20
16
annual
report
30 June 2016
For personal use only FY 2016
Performance
Snapshot
Becoming National Market Leader
Elevating Eureka’s Investment Profile
Investing $43m
to acquire 13 additional villages to become Australia’s
largest ASX listed provider of low cost seniors rental
accommodation with over 1,900 units owned and/or
managed at the start of FY 2017.
Posting Record Profitability
Leveraging an expanded operational base and increased
group wide efficiencies to post a
record NPAT of $10.467m.
Creating Shareholder Value
Accelerating successful “ buy and build “ strategy to
support a rise in share price from 40 cents to
79 cents during FY 2016.
Gaining a market
capitalization of
$180 million
and resulting elevation into ASX All Ordinaries Index and
attracting new institutional investors to the company’s
share register.
Funding For Continued Growth
Raising over
$26.45 million
in new capital to strengthen Eureka’s balance sheet and
fund new acquisitions.
Ensuring Past Growth Is Accelerated
Formalising Key Blue Care Alliance
Holding and surveilling a pipeline of around
Creating an enhanced environment for residents and a
competitive edge for Eureka with Blue Care’s respected in
home aged care and support services being progressively
rolled out to all the company’s Queensland villages over the
next 12 months.
200 possible
acquisition targets
and increasing total potential brown field development
land in company owned villages with the capacity to build
up to 250 new units.
EGH annual report 2016For personal use only
$11m
$10m
$9m
$8m
$7m
$6m
$5m
$4m
$3m
$2m
$1m
0
$1.00
$0.75c
$0.50c
$0.25c
0
NPAT
EBITDA
$13m
$12m
$11m
$10m
$9m
$8m
$7m
$6m
$5m
$4m
$3m
$2m
$1m
0
2014
2015
2016
2014
2015
2016
TOTAL ASSETS
SHARE PRICE
$115m
$100m
$75m
$60m
$45m
$30m
$15m
0
2014
2015
2016
2014
2015
2016
4
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only Key
Forward
Goals
More Than Doubling Units
Owned Or Managed
Further accelerating “ buy and build “ strategy to increase
units owned and managed by Eureka.
5,000 is Eureka's
intermediate goal.
Entering ASX 300 Index
Sustaining
strong growth
in market capitalization and share price to achieve entry into
ASX 300 Index.
2014
$12m
2015
$95m
MARKET
CAPITALISATION
2016
$180m
EGH annual report 2016For personal use only
UNITS OWNED
AND/OR MANAGED
O
1
,
1
W
9
N
9
E
D
0
0
2 , 0
E
O W N
& / O
N
M A
D
R
G
A
D
E
2014
2015
2016
O
W
N
E
D
7
1
4
O W NED
1,419
MANAGED
&/OR
9 9 O W N E D
D &/O
R
D
E
G
A
N
A
M
1,485
E
N
W
O
6
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only contents
Chairman’s Review
Directors’ Report
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Auditor’s Independence Declaration
Corporate Governance Statement
Corporate Directory
Security Holder Information
3
10
22
23
24
25
26
59
60
62
63
64
65
ABN: 15 097 241 159
EGH annual report 2016For personal use only Chairman’s
Review
It is with considerable pleasure that I report to
shareholders on what has proved another year
of significant growth and achievement by Eureka
Group Holdings Limited (Eureka).
Evaluated from all perspectives, FY 2016
proved a resounding success with the company
again posting record profitability, generating
additional shareholder wealth and delivering
social value through what is now Australia’s
largest ASX listed portfolio of affordable seniors
rental accommodation.
The continued acceleration of the company’s “buy and build”
strategy, under which around $43.48m was invested during
the year in acquiring additional retirement assets, backed by a
bolstered balance sheet, resulted in Eureka by year end being
entrenched as the nation’s largest ASX listed provider of low cost
retirement rental assets with just under 2,000 units owned and/
or managed.
Testament to the substantial progress the company made
throughout FY 2016 is the strong share price growth achieved
over the period and the new institutional investors committing to
Eureka’s “buy and build” strategy which resulted in its elevation to
the ASX All Ordinaries index and a market capitalisation of around
$180m by year end.
National Growth Fuels
Record Profitability
Eureka’s continued focus on acquiring quality asset backed,
income-generating assets in the fastest growing sector of
Australia’s seniors accommodation industry, along with centralised
efficiencies flowing from creating critical mass clusters of regional
super villages, provided the underlying platform for another year
of record financial results which were at, or ahead of previous
market guidance.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) increased 202% from the previous financial year to
$12.47m (FY 2015 $4.12m). This was achieved on the back of
group revenue which was up 98% from the prior year to $24.16m
(FY 2015 $12.21m). This higher revenue base resulted in Eureka
posting a record net profit after tax (NPAT) of $10.47m, 237%
higher than the prior year (FY 2015 $3.11m). The company’s
earnings per share improved 132% from 2.24 cents in FY 2015 to
5.19 cents.
The strong financial results recorded by Eureka reflect improved
across-the-board operational performance by the group’s enlarged
rental retirement portfolio. As at the close of the year under
review the company’s average occupancy was 86%, down from 89%
the previous year due to recent village acquisitions. Occupancy
is expected to settle around our long term average of 90% as new
villages are integrated.
A Strong Platform to
Sustain Growth
In FY 2016 Eureka further strengthened its balance sheet laying a
platform to accelerate its growth trajectory.
As a result of a significantly larger portfolio of income earning
“bricks and mortar” assets, total assets at financial year end
climbed to $111.32m compared to $51.83m at the close of FY 2015.
Similarly, net tangible assets backing per ordinary share increased
from 14.3 cents in the prior year to 26.3 cents as at 30 June 2016.
To sustain the company’s aggressive “buy and build” strategy,
Eureka successfully completed several capital raisings totalling
3 3
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only Chairman’s Review (continued)
$26.45m during the year and including the SPP completed in
July 2016, all of which like those of prior years were heavily
oversubscribed, again reinforcing the commitment of both existing
and new shareholders to the company’s growth blueprint and its
strategic focus on what is the fastest growing sector of Australia’s
burgeoning retirement industry.
In October 2015 the company successfully raised $10.40m (before
fees) from an institutional capital raising priced at 54 cents per
share. A subsequent institutional raising in June 2016 which was
priced at 75 cents per share added an additional $12.5m (before
fees) to Eureka’s balance sheet. Reflecting the heightened
investor following the company is now achieving a number of new
institutional and fund investors from Australia, New Zealand and
South East Asia joined the group’s register following the offers. A
Share Purchase Plan which closed in early July 2016, also offered
to shareholders at 75 cents raised an additional $3.95m.
Eureka has over a relatively short period of time earned a
reputation for consistently delivering on its promises. The heavy
oversubscription of the capital raisings completed in FY 2016
highlight the faith shareholders have in Eureka’s continued ability
to create strong and recurring gains to group EBITDA from the
acquisitions made from funds raised.
While Eureka continues to rigidly monitor group wide costs to
maintain and enhance margins, it is imperative that the size and
skill set of the company’s management team remain at levels
needed to not only sustain, but accelerate growth and profit gains.
Consistent with this need during the year an investment was made
in additional, key human resources to ensure the substantial
growth pipeline open to Eureka is fully capitalised on.
While the company will continue to augment its workforce
commensurate with prevailing growth rates, importantly, the
technological systems and infrastructure now in place will enable
a virtual doubling of the company’s current scale before any
additional investment will be needed in these resources.
Blue Care Alliance Enhances
Eureka’s Market Offer
A resident in home care partnership formalised with the
Uniting Church’s Blue Care in June 2016 represents a milestone
development for Eureka, and one which will deliver an enhanced
living environment for residents and a strategic competitive
advantage to the company.
Founded in 1953, Blue Care is one of Australia’s leading not-
for-profit residential aged care, community care and retirement
living providers. Under the historic partnership, Eureka residents
will benefit from Blue Care’s in home care and support services
through their experienced staff being located onsite at the
company’s villages for allocated periods of time, based on demand.
Significantly, Blue Care selected Eureka as their preferred low
cost housing partner following an evaluation of a number of
other senior’s accommodation providers, representing a clear
endorsement of the company’s social value adding business model
and its focus on providing quality, affordable rental properties in
well located and serviced localities.
Under the partnership, Eureka residents will receive ongoing
support and care tailored to their individual needs from Blue
4
EGH annual report 2016For personal use only and 1,938 units. Importantly, the company’s focus on creating
clusters of villages in select regional geographic localities which
deliver improved efficiencies and higher EBITDA was further
strengthened during the year, with Eureka now operating 323 units
in North Queensland, 214 units in Central Queensland, 599 units
in South East Queensland/Northern New South Wales, 584 units
in South Australia and 218 units in the Victoria/New South Wales
Border Region.
With the operating scale now in place, and the enhanced
efficiencies flowing from these critical mass regional village
clusters, Eureka has now reached a pivotal stage where the
conversion of year on year revenue, which is over 99% government
funded, to cash flow is being maximised.
In line with the company’s “buy and build” strategy, a number of
the acquisitions made during the year also contained valuable
additional land suitable for brown field development, resulting in
Eureka at year end holding a cumulative land bank of over 174,000
m2 (excluding the Terranora project ) within existing freehold
villages which has the capacity to house up to 250 new units
once developed.
The 13 new village acquisitions completed in FY 2016 and which
together add $5.22m to annualised EBITDA comprise:
• Mt Gambier Villages, South Australia
A 45 unit village acquired for $2.25m which has, pending final
development approval, the capacity to develop 15 new units.
Subsequent to this a second village in Mt Gambier containing
58 apartments including 10 double rooms was purchased
for $3.45m.
• Rockhampton Villages, Queensland
Two adjoining villages were acquired at intervals during the
year adding further scale to Eureka’s already strong presence
in the Central Queensland market. A 41 unit property,
including a mangers unit, was purchased for $3.25m. Later in
the year an adjoining Eureka managed village was acquired
for $4.565, effectively creating a super village containing over
90 beds.
• Bowen Village, Queensland
A 50 room village containing excess land for an additional 20
rooms was acquired for $1.32m.
• Wynnum Village, Queensland
A 41 unit village was acquired for $4.50m which also has
additional land capacity for 30 units to be developed. The
property is located in one of the strongest retirement
demographics in Brisbane, with the village maintaining a
consistent 100% occupancy level and waiting list.
5 5
Care’s staff, along with assistance and advice on how best to
access government funding for care services.
A partnership pilot programme which is currently underway at
Eureka’s Tivoli Gardens property has already proved a resounding
success with 19 of the 30 residents who are eligible to access
government funding for Blue Care’s care services signing up
within 2 weeks of the program starting. An extension of the pilot
programme will shortly be rolled out in other Eureka Queensland
villages at Wynnum, Rockhampton and Cairns.
At this stage it is envisaged that Blue Care’s support services will
be available at all of Eureka’s villages throughout Queensland
within 12 months.
The availability of government funded care support services
accessible via the Blue Care partnership will undoubtedly
lengthen the average term of occupancy across Eureka’s portfolio,
heighten demand for its rental accommodation and provide
a strong motivation for residents currently in competitors
villages where they pay for aged care services to relocate to the
company’s properties.
Eureka Cements Market
Leading Position
With the acceleration of Eureka’s “buy and build” strategy and an
accompanying $43.49m invested in acquiring 13 additional villages
in FY 2016 the company attained the mantle of Australia’s largest
ASX listed low cost aged rental accommodation provider.
This investment follows the successful expansion during the prior
financial year when 8 villages were acquired for a total of $29.12m.
