
We also want to take this opportunity to thank our
extremely dedicated staff and our fellow senior managers
for their commitment throughout FY20.
In addition, we wish to thank the Chairmen and the
directors of both the Group and Responsible Entity boards
and external committees across our organisation. Their
support and guidance remain paramount to the ongoing
evolution and success of our organisation.
Finally, we sincerely thank securityholders and all our
stakeholders for your on-going support and confidence you
place in our organisation. We look forward to engaging with
you in the year ahead.
JOHN MCBAIN
Joint CEO
JASON HULJICH
Joint CEO
14 | Centuria Capital Group – Annual Report 2020
COF: NISHI, 2 PHILLIP LAW STREET, CANBERRA, ACT
Centuria Capital Group – Annual Report 2020 | 15
Key financial metrics
Exceeded
FY20 operating
earnings per
security guidance
in COVID-19
environment
FY21 guidance1
Operating EPS
10.5-11.5cps
Distribution per
security 8.5cps
CENTURIA UNLISTED: 348 EDWARD STREET, BRISBANE, QLD
1 Announced 12 August 2020
16 | Centuria Capital Group – Annual Report 2020
OPERATING NET PROFIT AFTER TAX ($m)1
OPERATING EARNINGS PER SECURITY2 (CENTS)
53.3
16.3
45.1
45.7
14.8
12.7
12.0
10.3
15.5
11.3
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY20
STATUTORY NET PROFIT AFTER TAX ($m)3
NET ASSETS PER SECURITY ($)
54.8
50.9
1.54
1.29
1.32
1.16
1.44
17.3
12.3
21.1
FY16
FY17
FY18
FY19
FY20
FY16
FY174
FY18
FY19
FY204
DISTRIBUTIONS PER SECURITY (CENTS)
8.20
9.25
9.70
7.50
5.25
TOTAL SECURITYHOLDER RETURN (%)
S&P/ASX A-REIT 300 Index (accum.)
CNI
34.4%
19.2%
24.6%
18.5%18.5%
24.3%
23.3%
9.9%
6.1%
FY16
FY17
FY18
FY19
FY20
FY16
FY17
FY18
FY19
FY205
-5.6%
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 2020:
509,998,482 (at 30 June 2019: 383,557,332)
5 Source: Moelis Australia. Based on movement in security price
from ASX closing on 1 July 2019 to ASX closing on 30 June 2020
plus distributions per security paid during the respective period(s)
assuming re-investment of all distributions. Past performance is
not a reliable indicator of future performance
-20.7%
Centuria Capital Group – Annual Report 2020 | 17
Expanding our funds management platform
ASSETS UNDER MANAGEMENT (AU$bn)
34%
CAGR1
FY17 to FY21 Current
4.9bn
3.8bn
0.4
1.1
0.9
0.6
0.8
0.5
1.4
1.1
1.0
0.9
8.8bn
1.7
0.7
0.4
1.5
1.6
2.1
0.8
6.2bn
0.6
0.4
1.6
1.3
1.4
0.9
+52%
Expansion
since FY19
9.4bn
1.8
0.7
0.4
1.5
2.1
2.1
0.8
Augusta Capital Limited
Centuria Healthcare
Unlisted Office Wholesale
Unlisted Office Retail
Centuria Industrial REIT
Centuria Office REIT
Investment Bonds
FY17
FY18
FY19
FY20
FY21 Current
1 Past performance is not indicative of future performance. CAGR calculated from 30 June 2017 to 4 August 2020
18 | Centuria Capital Group – Annual Report 2020
COF: 235 WILLIAM STREET, NORTHBRIDGE, WA
86%
FY20 operating
recurring revenue
$37.2m
FY20 performance
fee cash collected1
$32.6m
Latent unrecognised
performance fees2
1 Performance fee cash of $37.2m including
GST attributable to Centuria Zenith Fund,
Centuria 8 Central Avenue Fund 1 and
2 Wentworth Street Parramatta Fund.
FY19 cash collected of $1.4m
2 The underlying property funds managed
by Centuria Capital Group have accrued
total performance fees of $40.4m as at 30
June 2020. $7.7m of this amount has been
recognised life to date with the latent
unrecognised performance fee being
$32.6m
Centuria Capital Group – Annual Report 2020 | 19
FY20 TOTAL REVENUES UNDERPINNED
BY RECURRING REVENUES
Non-Recurring Revenue
86%
Recurring Revenues (%)
80%
73%
Recurring Revenue
FY18
FY19
FY20
CIP: TELSTRA DATA CENTRE COMPLEX, CLAYTON, VIC
20 | Centuria Capital Group – Annual Report 2020
Centuria’s dual growth strategy
Over $5.0bn of direct real estate purchases and corporate acquisitions (2017 to date)
CORPORATE
JANUARY
2017
MAY
2019
JULY
2020
$1.4bn
ACQUISITION
Manager of (ASX:TIX), (ASX:TOF)
and four unlisted funds
$620m
ACQUISITION
63% stake in
Heathley Limited
$1.8bn
ACQUISITION
Platform highly concentrated
towards office/industrial assets
REAL ESTATE
OCTOBER
2018
DECEMBER
2019
AUGUST
2020
$645m
$492m
$417m
ACQUISITION
Hines office
portfolio1
ACQUISITION
ACQUISITION
Nishi Building2 & two
Arnott’s assets3
Telstra Data Centre,
Clayton, VIC3
NISHI
1 Acquired by COF and The Lederer Group
2 Acquired by COF
3 Acquired by CIP
Centuria Capital Group – Annual Report 2020 | 21
Leveraging deep in-house
management expertise
COF: 235 WILLIAM STREET, NORTHBRIDGE, WA
CIP: ARNOTT’S, 46 ROBINSON ROAD EAST, VIRGINIA, QLD
STRONG CAPITAL TRANSACTION CAPABILITIES
$1.7bn1
Across 20
acquisitions1
2nd
4th
Largest acquirer of
Australian industrial
assets in CY20192
Largest acquirer of
Australian commercial
assets in CY20193
Includes CIP acquisitions announced on 5 August 2020. Excludes Augusta Capital acquisitions
1
2 Source: JLL
3 Source: Cushman and Wakefield
22 | Centuria Capital Group – Annual Report 2020
STRONG ACTIVE ASSET MANAGEMENT CAPABILITIES
TOP PO RT FOLIO TE NANTS 1
STATE & FEDERAL
GOVERNMENT
16.5%
0.7%
Office
Industrial
Healthcare
4.1%
3.1%
0.7%
1.9%
0.2%
1.8%
1.7%
1.5%
1.5%
1.5%
1.4%
Over
140 assets1
600 tenants1
PRUDENT MANAGEMENT AND STRONG PERFORMANCE THROUGH COVID-19
In house management
facilitates greater tenant
engagement through
period of uncertainty
91%
Average real estate
platform rent
collections April
to June2,3
All Centuria funds
have continued to
distribute through
COVID-19
1 As at 30 June 2020. Includes CIP acquisitions announced 5 August 2020. Excludes Augusta Capital Limited assets
2 Excludes Augusta Capital Limited assets
3 As COVID-19 impacts and the National Code of Conduct on Commercial Leases remain active, it is possible that further rent relief claims could be received
Centuria Capital Group – Annual Report 2020 | 23
A focus on Environmental, Social & Governance (ESG)
Centuria is committed to the
development and implementation
of environmental and social
sustainability practices across its
portfolio, while adhering to its best
practice corporate governance.
Sustainable practices and principles are vital within the
communities and markets Centuria operates. We are dedicated
to improving the environmental and social wellbeing of our
office, industrial and healthcare communities.
Centuria aims to progress a pragmatic and achievable
sustainability framework that guides our investment decisions,
asset management and stakeholder relations for the betterment
of the communities and markets we operate within.
Environmental
ENERGY: OFFICE PORTFOLIO
1,476
SOLAR PANELS
INSTALLED
537t
CO2 EMISSIONS
REDUCED
Assessing other opportunities
to implement solar initiatives
across the portfolio
4.66
AVERAGE NABERS
ENERGY RATING1
PROPOSED NEW ENE RGY EFF IC IE NT DE VE LOP ME NT FOR CENTURIA INDUSTRIAL REIT
ARTIST IMPRESSION
42 Hoepner Road, Bundamba, QLD
2.4ha site purchased in June 2020, expanding
CIP's holding within the precinct
DA in place to build c.10,200sqm modern warehouse facility
Anticipated end value of $17.5m
1 Average by value. Includes COF, fixed term funds and CDPF
24 | Centuria Capital Group – Annual Report 2020
ASSESSING OPPORTUNITIES
TO DELIVER DESIGN OUTCOMES
TO A GREEN STAR STANDARD
FOR 42 HOEPNER RD.
)
Governance
How Centuria has
managed over 50%
growth in AUM1
since FY20 start
FY20
INITIATIVES
Integration of
Centuria Heathley
(now Centuria Healthcare)
Vision 2020
launched – integrated
property management
/ finance software
to support platform
efficiency & scale
System now in place to
contribute towards strong
platform growth
Information
Communication
Technology and
Cyber Security
Committee
Continued focus
on Non-Financial
Risk Committee
reporting directly
to Board
Established Centuria
Brisbane office
to provide active
asset management
for increased QLD
portfolio
Restructured
Centuria Responsible
Entity Boards
announced 30 July
2020 – broadening
experience and
diversity
CURRENT
FOCUS
Integration of Augusta
Capital Limited
Established solid
relationships with key
management personnel.
Focused on integration
into Centuria as COVID-19
impacts unwind
Continued
enhancement of
governance, systems
and processes to
support further
platform expansion
1 Centuria AUM as at 30 June 2020, Augusta AUM as at 31 March 2020. Includes CIP acquisitions announced 5 August 2020
Centuria Capital Group – Annual Report 2020 | 25
Social
SUPPORTING FOODBANK WITH
4,500SQM OF FREE STORAGE
FOR OVERFLOW DONATIONS
TOWARD THE AUSTRALIAN
BUSHFIRE CRISIS
St Lucy’s School: On-going fundraising and volunteer
support provided for students with disabilities
Member of the
Diversity Council
of Australia
Supporting
International
Women’s Day
CENTURIA HEALTHCARE:
$0.7BN OF SPECIALIST
HEALTHCARE REAL ESTATE
FOCUSED ON COST-
EFFECTIVE MODELS OF
CARE, STRONG ALIGNMENT
TO REPUTABLE OPERATORS
CENTURIA HEALTHCARE:
ST JOHN OF GOD MURDOCH HOSPITAL
Partnered with Group Homes Australia (GHA) to develop
and construct homes for people living with dementia
Social and affordable housing developments: Providing affordable homes for key
workers and disadvantaged people as part of Centuria’s commitment to society
316 MAITLAND ROAD, MAYFIELD, NSW
316 MAITLAND ROAD, MAYFIELD, NSW
FOUR PROJECTS,
190 DWELLINGS
45 PENDLEBURY ROAD, CARDIFF, NSW
23-25 YOUNG ST, WEST GOSFORD, NSW
357-359 MANN ST, NORTH GOSFORD, NSW
• Construction for all projects
progressing in-line with
expectations
• Anticipating project practical
completions in early to mid 2021
• Major institutional funding in place
PARTNERING WITH COMPASS
HOUSING (TIER 1 SERVICE
PROVIDER) AND TETRIS CAPITAL
• CNI equity contribution circa $20m
• Centuria: Developer
• Compass: Community housing
provider (Tenant)
• Tetris: Upfront take out party
Centuria Capital Group – Annual Report 2020 | 27
Board of directors
Garry Charny
CHAIRMAN
John McBain
EXECUTIVE DIRECTOR
AND JOINT CEO
Jason Huljich
EXECUTIVE DIRECTOR
AND JOINT CEO
Joint CEO John McBain has founded four
real estate entities including Hanover
Property Group Ltd, Waltus Investments,
Century Funds Management and Centuria
Capital, the latter two with Joint CEO,
Jason Huljich. He has 40 years real
estate experience across Australian, New
Zealand and British markets, focused on
the industrial and office sectors.
John is chiefly responsible for the
company’s macro and long-term strategic
direction, mergers and acquisitions,
corporate governance and he jointly
steers the Senior Executive Committee.
Since 2007, he has helped integrate
several businesses into the company’s
fold, including a former 360 Capital Group
listed platform (2016), a 63% interest
in Heathley Limited (2019) and, more
recently, the full takeover of Augusta
Capital Limited (2020).
John holds a Diploma in Urban Valuation
(University of Auckland).
Joint CEO Jason Huljich’s 24-year real
estate career spans the Australian
commercial and industrial real estate
sectors. He co-founded Centuria Capital,
with Joint CEO, John McBain.
Jason is chiefly responsible for the
company’s real estate portfolio and funds
management operations including the
listed Centuria Industrial REIT (ASX: CIP)
and Centurial Office REIT (ASX: COF),
as well as Centuria’s 76 unlisted funds.
Several unlisted funds regularly feature
in the Top 10 Performing Core Funds in
the Property Council of Australia / MSCI
Australia Unlisted Retail Quarterly Property
Funds Index.
Jason’s career began after graduating with
a Bachelor of Commerce (Commercial Law
major) from the University of Auckland. He
is a Property Funds Association of Australia
(PFA) Past President and National Executive
Committee Member. The PFA is the peak
industry body representing the $125 billion
direct property investment industry.
Garry was appointed as Chairman of
the Centuria Capital Group Board on 30
March 2016. He has significant board-
level experience with listed and unlisted
companies across a diverse range of
sectors including property (Trafalgar
Corporate, which became 360 Capital,
and Manboom); retail (Apparel Group,
Sportscraft, and Saba); technology
(General Electric EcXpress and 1st
Available) and media (Boost Media,
Macquarie Radio, and April Entertainment).
Currently, he is Managing Director
and founder of Wolseley Corporate,
an Australian corporate advisory and
investment house that consults on local
and international transactions in the
USA, United Kingdom, Malaysia, India and
throughout South-East Asia. Wolseley
specialises in mergers and acquisitions,
strategic corporate advice and contentious
matter resolution.
Garry is also Chairman of Spotted Turquoise
Films, an international Film and Television
Company based in Sydney and Los Angeles,
and Chairman of Shero Investments, a
Sydney-based investment company.
Previously, he was co-founder and
Chairman of Boost Media International, an
international media advisory business with
offices in Sydney, New York, Toronto, Kuala
Lumpur and Delhi. He was also President
of Boost Media LLC (USA).
From 1983-1995, Garry practised as
a Barrister-at-Law at the Sydney Bar
specialising in corporate, commercial,
equity and media. He was an Adjunct
Lecturer in Law at the University of NSW.
28 | Centuria Capital Group – Annual Report 2020
Peter Done
John Slater
Nicholas Collishaw
Susan Wheeldon
INDEPENDENT
NON-EXECUTIVE DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
NON-EXECUTIVE
DIRECTOR
INDEPENDENT
NON-EXECUTIVE DIRECTOR
John joined the Centuria Capital
Group Board as an Independent
Non-Executive Director in May
2013 having previously been
an adviser to the Centuria Life
Friendly Society Investment
Committee from 2011. He brings
a wealth of financial service
experience to the Board.
Between 1989 and 1999,
John was a senior executive
in KPMG’s Financial Services
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, which sold in 2016.
Peter joined the Centuria
Capital Group Board as an
Independent Non-Executive
Director in November 2007. He
is also Chairman of Centuria
Capital Group’s Audit, Risk
Management and Compliance
Committee.
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.
Peter hails from a 38-year
career at KPMG. From 1979,
he held the position of
Partner until his retirement in
2006. During his 27 years as
Partner, Peter was the lead
audit partner for many clients,
including those involved in
property development, primary
production and television and
film production and distribution.
Peter holds a Bachelor of
Commerce (Accounting)
from the University of New
South Wales and is a Fellow
of Chartered Accountants
Australia and New Zealand.
Nicholas has been a Non-
Executive Director of Centuria
Capital Group since October
2017. Previously he was
Centuria Capital’s CEO of Listed
Property Funds, joining in May
2013. Nicholas brings to the
Board more than 30 years
experience across domestic
and international real estate
and investment markets.
Between 2005 and 2012, he
was Mirvac Group’s CEO and
Managing Director, responsible
for successfully guiding the
real estate development and
investment company through
the Global Financial Crisis
and implementing sustained
growth strategies.
Nicholas has held senior
positions with James Fielding
Group, Paladin Australia,
Schroders Australia and
Deutsche Asset Management.
He has extensive experience
in all major real estate markets
in Australia and investment
markets in the United States,
United Kingdom and the
Middle East.
Nicholas is currently
Executive Director and Co-
Founder of Lincoln Place,
an Australian fund manager
specialising in the retirement
sector, as well as Chairman
of Redcape Hotel Group.
Susan joined the Centuria
Capital Group Board as an
Independent Non-Executive
Director in August 2016. She
brings extensive experience
across international commercial
markets within ICT, real estate,
legal, aviation and online retail
sectors.
Currently, Susan is Country
Manager for Australia and New
Zealand at Airbnb. Previously,
she served in a number of roles,
including Head of Government
& Performance and Head of
Agency at Google, working
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.
During her career Susan has
held a number of senior roles
in Australia and the United
Kingdom across a diverse range
of industries including global
law firms DLA Piper and King &
Wood Mallesons, working with
the Virgin Australia & Virgin
Atlantic airline brands, as Vice
President of Groupon, and as
Head of Brand & Retail at AMP
Capital Shopping Centres.
She holds an MBA from the
Australian Graduate School of
Management (AGSM) and is a
member of Australian Institute
of Company Directors.
Centuria Capital Group – Annual Report 2020 | 29
CIP: 14-17 DANSU COURT, HALLAM, VIC
30 | Centuria Capital Group – Annual Report 2020
Senior Executive
John McBain
EXECUTIVE DIRECTOR
AND JOINT CEO
Jason Huljich
EXECUTIVE DIRECTOR
AND JOINT CEO
Simon Holt
CHIEF FINANCIAL
OFFICER
Joint CEO John McBain’s 40-year real estate
career spans Australian, New Zealand and
British markets, focused on the industrial and
office sectors. He is an Executive Director of
Centuria Capital Group, Centuria Life Limited,
Centuria Healthcare Pty Limited, Augusta
Capital Limited, Augusta Funds Management
Limited and a Director of Asset Plus Limited
(NZX: APL).
John is chiefly responsible for the company’s
corporate governance, macro and long-
term strategic direction, mergers and
acquisitions, and he jointly steers the Senior
Executive Committee. The Finance, Company
Secretarial, Compliance, Investor Relations,
Marketing, Communications and Investment
Bonds teams report directly to John.
Since 2007, John has helped integrate
several businesses into the company’s fold,
including a former 360 Capital Group listed
platform (2016), a 63% interest in Heathley
Limited (2019) and, more recently, the full
takeover of Augusta Capital Limited (2020).
His career began after graduating with
a qualification in property valuation from
The University of Auckland. He worked in
commercial development before relocating
to London, as part of a UK-NZ joint venture,
responsible for development and investment
projects. In the early 1990s, John emigrated
to Sydney and founded Hanover Property
Group, which resuscitated distressed
commercial assets.
This success led to establishing property
syndicator, Waltus Australia, in a joint
venture with Waltus New Zealand. In 1999,
John and Jason co-founded Century Funds
Management, which sold to the Over Fifty
Group in 2006. In 2007, they regained
control of the entity, rebranded it as Centuria
Capital Limited and building it into a leading
Australian listed property funds manager with
A$9.4 billion of assets under management.
