2021
ANNUAL
REPORT
...
G R O U P H O L D I N G S L IM I T E D
CONTENTS
...
Chairman’s Report
3
Chief Executive’s Report
5
Directors’ Report
21
Auditor ’s Independence Declaration
30
Financial Statements
31
Directors’ Declaration
66
Independent Auditor ’s Report
67
Shareholder Information
72
Corporate Director y
74
1
Desane Group Holdings Investing in tomorrow,
TODAY
...
We are focused on creating wealth for our
shareholders by specialising in property
development and property investment. Our
in-depth knowledge of these sectors, together
with our intimate understanding of our clients
and customers allows us to transform add value
opportunities into long term earnings and growth
ensuring consistent returns for shareholders.
2
AR 2021
Chairman’s
REPORT
The Group’s traditional base of
industrial and logistic property assets
have continued to perform well and
are clearly positioned in a property
investment sector which has been
increasingly sought after. The recent
planning approval obtained from
Brisbane City Council to expand the
Wacol logistics centre by a further
3,250m² of net lettable high clearance
floor space is further evidence of the
Group’s continuing objective to expand
such assets across the eastern seaboard
of Australia. Such industrial and logistic
assets continue to grow as a reliable
source of income for Desane.
The Reserve Bank of Australia has
continued to maintain historically low
official interest rates, with benchmark
Australian Government bond yields
being sought after, arguably due
to their less risk and heightened
investment security. Current restrictions
on overseas and now even interstate
travel have revealed that household
savings have risen, with a concomitant
uplift in household consumption,
replacing domestic and international
travel expenditure. It is apparent the
availability of domestic savings has
flowed through to domestic equities and
property as investment opportunities.
“...securing a prudent residential pipeline
of three significant sites across the inner
Sydney suburb of Leichhardt.”
...
The Group has further added to the
development pipeline through the
acquisition, as mentioned in my report
last year, of 1.2ha on Thornton Drive,
Penrith, which is well positioned to
take advantage of the Western Sydney
Airport now under construction. This
area of Sydney is increasingly being
recognised as the northern administrative
and logistic gateway to the new airport.
As mentioned in my report last year,
the continuing deterioration of the
relationship between the USA and
China has paradoxically reinforced
investor perceptions that the Australian
economy has an underlying robustness
in such parlous times. Whilst the
international environment is clearly
more fluid, nevertheless over the past
12 months, Australian domestic equities
and industrial and logistic properties,
as an investment vehicle, have been
and remain well-regarded by local and
overseas investors.
Finally, I can report to
shareholders that this annual
report is the 34th such
report of Desane Group
Holdings Limited. Your
Company has continued to maintain
its profitability due to the quality of its
senior management and the invaluable
contribution of its current Board.
Your Board remains confident the current
prudent strategies of investment and
cash retention will continue to result in
responsible asset growth and further
earnings for shareholders. I congratulate
both the Group executives and the
employees of Desane Group Holdings
Limited for the solid and as always,
prudent management of the Group.
Finally, I would like to welcome those
shareholders who have recently joined
the Company. The Board looks forward
to a rewarding and fruitful association
with those new shareholders during the
coming years.
Professor John Sheehan AM
Chairman
It gives me great pleasure to introduce
the Annual Report of Desane Group
Holdings Limited for 2021.
I can report to shareholders that the
Group’s earnings before interest and tax,
for the financial year ending 30 June
2021, was $2.7m and the Group’s total
assets are $87.7m. The Group’s net
tangible assets (NTA) now stand at
$1.44 per security accounting for the
proposed dividend payment.
The Board has resolved to declare a final
dividend of 2.25 cents per security,
unfranked, to be paid in October 2021.
This will bring the total
dividend for FY21 to 4.5
cents per security.
Notwithstanding the
continuing uncertainty
from COVID-19, the Group has been
minimally affected, with a pleasing
increase in operational revenue of
14%, driven by rising rental income
year-on-year, with steady operational
costs. In this environment the Group has
maintained continuing robust financial
results, whilst at the same time ensured
that the current cash and financial
assets stand at a healthy $13.2m. As
mentioned in my report last year, these
reserves have continued to place the
Group in a position to take advantage
of opportunities over the next financial
year.
Indeed, such opportunities have arisen
with the Group securing a prudent
residential pipeline of three significant
sites across the inner Sydney suburb of
Leichhardt. Opportunities created by
COVID-19 have highlighted the benefit
of inner suburbs having the benefit of
easy access to the CBD. Of the three
properties, one is located near the
Hawthorne Light Rail Station, and the
remaining two properties are close to the
Leichhardt North Light Rail Station and
express bus services to the CBD.
3
Desane Group Holdings
4
AR 2021 5
Desane Group Holdings Chief Executive’s
REPORT
I am pleased to report that Desane
Group Holdings Limited has reported its
tenth consecutive yearly profit result
for FY21 and is rewarding shareholders
with a 4.5 cents per share full year
dividend. The Group’s net tangible
assets, over the past five (5) years, has
increased by 75% and shareholders
have been rewarded with over $12.9m
in dividends. Our management’s
focused approach has ensured that
shareholder’s asset value has been
protected and enhanced.
The Group’s operational revenue
increased by 14%, driven by increased
rental income year-on-year. The
Group’s total assets increased by 4% to
$87.7m over the corresponding period.
Desane’s cash position remains strong
with $13.2m in cash and financial
assets. The Company’s diversified
$7.0m loan portfolio, secured by first
registered mortgages against quality
property assets, is yielding an average
of 7% pa interest revenue.
Notwithstanding the economic impact
and uncertainty caused by the first
phase of COVID-19, the Group’s
management has remained focused on:
•Adding value to our existing
investment property portfolio;
•Creating value through obtaining
planning approvals to our
residential development properties;
•Preservation of cash reserves and
capital; and
•Ensuring the health and safety of
our employees and customers.
In October 2020, Desane received
development approval from Brisbane
City Council to expand its existing
industrial property asset located in
the Brisbane suburb of Wacol. The
existing 5,039m² facility is leased to
Brisbane City Council and serves as the
Council’s vehicle and fleet maintenance
headquarters. The approved facility
will add 3,250m² of net lettable high
clearance floor space to the existing
5,039m² facility, creating a total of
8,289m² of net lettable area.
Subject to State Government COVID-19
restrictions being eased and finalising
pre-leasing commitments, construction of
the facility is anticipated to commence in
2022. On completion, the combined
facilities will generate over $1.1m per
annum of net rental income for the
Group.
In October 2020, Desane formalised
the renewal of leases with three existing
tenants at its Lane Cove NSW industrial
investment properties, with two of the
tenants agreeing to a 5-year lease
term. Desane’s Lane Cove industrial
investment property portfolio is
expected to generate over $4.0m of
net rental income for the Group over
the next 5 years.
In June 2021, Desane received
development approval for a boutique
4 storey residential development,
comprising 9 residential apartments, 1
ground floor retail commercial space
and 10 basement car spaces. The
property is located in Norton Street’s
vibrant restaurant, café and cinema
precinct and is 200m from Leichhardt
North Light Rail Station.
The approval of the Norton Street
project complements our Company’s
existing nearby 46 apartment project
in Allen Street, which was approved
by Inner West Council in September
2019. The property is located 200m
from Hawthorne Light Rail Station and
is a short distance from local schools
and other amenities. On completion,
the combined Norton Street and
Allen Street residential developments
will yield an estimated end value of
$70.0m to $75.0m in gross revenue
for the Group.
In June 2021, as part of Desane’s
property investment restocking, Desane
exchanged contracts for the purchase
of a prime commercial property in the
Sydney suburb of Leichhardt for $7.25m.
The property, zoned B2-Local Centre,
has ample onsite parking and is located
in the heart of Norton Street, Leichhardt’s
commercial, retail and residential district.
The building currently includes multiple
diverse tenancies over 1,800m² of net
lettable area, which on a fully leased
basis is expected to return approximately
$0.5m net rent per annum. Settlement
is expected to occur on or before June
2022.
Over the next 12 months, the economic
impact of COVID-19 will become
evident. The investment policies and
measures implemented by Desane
should provide a level of protection
against a negative economic impact.
Desane’s investment property assets
are performing well, in line with
industrial and logistic assets across the
major capital cities. The COVID-19
pandemic has pushed consumers to
change the way they spend and has
accelerated Australia’s e-commerce
market resulting in a healthy demand
for properties that offer warehousing,
logistics and distribution facilities.
Desane’s investment assets fall into the
highly sought after industrial asset class,
providing stability of income during these
challenging times.
Our Company’s strong balance
sheet, coupled with the availability of
substantial cash reserves, will deliver the
Group the ability to continue to acquire
investment property assets in 2022.
I wish to thank the executive team and all
our dedicated staff for their hard work in
producing a steady result in very difficult
times.
Finally, I would like to acknowledge the
support of our Company’s shareholders,
in particular for the confidence they have
placed in the Company’s management
over the past twelve months.
Phil Montrone OAM
Managing Director & CEO
6
AR 2021
Leichhardt North
Lightrail
Hawthorne Parade
Lightrail
159 Allen Street
Leichhardt
7
Desane Group Holdings 322 Norton Street
Leichhardt
270-278 Norton Street
Leichhardt
A return
T O HERITAGE
...
Desane’s Legacy
Our knowledge and expertise in
property investment and development
passed down through two generations
permeates every level of business.
Our long standing involvement in the
inner Sydney real estate market gives
us unparalleled insight in locating value
and investment security, and a keen
eye for predicting local trends
and demands.
We are well positioned to match
commercial investment opportunities
creating shareholder value over the
coming years.
8
AR 2021
LOCATION
DISTANCE TO CBD
Leichhardt, NSW
5 kms
SIZE
607m²
PROPERTY TYPE
PROPERTY STATUS
Mixed Use
Approved Development
9
Desane Group Holdings 322 Norton Street
LEICHHARDT
Creating the community through
a boutique development. Located just 5 kms from Sydney’s
CBD, and set amongst the buzzing Norton Street district.
The 607m 2 site at Norton Street was previously used as
an auto-electrical shop and has development approval
for a 9-unit, mixed-use development.
The propert y is located
approximately 5
kilometres from the CBD
and is zoned B2 Mixed-
Use. Situated 200 metres
from Leichhardt North
Light Rail Station, the
propert y is in
walking distance to
transport as well as
Leichhardt’s vibrant cafes,
dining and shopping
scene.
Concept images of proposed project.
10
AR 2021
270-278 Norton Street
LEICHHARDT
A family legacy for almost four decades in the heart of the inner west.
This propert y generates income through multiple
tenancies, is ideally placed in leafy surrounds and has
been known for over fort y years for the joy it provided
when run as the function venue, Villa Rosa.
Situated just 400 metres from Leichhardt North Light Rail
and in the heart of bustling Norton Street, this propert y
will generate approximately $0.5 million net rental for
the Group when fully leased.
Zoned B2 (Leichhardt LEP) the propert y has an FSR of
1.5:1 and can be converted to residential apartments in
the future (subject to council approval).
11
Desane Group Holdings
LOCATION
DISTANCE TO CBD
Leichhardt, NSW
5 kms
SIZE
929m²
PROPERTY TYPE
PROPERTY STATUS
Mixed Use
Investment /Development
12
AR 2021 LOCATION
DISTANCE TO CBD
SIZE
PROPERTY TYPE
PROPERTY STATUS
Leichhardt, NSW
5 kms
2,782m²
Residential
Approved Development
13
Desane Group Holdings 159 Allen Street
LEICHHARDT
Lifestyle at the doorstep of the city fringe
159 Allen Street, Leichhardt is a 2,782m²,
R1 General Residential zoned site. The
propert y is located approximately 5
kilometres from the CBD, less than 200
metres from Hawthorne Light Rail Station
and is a rare development opportunit y
in Sydney ’s c it y fringe. The propert y is in
short distance to local schools, amenities
and other public services, including the
Universit y of Sydney and the Royal Prince
Alfred Hospital at Camperdown.
Desane has recently attained planning
approval from the Inner West Council for a
5-storey apartment complex, comprising of
46 residential apartments.
Concept images of proposed project.
14
AR 2021
16 Industrial Avenue
BRISBANE
An outstanding industrial property,
strengthening and
expanding our investment portfolio.
16 Industrial Avenue is a 21,750m² industrial site
comprising of a 5,039m² warehouse, ample on-site
parking and excellent truck access. The propert y is fully
leased to a high qualit y local government tenant on a
long term basis.
Desane has recently had approved a Development
Application with Brisbane Cit y Council, to construct
an additional 3,250m² industrial facilit y on the site.
Construction is anticipated to begin in 2022.
a
15
Desane Group Holdings
a
LOCATION
Wacol, QLD
DISTANCE TO CBD
SIZE
PROPERTY TYPE
PROPERTY STATUS
20 kms
21,750m²
Industrial
Investment / Approved Development
Concept images of proposed project.
16
AR 2021 LOCATION
DISTANCE TO CBD
SIZE
PROPERTY TYPE
PROPERTY STATUS
Lane Cove, NSW
12 kms
2,700m²
Industrial &
Commercial
Investment
17
Desane Group Holdings LOCATION
DISTANCE TO CBD
SIZE
PROPERTY TYPE
PROPERTY STATUS
Lane Cove, NSW
12 kms
2,400m²
Industrial &
Commercial
Investment
7 &13 Sirius Road
LANE C OVE
The limited availability of highly sought after
acquisition options will continue to drive
investor demand in the area.
