INVESTORS GROUP
ANNUAL REPORT 2018
ELANOR
INVESTORS GROUP
ANNUAL REPORT
FOR THE YEAR ENDED
30 JUNE 2018
2 | Elanor Investors Group Annual Report 2018
WorkZone West, Perth, WA Contents
Highlights
Message from the Chairman
CEO’s Message
Financial Report
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance
Security Holder Analysis
Corporate Directory
4
6
7
10
11
37
38
45
109
110
115
116
118
Financial Calendar
23 October 2018 Meeting of security holders
December 2018
Estimated interim distribution
announcement and securities
trade ex-distribution
February 2019
Interim results announcement
March 2019
Interim distribution payment
June 2019
Estimated final distribution
announcement and securities
trade ex-distribution
August 2019
Full-year results announcement
September 2019 Final distribution payment
September 2019 Annual tax statements
Meeting of security holders
The meeting of security holders will be held at 10:30am (Sydney
time) at Computershare, Level 4, 60 Carrington Street, Sydney
NSW 2000, on 23 October 2018.
Responsible Entity
Elanor Funds Management Limited ABN 39 125 903 031. ASFL
398 196. Elanor Investors Group comprises Elanor Investors
Limited (ABN 33 169 308 187) and Elanor Investment Fund
(ARSN 169 450 926).
Highlights
CORE EARNINGS
for the financial year 2018
$16.27m
DISTRIBUTIONS
(per security)
15.77c
FUNDS UNDER MANAGEMENT
as at 30 June 2018
$1,083m
SECURITIES ON ISSUE
as at 30 June 2018
93.0m
SECURITY PRICE
as at 30 June 2018
$2.06
NET TANGIBLE ASSET VALUE
(per security)
$1.63
GEARING
as at 30 June 2018
22.1%
28.4%
23.4%
58.8%
4.2%
3.7%
1.8%
from 4.2%
4 | Elanor Investors Group Annual Report 2018
Darwin
NORTHERN
TERRITORY
SOUTH
AUSTRALIA
WESTERN
AUSTRALIA
QUEENSLAND
Gladstone
Brisbane
Perth
Albany
Assets
Divested Assets
NEW SOUTH
WALES
Taree
Sydney
Canberra
VICTORIA
Adelaide
Auckland
NZ
Wellington
Melbourne
TAS
Hobart
Darwin
Darwin
Elanor Investors Group’s assets are
located in urban and regional areas
across Australia and New Zealand
NORTHERN
TERRITORY
NORTHERN
TERRITORY
QUEENSLAND
QUEENSLAND
WESTERN
AUSTRALIA
WESTERN
AUSTRALIA
SOUTH
AUSTRALIA
SOUTH
AUSTRALIA
Gladstone
Gladstone
Brisbane
Brisbane
Perth
Perth
Albany
Albany
Assets
Divested Assets
Assets
Divested Assets
NEW SOUTH
WALES
NEW SOUTH
WALES
Taree
Taree
VICTORIA
Adelaide
VICTORIA
Sydney
Sydney
Canberra
Canberra
Adelaide
Melbourne
Melbourne
TAS
Hobart
TAS
Hobart
Auckland
Auckland
NZ
NZ
Wellington
Wellington
Message from the Chairman
On behalf of the Board, I am pleased to present Elanor
Investors Group’s Annual Report, including its Financial
Statements for the year ended 30 June 2018.
The year ended 30 June 2018 has
been another successful year for the
Group, both financially and strategically.
The Group has achieved significant
growth in Core Earnings, funds under
management and security holder value.
The Group achieved Core Earnings
of $16.3 million for the year. Elanor’s
investment portfolio and managed
funds was in excess of $1.2 billion as
at 30 June 2018. From a strategic
perspective, the Group is well positioned
to grow in each of its core areas of focus
being retail real estate, commercial real
estate and hotels, tourism and leisure.
New real estate sectors continue to
be explored.
Our strong growth is driven by a clear
focus on our strategy to grow funds
under management by identifying and
originating investments that deliver
strong performance for both Elanor’s
funds management capital partners and
Elanor’s security holders. The successful
execution of this strategy resulted
in significant growth in funds under
management of 58.8% over the year.
Results
The results for the 2017/18 Financial
Year reflect the continued growth of
our funds management platform as
an ASX listed public company. Our
Core Earnings of $16.3 million reflected
a 28.4% increase on the prior year.
Distributions per security were 15.77
cents per stapled security for the year,
an increase of 23.4% on the prior year.
Underpinning this result was the strong
performance of the funds management
business generating earnings for the
year of $10.6 million. Importantly
recurring funds management fees
increased by 28% over the year. Growing
Elanor’s recurring management fees is a
major focus of the business.
6 | Elanor Investors Group Annual Report 2018
Following a strategic review of the
deteriorating trading and financial
performance of the John Cootes
Furniture business in June 2018, the
Group determined to exit the business,
either through a sale or an orderly
closure. As such, and as previously
announced, the Group has recognised
a provision for the exit and closure of
the business in the financial results for
the 2018 financial year. This one-off
provision has affected Elanor’s statutory
financial results but not the core
earnings results.
Achievements
The primary achievement over the
year has been the increase in funds
under management to $1.08 billion as
at 30 June 2018. The growth in Elanor’s
funds under management over the
year has been primarily achieved as a
result of the establishment of four new
managed funds: the Elanor Metro and
Prime Regional Hotel Fund (a multi-
asset accommodation fund); Bluewater
Square Syndicate; Belconnen Markets
Syndicate and the WorkZone West
Syndicate. Additionally, the Group
acquired the Campus DXC commercial
asset for the Elanor Commercial
Property Fund and the Gladstone
Square and Moranbah Fair shopping
centres for the Elanor Retail Property
Fund (ASX: ERF).
During the year, the Group completed
the sale of the Merrylands property for
$36 million, generating a net profit after
tax of $10.5 million. We also successfully
divested the Bell City hotel and the
193 Clarence Street hotel on behalf of
fund investors.
The Group continues to focus on
maintaining a strong balance sheet to
support its stated objective of growing
funds under management. During the
year we strengthened our balance sheet
with the issue of $60 million of 5 year,
unsecured 7.1% p.a. fixed rate notes,
providing significant medium term, non-
dilutive growth capital for the Group. In
conjunction with the Group’s secured
debt facilities, the balance sheet
remains conservatively geared at 22.1%
at 30 June 2018.
Governance
The Board continues to strengthen
the Group’s corporate governance
structure and processes consistent
with the strategic intent and operating
activities. This includes the further
development of Workplace Health and
Safety processes and procedures as
well as the enhancement of the Risk
Management Framework of the Group.
Acknowledgements
Thank you to fellow Board members,
the executive management team led by
the CEO and all the hard-working staff
across the Group for their contribution
during the year.
And most importantly, thank you to all
Elanor security holders, as well as the
investors and capital partners in our
managed funds, for your continued
support and confidence. I look forward
to discussing the business further at our
Annual General Meeting in Sydney on 23
October 2018.
Yours sincerely,
Paul Bedbrook
Chairman
CEO’s Message
We have continued to successfully grow
our business during the year.
I am pleased to present Elanor
Investors Group’s Annual Report for
the year ended 30 June 2018. We have
continued to successfully grow our
business during the year. The Group’s
Core Earnings of $16.3 million reflected
a 28.4% increase on the prior year.
Pleasingly, recurring funds management
revenue grew by 28% over the year as a
result of a 58.8% increase in funds under
management to $1.08 billion as at 30
June 2018.
From a strategic perspective, much
has been achieved over the year. We
embark on the year ahead with funds
under management of $1.08 billion,
a strengthened origination and asset
management team, capital available
to support significant growth in funds
under management, a deeper investor
base of offshore and domestic
institutional capital partners and a
strong pipeline. Furthermore, we see
quality investment opportunities in
each of our core areas of real estate
expertise: retail real estate; commercial
real estate and hotels, tourism and
leisure. We anticipate that our funds
management platform will continue to
deliver strong performance for both
Elanor security holders and Elanor’s
capital partners.
In addition to our core areas of real
estate expertise, we continue to
investigate other real estate sectors
that provide quality investment
opportunities. Furthermore, we
continue to explore strategic
opportunities to achieve our growth
objectives.
Strategy and Investment
Approach
The key strategic objective of the Group
is to grow funds under management by
identifying and originating investments
that deliver strong returns for both
Elanor’s funds management capital
partners and ENN security holders.
Elanor’s investment focus is on
acquiring and unlocking value in real
estate assets that provide strong, stable
cash flows and significant capital growth
potential. We evaluate acquisition
opportunities through a value and risk
management lens; our highly active
approach to asset management is
underpinned by an acute focus on
delivering investment performance.
Furthermore, we seek to co-invest with
our funds management capital partners
for both strategic and alignment
purposes. The Group also originates and
holds investments on balance sheet
to provide opportunities for future co-
investment by Elanor’s capital partners.
Key Results
• Core Earnings for the year were $16.3
million, representing an increase of
28.4% on the prior year.
• Distributions for the year were $14.6
million, or 15.77 cents per stapled
security. This represents a 23.4%
increase on the prior year.
• Net Tangible Assets (NTA) of $1.63
per security, down slightly on the prior
period of $1.66 per security.
Funds Management
• Funds under management increased
by $401 million, or 58.8%, from $681.6
million to $1.08 billion.
• Recurring funds management
revenue increased by 28% on the
prior period.
• Four new managed funds were
established during the period:
- Elanor Metro and Prime Regional
Hotel Fund (“EMPR”), a multi-asset
fund comprising 3 hotels in NSW
and ACT, with a gross asset value of
$80.2 million as at 30 June 2018;
- Bluewater Square Syndicate
(“Bluewater”), acquiring the
Bluewater Square shopping centre
in Redcliffe, QLD, with a gross asset
value of $53.7 million as at 30
June 2018;
- Belconnen Markets Syndicate
(“Belconnen”), acquiring the
Belconnen Markets site in the ACT,
with a gross asset value of $48.1
million as at 30 June 2018; and
- WorkZone West Syndicate
(“WorkZone”), acquiring the
WorkZone West commercial
property in Perth, WA, with a gross
asset value of $130.3 million as at
30 June 2018.
• The acquisition of the Campus DXC
commercial property in Felixstow, SA,
for the Elanor Commercial Property
Fund (“ECPF”), with a gross asset value
of $36 million as at 30 June 2018.
• The acquisition of the Gladstone
Square and Moranbah Fair shopping
centre assets for the Elanor Retail
Property Fund (ASX: ERF), with a
combined gross asset value of $56.6
million as at 30 June 2018.
• Divestment on behalf of capital partners
of the 193 Clarence Street hotel for $30
million in May 2018 and the Bell City
property for $157 million (settlement
occurred on 3 August 2018).
• During the year the Group also made
co-investments of $28 million in funds
managed by Elanor.
The Group’s strong track record and
growing investor base continues to be
evidenced by the increasing demand
Elanor Investors Group Annual Report 2018 | 7
CEO’s Message
continued
from its capital partners for newly
established funds. Furthermore, the
Group has significantly increased its
investment origination and capital
raising capability during the year,
with several key appointments to the
funds management team. Elanor is
strongly positioned to grow its funds
management business.
Investment Portfolio
The value of the Group’s investment
portfolio totalled $145.2 million as at 30
June 2018. Elanor’s investment portfolio
consists of the Group’s co-investments
in funds managed by Elanor and wholly
owned assets that provide opportunities
for future co-investment by external
capital partners.
In keeping with our strategy of co-
investing alongside our capital partners,
co-investments totalling $28 million
were made in managed funds during
the year, including in the Elanor Retail
Property Fund, the Elanor Metro
and Prime Regional Hotel Fund and
in the Elanor Commercial Property
Fund. Further to this, the Group also
co-invested in new managed funds,
including the Bluewater Square
Syndicate and the Belconnen Markets
Syndicate.
During the year, following a strategic
review of the John Cootes Furniture
business, we made the difficult decision
to exit that business. The decision
followed a period of deteriorating
trading and financial performance of
the business, notably over the last six
months. Accordingly, the Group has
recognised a provision for the closure of
the business, reducing the Group’s NTA
to $1.63 per stapled security as at 30
June 2018 ($1.66 per stapled security as
at 30 June 2017).
In June 2018, we sold the 26,135 square
metres of development land located at
Merrylands, NSW, which was acquired
as part of the John Cootes Furniture
acquisition. The $36 million sale
generated a net profit after tax of $10.5
million. Core Earnings for the year ended
30 June 2018 included $4.5 million in
8 | Elanor Investors Group Annual Report 2018
respect of the after tax profit on the
sale of the Merrylands property, with
a further $5.9 million expected to be
included in future Core Earnings results.
Capital Management
In the first half of the financial year,
the Group raised $60 million of 5 year,
unsecured, 7.1% p.a. fixed rate notes
(“Corporate Notes”) in two tranches.
The Corporate Notes provide medium
term, non-dilutive capital that will be
used in conjunction with available bank
facilities to fund the Group’s medium
term growth.
Over the year the Group maintained a
conservative approach to gearing. As at
30 June 2018, following the issue of the
Corporate Notes during the year, the
Group’s gearing was 22.1%.
In addition to the above, the Group
holds significant growth capital. This
capital, in conjunction with available
bank facilities, will be used to fund the
Group’s short to medium term funds
management growth objectives. Elanor
estimates that its available growth
capital will support the growth of the
Group’s funds under management to
approximately $2 billion.
Our intention remains for the Group’s
balance sheet to be conservatively
geared, while maintaining capital
capacity to take advantage of
opportunities arising from asset
valuation cycles.
Community Involvement
At Elanor, we are acutely aware of our
responsibility to the communities in
which operate and to society more
generally. During the year the Group
supported a number of charitable
causes and organisations including the
FSHD (Facioscapulohumeral Muscular
Dystrophy) Foundation, Big Brothers
Big Sisters, Disability Sports Australia,
Life Education Australia and The One
Foundation Australia. In addition
to these organisations, across the
Group, Elanor supports a number of
community focussed social initiatives.
Elanor, as owner of Featherdale Wildlife
Park, is committed to animal welfare and
native animal preservation. Featherdale
is a pre-eminent contributor to
numerous endangered species
preservation programs for Australian
native animals. Featherdale is a major
social contributor to the Western
Sydney community and across the
State of NSW in the areas of animal
preservation, education and animal
rescue. Featherdale is committed
to maintaining its significant social
contribution into the future.
Outlook
The Group’s core strategy will remain
focused on growing funds management
earnings and actively managing its
investment portfolio. The Group
has a number of funds management
opportunities under consideration
across all sectors of focus. The Group
will continue to focus on increasing
income from its managed funds,
seeding new managed funds with Group
owned investments, and co-investing
with external capital partners.
Elanor is committed to growing its funds
management business by acquiring
high investment quality assets based
on the Group’s investment philosophy
and criteria. The Group has a strong
pipeline of potential funds management
opportunities. Furthermore, the Group
is actively pursuing opportunities in
new real estate sectors and continuing
to explore strategic opportunities to
deliver its growth objectives.
I wish to thank my fellow Board
members, my executive leadership
team and all our staff, both at Group
level and at each of our investments,
for their dedication and commendable
efforts over the year.
Yours sincerely,
Glenn Willis
Managing Director and Chief Executive
Officer
Elanor Investors Group Annual Report 2018 | 9
Campus DXC, Felixstow, SAibis Styles, Port Macquarie, NSWAuburn Central, Sydney, NSW Financial Report
for the year ended 30 June 2018
Contents
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statements of Profit or Loss
Consolidated Statements of Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
11
37
38
39
40
42
44
45
109
110
10 | Elanor Investors Group Annual Report 2018
10 | Elanor Investors Group Annual Report 2018
Directors’ Report
ELANOR INVESTORS GROUP
DIRECTORS REPORT
The Directors of Elanor Investors Limited (Company), and the Directors of Elanor Funds Management Limited (Responsible
Entity or Manager), as responsible entity of the Elanor Investment Fund present their report together with the consolidated
financial report of Elanor Investors Group (Group, Consolidated Group or Elanor) and the consolidated financial report of
the Elanor Investment Fund (EIF Group) for the full year ended 30 June 2018 (period).
The annual financial report of Elanor Investors Group comprises the Company and its controlled entities, including Elanor
Investment Fund (Trust) and its controlled entities. The annual financial report of the EIF Group comprises Elanor
Investment Fund and its controlled entities.
Elanor Investors Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business is Level 38, 259 George Street, Sydney NSW 2000.
The Trust was registered as a managed investment scheme on 21 May 2014 and the Company was incorporated on 1
May 2014.
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the Group. The
Group's securities are traded on the Australian Securities Exchange (ASX: ENN). The units of the Trust and shares of the
Company cannot be traded separately and can only be traded as stapled securities. Although there is no ownership interest
between the Trust and the Company, the Company is deemed to be the parent entity of the Group under Australian
Accounting Standards.
The Directors' report is a combined Directors' report that covers both the Company and the Trust. The financial information
for the Group is taken from the consolidated financial reports and notes.
1. Directors
The following persons have held office as Directors of the Responsible Entity and Company during the period and up to
the date of this report:
Paul Bedbrook (Chair)
Glenn Willis (Managing Director and Chief Executive Officer)
Nigel Ampherlaw
William (Bill) Moss AO
2. Principal activities
The principal activities of the Group are the management of investment funds and syndicates and the investment in, and
operation of, a portfolio of investment assets and businesses.
3. Distributions
Distributions relating to the year ended 30 June 2018 comprise:
Distribution
Interim Distribution
Amount paid (cents per stapled security)
Payment Date
Final Distribution
Amount payable (cents per stapled security)
Payment Date
Year Ended 30 June 2018
7.16
2 March 2018
8.61
4 September 2018
A provision for the Final Distribution has not been recognised in the consolidated financial statements for the year as the
distribution had not been declared at the reporting date. The Final Distribution per stapled security will bring distributions
in respect of the year ended 30 June 2018 to 15.77 cents per stapled security.
Elanor Investors Group Annual Report 2018 | 11
3
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review
OVERVIEW AND STRATEGY
The key strategic objective of Elanor is to grow funds under management by identifying and originating real estate
investments that deliver strong performance for both Elanor security holders and Elanor's funds management capital
partners. Elanor seeks to co-invest with its capital partners in funds managed by Elanor for both strategic and alignment
purposes.
Investments are also originated and held on balance sheet where they provide opportunities for future co-investment by
external capital partners.
Elanor’s core focus is on acquiring and managing real estate investments with strong income generating fundamentals
and significant value-add potential. ENN currently focuses on the retail, commercial and hotels, tourism and leisure real
estate sectors. Elanor continues to investigate other real estate sectors that provide high investment value opportunities
for its capital partners and security holders. Furthermore, Elanor continues to explore strategic opportunities to deliver on
its growth objectives.
During the year Elanor’s assets under management increased by 58.8% from $681.6 million to $1,082.6 million.