Joint CEO Jason Huljich’s 24-year real estate
career spans the Australian commercial and
industrial real estate sectors. He co-founded
Centuria Capital with Joint CEO, John McBain.
He is an Executive Director of Centuria
Capital Group, Centuria Life Limited,
Centuria Healthcare Pty Limited, Centuria
Healthcare Asset Management Limited,
Augusta Capital Limited and Augusta
Funds Management Limited.
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 Joint CEOs, is also tasked with a
specific focus on expanding the parent
company, Centuria Capital.
Jason shares the helm of Centuria with John,
collectively overseeing $9.4 billion of assets
under management and 180 staff throughout
Australia, New Zealand and Philippines.
He is chiefly responsible for the company’s
real estate portfolio and funds management
operations including the listed Centuria
Industrial REIT (ASX: CIP) and Centurial
Office REIT (ASX: COF), as well as Centuria’s
76 unlisted funds. Several unlisted funds
regularly feature in the Top 10 Performing
Core Funds in the Property Council of
Australia / MSCI Australia Unlisted Retail
Quarterly Property Funds Index.
Since Centuria was established, Jason has
been pivotal in raising over $2.5 billion for
the listed and unlisted vehicles. He has been
central to positioning Centuria as Australia’s
fourth largest external manager. CIP is part
of the S&P/ASX 200 Index and COF and
Centuria Capital Group (CNI) are part of the
S&P/ ASX 300 Index.
Jason has a hands-on approach to the real
estate operations throughout the company’s
platform. Transactions, Development,
Funds Management, Distribution and Asset
Management teams all report directly to him.
Jason’s career began after graduating with
a Bachelor of Commerce (Commercial Law
major) from the University of Auckland. He
is a Property Funds Association of Australia
(PFA)’s Past President and National Executive
Committee Member. The PFA is the peak
industry body representing the $125 billion
direct property investment industry.
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.
Centuria Capital Group – Annual Report 2020 | 31
Senior Executive
Anna Kovarik
GROUP CHIEF RISK OFFICER
AND COMPANY SECRETARY
Ross Lees
HEAD OF FUNDS
MANAGEMENT
Andrew Essey
HEAD OF
TRANSACTIONS
Anna joined Centuria in July 2018 in the
role of General Counsel and Company
Secretary. In July 2020 Anna was promoted
to Group Chief Risk Officer 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.
Ross is the Head of Centuria’s Real
Estate Funds Management business,
responsible for both listed and unlisted
property funds, which include two ASX-
listed REITs as well as 22 unlisted funds,
worth just under $7 billion.
Ross joined the company in 2017 as
Centuria Industrial REIT (ASX:CIP) Fund
Manager, transforming the REIT into
Australia’s largest domestic pure play
industrial REIT.
He brings more than 16 years of industrial
investment management experience to
Centuria, having held senior transactional
and portfolio management positions for
peers including Dexus, LOGOS Group
and Stockland.
Ross holds a Master of Applied Finance
from Macquarie University and Bachelor of
Business (Property Economics) from UWS.
Andrew joined Centuria Capital Group in
early 2013, and has held senior positions
including National Leasing Manager, Fund
Manager and, most recently, Head of
Transactions.
Andrew is responsible for originating and
managing the Group’s property transactions
and overseeing of the acquisitions team.
He has transacted more than $4 billion of
office and industrial real estate on behalf
of Centuria.
Prior to joining Centuria, he was a Director
for DTZ’s Sydney North Shore Agency,
focused on leasing and sales within the
North Shore industrial and office park
markets. Throughout his six years with
DTZ, Andrew directly transacted more than
180 deals on behalf of institutional and
private investors.
Andrew holds a Bachelor of Business
Administration from Radford University,
Virginia, USA with a Major in marketing
and a Minor in economics.
32 | Centuria Capital Group – Annual Report 2020
André Bali
HEAD OF
DEVELOPMENT
Victor Georos
HEAD OF PORTFOLIO
AND ASSET MANAGEMENT
Michael Blake
HEAD OF
CENTURIA LIFE
Since 2007, André has overseen
all Centuria’s project and property
development functions, including
development and debt funds. He is
responsible for both passive and active
management of Centuria and Centuria
Healthcare’s listed and unlisted 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,
health, residential, industrial and retail.
Prior to Centuria, André founded and
operated a specialised property consulting
and advisory company. His experience
also includes several senior positions
in a number of property development
companies.
André holds an Honours Degree in
Applied Science from UNSW, Masters of
Commerce (Land Economics) from UWS,
Grad Cert of Finance from AGSM, AAPI and
held non-executive roles on several not-
for-profit organisations including Habitat
for Humanity.
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 LendLease,
including Head of Industrial & Business
Parks at GPT.
Victor holds a Bachelor of Land Economy
and a Graduate Diploma of Finance and
Investment (FINSIA).
With more than three decades in the
wealth management industry across
blue-chip Australian and multinational
corporations, Michael Blake joined
Centuria in 2016 and is responsible for
investment bond products provided by
Centuria Life.
He is chiefly responsible for Centuria
Life’s P&L, strategic direction, funds
under management growth, product
development and directly reports
to the Centuria Life Limited (CLL)
Board. He manages a team of five in
addition to working with Centuria’s
distribution team to raise the profile
and investments in Centuria LifeGoals
Investment Bond products.
Prior to his current position, Michael
was pivotal in launching the unlisted
Centuria Diversified Property Fund.
Michael joined Centuria after 12 years
with a prominent international real
estate investor and manager, where
he secured several industry awards
including Fund Manager of the Year and
Direct Property and A-REIT of the Year.
Prior to this, he held various National
Sales Manager and State Manager roles
for financial institutions across a 21-year
period.
He is a member of the Property Funds
Association (PFA). Michael holds a
Bachelor of Financial Administration
from the University of New England,
a Diploma of Financial Planning
from the Royal Melbourne Institute
of Technology (RMIT), a Master
of Business Administration from
Macquarie University, and is a graduate
of the Australian Institute of Company
Directors.
Centuria Capital Group – Annual Report 2020 | 33
34 | Centuria Capital Group – Annual Report 2020
Directors’ Report
For the year ended 30 June 2020
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 2020 and the
auditor’s report thereon.
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’.
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 of Centuria Capital Group on 30 March
2016. Garry is also Chairman of Centuria Life Limited and Over
Fifty Guardian Friendly Society Limited.
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 significant board-level experience in 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: 369,676
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 at 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
Special responsibilities
Chairman of the Audit, Risk Management and Compliance Committee
Member of the Nomination and Remuneration Committee
Interests in CNI
Ordinary stapled securities: 1,328,982
MR JOHN R. SLATER, DIP.FS (FP), F FIN.
Independent Non-Executive Director
Experience and expertise
John was appointed to the Board on 22 May 2013 having
previously been an adviser to the Centuria Life Friendly
Society Investment Committee from 2011. He brings a wealth
of financial service experience to the Board.
Between 1989 and 1999, John was a senior executive in KPMG
Financial Services 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, which he sold in 2016.
Other directorships
None
Special responsibilities
Member of the Audit, Risk Management and Compliance Committee
Member of the Nomination and Remuneration Committee
Interests in CNI
Ordinary stapled securities: 3,038,570
Centuria Capital Group – Annual Report 2020 | 35
MS SUSAN WHEELDON, MBA.
Independent Non-Executive Director
MR JOHN E. MCBAIN, DIP. URBAN VALUATION
Executive Director and Joint Chief Executive Officer
Experience and expertise
Susan was appointed to the Board on 31 August 2016.
Susan is Country Manager for Australia and New Zealand at
Airbnb. Previously, she served in a number of roles, including
Head of Government & Performance and Head of Agency at
Google, working 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
Director of Nimble Australia
Special responsibilities
Member of the Conflicts Committee
Interests in CNI
Ordinary stapled securities: Nil
MR NICHOLAS R. COLLISHAW, SAFIN, FAAPI, FRICS.
Non-Executive Director
Experience and expertise
Nicholas has been a Non-Executive Director of Centuria Capital
Group since October 2017. Previously he was Centuria Capital’s
CEO of Listed Property Funds, joining in May 2013. Nicholas
brings to the Board more than 30 years experience across
domestic and international real estate and investment markets.
Between 2005 and 2012, he was Mirvac Group’s CEO and
Managing Director, responsible for successfully guiding the real
estate development and investment company through the Global
Financial Crisis and implementing sustained growth strategies.
Nicholas 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: 3,861,523
Performance rights granted: 302,561
36 | Centuria Capital Group – Annual Report 2020
Experience and expertise
Joint CEO John McBain has founded four real estate entities
including Hanover Property Group Ltd, Waltus Investments,
Century Funds Management and Centuria Capital, the latter
two with Joint CEO, Jason Huljich. He has 40 years real estate
experience across Australian, New Zealand and British
markets, focused on the industrial and office sectors.
John is chiefly responsible for the company’s macro and
long-term strategic direction, mergers and acquisitions,
corporate governance and he jointly steers the Senior
Executive Committee. Since 2007, he has helped integrate
several businesses into the company’s fold, including a
former 360 Capital Group listed platform (2016), a 63%
interest in Heathley Limited (2019) and, more recently, the
full takeover of Augusta Capital Limited (2020).
John holds a Diploma in Urban Valuation (University of
Auckland).
Other directorships
None
Special responsibilities
Joint Chief Executive Officer
Interests in CNI
Ordinary stapled securities: 6,441,053
Performance rights granted: 1,891,347
MR JASON C. HULJICH, B. COMM.
Executive Director and Joint Chief Executive Officer
Experience and expertise
Joint CEO Jason Huljich’s 24-year real estate career spans
the Australian commercial and industrial real estate sectors.
He co-founded Centuria Capital, with Joint CEO, John McBain.
Jason is chiefly responsible for the company’s real estate
portfolio and funds management operations including the
listed Centuria Industrial REIT (ASX: CIP) and Centurial
Office REIT (ASX: COF), as well as Centuria’s 76 unlisted
funds. Several unlisted funds regularly feature in the Top 10
Performing Core Funds in the Property Council of Australia /
MSCI Australia Unlisted Retail Quarterly Property Funds Index.
Jason’s career began after graduating with a Bachelor of
Commerce (Commercial Law major) from the University of
Auckland. He is a Property Funds Association of Australia
(PFA) Past President and National Executive Committee
Member. The PFA is the peak industry body representing
the $125 billion direct property investment industry.
Other directorships
None
Special responsibilities
Joint Chief Executive Officer
Interests in CNI
Ordinary stapled securities: 3,718,114
Performance rights granted: 1,571,539
CIP: 1 ASHBURN ROAD, BUNDAMBA, QLD
Centuria Capital Group – Annual Report 2020 | 37
Directors’ Report
For the year ended 30 June 2020
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).
Director
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon
Mr Nicholas R. Collishaw
Mr John E. McBain
Mr Jason C. Huljich
Board
Meetings
COVID-19 Board
Briefings
Audit, Risk, Management
& Compliance
Committee Meetings
Nomination &
Remuneration
Committee Meetings
Conflicts
Committee
Meetings
A
27
25
23
24
27
27
27
B
27
27
27
27
27
27
27
A
8
8
8
7
8
8
8
B
8
8
8
8
8
8
8
A
6
5
3
#
#
#
#
B
6
6
6
#
#
#
#
A
6
6
6
#
#
#
#
B
6
6
6
#
#
#
#
A
9
#
#
8
#
#
#
B
9
#
#
9
#
#
#
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
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Anna Kovarik was appointed to the position of Company
Secretary on 5 July 2018.
Significant changes in the state of affairs of the Group during
the financial year were as follows:
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 United Kingdom and New
South Wales 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.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial
year were the marketing and management of investment
products including direct interest in property funds, friendly
society investment bonds and other liquid investments.
• Contributed equity attributable to Centuria Capital Group
increased by $251,291,000 to $722,893,000 reflecting
equity raisings undertaken during the year. This included
stapled securities issued as partial consideration for the
takeover of Augusta Capital Limited (‘Augusta’) on 8 July
2020 and the vesting of rights under the Executive Incentive
Plan. Details of changes in contributed equity are disclosed
in Note C10 to the consolidated financial statements.
• In October 2019, the Fund repaid $35,000,000 of the
7.0% fixed rate secured notes.
• The Group decreased its equity accounted stakes in
Centuria Office REIT (‘COF’) and Centuria Industrial REIT
(‘CIP’) to below 20% and these investments have since
been accounted for as financial assets carried at fair value
through profit or loss.
• The Group acquired a 63.06% economic interest (50%
voting interest) in Heathley Limited, now known as Centuria
Healthcare Pty Ltd (Centuria Healthcare). The Group was
deemed to attain control and has consolidated Centuria
Healthcare commencing from 19 July 2019.
• On the final day of the financial year the Group had
received commitments to acquire 63.92% of the total
Augusta shares and had stated its intention to declare
the offer unconditional. As a result, the Group has been
deemed to attain control over Augusta on the final day
of the financial year on 30 June 2020. The offer was
subsequently declared unconditional on 8 July 2020
at which time the Group’s shareholdings in Augusta
had reached 65.86%. The offer consisted of a cash
component of NZ$0.22 and a scrip component of 0.392
Centuria stapled securities per Augusta share.
38 | Centuria Capital Group – Annual Report 2020
OPERATING AND FINANCIAL REVIEW
The current year results have been impacted by the onset
of the COVID-19 pandemic. The Group manages a variety of
investment products including listed and unlisted property
funds with direct interests in commercial properties.
The various income sources of the Group including
management fees, performance fees and transaction fees are
primarily dependent on the Group’s Assets Under Management
(AUM) which are impacted by, amongst other things, valuations
of underlying investment properties and transaction volumes.
With the onset of the pandemic resulting in a lack of relevant
transactional evidence in the marketplace, real estate valuations
are currently subject to significant uncertainty. This has had an
impact on the Group’s real estate portfolio and, in particular, the
commercial office properties managed by the Group.
Valuation techniques relied upon in assessing the fair value of
investment properties have also been exposed to uncertainty
around underlying assumptions, including the expected impact of
the pandemic on vacancy rates, market rents and lease incentives.
In addition to the impact of these uncertainties on the Group’s
management fees, performance fees and transaction fees, the
Group also holds significant co-investment stakes in funds
managed by its subsidiaries which directly own commercial
real estate. The returns on these investments have been
similarly impacted by uncertainties in valuations and rental
collections as well as broader macro-economic factors
including volatility in equity capital markets.
In response to these emerging uncertainties, on 26 March
2020 the Group revised its FY20 forecast operating net profit
after tax (‘NPAT’) to 11.5 cents per security (‘cps’), down from
its previous expectation of 12.5 cps.
Subsequently, on 7 April 2020, the government announced a
National Cabinet Mandatory Code of Conduct (‘the Code’). The
Code applies to all tenancies suffering financial stress or hardship
as a result of the COVID-19 pandemic. The Group has complied
with the Code across all its managed property funds and worked
with tenants to provide appropriate rent relief packages.
Whilst the situation continues to evolve, the Group is now
pleased to report an increase in its final 30 June 2020
Operating NPAT to 12.0 cps. This represents an increase of
0.5 cps compared with its most recent guidance of 11.5 cents
announced in March 2020.
The Group recorded a consolidated statutory NPAT for the
year of $22,087,000 (2019: $50,941,000). Statutory NPAT
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
$53,253,000 (2019: $45,706,000). 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 NPAT includes a number of items that are not
considered operating in nature, the table below provides a
reconciliation from statutory profit to operating profit.
Reconciliation of statutory
profit to operating profit
2020
$’000
2019
$’000
Statutory profit after tax
22,087
50,941
Statutory earnings per security
(EPS) (cents)
4.7
14.2
Less non-operating items:
Unrealised loss/(gain) on fair value
of investments and derivatives
Transaction and other costs
Impairment charges in relation
to seed capital
Loss attributable to controlled
property funds
Eliminations between the operating
and non-operating segment
Share of equity accounted net loss/
(profit) in excess of distributions received
Write-off of capitalised borrowing costs
in relation to repayment of $35.0m in
7.0% fixed rate secured notes
Tax impact of above non-operating
adjustments
Operating profit after tax
34,837
6,208
(4,572)
6,625
550
-
1,323
7,390
(3,347)
(5,256)
(1,486)
(8,433)
1,229
-
(8,148)
53,253
(989)
45,706
Operating EPS (cents)
12.0
12.7
A summary of the Group’s operating segments is provided in
Note A7 of the Financial Report. The Operating NPAT for the
Group comprises 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.
Operating profit
after tax $’000
Segment
2020
2019
Increase/
(Decrease)
$’000
Increase/
(Decrease)
% Highlights
Property Funds
Management
Investment Bonds
Management
37,518
33,140
4,378
13
(A)
1,710
2,446
(736)
Co-Investments
19,166 14,505
4,661
Corporate
(5,141)
(4,385)
(756)
Operating profit
after tax
53,253 45,706
(B)
(C)
(30)
32
(17)
A detailed Segment Profit and Loss as well as a detailed Segment
Balance Sheet are outlined in Notes B1 and C1, respectively.
Centuria Capital Group – Annual Report 2020 | 39
Directors’ Report
For the year ended 30 June 2020
Operational highlights for the key segments were as follows:
EARNINGS PER SECURITY (EPS)
2020
Operating
2020
Statutory
2019
Operating
2019
Statutory
Basic EPS (cents/security)
Diluted EPS (cents/security)
12.0
11.6
4.7
4.6
12.7
11.9
14.2
13.2
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions paid or declared by the Group
during the current financial year were:
Cents per
security
Total
amount
$’000
Date paid
Dividends/distributions
paid during the year
Final 2019 dividend
(100% franked)
Final 2019 Trust distribution
Interim 2020 dividend
(100% franked)
Interim 2020 Trust distribution
Dividends/distributions
declared during the year
Final 2020 dividend
(100% franked)
Final 2020 Trust distribution
0.50
4.50
1.70
2.80
1,918 16 Aug 2019
17,262 16 Aug 2019
7,630 31 Jan 2020
12,567
31 Jan 2020
1.80
3.40
8,690
8 Jul 2020
16,420
8 Jul 2020
Total amount
14.70
64,487
(a) Property Funds Management
For the year ended 30 June 2020, excluding the after
tax impact of performance fees, the Property Funds
Management segment profit increased by $5,087,000
or 29% reflecting the growth in AUM.
For the year ended 30 June 2020, Property Funds
Management operating NPAT $37,518,000 was higher than
the prior year ending 30 June 2019 by $4,378,000 primarily
due to the impact of acquisitions in the first half of the
financial year.
The increase in AUM was primarily attributable to $1.2 Billion
in organic acquisitions with 9 assets valued at $935 million
acquired in listed vehicles COF and CIP and the remainder
of the increase relating to acquisitions in single asset funds
and Healthcare properties.
(b) Investment Bonds Management
For the year ended 30 June 2020, the Investment Bonds
Management segment’s operating NPAT decreased by
$736,000 to $1,710,000 primarily due to the impacts of
COVID-19 on investment markets impacting AUM of Benefit
Funds and consequently the management fees received.
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 2020, the Co-Investments
segment operating NPAT increased by $4,661,000. This
was primarily due to additional units acquired during the
year in COF and CIP, as well as lower financing costs due to
the repayment of $35,000,000 in 7.0% fixed rate secured
corporate notes in October 2019.
The Group’s ownership stakes in COF and CIP decreased
to 17.04% (2019: 20.76%) and 17.28% (2019: 24.15%),
respectively, due to reduced participation in equity raises
during the year. As a result, the Group’s accounting
treatment of these investments changed from equity
accounted investments to financial assets held at fair value.
The operating profit after tax for the Co-Investments
segment represents the distributions and returns generated
from investment stakes held less applicable financing costs.