7 Sirius Road, Lane Cove
13 Sirius Road, Lane Cove
A 2,700m² industrial and commercial
propert y. Located in the Lane Cove
West industrial precinct, the propert y is
approximately 12 kilometres north of the
Sydney CBD.
The propert y is fully leased to a long term
tenant and is situated within 100 metres
from another asset owned by Desane.
A 2,400m² commercial, high-tech building
with 50 secure basement parking spaces.
This propert y is fully leased to t wo
high-qualit y tenants on a long term basis.
The propert y is located within the Lane
Cove West precinct and is approximately
12 kilometres north of the Sydney CBD.
18
AR 2021
91 Thornton Drive
PENRITH
Located within 400 metres of Penrith Railway Station, 500 metres of
Westfield Penrith Plaza, the Penrith CBD and with easy access to
the new WestConnex Motorway, the Penrith Nepean Hospital
and the future Western Sydney Airport.
91 Thornton Drive, Penrith has an area of approximately
1.2 hectares, with an 88m frontage to Thornton Drive.
The site is located within 400 metres of Penrith Railway
Station and 500 metres of Westfield Penrith Plaza and
the Penrith CBD.
The NSW Government has announced an $8.0 billion
investment into the Western Sydney Airport at Badger ys
Creek, a $1.0 billion upgrade to the Nepean Hospital
and anticipates 40,000 new jobs will be created in the
Penrith area by 2021.
The propert y falls within the ‘Thornton’ Masterplan
Urban Transformation and will form part of the urban
transformation area.
Concept image of proposed project.
19
Desane Group Holdings
LOCATION
Penrith, NSW
DISTANCE TO CBD
60 kms
SIZE
1.2ha
PROPERTY TYPE
PROPERTY STATUS
Mixed Use
Unimproved Land
20
AR 2021 Directors’
REPORT
...
The Directors of Desane Group Holdings Limited (“Desane” and “the
Company”) present their report, together with the financial report of the
Company and its controlled entities for the financial year ended
30 June 2021.
Prof. John B Sheehan AM
Independent Non-Executive
Director and Chairman
Directors and Directors’ Interests
EXPERTISE AND EXPERIENCE
Prof. Sheehan, a Life Fellow member of the Australian Propert y Institute
(NSW division), has over 30 years experience and expertise in propert y
compensation law, town and countr y planning and environmental law.
He has been a board member since the Company ’s incorporation in 1987
and was appointed as Chairman in 1992, which he currently serves.
SPECIAL RESPONSIBILITIES
Chairman of the Remuneration & Nomination Committee
Chairman of the Environmental, Occupational Health and Safet y
Committee
Member of the Risk Management & Audit Committee
Member of the Finance & Operations Committee
INTERESTS IN DESANE
Ordinar y shares 168,735
EXPERTISE AND EXPERIENCE
Mr P Montrone has over 30 years experience and expertise in propert y
investment, acquisitions, development and project management. He has
been a significant board member since the Company ’s incorporation
in 1987 and was appointed as Managing Director in 1987, which he
currently serves.
SPECIAL RESPONSIBILITIES
Member of the Risk Management & Audit Committee
Member of the Finance & Operations Committee
Member of the Environmental, Occupational Health & Safet y Committee
Mr Phil Montrone OAM
Managing Director
INTERESTS IN DESANE
Ordinar y shares 14,330,444
21
Desane Group Holdings
AR 2021
EXPERTISE AND EXPERIENCE
Mr R Montrone, who was appointed as Director in 2015, has over 15
years experience in propert y investment, acquisitions, developments,
management, leasing, sales and project management. Mr Montrone is
a licensed real estate agent and an associate member of the Australian
Propert y Institute.
SPECIAL RESPONSIBILITIES
Member of the Risk Management & Audit Committee
Member of the Finance & Operations Committee
Member of the Environmental, Occupational Health & Safet y Committee
Mr Rick Montrone
Director
INTERESTS IN DESANE
Ordinar y shares 283,721
Mr Peter Krejci
Independent Non-Executive
Director
Mr Jack Sciara
Company Secretar y
EXPERTISE AND EXPERIENCE
Mr Krejci has over 20 years experience and expertise in corporate
management and is a founding Principal of BRI Ferrier. His professional
experience covers financial services, propert y and construction, retail,
logistics, manufacturing and mining. Mr Krejci was appointed as a board
member on 8 July 2019.
SPECIAL RESPONSIBILITIES
Chairman of the Risk Management & Audit Committee
Member of the Remuneration & Nomination Committee
Member of the Finance & Operations Committee
Member of the Environmental, Occupational Health & Safet y Committee
INTERESTS IN DESANE
Ordinar y shares Nil
Company Secretar y
The following person held the position of company secretar y at the end of
the financial year:
EXPERTISE AND EXPERIENCE
Mr J Sciara joined Desane in 2001, and has over 20 years experience
and expertise in corporate accounting and taxation. Jack was appointed
as Company Secretar y in 2016. His role in the Company includes
developing financial and tax strategies for the Group, investor relations,
ASX compliance and corporate governance and overseeing the financial
operations and financial reporting of all controlled entities. Jack is
a member of the Institute of Public Accountants and a registered Tax
Practitioner.
SPECIAL RESPONSIBILITIES
Chief Financial Officer and Company Secretar y
INTERESTS IN DESANE
Ordinar y shares 258,000
22
Directors’
REPORT
Meeting of Directors
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended
by each of the directors of the company during the financial year are:
Directors ’ Meetings and Finance &
Operations Commit tee Meetings
Risk Management & Audit
Commit tee Meetings
No.of
Meetings
At tended
No.of
Meetings
Held
No.of
Meetings
At tended
No. of
Meetings
Held
12
12
11
12
12*
12
12
12
12
12*
2
2
2
2
2
2
2
2
2
2
Remuneration & Nomination
Commit tee Meetings
Environmental & Occupational
Health & Safety
Commit tee Meetings
No. of
Meetings
At tended
No. of
Meetings
Held
No.of
Meetings
At tended
No. of
Meetings
Held
1
-
-
1
1*
1
1
1
1
1
1
1
-
1
1*
1
1
1
1
1
Directors
J.B Sheehan
P. Montrone
R. Montrone
P. Krejci
J. Sciara
Directors
J.B Sheehan
P. Montrone
R. Montrone
P. Krejci
J. Sciara
* As Company Secretar y
23
Desane Group Holdings
Principal Activities
There were no significant changes in the principal activities of the Company during the financial year, which were:
•
•
Propert y investment; and
Propert y development (residential and mixed use).
Operating and Financial Review
The Group recorded a consolidated statutor y net profit after tax for the year of $1.8m (2020: $2.3m). Statutor y
net profit after tax has been prepared in accordance with the Corporations Act 2001 and Australian Accounting
Standards, which comply with International Financial Reporting Standards.
The profit of the consolidated group, after providing for income
tax amounted to
A summar y of consolidated financial results by operational segments is set out below:
2021
$’000
1,806
2020
$’000
2,257
Total Revenue
Segment Result
Propert y development expenses
Propert y investment – rental
Propert y management
Propert y investment – net revaluations
Interest income
Less: Unallocated expenses
Operating profit
Income tax (expense)/benefit attribut-
able to operating profit
Deferred tax attributable to operating
profit
Operating profit after income tax
attributable to members of Desane
Group Holdings Limited
2021
$’000
-
2,080
47
2,522
498
5,147
2020
$’000
-
1,468
49
3,461
793
5,771
2021
$’000
(40)
644
47
2,522
498
3,671
(1,0 95)
2,576
2020
$’000
(33)
311
49
3,461
793
4,581
(1,349)
3,232
-
-
(770)
(975)
1,806
2,257
Financial Review
Despite the challenging propert y market and economic
hurdles due to the COVID-19 pandemic, Desane achieved
a solid financial result for the 2021 financial year and
continues to deliver on its core business objectives.
The Group’s operational revenues increased 14% on
the previous corresponding period whilst the Group’s
remuneration and employee benefits decreased by 14%.
In October 2020, Desane received development
approval from Brisbane Cit y Council to expand its
existing industrial propert y asset located in the Brisbane
suburb of Wacol. The existing 5,039m² facilit y is leased
to Brisbane Cit y Council and serves as the Council’s
vehicle and fleet maintenance headquarters.
The approved facilit y will add 3,250m² of net lettable
high clearance floor space to the existing 5,039m²
facilit y, creating a total of 8,289m² of net lettable area.
24
AR 2021
Directors’
REPORT
Construction of the approved facilit y is anticipated to
commence in 2022, subject to Government COVID-19
restrictions being eased and finalising pre -leasing
commitments. On completion, the combined facilities will
generate over $1.1m per annum of net rental income for
the Group.
and residential district. The building currently includes
multiple diverse tenancies over 1,800m² of net lettable
area, which on a fully leased basis is expected to return
approximately $0.5m net rent per annum. Settlement is
scheduled to occur on or before June 2022.
Also in October 2020, Desane formalised the renewal
of leases with three existing tenants at its Lane Cove
NSW industrial investment properties, with t wo of the
tenants agreeing to a 5- year lease term. With the lease
renewals, Desane’s Lane Cove industrial investment
propert y portfolio is expected to generate over $4m of
net rental income for the Group over the next 5 years.
Following the lease renewals of the Lane Cove NSW
industrial properties, Desane formalised the renewal of
its $6m loan facilit y with the Commonwealth Bank for a
further 3 years at 1.9% pa variable.
Despite the challenging economic climate ahead, Desane
will continue to focus on three main objectives into the
new financial year and beyond:
1.
2.
3.
Strategic investment acquisitions which will
bolster ROE and rental income streams;
Evaluate its development projects with an eye to
achieving maximum value outcomes; and
R eview capital management strategies to ensure
capacit y to grow and continued shareholder
dividends.
Capital Gains Tax Deferral
In June 2021, as part of its propert y investment portfolio
restocking, Desane exchanged contracts for the purchase
of a prime commercial propert y in the Sydney suburb of
Leichhardt for $7.25m. The propert y, zoned B2-Local
Centre, has ample onsite parking and is located in the
heart of Norton Street, Leichhardt’s commercial, retail
Included in the deferred tax liabilit y of $17.1m is
approximately $13.9m of capital gains tax (CGT)
deferral, pertaining to the involuntar y sale of the Rozelle
propert y in September 2018, as part of the compulsor y
acquisition by NSW Roads & Maritime Services which
triggered a CGT event.
Dividends Paid or Recognised
2020
$’000
920
920
2021
$’000
920
920
Dividends paid or declared for payment are as follows:
Interim dividend of $0.0225 unfranked, per share, paid on 27 March 2020
Ordinar y dividend of $0.0225 unfranked, per share, paid on 23 October
2020, declared in the 2020 financial year
Interim dividend of $0.0225 unfranked, per share, paid on 26 March 2021
Ordinar y dividend of $0.0225 unfranked, per share, declared by the
directors from retained earnings payable on 25 October 2021
Dividend Reinvestment Plan (DRP)
The DRP has been suspended until further notice.
Significant Changes in State of Af fairs
There was no significant change in the state of affairs of the Group.
Events Subsequent to Balance Date
There were no events subsequent to the balance date.
Likely Developments
The Group continues to pursue its strategy of focusing on its core operations, utilising a strengthened statement of
financial position to provide support to grow and develop these operations.
Environmental Regulation
The consolidated group complies with all relevant legislation and regulations in respect to environmental matters.
No matters have arisen during the year in connection with Desane’s obligations pursuant to Commonwealth and
State environmental regulations.
Occupational Health and Safety Regulations
The consolidated group complies with all relevant legislation and regulations in respect to occupational health and
safet y matters.
25
Desane Group Holdings
COVID-19
The Government initiated enforceable lockdowns in June 2021 to reduce the spread of COVID-19 and consequently,
Desane’s workplace environment and practices were reviewed to ensure that the safet y of its staff and visitors was a
priorit y and that Desane was in compliance with Government policies.
Appropriate COVID-19 safet y measures have been implemented since March 2020, which included the restriction of
non-essential meetings at the head office, all staff members being given the option and equipment to work from home
and all Board members being given the option to attend Board meetings remotely.
All properties owned and managed by Desane, both in NSW and QLD, also adhere to Occupational Health and
Safet y requirements. Staff members and contractors (on behalf of Desane) attending properties ensured that all site
COVID-19 safet y measures were followed and that Government COVID-19 policies were complied with.
Desane has not applied for, nor received, Federal Government COVID-19 financial assistance such as JobKeeper.
AUDITED REMUNERATION REPORT
This report details the nature and amount of remuneration for each director of Desane Group Holdings Limited, and
for the executives receiving the highest remuneration.
Remuneration Policy
The remuneration policy of Desane Group Holdings Limited has been designed to align director and executive
objectives with shareholder and business objectives. The board of Desane Group Holdings Limited believes the
remuneration policy to be appropriate and effective in its abilit y to attract and retain the best executives and
directors to run and manage the consolidated group, as well as create goal congruence bet ween directors,
executives and shareholders.
Approach to Remuneration
The Group is committed to applying fair and equitable remuneration practices, taking into account the Company ’s
corporate strategy, objectives and shareholder returns.
The Group’s current remuneration framework includes:
1.
2.
3.
Fixed remuneration
Incentive schemes
Executive agreements
Fixed Remuneration
Fixed remuneration includes a base salar y, statutor y superannuation and all other statutor y entitlements. Fixed
remunerations are reviewed annually by the Remuneration Committee and are based upon performance,
qualification, experience and current market practices. The Remuneration Committee accesses external independent
advice if required.