As at 30 June 2016 Eureka owned 23 villages containing 1,199 units
with a total portfolio under management comprising 32 villages
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Chairman’s Review (continued)
• Terranora Village, Northern New South Wales
The significant $7m acquisition of an 80 unit village with
elevated views over Tweed Heads and surrounding hinterland
represents Eureka’s largest and most profitable development
opportunity to date. A planned major re-engineering of
the property which contains six hectares of vacant land is
currently on track and involves:
•
•
•
•
selling the 80 rental units acquired, all of which are
significantly larger than Eureka’s standard rental units,
for a projected $14.0m.
selling 3.5 hectares of the vacant land as house/land
packages for an estimated $4.0m.
maintaining the management rights for the above
units which will add around $250,000 to group
EBITDA annually.
building a “next generation” Eureka super village
containing 125 x 39 m2 seniors rental units on the 2.5
hectares of remaining vacant land utilising $10.0 m from
the various sales proceeds which will add around $2.0m
annually to group EBITDA.
The first stage of the re-engineering project is currently on track,
with a number of expressions of interest for the unit sales in place
and subsequent cash flow expected to come on stream from the
September quarter on. Stage 2 covering sale of the house/land
packages is scheduled to finish by June 2017, with the final stage,
construction of the 125 new units expected to commence late
2017 or early 2018 following receipt of planning and development
approvals. This project will undoubtedly help propel Eureka onto
a new growth trajectory and significantly strengthen its balance
sheet through generating around $8.0m in net cash proceeds,
adding an additional recurring $2.5m to EBITDA and providing a
“next generation” Eureka village of 125 units as a blueprint for the
future potential development of new purpose designed company
super villages.
•
Salisbury, South Australia
A 60 room village in Adelaide which has a 100%
occupancy level and waiting list was acquired for $4.6m.
•
Amber Lodge, South Australia
This 54 unit village, which has the land capacity to
develop an additional 36 units, was acquired for $4.5m.
•
Blue Care Villages
The three village acquisitions made by Eureka in the
year represent a significant extension of the previously
outlined partnership agreement struck with care
provider Blue Care. Just prior to 30 June the company
consolidated its position as Blue Care’s preferred low
cost housing provider through the acquisition of three of
6
the aged and community services group’s rental villages
containing 99 units located in Brisbane, Southport and
Townsville for $6.0m. Eureka and Blue Care remain
committed to expanding future mutual opportunities
to optimise their joint customer value, through Eureka
providing the quality affordable accommodation
component and Blue Care the vital service of in home
aged care and support.
•
Couran Cove
On 30 June 2016, Eureka settled another milestone
acquisition and one which like Terranora, offers
the company a major and profitable re-engineering
opportunity. The transaction which elevates the number
of units owned or managed by Eureka to over 2,000
involves the acquisition of an initial 36 units at the
Couran Cove Island Resort in Runaway Bay, a 10 minute
ferry ride from Southport on the Gold Coast. While
Couran Cove was for many years primarily a tourist
destination, the initial $2.05m acquisition by Eureka
from Island Resorts Pty Ltd marks the start to a major
re-engineering of selected parts of the resort into an
independent low cost rental village.
This initial investment made in Couran Cove highlights that,
backed by appropriate due diligence, there is a broad range of
under utilised property assets located in traditional retirement
catchments that can quickly and economically be converted to
low cost seniors accommodation. While the company’s acquisition
pipeline primarily remains focused on existing retirement assets
Eureka continues to investigate other undervalued asset classes in
potential growth markets such as motels and residential properties
in established regional centres.
EGH annual report 2016For personal use only
Australia’s Aged Dynamics to
Propel Eureka’s Growth
Australia’s rapidly aging population is now a clearly established
demographic fact, and one which will provide a major impetus to
Eureka’s continued growth and profitability.
It has been well publicised by the Australian Bureau of Statistics
(ABS) that in 2014, 15% of the population representing 3.5 million
people were aged 65 and over and that by 2030 this will increase to
19%, jumping further to a projected 21%, or 8.4 million, by 2030.
This dynamic is already having a dramatic impact on Australia’s
retirement industry and is a trend which will significantly intensify
with nearly an additional 3 million Australian seniors reaching
retirement age or over in just the next 14 years.
The impact this seismic shift will have on the nation’s retirement
living market is clearly highlighted by research which indicates
71% of persons surveyed intended to retire at the age of 65 years or
over, up from 66% in the survey result of 2012-13 (ABS: Retirement
and Retirement Intentions July 2014 – June 2015).
Moreover, Grant Thornton research has projected that by 2025
7.5% of older Australians representing 382,000 people will want
to live in retirement villages, 200,000 more than, and greater than
double the number of residents currently residing in a retirement
living home.
A wide range of statistics also supports the fact an increasingly
large portion of Australians at, or approaching retirement age, are
financially ill-prepared to fully fund their retirement years. The
ABS has reported that 47% or persons aged 45 and over who had
retired recorded a government pension or allowance as their main
source of income.
The financial shortfall facing many Australians entering retirement
phase is further reinforced by a collaborative research study
by the University of Melbourne and Towers Watson in 2014
which highlights the large number of seniors unable to finance
a comfortable retirement lifestyle. Using the Association of
Superannuation Funds in Australia (ASFA) Retirement Standard
income for a comfortable lifestyle of $57,665 for couples and
$42,158 for singles, the report found that ignoring all sources of
income other than super, only 15% of couples and 5% of singles are
expected to reach the above target.
Further, the report found that factoring in the age income as an
additional income source resulted in still only 32% of couples and
11% of singles being on track to fund a comfortable retirement.
These statistical analyses along with many others, all underscore
what will not only be a dramatic escalation in demand for
retirement living facilities, but in particular, a significantly
larger number of aged Australians who for financial reasons
will seek low cost rental accommodation as their only viable
retirement option.
These dynamics, and the pace with which they are occurring,
provide an unparalleled opportunity for Eureka as Australia’s
largest provider of affordable seniors rental accommodation to
rapidly and profitably capitalise on.
Another quickly emerging population demographic trend which is
strongly aligned with Eureka’s growth blueprint is the projected
surge in the number of baby boomers, or those born between 1946
and 1964, relocating to regional country towns. National research
company Propertyology forecasts an escalation in the number of
baby boomers who are either retired or rapidly nearing retirement
seeking more affordable accommodation in regional centres based
7 7
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only Chairman’s Review (continued)
on soaring property prices in many of the major cities, coupled
with insufficient retirement savings.
Given that approximately 59% of Eureka’s low cost seniors
rental villages are currently located in such regional towns,
a proportion unlikely to change into the future, again has the
company strategically placed to reap maximum benefit from
this forecast exodus to well serviced localities outside the major
metropolitan centres.
At the current time, of the approximate 2,270 aged
accommodation facilities which house around 184,000 residents,
only approximately 60 are managed by corporatised entities,
with a vast majority of facilities owned and managed by owner
operators, single strata title structures and not-for-profit groups.
This highly fragmented market structure provides Eureka with
a virtually unlimited pipeline of acquisition opportunities and
the ability to “cherry pick” quality high occupancy villages,
located in particular, in those areas in which the company holds
a strong market presence to create clusters of super villages with
accompanying economies of scale and enhanced efficiencies.
Eureka’s Successful
Business Model
Eureka’s tried and proven business model is predicated on
being a “shared value” enterprise which is generating a profit for
shareholders and making a beneficial and measurable impact
on the increasingly significant social issue of affordable housing
availability in Australia.
The company is actively addressing the above social issue by
providing a rapidly expanding pool of quality, affordable rental
accommodation options to independent retirees who are either
completely or primarily reliant on the Australian Government
Pension and Rent Assistance.
As the only ASX listed company solely focused on providing
affordable seniors accommodation, Eureka’s revenue streams
are essentially underwritten by the Australian Government with
nearly 100% of group rental income paid via government pensions
and/or rent assistance. Given the source of its revenue base
and the dynamics of Australia’s rapidly changing population
demographics, the company has a highly robust and sustainable
business model that:
is largely immune to global economic cycles and
disruptions
delivers year-on-year revenue and EBITDA growth
has low working capital requirements
•
•
•
8
•
•
•
•
owns an expanding “bricks and mortar” asset base more
stable than other property asset classes
comprises a customer base whose financial
circumstances make their property tenure predominantly
fixed and stable
is difficult to disrupt through digital technologies or
alternate offerings
operates in a highly fragmented industry that is ripe for
ongoing consolidation
Within the global investment market, including Australia’s, there
is a decided movement by some funds and institutional investors
towards ethical enterprises which also have a proven performance
track record. This trend is already apparent on Eureka’s share
register with a number of new investors attracted by both
the strong social value and year-on-year earnings growth the
company’s business model consistently delivers.
EGH annual report 2016For personal use only
Buoyant Outlook for FY 2017
Eureka enters the new financial year as Australia’s largest provider
of affordable seniors rental accommodation with just under 2,000
units under ownership and/or management, a strong balance
sheet and a robust working capital base of over $8.05m. Having
achieved critical market mass of 2,000 units and the resulting
cost efficiencies flowing from this scale, Eureka is strongly
positioned to achieve its next immediate goal of 5,000 units owned
or managed.
At the time of this report, the company has a pipeline of 200
potential acquisition opportunities which have been identified
following preliminary due diligence, and is intent on again
accelerating its “buy and build” strategy in FY 2017. Importantly,
with the cash flow from the Terranora re-engineering project
commencing from this September quarter and the locked in
recurring revenue streams from the company’s existing retirement
portfolio, Eureka is now capable of largely self funding future
acquisitions, barring any major transaction opportunities which
may arise.
The historic agreement struck with Blue Care will see their in
home aged care services and support progressively rolled out
to all Queensland Eureka villages during the current financial
year. This partnership presents Eureka with a significant point of
differentiation from its competitors, and provides the company
a capability to seriously disrupt the low cost sector of the
Australian retirement market, and particularly those competitor
villages in which residents are required to independently pay for
such services.
The company also has an extremely strong upside for organic
growth; currently owning (excluding Terranora) over 174,000 m2
of brown field or in-fill development land in existing villages, with
the potential to develop up to 250 new units. During the current
year Eureka expects to make further progress on its two major re-
engineering projects at Terranora and Couran Cove, both of which
will have a profound impact on the company. Jointly they have the
capacity to add up to 420 units to Eureka’s portfolio, generate a
significant cash windfall along with stronger group EBITDA and a
substantially strengthened balance sheet.
Eureka currently has around 6 prospective acquisition targets
under detailed due diligence and is confident of finalising several
of these within the first quarter. As previously outlined, wherever
possible, acquisitions will be targeted which create village clusters
in existing Eureka locations to leverage additional group wide cost
efficiencies and economies of scale.
Following the almost doubling of Eureka’s share price from a
low of 40 cents to 79 cents at the close of FY 2016, the company
is confident of again creating shareholder value in the current
financial year based on the expansive growth planned and the
strong “bricks and mortar” backed balance sheet and cash
reserves in place.
On a final note I wish to acknowledge the invaluable input and
commitment made during the year to the company’s continued
success by my fellow directors, senior management team, staff
and village managers. It is again worth highlighting the clear
alignment that exists between Eureka’s board/senior management
team and shareholders interests. Cumulatively the board and
senior management hold 13% of shares on issue, and as such
have a decided incentive to continue diligently accelerating the
company’s growth strategy and maximising financial outcomes
for shareholders.
My sincere thanks and appreciation are also extended to the ever
growing number of shareholders now on Eureka’s register for
their unwavering support and loyalty throughout the year. You
all own a company which continues to make major financial
gains, has an unlimited growth horizon and importantly, delivers
significant, measurable social capital to Australia’s rapidly growing
seniors community.
Robin Levison
Chairman
9 9
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only Eureka Group Holdings Limited and controlled entities
Directors’ Report
The Directors present their report on Eureka Group Holdings Limited (the “Company”, “EGH” or “Eureka”) and its controlled
entities (the “Group”, or the “Consolidated Entity”) for the year ended 30 June 2016.