40 | Centuria Capital Group – Annual Report 2020
EVENTS SUBSEQUENT TO THE REPORTING DATE
INDEMNIFICATION OF OFFICERS AND AUDITORS
In addition to the issuance of 27,021,424 stapled securities
in the Group which were recognised as at 30 June 2020
in respect of the acquisition of Augusta, the Group has
subsequently issued a further 22,405,357 stapled securities
for the additional Augusta shares that have been acquired to
the date of this report. The Group’s ownership of Augusta at
the date of this report has increased to 96.4%.
Since balance date, the COVID-19 pandemic has continued
to evolve with potential impacts on specific areas of
judgement applied in preparing these financial statements.
Victoria has reported increasing numbers of COVID-19
cases since early July 2020 and the Victorian government has
subsequently announced a stage-4 lock-down for Melbourne
commencing from 2 August 2020 to 13 September 2020.
On 21 July 2020 the Government announced it is extending
the JobKeeper Payment for a further six months until end
of March 2021 to support businesses who continue to be
significantly impacted by COVID-19.
The Group has continued to re-evaluate the potential impacts
of the pandemic on significant inputs and key areas of
judgement as outlined in Note A2. Based on these evaluations,
the Group has determined there are no material events which
would give rise to an adjustment.
Since balance date, CIP has announced unconditional
acquisitions amounting to $447 million. Included in these
acquisitions is the sale and lease back of the Telstra Data
Centre in Clayton, Victoria.
Other than the above, there has not arisen in the interval
between 30 June 2020 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 periods.
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.
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 an officer or auditor.
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 50.
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.
Centuria Capital Group – Annual Report 2020 | 41
Directors’ Report
For the year ended 30 June 2020
AUDITED REMUNERATION REPORT
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 ended 30 June 2020.
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
Mr Garry S. Charny
Role
Independent Non-Executive
Director and Chairman
Mr Peter J. Done
Independent Non-Executive Director
Mr John R. Slater
Independent Non-Executive Director
Ms Susan Wheeldon
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
• Ensuring the overall cost of remuneration is managed and
linked to operating performance of the Group; 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.
Under the remuneration policy, senior management’s
remuneration includes a fixed component as well as 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 Total Securityholder Return (TSR) and
Key Strategic Goals hurdles being met. The remuneration of
senior management is directly aligned with 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.
Mr Simon W. Holt
Chief Financial Officer
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.
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;
42 | Centuria Capital Group – Annual Report 2020
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.
JOINT CEOS
49%
35%
16%
The Group’s financial targets fall into the following categories:
• Meeting or Exceeding Budgeted Operating NPAT;
• Growth in Net Group Assets Under Management (AUM);
• Management and control of Group overheads in line with
size and scale of operations;
• Integration and growth of newly acquired businesses;
• Execution and delivery of Growth targets through Mergers
& Acquisitions; and
• Delivery of minimum performance fees.
The Group’s non-financial targets fall into the following categories:
• Identification and Management of financial and non-
financial risks;
• Development of a strong risk management culture;
• Identification, reporting and resolution of conflicts of
interest between various stakeholders;
OTHER SENIOR
MANAGEMENT
54%
33%
13%
• Development and facilitation of new distribution channels;
0%
20%
40%
60%
80%
100%
• Ensuring high employee engagement;
• Delivery of appropriate training and development
opportunities for staff; and
FIXED REMUNERATION
VARIABLE REMUNERATION (STI)
VARIABLE REMUNERATION (LTI)
• Ensuring continued growth in financial coverage and
(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 accountable
for meeting those targets. The potential STI available is set at
a level to provide sufficient incentive for senior management
to achieve operational targets and such that the cost to the
Group is reasonable in the circumstances.
media exposure.
At the Board’s absolute discretion, the Group’s Senior
Management 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
(2019: nil) STI ordinary securities to the Group’s Senior
Management in addition to cash bonuses provided.
(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 LTI 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).
Centuria Capital Group – Annual Report 2020 | 43
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
30 June
2020
30 June
2019
30 June
2018
30 June
2017
30 June
2016
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
21,105 50,795 54,765
17,323
12,303
53,253 45,706 45,087
15,489
11,344
$1.77
$1.40
$1.23
$1.05
$0.93
$1.79
$1.77
$1.40
$1.23
$1.05
Interim dividend
4.5cps 4.25cps
4.1cps
2.3cps 2.25cps
Final dividend
5.2cps 5.0cps
4.1cps
5.2cps 3.0cps
Special non-cash
dividend
-
7.8cps
- 17.27cps
-
Statutory basic
earnings per Centuria
Capital Group security 4.7cps 14.2cps 19.8cps
Operating basic
earnings per Centuria
Capital Group security 12.0cps 12.7cps 16.3cps
11.5cps 15.8cps
10.3cps 14.8cps
Directors’ Report
For the year ended 30 June 2020
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:
Unvested
rights
- Growth in property and friendly society funds
under management (“FUM Hurdle”); and
- Absolute Total Securityholder Return
Performance (“Absolute TSR Hurdle”).
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
5
6
7
1 November 2017
1 July 2017 to 30 June 2020
1 February 2019
1 July 2018 to 30 June 2021
18 October 2019
1 July 2019 to 30 June 2022
44 | Centuria Capital Group – Annual Report 2020
FUM Hurdle
The percentage of Rights subject to the growth in FUM Hurdle that vest, if any, will be determined as follows:
Tranche 5
(25% of rights granted)
Tranche 6
(25% of rights granted)
Tranche 7
(25% of rights granted)
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
Maximum %
or above
Between
threshold %
and maximum %
20% or greater
100%
20% or greater
100%
20% or greater
100%
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%
More than 10%,
less than 20%
Pro-rata vesting
between 25%
to 100%
Threshold %
10%
25%
10%
25%
10%
25%
Less than the
threshold %
Less than 10%
0%
Less than 10%
0%
Less than 10%
0%
Absolute TSR Hurdle
The percentage of Rights subject to the Absolute TSR Hurdle that vest, if any, will be determined as follows:
Tranche 5
(75% of rights granted)
Tranche 6
(75% of rights granted)
Tranche 7
(75% of rights granted)
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
Maximum %
or above
Between
threshold %
and maximum %
15% or greater
100%
15% or greater
100%
20% or greater
100%
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%
More than 10%
less than 15%
Pro-rata vesting
between 25%
to 100%
Threshold %
10%
25%
10%
25%
10%
25%
Less than the
threshold %
Less than 10%
0%
Less than 10%
0%
Less than 10%
0%
Centuria Capital Group – Annual Report 2020 | 45
Directors’ Report
For the year ended 30 June 2020
Rights Granted
The following Rights were granted to senior management:
Key management personnel
No. of Rights granted
Vesting conditions
Fair value at Grant Date
Tranche 5 (grant date of 1 November 2017) (i)
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Total
125,762
377,287
79,055
237,165
43,834
131,502
994,605
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
(i) The performance objectives for performance rights granted under Tranche 5 were met in full by 30 June 2020. As a result, these rights will vest on 13 August 2020.
Key management personnel
No. of Rights granted
Vesting conditions
Tranche 6 (grant date of 1 February 2019)
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Total
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
Key management personnel
No. of Rights granted
Vesting conditions
Tranche 7
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Total
(i) Grant date of 25 November 2019.
(ii) Grant date of 18 October 2019.
187,500 (i)
562,500 (i)
187,500 (i)
562,500 (i)
69,514 (ii)
208,542 (ii)
1,778,056
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
FUM Growth Hurdle
Absolute TSR Growth Hurdle
Fair value at
Grant Date
$1.11
$0.19
$1.11
$0.19
$1.11
$0.19
Fair value at
Grant Date
$1.87
$0.79
$1.87
$0.79
$1.87
$0.79
46 | Centuria Capital Group – Annual Report 2020
Note (i)
Total
Statutory remuneration table
The following table discloses total remuneration of executive directors and senior management in
accordance with the Corporations Act 2001:
Short-term
employee benefits
Post
employment
benefits
Other
long-term
benefits
Share-
based
payments
Year
Salaries
($)
Bonus
($)
Super-
annuation
($)
Long service
leave
($)
$
Total
$
Mr John E. McBain
2020
1,310,732
945,000
22,397
3,151
466,609
2,747,889
2019
1,179,469
900,000
20,531
121,136
367,324
2,588,460
Mr Simon W. Holt
2020
686,550
436,150
2019
629,469
422,500
21,003
20,531
-
-
169,260
1,312,963
111,878
1,184,378
Mr Jason C. Huljich
2020
1,307,092
945,000
21,003
19,703
399,961
2,692,759
2019
934,469
850,000
20,531
(93,160)
226,523
1,938,363
Mr Nicholas R. Collishaw 2020
2019
-
-
-
-
-
-
-
-
77,783
77,783
152,267
152,267
2020
3,304,374
2,326,150
64,403
22,854
1,113,613
6,831,394
2019
2,743,407
2,172,500
61,593
27,976
857,992 5,863,468
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 $2,000,000 per year was approved at the 2017 Annual General Meeting.
Centuria Capital Group – Annual Report 2020 | 47
Directors’ Report
For the year ended 30 June 2020
Directors’ Fees
Each director receives a fee for being a director of Group companies and an additional fee is paid to the
Chairman and to the Chairman of each Board Committee. The payment of the additional fees to each
Chairman recognises the additional time commitment and responsibility associated with the position.
Mr Garry S. Charny
Mr Peter J. Done
Mr John R. Slater
Ms Susan Wheeldon
Mr Nicholas R. Collishaw
Total
Short-term
benefits
Board fees
($)
Post employment
benefits
Superannuation
($)
235,777
215,753
196,324
182,220
135,409
124,658
99,995
92,055
124,993
115,068
792,498
729,754
20,849
20,497
8,977
6,780
12,864
11,842
9,499
8,745
11,874
10,932
64,063
58,796
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Total
$
256,626
236,250
205,301
189,000
148,273
136,500
109,494
100,800
136,867
126,000
856,561
788,550
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
Mr Nicholas R. Collishaw
Mr John E. McBain
Mr Jason C. Huljich
Mr Simon W. Holt
Balance at
1 July 2019
Movement
Balance at
30 June 2020
Changes prior
to signing
Balance at
signing date
326,345
1,300,412
43,331
28,570
3,200,000
(161,430)
-
3,586,227
5,865,404
3,433,294
377,944
-
275,296
575,649
284,820
133,092
369,676
1,328,982
3,038,570
-
3,861,523
6,441,053
3,718,114
511,036
–
–
–
–
–
–
–
–
369,676
1,328,982
3,038,570
-
3,861,523
6,441,053
3,718,114
511,036
48 | Centuria Capital Group – Annual Report 2020
DIRECTOR AND SENIOR MANAGEMENT EQUITY HOLDINGS AND OTHER TRANSACTIONS
(CONTINUED)
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 $556,050
(inclusive of GST) (2019: $588,500) for corporate advisory fees.
• Tailwind Consulting Pty Ltd, a related party of Mr John R. Slater was paid a total of $271,558
(inclusive of GST) (2019: $279,836) for consultancy services. In addition, Tailwind Consulting
paid the Group $4,840 for rental of office space in 2019.
• Mr Nicholas R. Collishaw was paid a total of $66,000 (inclusive of GST) in 2019 for
consultancy services.
This report is made in accordance with a resolution of Directors.
Mr Garry S. Charny
Director
Mr Peter J. Done
Director
Sydney
12 August 2020
Centuria Capital Group – Annual Report 2020 | 49
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 2020 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
12 August 2020
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.
22
50 | Centuria Capital Group – Annual Report 2020
Financial statements
CENTURIA HEALTHCARE: 18 PROWSE STREET, WEST PERTH, WA
Centuria Capital Group – Annual Report 2020 | 51
Financial Report 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 Coronavirus (COVID-19) impact
A3 Significant accounting policies
A4 Adoption of new accounting standards and interpretations
A5 Other new Accounting Standards and Interpretations
A6 Use of judgements and estimates
A7 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
C5 Property held for development
C6 Intangible assets
C7 Payables
C8 Borrowings
C9 Right of use asset/Lease liability
C10 Contributed equity
C11 Commitments and contingencies
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 Events subsequent to the reporting date
Directors’ declaration
Independent auditor’s report
52 | Centuria Capital Group – Annual Report 2020
53
54
55
56
58
58
58
58
59
60
60
60
61
62
62
64
65
65
65
67
68
69
69
71
72
74
75
76
77
77
78
79
79
80
80
80
80
81
81
83
85
86
87
87
88
88
96
96
97
98
Consolidated statement of
comprehensive income
As at 30 June 2020
Notes
2020
$’000
2019
$’000
Revenue
B1, B2
162,373
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
E1
B3
B4
B5
8,310
34,445
(48,280)
(115,043)
(18,602)
23,203
(1,116)
22,087
PROFIT AFTER TAX IS ATTRIBUTABLE TO:
Centuria Capital Limited
Centuria Capital Fund (non-controlling interests)
External non-controlling interests
Profit after tax
Foreign currency translation reserve
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
20,956
149
982
22,087
(421)
21,666
20,535
149
982
21,666
20,956
149
21,105
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
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)
B6
B6
Cents
Cents
4.7
4.6
4.7
4.5
14.2
13.2
5.5
5.1
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
Centuria Capital Group – Annual Report 2020 | 53
Consolidated statement of
financial position
As at 30 June 2020
Cash and cash equivalents
Receivables
Income tax receivable
Financial assets
Other assets
Investment properties held for sale
Property held for development
Deferred tax assets
Equity accounted investments
Investment properties
Right of use asset
Intangible assets
Total assets
Payables
Provisions
Borrowings
Provision for income tax
Interest rate swaps at fair value
Benefit Funds policyholder's liability
Deferred tax liabilities
Call/Put option liability
Lease liability
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
Notes
D2
C2
2020
$’000
2019
$’000
174,458
124,673
68,729
69,862
B5(b)
755
-
C3
773,417
356,114
10,795
5,741
C5
B5(c)
E1
C4
C9
C6
861
31,295
39,519
-
-
-
32,955
386,713
167,110
177,500
21,393
-
280,120
157,663
1,601,407
1,278,266
C7
76,532
42,232
2,201
1,878
C8
265,051
303,110
B5(b)
5,998
33,388
813
28,814
311,535
339,557
B5(c)
35,825
10,494
17,167
C9
22,564
-
-
770,261
726,898
831,146
551,368
C10
177,149
128,164
2,901
17,074
2,101
12,438
197,124
142,703
C10
545,744
343,438
(9,771)
19,067
Total equity attributable to Centuria Capital Fund (non-controlling interests)
535,973
362,505
Total equity attributable to Centuria Capital Group securityholders
733,097
505,208
Equity attributable to external non-controlling interests
Contributed equity
Retained earnings
Total equity attributable to external non-controlling interests
Total equity
57,230
40,819
98,049
32,927
13,233
46,160
831,146
551,368
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes.
54 | Centuria Capital Group – Annual Report 2020
Centuria Capital Limited
Centuria Capital Fund
(non-controlling interests)
External non-
controlling interests
Contributed
equity
$’000
Reserves
$’000
Retained
earnings
$’000
Contributed
equity
$’000
Retained
earnings
$’000
Total
$’000
Total
$’000
Total
attributable
to Centuria
Capital Group
Security-
holders
$’000
Contributed
equity
$’000
Retained
earnings
$’000
Total
$’000
Total
equity
$’000
128,164
2,101
12,438 142,703
343,438
19,067 362,505 505,208
32,927 13,233 46,160 551,368
-
-
-
20,956
20,956
-
149
149
21,105
(421)
-
(421)
--
-
-
(421)
-
-
982
982 22,087
-
-
(421)
-
(421)
20,956
20,535
-
-
-
-
795
1,221
-
2,016
-
-
-
149
149
20,684
-
982
982 21,666
-
-
-
-
-
42,982 13,386 56,368 56,368
2,016
-
-
-
2,016
-
- (16,320) (16,320)
- (28,987) (28,987)
(45,307)
- (3,375) (3,375) (48,682)
Balance at
1 July 2019
Profit for the year
Foreign currency
translation
reserve
Total
comprehensive
income for the
year
Acquisition of
subsidiaries with
Non-controlling
interests
Equity settled
share based
payments
expense
Dividends and
distributions
paid/accrued
Securities issued
49,845
Cost of equity
raising
(1,655)
Deconsolidation
of controlled
property funds
Balance at
30 June 2020
-
-
-
-
-
-
-
49,845
205,216
- 205,216 255,061
1,459
(1,655)
(2,910)
-
(2,910)
(4,565)
-
-
-
1,459 256,520
- (4,565)
-
-
-
-
-
(20,138) 16,593 (3,545)
(3,545)
177,149
2,901
17,074
197,124
545,744
(9,771) 535,973
733,097
57,230 40,819 98,049 831,146
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Centuria Capital Group – Annual Report 2020 | 55
Consolidated statement of changes in equity
As at 30 June 2020
Balance at
1 July 2018
Profit for
the year
Total
comprehensive
income for the
year
Equity settled
share based
payments
expense
Dividends and
distributions
paid/accrued
Special non-
cash dividend/
capital
reallocation
Cost of equity
raising
Balance at
30 June 2019
Centuria Capital Limited
Centuria Capital Fund
(non-controlling interests)
External non-
controlling interests
Contributed
equity
$’000
Reserves
$’000
Retained
earnings
$’000
Contributed
equity
$’000
Retained
earnings
$’000
Total
$’000
Total
attributable
to Centuria
Capital Group
Security-
holders
$’000
Total
$’000
Contributed
equity
$’000
Retained
earnings
$’000
Total
$’000
Total
equity
$’000
98,770 1,896 28,005 128,671 244,930
18,183 263,113 391,784
32,927
16,450
49,377
441,161
-
-
-
19,611
19,611
-
31,184
31,184
50,795
-
19,611
19,611
-
31,184
31,184
50,795
966
205
-
1,171
-
-
-
1,171
-
-
-
146
146
50,941
146
146
50,941
-
-
1,171
-
-
(997)
-
(5,178)
(5,178)
- (30,300) (30,300)
(35,478)
- (3,363)
(3,363)
(38,841)
- (30,000) (30,000)
30,000
-
-
-
-
29,425
70,694
(997)
(2,186)
-
-
-
30,000
-
70,694
100,119
(2,186)
(3,183)
-
-
-
-
-
-
-
-
-
-
100,119
(3,183)
Stapled
securities issued
29,425
128,164 2,101
12,438 142,703 343,438
19,067 362,505 505,208
32,927
13,233
46,160 551,368
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
56 | Centuria Capital Group – Annual Report 2020
Notes
2020
$’000
2019
$’000
Cash flows from operating activities
Management fees received
Performance fees received
Rent received
Distributions received
Interest received
Payments to suppliers and employees
Interest paid
Income taxes paid
Applications - Benefits Funds
Redemptions - Benefits Funds
Net cash provided by operating activities
D3
Cash flows from investing activities
Proceeds from sale of related party investments
Purchase of investments in related parties
Repayment of loans by related parties
Loans to related parties
Proceeds from sale of investment property
Payments in relation to investment properties
Purchase of equity accounted investments
Purchase of other investments
Payments for property, plant and equipment
Cash balance on acquisition of subsidiaries
Purchase of subsidiaries
Collections from reverse mortgage holders
Purchase of property held for development
Benefit Funds net disposals of investments in financial assets
Return of investment to external non-controlling interests
Proceeds from sale of investments
Cash contribution to related party
Loans provided to other parties
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of securities to
securityholders of Centuria Capital Group
Equity raising cost paid
Proceeds from borrowings
Repayment of borrowings
Capitalised borrowing costs paid
Distributions paid to securityholders of Centuria Capital Group
Proceeds from issues of securities to external non-controlling interests
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
75,476
37,231
19,261
35,083
3,232
(92,582)
(13,171)
(9,634)
20,383
(42,153)
33,126
46,330
1,361
20,775
34,628
6,863
(64,906)
(15,761)
(1,052)
17,160
(32,494)
12,904
53,554
3,552
(111,831)
(173,294)
11,800
(11,800)
23,500
(21,108)
(14,102)
(6,115)
(522)
15,773
(40,852)
1,646
(1,295)
6,764
(4,230)
-
-
-
(98,818)
205,736
(4,317)
6,549
(49,887)
(1,311)
(39,377)
1,459
(3,375)
115,477
49,785
124,673
174,458
5,865
-
22,600
(1,896)
(23,960)
(72,263)
(3,713)
-
-
953
-
20,001
-
136,899
(20,000)
(5,925)
(111,181)
100,119
(3,179)
80,000
(21,705)
(1,725)
(29,111)
-
(3,363)
121,036
22,759
101,914
124,673
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Centuria Capital Group – Annual Report 2020 | 57
Notes to the financial statements
For the year ended 30 June 2020
A About the report
A1 GENERAL INFORMATION
A2 CORONAVIRUS (COVID-19) IMPACT
BACKGROUND
COVID-19 was declared a worldwide pandemic by the
World Health Organisation in March 2020. COVID-19, as
well as measures to slow the spread of the virus, have
since had a significant impact on global financial markets.