Incentive Schemes (Discretionar y Remuneration)
Short Term Incentives
A discretionar y Short Term Incentive (“STI”) cash bonus may be offered to executives and key management
personnel (“KMP”) at the discretion of the Remuneration Committee. STIs align the achievement of strategic short
term objectives for the long term benefit of the Company and its shareholders. The total potential STI available is set
at a level that provides sufficient incentive to the executive to achieve the operational targets at a cost to the Group
that is reasonable.
26
AR 2021 Directors’
REPORT
Approved STIs depend on the extent to which specific targets set by the Board at the beginning of the financial year
(or shortly thereafter) are achieved. The targets consist of a number of Key Performance Indicators (“KPI”) which are
linked to the Company ’s strategic business objectives such as (but not limited to):
•
•
•
•
•
Dividends paid;
Earnings before interest and tax (“EBIT”);
Net profit after tax (“NPAT”);
Share price performance; and
Net tangible asset (“NTA”) per share.
On an annual basis, after consideration of the Group’s performance against KPIs, the remuneration committee
determines the amount, if any, of the STI to be paid to KMP.
For the financial year ended 30 June 2021, there was no approval or payment of an STI bonus to KMP (2020:$-).
Consequences of Performance on Shareholder Wealth
In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee have
regard to the following indices in respect of the current and previous financial years.
NPAT for the year at 30 June
Dividends paid per share (cents)
Closing share price at 30 June
Earnings/(loss) per share (cents) at 30 June
2021
$1.8m
4.5
$1.180
4.42
2020
$2.3m
4.5
$1.350
5.52
2019
$27.3m
5.25
$1.405
66.73
Ordinar y shares on issue at 30 June
40,909,990
40,909,990
40,909,990
NTA per share at 30 June
Executive Agreements
$1.44
$1.44
$1.43
Executive agreements are formal legal agreements bet ween the Company and all executives and KMP. The
agreements are executed in line with the Corporations Act and will define terms of employment, role and
responsibilities, performance expectations, specify termination payment arrangements, provide provisions for
performance related bonuses and ensure transparency for the Company and its shareholders.
Executive agreements are generally reviewed ever y three years (unless required earlier) by the executive, KMP and
the Remuneration Committee to ensure that they are adequate and updated if required.
Termination benefits are within the limited set by the Corporations Act 2001 such that they do not require
shareholder approval.
Commencement
Date
Term of Agreement &
Notice Period
Base Salar y
Including
Superannuation
$’000
Termination
Payments /
Benefits
$
1 September 1987
No fixed term & 12 months
2 November 2003
No fixed term & 12 months
3 September 2001
No fixed term & 12 months
222
395
223
-
-
-
Name
P Montrone
R Montrone
J Sciara
Non Executive Directors
Total compensation for all non executive directors, last voted on at the 2015 Annual General Meeting, is not to
exceed $0.3m per annum. Currently, non executive directors are compensated to a total of $0.1m per annum
(2020: $0.1m), inclusive of superannuation. The 2021 non executive director fees are 48% (2020: 48%) of the
aggregate maximum sum approved by shareholders.
27
Desane Group Holdings
The base fee for the Chairman is $84,000 per annum and $55,000 per annum for other non executive directors.
Base fee cover all main board activities and membership of all board committees. Non executive directors are not
provided with retirement benefits apart from statutor y superannuation if applicable.
Details of Remuneration for year ended 30 June 2021
The remuneration for each director and the executive officer of the consolidated entit y receiving the highest
remuneration during the year was as follows:
Shor t Term Benefits
Salar y & Fees
$’000
STI Cash Bonus
$’000
Superannuation
$’000
Total
$’000
84
55
203
361
204
907
-
-
-
-
-
-
-
5
19
34
19
77
84
60
222
395
223
984
Directors
John B. Sheehan (non-executive)
Peter Krejci (non-executive)
Phil Montrone
Rick Montrone
Chief Financial Of ficer/Company
Secretar y
Jack Sciara
Indemnif ying Of ficers or Auditor
The company or consolidated group has not, during or since the financial year, in respect of any person who is
or has been an officer or auditor of the company or a related body corporate, indemnified or made any relevant
agreement for indemnifying against a liabilit y incurred as an officer, including costs and expenses in successfully
defending legal proceedings.
The company paid a premium of $20,918 to insure the directors of the company and controlled entities. The policy
provides cover for individual directors and officers of the company, in respect of claims made and notified to the
insurer during the policy period for losses and expenses incurred in defence of claims for any alleged wrongful acts
arising out of their official capacities. It will also reimburse the company for any liabilit y it has to indemnify the
directors or officers for such losses.
It is noted that the company ’s Constitution allows an officer or auditor of the company to be indemnified by the
company against any liabilit y incurred by him in his capacit y of officer or auditor in defending any proceedings in
which judgement is given in his favour.
Options
No options have been granted over unissued shares during the financial year and there are no outstanding options
at 30 June 2021.
Proceedings on Behalf of the Company
The Owners Corporation of 47-51 Lilyfield Road, Rozelle, no longer having the abilit y to pursue the project builder,
who is in liquidation, for alleged building defect rectification works, has commenced legal proceedings in the NSW
Supreme Court against Desane Contracting Pt y Ltd. Refer to Note 27d for further details.
28
AR 2021 Directors’
REPORT
Non-audit Services
The board of directors, in accordance with the advice from the Audit Committee, is satisfied that the provision of non-
audit services during the year is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external
auditor ’s independence for the following reasons:
•
•
All non-audit services are reviewed and approved by the Audit Committee prior to commencement
to ensure they do not adversely affect the integrit y and objectivit y of the auditor; and
The nature of the services provided does not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June
2021.
Taxation services
Auditor’s Independence Declaration
$'000
3
The lead auditor ’s Independence Declaration for the year ended 30 June 2021, has been received and can be found
on page 30 of the Financial Report.
ASIC Class Order 98/100 Rounding of Amounts
The company is an entit y to which ASIC Class Order 98/100 applies and accordingly, amounts in the financial
statements and directors’ report have been rounded to the nearest thousand dollars.
Corporate Governance Statement
Desane is committed to implementing sound standards of corporate governance. The Group has taken into
consideration the ASX Corporate Governance Council’s Corporate Governance principles and Recommendations
(4th Edition) (“ASX Recommendations”). The Group’s corporate governance statement outlines the key principles
and practices of the Company. A copy of the Group’s Corporate Governance Statement has been placed on the
Group’s website under the About Us tab in the Corporate Governance Section - desane.com.au/about/corporate -
governance/
This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the
Board of Directors, at Sydney, this 23rd day of August, 2021.
P Montrone
Director
Sydney
J B Sheehan
Director
Sydney
29
Desane Group Holdings
Auditor’s Independent
DECLARATION
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
GPO Box 4566, Sydney NSW 2001
Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF DESANE GROUP HOLDINGS LIMITED AND CONTROLLED ENTITIES
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2021 there have been no
contraventions of:
(i) The auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) Any applicable code of professional conduct in relation to the audit.
GCC BUSINESS & ASSURANCE PTY LTD
(Authorised Audit Company)
GRAEME GREEN
Director
23 August 2021
Liability limited by a scheme approved under Professional Standards Legislation
13
30
AR 2021
Consolidated Statement of Profit or Loss
FOR THE YEAR ENDED 30 JUNE 2021
Continuing Operations
Revenue
Other Income
Gain/(loss) on revaluation of investment properties
Propert y development expenses
Employee benefits expense
Depreciation and amortisation expense
Finance costs
Other expenses from ordinar y activities
Profit before income tax
Income tax (expense)/benefit
Profit from continuing operations
Other comprehensive income
Net Profit (af ter income tax)
Profit attributable to minorit y equit y interest
Profit attributable to members of the parent entit y
Earnings per Share:
Overall Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements.
Consolidated Group
Note
2
2a
2
4
8
8
2021
$’000
2,127
498
2,522
(40)
(1,121)
(53)
(133)
(1,224)
2,576
(770)
1,806
-
1,806
-
1,806
4.42
4.42
4.42
4.42
2020
$’000
1,517
793
3,461
(33)
(1,313)
(53)
(149)
(991)
3,232
(975)
2,257
-
2,257
-
2,257
5.52
5.52
5.52
5.52
31
Desane Group Holdings
Consolidated Statement of Financial Position
FOR THE YEAR ENDED 30 JUNE 2021
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventor y – development propert y
Other current assets
Other financial assets
Total Current Assets
Non-current Assets
Investment properties
Propert y, plant and equipment
Other assets
Other financial assets
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Non-current Liabilities
Borrowings
Provisions
Deferred tax liabilit y
Total Non-current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Retained earnings
Total Equity
The accompanying notes form part of these financial statements
Consolidated Group
Note
2021
$’000
2020
$’000
9
10
11
12
13
14
15
12
13
16
18
17
19
22
20
21
353
298
4,00 9
386
12,637
17,683
67,350
2,367
75
170
69,962
87,645
4,70 9
1,075
5,784
5,900
59
17,126
23,085
28,869
58,776
21,213
37,563
58,776
10,203
189
3,540
285
8,323
22,540
57,043
2,409
2
550
60,004
82,544
341
1,047
1,388
5,900
89
16,356
22,345
23,733
58,811
21,213
37,598
58,811
32
AR 2021
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2021
Balance as at 1 July 2020
Shares issued during the year
Profit at tributable to members of the parent entity
Consolidated Group
Issued
Capital
$'000
21,213
-
-
Retained
Earnings
$'000
37,598
-
1,806
21,213
39,404
Total
$'000
58,811
-
1,806
60,617
Dividends paid or recognised for the year
-
(1,841)
(1,841)
Balance at 30 June 2021
21,213
37,563
58,776
Balance as at 1 July 2019
Shares issued during the year
Profit attributable to members of the parent entit y
Dividends paid or recognised for the year
Balance at 30 June 2020
The accompanying notes form part of these financial statements.
Issued
Capital
$'000
21,213
-
-
21,213
-
21,213
Retained
Earnings
$'000
37,182
-
2,257
39,439
(1,841)
37,598
Total
$'000
58,395
-
2,257
60,652
(1,841)
58,811
33
Desane Group Holdings
Consolidated Statement of Cashflows
FOR THE YEAR ENDED 30 JUNE 2021
Consolidated Group
Note
2021
Inflows
(Out flows)
$’000
2020
Inflows
(Out flows)
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Propert y development expenditure
Interest received
Finance costs
Net cash provided by (used in) operating activities
29
Cash flows from investing activities
Purchase of propert y, plant and equipment
Purchase of development properties
Purchase of investment properties
Purchase of financial assets
Capital costs of investment properties
2,176
(2,381)
(40)
498
(133)
120
(11)
(468)
(3,630)
(3,934)
(86)
1,591
(2,401)
(33)
793
(149)
(199)
(30)
(3,540)
(20,594)
(8,772)
(91)
Net cash provided by (used in) investing activities
(8,129)
(33,027)
Cash flows from financing activities
Dividends paid by parent entit y
Net cash provided by (used in) financing activities
Net increase/(decrease) in cash held
Cash at beginning of financial year
Cash at end of financial year
The accompanying notes form part of these financial statements.
(1,841)
(1,841)
(9,850)
10,203
353
(2,147)
(2,147)
(35,373)
45,576
10,203
9
34
AR 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 1:
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Preparation
The financial report covers the economic entit y of Desane
Group Holdings Limited and its controlled entities. The
separate financial statements of the parent entit y, Desane
Group Holdings Limited, have not been presented within
this financial report, as permitted by the Corporations
Act, 2001. Desane Group Holdings Limited is a listed
public company, incorporated and domiciled in Australia.
The consolidated financial statements are presented in
Australian dollars, which is the functional currency for the
parent company and its controlled entities.
The financial statements were authorised for issue on 23
August 2021 by the directors of the Company.
The financial statements are a general purpose financial
report, that have been prepared in accordance with the
Corporations Act, 2001, Australian Accounting Standards
and Interpretations of the Australian Accounting
Standards Board (“AASB”) and the International Financial
Reporting Standards as issued by the International
Accounting Standards Board (“IASB”). The Group is a
for-profit entit y for financial reporting purposes under
Australian Accounting Standards.
Australian Accounting Standards set out accounting
policies that the AASB has concluded would result in
a financial report containing relevant and reliable
information about transactions, events and conditions.
Compliance with Australian Accounting Standards
ensures that the financial statements and notes also
comply with International Financial Reporting Standards,
as issued by IASB.
Except for cash flow information, the financial statements
have been prepared on an accruals basis and are based
on historical costs, modified, where applicable, by the
measurement at fair value of selected non-current assets,
financial assets and financial liabilities.
The following is a summar y of the material accounting
policies adopted by the consolidated group in the
preparation of the financial report. The accounting
policies have been consistently applied, unless
other wise stated.
The accounting policies set out below have been
consistently applied to all years presented.
Accounting Policies
a.
Principles of Consolidation
The consolidated financial statements incorporate all
35
of the assets, liabilities and results of the parent entit y
controlled by Desane Group Holdings Limited and all of
its controlled entities. Desane Group Holdings Limited
controls an entit y when it is exposed to or has rights to,
variable returns from its involvement with the entit y and
has the abilit y to affect those returns through its power
over the entit y.
A list of controlled entities is contained in note 30 to the
financial statements. All controlled entities have a 30
June financial year end.
All inter-company balances and transactions bet ween
entities in the economic entit y, including any unrealised
profits or losses, have been eliminated on consolidation.
Accounting policies of controlled entities have been
changed where necessar y to ensure consistencies with
those policies applied by the parent entit y.
Where controlled entities have entered or left the
economic entit y during the year, their operating results
have been included/excluded from the date control was
obtained or until the date control ceased.