Furthermore, co-investments of $28 million were made in new managed funds over the year resulting in an investment
portfolio of $145.2 million as at 30 June 2018. Combined funds and investment portfolio totaled $1.23 billion as at 30 June
2018.
During the year the Group issued $60 million 7.1% unsecured 5 year fixed rate notes (Corporate Notes) in two tranches.
The notes are due for repayment on 17 October 2022.
The Group completed the following funds management initiatives during the year:
•
•
•
The establishment of Elanor Metro and Prime Regional Hotel Fund (EMPR), a multi-asset hotel fund. EMPR
acquired Ibis Styles Eaglehawk, Byron Bay Hotel and Apartments and Ibis Styles Canberra in November 2017.
These acquisitions established the fund which had a gross asset value of $80.2 million as at 30 June 2018.
The acquisition of the Gladstone Square and Moranbah Fair shopping centre assets into the Elanor Retail
Property Fund (ASX: ERF) with a combined gross asset value of $56.5 million as at 30 June 2018.
The Bluewater Square Syndicate was established in October 2017, acquiring the Bluewater Square Shopping
Centre in Redcliffe QLD, with a gross asset value of $53.7 million as at 30 June 2018.
• Campus DXC was acquired by the Elanor Commercial Property Fund in May 2018, with a gross asset value of
$36 million as at 30 June 2018.
•
•
In June 2018, the Group completed the acquisition of the Belconnen Markets site in Belconnen, ACT into the
Belconnen Markets Syndicate, with a gross asset value of $48.1 million as at 30 June 2018.
The WorkZone West Syndicate was established in June 2018, acquiring the WorkZone West Commercial
property in Perth, WA, with a gross asset value of $130.3 million as at 30 June 2018.
During the year, the Group completed two asset divestments on behalf of its capital partners with the sale of 193 Clarence
Street hotel for $30 million in May 2018, and the Bell City property for $157 million. Settlement of the Bell City property was
completed on 3 August 2018.
In addition to the above, on 6 June 2018, the Group sold the Merrylands property for $36 million. Settlement was completed
on 3 August 2018.
ENN’s strong investment track record and growing investor base continues to be evidenced by the demand for ENN’s
newly established funds. Elanor has a scalable real estate funds management platform with significant capacity for growth.
The Group continues to invest in senior, experienced asset and capital origination talent, and has strengthened its asset
management capabilities during the period. This, coupled with the Group’s available capital, positions the Group to strongly
grow its funds management business.
The Group has a strong investment pipeline.
12 | Elanor Investors Group Annual Report 2018
4
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO
The following tables show the Group's managed funds and investment portfolio:
Managed Funds
Funds
Location
Type
193 Clarence Hotel Syndicate
Sydney, NSW
Bell City Syndicates (4)
Preston, VIC
Hotel
Hotel, budget accommodation and
commercial complex
Elanor Hospitality and
Accommodation Fund
NSW, TAS and ACT
Six hotels across NSW (4), TAS
(1) and ACT (1)
Limestone Street Centre Syndicate
Elanor Retail Property Fund
(ASX:ERF)
Elanor Commercial Property Fund
Hunters Plaza Syndicate
Additions since 30 June 2017
Elanor Retail Property Fund
(ASX:ERF)
Elanor Metro and Prime Regional
Hotel Fund (Nov 2017)
Bluewater Square Syndicate (Oct
2017)
Elanor Commercial Property Fund
(May 2018)
Belconnen Market Syndicate (Jun
2018)
Ipswich, QLD
Auburn, Taree and Tweed
Heads, NSW, Bundaberg,
QLD, and Glenorchy, TAS
Cannon Hill and Mt Gravatt,
QLD
Auckland, NZ
Gladstone and Moranbah,
QLD
Canberra and
Narrabundah ACT
and Byron Bay NSW
Commercial office building
Sub-regional shopping centre
269.7
Two commercial properties
Sub-regional shopping centre
54.7
47.7
Sub-regional shopping centre
56.5
Three hotels across ACT (2) and
NSW (1)
Redcliffe, QLD
Shopping centre
OG Road, SA
Commercial property
Canberra ACT
Shopping centre
WorkZone West Syndicate
Perth, WA
Commercial property
Disposals since 30 June 2017
193 Clarence Hotel Syndicate
Sydney, NSW
Hotel
Total Managed Funds
Gross
Asset
Value
$'m
24.7
159.5
110.2
36.0
80.2
53.7
36.0
48.1
130.3
(24.7)
1,082.6
Elanor Investors Group Annual Report 2018 | 13
5
Directors’ Report
ELANOR INVESTORS GROUP
DIRECTORS REPORT
continued
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO (continued)
Investment Portfolio
Asset
Location
Type
Note
Carrying Value
$'m
Hotels Tourism and Leisure
Featherdale Wildlife Park
Sydney, NSW
Wildlife Park
Hotel Ibis Styles Albany
Albany, WA
Hotel
Special Situations Investments
John Cootes Furniture
15 locations across NSW
Merrylands Property
Merrylands, NSW
Disposals since 30 June 2017
John Cootes Furniture
15 locations across NSW
Merrylands Property
Merrylands, NSW
Furniture retailer
Property
associated with
John Cootes
Furniture
Furniture retailer
Property
associated with
John Cootes
Furniture
1
1
2
3
2
3
39.0
5.3
Cost
$’m
16.1
17.6
(16.1)
(17.6)
Managed Fund
Co-Investments
Equity accounted value
$’m
Bell City Syndicates (4)
Preston, VIC
193 Clarence Hotel Syndicate
Sydney, NSW
Elanor Hospitality and
Accommodation Fund
Limestone Street Centre
Syndicate
Elanor Retail Property Fund (ASX:
ERF)
Elanor Commercial Property Fund
NSW, TAS and ACT
Ipswich, QLD
Auburn, Taree and Tweed
Heads, NSW, Bundaberg,
Moranbah and Gladstone,
QLD, and Glenorchy, TAS
Cannon Hill and Mt
Gravatt, QLD and OG
Road, SA
Hunters Plaza Syndicate
Auckland, NZ
Additions since 30 June 2017
Elanor Metro and Prime Regional
Hotel Fund
14 | Elanor Investors Group Annual Report 2018
Canberra and
Narrabundah ACT and
Byron Bay NSW
Three hotels
across ACT (2)
and NSW (1)
6
Hotel, budget
accommodation
and commercial
complex
Hotel
Six hotels across
NSW (4), TAS (1)
and ACT (1)
4
4
5
Commercial office
4
Sub-regional
shopping centres
Three Commercial
office properties
Sub-regional
shopping centre
4
4
4
5
11.7
1.1
23.9
1.4
34.2
0.7
1.2
18.3
Directors’ Report
ELANOR INVESTORS GROUP
DIRECTORS REPORT
continued
4. Operating and financial review (continued)
MANAGED FUNDS AND INVESTMENT PORTFOLIO (continued)
Bluewater Square Syndicate
Redcliffe, QLD
Shopping centre
Belconnen Markets Syndicate
Canberra ACT
Shopping centre
Disposals since 30 June 2017
193 Clarence Hotel Syndicate
Sydney, NSW
Hotel
5
5
4
Total Investment Portfolio
Total Managed Funds and
Investment Portfolio
9.3
0.2
(1.1)
145.2
1,227.8
Note 1: All owner occupied properties in the Hotel, Tourism and Leisure business are held for use by the Group for the supply of services
and are classified as land and buildings and stated at fair value.
Note 2: The John Cootes Furniture business is a wholly owned subsidiary of the Company and accounted for using the basis of
consolidation.
Note 3: The Merrylands property is stated at cost.
Note 4: Managed Fund co-investments are associates and accounted for using the equity method.
Note 5: The co-investment in Elanor Hospitality and Accommodation Fund (EHAF), Elanor Metro and Prime Regional Hotel Fund (EMPR)
and Bluewater Square Syndicate (Bluewater) has been consolidated in the financial statements. The amount shown assumes that the
investments were accounted for using the equity method.
REVIEW OF FINANCIAL RESULTS
The Group recorded a statutory profit after tax, prior to a provision for discontinued operations in relation to the John Cootes
Furniture business, of $8.4 million for the year ended 30 June 2018.
Elanor holds a 42.64% interest in the Elanor Hospitality and Accommodation Fund (EHAF), 44.04% interest in the Elanor
Metro and Prime Regional Hotel Fund (EMPR) and 41.92% interest in the Bluewater Square Syndicate (Bluewater). For
accounting purposes, Elanor is deemed to have a controlling interest in EHAF, EMPR and Bluewater given its level of
ownership and role as manager of the Fund. This means that the financial results and financial position of the EHAF,
EMPR and Bluewater are consolidated into the financial statements of the Group for the year ended 30 June 2018.
All other managed fund co-investments are accounted for using the equity method in the Group’s consolidated financial
statements.
Presenting the summary consolidated financial results of the Group on the basis that EHAF, EMPR and Bluewater are
accounted for using the equity method is important because Elanor considers that this gives the most appropriate
presentation consistent with management and reporting of the Group and to provide a comparable basis to the presentation
of the results for prior periods. On this basis Elanor’s adjusted net profit after tax, prior to a provision for discontinued
operations in relation to the John Cootes Furniture business, was $14.4 million.
On 26 June 2018, following a strategic review of the deteriorating trading and financial performance of the John Cootes
Furniture business, the Directors resolved to exit the business, either through a sale or a closure of the business. In
accordance with accounting standards, the John Cootes Furniture business has been classified as a Discontinued
Operation and a provision for discontinued operations of $18.3 million has been raised within these financial statements.
7
Elanor Investors Group Annual Report 2018 | 15
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF FINANCIAL RESULTS (continued)
The provision for discontinued operations is comprised as follows:
After tax operating loss of John Cootes Furniture for the
year ended 30 June 2018
Write-down of net assets and provision as at 30 June
2018
Impact on
Provision
(Post tax)
$’000
2,238
Core
Impact on
Earnings1
$’000
(2,238)
NTA2
$’000
(2,238)
Impact on
Net Assets
$’000
(2,238)
16,090
-
(9,620)
(16,090)
18,328
(2,238)
(11,858)
(18,328)
Note 1: The after-tax operating loss of John Cootes Furniture for the year has been included in Core Earnings. If this amount had been
excluded from Core Earnings, Core Earnings for the period would have been 14% higher.
Note 2: The impact of the provision for discontinued operations on net tangible assets has been to reduce net tangible assets as at 30
June 2018 by 7%
Core or Distributable earnings for the year were $16.3 million or 17.5 cents per stapled security. A Final Distribution of 8.61
cents per stapled security has been declared for the six months ended 30 June 2018 (90% pay-out ratio on Core Earnings).
Core Earnings is considered more relevant than statutory profit as it represents an estimate of the underlying recurring
cash earnings of the Group, and has been determined in accordance with ASIC Regulatory Guide 230.
A summary of the Group and EIF Group's results for year is set out below:
Statutory financial results
Net profit after tax from continuing operations ($'000)
Net profit after tax from continuing operations ($'000)
(EHAF, EMPR and Bluewater equity accounted)
Core Earnings ($'000)
Distributions payable to security holders ($'000)
Core Earnings per stapled security (cents)
Core Earnings per weighted average stapled
security (cents)
Distributions (cents per stapled security / unit)
Net tangible assets ($ per stapled security)
Net tangible assets ($ per stapled security) (EHAF,
EMPR and Bluewater equity accounted)
Gearing (net debt / total assets less cash) (%)
Gearing (net debt / total assets less cash) (%)
(EHAF, EMPR and Bluewater equity accounted)
Group
30 June
2018
Group EIF Group EIF Group
30 June
30 June
2017
2018
30 June
2017
8,417
11,626
1,962
38,774
14,397
16,270
14,642
17.49
17.84
15.77
2.34
1.63
38.5
22.1
11,400
12,670
11,403
14.20
14.49
12.78
1.96
1.66
21.15
4.24
4,281
12,777
11,415
13.77
14.01
12.31
1.88
1.10
31.3
0.75
33,590
7,720
6,948
8.65
8.83
8.74
1.45
1.13
30.01
7.04
16 | Elanor Investors Group Annual Report 2018
8
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF FINANCIAL RESULTS (CONTINUED)
The table below provides a reconciliation from statutory net profit / (loss) after tax to distributable Earnings:
Group
30 June
2018
$’000
Group
30 June
2017
$’000
EIF Group
30 June
2018
$’000
EIF Group
30 June
2017
$’000
Statutory Net profit / (loss) after tax
(9,911)
11,626
1,962
38,774
Adjustment to remove the impact of consolidation of
EHAF, EMPR and Bluewater
Adjustment to include the impact of accounting for
EHAF, EMPR and Bluewater using the equity method
9,870
(3,880)
5,277
(5,994)
(3,891)
3,654
(2,959)
810
Adjusted Net profit / (loss) after tax
(3,932)
11,400
4,280
33,590
Adjustment to exclude discontinued operations
Loss from John Cootes Furniture trading for the period
after tax
Adjusted Group net profit after tax
Adjustments for items included in statutory profit/(loss)
Increase in equity accounted investments to reflect
distributions received / receivable
Adjustment on realisation of equity accounted
investment
Building depreciation expense
Straight lining of rental expense
Gain on asset disposals
Holdback of Merrylands net profit after tax
Net cash received from Merrylands sale
Fair value adjustments on investment property
Amortisation amounts
Tax adjustments
Core Earnings
5
5
2
3
4
6
1
18,328
(2,238)
-
-
-
-
-
-
12,158
11,400
4,280
33,590
5,937
190
5,043
(696)
(77)
134
5
2,258
(10,452)
4,547
-
1,941
(181)
-
(77)
324
20
-
-
-
-
826
(90)
-
-
2,258
-
-
307
966
-
-
-
-
-
-
-
(25,567)
393
-
16,270
12,670
12,777
7,720
Note 1: Core Earnings has been determined in accordance with ASIC RG 230 and represents the Directors view of underlying earnings
from ongoing operating activities for the period, being net profit / (loss) after tax, adjusting for one-off items, non-cash items (being fair
value movements, depreciation charges on the buildings held by the Trust, amortisation of intangibles, straight lining of rental expense,
and amortisation of equity settled STI amounts), and restating share of profit from equity accounted investments to reflect distributions
received / receivable in respect of those investments.
Note 2: Share of profit from equity accounted investments includes depreciation and amortisation and fair value adjustments on investment
property that were added back in the determination of distributable earnings for those managed funds. The Group’s share of those
adjustments to distributable earnings in the relevant managed funds have been added back for the purposes of calculating Core Earnings
so that the Group’s Core Earnings reflects the distribution received / receivable by the Group from those investments in Elanor managed
funds.
Note 3: During the period, the Group incurred total depreciation charges of $1.355 million as per supplementary statements, however only
the depreciation expense on buildings of $0.134 million has been added back for the purposes of calculating Core Earnings.
Elanor Investors Group Annual Report 2018 | 17
9
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF FINANCIAL RESULTS (CONTINUED)
Note 4: In November 2017 the Group sold Ibis Styles Eaglehawk to Elanor Metro and Prime Regional Hotel Fund for $20.0 million. This
asset was accounted for by the Group on a fair value basis whereby revaluation increases arising from changes in the fair value of land
and building are recognised in other comprehensive income and accumulated within equity as opposed to being reflected in the
consolidated profit and loss of the Group.
Note 5: As a result of the Directors decision to exit the John Cootes Furniture business, and its subsequent recognition as a Discontinued
Operation in the financial statements, certain adjustments including the impairment of goodwill and brands, have been recognised in net
profit for the year to 30 June 2018. These adjustments have been added back, whilst the trading results for the period have been included
for the purposes of calculating Core Earnings.
Note 6: During the period, the Group incurred non-cash profit and loss charges in respect of the amortisation of certain amounts including
the equity component of the Group’s Short Term Incentive (STI), Long Term Incentive (LTI) amounts, intangibles and borrowing costs.
These amounts have been added back for the purposes of calculating Core Earnings.
REVIEW OF OPERATIONAL RESULTS
The Group is organised into four divisions by business type.
Funds Management manages third party owned investment funds and syndicates.
Hotels, Tourism and Leisure originates investment and funds management assets. The investment portfolio at balance
date included Featherdale Wildlife Park and Ibis Styles Albany Hotel, along with co-investments in Elanor Hospitality and
Accommodation Fund, Elanor Metro and Prime Regional Hotel Fund and Bell City Syndicates. Hotels, Tourism and Leisure
also manages these syndicates.
Real Estate originates investment and fund management assets. The current investment portfolio comprises investments
in Elanor Retail Property Fund (ASX: ERF), Elanor Commercial Property Fund, Limestone Street Centre Syndicate,
Hunters Plaza Syndicate, Bluewater Square Syndicate and Belconnen Markets Syndicate. Real Estate manages each of
these syndicates.
Special Situations Investments contains the John Cootes Furniture business and the property associated with John Cootes
Furniture business at Merrylands, NSW.
Set out below is an adjusted presentation of the statutory financial results by segment, on the basis that the Group’s interest
in EHAF, EMPR and Bluewater are accounted for using the equity method rather than on a consolidated basis. Elanor
considers that presenting the operating performance of the Group on this adjusted basis gives the most appropriate
presentation of the Group consistent with management and reporting of the Group and to provide a comparable basis to
the presentation of prior period results. The results provided on this basis are presented as the ‘ENN Group’.
18 | Elanor Investors Group Annual Report 2018
10
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
The performance of the ENN Group for the period ended 30 June 2018, as represented by the aggregate results of its
operations for the period, was as follows:
ENN Group
Segment
Revenue
ENN Group
Segment
Revenue
ENN Group
Segment
EBITDA
ENN Group
Segment
EBITDA
ENN Group Revenue and EBITDA (adjusted to
reflect EHAF, EMPR and Bluewater accounted
for using the equity method)
Funds Management
Hotels, Tourism and Leisure
Real Estate
Special Situations Investments1
Total Segment Revenue and EBITDA
Unallocated corporate costs
Group EBITDA
Depreciation and amortisation
Group EBIT
Other Income
Interest income
Borrowing costs
Group net profit / (loss) before income tax
Income tax expense
Group net profit / (loss) after income tax1
30 June
2018
$'000
13,708
16,768
1,975
67,926
100,377
30 June
2017
$'000
14,176
23,601
2,437
31,000
71,214
30 June
2018
$'000
10,634
2,817
885
10,738
25,074
(6, 547)
18,527
(1,723)
16,804
734
1,163
(3,057)
15,644
(3,486)
12,158
30 June
2017
$'000
11,338
7,068
1,512
1,332
21,250
(6,063)
15,187
(1,865)
13,322
141
270
(908)
12,825
(1,425)
11,400
Note 1: The trading results for the John Cootes Furniture business are reflected in the segment results for the year to 30
June 2018.
For further information on the segment performance, see Note 1 to the consolidated financial statements.