PRINCIPAL ACTIVITIES
The principal activities of EGH include:
•
•
•
Providing specialist property asset management through property ownership and caretaking and infrastructure
management;
Providing accommodation and tailored services to a broad market of aged residents with discretionary and non-
discretionary spend characteristics; and
Project management.
REVIEW OF OPERATIONS AND RESULTS
The performance of the Group as represented by the results of operations for the year, were as follows:
Performance Measure
Net profit
Add back:
Interest
Tax
Depreciation
Amortisation
Earnings before interest, tax, depreciation and amortisation (EBITDA)
The increase in EBITDA to $12.468m was represented by:
-
-
-
profit contribution from the villages acquired during the year;
net fair value gain of $4.0m on investment properties; and
continued strong occupancy.
Consolidated
30 June 2016
$’000
10,467
1,733
-
113
155
12,468
30 June 2015
$’000
3,105
858
-
34
132
4,129
Financing costs increased during the 30 June 2016 year as a result of increased borrowings to fund the village acquisitions.
Financial Position
Total Assets
Net assets
Working capital (current assets less current liabilities)
Consolidated
30 June 2016
$’000
30 June 2015
$’000
111,323
64,934
8,505
51,834
31,855
4,657
The Group continues to strengthen its financial position. During the year, the Group acquired investment properties for total
consideration including transactions costs of $49m (including Terranora units that were transferred to inventory). These
acquisitions were partly funded through bank debt, which resulted in bank debt increasing from $19.5m to $42.7m.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the 30 June 2016 financial year the Group acquired 13 senior’s rental villages. This is consistent with Eureka’s
growth strategy to acquire high performing villages and associated management rights. The villages acquired include:
Lambert Village for $2.25m in September 2015 – 45 units
•
• Eureka Cascade Gardens Rockhampton 1 for $3.25m in October 2015 – 41 units
• Village Life Wynnum for $4.5m in October 2015 – 41 units
• Bowen Village for $1.32m in December 2015 – 50 units
• Mount Gambier 2 Village for $3.45m in December 2015 – 58 units
• Eureka Cascade Gardens Rockhampton 2 for $4.56m in December 2015 – 53 units
Terranora Village for $7m in December 2015 – 80 units plus substantial land holdings!
•
• Salisbury Village for $4.6m in February 2016 – 60 units
• Amber Lodge Village for $4.5m in June 2016 – 54 units
•
• Southport Pioneer Place Village for $3.37m in June 2016 – 35 units
• Margate Maiala Place Village for $2.79m in June 2016 – 44 units
• Couran Cove Island Resort $2.05m in June 2016 – 36 units
Townsville Christine Court Village for $1m in June 2016 – 20 units
10
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Directors’ Report
The purchase prices above are exclusive of applicable acquisition costs.
During the 30 June 2016 financial year, after a review of all the Group assets, the Group divested its management rights in
Capalaba and Maroochydore.
DIVIDENDS
No dividends have been paid during the year (2015: $nil). No dividends for the financial year ended 2016 have been
recommended at the date of this report.
SHARE CAPITAL, REDEEMABLE CONVERTIBLE NOTES AND SHARE OPTIONS
The number of ordinary shares on issue at 30 June 2016 was 225,784,473 (2015: 188,099,927).
There were no options issued during the year. The balance of options outstanding at 30 June 2016 is nil (2015: nil).
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the current 2017 Financial Year there will be a continued acceleration of Eureka’s “Buy and Build” strategy which has
seen the company move away from its historical ownership of management rights only, over low cost rental retirement
villages to a dominant and holistic bricks and mortar village ownership and management model which has generated far
superior returns to shareholders.
Eureka will continue to acquire existing underperforming assets which meet its EBITDA return hurdle rate and will continue
to improve the performance of existing recently acquired assets which to date has consistently added to the value of each
village.
Each year the company also reviews its management rights portfolio and there may be further divestments from that
portfolio should it be seen as opportune.
The re-engineering of the Terranora property acquired for $7 million in December 2015 has commenced and is expected to
result in settlements during the first half of FY 2017. Eureka has received a number of “expressions of interest” to buy the
units held for resale at a range of $325,000 - $375,000 for the larger units and expects to receive around $140,000 for the
smaller less well situated units which when put to contract, will result in the company comfortably meeting the $14 million
net cash in-flows previously predicted from their re-sale. Initial cash receipts should start to be received in the October-
December quarter this year. The marketing for the Terranora excess vacant land not required by Eureka will also start
within the next 6 months.
Building on our previous announcement, Eureka continues to acquire further assets at Couran Cove as they become
available and will continue the transition of the current inner part of the resort known as the Eco-Village to a low cost rental
retirement village. To capitalize on the potential scale of the Couran Cove opportunity, Eureka is also acquiring the
caretaking and infrastructure management rights for entire resort as the company sees the Couran opportunity as creating
its largest single village by number of units.
Lastly Eureka will continu e to build on the Blue Care partnership announced in June 2016 and expects the Bluer Care “in
home care” model to be rolled out to further Queensland villages once the current Ipswich trial is completed.
SUBSEQUENT EVENTS
On 8 July 2016, the Company’s Share Purchase Plan (‘SPP’) was finalised. Due to overwhelming support from
shareholders the SPP was oversubscribed. The Board decided to increase the size of the SPP from $2.5m to $3.95m and
allotted shares on 14 July 2016 at 75 cents per share.
The Group has completed the due diligence and gone unconditional on 17 August 2016 on the acquisition of 55-unit village
in Orange, NSW known as Albert Street Gardens for $5.12m.
Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2016 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 subsequent financial years.
ENVIRONMENTAL REGULATION
The Group’s operations are not subject to any particular or significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
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INDEMNIFICATION AND INSURANCE OF OFFICERS OR AUDITORS
During or since the end of the financial year the Group has not given any indemnity or entered into any agreement to
indemnify any person who is or has been an officer of the Company.
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young during or since the financial year. During the financial year the
Group has paid a premium of $34,173 for Directors’ and Officers’ liability for current and former Directors and Officers.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purposes of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the year.
ROUNDING OF AMOUNTS
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191’Class issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this
report have been rounded off in accordance with that legislation to the nearest thousand dollars, or in certain cases, the
nearest dollar.
DIRECTORS AND MEETINGS ATTENDED
The names of all Directors who held office since the beginning of the year together with the numbers of meetings the
Company’s Directors held during the year, and the numbers of meetings attended by each Director are:
Name
Robin Levison
Lachlan McIntosh
Greg Rekers
Kerry Potter
Nirmal Hansra
Director's
Meetings
Audit & Risk Committee
Meetings
Held
10
10
10
10
10
Attended
10
10
10
10
10
Held
5
5
-
-
5
Attended
5
5
-
-
5
Nomination &
Remuneration
Committee Meetings
Attended
4
4
-
-
4
Held
4
4
-
-
4
INFORMATION ON DIRECTORS
The details of each Director’s qualifications, experience and special responsibilities for those in office during the year are:
Robin Levison – Executive Chairman
Robin Levison holds a Masters of Business Administration from the University of Queensland and is a Member of the
Institute of Chartered Accountants in Australia. Robin has 15 years of Public Company Management experience. During this
time he served as managing Director at Industrea Limited and Spectrum Resources and has held senior roles at KPMG,
Barclays Bank and Merrill Lynch. Robin is also a Deputy Chair of the University of Queensland Business, Economics and
Law Alumni Ambassador Council, and is a Graduate and Fellow of Australian Institute of Company Directors.
Other listed company directorships in the last 3 years: PPK Group Limited, Industrea Limited (from May 2005 to December
2012).
Special responsibilities: Chair of the Board.
Lachlan McIntosh – Non-Executive Director
Lachlan McIntosh has a Bachelor of Commerce degree and is a Member of the Institute of Chartered Accountants in
Australia. He specialises in corporate finance and mergers and acquisitions. He has had substantial experience in the real
estate and retirement accommodation industry along with significant experience in the franchising industries and mining
services industries.
Other listed company directorships in the last 3 years: Industrea Ltd (from May 2004 to December 2012), New Guinea Gold
Corporation (April 2013 to April 2014) and Onterran Limited (from 11 October 2014).
Special responsibilities: Member of Audit & Risk Committee, Member of Nomination & Remuneration Committee.
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Greg Rekers – Executive Director and Head of Real Estate
Greg leads the Company’s real estate activities. Greg is also a director of Navigator Property Group (NPG), a consultancy
group specialising in the areas of property development and project marketing.
Greg worked for PRD Gold Coast, a national and international property marketing company where he was a leading project
salesman. Upon departing PRD, Greg continued to be highly successful in providing project marketing services to numerous
property developers, which then led to the creation of NPG.
Other listed company directorships in the last 3 years: nil
Special responsibilities: nil
Kerry Potter – Executive Director and Chief Operating Officer
Kerry is the Company’s Chief Operating Officer. Kerry is also a director of Navigator Property Group, a consultancy
specialising in the areas of property development and project marketing.
Kerry holds a Bachelor of Commerce degree and worked with the Commonwealth public service until 1987 where he had
been a director of the Government’s real estate arm. Kerry then became the Director of Project Marketing for PRD Gold
Coast, a successful national and international organisation. After leaving PRD, Kerry became CEO of Raine and Horne
Queensland and Chesterton International. Kerry then became the principal and hands-on director of numerous development
residential and commercial projects for various consortia in the period 2000 to 2007.
Other listed company directorships in the last 3 years: nil
Special responsibilities: nil
Nirmal Hansra – Non-Executive Director
Nirmal holds a Master of Commerce (Business Management) degree from University of NSW and is a Fellow of the
Australian Institute of Company Directors, Institute of Chartered Accountants in Australia and Australian Society of Certified
Practicing Accountants.
He has over 40 years of business management and corporate advisory experience. During this time Nirmal had roles as
CFO / Finance Director of listed companies such as Industrea Limited, ISoft Group Limited, Australian Pharmaceutical
Industries Limited and Ruralco Holdings Limited.
Nirmal is Chair of Campbell Page Ltd, non-executive director and chairman of the finance, audit and risk committee of
Kuringai Financial Services Limited, Council of the Ageing (COTA) in New South Wales and NF Australia Limited. He is also
a non-executive director of Have A Voice Pty Ltd.
Other listed company directorships in the last 3 years: nil
Special responsibilities: Chair of Audit & Risk Committee, Chair of Nomination & Remuneration Committee
COMPANY SECRETARY
Oliver Schweizer – Company Secretary
Oliver was appointed Company Secretary in June 2014. Oliver has a Bachelor of Economics degree and is a Chartered
Financial Analyst. Oliver has over 15 years’ experience in commercial accounting, finance, investments and listed entities.
KEY MANAGEMENT PERSONNEL
The details of each key management personnel’s qualifications, experience and special responsibilities for those in office
during the year (excluding Head of Real Estate and Chief Operating Officer noted above) are:
Ryan Maddock – Chief Financial Officer
Ryan Maddock is a Chartered Accountant and has a Bachelor of Business with a Major in Accounting from Griffith
University. He has over 12 years of accounting experience working in both Australia and North America and most recently
held the role of Senior Financial Accountant at a Perth-based TSX-listed company. Prior to that he held the roles of Audit
Manager at KPMG and Accountant at PKF.
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INTEREST IN SHARES AND OPTIONS HELD AT THE DATE OF THIS REPORT
Ordinary shares
Options over
ordinary shares
Directors
Robin Levison
Lachlan McIntosh
Nirmal Hansra
Greg Rekers
Kerry Potter
Directors Total
Executives
Ryan Maddock
Executives Total
OPTIONS
12,590,808
11,916,166
583,334
2,140,608
2,906,442
30,137,358
88,450
88,450
-
-
-
-
-
-
-
-
There were no options outstanding during the financial year and up to the date of the Directors’ report.