Non-controlling interests, being the equit y in a controlled
entit y not attributable, directly or indirectly, to a parent,
are reported separately within the equit y section of the
consolidated statement of financial position. The non-
controlling interests in the net assets comprise their
interests at the date of the original business combination
and their share of changes in equit y since that date.
b.
Income Tax
The income tax expense (benefit) for the year comprises
current income tax expense and deferred tax expense
(benefit).
Current income tax expense charged to the profit or
loss is the tax payable on taxable income calculated
using the applicable income tax rates enacted, or
substantially enacted, as at reporting date. Current tax
liabilities (assets) are therefore measured at the amount
expected to be paid to (recovered from) the relevant
taxation authorit y. Deferred income tax expense reflects
movements in deferred tax asset and deferred tax liabilit y
balances during the year as well as unused tax losses.
Deferred tax assets and liabilities are ascertained based
on the temporar y differences arising bet ween the tax
base of the assets and liabilities and their carr ying
amounts in the financial statements. Deferred tax assets
also result where amounts have been fully expensed but
future tax deductions are available. No deferred income
tax will be recognised from the initial recognition of an
asset or a liabilit y, excluding a business combination,
where there is no effect on accounting or taxable profit
or loss. Deferred tax assets or liabilities are calculated
at the tax rates that are expected to apply to the period
when the asset is realised or the liabilit y is settled,
Desane Group Holdings
based on the tax rates enacted or substantively enacted
at reporting date. Their measurement also reflects the
manner in which management expects to recover or settle
the carr ying amount of the related asset or liabilit y.
Deferred tax assets relating to temporar y differences and
unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available
against which the benefits of the deferred tax asset can
be utilised.
Where temporar y differences exist in relation to
investments in subsidiaries, branches, associates and
joint ventures, deferred tax assets and liabilities are
not recognised where the timing of the reversal of the
temporar y difference can be controlled and it is not
probable that the reversal will occur in the foreseeable
future.
Current tax assets and liabilities are offset where
a legally enforceable right of set-off exists and it
is intended that the net settlement or simultaneous
realisation and settlement of the respective asset and
liabilit y will occur. Deferred tax assets and liabilities are
offset where a legally enforceable right of set-off exists,
the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authorit y on either the
same taxable entit y or different taxable entities where it
is intended that net settlement or simultaneous realisation
and settlement of the respective asset and liabilit y will
occur in future periods in which significant amounts
of deferred tax assets or liabilities are expected to be
recovered or settled.
Tax Consolidation
Desane Group Holdings Limited and its wholly owned
Australian controlled entities have formed an income
tax consolidated group under tax consolidation
legislation. Each entit y in the Group recognises its own
current and deferred tax assets and liabilities. Such
taxes are measured using the ‘stand-alone taxpayer ’
approach to allocation. Current tax liabilities (assets)
and deferred tax assets arising from unused tax losses
and tax credits in the controlled entities are immediately
transferred to the head entit y. The Group notified the
Australian Taxation Office that it had formed an income
tax consolidated group to apply from 1 July 2003.
The tax consolidated group has entered a tax funding
arrangement whereby each company in the Group
contributes to the income tax payable by the Group in
proportion to their contribution to the Group’s taxable
income.
c.
Inventories
Development Propert y
Land held for development and sale is measured at the
lower of cost and net realisable value. Net realisable
value is determined on the basis of sales in the ordinar y
course of business. Costs include the cost of acquisition,
development, borrowing costs and holding costs until
the completion of development. Gains and losses are
recognised in the statement of profit and loss on the
signing of an unconditional contract of sale if significant
risks and rewards and effective control over the propert y
passes to the purchaser at this point.
Inventor y is classified as current when development is
expected to be developed and available for sale in the
next t welve months, other wise it will be classified as
non-current.
If applicable, the carr ying value will include revaluations
applied to the asset during the period the propert y was
classified as an investment propert y.
d.
Pr operty, Plant and Equipment
Propert y
Freehold land and buildings are carried at their fair
value (being the amount for which an asset could be
exchanged bet ween knowledgeable, willing parties in an
arm’s length transaction), based on periodic, but at least
triennial, valuations by external independent valuers,
less accumulated impairment losses and accumulated
depreciation for buildings.
Increases in the carr ying amount arising on revaluation of
land and buildings are credited to a revaluation surplus
in equit y. Decreases that offset previous increases of the
same asset are recognised against revaluation surplus
directly in equit y; all other decreases are recognised in
profit or loss.
Any accumulated depreciation at the date of revaluation
is eliminated against the gross carr ying amount of the
asset and the net amount is restated to the revalued
amount of the asset.
Plant and Equipment
Each class of plant and equipment is carried at cost
or fair value less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment are measured on a cost basis.
The carr ying amount of plant and equipment is reviewed
annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable
amount is assessed on the basis of the expected net cash
flows that will be received from the assets employment
and subsequent disposal. The expected net cash
flows have been discounted to their present values in
determining recoverable amounts.
36
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
and, as permitted by accounting standards, the properties
are not depreciated.
Depreciation
The depreciable amount of plant and equipment is
depreciated on a straight line basis over their useful lives
to the economic entit y commencing from the time the
asset is held ready for use.
Rental revenue from the leasing of investment properties
is recognised in the statement of profit and loss in the
periods in which it is receivable, as this represents the
pattern of service rendered through the provision of the
properties. All tenant leases are on an arm's length
basis.
The depreciation rates used for each class of depreciable
assets are:
f.
Leases
Class of Fixed Asset
Depreciation Rate
Motor vehicles
Plant and equipment
Office and computer equipment
15%
2.5%-33%
10%-33%
The assets’ residual values and useful lives are reviewed
and adjusted if appropriate, at each reporting date.
An asset’s carr ying value is written down immediately to
its recoverable amount if the asset’s carr ying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by
comparing proceeds with the carr ying amount. These
gains and losses are included in the consolidated
statement of profit and loss.
e.
In vestment Properties
Finance leases are capitalised by recognising an asset
and a liabilit y at the lower of the amounts equal to the
fair value of the leased propert y or the present value of
the minimum lease payments, including any guaranteed
residual values. Lease payments are allocated bet ween
the reduction of the lease liabilit y and the lease interest
expense for the period.
Leased assets are depreciated on a straight-line basis
over the shorter of their estimated useful lives or the lease
term.
Lease payments for operating leases, where substantially
all the risks and benefits remain with the lessor, as
recognised as expenses in the periods in which they are
incurred.
Lease incentives under operating leases are recognised
as a liabilit y and amortised on a straight line basis over
the lease term.
Investment properties, comprising freehold office and
industrial complexes, are held to generate long-term
rental yields and capital gains. All tenant leases are on
an arm’s length basis. The fair value model is applied to
all investment propert y and each propert y is reviewed
at each reporting date. The fair value is defined as the
price at which the propert y could be exchanged bet ween
knowledgeable, willing parties in an arm’s length
transaction. Each propert y is independently valued ever y
three years by registered valuers who have recognised
and appropriate professional qualifications, and recent
experience in the location and categor y of investment
propert y being valued. Changes to fair value are
recorded in the statement of profit and loss as revenue
from non operating activities. Acquired investment
properties are recognised in the statement of financial
position when control over the propert y is attained and
the Group derives the benefits of ownership.
Investment properties under construction are measured
at the lower of fair value and net realisable value. Cost
includes the cost of acquisition, development and interest
on financing during development. Interest and other
holding charges after practical completion are expensed
as incurred.
Investment properties are maintained at a high standard
g.
Financial Instruments
The Group has adopted AASB 9: Financial Instruments.
Initial recognition and measurement
Financial assets and financial liabilities are recognised
when the entit y becomes a part y to the contractual
provisions to the instrument. For financial assets, this
is equivalent to the date that the entit y commits itself to
either the purchase or sale of the asset (ie. trade date
accounting is adopted).
Financial instruments are initially measured at fair value
plus transaction costs, except where the instrument is
classified “at fair value through profit or loss”, in which
case transaction costs are expensed to profit or loss
immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair
value, amortised cost using the effective interest method,
or cost.
The Group has interests in the following financial assets:
37
Desane Group Holdings
Held-to-maturit y investments
(i)
Held-to-maturit y investments are non-derivative
financial assets that have fixed maturities and fixed or
determinable payments, and it is the Group’s intention
to hold these investments to maturit y. Interest income is
recognised in profit or loss when received. On maturit y,
the financial asset is derecognised and re -classified as
cash at bank.
h.
Impairment of Assets
At each reporting date, the group reviews the carr ying
values of its tangible assets to determine whether there
is any indication that those assets have been impaired.
The assessment will include the consideration of external
and internal sources of information. If such an indication
exists, the recoverable amount of the asset, being the
higher of the asset’s fair value less cost to sell and value
in use, is compared to the asset’s carr ying value. Any
excess of the asset’s carr ying value over its recoverable
amount is expensed to the consolidated statement of
profit and loss.
i.
In vestments in Associates
Associates are companies in which the Group has
significant influence. Significant influence is the power
to participate in the financial and operating policy
decisions of the entit y but is not control or joint control of
those policies.
Profits and losses resulting from transactions bet ween the
Group and the associate are eliminated to the extent of
the Group’s interest in the associate.
When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, the Group
discontinues recognising its share of further losses unless
it has incurred legal or constructive obligations or made
payments on behalf of the associate. When the associate
subsequently makes profits, the Group will resume
recognising its share of those profits once its share of the
profits equals the share of the losses not recognised.
Investments in associate companies are recognised in the
financial statements by applying the equit y method of
accounting, whereby the investment is initially recognised
at cost and adjusted thereafter for the post acquisition
change in the Group’s share of net assets of the associate
company. In addition, the Group’s share of the profit or
loss of the associate is included in the Group’s profit or
loss.
j.
Interests in Joint Arrangements
Joint arrangements represent the contractual sharing
of control bet ween parties in a business venture
where unanimous decisions about relevant activities
are required. Joint venture operations represent
arrangements whereby joint operators maintain direct
interests in each asset and exposure to each liabilit y of
the arrangement. The Group’s interests in the assets,
liabilities, revenue and expenses of joint operations are
included in the respective line items of the consolidated
financial statements.
Gains and losses resulting from sales to a joint
operation are recognised to the extent of the other
part y ’s interest. When the Group makes a purchase
from a joint operation, it does not recognise its share of
the gains and losses from the joint arrangement until it
resells the goods and services to a third part y.
k.
Employee Benefits
Short-term Employee Benefits
Provision is made for the Group’s obligation for short-
term employee benefits. Short-term employee benefits
(other than termination benefits) that are expected to
be settled wholly before 12 months after the end of the
annual reporting period in which the employees render
the related service, including wages, salaries and sick
leave. Short-term employee benefits are measured at
the (undiscounted) amounts expected to be paid when
the obligation is settled.
The Group’s obligations for short-term employee benefits
such as wages, salaries and sick leave are recognised
as part of current trade and other payables in the
statement of financial position. The Group’s obligations
for employees’ annual leave and long service leave
entitlements are recognised as provisions in the
statement of financial position.
Other Long-term Employee Benefits
Provision is made for employees’ long service leave and
annual leave entitlements not expected to be settled
wholly within 12 months after the end of the annual
reporting period in which the employees render the
related service. Other long-term employee benefits
are measured at the present value of the expected
future payments to be made to employees. Expected
future payments incorporate anticipated future wage
and salar y levels, durations of service and employee
departures and are discounted at rates determined by
reference to market yields at the end of the reporting
period on government bonds that have maturit y
dates that approximate the terms of the obligations.
Any remeasurements for changes in assumptions of
obligations for other long-term employee benefits are
recognised in profit or loss in the periods in which the
changes occur.
The Group’s obligations for long-term employee benefits
are presented as non-current provisions in its statement
of financial position, except where the Group does not
have an unconditional right to defer settlement for at
least 12 months after the end of the reporting period,
in which case the obligations are presented as current
provisions.
38
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
period are classified as current assets. All other
receivables are classified as non-current assets.
l.
Provisions
p.
T rade and Other Payables
Provisions are recognised when the group has a legal
or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits
will result and that outflow can be reliably measured.
m.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand,
deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months
or less, and bank overdrafts. Bank overdrafts are shown
within short-term borrowings in current liabilities on the
statement of financial position.
n.
Revenue and Other Income
Trade and other payables represent the liabilities for
goods and services received by the entit y that remain
unpaid at the end of the reporting period. The balance
is recognised as a current liabilit y with the amounts
normally paid within 30 days of recognition of the
liabilit y.
q.
Borrowing Costs
Borrowing costs directly attributable to the acquisition,
construction or production of assets that necessarily take
a substantial period of time to prepare for their intended
use or sale, are added to the cost of those assets until
such time as the assets are substantially ready for their
intended use or sale.
The Group has applied AASB 15: Revenue from Contracts
with Customers.
All other borrowing costs are expensed in the period in
which they are incurred.
Revenue from the rendering of propert y services is
recognised upon deliver y of the service to customers.
Investment propert y revenue is recognised on a
straight-line basis over the period of the lease term so
as to reflect a constant periodic rate of return on the net
investment. The Group derives revenue from investing in
properties for rental and capital appreciation over time.
There are no changes to the measurement or timing of
investment propert y rental revenue that have arisen from
adoption of AASB 15.
Revenue from sale of properties held for resale and
non-current propert y or other assets is brought to account
on the signing of an unconditional contract of sale if the
significant risks and rewards and effective control over
the propert y passes to the purchaser at this point.
r.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In
these circumstances the GST is recognised as part of the
cost of acquisition of the asset or as part of an item of the
expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on
a gross basis, except for the GST component of investing
and financial activities, which are disclosed as operating
cash flows.
s.