Group EBITDA shown above includes the equity accounted result of the Group’s co-investments in funds managed by
Elanor, including EHAF, EMPR and Bluewater. The Group measures the performance of its co-investments based on
distributions received / receivable from these co-investments, consistent with the treatment within Core Earnings. Group
EBITDA, adjusted to show distributions received / receivable from co-investments rather than the equity accounted result
is as follows:
Operating Performance for year
ended 30 June 2018
ENN Group
EBITDA
Remove
Equity
Accounted
Result
Add
Distributions
received /
receivable
EBITDA
Contribution
to Core
Earnings
Funds Management
Hotels, Tourism and Leisure
Real Estate
Special Situation Investments
Unallocated Corporate Costs
EBITDA
$’000
10,634
2,817
885
10,738
(6,547)
18,527
$’000
-
1,914
(1,975)
-
-
(61)
11
$’000
-
2,936
3,061
-
-
5,997
$’000
10,634
7,667
1,971
10,738
(6,547)
24,463
Elanor Investors Group Annual Report 2018 | 19
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Funds Management
The performance of the Funds Management division is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
Funds under Management
Opening funds under management
Increase in value of funds under management
Disposals / decrease in value of funds under management
New funds
Total
2018
$’000
13,708
10,634
77.6%
30 June
2018
$’m
681.6
20.9
(24.7)
404.8
1,082.6
2017
$’000
14,176
11,338
80.0%
30 June
2017
$’m
484.5
24.7
(39.4)
211.8
681.6
The Group has achieved significant growth in funds under management since July 2017, with the Group establishing four
new funds being Elanor Metro and Prime Retail Hotel Fund (a multi-asset fund comprising 3 hotels), Bluewater Square
Syndicate, Belconnen Markets Syndicate and the WorkZone West Syndicate. In addition, during the period, Elanor
Commercial Property Fund acquired the Campus DXC property, and Elanor Retail Property Fund acquired the Gladstone
Mall and Moranbah Fair shopping centre assets.
During the period the Group strengthened its internal asset management and investment management capabilities, along
with its asset origination resources, and deepened its capital partner base to support the Group’s strategic focus to deliver
growth in funds under management and the performance of assets under management.
Hotels, Tourism and Leisure
The performance of the Hotels, Tourism and Leisure division for the period is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
2018
$’000
21,618
7,667
35.5%
2017
$’000
24,463
7,930
32.4%
Hotels, Tourism and Leisure EBITDA contribution to Core Earnings, includes the results of Featherdale Wildlife Park and
Ibis Styles Albany Hotel, and the results of Ibis Styles Eaglehawk Hotel, until 31 October 2017, when it was sold to EMPR.
Hotels, Tourism and Leisure EBITDA contribution to Core Earnings also includes distributions received / receivable from
the Group’s co-investment in funds managed by the Group of $2.9 million for the year ended 30 June 2018 ($2.6 million
for the comparative period).
20 | Elanor Investors Group Annual Report 2018
12
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Hotels, Tourism and Leisure (continued)
The table below sets out the assessed value of each investment portfolio property at 30 June 2018.
Carrying Value of Properties
Featherdale Wildlife Park
Ibis Styles Eaglehawk Hotel
Ibis Styles Albany Hotel
Total
2018
$’m
39.0
-
5.3
44.3
2017
$’m
39.0
20.0
5.3
64.3
The carrying value of the Group’s Hotels, Tourism and Leisure co-investments as at 30 June 2018, using the equity method,
is as follows:
Carrying Value of Co-Investments
Elanor Hospitality and Accommodation Fund
Elanor Metro and Prime Regional Hotel Fund
Bell City Fund
193 Clarence Hotel Syndicate
Total
Real Estate
2018
$’m
23.9
18.3
11.7
-
53.9
2017
$’m
19.4
-
11.8
1.1
32.3
Real Estate comprises distributions received / receivable from co-investments in funds managed by the Group as
follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings
Operating margin
2018
$’000
3,061
1,972
64.4%
2017
$’000
1,765
840
47.6%
Real Estate EBITDA contribution to Core Earnings also includes distributions received / receivable from the Group’s co-
investment in funds managed by the Group of $3.1 million for the year ended 30 June 2018 ($1.8 million for the comparative
period).
The carrying value of these investments as at 30 June 2018, using the equity method, is as follows:
Carrying Value of Co-Investments
Elanor Retail Property Fund (ASX: ERF)
Bluewater Square Syndicate
Elanor Commercial Property Fund
Hunters Plaza Syndicate
Belconnen Markets Syndicate
Limestone Street Centre Syndicate
Total
2018
$’m
34.2
9.3
0.7
1.2
0.2
1.4
47.0
2017
$’m
31.0
-
0.5
-
-
1.4
32.9
Elanor Investors Group Annual Report 2018 | 21
13
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
4. Operating and financial review (continued)
REVIEW OF OPERATIONAL RESULTS (CONTINUED)
Special Situations Investments
Special Situations Investments contains the John Cootes Furniture business and the property associated with John Cootes
Furniture business at Merrylands.
On 6 June 2016, the Merrylands property was sold by the Group for $36 million.
On 26 June 2018, following a strategic review of the deteriorating trading and financial performance of the John Cootes
Furniture business, the Directors resolved to exit the business, either through a sale or a closure of the business. In
accordance with accounting standards the John Cootes Furniture business has been classified as a Discontinued
Operation and a provision for discontinued operations of $18.3 million has been raised within these financial statements.
The performance of the Special Situations Investments division for the period is summarised as follows:
Operating Performance
Total Adjusted revenue
EBITDA Contribution to Core Earnings 1
Operating margin
2018
$’000
67,926
10,738
15.8%
2017
$’000
31,000
1,332
4.3%
Note 1: These results include the before tax profit from the sale of the Merrylands property as well as the trading losses
from the John Cootes Furniture business for the year to 30 June 2018.
Summary and Outlook
The Group's core strategy will remain focused on growing its funds management earnings and actively managing its
investment portfolio. The Group has a number of funds management opportunities under consideration across all sectors
of focus. The Group will continue to focus on increasing income from its managed funds, seeding new managed funds with
Group owned investments, and co-investing with external capital partners.
Risks to the Group in the coming year primarily comprise potential earnings variability associated with general economic
and market conditions including inbound tourism and domestic retail spending, the availability of capital for funds
management opportunities, movements in property valuations, tightening debt capital markets and possible weather
related events. The Group manages these risks through its active asset management approach across its investment
portfolio, continuing to focus on broadening the Group's capital partner base, insurance arrangements and through the
active management of the Group’s capital structure.
Elanor is committed to growing its funds management business by acquiring quality assets based on the Group’s
investment philosophy and criteria. The Group has a strong pipeline of potential funds management opportunities.
Furthermore, the Group is actively pursuing opportunities in new real estate sectors and continues to explore strategic
opportunities to deliver its growth objectives.
5.
Interests in the Group
The movement in stapled securities of the Group during the year is set out below:
Stapled securities on issue at the beginning of the year
Stapled securities issued through Institutional Placement
Stapled securities issued for Security Purchase Plan
Stapled securities converted under long term incentive scheme
Stapled Securities issued under the short term incentive scheme
Stapled securities on issue at the end of the period
22 | Elanor Investors Group Annual Report 2018
14
Consolidated
Group
30 June 2018
'000
89,224
-
-
3,529
263
93,016
Consolidated
Group
30 June 2017
'000
71,386
16,216
1,622
-
-
89,224
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
6. Directors
Name
Paul Bedbrook
Particulars
Independent Non-Executive Chairman
Paul was appointed a Director of both the Company and the Responsible Entity (also
the Responsible Entity of ERF) in June 2014. Paul has had a career of over 30 years
in financial services, originally as an analyst, fund manager and then the GM & Chief
Investment Officer for Mercantile Mutual Investment Management Ltd (ING owned)
from 1987 to 1995. Paul was an executive for 26 years with the Dutch global banking,
insurance and investment group, ING, retiring in 2010. Paul’s career included the roles
of: President and CEO of ING Direct Bank, Canada (2000 – 2003), CEO of the ING
Australia/ANZ Bank Wealth JV (2003-2008) and Regional CEO, ING Asia Pacific,
Hong Kong (2008 – 2010). Paul is currently the Chairman of Zurich Financial Services
Australia and its Life, General and Investment Companies, a non-executive director of
Credit Union Australia, and the National Blood Authority.
Former listed directorships in the last three years: None
Interest in stapled securities: 257,327
Qualifications: B.Sc, F FIN, FAICD
Glenn Willis
Managing Director and Chief Executive Officer
Glenn was appointed a Director of both the Company and the Responsible Entity
(also the Responsible Entity of ERF) in June 2014. Glenn has extensive industry
knowledge with over 30 years’ experience in the Australian and international
investment markets.
Glenn was most recently co-founder and Chief Executive Officer of Moss Capital.
Prior to Moss Capital, Glenn co-founded Grange Securities and led the team in his
role as Managing Director and CEO. Grange Securities was a pre-eminent Australian
owned investment bank with businesses in fixed income, equities, corporate finance
and funds management. Grange Securities grew to be Australia’s largest Australian
owned fixed income house.
After 12 years of growth, Grange Securities, a business with approximately 150
personnel, was acquired by Lehman Brothers International in 2007, as the platform for
Lehman’s Australian investment banking and funds management operations. Glenn
was appointed Managing Director and Country Head in March 2007. In 2008, Glenn
was appointed executive Vice Chairman of Lehman Brothers Australia.
Glenn previously held senior positions at Fay Richwhite and Challenge Bank.
Former listed directorships in the last three years: None
Interest in stapled securities: 8,806,226
Qualifications: B.Bus (Econ & Fin)
Elanor Investors Group Annual Report 2018 | 23
15
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
6. Directors (continued)
Nigel Ampherlaw
Independent Non-Executive Director
Chairman, Audit and Risk Committee
Nigel was appointed a Director of both the Company and the Responsible Entity
(also the Responsible Entity of ERF) in June 2014. Nigel was a Partner of
PricewaterhouseCoopers for 22 years where he held a number of leadership
positions, including heading the financial services audit, business advisory services
and consulting businesses. He also held a number of senior client Lead Partner
roles. Nigel has extensive experience in risk management, technology, consulting
and auditing in Australia and the Asia-Pacific region.
Nigel’s current Directorships include Chairman of Credit Union Australia, and non-
executive Director of the Australia Red Cross Blood Service, where he is a member
of the Finance and Audit Committee and a member of the Risk Committee.
Former listed directorships in the last three years:
Quickstep Holdings Ltd
Interest in stapled securities: 164,654
Qualifications: B.Com, FCA, MAICD
William (Bill) Moss AO Non-Executive Director
Chairman, Remuneration and Nominations Committee
Bill was appointed a Director of both the Company and the Responsible Entity (also
the Responsible Entity of ERF) in June 2014. Bill is an Australian businessman and
philanthropist with expertise in real estate, banking, funds and asset management.
Bill spent 23 years as a senior executive and Executive Director with Macquarie
Group, the pre-eminent Australian investment bank, where Bill managed the Global
Banking and Real Estate businesses. Bill founded, grew and led Macquarie Real
Estate Group to a point where it managed over $23 billion worth of investments
around the world.
Bill is Chairman of Moss Capital, Boston Global Group, and Non-Executive Director
of Northern Territory Infrastructure Development Fund. He is also Chairman and
Founder of The FSHD Global Research Foundation.
Bill is a commentator on the Australian finance and banking sectors, the global
economy and the ongoing need for Australia to do more to advance the interests
of the country’s disabled and disadvantaged.
In 2015, Bill was awarded one of Australia’s highest honours, Office of the Order
of Australia (AO), for services to the banking, charity, and finance sectors.
Former listed directorships in the last three years: None
Interest in stapled securities: 2,378,159
Qualifications: B.Ec
24 | Elanor Investors Group Annual Report 2018
16
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
7. Directors’ relevant interests
Paul Bedbrook
Glenn Willis1
Nigel Ampherlaw
William (Bill) Moss
Stapled securities
At 1 July 2017
257,327
1,452,050
164,654
4,678,159
Net
Movement
-
304,176
-
(2,300,000)
Stapled securities at the
date of this report
257,327
1,756,226
164,654
2,378,159
Note 1: Glenn Willis has an entitlement to an additional 7,050,000 securities under equity based executive incentive plans.
Other than as disclosed in the Annual Financial Report, no contracts exist where a director is entitled to a benefit.
8. Meetings of Directors
The attendance at meetings of Directors of the Responsible Entity and the Company during the year is set out in the
following table:
Elanor Board
(Responsible Entity &
the Company)
Attended
15
15
15
15
Held
15
15
15
15
Audit & Risk
Committee
Attended
6
6
6
N/A
Held
6
6
6
N/A
Remuneration and
Nominations
Committee
Attended
6
N/A
6
6
Held
6
N/A
6
6
Paul Bedbrook
Glenn Willis
Nigel Ampherlaw
William (Bill) Moss
9. Remuneration Report (Audited)
The remuneration report for the year ended 30 June 2018 outlines the remuneration arrangements, philosophy and
framework of the Elanor Investors Group (Group) in accordance with the requirements of the Corporations Act 2001 (Cth)
and its regulations.
The remuneration report is set out under the following main headings:
a)
b)
c)
d)
e)
f)
g)
h)
Remuneration Policy and Approach
Key Management Personnel
Executive Remuneration Arrangements
Executive Remuneration Outcomes
Non-Executive Director Remuneration Arrangements and Outcomes
Additional Disclosures Relating to Long Term Incentive Plans and Securities
Loans to Key Management Personnel
Other Transactions and Balances with Key Management Personnel and their Related Parties
The information provided in the remuneration report has been audited as required by section 308 (3C) of the Corporations
Act 2001 (Cth).
a)
Remuneration Policy and Approach
The Elanor Investors Group aims to attract, retain and motivate highly skilled people and therefore ensures its remuneration
is competitive with prevailing employment market conditions and also provides sufficient motivation by ensuring that
remuneration is aligned to the Group’s results.
The Group’s remuneration framework seeks to align executive reward with the achievement of strategic objectives and in
particular, the creation of sustainable value and earnings growth for investors. In addition, the Board seeks to have
reference to market best practice to ensure that executive remuneration remains competitive, fair and reasonable.
The Group has a formally constituted Remuneration and Nomination Committee which comprises three Non-Executive
Director (NED) members, Mr William Moss AO (Chair), Mr Paul Bedbrook and Mr Nigel Ampherlaw.
Elanor Investors Group Annual Report 2018 | 25
17
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
a)
Remuneration Policy and Approach (continued)
The Remuneration and Nomination Committee meets at least annually for the purposes of reviewing and making
recommendations to the Elanor Investors Group Board on the level of remuneration of the senior executives and the
Directors. During the period Remuneration and Nomination Committee met 6 times.
Specifically, the Board approves the remuneration arrangements of the Managing Director and other executives and all
aggregate and individual awards made under the short term (STI) and long-term incentive (LTI) plans, following
recommendations from the Remuneration and Nomination Committee. The Board also sets the aggregate remuneration
of NED's, which is then subject to security holder approval.
When the Remuneration and Nomination Committee meets, the Managing Director is not present during any discussions
related to his own remuneration arrangements.
The Remuneration and Nomination Committee endeavours to ensure that the remuneration outcomes strike an appropriate
balance between the interests of the Group’s security holders and rewarding, retaining and motivating the Group's
executives and the Directors.
Further information on the Remuneration and Nomination Committee’s role and responsibilities can be viewed at
www.elanorinvestors.com.
b)
Key Management Personnel
The remuneration report details the remuneration arrangements for Key Management Personnel (KMP), who are defined
as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group,
directly or indirectly, including the directors (whether executive or otherwise). The KMP of the Elanor Investors Group for
the year ended 30 June 2018 were:
Executive
Mr Glenn Willis
Mr Paul Siviour
Ms Marianne Ossovani
Mr Symon Simmons
Position
Managing Director and Chief Executive Officer
Chief Operating Officer
Chief Investment Officer and Head of Hotels, Tourism and Leisure
Chief Financial Officer and Company Secretary
Non-Executive
Mr Paul Bedbrook
Mr Nigel Ampherlaw
Mr William (Bill) Moss AO
Position
Independent Chairman and Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
c)
Executive Remuneration Arrangements
The Group's executive remuneration framework has three components:
•
•
•
Base pay, including superannuation;
Short term incentives; and
Long term incentives.
Remuneration levels are considered annually through an assessment of each executive based on the individual's
performance and achievements during the financial year and taking into account the overall performance of the Elanor
Investors Group and prevailing remuneration rates of executives in similar positions.
Remuneration Structure
-
Base pay, including superannuation
Base pay is determined by reference to appropriate benchmark information, taking into account an individual's
responsibilities, performance, qualifications and experience. There are no guaranteed base pay increases in any
executive's contracts.
26 | Elanor Investors Group Annual Report 2018
18
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
c)
-
Executive Remuneration Arrangements (continued)
Short term incentive
The Group has implemented an STI scheme (the STI Scheme), based on an annual profit share, which is available to all
staff. The STI Scheme is based on a profit share pool, to be calculated each year based on the Group's financial
performance for the relevant year.
The purpose of the STI Scheme is to provide an annual bonus arrangement that incentivises and rewards management
for achieving annual pre-tax ROE for security holders in excess of 10% per annum. The profit share pool is based on 20%
of ROE above 10%, 22.5% of the ROE above 15%, 25% of the ROE above 17.5% and 30% of the ROE above 20%. The
STI Scheme provides that 50% of any awards to individuals from the profit share pool may be delivered in deferred
securities, which vest two years after award, provided that the employee remains with the Group and maintains minimum
performance standards.
The Elanor Investors Group Board monitors the appropriateness of the profit share scheme and any distribution of the
profit share pool will be at the Board's discretion, taking into consideration the forecast and actual financial performance
and position of the Group.
-
Long term incentive
The Group has implemented an LTI scheme (the LTI Scheme), based on an executive loan security plan and an executive
options plan.
Under the executive loan security plan, awards (comprising the loan of funds to eligible Elanor employees to acquire
Securities which are subject to vesting conditions) have been issued to certain employees. Awards totalling 13.96 million
Securities were on issue at 30 June 2018.
The limited recourse loan provided by the Group under the loan security plan carries interest of an amount equal to any
cash dividend or distribution but not including any dividend or distribution of capital, or an abnormal distribution.
In addition to the loan security plan, the Group has implemented an executive option plan comprising rights to acquire
Securities at a specified exercise price, subject to the achievement of vesting conditions, which may be offered to certain
eligible employees (including the Chief Executive Officer, direct reports to the Chief Executive Officer and other selected
key executives) as determined by the Board. Options have been issued to the Chief Executive Officer only of 2.0 million
Securities.
The purpose of the LTI Scheme is to assist in attracting, motivating and retaining key management and employees. The
LTI Scheme operates by providing key management and employees with the opportunity to participate in the future
performance of Group securities. The vesting conditions of LTI plans and related awards include both a service based
hurdle and an absolute total security holder return (TSR) performance hurdle. The service based hurdle is 2, 3 and 4 years
in the case of the loan security plan. The TSR is 10% per annum in the case of the loan security plan and 15% per annum
in the case of the options plan. The 2017 option plan has an exercise price of $3.05 per security (43% premium to the
$2.13 offer price).