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for Eureka Group Holdings Limited’s non-executive directors’,
executive directors and other key management personnel (“KMP”) of Eureka Group Holdings Limited for the year ended 30
June 2016. The information provided in this remuneration report has been audited as required by Section 308(3C) of the
Corporations Act 2001.
This remuneration report has been set out under the following headings:
a) Principles of compensation of key management personnel
b) Details of remuneration
c) Non-executive director remuneration policy
d) Service agreements
e) Relationship between remuneration and Company performance
f) Remuneration consultants
g) Equity Instruments held by Key Management Personnel
h) Loans to/from Key Management Personnel
i) Other transactions with Key Management Personnel
(a) PRINCIPLES OF COMPENSATION OF KEY MANAGEMENT PERSONNEL
Compensation of key management personnel comprise fees determined having regard to industry practice and the need to
obtain appropriately qualified independent persons. Compensation aligns executive reward with the achievement of
strategic objectives and the creation of value for shareholders, and conforms to the market best practice for delivery of
reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good
reward governance practices:
•
•
•
•
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage/alignment of executive compensation, and
transparency.
The Nomination & Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its
directors and executives. Consideration is given to normal commercial rates of remuneration for similar levels of
responsibility and the Company’s financial performance.
Remuneration comprises the following:
•
•
•
base pay (salaries/fees) and benefits, including superannuation;
short-term incentives (bonuses); and
long-term
contemplated).
incentives such as options and shares (although
long-term
incentives are not
immediately
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The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to
attract, motivate and retain high performance and high quality personnel.
All executives have detailed job descriptions with identified key performance indicators against which annual reviews are
compared in relationship between the benefits contained in the employment agreements and the Company’s performance in
the 2016 financial year.
Remuneration for certain individuals is directly linked to performance of the Group. Bonus payments are dependent on key
criteria, refer to the table in section (e) Relationship Between Remuneration and Company Performance for further details.
The Nomination & Remuneration Committee is of the opinion that continued improved results can be achieved in part by the
adoption of performance based compensation and is satisfied that this improvement will continue to increase shareholder
wealth if maintained over the coming years.
(b) DETAILS OF REMUNERATION
The names of persons who were key management personnel of Eureka Group Holdings Limited at any time during the
financial year are shown in the following table. Key management personnel are defined as those who have a direct impact
on the strategic direction of the Company. At the date of this report, the key management personnel of the Group are:
Name
Role
Robin Levison
Executive Director/Chair
Lachlan McIntosh
Non-Executive Director
Nirmal Hansra
Non-Executive Director
Period in role
24/12/2013 – ongoing
20/07/2009 – ongoing
24/04/2012 – ongoing
Greg Rekers
Executive Director/Head of Real Estate
24/04/2012 – ongoing
Kerry Potter
Executive Director/Chief Operating Officer
24/04/2012 – ongoing
Ryan Maddock
Chief Financial Officer
16/06/2014 – ongoing
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Key management personnel remuneration for the year ended 30 June 2016 and 30 June 2015:
Short term
Post
employment
Salary/
fees
$
Bonus
$
Super-
annuation
$
Share
based
payment
s
$
Other
long
term
benefits
$
Termina-
tion
payments
$
Total
$
Perfor
m-
ance
related
%
% of
bonus
that was
paid
% of
bonus
that was
forfeited
30 June 2016
Directors
Robin Levison
105,000
Lachlan McIntosh
39,000
Nirmal Hansra
37,998
-
-
-
Greg Rekers
229,241
100,000
Kerry Potter
229,241
100,000
Directors Total
640,480
200,000
Executives
-
-
-
-
-
-
Ryan Maddock
141,294
40,539
Executives Total
141,294
40,539
Total
781,774
240,539
17,697
17,697
17,697
30 June 2015
Directors
Robin Levison
60,000
Lachlan McIntosh
36,000
Nirmal Hansra
Greg Rekers
Kerry Potter
32,002
284,500
284,500
Directors Total
697,002
Executives
Ryan Maddock
Sharon Alderwick1
144,399
61,039
Executives Total
205,438
Total
902,440
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,133
5,700
19,833
19,833
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50%
50%
100%
100%
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
105,000
39,000
37,998
329,241
329,241
840,480
199,530
199,530
1,040,010
60,000
36,000
32,002
284,500
284,500
697,002
158,532
66,739
225,271
922,273
1 Sharon Alderwick ceased as key management personnel on 31 December 2014.
(c) NON-EXECUTIVE DIRECTOR REMUNERATION POLICY
Fees and payments to non-executive directors reflect the demands that are made on, and the responsibilities of, the
directors. The Nomination & Remuneration Committee reviews non-executive directors’ fees and payments annually. Non-
executive directors do not receive share options or other incentives.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum currently stands at $250,000 in aggregate plus statutory
superannuation.
The following fees have applied:
Base fees
Robin Levison – Executive Chairman
Lachlan McIntosh – Non-Executive Director
Nirmal Hansra – Non-Executive Director
$
120,000
40,000
40,000
No superannuation has been paid to non-executive directors.
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(d) SERVICE AGREEMENTS
On appointment to the board, all non-executive directors enter into a service agreement with the Company in the form of a
letter of appointment. The letter summarises the board policies and terms, including remuneration, relevant to the office of
director. Remuneration and other terms of employment for the chief executive officer, chief financial officer and the other key
management personnel are also formalised in service agreements.
The details of these agreements for executive key management personnel are as follows:
Greg Rekers (Executive Director & Head of Real Estate)
Agreement Commenced 24 April 2012
Term of the Agreement:
The Agreement may be terminated by the Company after the first anniversary of the contract, provided that the Company
pays Mr Rekers a lump sum equal to the value of the salary package for one year. The agreement may be terminated by Mr
Rekers with 3 months’ notice. The agreement may also be terminated by the Company in the event of grave misconduct.
Details:
Mr Rekers remuneration comprises a consulting fee of $200,000 plus 30% of all sales commissions (consulting fee is half of
the total payment to Navigator Property Group) and a travel allowance of $24,000. Mr Rekers’ remuneration also comprises
additional short-term incentives equal to 50% of his base fee, for reaching agreed upon budgets, adhering to all relevant
legislative requirements and reporting financials in a timely manner. Mr Rekers is responsible for the departments of real
estate, property development and project marketing for the Company. The directors believe that the remuneration is
appropriate for the duties allocated to Mr Rekers. Upon termination subject to adherence of contractual clauses, Mr Rekers
is entitled to a lump sum equal to the value of the salary package for 1 year. Mr Rekers will receive no entitlements if
terminated for grave misconduct.
Kerry Potter (Executive Director & Chief Operations Officer)
Agreement Commenced 24 April 2012
Term of the Agreement:
The Agreement may be terminated by the Company after the first anniversary of the contract, provided that the Company
pays Mr Potter a lump sum equal to the value of the salary package for one year. The agreement may be terminated by Mr
Potter with 3 months’ notice. The agreement may also be terminated by the Company in the event of grave misconduct.
Details:
Mr Potters’ remuneration comprises a consulting fee of $200,000 plus 30% of all sales commissions (consulting fee is half of
the total payment to Navigator Property Group) and a travel allowance of $24,000. Mr Potters’ Remuneration also comprises
additional short-term incentives equal to 50% of his base fee, for reaching agreed upon budgets, adhering to all relevant
legislative requirements and reporting financials in a timely manner. Mr Potter is responsible for the day to day management
and operations of the Company. The directors believe that the remuneration is appropriate for the duties allocated to Mr
Potter. Upon termination subject to adherence of contractual clauses, Mr Potter is entitled to a lump sum equal to the value
of the salary package for 1 year. Mr Potter will receive no entitlements if terminated for grave misconduct.
Ryan Maddock (Chief Financial Officer)
Agreement Commenced 16 June 2014
Term of the Agreement:
The agreement may be terminated by either the Company or Mr Maddock with six weeks’ notice or by the Company in the
event of a material breach of misconduct by Mr Maddock.
Details:
Mr Maddock’s remuneration increased from a salary of $140,000 plus superannuation to $182,648 plus superannuation
from 9 May 2016. Mr Maddock’s remuneration is not linked to the company’s performance and he is entitled to a bonus at
the Directors’ discretion. Mr Maddock is responsible for the finance division and the accounting and finance functions of the
Company and its associated companies. The directors believe that the remuneration is appropriate for the duties allocated
to Mr Maddock. In the event the Group is purchased by or merged with another company and, if as a result of that purchase
or merger Mr Maddock is terminated, the Group must pay Mr Maddock the monthly remuneration for a period of three
months. There are no other pay-outs upon resignation or termination, outside of industrial regulations.
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Directors’ Report
(e) RELATIONSHIP BETWEEN REMUNERATION AND COMPANY PERFORMANCE
The following table shows the revenue, net profit before tax, earnings per share, share price and dividend per share for the
past 5 years of the Company. The factors that are considered to affect remuneration are summarised below:
Total Revenue $’000
Net Profit before tax $’000
EBITDA $’000
Earnings per share (cents
per share)
Share price at year end
Dividend per share
2016
24,155
10,467
12,468
5.19
0.79
0.00
2015
12,213
3,105
4,129
2.24
0.51
0.00
2014
10,662
661
1,512
0.80
0.12
0.00
2013
10,874
75
865
0.10
0.065
0.00
2012
15,593
686
1,632
1.37
0.10
0.00
(f) REMUNERATION CONSULTANTS
The Group did not engage any remuneration consultants during the 2016 financial year.
(g) EQUITY INSTRUMENTS HELD BY KEY MANAGEMENT PERSONNEL
Shares held
The numbers of securities held during the financial year by each director and other key management personnel of the
group, including their personally related parties, are set out below. There were no shares granted during the reporting period
as compensation.
Balance
1 July 2015
Received as
remuneration
Shares
acquired
Shares
disposed
Conversion
of notes
Balance
30 June 2016
Directors
Robin Levison
12,349,608
Lachlan McIntosh
12,646,166
Nirmal Hansra
Greg Rekers
Kerry Potter
Executives
Ryan Maddock
Total
Options held
583,334
2,884,266
2,866,442
88,450
31,418,266
-
-
-
-
-
-
-
200,000
-
-
-
-
-
-
(750,000)
-
(763,658)
-
-
200,000
(1,513,658)
-
-
-
-
-
-
-
12,549,608
11,896,166
583,334
2,120,608
2,866,442
88,450
30,104,608
There were no options over ordinary securities held during the financial year by any of the directors of the Group or other
key management personnel of the Group, including their personally related parties.
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Directors’ Report
(h) LOANS TO/FROM KEY MANAGEMENT PERSONNEL
As at 30 June 2016, total loans outstanding to Kathlac Pty Ltd, an entity associated with Lachlan McIntosh, from Eureka
Group Holdings Limited, was nil (2015: nil).
Consolidated
Balance at beginning of year
Increase in loan amount
Loan repayments made
Interest charged
Conversion of debt to convertible notes/shares
Amount included in current financial liabilities – Shareholder Loans
The following convertible notes were converted into shares during the year:
30 June 2016
$
-
410,000
(411,105)
1,105
-
-
30 June 2015
$
100,099
490,000
(596,082)
5,983
-
-
Convertible Note: Kathlac Pty Ltd
(entity associated with Lachlan McIntosh)
Balance at beginning of the year
Proceeds received on issue of convertible notes
Interest charged
Interest paid
Conversion of convertible notes to shares
Balance at end of the year – current liability
Convertible Note: Ignition Capital Pty Ltd and Ignition Capital No. 2 Pty Ltd
(entities associated with Robin Levison)
Balance at beginning of the year
Proceeds received on issue of convertible notes
Interest charged
Interest paid
Conversion of convertible notes to shares
Balance at beginning of the year – current liability
Consolidated
30 June 2016
$
30 June 2015
$
-
-
-
-
-
-
-
-
-
-
-
-
51,247
-
1,082
(2,329)
(50,000)
-
409,973
-
13,479
(23,452)
(400,000)
-
There were no loans to any director or key management personnel at any time during the year and prior year.