Comparative Figures
Interest revenue is recognised on a proportional basis
taking into account the interest rates applicable to the
financial assets.
Dividend revenue is recognised when the right to receive
a dividend has been established. Dividends received
from associates and joint venture entities are accounted
for in accordance with the equit y method of accounting.
When required by Accounting Standards, comparative
figures have been adjusted to conform to changes in
the presentation in the financial year. When the Group
retrospectively applies an accounting policy and makes
a retrospective restatement or reclassifies items in its
financial statement, an additional (third) statement of
financial position as at the beginning of the preceding
period in addition to the minimum comparative financial
statement is presented.
All revenue is stated net of the amount of goods and
services tax (GST).
t.
Rounding of Amounts
o.
T rade and Other Receivables
Trade and other receivables include amounts due from
customers for goods sold and services performed in the
ordinar y course of business. Receivables expected to
be collected within 12 months of the end of the reporting
The parent entit y has applied the relief available to it
under ASIC Class Order 98/100. Accordingly, amounts
in the financial statements and directors’ report have
been rounded off to the nearest $1,000.
u.
The preparation of the financial reports requires
Critical Accounting Estimates and Judgements
39
Desane Group Holdings
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial reports. Management bases its judgements
and estimates on historical experience and other
various factors it believes to be reasonable under the
circumstances, but which are inherently uncertain and
unpredictable, the results of which form the basis of the
carr ying value of assets and liabilities. The resulting
accounting estimates may differ from actual results under
different assumptions and conditions.
Key estimates and assumptions that have a risk of causing
adjustment with the next financial year to the carr ying
amounts of assets and liabilities recognised in these
financial reports are:
(i)
Impairment – propert y valuations
Critical judgements are made by the Group in respect of
the fair values of investment properties. The fair value of
these investments are reviewed regularly by management
with reference to external independent propert y
valuations and market conditions existing at reporting
date, using generally accepted market practices.
Then critical assumptions underlying management’s
estimates of fair values are those relating to the passing
rent, market rent, occupancy, capitalisation rate, terminal
yield and discount rate. If there is any change in these
assumptions or economic conditions, the fair value of the
propert y investments may differ. Assumptions used in
valuation of propert y investments are disclosed in
note 14.
(ii)
Impairment – general
The Group assesses impairment at the end of each
reporting period by evaluating conditions and events
specific to the Group that may be indicative of
impairment triggers. Recoverable amounts of relevant
assets are reassessed using value -in-use calculations
which incorporate various key assumptions.
NOTE 2:
REVENUE AND OTHER INCOME
Revenue from Continuing Operations
Propert y rental income
Propert y management fees
Total Revenue from Continuing Operations
Other Revenue
Interest revenue from:
- other persons
Total Other Revenue
Total Revenue
Other Income
Propert y investment – net revaluations
Total Other Income
Consolidated
Group
2021
$’000
2020
$’000
2,080
47
2,127
1,468
49
1,517
498
498
793
793
2,625
2,310
2,522
2,522
3,461
3,461
40
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 3:
PROFIT FOR THE YEAR
Profit before income tax from continuing operations includes the following specific expenses:
Expenses
Auditors’ remuneration
Depreciation of plant and equipment
Finance costs:
- External
Transfer to/(from) provisions for:
- Employee entitlements
Rental expenses relating to operating leases
Direct propert y expenditure from investment propert y generating
rental income
NOTE 4:
INCOME TAX EXPENSE
a.
The components of tax expense comprise:
Deferred tax
b.
income tax is reconciled to income tax as follows:
The prima facie tax on profit from ordinar y activities before
Prima facie tax payable on profit from ordinar y activities before
income tax at 30% (2020: 30%)
- consolidated group
Add:
Tax effect of:
- adjustment for prior year tax provision
- other accruals/provisions
- other non-allowable items
- other items not included in taxable income
Income tax attributable to entit y
Note
6
Consolidated
Group
2021
$’000
2020
$’000
80
53
133
(2)
5
613
79
53
149
(12)
33
333
Note
22
Consolidated
Group
2021
$’000
2020
$’000
770
770
975
975
773
970
1
5
2
(11)
770
16
6
1
(18)
975
The applicable weighted average effective tax rates
29.9%
30.2%
41
Desane Group Holdings
The amount of benefits brought to account or which may be realised in the future, is based on the assumption that
no adverse change will occur in the income tax legislation, the anticipation that the Group will derive sufficient
future assessable income to enable the benefit to be realised and continue to comply with the conditions of
deductibilit y imposed by the law.
NOTE 5:
KEY PERSONNEL COMPENSATION
Names and position held of economic and parent entity key personnel in of fice at any time during the
a.
financial year are:
Key Personnel
Position
Prof. John B. Sheehan AM
Mr Phil Montrone OAM
Mr Peter Krejci
Mr Rick Montrone
Mr Jack Sciara
b.
Compensation Practices
Chairman (non-executive director)
Managing Director
Director (non-executive)
Director – Head of Propert y
Company Secretar y and Chief Financial Officer
The board’s policy for determining the nature and amount of compensation of key personnel for the group is as
follows:
The compensation structure for key personnel is based on a number of factors, including length of service,
particular experience of the individual concerned, and the overall performance of the company. Employment is
on a continuing basis the terms of which are not expected to change in the immediate future. Upon retirement key
personnel are paid employee benefit entitlements accrued to the date of retirement.
The company may terminate any employee without cause by providing adequate written notice or making payment in
lieu of notice based on the individual’s annual salar y component. Termination payments are generally not payable
on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate
employment at any time.
All remuneration packages are set at levels that are intended to attract and retain executives capable of managing
the economic entit y ’s operations. Refer note 5c.
c. Key Personnel Compensation
2021
Key Personnel
Prof. John B. Sheehan
Mr Peter Krejci
Mr Phil Montrone
Mr Rick Montrone
Mr Jack Sciara
Salar y
& Fees
Superannuation
Shor t Term
Incentives
Total
$’000
$’000
$’000
$’000
84
55
203
361
204
907
-
5
19
34
19
77
-
-
-
-
-
-
84
60
222
395
223
984
42
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 5:
KEY PERSONNEL COMPENSATION
(CONTINUED)
2020
Key Personnel
Prof. John B. Sheehan
Mr Peter Krejci
Mr Phil Montrone
Mr Rick Montrone
Mr Jack Sciara
d.
Shareholdings
Salar y
& Fees
Superannuation
Shor t Term
Incentives
Total
$’000
$’000
$’000
$’000
84
55
368
375
235
1,117
-
5
35
36
22
98
-
-
-
-
-
-
84
60
403
411
257
1,215
Number of shares held by parent entit y directors and specified executives
Key Personnel
Prof. John B. Sheehan
Mr Phil Montrone
Mr Rick Montrone
Mr Peter Krejci
Mr Jack Sciara
Balance
30.06.20
’000
169
14,314
213
-
258
14,954
Net Change
Other*
’000
-
16
71
-
-
87
Balance
30.06.21
’000
169
14,330
284
-
258
15,041
* “Net Change Other” refers to shares purchased or sold during the financial year.
43
Desane Group Holdings
NOTE 6:
AUDITORS’ REMUNERATION
Remuneration of the auditor for the parent entity:
Michael Chau & Associates
- auditing or reviewing the financial report
GCC Business Assurance P ty Ltd
- auditing or reviewing the financial report
- taxation services
NOTE 7:
DIVIDENDS
Dividends Paid
a. Interim dividend of $0.0225 unfranked, per share, paid on
27 March 2020
Ordinar y dividend of $0.0225 unfranked, per share, paid on
23 October 2020, declared in the 2020 financial report
Interim dividend of $0.0225 unfranked, per share, paid on
26 March 2021
Ordinar y dividend of $0.0225 unfranked, per share, declared by
directors from retained earnings payable on 25 October 2021
Consolidated
Group
2020
$’000
2021
$’000
3
73
3
79
Consolidated
Group
2020
$’000
920
920
-
77
3
80
2021
$’000
920
920
b . The Group has $nil (2020 - $nil) franking credits available before the final dividend for 2021 is
provided.
44
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 8:
EARNINGS PER SHARE
Consolidated
Group
2021
$’000
2020
$’000
Reconciliation of earnings used in the calculation of earnings per share
Operating profit after income tax
1,806
2,257
Reconciliation of weighted average numbers of ordinar y shares used in the
calculation of earnings per share
Consolidated
Group
2021
2020
Weighted average number of ordinar y shares used in the calculation of basic
earnings per share
40,90 9,990 40,909,990
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Conversion, call, subscription or issue af ter 30 June 2021
4.42
4.42
5.52
5.52
There has been no conversion to, calls of, or subscription for ordinar y shares since the reporting date and before
the completion of these accounts.
NOTE 9:
CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Interest bearing short term deposits
The effective interest rate on cash at bank was nil (2020 – nil).
The ef fective interest rate on shor t term bank deposits was an average of
0.1% (2020 – 1.0%). These deposits have a weighted average maturity of
90 days.
Reconciliation of cash
Cash at the end of the financial year as shown in the cash flow statement is
reconciled to items in the statement of financial position as follows:
Cash as above
Less: Bank overdraft (refer to note 17)
45
Consolidated
Group
2021
$’000
178
175
353
2020
$’000
10,203
-
10,203
353
-
353
10,203
-
10,203
Desane Group Holdings
NOTE 10:
CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
NOTE 11:
CURRENT ASSETS – INVENTORY (DEVELOPMENT PROPERTY)
322 Norton Street, Leichhardt – acquisition cost
322 Norton Street, Leichhardt – development costs
NOTE 12:
OTHER ASSETS
(a)
Current Assets
Prepayments and GST receivables
(b)
Non Current Assets
Formation costs
Lease payment plan
Consolidated
Group
2021
$’000
2020
$’000
298
189
Consolidated
Group
2021
$’000
3,379
630
4,00 9
2020
$’000
3,379
161
3,540
Consolidated
Group
2021
$’000
386
386
2020
$’000
285
285
Consolidated
Group
2021
$’000
2020
$’000
2
73
75
2
-
2
46
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 13:
OTHER FINANCIAL ASSETS
(a)
Current Assets
Interest bearing deposit
Held-to-maturity investments
Fixed interest securities
Provision for doubtful debt
(b)
Non Current Assets
Held-to-maturity investments
Fixed interest securities
The ef fective interest rate on fixed interest securities is an average of 7% pa.
These securities have a weighted average maturity of 365 days.
NOTE 14:
NON-CURRENT ASSETS - PROPERTIES
Investment properties
13 Sirius Road, Lane Cove NSW
7 Sirius Road, Lane Cove NSW
91 Thornton Drive, Penrith NSW
159 Allen Street, Leichhardt NSW
16 Industrial Avenue, Wacol QLD
270-278 Norton Street, Leichhardt NSW
47
Consolidated
Group
2021
$’000
6,000
6,669
(32)
12,637
2020
$’000
-
8,355
(32)
8,323
Consolidated
Group
2021
$’000
2020
$’000
170
170
550
550
Note
14a
14b
14c
14d
14e
14f
Consolidated
Group
2021
$’000
8,600
10,511
7,503
22,861
10,176
7,699
67,350
2020
$’000
7,907
9,000
7,171
22,861
10,104
-
57,043
Desane Group Holdings
Valuation overview
The basis of the directors’ valuation of the investment
properties (non-current) is a fair market value as defined
in note 1e.
The directors have based the value on the valuation
report, together with current direct comparison market
sales evidence.
c. The directors’ valuation, as at 30 June 2021. An
independent valuation was undertaken in December
2020 by a certified practicing valuation company. The
directors have based the value on the valuation report,
together with current direct comparison market sales
evidence.
d. The directors’ valuation as at 30 June 2021. The
purchase of the propert y was settled in October 2019.
The propert y is located 5km from Sydney ’s CBD and
is zoned R1 General Residential and has Development
Approval for 46 residential apartments.
e. Valued at cost as at 30 June 2021. The propert y was
purchased in November 2019, on market terms.
f. The contract for the propert y was exchanged in June
2021, with 50% payment of $3,625,000 and the balance
payable at settlement on or before June 2022. The title
on the propert y will pass to the Group on settlement.
In arriving at their opinion, the directors have reviewed
and adopted the following three approaches and
methodologies:
1.
2.
3.
Capitalisation of current net rental income;
Discounted cash flow (“DCF”); and
Direct comparison to market sales evidence.
The properties are being valued independently at
least ever y three years. The Group has no restrictions
on the realisabilit y of an investment propert y nor any
contractual obligations to construct, develop, perform,
repair or enhance an investment propert y.
a. The directors’ valuation, as at 30 June 2021. An
independent valuation was undertaken in December
2020 by a certified practicing valuation company. The
directors have based the value on the valuation report,
together with current direct comparison market sales
evidence.
b. The directors’ valuation as at 30 June 2021. An
independent valuation was undertaken in December
2020 by a certified practicing valuation company.