TSR was selected as the LTI performance measure to ensure an alignment between the security holder return and reward
for executives.
Elanor Investors Group Annual Report 2018 | 27
19
Directors’ Report
continued
ELANOR INVESTORS GROUP
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes
The table below sets out summary information about the Group's earnings and movements in shareholder wealth for the
year ended 30 June 2018:
Net profit before tax from continuing operations ($’000)
Net profit before tax from continuing operations ($'000)
(EHAF, EMPR & Bluewater equity accounted)
30 June 2018
30 June 2017
30 June 2016
12,661
14,397
12,394
12,825
5,070
7,422
Net profit after tax from continuing operations ($’000)
8,417
11,626
4,143
Net profit / (loss) after tax ($’000) from continuing
operations (EHAF, EMPR & Bluewater equity accounted)
Core earnings ($’000)
Security price at start of year
Security price at end of year
Interim distribution
Final distribution
Total distributions
Basic earnings per security from continuing operations
Basic earnings per security from continuing operations
(EHAF, EMPR & Bluewater equity accounted)
12,158
11,400
6,810
16,270
$2.14
$2.06
7.16 cents
8.61 cents
15.77 cents
9.04 cents
13.33 cents
12,670
$1.88
$2.14
7.77 cents
5.01 cents
12.78 cents
13.29 cents
13.03 cents
11,560
$1.70
$1.88
7.31 cents
7.34 cents
14.65 cents
5.86 cents
9.64 cents
The financial performance measure driving STI payment outcomes is pre-tax return on equity (ROE). The required pre-tax
return hurdle was not achieved for the financial year. Reported earnings before tax from continuing operations for the year
were $14.4 million or $12.2 million after tax. This reflects a 13.33 cents basic earnings per security based on average
equity employed for the period.
For the year ended 30 June 2018 the Group achieved Core Earnings of $16.27 million, a 28.41% increase on the prior
year. Total distributions per security in respect of the period were 15.77 cents.
The Group’s closing trading price on 30 June 2018 was $2.06 per security, a 3.7% decrease on the $2.14 price at 1 July
2017.
In the context of the Group’s strong growth in Core Earnings and distributions to security holders for the year ended 30
June 2018, the Board approved, on 26 June 2018, a discretionary bonus pool of $1.4 million (incorporating cash and the
value of deferred securities) to assist in the motivation and retention of key employees.
On 26 June 2018, the Board confirmed the vesting and removal of trading restrictions over the 2016 STI award securities,
with effect on or about 20 August 2018.
On 11 July 2017, the end of the 2014 LTI vesting period, all vesting conditions were met and the Directors resolved to
approve the vesting of the 2014 LTI awards on 18 August 2017.
The Remuneration and Nomination Committee retained a leading professional services firm to undertake a review of the
proposed 2017 LTI Plan in June 2017 to consider the proposed design and quantum of the grant, with reference to market
practice and Elanor’s stated LTI Plan and business objectives. The Remuneration and Nomination Committee resolved to
recommend the Board approve the Plan. No remuneration recommendations as defined under Division 1, Part 1.2.98(1)
of the Corporations Act 2001, were made by the professional services firm.
On 28 August 2017, following vesting of the 2014 LTI Award securities, the Board approved the issue of 2017 LTI Awards,
under similar terms and conditions to the 2014 LTI Awards, with the exception that the 2017 LTI Awards will vest in three
equal annual tranches, commencing approximately two years after grant date. A total of 14 million 2017 LTI Awards were
approved.
On 28 August 2017 the Board approved the issue of 2 million options under the Group’s option plan to Glen Willis. These
options have an exercise price of $3.05, being a 43% premium to the issue price. The issue of options and 2017 LTI
Awards to Glenn Willis was approved by security holders on 17 October 2017, at the Group’s Annual General Meeting
(AGM).
28 | Elanor Investors Group Annual Report 2018
20
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Elanor Investors Group Annual Report 2018 | 29
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes (continued)
Table 2: Remuneration components as a proportion of total remuneration on an annualised basis
Executive
Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
2018
2017
2018
2017
2018
2017
2018
2017
Fixed remuneration
(%)
Remuneration linked
to performance (%)
47.15
64.63
55.25
65.23
75.17
69.56
57.43
69.16
52.85
35.37
44.75
34.77
24.83
30.44
42.57
30.84
Total
(%)
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
No key management personnel appointed during the period received a payment as part of his or her consideration for
agreeing to hold the position.
Remuneration and other terms of employment for the key management personnel are formalised in employment contracts.
The key provisions of the employment contracts for key management personal are set out below.
The Remuneration and Nomination Committee undertook a review of executive remuneration in June 2018, and resolved
to increase the remuneration to the amounts shown in the tables below, with effect from 1 July 2018.
Table 3: Employment contracts of key management personnel
G. Willis
Executive
P. Siviour
S. Simmons
Position
Managing Director and
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer and
Company Secretary
Term
No fixed term
No fixed term
No fixed term
Salary (including
Superannuation)
Incentive
remuneration
$600,000
$512,500
$500,000
Eligible for an award of
short term and long term
incentive remuneration (if
any) as described above
Eligible for an award of
short term and long term
incentive remuneration (if
any) as described above
Eligible for an award of
short term and long term
incentive remuneration (if
any) as described above
Benefits
Entitled to participate in
Elanor Investors Group
benefit plans that are
made available
Entitled to participate in
Elanor Investors Group
benefit plans that are made
available
Entitled to participate in
Elanor Investors Group
benefit plans that are made
available
30 | Elanor Investors Group Annual Report 2018
22
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
d)
Executive Remuneration Outcomes (continued)
Termination
Employment shall
continue with the Group
unless either party
gives 12 months’ notice
in writing.
Employment shall continue
with the Group unless either
party gives 9 months’ notice
in writing.
Employment shall continue
with the Group unless
either party gives 4 weeks’
notice in writing.
Restraint
12 months from the
time of Termination.
N/A
N/A
e)
Non-Executive Director Remuneration Arrangements and Outcomes
The Elanor Board determines the remuneration structure for NED's based on recommendations from the Remuneration
and Nomination Committee. The NED's individual fees are annually reviewed by the Remuneration and Nomination
Committee taking into consideration the level of fees paid to NED's by companies of similar size and stature. The
Remuneration and Nomination Committee undertook a review of the remuneration of NEDs in June 2018, and resolved to
increase the amount of fees paid by approximately 14% in total, effective 1 July 2018. The maximum aggregate amount of
fees that can be paid to NEDs is subject to approval by security holders at the Annual General Meeting (currently $500,000).
The NED's receive a fixed remuneration amount, in respect of their services provided to the Responsible Entity and Elanor
Investors Limited. They do not receive any performance based remuneration or any retirement benefits other than statutory
superannuation.
Table 4: Remuneration of Non-Executive Directors
Salary (including
Superannuation)
$
Committee
Fees
$
Total (including
Superannuation)
$
Non-Executive
Directors
P. Bedbrook
N. Ampherlaw
W. Moss
2018
2017
2018
2017
2018
2017
150,000
150,000
70,000
70,000
70,000
70,000
10,000
10,000
10,000
10,000
10,000
10,000
160,000
160,000
80,000
80,000
80,000
80,000
During the year no options were issued to the NED’s.
The following options were issued to the NED’s under the FY17 Fee Sacrifice Offer, approved by security holders on 10
November 2016:
Name
P. Bedbrook
Award
Type
Options
Options
N. Ampherlaw Options
Options
Options
Options
W. Moss
During the financial year
Year
2018
2017
2018
2017
2018
2017
Number
Granted
0
851,064
0
1,063,830
0
957,447
Number
Vested
0
0
0
0
0
0
% of
Grant
Vested
0%
0%
0%
0%
0%
0%
Number
Forfeited
0
0
0
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
N/A
N/A
N/A
% of the actual
compensation
for the year
consisting of
awards
0%
25%
0%
63%
0%
56%
Elanor Investors Group Annual Report 2018 | 31
23
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
e)
Non-Executive Director Remuneration Arrangements and Outcomes (continued)
The fair value at grant date of each Option was $0.04. The NED option vesting period ended on 30 June 2017.
Remuneration and other items of appointment of the NED’s are formalised in contracts.
The NED’s are employed on employment contracts with no fixed tern. The NED’s employment is subject to the
Constitution of the Group, the Corporations Act, and the 3 year cycle of the rotation and election of Directors.
f)
Additional Disclosures Relating to Long Term Incentive Plans and Securities
Details of Long Term Incentive Plan payments granted or vested as Loan Security compensation to Key Management
Personnel during the current financial year:
During the financial year
Name
G. Willis
Award
Type
Loan
Securities
P. Siviour
Loan
Securities
M. Ossovani
Loan
Securities
S. Simmons
Loan
Securities
Number
Granted
4,250,000
0
0
2,800,000
1,750,000
0
0
1,100,000
0
0
0
1,100,000
1,250,000
0
0
280,000
Number
Vested
0
0
0
2,800,000
0
0
0
1,100,000
0
0
0
1,100,000
0
0
0
280,000
% of
Grant
Vested
0%
0%
0%
100%
0%
0%
0%
100%
0%
0%
0%
100%
0%
0%
0%
100%
Number
Forfeited
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Year
2018
2017
2016
2015
2018
2017
2016
2015
2018
2017
2016
2015
2018
2017
2016
2015
% of the actual
compensation
for the year
consisting of
awards
23%
0%
0%
22%
13%
0%
0%
12%
0%
0%
0%
12%
10%
0%
0%
4%
The Loan Security plan has been accounted for as 'in-substance' options. The fair value at grant date of each Loan
Security was $0.10.
Details of Long Term Incentive Plan payments granted or vested as Option compensation to key management personnel
during the current financial year:
During the financial year
Name
G. Willis
Award
Type
Options
Year
2018
2017
2016
2015
Number
Granted
2,000,000
0
0
1,600,000
Number
Vested
0
0
0
1,600,000
% of
Grant
Vested
0%
0%
0%
100%
Number
Forfeited
0
0
0
0
% of
Grant
Forfeited
N/A
N/A
N/A
N/A
The fair value at grant date of each Option was $0.03
% of the actual
compensation
for the year
consisting of
awards
2%
0%
0%
3%
32 | Elanor Investors Group Annual Report 2018
24
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
f)
Additional Disclosures Relating to Long Term Incentive Plans and Securities (continued)
The following table summarises the value of options granted during the financial year, in relation to options granted to Key
Management Personnel as part of the remuneration:
Name
G. Willis
Year
2018
2017
2016
2015
Value of options
granted at the grant
date1
$
66,000
0
0
0
Value of options
exercised at the
exercise date2
$
0
0
0
0
Note 1: The value of options granted during the financial year is calculated as at the grant date using a binomial pricing model. This grant
date value is allocated to remuneration of key management personnel on a straight-line basis over the period from grant date to vesting
date.
Note 2: The value of options exercised during the financial year is calculated as at the exercise date using a binomial pricing model. No
options were exercised in the period to 30 June 2018.
Key Management Personnel equity holdings
Changes to the interests of Key Management Personnel in the Group's Securities are set out below:
Elanor Investors Group – Stapled Securities
Name
Non-Executive
Directors
P. Bedbrook
N. Ampherlaw
W. Moss AO
Executive
Officers
G. Willis
P. Siviour
M. Ossovani
S. Simmons
Opening
Balance
1 July 2017
257,327
164,654
4,678,159
Acquired1
Disposed
Closing
Balance
30 June 2018
-
-
-
-
-
(2,300,000)
257,327
164,654
2,378,159
1,452,050
584,214
150,608
213,867
304,176
1,138,151
1,100,000
318,151
-
(100,000)
(1,100,000)
-
1,756,226
1,622,365
150,608
532,018
Note 1: The number of stapled securities acquired during the year includes issues of securities under the Group’s short term and long
term incentive schemes, and securities acquired on market.
Options over Elanor Investors Group – Stapled Securities
Opening
Balance
1 July
2017
Acquired
under the
Group's
incentive
plans
Exercised
or
Disposed
Closing
Balance
30 June
2018
Balance
vested at
Closing
Vested
but not
exercisable
Vested
and
exercisable
Options
vested
during
the year
Name
G. Willis
1,600,000
2,000,000
(1,600,000)
2,000,000
0
0
0 1,600,000
All options issued to Key Management Personnel were made in accordance with the provisions of the employee share
option plan. During the financial year, 1.6 million options were net settled and disposed of by Key Management Personnel.
Elanor Investors Group Annual Report 2018 | 33
25
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
9. Remuneration Report (Audited) (continued)
f)
Additional Disclosures Relating to Long Term Incentive Plans and Securities (continued)
Key Management Personnel equity holdings (continued)
Issued
under
the
Group's
Salary
sacrifice
offer
Opening
Balance
1 July
2017
Name
Exercised
or
Disposed
Closing
Balance
30 June
2018
Balance
vested at
Closing
Vested
but not
exercisable
Vested
and
exercisable
Options
vested
during the
year
P. Bedbrook
851,064
N. Ampherlaw
1,063,830
W. Moss
957,447
0
0
0
0
0
0
851,064
1,063,83
957,447
0
0
0
0
0
0
0
0
0
0
0
0
All options issued to NED’s were made under the FY17 Fee Sacrifice offer, approved by security holders on 10 November
2016.
g)
Loans to Key Management Personnel
No loans have been provided to Key Management Personnel of the Group during the year.
h)
Other Transactions and Balances with Key Management Personnel and their Related Parties
There were no transactions with Key Management Personnel and their Related Parties during the financial year that are
not otherwise referred to in the consolidated financial statements.
10. Company Secretary
Symon Simmons held the position of Company Secretary of the Responsible Entity and the Company during the period.
Symon is the Chief Financial Officer of the Group, and has extensive experience as a company secretary, is a Justice of
the Peace in NSW and is a Responsible Manager on the Australian Financial Services Licence held by the Responsible
Entity.
11.
Indemnification and insurance of officers and auditors
During the financial year, the Group paid a premium in respect of a contract insuring the Directors of the Group (as named
above), the company secretary, and all executive officers of the Company and of any related body corporate against a
liability incurred in their capacity as Directors and officers of the Company to the extent permitted by the Corporations Act
2001 (Cth). The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer of the Company or of any related body corporate against a liability incurred
in their capacity as an officer.
The auditor of the Group is not indemnified out of the assets of the Group.
12. Environmental regulation
To the best of their knowledge and belief after making due enquiry, the Directors have determined that the Group has
complied with all significant environmental regulations applicable to its operations in the jurisdictions in which it operates.
13. Significant changes in state of affairs
There was no significant change in the state of affairs of the Group during the year.
34 | Elanor Investors Group Annual Report 2018
26
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
14. Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 (Cth) is
included on the page following the Directors' Report.
15. Non audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in Note 29 to the consolidated financial statements.
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or
firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001 (Cth).
The Directors are of the opinion that the services as disclosed in Note 29 to the consolidated financial statements do not
compromise the external auditor’s independence, based on advice received from the Audit and Risk Committee, for the
following reasons:
•
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in APES 110
‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for
the Group, acting as advocate for the group or jointly sharing economic risks and rewards.
16.
Likely developments and expected results of operations
The financial statements have been prepared on the basis of the current known market conditions. The extent of any
potential deterioration in either the capital or physical property markets on the future results of the Group is unknown. Such
results could include property market valuations, the ability of borrowers, including the Group, to raise or refinance debt,
and the cost of such debt and the ability to raise equity.
At the date of this report and to the best of the Directors’ knowledge and belief, there are no other anticipated changes in
the operations of the Group which would have a material impact on the future results of the Group.
17.
Fees paid to and interests held in the Trust by the Manager or its associates
The interest in the Trust held by the Manager or its related entities as at 30 June 2018 and fees paid to and expenses
reimbursed by its related entities during the financial year are disclosed in Note 25 to the consolidated financial statements.
18. Events occurring after reporting date
On 3 August 2018, the Responsible Entity completed the sale of the Bell City asset for $157 million, and finalised settlement
of the Business Interruption element of the insurance claim relating to the John Cootes Furniture warehouse fire in July
2015.
The Directors of the Responsible Entity and the Company are not aware of any other matter since the end of the period
that has or may significantly affect the operations of the Group, the result of those operations, or the state of the Group’s
affairs in future financial periods that are not otherwise referred to in this Directors’ Report.
19. Proceedings on behalf of the Group
The Manager has engaged legal counsel and served a formal warranty claim notice on the vendor of the Bluewater Square
shopping centre under the purchase agreement for that property. Preparations for the next step to pursue legal claims are
well advanced, and are expected to be taken shortly.
No other proceedings have been brought, or intervened in, on behalf of the Group.
Elanor Investors Group Annual Report 2018 | 35
27
Directors’ Report
ELANOR INVESTORS GROUP
continued
DIRECTORS REPORT
20. Rounding of amounts to the nearest thousand dollars
In accordance with Legislative Instrument 2016/191 issued by the Australian Securities and Investments Commission
relating to the rounding off of amounts in the financial statements, amounts in the financial statements have been rounded
to the nearest thousand dollars in accordance with that Legislative Instrument, unless otherwise indicated.
This report is made in accordance with a resolution of the Boards of Directors of Elanor Funds Management Limited and
Elanor Investors Limited.
Signed in accordance with a resolution of the Directors pursuant to section 298(2) of the Corporations Act 2001 (Cth).
Paul Bedbrook
Chairman
Sydney, 17 August 2018
Glenn Willis
CEO and Managing Director
36 | Elanor Investors Group Annual Report 2018
28
Auditor’s Independence Declaration
Elanor Investors Group Annual Report 2018 | 37
Consolidated Statements of Profit or Loss
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2018
of Profit or Loss
The above Consolidated Statements of Profit or Loss should be read in conjunction with the accompanying notes
38 | Elanor Investors Group Annual Report 2018
30
Consolidated Statements of Comprehensive Income
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Consolidated Statements of Comprehensive Income
The above Consolidated Statements of Comprehensive Income should be read in conjunction with the accompanying notes
31
Elanor Investors Group Annual Report 2018 | 39
Consolidated Statements of Financial Position
ELANOR INVESTORS GROUP
as at 30 June 2018
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2018
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
40 | Elanor Investors Group Annual Report 2018
32
Consolidated Statements of Financial Position
ELANOR INVESTORS GROUP
as at 30 June 2018
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 JUNE 2018
The above Consolidated Statements of Financial Position should be read in conjunction with the accompanying notes
33
Elanor Investors Group Annual Report 2018 | 41
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42 | Elanor Investors Group Annual Report 2018
P
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Elanor Investors Group Annual Report 2018 | 43
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Consolidated Statements of Cash Flows
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
The above Consolidated Statements of Cash Flows should be read in conjunction with the accompanying notes
44 | Elanor Investors Group Annual Report 2018
36
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
About this Report
Elanor Investors Group (Group, Consolidated Group or Elanor) is a ‘stapled’ entity comprising Elanor Investors Limited
(EIL or Company) and its controlled entities (EIL Group) and Elanor Investment Fund (Trust) and its controlled entities
(EIF Group), the units in the Trust are stapled to shares in the Company. The stapled securities cannot be traded or dealt
with separately. The stapled securities of the Group are listed on the Australian Securities Exchange (ASX: ENN). As
permitted by Class Order 05/642 issued by the Australian Securities and Investments Commission (ASIC), this report is
a combined report that presents the consolidated financial statements and accompanying notes of both Elanor Investors
Group and the Elanor Investment Fund (EIF Group).