Governments across the globe have enforced restrictions to
limit the spread of the virus, with most governments having
implemented economic stimulus packages. Despite these
measures, there is still considerable economic uncertainty,
especially with the perceived threat of a ‘second wave’
outbreak, and fears of a sustained recession.
COVID-19 has presented a fast evolving and significant
challenge to global and local economies. The real estate
sector specifically has been impacted by concerns
surrounding security of income and uncertainty around
property valuations. In addition, this uncertainty and
associated market volatility has resulted in a significant
slowdown of transactional activity and investment in most
real estate markets.
The Group has considered the impact of COVID-19 and
other market volatility in preparing its financial statements.
While the specific areas of judgement as noted in Note
A6 did not change, the impact of COVID-19 resulted in the
application of further judgement within those identified
areas. Given the evolving nature of COVID-19 and the
limited recent experience of the economic and financial
impacts of such a pandemic, changes to the estimates and
outcomes that have been applied in the measurement of
the Group’s assets and liabilities may arise in the future.
Other than adjusting events that provide evidence of
conditions that existed at the end of the reporting period,
the impact of events that arise after the reporting period
will be accounted for in future reporting periods.
PROCESSES APPLIED
As a consequence of COVID-19 and in preparing these
financial statements, Management:
• re-evaluated whether there were any additional areas of
judgement or estimation uncertainty;
• assessed the carrying values of its assets and liabilities and
determined the impact thereon as a result of market inputs
and variables impacted by COVID-19; and
• considered the impact of COVID-19 on the Group’s financial
statement disclosures.
The shares in Centuria Capital Limited, (the ‘Company’)
and the units in Centuria Capital Fund (‘CCF’) are stapled
and 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, as well as co-investments 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 2020 were authorised for
issue by the Group’s Board of Directors on 12 August 2020.
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, properties held for development 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.
GOING CONCERN
The financial report has been prepared on a going-concern
basis, which assumes continuity of normal business activities
and the realisation of assets and settlement of liabilities in
the ordinary course of business. The COVID-19 pandemic has
created uncertainty on the global and local financial markets
and may impact on the ability of funds managed by the Group to
meet their obligations. The Group has completed an extensive
assessment on trade receivables and remains confident that it
will be able to continue as a going concern. Refer to Note C2.
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.
58 | Centuria Capital Group – Annual Report 2020
CONSIDERATION OF THE STATEMENTS OF FINANCIAL
POSITION AND FURTHER DISCLOSURES
Key statement of financial position items and related disclosures
that have been impacted by COVID-19 were as follows:
Financial assets
The Group carries significant investments in entities that directly
own real estate, such as external funds that are managed by
subsidiaries of the Group. These investments are impacted by
stock market volatility (for investments in ASX-listed securities)
and by property valuations (for investments in unlisted
securities). Refer to Note C3. The Group’s residential mortgage
receivables are fair valued with inputs including long term yield
curve and assumptions in relation to the valuation of secured
properties at the expiry of the arrangement. Refer to note F3.
Investment properties
As a result of COVID-19, there is significant valuation
uncertainty due to an inactive property investment market, a
lack of relevant transactional evidence as well as uncertainties
in relation to the potential impact of the pandemic on future
cash flows. Assessing the fair value of investment property
involves uncertainties around underlying assumptions given
the constantly changing nature of the situation. Refer to note
C4 for an outline of the Group’s investment property valuation
methodologies, as well as additional sensitivity analysis
performed around the fair valuation of properties in response
to the onset of the pandemic.
Intangible assets
Consistent with the Group’s accounting policies, the Group
has tested goodwill and indefinite life intangible assets for
impairment. Such assessment incorporated a consideration of
COVID-19. Refer to note C6
Financial instruments
Given recent market volatility as a result of COVID-19, the
Group reviewed the appropriateness of the inputs to its
valuations of financial instruments including receivables,
payables and derivative instruments. The impact of changes of
inputs to the valuations has also been considered in terms of
the classification of exposures in the fair value hierarchy and
transfers within the fair value hierarchy. Refer to note F3.
A3 SIGNIFICANT ACCOUNTING POLICIES
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 2019 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.
During the year, the Group decreased its equity accounted
stakes in Centuria Office REIT (‘COF’) and Centuria Industrial
REIT (‘CIP’) to below 20% and these investments have since
been accounted for as financial assets carried at fair value
through profit or loss. Refer Note E1 for further details.
As at 26 February 2020, the Group increased its ownership
stakes in the Centuria Diversified Property Fund to 22.7%.
From that date, the Group has equity accounted its interest in
that fund.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated into the
respective functional currencies of Group companies at the
exchange rate at the dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange rate
when the fair value was determined. Non-monetary items that
are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in profit
or loss.
However, foreign currency differences arising from the
translation of the following items are recognised in Other
Comprehensive Income (OCI):
• an investment in equity securities designated as at Fair
value through OCI (FVOCI) (except on impairment, in
which case foreign currency differences that have been
recognised in OCI are reclassified to profit or loss);
• a financial liability designated as a hedge of the net
investment in a foreign operation to the extent that the
hedge is effective; and
• qualifying cash flow hedges to the extent that the hedges
are effective.
FOREIGN OPERATIONS
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition, are
translated into the Australian dollar (AUD) at the exchange rate
at the reporting date. The income and expenses of foreign
operations are translated into AUD at the exchange rates at the
date of the transactions.
Foreign currency differences arising from the translation of
foreign operations are recognised in OCI and accumulated
into the translation reserve, except to the extent that the
translation difference is allocated to NCI.
NEW ACCOUNTING STANDARDS
The Group has applied new accounting standards and their
impact is disclosed in Note A4. 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.
Centuria Capital Group – Annual Report 2020 | 59
Notes to the financial statements
For the year ended 30 June 2020
A4 ADOPTION OF NEW ACCOUNTING
A5 OTHER NEW ACCOUNTING STANDARDS AND
STANDARDS AND INTERPRETATIONS
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 16 LEASES
(i) Nature of change
AASB 16 Leases was issued in February 2016. It has resulted
in almost all leases being recognised on the balance sheet, as
the distinction between operating and finance leases has been
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 has primarily impacted the accounting for
the Group’s operating leases. As at the reporting date, the
Group has six material operating lease commitments being
Level 41 Chifley Square, Sydney NSW, Level 7, 56 Clarence
Street, Sydney NSW, 120 Collins Street, Melbourne VIC, 348
Edward Street, Brisbane QLD, 38-35 Gaunt Street Auckland
NZ and 331-335 Devon Street East, New Plymouth NZ. The
application of the new standard has resulted in the recognition
of right of use assets along with lease liabilities for each lease
in the consolidated statement of financial position.
The adoption of the new standard has also required
reclassification in the consolidated statement of profit or
loss and other comprehensive income of the lease payments
expenses, associated with these leases, replaced with
depreciation expense on the leased assets and interest
charges with respect to the lease liabilities. The changes on
adoption of the new standard have not had a material impact
on retained earnings, the consolidated statement of profit or
loss or other comprehensive income in the current period.
When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments
using its incremental borrowing rate at 1 July 2020. The
weighted-average rate applied is 5.55%.
Upon adoption of the new leasing standard effective
1 July 2019, the modified retrospective approach was
used at transition resulting in leased assets increasing
by approximately $19,723,779 which was offset by a
corresponding increase in lease liabilities of approximately
$19,723,779, with no material net impact to net profit.
A number of new accounting standards have been published
that are not effective for the 30 June 2020 reporting period.
The Group has not early adopted the new or amended standards
in preparing these consolidated financial statements.
The following amended standards and interpretations are
not expected to have a significant impact on the Group’s
consolidated financial statements.
AASB 17 INSURANCE CONTRACTS
AASB 17 Insurance Contracts establishes principles for the
recognition, measurement, presentation and disclosure of
insurance contracts issued. It also requires similar principles
to be applied to reinsurance contracts held and investment
contracts with discretionary participation features issued.
The objective is to ensure that entities provide relevant
information in a way that faithfully represents those contracts.
This information gives a basis for users of financial statements
to assess the effect that contracts within the scope of AASB
17 have on the financial position, financial performance and
cash flows of the entity. The Group are currently assessing the
impact of AASB 17 Insurance Contracts.
AASB 2018-6
Clarifies the definition of a business as per AASB 3 Business
Combinations and is applied prospectively to future acquisitions.
AASB 2018-7
Clarifies the definition of material as applied across all
reporting standards as per AASB 101 Presentation of Financial
Statements with intention of increasing a user’s focus on the
material items in a financial report.
AASB 2014-10
Clarifies the requirements for recording the sale or contribution
of assets between an investor and its associate or joint venture.
A6 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 C4 Investment properties
• Note C6 Intangible assets
• Note F3 Financial instruments
60 | Centuria Capital Group – Annual Report 2020
A7 SEGMENT SUMMARY
As at 30 June 2020 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
Management of listed and unlisted property funds and rendering
of services in social and affordable housing developments.
Investment Bonds Management
Co-Investments
Corporate
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, properties held
for development 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 in 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 of Centuria Life Limited 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 managed by the group and consolidated under accounting
standards. The group’s principal activities do not include direct
ownership of these funds for the purpose of measuring control under
accounting standards and deriving rental income. Therefore the results
attributable to the controlled property funds are excluded from operating
profit. However, the performance management of the controlled property
funds is included in operating profit, aligned with how performance of the
business is assessed by management of the Group.
Elimination of transactions between the operating segments and the
other non-operating segments above, including transactions between
the operating entities within the Group, the property funds controlled by
the Group and the benefit funds.
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
Centuria Capital Group – Annual Report 2020 | 61
Notes to the financial statements
For the year ended 30 June 2020
B Business performance
B1 SEGMENT PROFIT AND LOSS
For the year ended
30 June 2020
Property
Funds
Management
$’000
Investment
Bonds
Management
$’000
Co-
Investments
$’000
Notes
Corporate
$’000
Management fees
53,439
9,667
Operating
profit
$’000
63,106
6,854
21,509
19,075
2,919
3,597
823
-
-
-
-
-
-
2,851
394
-
-
-
Non
operating
items
$’000
Benefits
Funds
$’000
Controlled
Property
Funds
$’000
Eliminations
$’000
Statutory
profit
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
2,353
-
-
-
-
-
-
20
22
12,691
3,747
-
-
66
(6,027)
57,079
-
-
-
-
(131)
-
-
6,854
21,509
19,075
2,939
5,841
13,514
3,747
(2,757)
27,853
-
-
1,750
2,212
31,785 (6,363)
5,188
42
445
-
-
-
-
-
-
-
31,785
-
-
-
-
-
-
-
-
-
-
6,854
21,509
19,075
2,919
259
429
-
-
-
565
416
1,066
2,047
-
-
-
1,750
99
105,049
10,125
32,230
4,311
151,715 (6,363)
9,390
16,546
(8,915)
162,373
E1
B3
B4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,849
461
- 34,445
-
-
-
-
8,310
34,445
- (34,837) (13,383)
(6,165)
6,105 (48,280)
(49,074)
(7,581)
(117)
(14,696) (71,468)
(6,758)(34,229)
(8,614)
6,026 (115,043)
(11)
(3)
(12,522)
(1,873) (14,409)
(1,229)
(5)
(3,090)
131
(18,602)
55,964
2,541
19,591
(12,258)
65,838 (41,338)
(3,321)
(1,323)
3,347
23,203
Property
acquisition fees
Property
performance fees
Development revenue
Property sales fees
Interest revenue
Rental income
Recoverable
outgoings
Distribution/dividend
revenue
Premiums -
discretionary
participation features
Other income
Total Revenue
Share of net profit
of equity accounted
investments
Net movement in
policyholder liabilities
Fair value movements
of financial
instruments and
property
Expenses
Finance costs
Profit/(Loss)
before tax
Income tax benefit/
(expense)
B5
(18,446)
Profit/(Loss) after tax
37,518
(831)
1,710
(425)
7,117 (12,585)
8,148
3,321
-
-
(1,116)
19,166
(5,141)
53,253 (33,190)
-
(1,323)
3,347
22,087
Profit/(loss) after tax
attributable to:
Centuria Capital
Limited
Centuria Capital Fund
Profit/(loss) after
tax attributable to
Centuria Capital Group
securityholders
Non-controlling
interests
37,518
1,710
568
(15,822)
23,974
(3,018)
-
-
18,598
10,681
29,279 (30,172)
37,518
1,710
19,166
(5,141)
53,253 (33,190)
-
-
-
-
-
-
Profit/(loss) after tax
37,518
1,710
19,166
(5,141)
53,253 (33,190)
-
-
-
-
-
-
-
-
-
20,956
1,042
149
1,042
21,105
(1,323)
(1,323)
2,305
3,347
982
22,087
62 | Centuria Capital Group – Annual Report 2020
B1 SEGMENT PROFIT AND LOSS (CONTINUED)
For the year ended
30 June 2019
Property
Funds
Management
$’000
Investment
Bonds
Management
$’000
Co-
Investments
$’000
Notes
Corporate
$’000
Management fees
39,720
9,963
(7,543)
42,140
-
-
-
-
-
-
-
-
-
-
78
317
3,443
-
-
27,591
-
-
-
-
-
-
-
-
-
-
-
Non
operating
items
$’000
Benefits
Funds
$’000
Controlled
Property
Funds
$’000
Eliminations
$’000
Statutory
profit
$’000
Operating
profit
$’000
49,683
1,135
22,522
1,558
1,581
4,181
-
-
-
-
-
-
-
-
-
-
27,591 (19,798)
7,163
-
-
-
-
-
-
-
-
-
(226)
5,453
41
(140)
-
-
14,653
4,328
-
-
-
-
-
-
1,135
22,522
1,558
1,355
9,535
14,653
4,328
-
-
119
(1,056)
13,900
-
-
2,407
2,444
1,135
22,522
1,558
1,581
343
-
-
-
-
1,194
272
-
686
-
16
-
2,168
-
-
2,407
157
68,053
10,313
28,594
3,459 110,419 (19,798)
15,180
18,915
(8,739)
115,977
E1
B3
B4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,231
1,982
-
17,370
-
-
-
-
30,213
17,370
4,572 (2,193)
(10,953)
6,312
(2,262)
(20,464)
(6,792)
(65)
(12,278) (39,599)
(6,625) (31,294)
(10,717)
7,543 (80,692)
(2)
(2)
(13,846)
(1,913) (15,763)
-
(4)
(4,635)
140 (20,262)
47,587
3,519
14,683
(10,732)
55,057
6,380
1,041
(7,390)
5,256
60,344
B5
(14,447)
(1,073)
(178)
6,347
(9,351)
989 (1,041)
-
-
(9,403)
33,140
2,446
14,505
(4,385)
45,706
7,369
-
(7,390)
5,256
50,941
Property
acquisition fees
Property
performance fees
Development revenue
Property sales fees
Interest revenue
Rental income
Recoverable
outgoings
Distribution/dividend
revenue
Premiums -
discretionary
participation features
Other income
Total Revenue
Share of net profit
of equity accounted
investments
Net movement in
policyholder liabilities
Fair value movements
of financial
instruments and
property
Expenses
Finance costs
Profit/(Loss)
before tax
Income tax benefit/
(expense)
Profit/(Loss) after tax
Profit/(loss) after tax
attributable to:
Centuria Capital
Limited
Centuria Capital Fund
Profit/(loss) after
tax attributable to
Centuria Capital Group
securityholders
Non-controlling
interests
33,020
2,446
417
(13,710)
22,173 (2,562)
120
-
14,088
9,325
23,533
9,931
33,140
2,446
14,505
(4,385)
45,706
7,369
-
-
-
-
-
-
Profit/(loss) after tax
33,140
2,446
14,505
(4,385)
45,706
7,369
-
-
-
-
-
-
-
-
(2,280)
19,611
31,184
-
(2,280)
50,795
(7,390)
(7,390)
7,536
5,256
146
50,941
Centuria Capital Group – Annual Report 2020 | 63
Notes to the financial statements
For the year ended 30 June 2020
B2 REVENUE
Revenue has been disaggregated in the segment profit and
loss in Note B1
(A) RECOGNITION AND MEASUREMENT
Property 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.
Consideration is due upon successful sale of the investment
property if the performance hurdles are satisfied.
In measuring the performance fees to be recognised each
period, 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’s performance fees are recognised over-time under
AASB 15 Revenue from Contracts with Customers.
The key assumptions made in estimating the amount of
performance fee revenue that is highly probable include:
2 YEARS FROM FORECAST FUND END DATE:
It is assumed that the highly probable threshold is only
met when the forecast end date of the fund is within two
years from balance date. The forecast end date is generally
based on the relevant fund’s end date as expressed in the
relevant PDS or a revised fund end date in the event that an
alternative strategy is undertaken by the Group, in which case
the unbooked portion of any forecast performance fees are
recognised over the extended term of the fund.
PROBABILITY THRESHOLDS FOR SENSITIVITY TO PROPERTY
VALUATIONS:
The level of constraint applied to performance fee revenue
is adjusted depending on remaining fund tenure. Specifically,
a discount in property values between 10.0% to 20.0% is
applied, depending on when in the two-year window the fund
is expected to wind up.
FAIR VALUE OF INVESTMENT PROPERTIES:
The fair value of investment properties is based on the
latest available valuation of the underlying property from the
published financial statements or board approved valuations.
Development revenue
In 2019, the Group entered into agreements to develop four
social affordable housing dwellings in the greater Newcastle,
NSW area. The Group recognises development revenue
based on satisfaction of performance obligations on an over-
time basis as its customers control the land on which the
developments are being delivered.
(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
Recognised
in 2020
$’000
21,509
19,075
11,964
2,334
53,239
38,654
* The underlying property funds managed by the Group have accrued total
performance fees of $40,399,000 as at 30 June 2020. Based on the assumptions
outlined in B2(a), the total estimated amount of performance fees available to the
Group to recognise is $32,642,000.