INVESTMENT PROPERTIES
2021
Acquisition
Cost
Construction
Cost
Interest
Capitalised
$’000
$’000
$’000
Other
Capital
Costs
$’000
Units
Sold/
to be Sold
$’000
Revaluation
$’000
Carr ying
Value
$’000
13 Sirius Rd,
Lane Cove NSW
7 Sirius Rd,
Lane Cove NSW
91 Thornton Dr,
Penrith NSW
159 Allen St,
Leichhardt NSW
16 Industrial Ave,
Wacol QLD
270-278
Nor ton St,
Leichhardt NSW
2,900
672
2,950
1,137
4,149
22,280
10,073
7,699
-
-
-
-
50,051
1,80 9
-
-
-
-
-
-
-
1,198
323
824
581
103
-
3,029
-
-
-
-
-
-
-
3,830
8,600
6,101
10,511
2,530
7,503
-
-
-
22,861
10,176
7,699
12,461
67,350
48
AR 2021 Acquisition
Cost
Construction
Cost
Interest
Capitalised
$’000
$’000
$’000
Other
Capital
Costs
$’000
Units
Sold/
to be Sold
$’000
Revaluation
$’000
Carr ying
Value
$’000
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 14:
NON-CURRENT ASSETS - PROPERTIES
(CONTINUED)
2020
13 Sirius Rd,
Lane Cove NSW
7 Sirius Rd,
Lane Cove NSW
91 Thornton Dr,
Penrith NSW
159 Allen St,
Leichhardt NSW
16 Industrial Ave,
Wacol QLD
2,900
672
2,950
1,137
4,149
22,280
10,073
-
-
-
42,352
1,809
-
-
-
-
-
-
1,198
311
821
581
31
2,943
NOTE 15:
NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Suite 4, 26-32 Pirrama Road, Pyrmont – land and buildings
Less: Accumulated depreciation
Capital works
Less: Accumulated depreciation
Depreciable plant and equipment
Less: Accumulated depreciation
Leasehold improvements
Less: Accumulated depreciation
Office furniture and equipment – at cost
Less: Accumulated depreciation
Motor vehicle – at cost
Less: Accumulated depreciation
In-house soft ware
Less: Accumulated depreciation
Total non-current assets
49
-
-
-
-
-
-
3,137
7,907
4,601
9,000
2,201
7,171
-
-
22,861
10,104
9,940
57,043
Consolidated
Group
2020
$’000
1,834
-
1,834
2021
$’000
1,834
-
1,834
351
(36)
315
21
(7)
14
104
(7)
97
125
(76)
49
69
(26)
43
23
(8)
15
351
(22)
329
21
(5)
16
104
(4)
100
114
(56)
58
69
(16)
53
23
(4)
19
2,367
2,409
Desane Group Holdings
Movements in Carr ying Amounts:
Movement in the carr ying amounts for each class of propert y, plant and equipment bet ween the beginning and the
end of the current financial year
Land &
Buildings
$’000
Capital
Works
$’000
Leasehold
Improvements
$’000
Plant &
Equipment
$’000
Total
$’000
Consolidated Group
Balance at the beginning of year
1,834
329
Additions
Disposals/write offs
Depreciation expense
Carr ying amount at the
end of the year
-
-
-
1,834
-
-
(13)
315
NOTE 16:
CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Unsecured liabilities
Trade payables
Sundr y and accrued expenses
270-278 Norton Street, Leichhardt – settlement commitment
NOTE 17:
BORROWINGS
Secured:
Bank overdraf t
a.
(refer to note 29).
Bank overdraft secured over Lane Cove properties
(b)
Non Current
Secured Liabilities – Bank Loans
Finance for propert y 13 Sirius Road, Lane Cove
Finance for propert y 7 Sirius Road, Lane Cove
100
-
-
(3)
97
146
2,40 9
11
-
11
-
(37)
(53)
121
2,367
Consolidated
Group
2020
$'000
173
168
-
341
2021
$'000
554
85
4,070
4,70 9
Consolidated
Group
Note
2021
$'000
2020
$'000
a
-
-
17i
17ii
2,950
2,950
5,900
2,950
2,950
5,900
50
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 17:
BORROWINGS
(CONTINUED)
i.
ii.
First mortgage finance secured over 13 Sirius Road, Lane Cove propert y (note 14a). Covenants imposed by
mortgagor require total debt not to exceed 50% of the propert y value and the EBITDA is required to exceed
interest expense by at least 2.0 times.
First mortgage finance secured over 7 Sirius Road, Lane Cove propert y (note 14b). Covenants imposed by
mortgagor require total debt not to exceed 50% of the propert y value and the EBITDA is required to exceed
interest expense by at least 2.0 times.
iii.
All covenants imposed on secured loan agreements have been met.
Maturity Schedule
27 July 2024
NOTE 18:
CURRENT LIABILITIES – PROVISIONS
Dividends
Employee entitlements*
* Movement represents net increase in provision set aside
Number of employees at year end
NOTE 19:
NON CURRENT LIABILITIES – PROVISIONS
Employee long service leave entitlement*
* Movement represents provision set aside.
Interest
Rates
(average)
2.25% pa
Consolidated
Group
2020
$'000
5,900
5,900
Consolidated
Group
2020
$'000
920
127
1,047
Consolidated
Group
2020
No
6
2021
$'000
5,900
5,900
2021
$'000
920
155
1,075
2021
No
6
Consolidated
Group
2021
$'000
59
2020
$'000
89
The provision for employee entitlements represent amounts accrued for annual leave and long service leave.
The current position for the employee entitlement includes the total amount accrued for annual leave entitlement and
long service leave that have been vested due to employees having completed the required period of service.
51
Desane Group Holdings
NOTE 20:
ISSUED CAPITAL
40,909,990 (2020: 40,909,990) Ordinar y Shares fully paid
Consolidated
Group
2021
$'000
21,213
2020
$'000
21,213
Consolidated
Group
Consolidated
Group
Ordinar y Shares Fully Paid
2021
Shares
2020
Shares
At beginning of the year
40,90 9,990
40,909,990
Ordinar y Shares fully paid at reporting period
40,90 9,990
40,909,990
2021
$'000
21,213
21,213
2020
$'000
21,213
21,213
a.
Movements in Ordinar y Share Capital of the Company
No shares were issued during 2021 (2020: nil).
b.
Authorised Capital
500,000,000 Ordinar y Shares of no par value.
c.
Capital Management
Management controls the capital of the Group in order to maintain a good debt to equit y ratio, provide the share -
holders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.
The Group’s debt and capital include ordinar y share capital and financial liabilities, supported by financial assets.
There are no externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its
capital structure in response to changes in these risks and in the market. These responses include the management of
debt levels, distributions to shareholders and share issues.
There have been no significant changes in the strategy adopted by management to control and manage the capital of
the Group since the prior year.
NOTE 21:
RETAINED EARNINGS
Retained earnings at beginning of financial year
Net profit attributable to members of parent entit y
Dividends provided for or paid
Retained earnings at end of financial year
2021
$'000
37,598
1,806
(1,841)
37,563
Consolidated
Group
2020
$'000
37,182
2,257
(1,841)
37,598
52
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 22:
DEFERRED TAXES
Non-current
Deferred tax liabilit y comprises:
Consolidated
Group
Note
2021
$’000
2020
$’000
Tax allowances relating to propert y and equipment
14,348
14,285
Revaluation of investment properties
Deferred tax asset attributable to tax and capital losses
Provisions
Reconciliation
Gross Movement
The overall movement in the deferred tax account is as follows:
Opening balance
Charge to statement of profit and loss
4
Closing balance
Deferred Tax Liability
Tax allowance relating to propert y, plant and equipment
Opening balance
Adjustment to previous year ’s provision
Charged to the statement of profit and loss
Closing balance
Revaluation of investment properties
Opening balance
Net revaluation during the current period
Transfers on propert y sale
Closing balance
Deferred Tax Assets
Tax and capital losses
Opening balance
Prior year adjustment
Tax and capital losses utilised
Closing balance
Provisions
Opening balance
Credited to statement of profit and loss
Closing balance
53
3,739
(879)
(82)
17,126
2,982
(829)
(82)
16,356
16,356
770
17,126
15,381
975
16,356
14,285
14,233
-
63
-
53
14,348
14,285
2,982
757
-
3,739
(829)
-
(50)
(879)
(82)
-
(82)
1,944
1,038
-
2,982
(707)
16
(138)
(829)
(88)
6
(82)
Desane Group Holdings
NOTE 23:
FINANCIAL INSTRUMENTS
a.
Financial Risk Management
The group’s financial instruments consist mainly of deposits with banks, mortgage loans with banking institutions,
accounts receivable and payable, and loans to and from controlled entities.
Desane’s Board of Directors and management are responsible for the monitoring and managing of financial risk
exposures on a monthly basis.
The main risks the group is exposed to through its financial instruments are liquidit y risk and interest rate risk.
Liquidit y Risk
Liquidit y risk arises from the possibilit y that the group might encounter difficult y in settling its debts or other wise
meeting its obligations related to financial liabilities. Desane manages this risk through the following mechanisms:
•
•
•
•
Preparing for ward looking cash flow analysis in relation to its operational, investing and financing
activities;
Monitoring undrawn credit facilities;
Obtaining funding from a variet y of sources; and
Investing surplus cash with major financial institutions.
Interest Rate Risk
Exposure to interest rate risks arises on financial assets and financial liabilities recognised at the end of the reporting
period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial
instruments.
Interest rate risk is managed using a mix of fixed and floating rate debt. At 30 June 2021, approximately 100% of
the Group’s debt is with a floating interest rate and any balance is fixed interest rate debt.
The group entit y ’s exposure to interest rate risk and the effective weighted average interest rate by maturit y periods
are set out in the following table (note 23d). For interest rates applicable to each class of asset or liabilit y, refer
to individual notes to the financial statements. Exposures arise predominantly from assets and liabilities bearing
variable interest rates as the consolidated entit y intends to hold fixed rate assets and liabilities to maturit y.
The contractual maturities of the financial liabilities are set out below. The amounts represent the future undiscounted
principal and interest cash flows relating to the amounts drawn at reporting date.
b.
Credit Risk Exposure
The credit risk on financial assets of the consolidated entit y which has been recognised in the statement of financial
position is generally the carr ying amount, net of any provisions for doubtful debts.
The consolidated group does not have any material credit risk exposure to any single receivable or group of
receivables under financial instruments entered into by the economic entit y.
c.
Net Fair Values
On Statement of Financial Position:
The net fair value of cash and cash equivalents and non-interest bearing monetar y financial assets and financial
liabilities approximates their carr ying value.
Off Statement of Financial Position:
The parent entit y and certain controlled entities have potential financial liabilities which may arise from certain
contingencies disclosed in note 30. No material losses are anticipated in respect of any of these contingencies.
54
AR 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 23:
FINANCIAL INSTRUMENTS
(CONTINUED)
d. Carr ying Amount and Net Fair Values
There is no material difference bet ween the carr ying amounts and the net fair values of financial assets and
liabilities
2021
Financial Assets
Cash and
deposits
Receivables
Other financial assets
Weighted average
interest rates
Financial Liabilities
Trade and other
creditors
Interest bearing
liabilities
Weighted average
interest rate
Net financial assets
(liabilities)
Note
Floating
Interest
Rate
Floating
Interest
Maturing
within
1-5 years
Fixed
Interest
Maturing
within
1 year
Fixed
Interest
Maturing
within
1-5 years
Non
Interest
Bearing
Total
$’000
$’000
$’000
$’000
$’000
$’000
9
- -
10, 12
13
- -
- -
- -
353
-
12,637
12,990
-
-
170
170
-
353
759
759
- 12,807
759 13,919
- -
3.8%
7.0%
-
3.8%
16
17
- -
- 5,900
- 5,900
- 2.25%
-
-
-
-
-
-
-
-
4,70 9
4,70 9
-
5,900
4,70 9 10,60 9
-
2.25%
- (5,900)
12,990
170
(3,950)
3,310
55
Desane Group Holdings
Note
Floating
Interest
Rate
Floating
Interest
Maturing
within
1-5 years
Fixed
Interest
Maturing
within
1 year
Fixed
Interest
Maturing
within
1-5 years
Non
Interest
Bearing
Total
$’000 $’000
$’000
$’000
$’000
$’000
-
-
-
-
-%
-
-
-
-%
-
-
-
-
-
-%
-
5,900
5,900
2.5%
10,203
-
8,323
18,526
-
-
550
550
- 10,203
476
476
-
8,873
476
19,552
3.7%
7.0%
-%
3.7%
-
-
-
-
-
-
341
-
341
341
5,900
6,241
-%
-%
-%
2.5%
(5,900)
18,526
550
135
13,311
2020
Financial Assets
Cash and deposits
Receivables
Other financial assets
Weighted average
interest rates
Financial Liabilities
9
10, 12
13
Trade and other creditors
Interest bearing liabilities
16
17
Weighted average
interest rate
Net financial assets
(liabilities)
Sensitivit y Analysis
The following table illustrates sensitivities to the Group’s exposure to changes in interest rates. The table indicates
the impact on how profit and equit y values reported at reporting date would have been affected by change in the
relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the
movement in a particular variable is independent of other variables.
The net effective variable interest rate borrowings (floating interest rate) expose the Group to interest rate risk which
will impact future cash flows and interest charges, are indicated in the above figures. All interest bearing liabilities
and their weighted interest rate is shown in note 23(d).
There are no financial liabilities maturing over 5 years.
Year ended 30 June 2021
- interest rate sensitivit y calculated at an average of +/- 2%pa.
Year ended 30 June 2020
- interest rate sensitivit y calculated at an average of +/- 2%pa.
Consolidated
Group
Profit
$'000
+/- 118
Equity
$'000
+/- 118
Consolidated
Group
Equit y
$'000
+/- 118
Profit
$'000
+/- 118
56
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 24:
RELATED PARTY TRANSACTIONS
All transactions are under normal commercial terms and conditions.