The Elanor Investors Group’s annual financial report has been presented to provide users of the financial report with a
clearer understanding of relevant balances and transactions that drive the Group’s financial performance and financial
position. Plain English is used in commentary or explanatory sections of the notes to the financial statements to also
improve readability of the financial report. Additionally, amounts in the consolidated financial statements have been
rounded off to the nearest one thousand dollars, unless otherwise indicated, in accordance with ASIC Corporations
(Rounding in Financial/Director’s Reports) Instrument 2016/191.
Basis of Consolidation
The consolidated Financial Statements of the Group incorporate the assets and liabilities of Elanor Investors Limited (the
Parent) and all of its subsidiaries, including Elanor Investment Fund and its subsidiaries as at 30 June 2018. Elanor
Investors Limited is the parent entity in relation to the stapling. The results and equity of Elanor Investment Fund (which
is not directly owned by Elanor Investors Limited) have been treated and disclosed as a non-controlling interest. Whilst
the results and equity of Elanor Investment Fund are disclosed as a non-controlling interest, the stapled security holders
of Elanor Investment Fund are the same as the stapled security holders of Elanor Investors Limited.
These consolidated Financial Statements also include a separate column representing the consolidated Financial
Statements of EIF Group, incorporating the assets and liabilities of Elanor Investment Fund and all of its subsidiaries, as
at 30 June 2018.
Control of Elanor Hospitality and Accommodation Fund (EHAF), Elanor Metro and
Prime Regional Hotel Fund (EMPR) and Bluewater Square Syndicate (Bluewater).
EHAF
EHAF comprises stapled securities in Elanor Hospitality and Accommodation Fund and EHAF Management Pty Limited.
The Group holds 42.64% of the equity in EHAF. The Group's 42.64% ownership interest in EHAF gives the Group the
same percentage of the voting rights in EHAF. EHAF is an unregistered trust for which Elanor Funds Management Limited
acts as the Manager of the asset and Trustee of the trust.
EMPR
EMPR comprises stapled securities in Elanor Metro and Prime Regional Hotel Fund and EMPR Management Pty Limited.
The Group holds 44.04% of the equity in EMPR. The Group's 44.04% ownership interest in EMPR gives the Group the
same percentage of the voting rights in EMPR. EMPR is an unregistered trust for which Elanor Funds Management
Limited acts as the Manager of the asset and Trustee of the trust.
Bluewater
The Group holds 41.92% of the equity in Bluewater Square Syndicate. The Group's 41.92% ownership interest in
Bluewater gives the Group the same percentage of the voting rights in Bluewater. Bluewater is an unregistered trust for
which Elanor Funds Management Limited acts as the Manager of the asset and Trustee of the trust.
The responsible entity of EHAF, EMPR and Bluewater is owned wholly by the Group and governed by the licensing and
legal obligations of a professional asset manager. The powers of the Trustee are governed by the constitution of EHAF,
EMPR and Bluewater respectively which sets out the basis of fees that the relevant Trustee can receive. These fees
include management fees, performance fees, and acquisition fees.
37
Elanor Investors Group Annual Report 2018 | 45
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Based on the assessment above, at the current level of equity investment in EHAF, EMPR and Bluewater the AASB 10
definition of control for these investments are met, and therefore each of these investments are consolidated into Elanor
Investors Group Financial Statements.
46 | Elanor Investors Group Annual Report 2018
38
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
The notes to the consolidated financial statements have been organised into the following sections for reduced
complexity and ease of navigation:
RESULTS ................................................................................................................................
1.
2.
3.
4.
5.
6.
7.
8.
Segment information ...................................................................................................................... 48
Revenue from Operating Activities ................................................................................................ 50
Other Income and expenses .......................................................................................................... 51
Distributions ................................................................................................................................... 51
Discontinued Operations................................................................................................................ 52
Earnings / (losses) per stapled security ......................................................................................... 54
Income tax...................................................................................................................................... 56
Cash flow information..................................................................................................................... 59
OPERATING ASSETS .......................................................................................................... 60
9.
10.
11.
12.
Property, plant and equipment ....................................................................................................... 60
Investment Properties .................................................................................................................. 65
Equity accounted investments ....................................................................................................... 66
Inventories...................................................................................................................................... 70
FINANCE AND CAPITAL STRUCTURE .................................................................................. 71
13.
14.
15.
16.
17.
Interest bearing liabilities................................................................................................................ 71
Derivative financial instruments ..................................................................................................... 73
Contributed equity .......................................................................................................................... 75
Reserves ........................................................................................................................................ 76
Financial risk management ............................................................................................................ 77
GROUP STRUCTURE ........................................................................................................... 82
18.
19.
Parent entity ................................................................................................................................... 82
Subsidiaries and Controlled entities............................................................................................... 83
OTHER ITEMS ..................................................................................................................... 85
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Other financial assets and liabilities ............................................................................................... 85
Intangible assets ............................................................................................................................ 87
Net tangible assets......................................................................................................................... 89
Commitments ................................................................................................................................. 89
Share-based payments .................................................................................................................. 90
Related parties ............................................................................................................................... 92
Significant Events........................................................................................................................... 93
Events occurring after reporting date............................................................................................. 94
Summary of other significant accounting policies .......................................................................... 94
Auditor's remuneration ................................................................................................................... 96
Non-Parent Disclosure ................................................................................................................... 97
39
Elanor Investors Group Annual Report 2018 | 47
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Results
This section focuses on the operating results and financial performance of the Group. It includes disclosures of
segment information, revenue, distributions and cash flow including the relevant accounting policies adopted in
each area.
1.
Segment information
OVERVIEW
Segment information is presented on the same basis as that used for internal reporting purposes. The segments are
reported in a manner that is consistent with internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the Board of Directors of Elanor Investors Limited and the Responsible
Entity.
The main income statement items used by management to assess each of the divisions are divisional revenue and
divisional EBITDA. In addition, depreciation and amortisation are analysed by division. Each of these income statement
items is looked at after adjusting for transaction and establishment costs, amortisation of intangible assets and
impairment of goodwill.
BUSINESS SEGMENTS
The Group is organised into the following divisions by business type:
FUNDS MANAGEMENT
The Funds Management division manages third party owned investment funds and syndicates. As at 30 June 2018, the
Funds Management division has approximately $1,082.6 million of investments under management, being the managed
investments.
HOTELS, TOURISM AND LEISURE
Hotels, Tourism and Leisure originates investment and fund management assets. The current investment portfolio
includes Featherdale Wildlife Park and Ibis Styles Albany Hotel along with co-investments in Elanor Hospitality and
Accommodation Fund (Peppers Cradle Mountain Lodge, Mantra Wollongong Hotel, Mantra Pavilion Wagga Wagga, Ibis
Styles Port Macquarie, Ibis Styles Tall Trees and Parklands Resort Mudgee) and Elanor Metro and Prime Regional Fund
(Ibis Styles Canberra Eaglehawk, Byron Bay Hotel & Apartments and Ibis Styles Canberra Narrabundah) which are
consolidated in the Financial Statements. Hotels, Tourism and leisure also has a co-investment in the Bell City Syndicates
which is equity accounted in Financial Statements. The Hotels, Tourism and Leisure division also manages all of the
above syndicates.
REAL ESTATE
Real Estate originates investment and fund management assets. The current investment portfolio comprises co-
investments in Elanor Commercial Property Fund, Elanor Retail Property Fund, Limestone Street Centre Syndicate,
Hunters Plaza Syndicate and Belconnen Markets Syndicate. Bluewater Square Syndicate is consolidated in the Financial
Statements. The Real Estate division also manages all of the above syndicates.
SPECIAL SITUATION INVESTMENTS
Special Situations Investments comprises the property associated with John Cootes Furniture business at Merrylands,
NSW. The Merrylands property was sold on 6 June 2018 for $36 million.
On 26 June 2018, following a strategic review of the deteriorating trading and financial performance of the John Cootes
Furniture business, the Directors resolved to exit the business, either through a sale or a closure of the business. In
accordance with Accounting Standards, the John Cootes Furniture business has been classified as a Discontinued
Operation within these financial statements. Accordingly, the financial results of the special situations investments
segment are presented for the year ending 30 June 2018 without the John Cootes Furniture business. For further
information, refer to Note 5.
48 | Elanor Investors Group Annual Report 2018
40
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
Segment information (continued)
The table below shows segment results from continuing operations
Consolidated Group – 30 June 2018
Consolidated Group – 30 June 2017
41
Elanor Investors Group Annual Report 2018 | 49
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
2.
Revenue from Operating Activities
OVERVIEW
This note provides a breakdown of revenue from operating activities by activity type.
Revenue from continuing operations:
ACCOUNTING POLICY
Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and specific criteria have been met for each of Elanor’s activities as described below.
Hotel and wildlife park revenue
Revenue is recognised when goods and services have been provided to the customer and the outcome can be reliably
measured. Revenue is recognised when the risks and rewards of ownership have passed to the buyer.
Funds management fee revenue
Funds management fee revenue is recognised on an accruals basis as the services are performed, in accordance with
the terms of the relevant contracts. Where fees are subject to meeting certain performance hurdles, they are recognised
as income at the point when those conditions have been met.
If not received at balance sheet date, revenue is reflected in the balance sheet as a receivable and carried at its
recoverable value.
50 | Elanor Investors Group Annual Report 2018
42
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
3.
Other Income and Expenses
OVERVIEW
This note provides a breakdown of Other Income and Other Expenses, into the key components for the period.
Other income
ACCOUNTING POLICY
Income and Expenses
Income and expenses are brought to account on an accruals basis.
4.
Distributions
OVERVIEW
The Group’s aim is to provide investors with superior risk adjusted returns.
When determining distributions, the Group’s board considers a number of factors, including forecast earnings and
expected economic conditions. Elanor Investors Group aims to distribute 90% of Core Earnings, reflecting the Director’s
view of underlying earnings from ongoing operating activities for the period.
ENN Group
The following distributions were declared by the ENN Group either during the year or post balance date:
1. The interim distribution of 7.16 cents per stapled security was declared on 21 February 2018 and paid on 2 March 2018.
2. The final distribution of 8.61 cents per stapled security was declared on 17 August 2018. Please refer to the Directors' Report for
the calculation of Core Earnings and the Distribution.
43
Elanor Investors Group Annual Report 2018 | 51
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
5.
Discontinued Operations
On 26 June 2018, following a strategic review of the deteriorating trading and financial performance of the John Cootes
Furniture business, the Directors resolved to exit the business, either through a sale or a closure of the business.
Following this decision, the John Cootes Furniture business has been classified under accounting standards as a
Discontinued Operation within these financial statements.
a) Analysis of Profit or Loss for the year from Discontinued Operations
The combined results of the discontinued operations included in the profit and loss for the year are set out below. The
comparative profit and cash flows from discontinued operations have been re-presented to include those operations
classified as discontinued in the current year.
Profit or Loss for the year from Discontinued Operations
Note 1: Includes impairment of related intangibles, write off of plant and equipment, expected store lease termination costs and other
expenses relating to discontinuing the operations of the business.
Cash flows from/(used in) discontinued operations
52 | Elanor Investors Group Annual Report 2018
44
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
5.
Discontinued Operations (continued)
b) Assets held for sale
Assets relating to the John Cootes Furniture business held for sale are included in the following table:
c) Total liabilities directly associated with assets held for sale
ACCOUNTING POLICY
Discontinued Operations
A discontinued operation is a component of the Group that represents a separate major line of business that is part of a
disposal plan. The results of discontinued operations are presented separately in the Consolidated Statement of Profit
or Loss.
Critical Accounting Estimates
The estimates and judgements of impairment of the John Cootes Furniture business assets and associated costs, that
involve a high degree of complexity and have a risk of causing a material adjustment to the carrying amounts of assets
and liabilities within subsequent periods, are incorporated above. Any changes to carrying values in subsequent periods
due to revisions to estimates or assumptions or as a result of the final realisation of the business assets and liabilities
upon exit of the business will be recognised in the Group’s profit or loss as part of discontinued operations up to the
cessation of the John Cootes Furniture business.
45
Elanor Investors Group Annual Report 2018 | 53
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
6.
Earnings / (losses) per stapled security
OVERVIEW
This note provides information about Elanor Investor Group’s earnings on a per security basis. Earnings per security
(EPS) is a measure that makes it easier for users of Elanor’s financial report to compare Elanor’s performance between
different reporting periods. Accounting standards require the disclosure of two EPS measures, basic EPS and diluted
EPS. EPS information provides a measure of interests of each ordinary issued security of the parent entity in the
performance of the entity over the reporting period while diluted EPS information provides the same information but takes
into account the effect of all potential dilutive, ordinary securities outstanding during the period, such as Elanor’s options.
The tables below show the earnings per share of the Company, the parent entity of the Group and its controlled entities
as required by accounting standards.
The earning / (losses) per stapled security measure shown below is based upon the profit / (loss) attributable to
security holders:
1. The weighted average number of stapled securities and options granted used as the denominator in calculating basic and diluted
earnings / (losses) per stapled securities shown above is based on the number of stapled security on issue and options granted.
54 | Elanor Investors Group Annual Report 2018
46
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
6.
Earnings / (losses) per stapled security (continued)
The earnings / (losses) per stapled security measures shown below are based upon the profit / (loss)
attributable to security holders of the ENN Group:
1. The weighted average number of stapled securities and options granted used as the denominator in calculating basic and diluted
earnings / (losses) per stapled securities shown above is based on the number of stapled securities on issue and options granted
during the period.
ACCOUNTING POLICY
Basic earnings per stapled security is calculated as profit after tax attributable to security holders divided by the weighted
average number of ordinary stapled securities issued.
Diluted earnings per stapled security is calculated as profit after tax attributable to security holders adjusted for any profit
recognised in the period in relation to potential dilutive, stapled securities divided by the weighted average number of
stapled securities and dilutive stapled securities.
47
Elanor Investors Group Annual Report 2018 | 55
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
7.
Income tax
OVERVIEW
This note provides detailed information about the Group’s income tax items and accounting policies. This includes a
reconciliation of income tax expense if Australia’s company income tax rate of 30% was applied to the Group’s profit
before income tax as shown in the income statement to the actual income tax expense / benefit as well as an analysis of
Elanor’s deferred tax balances.
(a)
Income Tax Expense
(b)
Reconciliation of income tax expense to prima facie tax expense
1. Reversal of tax provision in respect of proposed tax legislation, subsequently not enacted.
ACCOUNTING POLICY
Accounting standards require the application of the “balance sheet method” to account for Elanor’s income tax.
Accounting profit does not always equal taxable income. There are a number of timing differences between the
recognition of accounting expenses and the availability of tax deductions or when revenue is recognised for accounting
purpose and tax purposes. These timing differences reverse over time but they are recognised as deferred tax assets
and deferred tax liabilities in the balance sheet until they are fully reversed. This is referred to as the “balance sheet
method”.
56 | Elanor Investors Group Annual Report 2018
48
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
7.
Income tax (continued)
(b)
Reconciliation of income tax expense to prima facie tax expense (continued)
Income tax expense comprises current and deferred tax and is recognised in the statement of profit or loss and other
comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date and any adjustment to tax payable in respect of previous years.
EIL and its wholly-owned Australian resident entities are part of a tax-consolidated group, formed on 11 July 2014, and
are therefore taxed as a single entity, with any deferred tax assets and liabilities of these entities set off in the consolidated
financial statements. The head entity within the tax-consolidated group is Elanor Investors Limited.
EHAF Management Pty Limited and its wholly-owned Australian resident entities are part of a tax-consolidated group,
formed on 21 March 2016, and are therefore taxed as a single entity, with any deferred tax assets and liabilities of these
entities set off in the consolidated financial statements. The head entity within the tax-consolidated group is EHAF
Management Pty Limited.
EMPR Management Pty Limited and its wholly-owned Australian resident entities are part of a tax-consolidated group,
formed on 6 November 2017, and are therefore taxed as a single entity, with any deferred tax assets and liabilities of
these entities set off in the consolidated financial statements. The head entity within the tax-consolidated group is EMPR
Management Pty Limited.
(c)
Deferred taxes
OVERVIEW
Management judgement is required in reviewing the recoverability of deferred tax assets carried by the Group, which
involves estimates of key assumptions including cash flow projection, growth rates and discount rates.
49
Elanor Investors Group Annual Report 2018 | 57
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
7.
Income tax (continued)
(c)
Deferred taxes (continued)
\
ACCOUNTING POLICY
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The
following differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
58 | Elanor Investors Group Annual Report 2018
50
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
8.
Cash flow information
OVERVIEW
This note provides further information on the consolidated cash flow statements of the Group. It reconciles profit for the
year to cash flows from operating activities, reconciles liabilities arising from financing activities and provides information
about non-cash transactions.
(a) Reconciliation of profit after income tax to net cash flows from operating activities
(b) Reconciliation of liabilities arising from financial activities
51
Elanor Investors Group Annual Report 2018 | 59
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Operating Assets
This section includes information about the assets used by the Group to generate revenue and profits, specifically
relating to its property, plant and equipment, and investments.
9.
Property, plant and equipment
OVERVIEW
All owner occupied investment properties held by the Group are deemed to be held for use by the Group for the supply
of services, and are therefore classified as property, plant and equipment under Australian Accounting Standards.
(a) Movement in property, plant and equipment
A reconciliation of the carrying amount of property, plant and equipment at the beginning and end of the current period
is set out below:
A reconciliation of the carrying amount of property, plant and equipment at the beginning and end of 30 June 2017 is
set out below:
60 | Elanor Investors Group Annual Report 2018
52
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
Property, plant and equipment (continued)
(b) Carrying value of property, plant and equipment
The carrying amount of property, plant and equipment at the beginning and end of the current period is set out below:
Consolidated Group
As at 30 June 2018, the Directors assessed the fair value of the properties above, supported by external or internal
valuation reports.
Had the Consolidated Group's property, plant and equipment been measured on a historical cost less accumulated
depreciation basis, their carrying amount would have been as follows:
53
Elanor Investors Group Annual Report 2018 | 61
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
Property, plant and equipment (continued)
ACCOUNTING POLICY
Fair value of Property, Plant and Equipment
Land and Buildings are carried at fair value with changes in fair value recognised in other comprehensive income in the
statement of comprehensive income. Fair value is defined as the price at which an asset or liability could be exchanged
in an arm's length transaction between knowledgeable, willing parties, other than in a forced or liquidation sale.