(i) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Dotted Line Pty Ltd
The Company trades from a premises owned by Dotted Line Pty Ltd, an entity associated with Greg Rekers. The premises
is rented on commercial terms. Rent totalling $39,600 was paid during the year (2015: $39,600). As at 30 June 2016 the
amount outstanding to Rekers Family Trust was $nil (2015: $nil).
Greg Rekers and Associates
Greg Rekers and Associates, a business associated with Greg Rekers, was paid fees of $22,000 for providing due diligence
research and advice during the year.
Griffith Scenic Village Pty Ltd
Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $8,414 on
commercial terms (2015: $7,566). As at 30 June 2016 the amount outstanding from Griffith Scenic Village Pty Ltd Pty Ltd
was $25,480 (2015: $25,480).
Griffith Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $22,178 for Manager’s unit rental fees
on commercial terms (2015: $22,178). As at 30 June 2016 the amount outstanding to Griffith Scenic Village Pty Ltd was $nil
(2015: $5,545).
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Directors’ Report
Gladstone Scenic Village Pty Ltd
Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, paid the Group management fees of $8,044
on commercial terms (2015: $14,401). As at 30 June 2016 the amount outstanding from Gladstone Scenic Village Pty Ltd
was $nil (2015: $nil).
Gladstone Scenic Village Pty Ltd, an entity associated with Lachlan McIntosh, was paid $29,229 for Manager’s unit rental
fees on commercial terms (2015: $17,050). As at 30 June 2016 the amount outstanding to Gladstone Scenic Village Pty Ltd
was $nil (2015: $nil).
Elizabeth Vale Scenic Village Pty Ltd
Elizabeth Vale Scenic Village Pty Ltd, an entity historically associated with Lachlan McIntosh, paid the Group management
fees of $nil on commercial terms (2015: $34,705).
Elizabeth Vale Scenic Village Pty Ltd, an entity historically associated with Lachlan McIntosh, was paid $nil for Manager’s
unit rental fees on commercial terms (2015: $22,249). The entity is now wholly owned by EGH.
22 Capital Pty Ltd
During the year, 22 Capital Pty Ltd, an entity associated with Lachlan McIntosh, was paid $375,815 in consulting fees. At 30
June 2016 the amount outstanding to 22 Capital Pty Ltd was $66,000(2015: $nil).
Ignition Equity Partners Pty Ltd
During the year, Ignition Equity Partners Pty Ltd, an entity associated with Robin Levison, received investor relations and
capital raising fees of $346,740 on commercial terms (2015: $158,812). At 30 June 2016 the amount outstanding to Ignition
Equity Partners Pty Ltd was $206,250 (2015: $nil).
Ignition Capital Pty Ltd
During the year, there were no convertible notes issued or converted to Ignition Capital Pty Ltd, an entity associated with
Robin Levison (2015: 300,000 converted). At 30 June 2016 the amount outstanding from Ignition Capital Pty Ltd was nil
(2015: $nil).
Ignition Capital No. 2 Pty Ltd
During the year, there were no convertible notes issued or converted to Ignition Equity Capital Pty Ltd, an entity associated
with Robin Levison, (2015: 100,000 converted). At 30 June 2016 the amount outstanding from Ignition Capital Pty Ltd was
nil (2015: $nil).
This concludes the remuneration report, which has been audited.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit services during the financial year by the auditor are
outlined in note 28 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor, is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 28 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 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 and Ethical Standards Board,
including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the
company, acting as advocate for the company or jointly sharing economic risks and rewards.
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Directors’ Report
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 61.
This report is made in accordance with a resolution of the Directors.
Robin Levison
Executive Chairman
Dated in Brisbane this 25th day of August, 2016.
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2016
Note
Consolidated
30 June 2016
$’000
30 June 2015
$’000
Revenue
Other income
Expenses
Village operating costs
Impairment – trade receivables
Employee benefits expenses
Finance expense
Marketing expenses
Consultancy expenses
Depreciation & amortisation expenses
Lease expenses
Other expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
3
3
4
4
4
5
Other comprehensive income
Items that may be reclassified to profit or loss
Items that will not be reclassified to profit or loss
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
23
23
19,106
5,049
(8,804)
(37)
(1,172)
(1,733)
(274)
(151)
(268)
(255)
(994)
10,467
-
10,467
-
-
-
10,851
1,361
(5,946)
(47)
(716)
(858)
(120)
(223)
(166)
(372)
(659)
3,105
-
3,105
-
-
-
10,467
3,105
5.19
5.19
2.24
2.24
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Financial Position
AS AT 30 JUNE 2016
Consolidated
Note
30 June 2016
$’000
30 June 2015
$’000
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Loans receivable
Total current assets
Non-Current Assets
Loans receivable
Investment property
Property, plant and equipment
Intangible assets
Total non-current assets
Total Assets
Current Liabilities
Trade and other payables
Other financial liabilities
Provisions
Total current liabilities
Non-current liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Share capital
Accumulated losses
Total Equity
19
6
7
8
10
10
12
13
14
15
17
16
17
16
18
6,841
3,434
6,300
819
66
17,460
539
86,472
1,232
5,620
93,863
5,154
306
20
159
84
5,723
541
39,689
878
5,003
46,111
111,323
51,834
3,688
5,123
144
8,955
37,393
41
37,434
608
394
64
1,066
18,913
-
18,913
46,389
19,979
64,934
31,855
90,860
(25,926)
64,934
68,248
(36,393)
31,855
The consolidated statement of financial position is to be read in conjunction with the accompanying notes
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Cash Flows
AS AT 30 JUNE 2016
Consolidated
Note
30 June 2016
$’000
30 June 2015
$’000
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers & employees
Interest received
Interest paid
Net Cash provided by/(used) in Operating Activities
19(b)
Cash Flows from Investing Activities
Payments for investment properties
Payments for property, plant & equipment
Proceeds from the sale of intangible assets
Payments for loans provided
Repayments of loans provided
Payments for intangible assets
Net Cash provided by/(used) in Investing Activities
Cash Flows from Financing Activities
Proceeds from borrowings
Repayment of borrowings
Payments of transaction costs related to borrowings
Proceeds from share issues
Payments for share issue costs
Net Cash provided by/(used in) Financing Activities
18
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
19(a)
17,030
(11,247)
44
(1,587)
4,240
(40,514)
(111)
482
(1,141)
178
(803)
(41,909)
18,637
(827)
(250)
22,900
(1,104)
39,356
1,687
5,154
6,841
10,957
(8,216)
61
(883)
1,919
(22,517)
(159)
990
(769)
142
(437)
(22,750)
11,862
(5,109)
(63)
18,700
(690)
24,700
3,869
1,285
5,154
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2016
Share Capital
$’000
Consolidated
Accumulated Losses
$’000
Total
$’000
For the year ended 30 June 2016
Balance at 1 July 2015
68,248
(36,393)
31,855
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share issued during the year
Capital raising costs
Balance at 30 June 2016
-
-
-
23,920
(1,308)
90,860
10,467
-
10,467
-
-
(25,926)
10,467
-
10,467
23,920
(1,308)
64,934
For the year ended 30 June 2015
Balance at 1 July 2014
46,035
(39,498)
6,537
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share issued during the year
Capital raising costs
Balance at 30 June 2015
-
-
-
22,925
(712)
68,248
3,105
-
3,105
-
-
(36,393)
3,105
-
3,105
22,925
(712)
31,855
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
1. INTRODUCTION
Eureka Group Holdings Limited (covering the financial statements of Eureka Group Holdings Limited and all of its
subsidiaries) (“EGH” or the “Group” or the “Consolidated Entity”) for the year ended 30 June 2016 is a company
incorporated and domiciled in Australia. EGH is a for-profit entity for the purposes of preparing the financial statements.
The Group’s operations and principal activities comprise ownership and property management of Senior Independent Living
Communities.
The financial report is presented in Australian dollars. The company is of a kind referred to in ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191’, issued by the Australian Securities and Investments Commission,
relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that legislation to the nearest
thousand dollars, or in certain cases, the nearest dollar.
The registered office of the company is Unit 7, 486 Scottsdale Drive, Varsity Lakes, QLD 4227.
The financial report was authorised for issue on 25 August 2016 by the Directors.
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF PREPARATION
The principal accounting policies adopted by the Group, comprising the parent entity Eureka Group Holdings Limited and its
subsidiaries, are stated in order to assist in the general understanding of the financial report. These policies have been
consistently applied to all the years presented, unless otherwise stated.
The consolidated financial report is a general purpose financial report which has been prepared in accordance with
Australian Accounting Standards and the Corporations Act 2001.
Compliance with IFRS
The consolidated financial report of EGH complies with International Financial Reporting Standards (IFRSs) and
interpretations adopted by the International Accounting Standards Board (IASB).
New, revised and amended Accounting Standards adopted by the Group
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board that are mandatory for the current period. The adoption of these Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.
Early adoption of standards
The Group has not elected to apply any pronouncements before their operative date in the annual reporting period
beginning 1 July 2015.
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment
properties and derivative financial instruments.
CONSOLIDATION
This financial report covers the consolidated entity consisting of Eureka Group Holdings Limited and its controlled entities.
Eureka Group Holdings Limited is the ultimate parent entity.
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Eureka Group
Holdings Limited as at 30 June 2016 and the results of all controlled entities for the year then ended. The effects of all
transactions between entities in the Group are eliminated in full.
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to
variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. In assessing control, potential voting rights that presently are exercisable or convertible are taken into
account. The financial statements of subsidiaries are included in the financial report from the date that control commences
until the date that control ceases.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the 'business
combinations' accounting policy for further details. A change in ownership interest, without the loss of control, is accounted
for as an equity transaction, where the difference between the consideration transferred and the book value of the share of
the non-controlling interest acquired is recognised directly in equity attributable to the parent.
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises
the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in
profit or loss.
BUSINESS COMBINATIONS
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest
in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the
acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value
of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain
directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquiree.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information
possible to determine fair value.
REVENUE RECOGNITION
Rent Revenue
Rent revenue from investment properties is recognised on a straight-line basis over the lease term. Rent not received at
balance date is reflected in the balance sheet as a receivable, or if paid in advance, as deferred revenue. Lease incentives
granted are recognised over the lease term, on a straight-line basis, as a reduction of rent. Rent revenue from investment
properties is recognised on a straight-line basis over the lease term.
Management, Property Maintenance, Catering and Service Fees
The Group is entitled to receive a fee from unit owners for managing the units under management services agreements.
The Group also receives a fee from the tenants of the units for the provision of property maintenance, catering and other
services. The Group also provides property consulting services to third parties for agreed fees. Revenue is recognised when
the services are provided.
Interest Revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
INCOME TAX
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit and loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
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. Deferred tax
is not recognised for the differences relating to investments in subsidiaries to the extent that it is probable that it will not
reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. A deferred tax asset is recognised to the extent
that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
TAX CONSOLIDATION
The Company and its wholly-owned Australian resident entities have formed a tax-consolidation group with effect from 1
July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidation group is
Eureka Group Holdings Limited.
Current tax expense/income, deferred tax liabilities and deferred assets arising from temporary differences of the members
of the tax-consolidation group are recognised in the separate financial statements of the members of the tax-consolidation
group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in
the separate financial statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by
the head entity in the tax-consolidation group and are recognised by the Company as amounts payable/(receivable)
to/(from) other entities in the tax-consolidation group in conjunction with any tax funding arrangement amounts (refer below).