The Group’s main related parties are as follows:
i.
K ey management personnel:
Any person(s) having authorit y and responsibilit y for planning, directing and controlling the activities of the
entit y, directly or indirectly, including any director (whether executive or other wise) of that entit y, are
considered key management personnel.
ii.
Other related parties:
Other related parties include entities controlled by the parent entit y and entities over which key
management personnel have control.
Related parties of Desane Group Holdings Limited (parent entit y) fall into the following categories:
a.
Controlled Entities
Information relating to controlled entities is set out in note 30. Other transactions bet ween related parties consist of:
Desane Properties Pt y Ltd: Dividend paid
b.
Directors
Consolidated
Group
2021
$'000
1,250
2020
$'000
1,500
The names of the persons who were directors of the parent entit y during the financial year are as follows:
•
•
•
•
Phil Montrone
John Blair Sheehan
Rick Montrone
Peter Krejci
Information on the remuneration of directors and executives is set out in note 5.
The Managing Director and all executives are permanent employees of Desane Group Holdings Limited.
Trafalgar Contracting Pt y Ltd, which is a company owned by Mr Phil Montrone’s brother, has provided maintenance
and project management services totalling $6,050 at properties owned by the Group on an arm’s length basis.
Mr Jack Sciara provided professional tax services to the Group for the amount of $4,000 on an arm’s length basis.
Mr Rick Montrone’s spouse was paid $9,875 on market terms for the design and production of annual financial
reports and the AGM presentation.
Other than the above transactions, no director has entered into a material contract since the end of the previous
financial year and there were no material contracts involving directors’ interests existing at year-end.
NOTE 25: COMMITMENTS FOR EXPENDITURE
The contract for 270-278 Norton Street, Leichhardt was exchanged in June 2021, with 50% payment of $3,625,000
and the balance of $3,625,000 payable on or before June 2022.
57
Desane Group Holdings
NOTE 26: SUPERANNUATION COMMITMENTS
In the case of employees of the holding company and controlled entities, the company contributed 9.50% of each
member ’s salar y into the fund nominated by each member. Group companies contribute a minimum amount equal
to 9.50% of each member ’s salar y, plus the cost of the insurance coverage, if required, to insure the provision of
all benefits to the Fund. The benefits provided by the accumulation fund are based on the contributions and income
thereon held by the Fund on behalf of the member. The 9.50% contribution made by group companies is legally
enforceable.
The company and its controlled entities have a legally enforceable obligation to contribute to the funds.
The directors are not aware of any other changes in circumstances which would have a material impact on the
overall financial position of the funds.
Employer contributions to the plans; consolidated $97,220 (2020 - $116,185), parent entit y $38,143
(2020 - $77,562).
NOTE 27: CONTINGENT LIABILITIES
a.
not require repayment of the loan funds advanced in the coming year (refer note 30(ii)).
The parent entit y has given a letter of support to each of its t wo controlled entities, to the effect that it will
The shareholders’ funds as at 30 June 2021, in the controlled entities concerned were:
159 Allen Street Leichhardt Pt y Ltd
Desane Contracting Pt y Limited – net assets
Desane Properties Pt y Limited – net assets
b.
7 Sirius Road Property
Consolidated
Group
2020
$'000
(169)
(1,859)
47,580
2021
$'000
(304)
(1,898)
49,406
The parent entit y has guaranteed the repayment of the first mortgage finance secured over the 7 Sirius Road
pr opert y (note 17).
c.
13 Sirius Road Property
The parent entit y has guaranteed the repayment of the first mortgage finance secured over the 13 Sirius
R oad propert y (note 17).
d.
In 2 015, Ozzy States Pt y Ltd, the builder (now in liquidation), completed a mixed residential development
in Rozelle contracted by Desane Contracting Pt y Ltd. The Board has been advised that the project builder
has been placed in liquidation. The Owners Corporation for the Rozelle propert y, no longer having
th e abilit y to pursue the project builder for alleged building defect rectification works, has commenced
legal proceedings in the NSW Supreme Court against Desane Contracting Pt y Ltd. Desane Contracting
Pt y Ltd has engaged legal representation to defend the alleged claim and consequently the Board and
Directors have been legally advised that providing detailed information and disclosures regarding this
matter could prejudice the position of the entit y in satisfactorily resolving the dispute. This note is also in
accordance with accounting standards AASB 137 (92) and IAS137.
58
AR 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 28: OPERATING SEGMENTS –
CONSOLIDATED GROUP
Segment Information
Identification of Reportable Segments
The Group has identified its operating segments based
on the internal reports that are reviewed and used by
the Board of Directors in assessing performance and
determining the allocation of resources.
Reportable segments disclosed are based on aggregating
operating systems where the segments are considered
to have similar economic characteristics and are also
similar to the operations and or services provided by the
segment.
Types of Operations and Services by Segment
Revenue is derived by the industr y segments from the
following activities:
i.
Pr opert y Development
Development projects (residential, commercial or
industrial).
Segment Liabilities
Liabilities are allocated to segments where there is a
direct nexus bet ween the incurrence of the liabilit y and
the operations of the segment. Borrowings and tax
liabilities are generally considered to relate to the Group
as a whole and are not allocated. Segment liabilities
include trade and other payables and certain direct
borrowings.
Unallocated Items
The following items of revenue, expenses, assets and
liabilities are not allocated to operating segments as they
are not considered part of the core operations of any
segment:
•
•
•
•
•
•
•
•
Net gains on disposal of available for
sale investments;
Impairment of assets and other non
recurring items of revenue or expenses;
Income tax expense;
Deferred tax assets and liabilities;
Current tax liabilities;
Other financial liabilities;
Retirement benefit obligations; and
Administration expenses.
ii.
Pr opert y Investment
Geographical Segments
R ental income from prime real estate investments.
iii.
Pr opert y Project Management and Resale
The consolidated group operates in one geographical
segment being New South Wales, Australia.
Pr opert y project management and resale
of commercial, industrial and residential
pr operties, principally in Sydney metropolitan
areas.
Inter -segment Transactions
Inter-segment pricing is based on what would be realised
in the event the sale was made to an external part y at
arm’s-length basis.
iv.
Pr opert y Services
Pr opert y and related services.
Accounting Policies Adopted
Unless stated other wise, all amounts reported to the
Board of Directors, with respect to operating segments,
are determined in accordance with accounting policies
that are consistent to those adopted in the annual
financial statements of the Group.
Segment Assets
Where an asset is used across multiple segments, the
asset is allocated to that segment that receives majorit y
economic value from that asset. In the majorit y of
instances, segment assets are clearly identifiable on the
basis of their nature and physical location.
59
Desane Group Holdings
2021
Proper ty
Investment
Proper ty
Development
Proper ty
Project
Management
& Resale
Proper ty
Ser vices
Plant &
Equipment
Other
Consolidated
Group
$’000
2,080
-
2,080
3,299
$’000
$’000
$’000
$’000
$’000
-
-
-
(40)
-
-
-
-
47
-
47
47
-
-
-
-
498
-
498
498
External sales
Other segments
Total revenue
Segment result
Unallocated
expenses
Finance costs
Profit/(loss) before
income tax
Income tax expense
Profit/(loss) after income tax
$’000
2,625
-
2,625
3,804
(1,0 95)
(133)
2,576
(770)
1,806
2021
Segment
Assets
Proper ty
Investment
Proper ty
Development
Proper ty
Project
Management
& Resale
Proper ty
Ser vices
Plant &
Equipment
Other
Consolidated
Group
$’000
$’000
$’000
$’000
-
2,40 9
19,551
2020 opening
balance
$’000
57,043
$’000
3,540
Unallocated Assets
Deferred tax assets
Segment Asset
Increases/(Decreases)
for the Period
Acquisitions
Revaluations/
(devaluations)
Capital
expenditures
Development
expenditures
Depreciation
and capital
allowance
Net movement
in other
segments
7,699
2,522
86
-
-
-
-
-
-
469
-
-
67,350
4,00 9
Unallocated Asset
Deferred Tax Assets
Total Group Assets
-
-
-
-
-
-
-
-
$’000
82,543
-
7,710
2,522
86
469
(53)
11
-
-
-
(53)
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,632)
(5,632)
2,367
13,919
87,645
-
87, 645
60
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 28: OPERATING SEGMENTS – CONSOLIDATED GROUP
(CONTINUED)
2021
Segment
Liabilities
Proper ty
Investment
Proper ty
Development
Proper ty
Project
Management
& Resale
Proper ty
Ser vices
Plant &
Equipment
Other
Consolidated
Group
$’000
$’000
$’000
$’000
$’000
$’000
5,900
2020 opening
balance
Unallocated
Liabilities
Deferred tax
liabilities
Segment Liabilities
Increases/(Decreases)
for the Period
Net movement in
other segments
-
5,900
Unallocated Liabilities
Deferred Tax Liabilities
Total Group Liabilities
-
-
-
-
-
-
-
-
-
-
1,477
$’000
7,377
16,356
16,356
4,366
4,366
22,199
28,0 99
770
28,869
2020
Propert y
Investment
Propert y
Development
Propert y
Project
Management
& Resale
Propert y
Services
Plant &
Equipment
Other
Consolidated
Group
$’000
1,468
-
1,468
3,921
$’000
$’000
$’000
$’000
$’000
-
-
-
(33)
-
-
-
-
49
-
49
49
-
-
-
-
793
-
793
793
External sales
Other segments
Total revenue
Segment result
Unallocated
expenses
Finance costs
Profit/(loss)
before income tax
Income tax expense
Profit/(loss) after income tax
61
$’000
2,310
-
2,310
4,730
(1,349)
(149)
3,232
(975)
2,257
Desane Group Holdings
2020
Segment
Assets
Propert y
Investment
Propert y
Development
Propert y
Project
Management
& Resale
Propert y
Services
Plant &
Equipment
Other
Consolidated
Group
$’000
$’000
$’000
$’000
$’000
$’000
43,398
-
2019 opening
balance
Unallocated Assets
Deferred tax Assets
Segment Assets
Increases/(Decreases)
for the Period
Acquisitions
10,093
3,379
3,461
91
-
-
-
161
-
-
57,043
3,540
Revaluations/
(devaluations)
Capital
expenditures
Depreciation
and capital
allowance
Net movement in
other segments
Unallocated Assets
Deferred Tax Assets
Total Group Assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,432
46,019
30
-
-
(53)
-
-
-
-
$’000
91,849
-
13,502
3,461
252
(53)
-
(26,467)
(26,467)
2,409
19,552
82,544
-
82,544
2020
Segment
Liabilities
Propert y
Investment
Propert y
Development
Propert y
Project
Management
& Resale
Propert y
Services
Plant &
Equipment
Other
Consolidated
Group
$’000
$’000
$’000
$’000
$’000
$’000
2019 opening
balance
16,400
Unallocated Liabilities
Deferred tax Liabilities
Segment Liabilities
Increases/(Decreases)
for the Period
Net movement in
other segments
(10,500)
5,900
Unallocated Liabilities
Deferred Tax Liabilities
Total Group Liabilities
-
-
-
-
-
-
-
-
-
-
1,673
$’000
18,073
15,381
15,381
-
-
(196)
(10,696)
16,858
22,758
975
23,733
62
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 29: CASH FLOW INFORMATION
a.
Reconciliation of Cash Flow from Operations with Profit Af ter Income Tax
Profit/(loss) after income tax
Non-cash flows in profit/(loss)
Depreciation and amortisation
(Gain)/loss on asset revaluation
Changes in assets and liabilities
(Increase)/decrease in trade receivables
(Increase)/decrease in prepayments
(Decrease)/increase in trade payments and accruals
(Decrease)/increase in other payables
(Decrease)/increase in provisions
Increase/(decrease) in deferred taxes payable
Transfer to investing activities
Cash flow from operations
Credit Standby Arrangements with Banks
Credit facilit y
Amount utilised
Consolidated
Group
2020
$'000
2,257
53
(3,461)
(110)
(24)
207
2021
$'000
1,806
53
(2,522)
(183)
(101)
299
4,069
(10,584)
(2)
770
(4,069)
120
(12)
975
10,500
(199)
Consolidated
Group
2021
$'000
100
-
2020
$'000
100
-
Bank overdraft facilit y is arranged with one bank and the general terms and conditions are set and agreed annually.
Interest rates are variable and subject to adjustment. Please refer to note 17.
Loan Facilities with Financial Institutions
Consolidated
Group
2021
$'000
5,900
2020
$'000
5,900
(5,900)
(5,900)
Loan facilities
Amount utilised
For more details on the loan facilities, please refer to note 17
63
Desane Group Holdings
NOTE 30: PARENT ENTITY DISCLOSURES
The following information has been extracted from the books and records of the parent entit y and has been prepared
in accordance with Accounting Standards.
STATEMENT OF COMPREHENSIVE INCOME
Result of Parent Entity
Profit for the period
Other comprehensive income
Total comprehensive income for the period
STATEMENT OF FINANCIAL POSITION
Current Assets
Cash
Other assets
Non-current Assets
Trade and other receivables – loans to controlled entities
Investment – controlled entities
Propert y, plant and equipment
Total Assets
Current Liabilities
Trade and other payables
Short term provisions
Total Liabilities
Net Assets
Total Equity
Issued capital
Retained earnings/(accumulated losses)
Total Equity
i.