In reaching estimates of fair value, management judgement needs to be exercised. The level of management judgement
required in establishing fair value of the land and buildings for which there is no quoted price in an active market is
reduced through the use of external valuations.
Land and Buildings
All owner occupied properties in the Hotel, Tourism and Leisure class are held for use by the Group for the supply of
services and are classified as land and buildings and stated at their revalued amounts under the revaluation model, being
the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated
impairment losses. Fair value is the amount for which the land and buildings could be exchanged between
knowledgeable, willing parties in an arm's length transaction.
Revaluation increases arising from changes in the fair value of land and buildings are recognised in other comprehensive
income and accumulated within equity, except to the extent that it reverses a revaluation decrease for the same asset
previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease
previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is
recognised in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve
relating to a previous revaluation of that asset.
Furniture, fittings and equipment
Furniture, fittings and equipment are stated at cost less accumulated depreciation.
Livestock
Livestock are stated at cost, less accumulated depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the animals. Depreciation on livestock is calculated using the straight-line method, over
the useful lives of the assets which range from 5 - 50 years.
Depreciation
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost
or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold
improvements and certain leased plant and equipment, the shorter lease term as follows:
Buildings
Computer Equipment
Vehicles
Furniture, fittings and equipment
40 years
3 - 5 years
8 years
3 - 10 years
62 | Elanor Investors Group Annual Report 2018
54
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
Property, plant and equipment (continued)
(c) Valuation technique and inputs
The key inputs used to measure fair values of investment properties are disclosed below along with their sensitivity to an
increase or decrease.
The investment property fair values presented are based on market values, which are derived using the capitalisation
and the discounted cash flow methods. The Group's preferred or primary method is the capitalisation method.
Property Assets
The aim of the valuation process is to ensure that assets are held at fair value and that the Group is compliant with
applicable Australian Accounting Standards, regulations, and the Trust’s Constitution and Compliance Plan.
All properties are required to be internally valued every six months with the exception of those independently valued
during that six month period. The internal valuations are performed by utilising the information from a combination of
asset plans and forecasting tools prepared by the asset management team. Appropriate capitalisation rate, terminal yield
and discount rates based on comparable market evidence and recent external valuation parameters are used to produce
a capitalisation based valuation and a discounted cash flow valuation.
The internal valuations are reviewed by the Chief Operating Officer who recommends each property's valuation to the
Audit, Risk & Compliance Committee and the Board in accordance with the Group's internal valuation protocol.
The Group's valuation policy requires that each property in the portfolio is valued by an independent valuer at least every
three years. In practice, properties may be valued more frequently than every three years primarily where there may
have been a material movement in the market and where there is a significant variation between the carrying value and
the internal valuation.
Independent valuations are performed by independent and external valuers who hold a recognised relevant professional
qualification and have specialised expertise in the types of investment properties valued.
Capitalisation method
Capitalisation rate is an approximation of the ratio between the net operating income produced by an investment property
and its fair value. This excludes consideration of costs of acquisition or disposal. The net income is capitalised in
perpetuity from the valuation date at an appropriate investment yield. The adopted percentage rate investment yield
reflects the capitalisation rate and includes consideration of the property type, location, comparable sales and whether
the property is subject to vacant possession (in the case of hotel properties).
Discounted cash flows (DCF)
Under the DCF method, a property's fair value is estimated using explicit assumptions regarding the benefits and liabilities
of ownership over the asset's life including an exit or terminal value. The DCF method involves the projection of a series
of cash flows on a real property interest. To this projected cash flow series, an appropriate discount rate is applied to
establish the present value of the income stream associated with the property. The discount rate is the rate of return
used to convert a monetary sum, payable or receivable in the future, into present value. The rate is determined with
regard to market evidence and prior independent valuation.
All property investments are categorised as level 3 in the fair value hierarchy. There were no transfers between the
hierarchies during the period.
55
Elanor Investors Group Annual Report 2018 | 63
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
Property, plant and equipment (continued)
(c) Valuation technique and inputs (continued)
Assets measured at fair value
The significant unobservable inputs associated with the valuation of the Group's property, plant and equipment are as
follows:
Sensitivity Information
The key unobservable inputs to measure the fair value of investment properties are disclosed below along with
sensitivity to a significant increase or decrease set out in the following table:
Sensitivity Analysis
When calculating the income capitalisation approach, the net property income has a strong inter-relationship with the
adopted capitalisation rate given the methodology involves assessing the total income receivable from the property and
capitalising this in perpetuity to derive a capital value. In theory, an increase in the income and an increase (softening)
in the adopted capitalisation rate could potentially offset the impact to the fair value. The same can be said for a decrease
in the income and a decrease (tightening) in the adopted capitalisation rate. A directionally opposite change in the income
and the adopted capitalisation rate could potentially magnify the impact to the fair value.
When assessing a discounted cash flow, the adopted discount rate and adopted terminal yield have a strong
interrelationship in deriving a fair value given the discount rate will determine the rate at which the terminal value is
discounted to the present value. The impact on the fair value of an increase (softening) in the adopted discount rate could
potentially offset the impact of a decrease (tightening) in the adopted terminal yield. The same can be said for a decrease
(tightening) in the adopted discount rate and an increase (softening) in the adopted terminal yield. A directionally similar
change in the adopted discount rate and adopted terminal yield could potentially magnify the impact to the fair value.
64 | Elanor Investors Group Annual Report 2018
56
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
10.
Investment Properties
The carrying amount of investment properties at the beginning and end of the current period is set out below:
The following table represents the total fair value of investment properties at 30 June 2018:
ACCOUNTING POLICY
Fair value of Investment Properties
Land and Buildings are carried at fair value with changes in fair value recognised through profit or loss in the statement
of comprehensive income. Fair value is defined as the price at which an asset or liability could be exchanged in an arm's
length transaction between knowledgeable, willing parties, other than in a forced or liquidation sale.
In reaching estimates of fair value, management judgment needs to be exercised. The level of management judgment
required in establishing fair value of the land and buildings for which there is no quoted price in an active market is
reduced through the use of external valuations.
Investment properties are properties held to earn rentals and / or for capital appreciation (including property under
construction for such purposes). Investment properties are measured initially at its cost, including transaction costs.
Subsequent to initial recognition, investment properties are measured at fair value. Gains and losses arising from
changes in the fair value of investment properties are included in profit or loss in the period in which they arise.
At each reporting date, the carrying values of the investment properties are assessed by the Director's and where the
carrying value differs materially from the Directors' assessment of fair value, an adjustment to the carrying value is
recorded as appropriate.
The Directors' assessment of fair value of each investment property takes into account latest independent valuations,
with updates taking into account any changes in estimated yield, underlying income and valuations of comparable
properties. In determining the fair value, the capitalisation of net income method and / or the discounting of future net
cash flows to their present value have been used, which are based upon assumptions and judgements in relation to
future rental income, property capitalisation rate or estimated yield and make reference to market evidence of transaction
prices for similar properties.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from
use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the
property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
included in profit or loss in the period in which the property is derecognized.
57
Elanor Investors Group Annual Report 2018 | 65
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
10.
Investment Properties (continued)
Valuation, technique and inputs
Investment properties are categorised as level 3 in the fair value hierarchy. There were no transfers between hierarchies
during the period.
Fair value measurement
The significant unobservable inputs associated with the valuation of the Group's investment properties are as follows:
11.
Equity accounted investments
OVERVIEW
This note provides an overview and detailed financial information of the Group’s investments that are accounted for using
the equity method of accounting. These include joint ventures where the Group has joint control over an investee together
with one or more joint venture partners and investments in associates, which are entities over which the Group is
presumed to have significant influence but not control or joint control.
The Group’s equity accounted investments are as follows:
66 | Elanor Investors Group Annual Report 2018
58
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11.
Equity accounted investments (continued)
Details of Material Associates
Summarised financial information in respect of each of the Group's material associates is set out below. The summarised
financial information below represents amounts shown in the associate's financial statements prepared in accordance
with accounting standards, adjusted by the Group for equity accounting purposes.
Bell City Fund
The Bell City Fund comprises the aggregated investment in six entities being, Bell City Accommodation Management
Pty Limited, Bell City Accommodation Syndicate, Bell City Hotel Management Pty Limited, Bell City Hotel Syndicate, Bell
City Office Syndicate and Bell City Residential Development Syndicate.
Elanor Retail Property Fund
The Elanor Retail Property Fund (ERF) is an externally managed real estate investment fund, investing in Australian
retail property, focusing on high investment quality neighbourhood and sub-regional shopping centres. ERF was listed
on the Australian Securities Exchange (ASX) on 9 November 2016.
As the Group has a 17.89% investment in the equity in ERF, the Group has significant influence by virtue of its role as
Responsible Entity of the Fund and its ability to participate in the financial and operating policy decisions of the Fund.
The following information represents the aggregated financial position and financial performance of the Elanor Retail
Property Fund and Bell City. This summarised financial information represents amounts shown in the associate's financial
statements prepared in accordance with AASBs, adjusted by the Group for equity accounting purposes.
59
Elanor Investors Group Annual Report 2018 | 67
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11.
Equity accounted investments (continued)
Details of Material Associates (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in Elanor Retail
Property Fund recognised in the consolidated financial statements:
30 June 2017
On 9 November 2016, the Elanor Retail Property Fund (ERPF) and the Auburn Central Syndicate were rolled into the
IPO of the new listed Elanor Retail Property Fund (ERF). Prior to the IPO, the Group held 24.4% of ERPF, and at balance
date the Group held 17% of the listed ERF, accounted for using equity method.
68 | Elanor Investors Group Annual Report 2018
60
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11.
Equity accounted investments (continued)
Details of Material Associates (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
and the Elanor Retail Property Fund recognised in the consolidated financial statements:
Aggregate information of associates that are not individually material
ACCOUNTING POLICY
Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial and operating policy decisions of the investee but is not control or joint control over those policy decisions.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Under the equity method, investments in associates are carried in the Statement of Financial Position at cost as adjusted
for post-acquisition charges in the Group's share of profit or loss and other comprehensive income of the associate, less
any impairment in the value of individual investments.
The Group holds a 17.89% interest in ERF which has been classified as a material associated entity. Management of
the Group reviewed and assessed the classification of the Group's investment in the associated entities in accordance
with AASB 128 on the basis that the Group has significant influence over the financial and operating policy decisions of
the investee.
The results and assets and liabilities of associates or joint ventures are incorporated in these financial statements using
the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which
case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint
venture is initially recognised in the statement of financial position at cost and adjusted thereafter to recognise the Group's
share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group's share of
losses of an associate or a joint venture exceeds the Group's interest in that associate or joint venture (which includes
any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture), the
Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the
Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.
The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment loss with
respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with AASB 136 'Impairment of Assets' as a single
61
Elanor Investors Group Annual Report 2018 | 69
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
11.
Equity accounted investments (continued)
Investment in associates and joint ventures (continued)
asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying
amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that
impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment
subsequently increases.
When an entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the
transactions with the associate or joint venture are recognised in the Group's financial statements only to the extent of
interests in the associate or joint venture that are not related to the Group
12.
Inventories
OVERVIEW
Inventories are assets held for sale or consumables held in the ordinary course of operations.
Note 1: The Merrylands property was sold by the Group on 6 June 2018 for $36 million.
Note 2: At 30 June 2018, $8.2 million of inventory from the John Cootes Furniture business was transferred to Assets held for sale in the
Consolidated Statements of Financial Position. See Note 5.
ACCOUNTING POLICY
Inventories are assets held for sale or consumables held in the ordinary course of operations and recognised at the lower
of cost or net realisable value.
The cost of the inventory comprises costs of purchase, cost of conversion and other costs incurred in bringing the
inventories to their present location and condition. A provision is raised when it is believed that the costs incurred will not
be recovered on the ultimate sale of the inventory. Cost for all inventories is determined using the first-in, first-out (FIFO)
method.
The Group holds certain landholdings that are intended solely for sale, and not for long term appreciation or the derivation
of rental income. These landholdings are carried as non-current inventory.
Inventory is carried at the lower of cost or net realisable value. The directors have assessed the carrying value of the
Goods held for resale and Property Inventory, and have not recognised any impairment during the period.
70 | Elanor Investors Group Annual Report 2018
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Finance and Capital Structure
This section provides further information on the Group’s debt finance, risk management arrangements including
derivatives, contributed equity and reserves.
Finance and Capital Structure
13.
Interest bearing liabilities
OVERVIEW
The Group borrows funds from financial institutions to partly fund the acquisition of income producing assets, such as
investment properties, securities or the acquisition of businesses. The Group’s borrowings are generally fixed either
directly or through the use of interest rate swaps and have a fixed term. This note provides information about the Group’s
debt facilities, including the facilities of EHAF, EMPR and Bluewater.
The term debt is secured by registered mortgages over all freehold property and registered security interests over all
present and after acquired property of key Group companies. The terms of the debt also impose certain covenants on
the Group including Loan to Value ratio and Interest Cover covenants. The Group is currently meeting all its covenants.
Unsecured Fixed Rate Notes
On 17 October 2017 and 18 December 2017 the Group issued $40 million and $20 million 7.1% unsecured 5 year fixed
rate notes respectively. The total $60 million unsecured fixed rate notes are due for repayment on 17 October 2022.
The unsecured notes include Loan to Value Ratio and Interest Cover Covenants. The Group is currently meeting all of
its covenants.
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Elanor Investors Group Annual Report 2018 | 71
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13.
Interest bearing liabilities (continued)
CREDIT FACILITIES
As at 30 June 2018, the Group had unrestricted access to the following credit facilities:
CONSOLIDATED GROUP
Included in the above numbers, the ENN Group has access to a $18.5 million facility, upon which both the Company and
the Trust can draw. The drawn amount at 30 June 2018 is $1.0 million. The facility will mature on 11 July 2020. At 30
June 2018 the amount of drawn facilities is hedged to 0%. As a result of the sale of the Merrylands property on 3 August
2018, the facility available to the ENN Group has been reduced to $9.7 million.
Included in the above numbers, the EHAF Group has access to a $46.7 million facility, upon which both the company
and trust can draw. The drawn amount at 30 June 2018 is $46.7 million which will mature on 21 March 2019. At 30 June
2018, the amount of drawn facilities is hedged to 100%.
Included in the above numbers, the EMPR Group has access to a $36.6 million facility, upon which both the company
and trust can draw. The drawn amount at 30 June 2018 is $36.6 million which will mature on 5 November 2021. At 30
June 2018, the amount of drawn facilities is hedged to 100%.
Included in the above numbers, Bluewater has access to a $31.8 million facility. The drawn amount at 30 June 2018 is
$31.3 million which will mature on 30 October 2021. At 30 June 2018, the amount of drawn facilities is hedged to 100%.
72 | Elanor Investors Group Annual Report 2018
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13.
Interest bearing liabilities (continued)
All of the facilities have a variable interest rate. The interest rates on the loans are partially fixed using interest rate swaps.
The weighted average annual interest rates payable of the loans at 30 June 2018, including the impact of the interest
rate swaps, is 4.63% per annum.
ACCOUNTING POLICY
Interest bearing liabilities are recognised initially at cost, being the fair value of the consideration received net of
transaction costs associated with the borrowing. Subsequent to initial recognition, interest bearing liabilities are
recognised at amortised cost using the effective interest method. Under the effective interest method, any transaction
fees, costs, discounts and premiums directly related to the borrowings are recognised in the statement of profit or loss
and other comprehensive income over the expected life of the borrowings.
Interest bearing liabilities are classified as current liabilities where the liability has been drawn under a financing facility
which expires within 12 months. Amounts drawn under financial facilities which expire after 12 months are classified as
non-current.
14. Derivative financial instruments
OVERVIEW
The Group’s derivative financial instruments consist of interest rate swap contracts to hedge its exposure to movements
in variable interest rates. The interest rate swap agreements allow the Group to raise long term borrowings at a floating
rate and effectively swap them into a fixed rate.
ACCOUNTING POLICY
Interest rate swaps
The ENN, EHAF, EMPR Groups and Bluewater have entered into interest rate swap agreements with a notional
principal amount totaling $114.6 million that entitles it to receive interest, at quarterly intervals, at a floating rate on the
notional principal and oblige it to pay interest at a fixed rate.
The interest rate swap agreements allow the Group to raise long term borrowings at a floating rate and effectively swap
them into a fixed rate.
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Elanor Investors Group Annual Report 2018 | 73
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
14. Derivative financial instruments (continued)
Derivatives
Derivatives are initially recognised at fair value at the date the derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.
Hedge accounting
The Group designates its hedging instruments, which include derivatives, as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument
is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain
or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and
losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or
loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However,
when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability,
the gains and losses previously recognised in other comprehensive income and accumulated in equity are transferred
from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument
expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss
recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected
to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.
Valuation, techniques and inputs
Financial Instruments
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques. These valuation techniques maximise the use of observable market data where
it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This
is not applicable for the Group or the EIF Group.
Specific valuation techniques used to value financial instruments include:
•
•
The use of quoted market prices or dealer quotes for similar instruments; and
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based
on observable yield curves;
All of the resulting fair value estimates of financial instruments are included in level 2. There are no level 3 financial
instruments in either the Group or the EIF Group.
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66
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
15. Contributed equity
OVERVIEW
The shares of Elanor Investors Limited (Company) and the units of Elanor Investment Fund (EIF) are combined and
issued as stapled securities. The shares of the Company and units of EIF cannot be traded separately and can only be
traded as stapled securities.
Below is a summary of contributed equity of the Company and EIF separately and for Elanor’s combined stapled
securities. The basis of allocation of the issue price of stapled securities to Company shares and EIF units post stapling
is determined by agreement between the Company and EIF as set out in the Stapling Deed.
Contributed equity for the period ended 30 June 2018
A reconciliation of treasury securities on issue at the beginning and end of the prior period is set out below:
Contributed equity for the period ended 30 June 2017
A reconciliation of treasury securities on issue at the beginning and end of the prior period is set out below:
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Elanor Investors Group Annual Report 2018 | 75
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
15. Contributed equity (continued)
ACCOUNTING POLICY
Equity-settled security-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled security-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee
benefits reserve.
16. Reserves
OVERVIEW
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in
the business and not distributed until such time the underlying balance sheet item is realised. This note provides
information about movements in the other reserves line item of the balance sheet and a description of the nature and
purpose of each reserve.
The asset revaluation reserve is used to record increments and decrements on the revaluation of property, plant and
equipment.
The cash flow hedge reserve is used to recognise increments and decrements in the fair value of cash flow hedges.
The stapled security-based payment reserve is used to recognise the fair value of loan, restricted securities and options
issued to employees but not yet exercised under the Group's DSTI and LTIP.