Any difference between these amounts is recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidation group to the extent
that it is probable that future taxable profits of the tax-consolidation group will be available against which the asset can be
utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
Nature of Tax Funding Arrangements and Tax Sharing Arrangements
The head entity in conjunction with other members of the tax-consolidation group has entered into a tax funding
arrangement which sets out the funding obligations of members of the tax-consolidation group in respect of tax amounts.
The tax funding arrangements require payments to/from the head entity to the current tax liability/ (asset) assumed to be the
head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-
entity receivable/ (payable) equal in amount to the tax liability/ (asset) assumed. The inter-entity receivables/ (payables) are
at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the
head entity’s obligation to make payments for tax liabilities to the relevant authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations.
OPERATING SEGMENTS
Operating segments are presented using the 'management approach', where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers ('CODM') - being the Board of Directors. The CODM
is responsible for the allocation of resources to operating segments and assessing their performance.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash includes cash at bank and on hand as well as highly liquid investments
with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of
changes in value, net of outstanding bank overdrafts.
TRADE AND OTHER RECEIVABLES
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off
by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and
default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be
impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
INVESTMENT PROPERTY
Investment property will be accounted for using the following accounting policy:
Land and buildings have the function of investment and are regarded as composite assets. In accordance with applicable
accounting standards, the buildings, including plant and equipment, are not depreciated.
Transfers from investment property to inventory are determined by a change of use as evidenced by a start of development
with a view to subsequent sale. The investment property are recognised at the date of transfer at fair value which, as
inventory, is considered deemed cost.
Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment
properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from
changes in the fair values of investment properties are recognised in profit or loss in the period in which they arise.
Transfers to and from investment properties to property, plant and equipment are determined by a change in use of owner-
occupation. The fair value on the date of change of use from investment properties to property, plant and equipment are
used as deemed cost for the subsequent accounting. The existing carrying amount of property, plant and equipment is used
for the subsequent accounting cost of investment properties on date of change of use.
Fair value is determined from market based evidence, by an appraisal undertaken by a professionally qualified valuer with
experience in the location, category of the investment property, reputation, independence and whether professional
standards are maintained. It is the Group’s policy to have all investment properties externally valued at intervals of not less
than three years or a third of the properties each year. Internal valuations are undertaken with reference to current market
conditions and available information for those investment properties not externally valued at each reporting date. It is the
policy of the Group to review the fair value of each investment property at each reporting date and to cause investment
properties to be revalued to fair values.
Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal
and the carrying amount of the item) is recognised in profit or loss.
PROPERTY PLANT & EQUIPMENT
Property plant and equipment is recognised at cost. Depreciation and amortisation is calculated on the straight line (SL) or
diminishing value (DV) basis so as to write off the net cost of each item of property, plant and equipment over its expected
useful life to the Group. Rates used for each class of asset are:
Class
Rate
Method
Plant and equipment
25-50%
SL/DV
Buildings
2.5%
SL
INTANGIBLE ASSETS
Only intangible assets that have been purchased or paid for by the Group are recognised in the accounts. Internally
generated intangibles such as management rights on Communities that the Group has constructed are not recognised in the
accounts.
Management rights and letting rights have a finite life and are carried at the lower of cost or recoverable amount. The
management rights and letting rights are amortised using the straight line method over 40 years being the estimated useful
life (for strata-titled villages), or over the period of the management right contract (for single-owner villages).
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Rent rolls have a finite life and are carried at the lower of cost or recoverable amount. Rent rolls are amortised using the
straight line method over 15 years being the estimated useful life
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised, instead goodwill is
reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. Goodwill acquired is allocated to each of the cash-generating units expected to benefit from the
combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to
which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an
impairment loss is recognised. Impairment losses for goodwill are not subsequently reversed.
IMPAIRMENT OF ASSETS
Financial Assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.
An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset
previously recognised in equity is reclassified to profit or loss. Any impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised
cost, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal
is recognised directly in other comprehensive income.
Non-Financial Assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill
and intangible assets that have indefinite lives, recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the
purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-
generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to
cash-generating units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying
amount of the other assets in the unit (group of units) on a pro rata basis.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. Except for goodwill, an impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets including investment properties, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
FINANCIAL ASSETS AND LIABILITIES
A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial
assets are derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group
transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset.
Regular purchases and sales of financial assets are accounted for at trade date i.e. the date that the Group commits itself to
purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligation specified in the contract expire or
are discharged or cancelled.
An instrument is classified as at fair value through profit and loss if it is held for trading or is designated as such upon initial
recognition. Financial instruments are designated at fair value through profit or loss if the group manages such investments
and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk
management or investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss
when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes are
recognised in profit or loss.
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or
determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not
classified into any of the other categories (at fair value through profit or loss, loans and receivables or held-to-maturity
investments) are also included in the available-for-sale category.
NON-CURRENT ASSETS (OR DISPOSAL GROUPS) CLASSIFIED AS HELD FOR SALE
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. They are measured at the lower of their carrying
amount and fair value less costs to sell. For non-current assets or assets of disposal groups to be classified as held for sale,
they must be available for immediate sale in their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal
group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised
by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of the disposal group) are not depreciated or amortised while they are
classified as held for sale. Non-current assets classified as held for sale and the assets of a disposal group classified as
held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a
disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.
TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid at that date. The amounts are unsecured and are generally settled within 30-60 days.
BORROWINGS
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be
drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which is relates.
The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-
convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included
in shareholders’ equity, net of income tax effects.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss as other income or finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all
or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference
between the carrying amount of the financial liability and the fair value of the equity instruments issued.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
EMPLOYEE BENEFITS
Short-term Employee Benefits
Liabilities for wages and salaries, annual leave and long service leave expected to be settled within 12 months of the
reporting date are recognised in current liabilities, and are measured as the amounts expected to be paid when the liabilities
are settled inclusive of on-costs. Sick leave is non-vesting and is expensed as paid.
Long-term Employee Benefits
The liabilities for annual leave and long service leave expected to not be settled within 12 months of the reporting date are
recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is
measured as the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date. Consideration is given for expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields as at the reporting date on corporate
bond rates with the terms to maturity that match, as closely as possible, the estimated future cash outflows.
PROVISIONS
Provisions are recognised when the Group has a present obligation, the future sacrifice of economic benefits is probable,
and the amount of the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties surrounding the obligation.
RETIREMENT VILLAGE RESIDENT LOANS
These loans, which are repayable on the departure of the resident, are classified as financial liabilities at fair value through
profit and loss with resulting fair value adjustments recognised in the income statement. The fair value of the obligation is
measured as the ingoing contribution plus the resident’s share of capital appreciation to reporting date. Although the
expected average residency term is more than ten years, these obligations are classified as current liabilities, as required
by Accounting Standards, because the Group does not have an unconditional right to defer settlement to more than twelve
months after reporting date.
This liability is stated net of accrued deferred management fees at reporting date, because the Group’s contracts with
residents require net settlement of those obligations.
FINANCE COSTS
Finance costs include interest on short-term and long-term borrowings, amortisation of discounts or premiums relating to
borrowings, amortisation of ancillary costs in connection with the arrangement of borrowings and finance lease charges.
Finance costs incurred whilst qualifying assets are under construction are capitalised in the period in which they are
incurred. Once each project is completed and ready for sale, subsequent finance costs are expensed when incurred. All
other finance costs are expensed when incurred.
GOODS AND SERVICES TAX
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an
asset or as part of an item of expense.
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Receivables and payables are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables.
LEASES
Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the
leased property or, if lower the present value of the minimum lease payments. The corresponding rental obligations, net of
finance charges, are included in financial liabilities. Each lease payment is allocated between the liability and finance cost.
The finance cost is charged to the profit and loss over the lease period so as to produce a constant periodic rate of interest
on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is
depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no
reasonable certainty that the group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are
classified as operating leases. Operating lease payments are recognised as an expense on a straight line basis over the
lease term.
DIVIDENDS
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of
the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
CAPITAL MANAGEMENT
The Group considers its share capital and accumulated losses as capital. When managing capital, the objective is to ensure
the Group continues as a going concern, as well as to maintain optimum returns to shareholders and benefits for other
stakeholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the
entity.
The Group does not have any specific capital targets and nor is it subject to any external capital restrictions. The Board and
Senior Management meet monthly and review in detail the current cash position and cash flow forecasts having regard to
planned expansions and take the necessary action to ensure sufficient funds are available.
CONTRIBUTED EQUITY
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
EARNINGS PER SHARE
Basic Earnings Per Share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company, excluding any costs
of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
USE OF JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. 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.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have most significant effect on the amount recognised in the financial statements are described as follows:
Goodwill
The Group tests annually, or more frequently, if events or changes in circumstances indicate impairment on whether
goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on
the current cost of capital and growth rates of the estimated future cash flows. Refer to note 14 for further information.
33
EGH ANNUAL REPORT 2016
33
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Amortisation of Management Rights
Management rights are amortised over either 40 years (for strata-titled villages) or the period of the management right
contract (for single-owner villages).
For strata-titled villages where management rights are attached, the Group amortises its management rights over a period of
40 years (being the estimated useful life). The amortisation period used reflects the pattern in which the asset’s future
economic benefits are expected to be consumed by the Group. In determining the useful life, the Group considered the
expected usage of the assets, the legal rights over the asset and the renewal period of the management right agreements.
The management rights are attached to each individual village’s property and include options or the ability to renew the
contract. Taking these points into consideration, the Directors believe the amortisation period should be similar to the life of
the property rather than agreement period.
For Single-owner villages where management rights are attached, its management rights are amortised over the life of the
contract. This is because Eureka has materially less control over future contract renewals than it does with the strata-titled
villages. Eureka considers that it has materially less control over future contract renewals in single-owner villages primarily
because: (a) it does not own or have any sort of tenure in respect of the managers unit; and (b) a single vote of the owner
can elect to not renew Eureka’s management rights contract.
Investment Property – Classification
The Group classifies property as investment property when it meets the following key criteria:
•
•
The property is held by the Group to generate long term investment growth and ongoing rental returns; and
Ancillary services are insignificant to the arrangement as a whole.
Associated with these properties are insignificant ancillary services – principally the provision of food services to residents.
Judgement is required as to whether the ancillary services are significant. Management has determined that the ancillary
services are not significant by comparing the fair value of the ancillary services to the total income generated from the
property. In addition, qualitative factors have been considered as part of the assessment of ancillary services including both
operational and legislative considerations. An assessment of the qualitative and economic factors associated with these
services has been made and the ancillary services have been concluded not to be significant and hence property has been
recorded as investment property.
Properties that do not meet this criteria are classified as property, plant and equipment.
Investment Property – Measurement
The Group carries its investment property at fair value, with changes in fair value being recognised in profit or loss. The best
evidence of fair value is current prices in an active market for similar investment properties. Where such information is not
available, the Group determines a property’s value within a range of reasonable fair value estimates. In making its judgment,
the Group considers information from a variety of sources including:
a) Acquisition price paid for the property;
b) Recent prices of similar properties with adjustments to reflect any changes in economic conditions since the date of
the transactions that occurred at those prices; and
c) Capitalised income projections based upon a property’s estimated net market income, which is assumed to be a
level annuity in perpetuity and capitalisation rate derived from analysis of market evidence.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what
is significant to fair value and therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may
lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair
value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Recovery of Deferred Tax Assets
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future
taxable amounts will be available to utilise those temporary difference and tax losses.