** 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.
2020
$
2019
$
Management fees from Property Funds
managed by Centuria
52,412,451 38,566,046
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
18,362,378
2,121,706
6,854,484
1,135,110
21,508,771 22,522,000
4,474,097
3,574,208
2,938,640
1,354,000
229,297
36,958
408,358
1,209,583
-
202,062
107,188,476
70,721,673
(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 investors and
policyholders. Directors and director-related entities receive
the same returns on these investments as all other investors
and policyholders.
All such transactions are made on an arm’s length basis at
normal market prices and commercial terms.
The Group pays some expenses on behalf of related entities
and receives a reimbursement for those payments.
64 | Centuria Capital Group – Annual Report 2020
2020
$’000
2019
$’000
14,310
2,542
3,211
17,521
(514)
2,028
(13,687)
7,375
(2,439)
(279)
1,116
-
-
9,403
2020
$’000
23,203
(2,283)
20,920
6,276
2019
$’000
60,344
(27,211)
33,133
9,940
B3
EXPENSES
Employee benefits expense
Consulting and professional fees
Property outgoings and fund expenses
Transaction costs
Administration fees
Cost of sales - development
2020
$’000
2019
$’000
RECOGNITION AND MEASUREMENT
The Group’s finance costs include:
33,653
26,084
method; and
• interest expense recognised using the effective interest
4,964
6,601
6,125
2,220
17,320
3,805
7,992
5,934
2,019
848
• the net gain or loss on hedging instruments that is
recognised in profit or loss.
B5 TAXATION
Claims - discretionary participation features
29,209
24,985
Property management fees paid
Other expenses
Depreciation Expense
2,810
9,198
2,943
1,336
7,229
460
115,043
80,692
Current tax expense in respect
of the current year
Adjustments to current tax
in relation to prior years
(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 49. All such transactions
are made in arms length transactions at normal market prices
and on normal commercial terms.
(ii) Key management personnel compensation
The aggregate compensation paid to key management
personnel of the Group is set out below:
2020
$
2019
$
Short-term employee benefits
6,423,022
5,645,160
Post-employment benefits
128,467
120,390
Other long-term employment benefits
22,854
115,816
Deferred tax (benefit)/expense
relating to the origination and
reversal of temporary differences
Adjustments to deferred tax in
relation to prior years
Adjustments to deferred tax in
relation to tax rate adjustments
Income tax expense
(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:
Share-based payments
1,113,613
857,992
7,687,956
6,739,358
Profit before tax
Less: profit not subject to income tax
Detailed information on key management personnel is
included in the Audited remuneration report.
Income tax expense calculated at 30%
Add/(deduct) tax effect of amounts which
are not deductible/(assessable):
B4
FINANCE COSTS
Tax offset for franked dividends
(227)
(617)
Operating interest charges
11,595
13,003
Bank loans in Controlled Property
Funds interest charges
Reverse mortgage facility interest
charges
Loss/(gain) on derivatives on fair value
hedges
(Gain)/loss on financial assets fair
value hedges
Other finance costs
Finance lease interest
2020
$’000
2019
$’000
Reversal of prior year equity
accounted contribution
Non-allowable expenses - other
Utilisation of capital losses
Adjustments to current tax in
relation to prior years
3,090
4,636
2,093
1,888
Income tax expense
(6,000)
844
(550)
773
1,116
-
594
-
(514)
9,403
4,667
(6,909)
(4,667)
6,909
595
1,229
735
-
18,602
20,262
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. There was no taxable income
derived for New Zealand tax purposes for the year ending
30 June 2020 in relation to the Augusta acquisition.
Centuria Capital Group – Annual Report 2020 | 65
Notes to the financial statements
For the year ended 30 June 2020
(B) CURRENT TAX ASSETS AND LIABILITIES
(C) MOVEMENT OF DEFERRED TAX BALANCES
2020
$’000
2019
$’000
Current tax assets/(liabilities) attributable to:
Income tax receivable - NZ
Benefit Funds
Securityholders
755
(2,934)
(3,064)
(5,243)
Financial year ended 30 June 2020
Opening
balance
$’000
Movement
$’000
-
(738)
(75)
(813)
Closing
balance
$’000
Deferred tax assets
Provisions
Transaction costs
Capital losses
Revenue tax losses
Financial derivatives
Property held for development
Right of use asset/Lease liability
Equity accounted investment
1,560
-
604
3,762
2,164
3,762
26,792
(1,664)
25,128
4,021
(2,903)
-
-
-
-
2,757
3,964
103
523
1,118
2,757
3,964
103
523
32,373
7,146
39,519
Deferred tax liabilities
Indefinite life management rights (27,638)
(5,615)
(33,253)
Accrued performance fees
Accrued income
Unrealised gain/(loss)
on financial assets
Other
Transaction costs
Financial derivatives
Financial year ended 30 June 2019
Deferred tax assets (i)
Provisions
Transaction costs
Capital losses
Revenue tax losses
Deferred tax liabilities (i)
Indefinite life
management rights
(6,115)
(290)
(1,432)
(138)
(4,733)
(2,521)
4,617
(1,498)
-
(290)
1,051
(265)
4,733
2,521
(381)
(403)
-
-
(42,867)
7,042
(35,825)
Opening
balance
$’000
Movement
$’000
Closing
balance
$’000
2,643
(1,083)
1,560
346
(346)
-
-
29,803
4,021
2,570
4,021
32,373
(27,638)
-
(27,638)
Accrued performance fees
-
(6,115)
(6,115)
Accrued income
(290)
-
(290)
Unrealised gain/(loss)
on financial assets
Other
(2,529)
(6)
1,097
(132)
(1,432)
(138)
Financial derivatives
(2,459)
(62)
(2,521)
Transaction costs
-
(4,733)
(4,733)
(32,922)
(9,945)
(42,867)
66 | Centuria Capital Group – Annual Report 2020
(i): Net deferred tax assets and liabilities at 30 June 2020
of ($10,494,000) liability have been presented as deferred
tax assets of $32,373,000 and deferred tax liabilities of
($42,867,000). As at 30 June 2020, the deferred tax balances
have been shown on a gross basis on the face of the balance
sheet as the Group has tax balances which relate to both
Australian and New Zealand tax jurisdictions.
RECOGNITION AND MEASUREMENT
Income tax expense represents the sum of the tax currently
payable and payable on a deferred basis.
(i) Current tax
The tax currently payable is based on taxable income for the
year. Taxable income differs from profit as reported in the
consolidated profit or loss because of items of income or
expense that are assessable or deductible in other years as
well as items that are never assessable 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
assessable 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:
• assessable 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;
• assessable 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
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 income 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 applicable rates are 30% for deferred
tax assets and liabilities arising to the Australian subsidiaries
of the Company and 28% for deferred tax asset and liabilities
arising to the New Zealand subsidiaries of the Company. The
measurement of deferred tax assets and liabilities 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.
26,814
(22)
26,792
• assessable temporary differences arising from goodwill
B6 EARNINGS PER SECURITY
Basic (cents per stapled security)
Diluted (cents per stapled security)
2020
Cents
4.7
4.6
2019
Cents
14.2
13.2
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)
2020
2019
444,644,883 358,809,337
460,824,844 383,381,274
(i) The weighted average number of ordinary securities used in the calculation of
diluted earnings per security is determined:
- as if 30 June 2020 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 2020 was the end of
the performance period are deemed to have been issued at the start of the financial
year; and
- as if 10,049,235 unexercised options with an exercise price of $1.30 per option
had been converted to ordinary securities at the start of the financial year.
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
subsidiaries are part of a tax consolidated group under
Australian taxation law. The Company is the head company
of the tax consolidated group. Tax expense/benefit, deferred
tax assets and deferred tax liabilities arising from temporary
differences of the members of the tax consolidated group
are recognised in their separate financial statements using
a ‘standalone taxpayer’ approach. Under the tax funding
agreement 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 the Company and the members of the tax
consolidated group.
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 entities.
Centuria Capital Fund (‘CCF’) and its sub-trusts are not part
of the tax consolidated group. Under current Australian income
tax legislation, trusts are not liable for income tax, provided
their securityholders are presently entitled to the net (taxable)
income of the trust including realised capital gains, each
financial year.
Centuria Healthcare Pty Ltd (‘Centuria Healthcare’) is not a
wholly-owned subsidiary of the Company at 30 June 2020
Centuria Healthcare has formed its own tax consolidated group
with its wholly-owned subsidiaries at 30 June 2020. Centuria
Healthcare is the head company of the Centuria Healthcare tax
consolidated group. Tax expense/benefit, deferred tax assets
and deferred tax liabilities arising from temporary differences
of the members of the tax consolidated group are recognised
in their separate financial statements using a ‘standalone
taxpayer’ approach. As no tax funding agreement existed at
30 June 2020 between the members of the tax consolidated
group, any amounts payable or receivable in relation to the tax
contribution for each entity is recognised as a contribution of
capital with the head company of the tax consolidated group.
The New Zealand tax resident subsidiaries of the Company
are all stand-alone taxpayers from a New Zealand income tax
perspective as they have not elected to form a consolidated
group for New Zealand tax purposes.
(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.
Centuria Capital Group – Annual Report 2020 | 67
Notes to the financial statements
For the year ended 30 June 2020
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)
2020
2019
Cents per
security
Total
$’000
Cents per
security
Total
$’000
0.50
4.50
1.70
2.80
-
1,918
17,262
7,630
12,567
-
1.00
3.10
0.85
3.40
7.80
3,048
9,449
3,260
13,038
30,000
1.80
3.40
8,690
16,420
0.50
4.50
1,918
17,262
Dividends/distributions paid/declared to Centuria Capital
Group securityholders (ii)
14.70
64,487
21.15
77,975
(i) The Group declared a final dividend/distribution in respect of the year ended 30 June 2020 of 5.2 cents per stapled security which
included a fully franked dividend of 1.8 cents per share and a trust distribution of 3.4 cents per unit. The final dividend had a record date of
30 June 2020 and was paid on 8 July 2020. The total amount paid of $25,110,000 (2019: $19,180,000) has been provided for as a liability in
these financial statements.
(ii) In addition to the dividends and distributions paid to Group securityholders, the Group paid distributions of $3,375,000 (2019:
$3,363,000) 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 paid on 8 July 2020.
2020
$’000
10,427
2019
$’000
337
Of the franking credit balance of $10,427,000 at 30 June 2020, $5,769,000 relates to the Centuria
Capital Limited tax consolidated group and $4,658,000 relates to the Centuria Healthcare tax
consolidated group.
68 | Centuria Capital Group – Annual Report 2020
C Assets and liabilities
C1 SEGMENT BALANCE SHEET
As at
30 June 2020
ASSETS
Cash and cash
equivalents
Receivables
Income tax receivable
Financial assets
Other assets
Investment properties
held for sale
Property held for
development
Deferred tax assets
Equity accounted
investments
Investment properties
Right of use asset
Intangible assets
Total assets
LIABILITIES
Payables
Provisions
Borrowings
Provision for
income tax
Interest rate swap at
fair value
Benefit Funds policy
holders' liability
Call/Put option liability
Lease liability
Total liabilities
Net assets
D2
C2
B5
C3
C5
B5
E1
C4
C9
C6
306
-
332
-
-
-
-
-
280,120
385,670
C8
B5
873
-
2,570
-
-
C9
-
-
Deferred tax liability
B5(c)
33,253
Property
Funds
Management
$’000
Investment
Bonds
Management
$’000
Notes
Co-
Investments
$’000
Corporate
$’000
Operating
balance
sheet
$’000
Benefits
Funds
$’000
Controlled
Property
Funds
$’000
Eliminations
$’000
Statutory
balance
sheet
$’000
24,632
51,188
6,985
1,780
50,707
67,137
149,461
22,585
2,412
-
174,458
7,744
4,818
65,530
4,192
88
(1,081)
68,729
-
-
-
449
755
-
464,191 58,904
523,095 289,359
206
205
10,052
10,795
-
-
861
31,295
-
-
29,092
104
-
10,323
861
31,295
39,519
32,955
-
-
-
21,393
21,393
-
280,120
-
-
-
-
32,955
-
-
-
-
-
-
-
-
-
-
167,110
-
-
-
755
(39,037)
773,417
-
-
-
-
-
-
-
-
10,795
861
31,295
39,519
32,955
167,110
21,393
280,120
-
-
-
-
-
-
-
-
9,075
587,958 173,076 1,155,779 316,136 169,610
(40,118)
1,601,407
C7
4,417
2,345
20,749
43,145
-
1,328
70,656
2,201
2,220
4,737
(1,081)
-
-
-
76,532
2,201
167,291
13,017
180,308
- 85,920
(1,177)
265,051
-
-
-
-
-
2
-
-
-
-
-
494
3,064
2,934
-
32,752
32,752
-
636
-
-
311,535
200
2,923
36,378
(533)
-
-
17,167
17,167
22,564
22,564
-
-
-
-
-
-
-
-
-
-
-
-
5,998
33,388
311,535
35,825
17,167
22,564
41,113
2,347
188,240 133,390 365,090 316,136 91,293
(2,258)
770,261
344,557
6,728
399,718 39,686
790,689
-
78,317
(37,860)
831,146
Centuria Capital Group – Annual Report 2020 | 69
Notes to the financial statements
For the year ended 30 June 2020
C1 SEGMENT BALANCE SHEET (CONTINUED)
Property
Funds
Management
$’000
Investment
Bonds
Management
$’000
Notes
Co-
Investments
$’000
Corporate
$’000
Operating
balance
sheet
$’000
Benefits
Funds
$’000
Controlled
Property
Funds
$’000
Eliminations
$’000
Statutory
balance
sheet
$’000
As at
30 June 2019
ASSETS
Cash and cash
equivalents
Receivables
Other assets
Financial assets
Equity accounted
investments
Investment properties
Intangible assets
Total assets
LIABILITIES
Payables
Provisions
Borrowings
Interest rate swap at
fair value
Benefit Funds policy
holders’ liability
Provision for income
tax
D2
C2
C3
E1
C4
C6
13,193
37,940
46
-
-
-
157,663
208,842
6,289
62,817
5,460
87,759
32,123
4,791
-
124,673
22,181
4,658
65,726
5,979
(460)
(1,383)
69,862
-
5,447
5,741
-
58,540 53,720
112,260 283,794
360,400
-
-
-
-
-
360,400
26,313
-
157,663
- 177,500
-
-
-
5,741
(39,940)
356,114
-
-
-
386,713
177,500
157,663
7,484
503,938 69,285
789,549 348,209 181,831
(41,323)
1,278,266
C7
2,540
469
20,060 12,599
35,668
2,962
4,985
(1,383)
42,232
C8
-
1,020
1,878
-
-
-
1,878
202,607
8,194
210,801
- 94,309
(2,000)
303,110
- 28,083
28,083
-
731
-
-
-
- 339,557
(2,345)
75
738
-
-
-
-
28,814
339,557
813
10,494
Deferred tax liability
B5(c)
Total liabilities
Net assets
(204)
5,615 (7,686)
5,542
4,952
265
228,282 39,865
282,047 348,209 100,025
(3,383)
726,898
7,219
275,656 29,420
507,502
-
81,806
(37,940)
551,368
858
-
-
-
2,420
7,817
13,635
195,207
947
248
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70 | Centuria Capital Group – Annual Report 2020
C2 RECEIVABLES
Receivables from
related parties
Other receivables
Contract assets - Development
Notes
2020
$’000
2019
$’000
C2(a)
26,098
51,708
16,094
10,846
26,537
7,308
68,729
69,862
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:
Performance fees owing from property
funds managed by Centuria
Management fees owing from property
funds managed by Centuria
Distribution receivable from
Centuria Office REIT
Distribution receivable from
Centuria Industrial REIT
Receivable from Over Fifty
Guardian Friendly Society
Sales fees owing from property
funds managed by Centuria
Recoverable expenses owing from
property funds managed by Centuria
Distribution receivable from unlisted
property funds managed by Centuria
Redemption funds receivable from
Centuria Diversified Property Fund
Receivables from debt funds
managed by Centuria
2020
$
2019
$
9,385,830 22,296,386
7,294,799
4,324,197
3,484,055
2,814,461
3,182,678
2,958,601
1,104,355
435,035
1,022,000
985,000
336,300
1,404,810
288,220
111,092
- 16,000,000
-
378,571
26,098,237
51,708,153
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 of 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(i)
Reverse mortgage
receivables(ii)
Notes
2020
$’000
2019
$’000
267,282
281,757
C3(a)
440,529
6,702
14,571
6,066
58,904
53,720
773,417
356,114
(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.
The onset of the COVID-19 pandemic has had a substantial
impact on equity capital markets with significant volatility in
security prices as a result of economic uncertainty. Given the
continuing and evolving impact of COVID-19 on global financial
markets, this volatility is expected to continue in the near term.
The Group holds significant co-investment stakes in its
managed funds, COF and CIP, which are listed on the ASX and
are therefore exposed to volatility in the equity capital markets.
This volatility has resulted in fair value losses being recognised
in the financial year in respect of these investments.
In addition, the Group also holds co-investment stakes in
other unlisted funds that are managed by subsidiaries of the
Group. As these funds are unlisted, they are not exposed to
volatility in equity capital markets to the same extent as listed
securities, however they are exposed to changes in underlying
property values and potential impacts on future cashflows.
The funds have taken into account the impact of rent relief
packages provided to tenants, increase in downtime, incentive
allowances and reductions in rental growth in determining
property valuations.
Centuria Capital Group – Annual Report 2020 | 71
Notes to the financial statements
For the year ended 30 June 2020
C3
FINANCIAL ASSETS (CONTINUED)
(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.
2020
2019
Fair value
$
Units
held
Ownership
%
Fair value
$
Units
held
Ownership
%
Financial assets held by the Group
Centuria Industrial REIT*
Centuria Office REIT*
215,809,359
68,078,662
158,152,599
78,293,366
17.01%
15.22%
-
-
-
-
0%
0%
Centuria Diversified Property Fund**
-
-
0%
11,591,312
8,060,718
14.92%
Augusta Industrial Fund
Asset Plus Limited
17,232,050
19,000,000
9,705,148
30,528,933
Centuria Scarborough House Fund
97,694
102,836
Centuria Heathley Aged Care
Property Fund No.1
5,748,988
5,513,559
Centura Heathley Direct Medical Fund No.2
10,305,433
11,025,391
Centuria Life Goals - Various Funds
11,096
10,499
10.00%
18.85%
0.22%
9.21%
7.48%
0%
-
-
-
-
0%
0%
102,826
102,826
0.22%
-
-
-
-
-
-
0%
0%
0%
417,062,367
11,694,138
Financial assets held by the Benefit Funds
Centuria SOP Fund
Centuria Office REIT*
Centuria Industrial REIT*
1,064,000
1,000,000
18,956,484
9,384,398
3,446,506
1,087,226
3.28%
1.82%
0.27%
1,026,800
1,000,000
3.28%
-
-
-
-
0%
0%
Centuria Iskia Development Fund
-
-
0%
1,850,000
1,850,000
15.83%
23,466,990
440,529,357
2,876,800
14,570,938
* These investments which were previously equity accounted are now held as related party investments for the year ended 30 June 2020. See Note E1 for details. Also, see
below for a movement in the related party unit trust holdings during the financial year.
** Centuria Diversified Property Fund, previously held as related party investments is equity accounted for the year ended 30 June 2020. See Note E1 for details.
Opening balance
Investment purchases
Acquisition of subsidiary
Return of investment
Disposal
Fair value (loss)/gain
Carrying value transferred from/(to) equity accounted investments
Fair value gain on discontinuing equity accounted investments
30 June 2020
$’000
14,571
105,176
26,937
-
(28,194)
(108,138)
378,407
51,770
440,529
30 June 2019
$’000
228,109
139,424
-
(5,895)
(16,000)
2,693
(333,760)
-
14,571
72 | Centuria Capital Group – Annual Report 2020
RECOGNITION AND MEASUREMENT
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.