76 | Elanor Investors Group Annual Report 2018
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
17.
Financial risk management
OVERVIEW
The Group's principal financial instruments comprise cash, receivables, financial assets carried at fair value through profit
and loss, interest bearing loans, derivatives, payables and distributions payable.
The Group's activities are exposed to a variety of financial risks: market risk (including interest rate risk and equity price
risk), credit risk and liquidity risk.
This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies
and processes for measuring and managing risk and the Group's management of capital. Further quantitative disclosures
are included through these consolidated financial statements.
The Group's Board of Directors (Board) has overall responsibility for the establishment and oversight of the Group's risk
management framework. The Board has established an Audit & Risk Committee (ARC), which is responsible for
monitoring the identification and management of key risks to the business. The ARC meets regularly and reports to the
Board on its activities.
The Board has established Treasury Guidelines outlining principles for overall risk management and policies covering
specific areas, such as mitigating foreign exchange, interest rate and liquidity risks.
The Group's Treasury Guidelines provide a framework for managing the financial risks of the Group with a key philosophy
of risk mitigation. Derivatives are exclusively used for hedging purposes, not as trading or other speculative instruments.
The Group uses derivative financial instruments such as interest rate swaps where possible to hedge certain risk
exposures.
The Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate risk, ageing analysis for credit risk and cash flow forecasting for liquidity
risk.
There have been no other significant changes in the types of financial risks or the Group's risk management program
(including methods used to measure the risks).
a)
Market risk
Market risk refers to the potential for changes in the value of the Group's financial instruments or revenue streams from
changes in market prices. There are various types of market risks to which the Group is exposed including those
associated with interest rates, currency rates and equity market price.
(i)
Interest rate risk
Interest rate risk refers to the potential fluctuations in the fair value or future cash flows of a financial instrument because
of changes in market interest rates
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
17. Financial risk management (continued)
a)
(i)
Market risk (continued)
Interest rate risk (continued)
As at reporting date, the Consolidated Group had the following interest bearing assets and liabilities:
(ii)
Interest Rate Sensitivity
At reporting date if Australian interest rates had been 1% higher / lower and all other variables were held constant, the
impact on the Group in relation to cash and cash equivalents, derivatives, interest bearing loans and the Group's profit
and equity would be:
78 | Elanor Investors Group Annual Report 2018
70
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
17. Financial risk management (continued)
b)
Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.
The Group manages credit risk on receivables by performing credit reviews of prospective debtors, obtaining collateral
where appropriate and performing detailed reviews on any debtor arrears. Credit risk on derivatives is managed through
limiting transactions to investment grade counterparties.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk
at the reporting date was as detailed below:
Where entities have a right of set-off and intend to settle on a net basis under netting arrangements, this set-off has been
recognised in the consolidated financial statements on a net basis. Details of the Group's contingent liabilities are
disclosed in Note 23.
Trade and other receivables consist of GST, trade debtors and other receivables. At balance date 5% of the Group's
receivables were due from Australian tax authorities in respect of GST.
At balance date there were no other significant concentrations of credit risk.
No allowance has been recognised for the GST and trade debtors from the taxation authorities and related parties
respectively. Based on historical experience, there is no evidence of default from these counterparties which would
indicate that an allowance was necessary.
Impairment losses
The ageing of trade and other receivables at reporting date is detailed below:
71
Elanor Investors Group Annual Report 2018 | 79
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
17. Financial risk management (continued)
c) Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash including working capital and other reserves, as well as
through securing appropriate committed credit facilities.
The following are the undiscounted contractual cash flows of derivatives and non-derivative financial liabilities shown at
their nominal amount.
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
17. Financial risk management (continued)
d)
Capital risk management
The Group maintains its capital structure with the objective to safeguard its ability to continue as a going concern, to
increase the returns for security holders and to maintain an optimal capital structure. The capital structure of the Group
consists of equity as listed in Note 15.
The Group assesses its capital management approach as a key part of the Group's overall strategy and it is continuously
reviewed by management and the Directors.
To achieve the optimal capital structure, the Board may use the following strategies: amend the distribution policy of the
Group; issue new securities through a private or public placement; activate the Distribution Reinvestment Plan (DRP);
issue securities under a Security Purchase Plan (SPP); conduct an on-market buyback of securities; acquire debt; or
dispose of investment properties.
Australian Financial Services License
The Responsible Entity is licensed as an Australian Financial Services Licensee.
Under licence condition 9, the Responsible Entity must:
(a)
(b)
(c)
be able to pay its debts as and when they become due and payable; and
show in its most recent statement of financial position lodged with ASIC that its total (adjusted) assets
exceed total (adjusted) liabilities; and
have no reason to suspect that its total (adjusted) assets would not exceed total (adjusted) liabilities
on a current statement of financial position; and
(d)
meet the cash needs requirements by complying with Option 1.
Under licence condition 10, the Responsible Entity must maintain net tangible assets (NTA) of not less than the greater
of:
(a)
(b)
(c)
$150,000; or
0.5% of the value of Scheme Assets; or
10% of Average Responsible Entity revenue.
The Responsible Entity must also maintain Cash or Cash Equivalents of the greater of $150,000 or 50% of the required
NTA as well as Liquid Assets of greater than the required NTA.
The Responsible Entity had at all times a cash flow projection of at least 12 months, with assumptions, showing its ability
to meet debts as and when they fall due.
The Responsible Entity has not reported to ASIC any breaches of its financial requirements under its Australian Financial
Services License.
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Elanor Investors Group Annual Report 2018 | 81
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Group Structure
This section provides information about the Group’s structure including parent entity information, information about
controlled entities (subsidiaries) and business combination information relating to the acquisition of controlled entities.
18.
Parent entity
OVERVIEW
The financial information below on Elanor Investor Group’s parent entity Elanor Investors Limited (the “Company”) and
the Trust’s parent entity Elanor Investment Fund (“EIF”) as stand-alone entities has been provided in accordance with the
requirements of the Corporations Act 2001.
(a) Summarised financial information
1. Elanor Investors Limited is the parent entity of the Consolidated Group.
2. Elanor Investment Fund is the parent entity of the EIF Group.
(b) Commitments
At balance date Elanor Investors Limited and Elanor Investment Fund had no commitments (2017: none) in relation to
capital expenditure contracted for but not recognised as liabilities.
(c) Guarantees provided
At balance date Elanor Investors Limited and Elanor Investment Fund had no outstanding guarantees (2017: none).
(d) Contingent liabilities
At balance date Elanor Investors Limited and Elanor Investment Fund had no contingent liabilities (2017: none).
82 | Elanor Investors Group Annual Report 2018
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
18. Parent entity (continued)
ACCOUNTING POLICY
The financial information of the parent entities of the Group and the EIF Group have been prepared on the same basis as
the consolidated financial statements.
19. Subsidiaries and Controlled entities
OVERVIEW
This note provides information about the Group’s subsidiaries and controlled entities.
Details of the Group's material subsidiaries at the end of the reporting period are as follows:
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
19. Subsidiaries and Controlled entities (continued)
1. Elanor Investors Limited (“EIL”) is the head entity within the EIL tax-consolidated group. The companies in which EIL has 100%
ownership are members of the EIL tax-consolidated group.
2. EHAF Management Pty Limited is the head entity of the EHAF tax-consolidated group.
3. EMPR Management Pty Limited is the head entity of the EMPR tax-consolidated group.
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Other Items
This section includes information that is not directly related to the specific line items in the financial statements,
including information about contingent liabilities, events after the end of the reporting period, remuneration of auditors,
certain EIF Group disclosures, and changes in accounting policies.
20. Other financial assets and liabilities
OVERVIEW
This note provides further information about financial assets and liabilities that are incidental to the Group’s and the
Trust’s trading activities, being receivables and trade and other payables.
(a) Trade and Other Receivables
Note 1: $34.2 million relates to a receivable from the sale of the Merrylands property at 30 June 2018
ACCOUNTING POLICY
Trade and other receivables are initially recognised at fair value and subsequently accounted for at amortised cost.
Collectability of trade receivables is reviewed on a regular basis and bad debts are written off when identified. A specific
provision is made for any doubtful debts where objective evidence exists that the receivables will not be recoverable.
The amount of the impairment loss is the difference between the asset’s carrying amount and the present value of
estimated future cash flows.
All receivables with maturities greater than 12 months after reporting date are classified as non-current assets.
(b) Payables
ACCOUNTING POLICY
Payables represent liabilities and accrued expenses owing at year end which are unpaid. The amounts are unsecured
and usually paid within 30 days of recognition. Payables are recognised at amortised cost and normal commercial terms
and conditions apply to payables.
A distribution and or dividend payable to security holders is recognised for the amount of any distribution and or dividend
approved on or before reporting date but not paid at reporting date.
All payables with maturities greater than 12 months after the reporting date are classified as non-current liabilities.
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Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
20. Other financial assets and liabilities (continued)
(c) Provisions
ACCOUNTING POLICY
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a
provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present
value of those cash flows (where the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated
future cash outflows, using a high quality Corporate Bond rate as the discount rate, to be made in respect of services
provided by employees up to reporting date.
86 | Elanor Investors Group Annual Report 2018
78
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
20. Other financial assets and liabilities (continued)
(d) Other liabilities
21.
Intangible assets
OVERVIEW
Management Rights
Management Rights represent the acquisition of funds management rights and associated licences from Moss Capital
Pty Limited at IPO for $1.5 million. At IPO, the estimated useful life of the acquired funds management rights was 10
years.
Brands
Brands represent the acquisition of the John Cootes Furniture brand upon the acquisition of the John Cootes Furniture
business by JCF Management Pty Limited on 11 July 2014.
Goodwill
Goodwill represents goodwill acquired by the Group upon the acquisition of the John Cootes Furniture business by JCF
Management Pty Limited on 11 July 2014.
Note 1: $6.5 million impairment relates to discontinued operations (refer to Note 5).
79
Elanor Investors Group Annual Report 2018 | 87
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
21.
Intangible assets (continued)
ACCOUNTING POLICY
Funds management rights
Funds management rights have a finite useful life and are carried at cost less accumulated amortisation and impairment
losses. Amortisation is calculated using the straight-line method to allocate the cost of licenses over their estimated useful
lives of 10 years.
Brands
Brands acquired are carried at cost as established at the date of acquisition less accumulated impairment losses, if any.
Impairment test for brands
Brands are allocated to the Group's cash-generating units (CGU's) identified.
The Directors have assessed the carrying value of the brands relating to the Group’s investment in the John Cootes
Furniture business, and following the Directors assessment of the financial results and prospects of the business, have
determined that the brand value should be impaired to nil.
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the
business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to
each of the Group's cash generating units (or groups of cash-generating units) that is expected to benefit from the
synergies of the combination. A cash generating unit to which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount
of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of
each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss
recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Impairment test for goodwill
Goodwill is allocated to the CGU's identified.
The Directors have assessed the carrying value of the goodwill relating to the Group’s investment in the John Cootes
Furniture business, and following the Directors assessment of the financial results and prospects of the business, have
determined that the carrying value of the goodwill should be impaired to nil.
88 | Elanor Investors Group Annual Report 2018
80
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
22. Net tangible assets
OVERVIEW
This note sets out the net tangible assets of the Group.
23. Commitments
OVERVIEW
This note sets out the material commitments of the Group.
(a) Contingent liabilities and commitments
Unless otherwise disclosed in the financial statements, there are no material contingent liabilities and commitments.
(b) Lease commitments : the Group as lessee
The Group has non-cancellable leases in respect of premises. The leases are for a duration of between 1 to 5 years
and are classified as operating leases. The minimum lease payments are as follows:
(c) Lease commitments: the Group a s lessor
The Group has non-cancellable leases in respect of premises. The leases are for a duration of between 1 to 10 years
and are classified as operating leases. The minimum lease commitments receivable are as follows:
In the opinion of the Directors, there were no other commitments at the end of the reporting period.
81
Elanor Investors Group Annual Report 2018 | 89
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
24. Share-based payments
OVERVIEW
The Group has short term and long term ownership-based compensation schemes for executives and senior employees.
The Group has implemented an STI scheme (the STI Scheme), based on an annual profit share. The STI Scheme is based
on a profit share pool, to be calculated each year based on the Group's financial performance for the relevant year.
The purpose of the STI Scheme is to provide an annual bonus arrangement that incentivises and rewards management for
achieving annual pre-tax ROE for security holders in excess of 10% per annum. The profit share pool is based on 20% of
ROE above 10%, 22.5% of the ROE above 15%, 25% of the ROE above 17.5% and 30% of the ROE above 20%. The
Scheme provides that 50% of any awards to individuals from the profit share pool may be delivered in deferred securities,
which vest two years after award, provided that the employee remains with the Group and maintains minimum performance
standards.
The Elanor Investors Group Board monitors the appropriateness of the profit share scheme and any distribution of the profit
share pool will be at the Board's discretion, taking into consideration the forecast and actual financial performance and
position of the Group.
The Group has implemented an LTI scheme (the LTI Scheme), based on an executive loan security plan and an executive
options plan.
Under the executive loan security plan awards (comprising the loan of funds to eligible Elanor employees to acquire
securities which are subject to vesting conditions) have been issued to certain employees.
The limited recourse loan provided by the Group under the loan security plan carries interest of an amount equal to any cash
dividend or distribution but not including any dividend or distribution of capital, or an abnormal distribution.
In addition to the loan security plan, the Group has implemented an executive option plan comprising rights to acquire
securities at a specified exercise price, subject to the achievement of vesting conditions, which may be offered to certain
eligible employees (including the Chief Executive Officer, direct reports to the Chief Executive Officer and other selected key
executives) as determined by the Board. Executive Options currently on issue are to the Chief Executive Officer only, over
2.0 million securities.
The purpose of the LTI Scheme is to assist in attracting, motivating and retaining key management and employees. The LTI
Scheme operates by providing key management and employees with the opportunity to participate in the future performance
of Group securities. The vesting conditions LTI plans and related awards include both a service based hurdle and an absolute
total security holder return (TSR) performance hurdle. The service based hurdle is 2, 3 and 4 years in the case of the loan
security plan. The TSR is 10% per annum in the case of the loan security plan and 15% per annum in the case of the options
plan. The 2017 option plan has an exercise price of $3.05 per security (40% premium to the $2.18 offer price)
TSR was selected as the LTI performance measure to ensure an alignment between the security holder return and reward
for executives.
The following share-based payment arrangements were in existence during the current reporting period:
Employee Loan Securities
1. Service and non-market conditions include financial and non-financial targets along with a deferred vesting period.
90 | Elanor Investors Group Annual Report 2018
82
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
24. Share-based payments (continued)
Options
Subsequent to balance date, on 11 July 2018, 1.6 million Options Tranche 1 lapsed, unexercised.
1. Service and non-market conditions include financial and non-financial targets along with a deferred vesting period
The Group recognises the fair value at the grant date of equity settled securities above as an employee benefit expense
proportionally over the vesting period with a corresponding increase in equity. Fair value of options is measured at grant
date using a Monte-Carlo Simulation and Binomial option pricing model, performed by an independent valuer, and models
the future price of the Group's stapled securities.
Securities issued under STI plan
1. Service conditions include a deferred vesting period.
The total expense recognised during the year in relation to the Group's equity settled share-based payments was
$867,038.
ACCOUNTING POLICY
Security-Based Payments
Equity-settled security-based payments to employees and others providing similar services are measured at the fair value
of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled security-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of
equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or
loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled
employee benefits reserve.
83
Elanor Investors Group Annual Report 2018 | 91
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
25. Related parties
OVERVIEW
Related parties are persons or entities that are related to the Group as defined by AASB 124 Related Party Disclosures.
This note provides information about transactions with related parties during the period.
Elanor Investors Group
Responsible Entity fees
In accordance with the Constitution of Elanor Investment Fund (EIF), EFML is entitled to receive a management fee
equal to its reasonable costs in providing its services as Responsible Entity for which it is not otherwise reimbursed. For
the year ending 30 June 2018, this amount is $130,000.
Elanor Funds Management Limited (EFML) is the Responsible Entity of the Elanor Investment Fund (EIF) (a wholly
owned subsidiary of Elanor Investors Limited).
EFML makes payments for EIF from time to time. These payments are incurred by EFML in properly performing or
exercising its powers or duties in relation to EIF. EFML has a right of indemnity from EIF for any liability incurred by EFML
in properly performing or exercising any of its powers or duties in relation to EIF. The amount reimbursed for the year
ending 30 June 2018 was nil. (2017: nil)
EFML acted as Trustee and Manager and/or Custodian of a number of registered and unregistered managed investment
schemes, including schemes where the Group also held an investment. EFML is entitled to fee income, as set out in the
Constitution of each scheme, including management fees, acquisition fees, equity raise fees and performance fees.
EFML is also entitled to be reimbursed from each Scheme for costs incurred in properly performing or exercising any of
its powers or duties in relation to each Scheme.
A summary of the income earned during the year from these managed investment schemes is provided below:
Merrylands Property
On the sale of the Merrylands Property, Moss Capital of which Glenn Willis and William (Bill) Moss AO are directors and
shareholders, are entitled to a performance fee of 20% of the amount by which the IRR on the Merrylands Property
exceeds 15%, plus GST. Following the sale of the Merrylands property on 6 June 2018, a provision for this performance
fee of approximately $1.9 million has been recognised in the financial results for the period.
92 | Elanor Investors Group Annual Report 2018
84
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
25. Related parties (continued)
Key Management Personnel (KMP)
Executive
Mr. Glenn Willis
Mr. Paul Siviour
Ms. Marianne Ossovani
Mr. Symon Simmons
Position
Managing Director and Chief Executive Officer
Chief Operating Officer
Chief Investment Officer and Head of Hotels, Tourism and Leisure
Chief Financial Officer and Company Secretary
Non-Executive
Mr. Paul Bedbrook
Mr. Nigel Ampherlaw
Mr. William (Bill) Moss AO
Position
Independent Chairman and Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
The aggregate compensation made to the Key Management Personnel of the Group is set out below:
26. Significant Events
Establishment of Elanor Metro and Prime Regional Hotel Fund (EMPR) and Bluewater Square
Syndicate:
On 6 November 2017 the Group established a new multi asset managed fund, the Elanor Metro and Prime Regional
Hotel Fund (EMPR). The Fund comprises portfolio of 3 Australian Hotels (Ibis Styles Canberra Eaglehawk, Byron Bay
Hotel and Apartments, and Ibis Styles Canberra). Consistent with its strategy of aligning interests with investors, at 30
June 2018 the Group holds a co-investment of approximately 44% of the Fund’s equity.
In addition, the Group established Bluewater Square Syndicate in October 2017 which acquired the Bluewater Square
retail shopping centre. Consistent with its strategy of aligning interests with investors, at 30 June 2018 the Group holds
a co-investment of approximately 42% of the Fund’s equity.