PARENT ENTITY
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in Note 29. The accounting policies of the parent entity are
consistent with those of the Group, as disclosed above, except for the following:
•
•
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Financial Guarantees
Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of
the investment.
COMPARATIVES
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial
year amounts and other disclosures.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015
reporting periods. Eureka Group Holdings Limited assessment of the impact of these new standards and interpretations is
set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial
recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income
('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own
credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting
requirements are intended to more closely align the accounting treatment with the risk management activities of the entity.
New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be
measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures.
The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is yet to be assessed by the
Group.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be
presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be
satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the
service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied
over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised
as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial
position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's
performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and
any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this
standard from 1 July 2018 but the impact of its adoption is yet to be assessed by the Group.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
AASB 16 Leases
The new standard will be effective for annual periods beginning on or after 1 January 2019. Early application is permitted,
provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been applied, or is applied at
the same date as AASB 16. The key features of AASB 16 are as follows:
Lessee accounting
•
Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value.
• A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other
financial liabilities.
• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes
non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in
optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an
option to terminate the lease.
• AASB 16 contains disclosure requirements for lessees.
The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the
Group.
3. REVENUE
Revenue
Catering – managed properties
Catering – owned properties
Service fees
Management
Property maintenance and consulting services
Rental income
Other revenue
Other Income
Interest revenue
Forgiveness of debt
Net fair value gain on investment properties
Gain on sale of management rights
Other income
36
Consolidated
30 June 2016
$’000
30 June 2015
$’000
3,243
1,338
1,312
-
2,992
9,735
486
4,530
513
1,497
17
1,366
2,888
40
19,106
10,851
314
-
4,041
450
244
5,049
61
50
874
299
77
1,361
EGH ANNUAL REPORT 2016
36
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
4. ITEMS INCLUDED IN PROFIT/(LOSS)
Profit/(loss) before income tax expense includes the following specific items:
Rental expense relating to operating leases
- Minimum lease payments
255
372
Consolidated
30 June 2016
$’000
30 June 2015
$’000
Finance cost
- Interest and finance charges paid/payable for financial liabilities not at fair value
through profit or loss
Total finance cost
Amortisation
- Management rights
- Sale rolls
- Website
Total amortisation
Depreciation
- Plant & equipment
- Buildings
- Motor vehicles
Total depreciation
Defined contribution superannuation expense
1,733
1,733
151
3
1
155
86
20
7
113
238
858
858
127
4
1
132
25
8
1
34
78
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
5. INCOME TAX
The major components of income tax expense for the years ended
30 June 2016 and 2015 are:
Consolidated Statement of Profit or Loss
Current income tax
Deferred income tax
Income tax expense reported in the Statement of Profit or Loss
A reconciliation of tax expense and the accounting profit multiplied by the
applicable tax rate of 30% presents as follows:
Consolidated
30 June 2016
$’000
30 June 2015
$’000
-
-
-
-
-
-
Accounting profit before tax
10,467
3,105
Income tax calculated at 30%
Tax effect of permanent differences
Recognition of deferred tax assets not previously recognised
Income tax expense reported in the Statement of Profit or Loss
6. TRADE AND OTHER RECEIVABLES
Trade debtors
Other debtors
Financing extended
Provision for impairment
3,140
1
(3,141)
-
2,102
354
1,076
(98)
3,434
932
48
(980)
-
182
145
-
(21)
306
Trade receivables are non-interest bearing (unless otherwise stated) and are generally on 30 day terms.
During the period, short term financing has been extended to a third party. The financing incurs interest at 28% to 72% p.a.
and is due to be received within 12 months. The amounts advanced are secured over assets of the third party.
7.
INVENTORIES
Catering inventory – at cost
Terranora units
29
6,271
6,300
20
-
20
The Terranora units during the period were transferred from investment property and the balance represents 80 units. The
units were recognised at the date of transfer at fair value which, as inventory, is considered deemed cost. The costs of
additional development are capitalised to the inventory as incurred. Inventory is recorded at the lower of cost and net
realisable value. No valuation adjustments were required at 30 June 2016. The inventory is expected to be realised within 12
months via sales to third parties.
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
8. OTHER ASSETS
Security deposits
Prepayments
Capital replacement funds
Consolidated
30 June 2016
$’000
30 June 2015
$’000
4
194
621
819
4
155
-
159
A statutory charge, imposed under the Retirement Villages Act 1999 (Qld), exists over all amounts held in capital
replacement funds, which restricts the use for which these funds can be applied.
9. DEFERRED TAX ASSETS AND LIABILITIES
Recognised in the Statement of Financial Position
Deferred tax assets
Tax losses
Deferred tax liabilities
Difference in depreciation for tax and accounting
Investment properties
Net (assessable) and deductible differences on sundry items
Net deferred tax assets
Not recognised in the Statement of Financial Position
Unrecognised deferred tax assets
Tax losses
Net (assessable) and deductible differences on sundry items
Net unrecognised deferred tax assets
Reconciliation of Unrecognised tax balances
Opening unrecognised amounts
Recognition of temporary differences
Recognition and use of tax losses
Adjustment to prior period balances
Total movement
Closing balance
Consolidated
30 June 2016
$’000
30 June 2015
$’000
2,812
437
(187)
(2,869)
244
-
6,589
-
6,589
9,412
-
(3,260)
437
(2,823)
6,589
(131)
(262)
(44)
-
9,412
-
9,412
10,391
1
(543)
(437)
(979)
9,412
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have
not been recognised in respect of these items until it is probable that future taxable profits will be available against which the
Group can utilise these benefits. The benefits of the Group’s recognised and unrecognised tax losses will only be realised if
(a) The Group continues to meet the requirements of applicable tax laws to allow the losses to be carried forward and
utilised; (b) the Group earns taxable income in future periods; and (c) Applicable tax laws are not changed, causing the
losses to be unavailable.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
10. LOANS RECEIVABLE
Loans – vendor finance
Current
Non-current
Consolidated
30 June 2016
$’000
30 June 2015
$’000
605
605
66
539
605
625
625
84
541
625
The group acquired a loan book as part of the purchase of Elizabeth Vale Scenic Village Pty Ltd. Security for the loan
consists of a first ranking mortgage over the property to which the loan pertains.
Vendor finance loans have maturity dates of between 6.5 and 8.1 years and interest is payable on these loans at a rate of
between 5.50%-6.25%.
11. INVESTMENT IN SUBSIDIARIES
Equity Holding
Country of
Incorporation
30 June 2016
%
30 June 2015
%
Compton's Caboolture Pty Ltd
Compton's Villages Australia Unit Trust
Easy Living (Bundaberg) Unit Trust
Easy Living Unit Trust
ECG No. 1 Pty Ltd
EGL Finance Pty Ltd
Elizabeth Vale Scenic Village Pty Ltd
Eureka Care Communities Pty Ltd
Eureka Care Communities (Morphetville) Pty Ltd
Eureka Care Communities (Mount Gambier) Pty Ltd
Eureka Care Communities (Mount Gambier 2) Pty Ltd
Eureka Care Communities (Mount Gambier 3) Pty Ltd
Eureka Care Communities (Salisbury) Pty Ltd
Eureka Care Communities (Wynnum) Pty Ltd
Eureka Care Communities Unit Trust
Eureka Cascade Gardens (Belgian Gardens) Pty Ltd
Eureka Cascade Gardens (Bowen) Pty Ltd
Eureka Cascade Gardens (Cairns) Pty Ltd
Eureka Cascade Gardens (Couran Cove) Pty Ltd
Eureka Cascade Gardens (Lismore) Pty Ltd
Eureka Cascade Gardens (Margate) Pty Ltd
Eureka Cascade Gardens (Orange) Pty Ltd
Eureka Cascade Gardens (Southport) Pty Ltd
Eureka Group Care Pty Ltd
Eureka Property Pty Ltd
Eureka Easy Living Pty Ltd
40
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
-
-
-
-
-
-
100%
-
-
100%
-
100%
-
-
-
100%
100%
100%
EGH ANNUAL REPORT 2016
40
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Fig Investments Pty Ltd
Rockham Two Pty Ltd
Rockham Unit Trust
SCV Leasing Pty Ltd
SCV Manager Pty Ltd
SCV No. 1 Pty Ltd
SCV No. 2 Pty Ltd 1
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
-
-
-
100%
100%
100%
100%
There are no significant restrictions on the Company’s ability to access or use the assets and settle the liabilities of the
Group.
1 The entity was deregistered on 4 September 2015.
12. INVESTMENT PROPERTY
Consolidated
30 June 2016
$’000
30 June 2015
$’000
Investment properties at fair value
86,472
39,689
Movements in investment properties:
Balance at beginning of reporting period
Acquisitions
Transfer to inventory
Reclassification from property, plant and equipment
Transfer from assets classified as held for sale
Net increment due to fair value adjustment
Balance at end of reporting period
39,689
49,013
(6,271)
-
-
4,041
86,472
6,658
31,836
-
50
271
874
39,689
The Group’s investment properties are shown individually in the table below. The investments consist of twenty-three
retirement village assets along with associated manager’s units, surplus land and other rental units. The Group considers
their investments reside in one class of asset – Seniors Rental Villages.
The net change in fair value is recognised in profit or loss as net gain/(loss) on change in fair value of investment properties.
Fair value hierarchy disclosures for investment properties have been provided in Note 21.
EGH ANNUAL REPORT 2016
41
41
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Amounts recognised in profit or loss for investment properties:
Rental income
Direct operating expenses
Fair value gain recognised in other income
Consolidated
30 June 2016
$’000
30 June 2015
$’000
9,737
(6,088)
4,071
3,811
(1,812)
874
The group has no restrictions on the realisability of its investment properties and no contractual obligations to either
purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Certain assets are
however pledged as security for borrowings – Refer to note 17(a).