Controlled Entities
Investments in controlled entities are unquoted and comprise:
Parent Entity
Note
2021
$’000
2020
$’000
ii
i
155
-
155
8
52
151
-
151
13
60
12,557
14,197
490
107
490
129
13,214
14,889
36
1,115
1,151
25
1,115
1,140
12,063
13,749
21,213
(9,150)
12,063
21,213
(7,464)
13,749
Desane Properties Pt y Ltd
Desane Contracting Pt y Ltd
159 Allen Street Leichhardt Pt y Ltd
Class of
Shares
Ordinar y
Ordinar y
Ordinar y
Parent Entity
2021
2020
Holding
%
Investment
$’000
Holding
%
Investment
$’000
100
100
100
490
-
-
490
100
100
100
490
-
-
490
64
AR 2021 Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
NOTE 30: PARENT ENTITY DISCLOSURES
(CONTINUED)
All controlled entities are incorporated in Australia. Desane Properties Pt y Ltd declared a dividend of $1.25m out
of retained profits (2020: $1.5m). Desane Contracting Pt y Ltd declared a dividend of $nil (2020: $nil). 159 Allen
Street Leichhardt Pt y Ltd declared a dividend of $nil (2020: $nil).
Contribution to profit/(loss) after tax:
Desane Group Holdings Limited
Desane Properties Pt y Limited
Desane Contracting Pt y Limited
159 Allen Street Leichhardt Pt y Ltd
ii.
Loans to Controlled Entities
Desane Properties Pt y Limited
Desane Contracting Pt y Limited
159 Allen Street Leichhardt Pt y Ltd
Guarantees
2021
$'000
(1,0 95)
3,076
(40)
(135)
1,806
2020
$'000
(1,349)
3,771
(82)
(83)
2,257
(12,643)
(10,622)
1,882
23,318
12,557
1,857
22,962
14,197
Desane Group Holdings Limited has not entered into any guarantees, in the current or previous financial year, in
relation to the above debts of its controlled entities.
Capital Commitments
Desane Group Holdings has no capital commitments to note.
Contractual Commitments
At 30 June 2021, Desane Group Holdings Limited had not entered into any contractual commitments for the
acquisition of propert y, plant and equipment or any other affairs (2020: Nil).
NOTE 31: EVENTS AFTER THE REPORTING DATE
There were no material events subsequent to reporting date.
NOTE 32: ECONOMIC DEPENDENCY
A portion of all the Group’s investment properties are under financial loans.
65
Desane Group Holdings
Directors’
DECLARATION
In accordance with a resolution of the directors of Desane Group Holdings Limited, the directors of the company
declare that:
1.
The financial statements and notes, as set out on pages 31 to 65 are in accordance with the Corporations
Act 2001 and;
a.
b.
Comply with Australian Accounting Standards, which, as stated in accounting policy note 1 to the
financial statements, constitutes compliance with International Financial Reporting
Standards (IFRS); and
Give a true and fair view of the financial position as at 30 June 2021 and of the performance for
the year ended on that date of the consolidated group;
In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable; and
The directors have been given the declarations required by a 295A of the Corporations Act 2001 from the
Managing Director and Chief Financial Officer.
2.
3.
This declaration is made in accordance with a resolution of the Board of Directors.
J B Sheehan
Director
Sydney
23 August 2021
P Montrone
Director
Sydney
66
AR 2021
Independent
AUDITOR’S REPORT
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
GPO Box 4566, Sydney NSW
2001 Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF DESANE GROUP HOLDINGS LIMITED
REPORT ON THE AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS
Report on the Financial Report
Opinion
We have audited the financial report of Desane Group Holdings Limited and Controlled Entities (the Group),
which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement
of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including
a summary of significant accounting policies, and the directors’ declaration.
In our opinion:
-
the accompanying financial report of Desane Group Holdings Limited and Controlled Entities is in
accordance with the Corporations Act 2001; including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance about whether the financial report is free from material misstatement. Our
responsibilities under those standards are further disclosed in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110: Code of Ethics for Professional Accountants (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the company, would be in the same terms if given to the directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the year ended 30 June 2021. 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 an opinion on these
matters.
Liability limited by a scheme approved under Professional Standards Legislation
67
Desane Group Holdings
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
GPO Box 4566, Sydney NSW 2001
Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
Description of Key Audit Matter
How Our Audit Addressed the Key Audit Matter
1. Valuation of Investment Properties – non current
refer note 1(e) and note 14 to the consolidated
financial statements.
Our procedures included, but were not limited to the
following:
7 Sirius Road, Lane Cove, NSW
13 Sirius Road, Lane Cove, NSW
91, Thornton Drive, Penrith, NSW
159 Allen Street, Leichhardt, NSW
16 Industrial Avenue, Wacol , Qld
$,000
10,511
8,600
7,503
22,861
10,176
The properties were valued by the directors based
on
independent
valuations undertaken by a firm of licensed valuers.
the methodologies used by
Independent valuations were undertaken for the
Lane Cove properties in December 2020 and in
October 2020 for the Penrith property.
Commercial property valuations are sensitive to the
key assumptions applied in valuations. In particular,
rates of capitalisation of net rental income, market
rentals, vacancy levels, average lease expiring
dates, the inputs to determine discounted cash flow
outcomes and in appropriately assessing market
sales evidence in the property sector and location
under review.
In reference to market sales it is noted that the onset
of COVID-19 has resulted in a marked reduction of
transactions in the commercial property sector
where the Desane Group specialises. Ordinarily
market sales provide an important source of
evidence regarding property fair values
1. We confirmed that the independent valuations
were undertaken
in accordance with both
International Financial Reporting Standards
(IFRS) 13 and the Australian Property Institute
Standards to determine the fair value of the
properties.
2. We considered the valuation methods used by
the directors to ensure their approach and
methodologies accorded with the industry norm
for valuations of this nature and that all commonly
accepted
been
valuation methods
considered.
had
3. We checked the continued reliability of the
underlying assumptions used in the valuations to
supporting
lease agreements and other
documents.
4. We compared the inputs in the valuations,
including capitalisation rates, discount rates and
rental yields to historical data and available
industry data. The relative sensitivity of the
inputs was discussed with the directors.
5. Where applicable, we reviewed possible future
development
the
reasonableness of commerciality of the plans
and consequent reasonableness of the current
values disclosed in the financial statements.
assess
plans
to
6. Title/ownership was confirmed.
7. We considered the adequacy of the disclosures in
the financial statements.
We confirmed that the directors’ valuations were in
accordance with generally acceptable market
valuations with the key assumptions being within the
the
range of current market data. We
disclosures
to be
the
adequate.
financial statements
found
in
Liability limited by a scheme approved under Professional Standards Legislation
68
AR 2021 Independent
AUDITOR’S REPORT
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
GPO Box 4566, Sydney NSW 2001
Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
Description of Key Audit Matter
How Our Audit Addressed the Key Audit Matter
2.
Investment Property Purchased (refer note 14)
Our procedures included, but were not limited to the
following:
$,000
270-278 Norton Street, Leichhardt, NSW
7,699
A contract of purchase was entered into on 4 June,
2021 and accompanied by a payment of $3,625.
The balance of $3,625 is payable on settlement on
or before June 2022.
1. We verified the purchase of the property to the
purchase contract, solicitor’s detailed statement,
and other documentation.
2. The payment for the purchase instalment in June
2021 was agreed to Desane’s banking records.
3. We checked that the purchase was executed
under normal commercial terms.
4. We reviewed the adequacy of the disclosures in
the financial statements.
Purchase of the property verified.
3.
Inventory (development Property)
$,000
Our procedures included, but were not limited to the
following:
322 Norton Street, Leichhardt, NSW
4,009
1. Title/ownership was confirmed.
2. Possible future plans for development of the
property together with the underlying assumptions
and
were
reasonableness.
commerciality
assessed
for
Reasonable grounds exist to believe that the current
value
is ultimately
financial statements
recoverable from future developments and sales.
the
in
Information Other than the Financial Reports and Auditors Report thereon
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our
auditor’s report. Our opinion on the financial report does not cover the other information and accordingly we do
not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report,
the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as
applicable, matters relating to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Liability limited by a scheme approved under Professional Standards Legislation
69
Desane Group Holdings
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
GPO Box 4566, Sydney NSW 2001
Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could be
reasonably expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the financial report of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration
We have audited the remuneration report included in pages 26 to 28 of the directors’ report for the year ended
30 June 2021. The directors of the company are responsible for the preparation and presentation of the
remuneration report in accordance with s 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing
Standards.
Liability limited by a scheme approved under Professional Standards Legislation
70
AR 2021 Independent
AUDITOR’S REPORT
GCC Business & Assurance Pty Ltd
ABN 61 105 044 862
Responsibilities
GPO Box 4566, Sydney NSW 2001
Telephone: (02) 9231 6166
Facsimile: (02) 9231 6155
Suite 807, 109 Pitt Street, Sydney NSW 2000
The directors of the company are responsible for the preparation and presentation of the remuneration report in
accordance with s 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
remuneration report, based on our audit conducted in accordance with Australia Auditing Standards.
Auditor’s Opinion
In our opinion, the remuneration report of Desane Group Holdings Limited, for the year ended 30 June 2021,
complies with s 300A of the Corporations Act 2001.
GCC BUSINESS & ASSURANCE PTY LTD
(Authorised Audit Company)
GRAEME GREEN
Director
Sydney
23 August 2021
Liability limited by a scheme approved under Professional Standards Legislation
71
Desane Group Holdings
Shareholder
INFORMATION
The shareholder information set out below was applicable as at 5 August 2021.
1.
SHAREHOLDING
Distribution of equitable securities:
Categor y (size of holding)
1- 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Number of
Ordinar y
Shares*
Number of
Holders of
Ordinar y Shares
27,307
352,947
381,318
5,149,214
34,999,204
40,909,990
120
134
49
136
55
494
There were 86 holders of less than a marketable parcel of ordinar y shares.
* The number of Ordinar y Shares on issue as at 30 June 2021 was 40,909,990.
2.
TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS
The names of the 20 largest securit y holders are listed below:
Name
1. Cupara Pt y Ltd
2. J P Morgan Nominees Australia Pt y Limited
3. Montevans Pt y Ltd
4. Trafalgar Custodians Pt y Ltd
5. Glencairn Pt y Limited
6. PFPT Management Pt y Ltd
Ordinar y
Shares
11,270,878
4,347,701
2,745,400
2,451,165
1,250,000
938,831
7. Cordato Partners (Superannuation) Pt y Ltd
790,409
8. National Nominees Limited
9. Hillmorton Custodians Pt y Ltd
10. Dotnric Pt y Ltd
11. John & Judith Pt y Ltd
12. Keiser Investments Pt y Ltd
13. Mr Peter Howells
14. Oakmount Nominees Pt y Ltd
15. Kelpador Investments Pt y Ltd
16. Woodtrone Pt y Ltd
17. Mocorb Pt y Ltd
18. Waratah Propert y Services (No 1) Pt y Ltd
19. Joe Scardino & Felicia Scardino
20. Whimplecreek Pt y Ltd
740,875
637,871
593,579
582,677
556,158
380,000
330,000
283,770
283,721
282,131
276,512
273,555
270,000
% of
Issued
Capital
0.07
0.86
0.93
12.59
85.55
100.00
% Held to
Issued
Capital
27.55
10.63
6.71
5.99
3.06
2.29
1.93
1.81
1.56
1.45
1.42
1.36
0.93
0.81
0.69
0.69
0.69
0.68
0.67
0.66
29,285,233
71.58
72
AR 2021
Shareholder
INFORMATION
3.
SUBSTANTIAL SHAREHOLDERS
Substantial holders in the Company are set out below:
Cupara Pt y Ltd
Greig & Harrison Pt y Ltd
Phoenix Portfolios Pt y Ltd
Montevans Pt y Ltd
Ordinar y
Number
10,246,252
5,497,762
4,560,206
2,729,374
%
28.27
13.44
12.36
6.67
4.
V OTING RIGHTS
The voting rights attaching to each class of shares are set out below:
Ordinar y Shares
No restrictions. Ever y member present or by proxy shall have one vote and upon a poll, each share shall have
one vote.
There are no other classes of equit y securities.
73
Desane Group Holdings
Comapny
PARTICULARS
...
Directors & Key Personnel
Prof. John Blair Sheehan AM – Chairman (non-executive director)
Phil Montrone OAM – Managing Director
Rick Montrone – Director
Peter Krejci – Director (non-executive)
Jack Sciara – Company Secretar y and Chief Financial Officer
Principal Registered Office in Australia
Suite 4, 26-32 Pirrama Road, Pyrmont NSW 2009
Other Company Details
Postal address: PO Box 331, Leichhardt NSW 2040
Telephone: (02) 9555-9922
Facsimile: (02) 9555-9944
E-mail Address: info@desane.com.au
Website: desane.com.au
Share Register
Shareholders with questions about their shareholdings should contact Desane’s external share registrar:
Computershare Investor Services Pt y Limited
Level 5, 115 Grenfell Street, Adelaide SA 5000
Postal Address: GPO Box 2975, Melbourne VIC 3001
Telephone enquiries within Australia: 1300-556-161
Telephone enquiries outside Australia: 61-3-9415-4000
Website: www.computershare.com
Please advise the share registrar if you have a new postal address.
Auditor
GCC Business & Assurance Pt y Ltd
Suite 807, 109 Pitt Street, Sydney NSW 2000
Bankers
Commonwealth Bank of Australia
Securities Exchange Listing
Desane Group Holdings Limited shares are listed on the Australian Securities Exchange. The ASX code is
DGH.
Notice of Annual General Meeting
The Annual General Meeting of Desane Group Holdings Limited will be held virtually,
on Friday, 29 October 2021, commencing 10:00 am AEDT.
74
AR 2021