Financial assets are initially measured at fair value plus
transaction costs, except for those financial assets classified
as at fair value through profit or loss (“FVTPL”), which are
initially measured at fair value only.
Financial assets are classified as financial assets at FVTPL
when the financial asset is either held for trading or it is
designated as at fair value through profit or loss.
Financial assets at FVTPL 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 receivables are financial assets that
are recognised at FVTPL.
AASB 9 contains three principal classification categories for
financial assets
• measured at amortised cost;
• measured at fair value through other comprehensive income
(FVOCI); and
• measured at 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 Expected Credit
Loss (“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 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.
Given that COVID-19 is an ongoing situation, the Group has
continued to analyse the age of outstanding receivable
balances post balance sheet date and applied estimated
percentages of recoverability to estimate ECL, as well as the
financial stress of counterparties and their ability to operate as
a going concern. Debts that are known to be uncollectible 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 2020 | 73
Notes to the financial statements
For the year ended 30 June 2020
C4
INVESTMENT PROPERTIES
2020
$’000
2019
$’000
Opening balance
177,500
147,100
Acquisition of investment properties
15,116
-
Capital improvements and
associated costs
Loss on fair value
Change in deferred rent
and lease incentives
4,660
1,726
(6,141)
(10,705)
(525)
(621)
Sale of investment property
(23,500)
-
Transfer from/(to) investment
properties held for sale
Closing balance ^
-
40,000
167,110
177,500
^ The carrying amount of investment properties includes components related
to deferred rent, capitalised lease incentives and leasing fees amounting to
$12,704,534 (30 June 2019: $12,000,000).
Property
2020
$’000
2020
Capitalisation
rate %
2020
Discount
rate %
2019
$’000
2020
Valuer
111 St George
Terrace, Perth WA 155,000 150,000
6.75% 7.00% Colliers
City Centre Plaza,
Rockhampton Qld
- 27,500
-%
-%
8-10 Warneford St,
Sandy Bay TAS
5,610
120 and 122
Spencer St, South
Bunbury WA
6,500
-
-
Total fair value
167,110 177,500
KEY ESTIMATE AND JUDGEMENTS
7.00% 7.50% Directors
6.50%
-% Colliers
(A) VALUATION TECHNIQUES AND SIGNIFICANT
UNOBSERVABLE INPUTS
The investment properties recognised by the Group are
properties owned by related party funds that are taken to
be controlled by the Group under accounting standards.
Investment properties are properties held either to earn rental
income or for capital appreciation or for both. Investment
properties are initially recorded at cost which includes
stamp duty and other transaction costs. Subsequently, the
investment properties are measured at the fair value with
any change in value recognised in profit or loss. The carrying
amount of investment properties includes components relating
to deferred rent, lease incentives and leasing fees.
An investment property is derecognised upon disposal.
Any gain or loss arising on derecognition of the property
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included
in profit or loss in the period in which the property is
derecognised.
The fair value of the investment properties were determined
by the directors of the Responsible Entity of the relevant fund
or by an external, independent valuation company 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.
Given the changing economic conditions as a result of the
COVID-19 pandemic, there is uncertainty surrounding the
potential impact on future cash flows and the potential impact
on the valuation. Rent relief allowances in accordance with the
National Cabinet’s Code of Conduct (the ‘Code’) which sets
out commercial leasing principles for businesses during the
pandemic was taken into consideration when determining the
cashflows for the property, however actual future cashflows
may differ from this.
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 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.
74 | Centuria Capital Group – Annual Report 2020
(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).
Significant
unobservable
inputs
Fair value
measurement
sensitivity to
significant
increase in
input
Fair value
measurement
sensitivity to
significant
decrease in
input
Market rent
Increase
Decrease
Range of inputs FY20
$428,000 psm to
$572,000 psm
Capitalisation rate
Decrease
Increase
6.5% to 7.0%
Discount rate
Decrease
Increase
7.00% to 7.50%
A further sensitivity analysis was taken by the Group to assess
the fair value of investment properties given the uncertain
impact of the COVID-19 pandemic on property values.
The table below illustrates the valuation of movements in
capitalisation rates and discount rate:
Fair value at
30 June 2020
$000
Capitalisation
Rate impact
-0.25%
$000
Capitalisation
Rate impact
+0.25%
$000
Investment properties
167,110
6,429
(5,960)
Given the unknown future impact that COVID-19 might have
on the commercial real estate market and global market in
general, coupled with a lower interest rate environment, a
higher degree of judgement and considerations need to
be made in assessing the significant inputs that determine
property valuations. Management and external valuers
acknowledge current valuations are subject to ‘material
valuation uncertainty’ as a consequence of this. A reduction in
transaction volumes has made direct comparison as a method
more difficult. It is also challenging to determine the full impact
on net passing income to the property for future periods as
Management continues to negotiate rent relief agreements
with tenants that fall within the Code. To date, there has been
little evidence to suggest that capitalisation and discount
rates have softened since the COVID-19 pandemic hit. As the
COVID-19 pandemic progresses, Management will re-assess
the valuation method to ensure appropriate considerations in
relation to inputs used.
C5 PROPERTY HELD FOR DEVELOPMENT
Property
Opening balance
Acquisitions
Acquisition of subsidiary balance
30 June 2020
$’000
30 June 2019
$’000
-
1,295
30,000
31,295
-
-
-
-
A sensitivity analysis was taken to assess the fair value
of development properties given the uncertain impact of
COVID-19 on property values. The table below illustrates the
valuation impact of movements in costs to complete and
capitalisation rates:
Property
54 Cook Street,
Auckland
17-19 Man Street,
Queenstown
27-29 Young St,
West Gosford
Carrying
value at
30 June 2020
$000
Impact of
increase
in costs to
complete
-5%
Impact of
increase
in costs to
complete
+5%
Cap Rate
impact
-0.50%
$000
Cap Rate
impact
+0.50%
$000
19,884
496
(496)
1,215 (1,309)
10,116
1,776 (1,776)
1,496 (1,496)
1,295
-
-
-
-
31,295
2,272 (2,272)
2,711 (2,805)
(A) VALUATION UNCERTAINTY
Valuation uncertainty has arisen from an inactive property
investment market. A lack of transactional evidence means the
only market inputs and metrics available to reliably estimate
fair value relate to the market before the event occurred and
the impact of COVID-19 on prices is unlikely to be known
until the market stabilises. The valuations of the Group’s
development properties as at 30 June 2020 have therefore
been prepared on the basis of significantly less certainty
to highlight the difficulties in undertaking valuations in the
current environment.
To reflect the impact of the pandemic on development
property value, a number of adjustments have been made
to ordinary valuation assumptions. These adjustments are
dependent on a range of factors which include asset class,
lease obligations, property characteristics, market evidence
and the tenant’s core business. In respect to development
properties, the valuation has included additional holding
costs to account for project delays, increased contingency
allowances, additional allowances to account for estimated
increases in construction costs when works recommence
after a period of cessation.
Centuria Capital Group – Annual Report 2020 | 75
Notes to the financial statements
For the year ended 30 June 2020
The tourism industry has suffered significantly due to the
impacts of COVID-19 which has created further uncertainty.
Under alert levels 4 and 3 no domestic tourism was permitted
as hotel operators were unable to trade. The international
borders remain closed and there is no current decision on
when they will reopen. When they do reopen it is expected to
take a substantial period of time for international tourism to
rebound back to historical levels pre COVID-19. The valuation
assumptions adopted reflect this level of uncertainty not just
at present but at the time the relevant developments are
forecast to complete. The assumptions also considered the
impact on the viability of the respective tenant and / or hotel
operator in the future.
(B) VALUATION TECHNIQUES
No independent valuations were commissioned for the
development properties as at 30 June 2020. The residual
approach was adopted as the appropriate valuation method.
The residual approach is used primarily for property which
is undergoing, or is expected to undergo, redevelopment.
Fair value is determined through the estimation of a gross
realisation on completion of the redevelopment with
deductions made for all costs associated with converting the
property to its end use, including finance costs.
A key input into the residual approach is the cost required to
complete the development. This cost information is based on
internal budgets developed by the Group’s development team,
based on management’s experience and knowledge of market
conditions. The largest component of the project cost is the
construction cost and this input is verified by independent
quantity surveyors to ensure its accuracy. The valuations
also include allowances that may be required to support net
income in the early stages of a hotel development as it trades
up to a stabilised level of activity.
The valuation outcome at 54 Cook Street, Auckland was also
compared to alternate use scenarios including the conversion
to office use, an alternative operator and an “as is” land and
buildings value. Traditional valuation techniques such as the
capitalisation approach and discounted cash flow method
were not considered as appropriate as the development
properties are under construction and not income producing.
C6
INTANGIBLE ASSETS
Indefinite life management rights
Goodwill
Opening balance
Acquired goodwill
Acquired management rights
2020
$’000
112,182
167,938
2019
$’000
92,128
65,535
280,120
157,663
2020
$’000
2019
$’000
157,663
157,663
102,403
20,054
-
-
280,120
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 2021 are based on the Board approved budget for
2021 and are assumed to increase at a rate of 7.5% (2019: 7.5%)
per annum for years 2022-2025. The directors believe this is a
prudent and achievable growth rate based on past experience.
EXPENSES
Expenses in 2021 are based on the budget for 2021 and are
assumed to increase at a rate of 5.0% (2019: 5.0%) per annum
for the years 2022-2025. 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 9.44% (2019:
9.53%) is applied to cash flow projections. In determining the
appropriate discount rate, regard has been given to relevant
market data as well as Group specific inputs.
76 | Centuria Capital Group – Annual Report 2020
TERMINAL GROWTH RATE
Beyond 2025, a growth rate of 3.0% (2019: 3.0%), in line
with long term economic growth, has been applied to
determine the terminal value of the asset.
SENSITIVITY TO CHANGES IN ASSUMPTIONS
As at 30 June 2020, the estimated recoverable amount of
intangibles including goodwill relating to the Property Funds
Management cash-generating unit exceeded its carrying
amount by $322.4 million (2019: $188.1million). 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.
C8 BORROWINGS
Fixed rate secured notes
Floating rate secured notes
Reverse mortgage bill
facilities and notes
Secured facility - Augusta
Secured bank loans in
Controlled Property Funds
Borrowing costs capitalised
Notes
2020
$’000
2019
$’000
C8(a)
C8(a)
C8(b)
C8(c)
93,823
128,000
75,000
75,000
7,422
5,610
8,194
-
C8(d)
85,920
94,309
(2,724)
(2,393)
265,051
303,110
Revenue
growth rate
(average)
Pre-tax
discount rate
Expenses
growth rate
The terms and conditions relating to the above facilities are
set out below.
Assumptions used in value in
use calculation
Rate required for recoverable
amount to equal carrying value
7.50%
9.44%
5.00%
(2.45)%
17.50%
16.43%
The onset of the COVID-19 Pandemic introduces uncertainties
with respect to assumptions used in estimating the recoverable
amount of intangibles. Key assumptions such as revenue growth
rate, the appropriate discount rate as well as the overall rate of
growth in expenses maybe impacted due to these additional
uncertainties. Despite the potential impact of the pandemic,
the size and scale of the headroom of recoverable amount over
carrying value of Goodwill as at 30 June 2020 as well as the
sensitivity analysis completed during the year indicates that the
Group’s Goodwill balance continues to be recoverable.
(A) SECURED NOTES
The Group has issued fixed and floating corporate notes as per
below:
Fixed
Classification
Coupon
Rate
Due Date
2020
$’000
2019
$’000
Tranche 1
Current
7.0%
Tranche 2 Non-current
6.5%
Tranche 3 Non-current
5.0%
21 April
2021
21 April
2023
21 April
2024
30,708
83,000
45,000
45,000
18,115
-
93,823
128,000
Variable
Classification
Coupon
Rate
Due Date
2020
$’000
2019
$’000
C7 PAYABLES
Sundry creditors (i)
Dividend/distribution payable
Accrued expenses
2020
$’000
36,498
25,110
14,924
76,532
2019
$’000
13,869
19,180
9,183
42,232
Tranche 1
Current
Tranche 2 Non-current
Tranche 3 Non-current
BBSW
+4.5%
21 April
2021
BBSW
+4.25%
21 April
2023
BBSW
+4.50%
21 April
2024
26,040
40,000
35,000
35,000
13,960
-
75,000
75,000
(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.
Centuria Capital Group – Annual Report 2020 | 77
Notes to the financial statements
For the year ended 30 June 2020
(B) REVERSE MORTGAGE BILL FACILITIES AND NOTES
(SECURED)
As at 30 June 2020, the Group had $7,422,000 (2019: $8,194,000)
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 2021.
The facility limit as at 30 June 2020 is $8,200,000 (2019:
$9,100,000) 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.
Facility
Amount used at reporting date
Amount unused at reporting date
2020
$’000
8,200
(7,422)
778
2019
$’000
9,100
(8,194)
906
(C) SECURED FACILITY - AUGUSTA
Borrowings facilities acquired as part of Augusta are outlined
as follows:
Fund
30 June 2020
Augusta
Warehouse
Facility
Current/
non-current
classification
Maturity
date
Facility
limit
$’000
Funds
available
$’000
Draw
down
$’000
Borrowing
costs
$’000
Draw
down
$’000
30 June
Current
2021 5,610
- 5,610
- 5,610
5,610
(D) 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:
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 RIGHT OF USE ASSET/LEASE LIABILITY
The Group has six operating lease commitments being, office
leases at Level 41 Chifley Square, Sydney NSW, Level 32, 120
Collins Street, Melbourne VIC, Level 2, 348 Edward Street,
Brisbane QLD, Level 7, 56 Clarence Street, Sydney NSW, 38-35
Gaunt Street Auckland NZ and 331-335 Devon Street East,
New Plymouth NZ. The application of AASB 16 results in the
recognition of a right of use asset along with a lease liability
in the consolidated statement of financial position.
• the Chifley Square lease has a contract length of 10 years
with a 5 year extension option and fixed annual rent
increases of 4.0%;
• the Collins Street lease has a contract length of 5 years
with fixed annual rent increases of 3.75%;
• the 348 Edward Street lease has a contract length of 5
years with fixed annual rent increases of 3.5%;
• the 56 Clarence Street lease has a contract length of 5
years with a 5 year extension option and fixed annual rent
increases of 4.0%;
• the 38-35 Gaunt Street lease has a contract length of 8
years with fixed annual rent increases of 2.5%; and
• the 331-335 Devon Street East lease has a contract length
of 3 years with a 3 year extension option and fixed annual
rent increases based on CPI.
Information about leases for which the Group is a lessee is
presented below.
Right of use asset
Opening balance
Additions of new leases
Fund
30 June 2020
Centuria 111
St Georges
Terrace
Fund
Nexus
Property
Unit Trust
30 June 2019
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
Depreciation on right of use asset
Acquisition of subsidiary balance
Non-
current
30 Jun
2022 90,000 6,644 83,356 (193) 83,163
Lease liability
Opening balance
Non-
current
4 Dec
2022 2,805
Additional lease liability from new lease
- 2,805
(48) 2,757
Cash lease payments
85,920
Finance lease interest
Acquisition of subsidiary balance
Non-
current
30 Jun
2022 90,000 10,521 79,479 (107) 79,372
31 Dec
Current
2019 14,938
- 14,938
(1) 14,937
94,309
78 | Centuria Capital Group – Annual Report 2020
2020
$’000
19,724
977
(1,961)
2,653
21,393
2020
$’000
19,724
976
(2,018)
982
2,900
22,564
2019
$’000
-
-
-
-
-
2019
$’000
-
-
-
-
-
C10
CONTRIBUTED EQUITY
2020
2019
Centuria Capital Limited
No. of securities
$’000
No. of securities
$’000
Balance at beginning of the period
Equity settled share based payments expense
Stapled securities issued
Cost of equity raising
Balance at end of period
383,557,332
1,529,427
124,911,723
-
509,998,482
128,164
304,793,174
795
49,845
(1,655)
177,149
1,747,653
77,016,505
-
383,557,332
98,770
966
29,425
(997)
128,164
Centuria Capital Fund (non-controlling interests)
No. of securities
$’000
No. of securities
$’000
2020
2019
Balance at beginning of the period
Equity settled share based payments expense
Stapled securities issued
Cost of equity raising
Special non-cash dividend/capital reallocation(i)
383,557,332
1,529,427
124,911,723
-
-
343,438
304,793,174
244,930
-
205,216
(2,910)
-
1,747,653
77,016,505
-
-
-
70,694
(2,186)
30,000
343,438
Balance at end of the period
509,998,482
545,744
383,557,332
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. Half of these options (10,049,235) were exercised on
31 December 2019.
(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.
The Group has recognised the issuance of 27,021,424 stapled
securities on 30 June 2020 in satisfaction of the scrip
component of the offer consideration for the acquisition of
a 40.66% interest in Augusta Capital Limited. The securities
were issued at a price of $1.8175 based on the listed security
price of the Group at 30 June 2020.
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.
C11 COMMITMENTS AND CONTINGENCIES
AUSTRALIAN GUARANTEES
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.
CONSTRUCTION CONTRACTS
As at 30 June 2020, the Group was committed to expenditure of
$44,781,265 (excluding GST) in relation to construction contracts
in relation to its social affordable housing developments.
NEW ZEALAND GUARANTEES
Under the Development Agreement with Queenstown Lakes
District Council (QLDC) as part of the Lakeview joint venture,
the Group have provided a guarantee of the Partnership’s
obligations under the Development Agreement, with a
maximum capital commitment of NZ$14.0 million. The Group’s
total aggregate liability under this guarantee is capped at
NZ$4.25 million. Refer to Note E1 Interests in associates and
joint ventures for more information.
CAPITAL COMMITMENTS
At 30 June 2020 the Group has capital commitments of NZ$1.3
million. In addition, the Company has committed up to a further
NZ$12.8 million of capital over approximately the next 10 years
in its joint venture partnership with Ninety Four Feet.
CONTINGENT LIABILITIES
The Group’s subsidiary, Augusta Funds Management Limited,
entered in an agreement to purchase the Albany Lifestyle
Centre in May 2019, and paid a NZ$4.525 million deposit. The
vendor of the Albany Lifestyle Centre cancelled the acquisition
contract on 20 April 2020. As a result, the NZ$4.525 million
deposit funded by Augusta has been forfeited to the vendor.
While Augusta is not the counterparty to the acquisition
contract, there is a risk that Augusta (or its associated entities)
may be subject to further claims in relation to the proposed
acquisition. This could include claims for loss of value, interest
and other costs, less ongoing rental income received by the
vendor and the deposit funded by Augusta.
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.