Proceedings on behalf of Bluewat er Square Syndicate
The Manager has engaged legal counsel and served a formal warranty claim notice on the vendor of the Bluewater
Square shopping centre under the purchase agreement for that property. Preparations for the next step to pursue legal
claims are well advanced, and are expected to be taken shortly.
85
Elanor Investors Group Annual Report 2018 | 93
ELANOR INVESTORS GROUP
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
27. Events occurring after reporting date
On 3 August 2018, the Responsible Entity completed the sale of the Bell City asset for $157 million, and finalised
settlement of the Business Interruption element of the insurance claim relating to the John Cootes Furniture warehouse
fire in July 2015.
Subsequent to the period end, a distribution of 8.61 cents per stapled security has been declared by the Board of
Directors. The total distribution amount of $8.0 million will be paid on or before 4 September 2018 in respect of the six
months ended 30 June 2018.
Other than the event disclosed above, the directors are not aware of any other matter or circumstance not otherwise
dealt with in the financial reports or the Directors' Report that has significantly affected or may significantly affect the
operations of the Group, the results of those operations or the state of affairs of the Group in the financial period
subsequent to the year ended 30 June 2018.
28. Summary of other significant accounting policies
The preparation of consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and
expenses. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
The financial statements were authorised for issue by the Directors on 17 August 2018.
The significant policies which have been adopted in the preparation of these consolidated financial statements and areas
where a higher degree of judgement or complexity arise, or areas where assumptions and estimates are significant to
the Group's financial statements are detailed below:
• Discontinued Operations (Note: 5)
• Depreciation (Note: 9)
• Valuation (Note: 9 & 10)
• Provisions (Note: 20)
(a)
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, and short term deposits with an original maturity of 90
days or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
(b)
Impairment of assets
All assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. Where objective evidence or an indicator of impairment exists, an estimate of the asset's
recoverable amount is made. An impairment loss is recognised in the statement of profit or loss and other comprehensive
income for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is
the higher of an asset's fair value less cost of disposal and value in use.
(c)
Goods and Services Tax (GST)
Revenues, expenses and assets (with the exception of receivables) are recognised net of the amount of GST, to the
extent that the GST is recoverable from the taxation authority. Where GST is not recoverable, it is recognised as part of
the cost of acquisition, or as an expense.
Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the
taxation authority is included in the statement of financial position as receivable or payable.
Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within
operating cash flows
(d)
New accounting standards and interpretations
In the current year, the Group has applied all new and revised accounting standards and amendments that are
mandatorily effective during the period.
94 | Elanor Investors Group Annual Report 2018
86
ELANOR INVESTORS GROUP
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
28. Summary of other significant accounting policies(continued)
(d)
New accounting standards and interpretations (continued)
New standards and interpretations not yet adopted
Certain new Accounting Standards and Interpretations have been published that are not mandatory for the financial
year ended 30 June 2018 but are available for early adoption. They have not been applied in preparing this financial
report. The Group’s assessment of the impact of these new standards and interpretations is set out below:
Reference
Description
Impact on the Group’s financial statements
AASB 9 Financial
Instruments (Applicable 1
January 2018)
AASB 15 Revenue from
Contracts with Customers
(Applicable 1 January 2018)
AASB 16 Leases
(Applicable 1 January 2019
– early adoption allowed if
AASB 15 is adopted at the
same time)
AASB 9 addresses the
classification, measurement and
de-recognition of financial
assets and liabilities and
introduces new rules for hedge
accounting and impairment of
financial assets.
AASB 15 introduces a five-step
model for recognising revenue
earned from a contract with a
customer and will replace the
existing AASB 118 Revenue
and AASB 111 Construction
Contracts. The new standard is
based on the principle that
revenue is recognised when
control of a good or service
transfers to a customer – so the
notion of control replaces the
existing notion of risks and
rewards. It applies to all
contracts with customers except
leases, financial instruments
and insurance contracts.
AASB 16 introduces new
requirements in relation to lease
classification and recognition,
measurement and presentation
and disclosure of leases for
lessees and lessors. For
lessees a (right-of-use) asset
and a lease liability will be
recognised on the balance
sheet in respect of all leases
subject to limited exceptions.
The accounting for lessors will
not significantly change.
Adoption of the new standard is not expected
to have a material impact on the Group’s
financial statements.
The Group will adopt the standard in the
financial year beginning 1 July 2018.
The Group’s main sources of income are
rental income, revenue from hotels, wildlife
parks, sale of furniture and funds management
fees. These sources of income are within the
scope of the new revenue standard.
An assessment has been performed on the
Group’s existing revenue streams which
includes rental income, revenue from hotels,
wildlife park, sale of furniture and funds
management fees.
Based upon the assessment, it is expected
that AASB 15 will only have an impact on the
sale of the Merrylands property. The sale price
of $36 million generating a net profit after tax
of approximately $10.5 million will be
recognised in the financial statement for the
year ending 30 June 2019.
The Group will adopt the standard in the
financial year beginning 1 July 2018.
The Group is party to long-term non-
cancellable property leases which are
expected to have a material impact when
recognised in the statement of financial
position.
The expected impact on the Group as at the
date of adoption of 1 July 2019 is to record
lease liabilities and right of use assets of $2.8-
$3.4 million, excluding leases of discontinued
operations which are not expected to be in
place at the date of adoption of the standard.
The group will adopt the standard in the
financial year beginning 1 July 2019.
Several other amendments to standards and interpretations will apply on or after 1 July 2018, and have not yet been
applied, however they are not expected to impact the Group’s consolidated financial statements.
87
Elanor Investors Group Annual Report 2018 | 95
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
29. Auditor's remuneration
OVERVIEW
The independent auditors of Elanor Investors Group (Deloitte Touche Tohmatsu) have provided a number of audit and
other assurance related services as well as other non-assurance related services to Elanor Investors Group and the
Trust during the year. Pitcher Partners provided audit services in respect of the Trust’s Compliance Plan.
Below is a summary of fees paid for various services to Deloitte Touche Tohmatsu and Pitcher Partners during the year.
96 | Elanor Investors Group Annual Report 2018
88
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure
OVERVIEW
This note provides information relating to the non-parent EIF Group only. The accounting policies are consistent with the
Group, except as otherwise disclosed.
(a)
Segment information
Chief operating decisions are based on the segment information as reported by the consolidated Group and therefore
EIF is deemed to have only one segment.
(b)
Distributions
The following distributions were declared by the EIF Group either during the year or post balance date:
1. The interim distribution of 7.16 cents per stapled security was declared on 21 February 2018 and paid on 2 March 2018.
2. The final distribution of 5.15 cents per stapled security was declared on 17 August 2018. Please refer to the Directors' Report
for the calculation of Core Earnings and the Distribution.
(c)
Earnings / (losses) per stapled security
The earnings / (losses) per stapled security measure shown below is based upon the profit / (loss) attributable to security
holders:
1. The weighted average number of stapled securities and options granted used as the denominator in calculating basic and diluted
earnings / (losses) per stapled securities shown above is based on the number of stapled securities on issue and options granted.
(d)
Taxation of the Trust
Under current Australian income tax legislation, the Trust and its sub-trusts are not liable for income tax on their taxable
income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income
of the Trust. Accordingly, the Group only pays tax on Company taxable earnings and there is no separate tax disclosure
for the Trust.
89
Elanor Investors Group Annual Report 2018 | 97
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(e)
Rental income
Rental income from investment properties, received by the EIF Group, is accounted for on a straight-line basis over the
term of the lease.
(f)
Investment Property
Movement in investment properties
The carrying value of investment properties at the beginning and end of the current period is set out below:
Carrying value investment properties
A reconciliation of the carrying value of investment properties at the beginning and end of the current period is set out
below:
Refer to Note 10 Property, plant and equipment for further details.
ACCOUNTING POLICY
Fair value of Investment Properties
Investment property relates to the land and buildings owned by the EIF Group (being the Elanor Investment Fund and its
controlled entities) only, in which rental income is earned from entities within the EIL Group.
98 | Elanor Investors Group Annual Report 2018
90
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(f)
Investment Property (continued)
Valuation, technique and inputs
Investment properties are categorised as level 3 in the fair value hierarchy. There were no transfers between hierarchies
during the period.
Fair value measurement
The significant unobservable inputs associated with the valuation of the Group's investment properties are as follows
(g)
Equity accounted investments
The Trust’s equity accounted investments are as follows:
91
Elanor Investors Group Annual Report 2018 | 99
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(g)
Equity accounted investments (continued)
The following information represents the aggregated financial position and financial performance of the Elanor Retail
Property Fund. This summarised financial information represents amounts shown in the associate's financial statements
prepared in accordance with AASBs, adjusted by the Trust for equity accounting purposes.
30 June 2018
100 | Elanor Investors Group Annual Report 2018
92
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(g)
Equity accounted investments (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Elanor Retail
Property Fund recognised in the consolidated financial statements:
30 June 2017
93
Elanor Investors Group Annual Report 2018 | 101
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(g)
Equity accounted investments (continued)
Reconciliation of the above summarised financial information to the carrying amount of the interest in the Bell City Fund
and the Elanor Retail Property Fund recognised in the consolidated financial statements:
Aggregate information of associates that are not individually material
(h)
Interest bearing liabilities
The term debt is secured by registered mortgages over all freehold property and registered security interests over all
present and after acquired property of key Group companies. The terms of the debt also impose certain covenants on
the EIF Group including Loan to Value ratio and Interest Cover covenants. The EIF Group is currently meeting all its
covenants.
As part of the internal funding of the Fund, EIF entered into a long term interest-bearing loan with EIL at arm’s length
terms, maturing on 2024. As at 30 June 2018, the outstanding payable to the Company was $30.9 million.
102 | Elanor Investors Group Annual Report 2018
94
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(h)
Interest bearing liabilities (continued)
Credit facilities
As at 30 June 2018, the EIF Group had unrestricted access to the following credit facilities:
Included in the above numbers, EIF has access to a $17.5 million facility, upon which both the Company and the Trust
can draw. The drawn amount at 30 June 2018 is $1.0 million which will mature on 11 July 2020. At 30 June 2018 the
amount of drawn facilities is hedged to 0%. As a result of the sale of Merrylands on 3 August 2018, the facility available
has been reduced to $9.7 million.
Included in the above numbers, the EHAF Group has access to a $46.7 million facility, upon which both the Company
and Trust can draw. The drawn amount at 30 June 2018 is $46.7 million which will mature on 21 March 2019. At 30 June
2018, the amount of drawn facilities is hedged to 100%.
Included in the above numbers, the EMPR Group has access to a $36.6 million facility, upon which both the Company
and Trust can draw. The drawn amount at 30 June 2018 is $36.6 million which will mature on 5 November 2021. At 30
June 2018, the amount of drawn facilities is hedged to 100%.
Included in the above numbers, Bluewater has access to a $31.8 million facility. The drawn amount at 30 June 2018 is
$31.3 million which will mature on 30 October 2021. At 30 June 2018, the amount of drawn facilities is hedged to 100%.
95
Elanor Investors Group Annual Report 2018 | 103
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(i)
Derivative Financial instruments
The EIF Group enters into derivative financial instruments to manage its exposure to interest rate risk.
(j)
Reserves
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in
the business and not distributed until such time the underlying balance sheet item is realised. This note provides
information about movements in the other reserves line item of the balance sheet and a description of the nature and
purpose of each reserve.
The asset revaluation reserve is used to record increments and decrements on the revaluation of property, plant and
equipment.
The cash flow hedge reserve is used to recognise increments and decrements in the fair value of cash flow hedges.
The stapled security-based payment reserve is used to recognise the fair value of loan, restricted securities and options
issued to employees but not yet exercised under the Group's DSTI and LTIP.
104 | Elanor Investors Group Annual Report 2018
96
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(k)
(1)
(i)
Financial Risk Management
Market Risk
Interest rate risk
As at reporting date, the EIF Group had the following interest bearing assets and liabilities:
(ii)
Interest Rate Sensitivity
97
Elanor Investors Group Annual Report 2018 | 105
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(k)
(2)
Financial Risk Management (continued)
Credit Risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit
risk at the reporting date was as detailed below:
Impairment losses
The ageing of trade and other receivables at reporting date is detailed below:
(3)
Liquidity risk
106 | Elanor Investors Group Annual Report 2018
98
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(k)
Financial Risk Management (continued)
(3)
Liquidity risk (continued)
(l)
Other financial assets and liabilities
This note provides further information about material financial assets and liabilities that are incidental to the EIF and the
Trust’s trading activities, being receivables and trade and other payables.
Trade and Other Receivables
Payables
99
Elanor Investors Group Annual Report 2018 | 107
Notes to the Consolidated Financial Statements
ELANOR INVESTORS GROUP
for the year ended 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
30. Non-Parent Disclosure (continued)
(m)
Cash flow information
This note provides further information on the consolidated cash flow statements of the Trust. It reconciles profit for the
year to cash flows from operating activities and information about non-cash transactions
Reconciliation of profit after income tax to net cash flows from operating activities
108 | Elanor Investors Group Annual Report 2018
100
Directors’ Declaration
to Stapled Security Holders
ELANOR INVESTORS GROUP
DIRECTORS’ DECLARATION TO STAPLED SECURITY HOLDERS
Directors’ Declaration to Stapled Security Holders
In the opinion of the Directors of Elanor Investors Limited and Elanor Funds Management Limited as responsible entity
for the Elanor Investment Fund:
a)
the financial statements and notes set out on pages 38-108 are in accordance with the corporations Act 2001
(Cth) including:
i.
ii.
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
giving a true and fair view of the Group's and EIF's financial position as at 30 June 2018 and of their
performance, for the financial year ended on that date; and
b)
there are reasonable grounds to believe that the Group and EIF will be able to pay their debts as and when they
become due and payable.
c)
the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
d) The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required
by Section 295A of the Corporations Act 2001 (Cth).
This declaration is made in accordance with a resolution of the Boards of Directors in accordance with Section 295(5) of
the Corporations Act 2001 (Cth).
Glenn Willis
CEO and Managing Director
Sydney
17 August 2018
101
Elanor Investors Group Annual Report 2018 | 109
Independent Auditor’s Report
110 | Elanor Investors Group Annual Report 2018
Independent Auditor’s Report
continued
Elanor Investors Group Annual Report 2018 | 111
Independent Auditor’s Report
continued
112 | Elanor Investors Group Annual Report 2018
Independent Auditor’s Report
continued
Elanor Investors Group Annual Report 2018 | 113
Independent Auditor’s Report
continued
114 | Elanor Investors Group Annual Report 2018
Corporate Governance
The Board of Directors of Elanor Investors Group (Group) have approved the Group’s Corporate Governance Statement as at 30
June 2018. In accordance with ASX Listing Rule 4.10.3, the Group’s Corporate Governance Statement can be found on its website
at: www.elanorinvestors.com
The Board of Directors is responsible for the overall corporate governance of the Group, including establishing and monitoring key
strategy and performance goals. The Board monitors the operational and financial position and performance of the Group, and
oversees its business strategy, including approving the Group’s strategic goals.
The Board seeks to ensure that the Group is properly managed to protect and enhance securityholder interests, and that the
Group, its Directors, officers and personnel operate in an appropriate environment of corporate governance.
Accordingly, the Board has created a framework for managing the Group, including Board and Committee Charters and various
corporate governance policies designed to promote the responsible management and conduct of the Group.
Elanor Investors Group Annual Report 2018 | 115
Security Holder Analysis
(as at 24 August 2018)
Stapled Securities
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the Group. The Group’s
securities are traded on the Australian Securities Exchange (ASX: ENN), having listed on 11 July 2014. The units of the Trust and
shares of the Company cannot be traded separately and can only be traded as stapled securities. In accordance with the ASX’s
requirements for stapled securities, the ASX reserves the right (but without limiting its absolute discretion) to remove the Company
or the Trust or both from the ASX Official List if any of the units and the shares cease to be stapled together or any equity securities
issued by the Company or the Trust are not stapled to equivalent securities in the other entity.
Top 20 Security Holders
Number Security Holder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Pershing Australia Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Armada Investments Pty Ltd
National Nominees Limited
Aust Executor Trustees Ltd
Mr Paul Siviour
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Citano Pty Ltd
Farallon Capital Pty Ltd
Mr Symon Simmons
Mr Glenn Willis
Moat Investments Pty Ltd
National Nominees Limited
Top 4 Pty Ltd
Citylight Asset Pty Ltd
20
Cpu Share Plans Pty Ltd
Total
Balance of Register
Grand Total
No. of Securities
19,221,024
9,823,961
9,268,750
4,442,378
4,267,556
3,295,605
2,805,580
1,175,425
1,150,608
881,359
754,193
533,839
500,000
430,608
398,495
377,006
350,298
346,553
311,378
286,444
60,621,060
32,394,443
93,015,503
%
20.66
10.56
9.96
4.78
4.59
3.54
3.02
1.26
1.24
0.95
0.81
0.57
0.54
0.46
0.43
0.41
0.38
0.37
0.33
0.31
65.17
34.83
100.00
116 | Elanor Investors Group Annual Report 2018
Security Holder Analysis
(as at 24 August 2018) continued
Range Report
Range
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
No. of Securities
%
No. of Holders
67,758,321
21,148,767
2,847,762
1,192,568
68,085
72.85
22.74
3.06
1.28
0.07
62
783
346
345
151
%
3.68
46.41
20.51
20.45
8.95
93,015,503
100.00
1,687
100.00
The total number of security holders with an unmarketable parcel of securities was 57.
Substantial Security Holders
Security Holder
Perpetual Limited
Auscap Asset Management Limited
Voting rights
No. of Securities
13,551,684
8,080,000
%
14.57
8.69
On a poll, each security holder has, in relation to resolutions of the Trust, one vote for each dollar value of their total units held in
the Trust and in relation to resolutions of the Company, one vote for each share held in the Company.
On-Market Buy-back
There is no current on-market buy-back program in place.
Elanor Investors Group Annual Report 2018 | 117
Corporate Directory
Elanor Investors Group (ASX Code: ENN)
Elanor Investors Limited (ACN 169 308 187) and Elanor
Investment Fund (ARSN 169 450 926) (Elanor Funds Management
Limited (ACN 125 903 031) is the Responsible Entity)
Level 38,
259 George Street
Sydney NSW 2000
T: +61 2 9239 8400
Directors of the Responsible Entity and Elanor Investors
Limited
Paul Bedbrook (Chair)
Glenn Willis (Managing Director and CEO)
Nigel Ampherlaw
William (Bill) Moss AO
Company Secretary of the Responsible Entity and Elanor
Investors Limited
Symon Simmons
Security Registry
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Auditors
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Custodian
The Trust Company (Australia) Limited
Level 18,
123 Pitt Street,
Sydney NSW 2000
Website
www.elanorinvestors.com
118 | Elanor Investors Group Annual Report 2018
Cradle Mountain Lodge, Cradle Mountain, TAS Level 38, 259 George Street
Sydney NSW 2000
T: +61 2 9239 8400
www.elanorinvestors.com