Centuria Capital Group – Annual Report 2020 | 79
Notes to the financial statements
For the year ended 30 June 2020
D Cash flows
D1
OPERATING SEGMENT CASH FLOWS (I)
D2 CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Management fees received
Performance fees received
Distributions received
Interest received
Other income received
2020
$’000
2019
$’000
82,127
55,406
37,231
1,361
29,938
27,246
988
823
1,509
-
Included in cash and cash equivalents of $174,458,000 is
$23,621,773 (2019: $39,359,000) relating to amounts held by
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
Payments to suppliers and employees
(82,102) (56,420)
Income tax paid
Interest paid
(8,581)
(242)
Profit for the year
(9,889)
(11,261)
Adjustments for:
Net cash provided by operating activities
50,535
17,599
Cash flows from investing activities
Proceeds from sale of related party investments
53,554
3,552
Purchase of investments in related parties
(122,688) (173,487)
Repayment of loans by related parties
11,800
5,865
Depreciation and amortisation
Share-based payment expense
Amortisation of borrowing costs
Fair value movement of financial assets
42,032
(8,434)
Interest revenue from reverse mortgages
(2,631)
(2,530)
Interest expense reverse mortgage facility
1,126
1,495
Loans to related parties for purchase of properties (11,800)
-
Purchase of equity accounted investments
(12,977) (23,960)
Equity accounted profit in excess of
distribution paid
(1,978)
(10,415)
Purchase of other investments
(6,115) (72,262)
Unrealised loss on investment properties
6,260
10,695
Payments for plant and equipment
(522)
(3,713)
Amortisation of lease incentives
Cash balance on acquisition of subsidiaries
15,773
Purchase of subsidiaries
(40,852)
Purchase of Property Held for Development
(1,295)
-
-
-
Costs paid for debt issuance
Finance lease interest
Cash paid on lease liability
Collections from reverse mortgage holders
1,646
952
Changes in net assets and liabilities:
Proceeds from sale of investments
- 136,899
(Increase)/decrease in assets:
Purchase of equity accounted investments
-
-
Receivables
Cash contribution to related party
Loans provided to other parties
- (20,000)
-
(5,925)
Prepayments
Deferred tax assets
Net cash used in investing activities
(113,476) (152,079)
Increase/(decrease) in liabilities:
2020
$’000
2019
$’000
22,087
50,941
2,943
2,014
995
460
966
799
1,665
1,311
1,229
(2,366)
1,602
1,744
-
-
(3,571)
(30,954)
(349)
(452)
(12,926)
-
(6,162)
(2,699)
4,963
510
3,998
975
7,375
1,454
(28,024)
(10,118)
33,126
12,904
Other payables
Tax provision
Deferred tax liability
Provisions
Policyholder liability
Net cash flows provided
by operating activities
Cash flows from financing activities
Proceeds from issue of securities
205,736 100,119
Equity raising costs paid
Proceeds from borrowings
Repayment of borrowings
Capitalised borrowing costs paid
Distributions paid
(4,317)
(3,179)
-
80,000
(35,771)
(235)
(1,628)
(1,744)
(39,377)
(29,111)
Net cash provided by financing activities
124,643 145,850
Net increase in operating cash and cash
equivalents
61,702
11,370
Cash and cash equivalents at the beginning
of the period
87,759
76,389
Cash and cash equivalents at the end of the period 149,461
87,759
(i) The operating segment cash flows support the segment note disclosures of
the 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 57 for the full statutory cash flow statement of the Group.
80 | Centuria Capital Group – Annual Report 2020
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.
E Group Structure
E1
INTERESTS IN ASSOCIATES AND JOINT VENTURES
During the year, the Group’s investment in Centuria Office REIT (COF) and Centuria Industrial REIT (CIP) reduced below 20% and
the Group no longer had significant influence over COF and CIP. As a result, these investments which were previously accounted for
as equity accounted investments using the equity method, are now recognised as financial assets at fair value as at 30 June 2020.
As at 26 February 2020, the Group increased its ownership stakes in the Centuria Diversified Property Fund to 22.7%. From that
date, the Group has equity accounted its interest in that fund.
The Group’s subsidiary, Augusta Lakeview Holdings Limited (Lakeview Holdings) has signed a partnership agreement with
NFF QT Development Unit Trust (NFF) to establish QT Lakeview Partnership (the Joint Venture) to develop the Lakeview site
in Queenstown, New Zealand. Lakeview Holdings has a 25% interest in the Joint Venture which represents a maximum capital
commitment to Lakeview Holdings of NZ$14.0 million. The Joint Venture has entered into a development agreement with the
Queenstown Lakes District Council to develop a range of residential, hotels, co-working, co-living, hospitality and retail options
on the 3 hectare site on a staged basis, with construction estimated to take more than 10 years and phased over 7 stages.
Name of entity
% of
ownership
interest
30 June 2020
%
% of
ownership
interest
30 June 2019
%
Principal
activity
Quoted fair value
30 June 2020
$’000
Quoted fair value
30 June 2019
$’000
Carrying amount
30 June 2020
$’000
Carrying amount
30 June 2019
$’000
QT Lakeview Developments Limited
25.00
0.00
Centuria Office REIT
0.00
20.76
Centuria Industrial REIT
0.00
24.15
Centuria Diversified Property Fund
22.68
0.00
Total equity accounted investments
Property
investment
Property
investment
Property
investment
Property
investment
1,125
-
1,125
-
-
-
31,830
32,955
207,104
200,138
-
407,242
-
-
31,830
32,955
203,435
183,278
-
386,713
The Group equity accounted Augusta Capital Limited from 12 May 2020 to 30 June 2020. On 30 June 2020, the Group
consolidated Augusta Capital Limited. Refer to note E2(b).
Movements in carrying amounts of
equity accounted investments
Opening balance as at 1 July 2019
Acquisition of investments
Acquisition of subsidiary that held significant influence
Share of net (loss)/profit after tax
Distributions received/receivable
Carrying value transferred from/(to) financial assets
Fair value gain/(loss)
Gain of control of Augusta Capital Limited on
30 June 2020
Augusta Capital
Limited
$’000
QT Lakeview
Developments
Limited
$’000
Centuria
Diversified
Property Fund
$’000
Centuria
Office REIT
$’000
Centuria
Industrial REIT
$’000
Total
$’000
-
20,285
-
(584)
-
-
16,517
(36,218)
-
-
1,125
-
-
-
-
-
-
-
-
(502)
502
-
-
203,435
183,278
386,713
7,500
12,976
-
2,785
(3,291)
-
6,611
40,761
1,125
8,310
(3,057)
(5,846)
-
-
-
-
-
-
16,517
(36,218)
32,955
31,830
(210,429)
(199,808)
(378,407)
Closing balance as at 30 June 2020
-
1,125
31,830
The below table shows the movement in carrying amounts of equity accounted investments from 1 July 2018 to 30 June 2019.
Movements in carrying amounts of equity accounted investments
Opening balance as at 1 July 2018
Carrying value transferred from financial assets
Investment
Share of net profit after tax
Distributions received/receivable
Closing balance as at 30 June 2019
Centuria
Office REIT
$’000
Centuria
Industrial REIT
$’000
-
-
Total
$’000
-
179,736
154,024
333,760
20,000
13,369
23,960
16,844
43,960
30,213
(9,670)
(11,550)
(21,220)
203,435
183,278
386,713
Centuria Capital Group – Annual Report 2020 | 81
Notes to the financial statements
For the year ended 30 June 2020
(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’s share of those amounts.
QT Lakeview
Developments Pty Ltd
Centuria Diversified
Property Fund
Centuria
Office REIT
Centuria
Industrial REIT
Summarised balance sheet
(excluding intangibles)
30 June 2020
$’000
30 June 2019
$’000
30 June 2020
$’000
30 June 2019
$’000
30 June 2020
$’000
30 June 2019
$’000
30 June 2020
$’000
30 June 2019
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,013
-
11,633
29,646
166,588
166,588
3,812
3,812
64,988
351
65,339
127,083
22.68%
28,822
3,008
31,830
10,919
24
(10,919)
(1,233)
(3,699)
-
(351)
(5,259)
(5,259)
-
(5,259)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
108,859
334
7,143
(22,110)
(33,910)
8
(6,752)
53,572
53,572
-
53,572
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
93,863
195
53,808
(21,496)
(34,563)
602
(3,581)
88,828
88,828
-
88,828
Cash and cash equivalents
Investment properties held for sale
Other current assets
Total current assets
-
-
-
-
Other non-current assets
Total tangible non-current assets
4,501
4,501
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
Summarised statement of
comprehensive income
Revenue
Interest income
Net (loss)/gain on fair value
of investment properties and
other investments
Finance costs
Other expenses
Other income
Loss on fair value of derivative
financial instruments
(Loss)/profit from
continuing operations
(Loss)/profit for the year
Other comprehensive income
Total comprehensive (loss)/income
-
-
-
-
-
4,501
25.00%
1,125
-
1,125
-
-
-
-
-
-
-
-
-
-
-
82 | Centuria Capital Group – Annual Report 2020
E2 BUSINESS COMBINATION
(A) CENTURIA HEALTHCARE PTY LIMITED ACQUISITION
On 20 May 2019, the Group announced the acquisition of
a 63.06% economic interest and 50.00% voting interest
in Centuria Healthcare Pty Limited (Centuria Healthcare)
(formerly Heathley Limited) for cash consideration of
$24,439,000. Completion of the acquisition was subject to
Centuria Healthcare shareholders convening a meeting and
voting to approve the transaction in addition to other items.
This vote was passed during a meeting held on 19 July 2019
and the transaction was subsequently completed on
5 September 2019.
The Group is taken to have gained control over Centuria
Healthcare from the time the shareholder vote was passed
on the basis that the acquisition was considered as
substantially complete at that time.
The purchase of Centuria Healthcare is part of the Group’s
strategy of growing its real estate funds management platform
and establishing a presence in the growing healthcare sector.
CONSIDERATION TRANSFERRED
The following table summarises the acquisition date fair value
of each major class of consideration transferred.
Cash
Contingent consideration - call/put option liability(i)
Total consideration transferred
24,439
16,356
40,795
(i) Contingent consideration
The Call/Put option liability relates to a simultaneous
call option and put option over the remaining shares in
Centuria Healthcare which are held by existing management
shareholders of Centuria Healthcare. The call option is in
favour of the Group, whilst the put option is in favour of the
management shareholders. The options are exercisable five
years from the date of completion of the initial acquisition of
the 63% economic interest in Centuria Healthcare, with an
exercise price equal to 10x EBIT for the last financial year prior
to exercise of the option plus Net Tangible Assets.
The Group has applied the anticipated-acquisition method
in accounting for the business combination as the Group has
the right and the obligation to purchase any remaining non-
controlling interest under a put/call arrangement.
Under the anticipated acquisition method, the interests of
the non-controlling shareholders are recognised by the
Group as a financial liability relating to the purchase of those
interests. The recognition of the financial liability implies
that the interests subject to the purchase are deemed to
have already been acquired, meaning no non-controlling or
outside equity interests are recognised. The corresponding
interests are therefore presented as already owned by the
Group even though the non-controlling shareholders retain
legal ownership. The initial measurement of the fair value of
the financial liability recognised by the Group forms part of
the contingent consideration for the acquisition.
IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES
ASSUMED
The assets and liabilities recognised as a result of the
acquisition are as follows:
Cash and cash equivalents
Receivables
Financial assets
Other assets
Payables
Provisions
Provision for income tax
Deferred tax liabilities
Total identifiable net assets acquired
Fair Value
$’000
4,140
6,188
120
180
(6,071)
(1,036)
105
3,154
6,780
Goodwill arising from the acquisition has been recognised
as follows:
Consideration transferred
$’000
Fair value of identifiable net assets
Goodwill
$’000
40,795
(6,780)
34,015
The goodwill is attributable mainly to Centuria Healthcare’s
work force and business relationships which the Group will
utilise to establish a platform for healthcare real estate from
which to grow. None of the goodwill recognised is expected
to be deductible for tax purposes.
TRANSACTION RELATED COSTS
Transaction related costs of $546,000 were accrued in
the profit and loss for the year ended 30 June 2019 and an
additional $46,000 were expensed in the profit and loss
for the year ended 30 June 2020.
Centuria Capital Group – Annual Report 2020 | 83
Notes to the financial statements
For the year ended 30 June 2020
(B) AUGUSTA CAPITAL LIMITED ACQUISITION
On 5 May 2020, the Group, through its wholly owned
subsidiary Centuria New Zealand Holdings Limited,
acquired a 10.32% interest in Augusta Capital Limited
(Augusta). The Group acquired a further 10.16% interest in
Augusta on 12 May 2020 which increased its total interest
to 20.48%. At that time the Group was taken to have
significant influence over Augusta and recognised its
investment in Augusta under the equity method.
The Group acquired a further 2.79% interest in Augusta on 26
May 2020, increasing its total interest to 23.27%.
Subsequently, on 29 June 2020, the Group made a takeover
offer to Augusta shareholders to acquire all of the Augusta
shares that it did not already own (the Offer). As a result of the
Offer, the Group acquired a further 40.66% of Augusta shares
on 30 June 2020 (acquisition date), increasing its total interest
to 63.92% and gaining control of Augusta.
The initial 23.27% interest was purchased for consideration
of NZ$0.55 per Augusta share which was funded with existing
cash reserves of the Group. The acquisition of the additional
40.66% interest was subject to the Offer consideration
which comprised NZ$0.22 cash plus the issuance of 0.392
CNI stapled securities for each Augusta share. The cash
component of the Offer consideration was funded with
existing cash reserves of the Group.
The purchase of Augusta is part of the Group’s strategy of
growing its real estate funds management platform, diversifying
its platform geographically, and increasing recurring revenues
through additional co-investment in managed funds.
IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
The assets and liabilities recognised as a result of the
acquisition are as follows:
Fair Value AUD
$’000
Cash and cash equivalents
Receivables
Financial assets
Income tax receivable
Other assets
Deferred tax assets
Equity accounted investments
Investment properties - held for sale
Intangible assets - indefinite life management rights
Property held for development
Right of use asset
Payables
Deferred tax liabilities
Borrowings
Lease liability
Total identifiable net assets acquired
11,633
4,659
26,937
755
1,129
3,908
1,125
861
20,054
29,999
2,653
(2,309)
(5,615)
(5,610)
(2,900)
87,279
GOODWILL
Goodwill arising from the acquisition has been recognised
as follows:
AUD
$’000
Consideration transferred
For the year ended 30 June 2020, Augusta did not contribute
any revenue or profit to the Group’s results. This is because
the Group did not gain control of Augusta until 30 June 2020.
Non-controlling interest, based on the acquisition
date fair value (i)
Fair value of pre-existing interests in Augusta (ii)
63,290
56,159
36,218
(87,279)
68,388
Fair value of identifiable net assets
Goodwill (iii)
(i) Non-controlling interest
The non-controlling interest reflects the portion of Augusta
shares that had not been acquired by the Group at the acquisition
date and represents the interests that continue to be held by
existing Augusta shareholders at the acquisition date fair value.
(ii) Remeasurement of pre-existing interest
As the business combination was achieved in stages, the
Group is required to remeasure its equity interests in Augusta
held before the acquisition date at their acquisition date fair
value and recognise the resulting gain in profit or loss.
(iii) Goodwill
The goodwill is attributable mainly to Augusta’s work force
and established business practices and relationships which
will form the basis for the Group’s New Zealand platform from
which to grow. None of the goodwill recognised is expected to
be deductible for tax purposes.
TRANSACTION RELATED COSTS
Transaction related costs of $5,236,000 were incurred for year
in respect of the acquisition of Augusta, of which $4,601,000
were expensed in the profit and loss and $635,000 were
recorded against equity.
CONSIDERATION TRANSFERRED
The following table summarises the acquisition date fair value
of each major class of consideration transferred.
Payable (i)
Equity (Company shares issued) (ii)
Equity (Fund units issued) (ii)
Total consideration transferred
AUD
$’000
14,179
7,735
41,376
63,290
(I) PAYABLE
At 30 June 2020, the Group had not yet paid the cash
component of the Offer consideration. The Payable represents
the Australian dollar equivalent of the Group’s obligation to pay
NZ$0.22 cash per Augusta share to each Augusta shareholder
who had accepted the Offer as at 30 June 2020.
(II) EQUITY ISSUED
The fair value of the ordinary shares issued by the Company and
ordinary units issued by the Fund is based on the listed security
price of CNI at 30 June 2020 of A$1.8175 and attributed 15.75%
to Company shares and 84.25% to Fund units.
84 | Centuria Capital Group – Annual Report 2020
E3
INTERESTS IN MATERIAL SUBSIDIARIES
The Group’s principal subsidiaries at 30 June 2020 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 the following jurisdictions Australia, New
Zealand and Singapore with principal places of business corresponding with the respective geographic jurisdictions. The parent
entity of the Group is Centuria Capital Limited.
Australian subsidiaries
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 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 Health Fund
Centuria Developments (Cardiff) Pty Limited
Ownership
interest %
30 June
2020
30 June
2019
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%
Centuria Developments (Mann Street) Pty Limited
100% 100%
Centuria Developments (Mayfield) Pty Limited
100% 100%
Centuria Developments (Young Street) Pty Limited
100% 100%
Centuria Developments Pty Limited
Centuria Employee Share Fund Pty Ltd
Centuria Finance Pty Ltd
Centuria Funds Management Limited
100% 100%
100% 100%
100% 100%
100% 100%
Australian subsidiaries
Over Fifty Investments Pty Ltd
Over Fifty Seniors Equity Release Pty Ltd
Senex Warehouse Trust No. 1
Centuria Healthcare Pty Ltd*
80 Grenfell Street Pty Ltd
Centuria Healthcare Property Fund
Nexus Property Unit Trust
Centuria Retail Fund
Centuria 111 St Georges Terrace Fund
Ownership
interest %
30 June
2020
30 June
2019
100% 100%
100% 100%
100% 100%
63%
50%
100%
59%
0%
0%
0%
0%
0% 50%
42% 42%
Centuria Investment Holdings No. 4 Pty Limited
100% 100%
Centuria Investment Management (CMA) Pty Limited 100%
0%
Centuria Investment Management (CMA) No. 2 Pty
Limited
Centuria 61-67 Wyatt St Pty Limited
Centuria 80 Flinders Street Pty Limited
Fromnex Pty Limited
Centuria Business Services Pty Limited
Ahnco Pty Ltd*
Centuria Healthcare Asset Management Limited*
Centuria Healthcare Asset Management Nominee 1
Pty Ltd*
Heathley Developments Limited*
Centuria Healthcare Energy Company Pty Ltd*
Centuria Industrial Property Services Pty Limited
100% 100%
Heathley Finance Company Pty Ltd*
Centuria Institutional Investments No. 3 Pty Limited 100% 100%
Centuria Healthcare Funds Distributions Limited*
Centuria Investment Holdings Pty Limited
100% 100%
Heathley Funds Management Pty Ltd*
Centuria Investment Management (CDPF) Pty Ltd
100% 100%
Centuria Healthcare Investments Pty Ltd*
Centuria Industrial Property Services Pty Ltd
100% 100%
Heathley Investor Services Pty Limited*
Centuria Institutional Investments No. 3 Pty Limited 100% 100%
Heathley Nominees Pty Ltd*
Centuria Investment Holdings Pty Limited
100% 100%
Heathley Property Services Pty Limited*
Centuria Investment Management (CDPF) Pty Ltd
100% 100%
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 SubCo Pty Limited
Over Fifty Capital Pty Ltd
Over Fifty Funds Management Pty Ltd
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
New Zealand Subsidiaries
Augusta Capital Limited
Augusta Funds Management Limited
Augusta Property Holdco Limited
Augusta Lake View Holdings Limited
Centuria New Zealand Holdings Limited
Singapore subsidiaries
Centuria Capital Private Limited (Singapore)
100% 100%
*: The ownership percentage outlined above for these subsidiaries reflects the
Group’s economic ownership. The Group holds a 50% voting right in each of these
subsidiaries.
Centuria Capital Group – Annual Report 2020 | 85
100%
100%
100%
50%
100%
63%
63%
63%
63%
63%
63%
63%
63%
63%
63%
63%
63%
64%
64%
64%
64%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Notes to the financial statements
For the year ended 30 June 2020
RECOGNITION AND MEASUREMENT
E4 PARENT ENTITY DISCLOSURE
(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 securityholders 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 being attributable to policyholders
(as approved to securityholders) an equal and offsetting
policyholder liability is recognised on consolidation. In
addition, on consolidation of the various income and
expenses attributable to the 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.
As at, and throughout the current and previous financial year,
the parent entity of the Group was Centuria Capital Limited.
2020
$’000
2019
$’000
Result of parent entity
Profit or loss for the year
Total comprehensive income for the year
22,152
22,152
43,386
43,386
Financial position of parent
entity at year end
Total assets
Total liabilities
Net assets
212,554
180,847
(26,207)
(50,557)
186,347
130,290
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
177,149
128,143
3,322
5,876
2,102
45
186,347
130,290
(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.
86 | Centuria Capital Group – Annual Report 2020
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 42 to 49.
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
2020
Number
2019
Number
5,727,134
5,368,687
2,892,669
2,276,559
-
(288,868)
(1,529,430)
(1,629,244)
Performance rights outstanding
at the end of the year
7,090,373
5,727,134
The performance objectives for 1,921,148 of the performance
rights issued under Tranche 5 were met in full at 30 June 2020.
As a result, these rights will vest on 12 August 2020.
(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:
Tranche 5
Tranche 6
Tranche 7
Expected vesting date
12 August
2020
31 August
2021
31 August
2022
Share price at the grant date
$1.46
$1.32
$2.13
Expected life
Volatility
Risk free interest rate
Dividend yield
2.8 years
2.6 years
2.9 years
20%
1.96%
5.7%
18%
1.75%
6.5%
18%
0.76%
4.5%
The following table sets out the fair value of the rights at the
respective grant date:
Performance Condition
Tranche 5
Tranche 6
Tranche 7
Growth in FUM
Absolute TSR
$1.24
$0.62
$1.11
$0.19
$1.87
$0.79
During the year, share based payment expenses were
recognised of $1,737,023 (2019: $1,172,048).
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.
Centuria Capital Group – Annual Report 2020 | 87
Notes to the financial statements
For the year ended 30 June 2020
F2 GUARANTEES TO BENEFIT FUND
F3 FINANCIAL INSTRUMENTS
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 (collectively “Funds”) as described below.
If CLL is required under the bond rules to pay policy benefits to
a policy owner as a consequence of the termination of a 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 Funds. The Funds 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.
(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.
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 Benefit 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.
88 | Centuria Capital Group – Annual Report 2020
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 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 81 years;
The Group carries on business throughout Australia and New
Zealand, primarily through subsidiary companies that are
established in the markets in which the Group operates. The
operations of CLL are regulated by APRA and the management
fund of CLL as 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 CLL meets the PCA requirements.
In addition, Centuria Property Funds Limited, Centuria Funds
Management Limited, Centuria Property Fund No.2 Limited,
Centuria Healthcare Asset Management Limited and Heathley
Funds Distribution 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.
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 regularly reviews 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 policyholders
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 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 2020 to
determine the fair value.
(ii) Valuation techniques and assumptions applied in
determining fair value of derivatives
The fair values of derivative instruments are calculated using
quoted prices. Where such prices are not available, discounted
cash flow analysis is performed using the applicable yield
curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
The valuation technique used to determine the fair value of the
Fixed for Life interest rate swaps is as follows:
• the weighted average reverse mortgage holders’ age is 81 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 2020 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 2020 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.
Centuria Capital Group – Annual Report 2020 | 89
Notes to the financial statements
For the year ended 30 June 2020
30 June 2020
FINANCIAL ASSETS
Measurement
basis
Fair value
hierarchy
Carrying
amount
$’000
Fair value
$’000
Cash and cash equivalents
Amortised cost Not applicable
174,458
174,458
Receivables
Financial assets
Financial assets
Financial assets - mortgage backed assets
Reverse mortgages receivables
Amortised cost Not applicable
68,729
68,729
Fair value
Fair value
Fair value
Fair value
Level 1
639,398
639,398
Level 2
Level 3
Level 3
73,920
73,920
1,195
1,195
58,904
58,904
1,016,604 1,016,604
FINANCIAL LIABILITIES
Payables
Amortised cost Not applicable
76,532
76,532
Benefit Funds policy holders' liability
Amortised cost Not applicable
311,535
311,535
Borrowings (net of borrowing costs)
Amortised cost Not applicable
265,051
267,907
Interest rate swaps - controlled property funds
Interest rate swaps - reverse mortgage fixed-for-life
Call/Put option liability
Fair value
Fair value
Fair value
Level 2
Level 3
Level 3
636
32,752
17,167
636
32,752
17,167
703,673
706,529
30 June 2019
FINANCIAL ASSETS
Measurement
basis
Fair value
hierarchy
Carrying
amount
$’000
Fair value
$’000
Cash and cash equivalents
Amortised cost Not applicable
124,673
124,673
Receivables
Financial assets
Financial assets
Financial assets - mortgage backed assets
Reverse mortgages receivables
Amortised cost Not applicable
69,862
69,862
Fair value
Fair value
Fair value
Fair value
Level 1
252,883
252,883
Level 2
Level 3
Level 3
48,296
48,296
1,215
1,215
53,720
53,720
550,649
550,649
FINANCIAL LIABILITIES
Payables
Amortised cost Not applicable
42,232
42,232
Benefit Funds policy holders' liability
Amortised cost Not applicable
339,557
339,557
Borrowings (net of borrowing costs)
Amortised cost Not applicable
303,110
309,624
Interest rate swaps - controlled property funds
Interest rate swaps - reverse mortgage fixed-for-life
Fair value
Fair value
Level 2
Level 3
731
731
28,083
28,083
713,713
720,227
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.
90 | Centuria Capital Group – Annual Report 2020
(iii) Fair value measurements recognised in the statement
of financial position (continued)
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.
(iv) Reconciliation of Level 3 fair value measurements of
financial assets and liabilities
Other
mortgage
backed
assets at
fair value
$’000
Reverse
mortgages
fair value
$’000
Fixed-for-life
interest rate
swaps
$’000
Call/Put
option
liability
$’000
Total
$’000
Year ended 30 June 2020
Balance at 1 July 2019
1,215 53,720 (28,083)
Loan repaid
(20)
(1,646)
465
- 26,852
- (1,201)
Call/Put option liability
Accrued interest
Attributable to interest
rate and other risk
Attributable to
credit risk
Balance at
30 June 2020
-
-
-
-
-
- (17,167) (17,167)
2,871
(1,760)
4,782 (4,669)
(823)
1,295
-
-
-
1,111
113
472
Other
mortgage
backed
assets at
fair value
$’000
Reverse
mortgages
fair value
$’000
Fixed-for-life
interest rate
swaps
$’000
Call/Put
option
liability
$’000
Total
$’000
Year ended 30 June 2019
Balance at 1 July 2018
1,215 48,059 (22,939)
(1,379)
227
2,956
(1,495)
- 26,335
- (1,152)
-
1,461
5,061
(7,211)
- (2,150)
Loan repaid
Accrued interest
Attributable to interest
rate and other risk
Attributable to
credit risk
Balance at
30 June 2019
-
-
-
-
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 exceeding
the property growth rate will not be recovered after that
point of time;
• For 30 June 2020 valuation, the property growth rates are
-3.5% for FY21, -1.5% for FY22, then reverted back to 3.4%
flat rate from FY23 onwards;
long term rates on 30 June 2020;
• The 1% flat credit risk premium, reflecting the portfolio
default profile on 30 June 2020, 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
1,195 58,904 (32,752) (17,167) 10,180
• Discount factors are calculated based on the market quoted
(977)
3,335
- 2,358
with joint borrowers;
• 34% of the residential mortgage loan portfolio consists of
1,215 53,720 (28,083)
- 26,852
joint lives;
• Discount factors are calculated based on the market quoted
long term rates on 30 June 2020;
• The 1.913% flat credit risk premium, reflecting the business
default profile on 30 June 2020, is added to the monthly
cash flow discount factors to discount future cash flows
generated by the reverse mortgage loans.
Centuria Capital Group – Annual Report 2020 | 91
Notes to the financial statements
For the year ended 30 June 2020
RECOGNITION AND MEASUREMENT
The Group enters into derivative financial instruments such as
interest rate swaps to manage its exposure to interest rate risk.
(E) LIQUIDITY RISK
The Group’s approach to managing liquidity is to ensure that it
will always have sufficient liquidity to meet its liabilities.
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 settled 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 2020, the highest loan to value ratio (LVR) of a loan in the
reverse mortgage loan book is 131% (2019: 103%), and there
are 69 out of 196 (2019: 63 out of 212) 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.
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
prepared 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 policyholders 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.
92 | Centuria Capital Group – Annual Report 2020
On
demand
$’000
Less than
3 months
$’000
3 months
to 1 year
$’000
1-5 years
$’000
5+ years
$’000
Total
$’000
-
-
-
-
-
Non-derivative financial liabilities
2020
Borrowings
Payables
Call/Put option liability
Total
2019
Borrowings
Payables
1,010
72,001
221,360
76,532
-
-
-
-
-
-
24,942
-
-
-
-
-
294,371
76,532
24,942
311,535
Benefit Funds policyholder's liability
311,535
Finance lease liabilities
-
443
1,404
8,938
11,779
22,564
311,535
77,985
29,603
317,172
11,779
729,944
Benefit Funds policyholder's liability
339,557
-
Total
339,557
43,373
29,603
317,172
1,141
29,603
317,172
42,232
-
-
-
-
-
-
-
-
347,916
42,232
339,557
729,705
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
2020
Interest rate swaps
Total
2019
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
Total
$’000
-
-
-
-
51
51
39
39
867
867
789
789
1,874
1,874
49,159
49,159
51,951
51,951
1,446
1,446
49,182
51,456
49,182
51,456
(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 PDS. There has been no change to the Group’s exposure to
market risks or the manner in which it manages and measures the risk.
Centuria Capital Group – Annual Report 2020 | 93
Notes to the financial statements
For the year ended 30 June 2020
(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.
The tables below detail the Group’s interest bearing financial assets and liabilities.
2020
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)
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)
Weighted
average effective
interest rate
%
Variable
rate
$’000
Fixed
rate
$’000
Total
$’000
0.24%
0.71%
10.00%
8.64%
150,752
79,902
-
1,181
23,706
81,397
6,702
57,723
174,458
161,299
6,702
58,904
231,835
169,528
401,363
4.19%
(171,228)
(93,823)
(265,051)
(171,228)
(93,823)
(265,051)
60,607
75,705
136,312
Weighted
average effective
interest rate
%
Variable
rate
$’000
Fixed
rate
$’000
Total
$’000
1.31%
2.93%
10.00%
8.73%
104,462
124,120
-
1,158
20,211
5,065
6,066
52,562
124,673
129,185
6,066
53,720
229,740
83,904
313,644
5.24%
(175,110)
(128,000)
(303,110)
(175,110)
(128,000)
(303,110)
54,630
(44,096)
10,534
(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.
94 | Centuria Capital Group – Annual Report 2020
Pay fixed for floating
contracts designated as
effective in fair value hedge
Average
contracted rate
Notional principal
amount
Fair value
2020
2019
2020
2019
2020
2019
%
%
$'000
$'000
$'000
$'000
Controlled property funds interest rate swaps
1.11%
1.36%
70,000
84,815
(636)
(731)
50 years swaps contracts
7.48%
7.48%
9,921
10,402 (32,752)
(28,083)
79,921
95,217 (33,388)
(28,814)
(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 25 basis point (0.25%) increase or decrease
represents management’s assessment of the reasonably possible change in interest rate.
At reporting date, if variable interest rates had been 25 (2019: 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
2020
Change in variable
2019
+0.25%
-0.25%
+1%
-1%
Effect on profit after tax
2020
$’000
(181)
109
2019
$’000
631
(537)
The methods and assumptions used to prepare the sensitivity analysis have not changed in the year. The
sensitivity analysis takes into account interest-earning assets and interest-bearing liabilities attributable
to the securityholders only, and does not take into account the bank bill facility margin changes.
(iv) Fair value hedges
The Group held the following instruments to hedge exposures to changes in interest rates.
Interest rate swaps - as at 30 June 2020
Net exposure ($'000)
Average fixed interest rate
Interest rate swaps - as at 30 June 2019
Net exposure ($'000)
Average fixed interest rate
Maturity
1-6 months
6-12 months
More than one year
-
-
-
-
-
-
-
-
9,921
7.48%
10,402
7.48%
The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows.
Carrying amount
Interest rate swaps
Nominal Amount
Assets
Liabilities
Hedge ineffectiveness
recognised in profit or loss
30 June 2020
30 June 2019
9,921
10,402
-
-
(32,752)
(28,083)
38
37
Interest rate swaps are recognised as interest rate swaps at fair value line item in the statement of
financial position. The line item in the profit or loss statement that includes hedge effectiveness is
within finance costs.
Centuria Capital Group – Annual Report 2020 | 95
Notes to the financial statements
For the year ended 30 June 2020
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
2020
$
420,565
125,500
114,266
660,331
2019
$
479,218
64,831
84,837
628,886
F5 EVENTS SUBSEQUENT TO THE REPORTING DATE
In addition to the issuance of 27,021,424 stapled securities in the Group which were recognised as at
30 June 2020 in respect of the acquisition of Augusta, the Group has subsequently issued a further
22,405,357 stapled securities for the additional Augusta shares that have been acquired to the date of
this report. The Group’s ownership of Augusta at the date of this report has increased to 96.4%.
Since balance date, the COVID-19 pandemic has continued to evolve with potential impacts on specific
areas of judgement applied in preparing these financial statements.
Victoria has reported increasing numbers of COVID-19 cases since early July 2020 and the Victorian
government has subsequently announced a stage-4 lock-down for Melbourne commencing from 2
August 2020 to 13 September 2020.
On 21 July the Government announced it is extending the JobKeeper Payment for a further six months
until end of March 2021 to support businesses who continue to be significantly impacted by COVID-19.
The Group has continued to re-evaluate the potential impacts of the pandemic on significant inputs
and key areas of judgement as outlined in Note A2. Based on these evaluations, the Group has
determined there are no material events which would give rise to an adjustment.
Since balance date, CIP has announced unconditional acquisitions amounting to $447 million. Included
in these acquisitions is the sale and lease back of the Telstra Data Centre in Clayton, Victoria.
Other than the above, there has not arisen in the interval between 30 June 2020 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 periods.
96 | Centuria Capital Group – Annual Report 2020
Directors’ Declaration
For the year ended 30 June 2020
In the opinion of the Directors’ of Centuria Capital Limited:
(a) the consolidated financial statements and notes set out on pages 52 to 96 and the Remuneration Report set out
on pages 42 to 49 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 2020 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 Joint Chief Executive Officers 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
Mr Peter J. Done
Director
Sydney
12 August 2020
Centuria Capital Group – Annual Report 2020 | 97
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 2020 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
the:
• Consolidated statement of financial position as at 30
June 2020;
• 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; and
• 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 (including Independence Standards) (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.
89
98 | Centuria Capital Group – Annual Report 2020
Key Audit Matters
The Key Audit Matters we identified for
the Stapled Group are:
• Recognition of performance fee
income
• Accounting for acquisitions
• 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 ($21.5m)
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 20% 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
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.
• 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
90
Centuria Capital Group – Annual Report 2020 | 99
•
•
yields. This leads to additional audit
effort due to the differing assumptions
based on asset classes, geographies
and characteristic 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.
investment properties, the Stapled Group’s
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.
Accounting for acquisitions
Refer to Note E2 to the Financial Report
The key audit matter
How the matter was addressed in our audit
During the year, the Stapled Group acquired:
•
63.92% of Augusta Capital Limited
(“Augusta”); and
63.06% of Centuria Healthcare Pty Ltd
(“Centuria Healthcare”) (formerly known as
Heathley Limited).
•
Acquisition accounting is identified as a
key audit matter given the significance to the
financial statements and the significant
judgment required to assess:
•
•
•
•
•
The effective date of the transaction based
on the evidence and determination of the
date of control and consolidation.
Fair value of consideration transferred;
Fair value of acquired assets and liabilities
including the value of identifiable intangible
assets (e.g. management rights);
Recognition of goodwill arising from the
acquisition;
Accounting treatment and valuation of the
put and call option in relation to the
remaining interest in Centuria Healthcare;
We involved valuation specialists in assessing
this key audit matter.
In performing our procedures, we:
• Obtained an understanding of the acquisition
by examining the sales and purchase
agreements and transaction documents.
• Considered the Stapled Group’s determination
of the date control was obtained. We did this
by evaluating the facts and circumstances of
the transaction and their relevance to the
Stapled Group’s assessment of control and
impact on the date control was obtained.
• Assessed the Stapled Group’s determination
of the fair value of consideration transferred,
considering all available information including
published prices and contractual agreements.
• Worked with our valuation specialists to
assess the Stapled Group’s determination of
fair value of acquired assets and liabilities. In
particular, we focused on the fair value of
identifiable intangible assets (e.g. management
rights).
• Evaluated the recognition of goodwill against
accounting standard requirements.
• Evaluated the Stapled Group’s recognition and
calculation of put and call option. This included
assessing its classification against accounting
standard requirements and challenging the
91
100 | Centuria Capital Group – Annual Report 2020
inputs to the calculation of the liability.
• Assessed the appropriateness of the relevant
disclosures in the Financial Report against
accounting standard requirements.
Recoverable amount of goodwill and indefinite life intangible assets ($275.5m)
Refer to Note C6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter is 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 Cash Generating
Unit (CGU) is subject to from time to time.
We involved valuation specialists in assessing
this key audit matter.
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 forecasts to inform our evaluation of
forecasts incorporated in the model.
• Challenged the Stapled Group’s significant
forecast cash flow and growth assumptions:
-
Challenged the Stapled Group’s significant
forecast cash flows by comparing baseline
cash flows to actual historic cash flows
and comparing key events to the Board
approved plan and strategy.
- 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
92
Centuria Capital Group – Annual Report 2020 | 101
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 on
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.
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
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 and Appendix 4E. The Investor Report, 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
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
93
102 | Centuria Capital Group – Annual Report 2020
•
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.
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_2020.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 for the year
ended 30 June 2020 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 42 to 49 of the Directors’ report for the year
ended 30 June 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards
KPMG
Nigel Virgo
Partner
Sydney
12 August 2020
94
Centuria Capital Group – Annual Report 2020 | 103
Additional ASX information
As at 31 July 2020
The securityholder information set out below was applicable as at 31 July 2020.
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
Number
of holders
Number
of securities
1,062
4,099
981
1,116
146
7,404
512,964
10,185,886
6,944,638
30,742,547
469,719,052
518,105,087
There were 280 holders of less than a marketable parcel of securities holding 32,887 securities.
TOP 20 SECURITYHOLDERS
The names of the twenty largest holders of securities are listed below:
Number held
92,223,039
88,592,543
63,890,587
33,239,554
32,368,569
23,432,165
22,409,493
17,700,754
9,536,034
8,893,666
5,779,411
4,870,000
4,244,364
3,477,066
3,270,454
2,939,287
2,702,659
2,215,115
2,131,028
1,979,348
Percentage
of issued
securities
17.80
17.10
12.33
6.42
6.25
4.52
4.32
3.42
1.84
1.72
1.12
0.94
0.82
0.67
0.63
0.57
0.52
0.43
0.41
0.38
425,895,136
82.21
Number held
Percentage
96,259,156
29,528,529
26,912,716
152,700,401
18.58%
6.11%
5.57%
30.26%
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PERPETUAL CORPORATE TRUST LTD
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