Details of investment properties are as follows:
Property
Location
Acquisition
date
Carrying
amount
Carrying
amount
30 Jun 16
30 Jun 15
$’000
$’000
92 Primrose Street Belgian Gardens
Belgian Gardens QLD
Bowen Village
Avenell Village on Vasey Bundaberg
Lot 21 134-136 King Street Caboolture
Bowen QLD
Bundaberg QLD
Caboolture QLD
Lot 43 134-136 King Street Caboolture (manager’s unit)
Caboolture QLD
53 & 54 34 King Street Caboolture (manager’s unit)
Caboolture QLD
80 134-136 King Street Caboolture (manager’s unit)
Caboolture QLD
Cascade Gardens Cairns
Cairns QLD
Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA
Elizabeth Vale Scenic Village 1
Elizabeth Vale Scenic Village 2
Rockhampton Village 1
Rockhampton Village 2
Elizabeth Vale SA
Elizabeth Vale SA
Frenchville QLD
Frenchville QLD
Lot 49 Hackham Community Centre (manager’s unit)
Hackham SA
97 144 Main South Road Hackham
33 Mardross Court Lavington
Lismore Village
Cascade Gardens Mackay
43 Macdonnell Court Margate
344 San Mateo Avenue Mildura
Lambert Village
Mt Gambier 2 Retirement Village
Amber Lodge
Alexam Place
60 Poplar Avenue Shepparton
Hackham SA
Lavington VIC
Lismore NSW
Mackay QLD
Margate QLD
Mildura VIC
Mt Gambier SA
Mt Gambier SA
Morphettville SA
Salisbury East SA
Shepparton VIC
84 10 Winani Street Slacks Creek (manager’s unit)
Slacks Creek QLD
7 Meron Street Southport
Eureka Group Holdings Limited and controlled entities
Couran Cove
Southport QLD
South Stradbroke
Island QLD
Jun-16
Dec-15
Oct-14
Sep-12
May-14
Jan-15
Jan-15
Jul-14
Dec-14
Oct-14
Apr-15
Oct-15
Dec-15
Oct-14
May-15
Jun-15
May-15
Apr-14
Jun-16
Jun-15
Sept-15
Dec-15
Jun-16
Feb-16
Jun-15
Jul-04
Jun-16
Jun-16
61 Marana Street Bilambil Heights
Notes to the Financial Statements
Bilambil Heights NSW
Dec-15
Lot 20 56A Moores Pocket Road Tivoli (manager’s unit)
FOR THE YEAR ENDED 30 JUNE 2016
Tivoli QLD
Myall Place Retirement Village
40 Federation Street Wynnum
Whyalla SA
Wynnum QLD
Mar-15
Jan-15
Oct-15
1,000
1,320
4,791
70
280
140
280
4,687
252
4,536
3,900
2,831
4,521
291
291
3,450
4,264
7,511
2,789
3,100
2,311
4,296
4,475
4,600
2,925
171
3,373
1,975
2,700
80
4,164
86,472
5,098
-
-
4,236
70
277
140
277
3,622
250
4,230
3,900
-
-
290
290
2,550
4,000
6,534
-
2,549
-
-
-
-
1,850
165
-
-
-
80
4,379
39,689
-
13. PROPERTY, PLANT & EQUIPMENT
42
Buildings at cost
Accumulated depreciation
Plant & equipment at cost
Accumulated depreciation
Motor Vehicles at Cost
Accumulated depreciation
Total property, plant & equipment
EGH ANNUAL REPORT 2016
42
Consolidated
30 June 2016
$’000
30 June 2015
$’000
642
(176)
466
1,439
(752)
687
88
(9)
79
1,232
642
(156)
486
1,139
(761)
378
15
(1)
14
878
Property, plant and equipment is pledged as security – refer note 17(a)
Reconciliation of movements in property, plant & equipment:
Opening balance at 1 July 2014
Additions at cost
Reclassification to investment property
Transfer (to)/from assets held for sale
Depreciation expense
Closing balance at 30 June 2015
Opening balance at 1 July 2015
Additions at cost
Reclassification to investment property
Transfer (to)/from assets held for sale
Depreciation expense
Closing balance at 30 June 2016
Buildings
$’000
Plant &
Equipment
$’000
Motor
Vehicle
$’000
Total
$’000
553
2
(11)
(50)
(8)
486
486
-
-
-
(20)
466
217
222
(36)
-
(25)
378
378
395
-
-
(86)
687
15
-
-
-
(1)
14
14
72
-
-
(7)
79
770
239
(47)
(50)
(34)
878
878
467
-
-
(113)
1,232
EGH ANNUAL REPORT 2016
43
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2016 EGH ANNUAL REPORT 2016 42 Amounts recognised in profit or loss for investment properties: Consolidated 30 June 2016 $’000 30 June 2015 $’000 Rental income 9,737 3,811 Direct operating expenses (6,088) (1,812) Fair value gain recognised in other income 4,071 874 The group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Certain assets are however pledged as security for borrowings – Refer to note 17(a). Details of investment properties are as follows: Property Location Acquisition date Carrying amount 30 Jun 16 $’000 Carrying amount 30 Jun 15 $’000 92 Primrose Street Belgian Gardens Belgian Gardens QLD Jun-16 1,000 - Bowen Village Bowen QLD Dec-15 1,320 - Avenell Village on Vasey Bundaberg Bundaberg QLD Oct-14 4,791 4,236 Lot 21 134-136 King Street Caboolture Caboolture QLD Sep-12 70 70 Lot 43 134-136 King Street Caboolture (manager’s unit) Caboolture QLD May-14 280 277 53 & 54 34 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 140 140 80 134-136 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 280 277 Cascade Gardens Cairns Cairns QLD Jul-14 4,687 3,622 Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA Dec-14 252 250 Elizabeth Vale Scenic Village 1 Elizabeth Vale SA Oct-14 4,536 4,230 Elizabeth Vale Scenic Village 2 Elizabeth Vale SA Apr-15 3,900 3,900 Rockhampton Village 1 Frenchville QLD Oct-15 2,831 - Rockhampton Village 2 Frenchville QLD Dec-15 4,521 - Lot 49 Hackham Community Centre (manager’s unit) Hackham SA Oct-14 291 290 97 144 Main South Road Hackham Hackham SA May-15 291 290 33 Mardross Court Lavington Lavington VIC Jun-15 3,450 2,550 Lismore Village Lismore NSW May-15 4,264 4,000 Cascade Gardens Mackay Mackay QLD Apr-14 7,511 6,534 43 Macdonnell Court Margate Margate QLD Jun-16 2,789 - 344 San Mateo Avenue Mildura Mildura VIC Jun-15 3,100 2,549 Lambert Village Mt Gambier SA Sept-15 2,311 - Mt Gambier 2 Retirement Village Mt Gambier SA Dec-15 4,296 - Amber Lodge Morphettville SA Jun-16 4,475 - Alexam Place Salisbury East SA Feb-16 4,600 - 60 Poplar Avenue Shepparton Shepparton VIC Jun-15 2,925 1,850 84 10 Winani Street Slacks Creek (manager’s unit) Slacks Creek QLD Jul-04 171 165 7 Meron Street Southport Southport QLD Jun-16 3,373 - Couran Cove South Stradbroke Island QLD Jun-16 1,975 - 61 Marana Street Bilambil Heights Bilambil Heights NSW Dec-15 2,700 - Lot 20 56A Moores Pocket Road Tivoli (manager’s unit) Tivoli QLD Mar-15 80 80 Myall Place Retirement Village Whyalla SA Jan-15 4,164 4,379 40 Federation Street Wynnum Wynnum QLD Oct-15 5,098 - Eureka Group Holdings Limited and controlled entities Notes to the Financial Statements FOR THE YEAR ENDED 30 JUNE 2016 EGH ANNUAL REPORT 2016 42 Amounts recognised in profit or loss for investment properties: Consolidated 30 June 2016 $’000 30 June 2015 $’000 Rental income 9,737 3,811 Direct operating expenses (6,088) (1,812) Fair value gain recognised in other income 4,071 874 The group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. Certain assets are however pledged as security for borrowings – Refer to note 17(a). Details of investment properties are as follows: Property Location Acquisition date Carrying amount 30 Jun 16 $’000 Carrying amount 30 Jun 15 $’000 92 Primrose Street Belgian Gardens Belgian Gardens QLD Jun-16 1,000 - Bowen Village Bowen QLD Dec-15 1,320 - Avenell Village on Vasey Bundaberg Bundaberg QLD Oct-14 4,791 4,236 Lot 21 134-136 King Street Caboolture Caboolture QLD Sep-12 70 70 Lot 43 134-136 King Street Caboolture (manager’s unit) Caboolture QLD May-14 280 277 53 & 54 34 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 140 140 80 134-136 King Street Caboolture (manager’s unit) Caboolture QLD Jan-15 280 277 Cascade Gardens Cairns Cairns QLD Jul-14 4,687 3,622 Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA Dec-14 252 250 Elizabeth Vale Scenic Village 1 Elizabeth Vale SA Oct-14 4,536 4,230 Elizabeth Vale Scenic Village 2 Elizabeth Vale SA Apr-15 3,900 3,900 Rockhampton Village 1 Frenchville QLD Oct-15 2,831 - Rockhampton Village 2 Frenchville QLD Dec-15 4,521 - Lot 49 Hackham Community Centre (manager’s unit) Hackham SA Oct-14 291 290 97 144 Main South Road Hackham Hackham SA May-15 291 290 33 Mardross Court Lavington Lavington VIC Jun-15 3,450 2,550 Lismore Village Lismore NSW May-15 4,264 4,000 Cascade Gardens Mackay Mackay QLD Apr-14 7,511 6,534 43 Macdonnell Court Margate Margate QLD Jun-16 2,789 - 344 San Mateo Avenue Mildura Mildura VIC Jun-15 3,100 2,549 Lambert Village Mt Gambier SA Sept-15 2,311 - Mt Gambier 2 Retirement Village Mt Gambier SA Dec-15 4,296 - Amber Lodge Morphettville SA Jun-16 4,475 - Alexam Place Salisbury East SA Feb-16 4,600 - 60 Poplar Avenue Shepparton Shepparton VIC Jun-15 2,925 1,850 84 10 Winani Street Slacks Creek (manager’s unit) Slacks Creek QLD Jul-04 171 165 7 Meron Street Southport Southport QLD Jun-16 3,373 - Couran Cove South Stradbroke Island QLD Jun-16 1,975 - 61 Marana Street Bilambil Heights Bilambil Heights NSW Dec-15 2,700 - Lot 20 56A Moores Pocket Road Tivoli (manager’s unit) Tivoli QLD Mar-15 80 80 Myall Place Retirement Village Whyalla SA Jan-15 4,164 4,379 40 Federation Street Wynnum Wynnum QLD Oct-15 5,098 - For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
13. PROPERTY, PLANT & EQUIPMENT
Buildings at cost
Accumulated depreciation
Plant & equipment at cost
Accumulated depreciation
Motor Vehicles at Cost
Accumulated depreciation
Total property, plant & equipment
86,472
39,689
Consolidated
30 June 2016
$’000
30 June 2015
$’000
642
(176)
466
1,439
(752)
687
88
(9)
79
1,232
642
(156)
486
1,139
(761)
378
15
(1)
14
878
Property, plant and equipment is pledged as security – refer note 17(a)
Reconciliation of movements in property, plant & equipment:
Opening balance at 1 July 2014
Additions at cost
Reclassification to investment property
Transfer (to)/from assets held for sale
Depreciation expense
Closing balance at 30 June 2015
Opening balance at 1 July 2015
Additions at cost
Reclassification to investment property
Transfer (to)/from assets held for sale
Depreciation expense
Closing balance at 30 June 2016
Buildings
$’000
Plant &
Equipment
$’000
Motor
Vehicle
$’000
Total
$’000
553
2
(11)
(50)
(8)
486
486
-
-
-
(20)
466
217
222
(36)
-
(25)
378
378
395
-
-
(86)
687
-
15
-
-
(1)
14
14
72
-
-
(7)
79
770
239
(47)
(50)
(34)
878
878
467
-
-
(113)
1,232
EGH ANNUAL REPORT 2016
43
43
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
14. INTANGIBLE ASSETS
Management rights – at cost
Accumulated amortisation
Carrying amount of management rights
Rent rolls – at cost
Accumulated amortisation
Carrying amount of sale rolls
Other intangibles – at cost
Accumulated amortisation
Carrying amount of other intangibles
Goodwill
Total intangible assets
Consolidated
30 June 2016
$’000
30 June 2015
$’000
4,512
(964)
3,548
140
(35)
105
41
(29)
12
3,859
(929)
2,930
140
(31)
109
37
(28)
9
1,955
1,955
5,620
5,004
The Group’s primary business activity is the management (through management rights agreements) of senior’s
accommodation throughout Australia. The Group’s primary intangible assets are management rights and goodwill. These
intangible assets, although separately classified per accounting standard requirements, all relate to the management of
senior’s accommodation. Their separate categorisation has arisen from acquisitions.
Impairment tests for Goodwill
Goodwill is monitored by the Board of Directors (who are identified as the chief operating decision makers) based on the
share of results of the owner operators net profit of the villages that EGH manages, less any overhead costs attributable to
the management of these villages. Goodwill has been allocated to the property management cash generating unit.
The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of a cash
generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions.
The calculations use cash flow projections based on financial budgets covering a five-year period. Cash flows beyond the
five-year period are extrapolated using an estimated long term growth rate.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. The
following key assumptions were used in the discounted cash flow model:
•
•
•
•
•
cash flows were projected over a five year period by applying a 2% growth rate (2015: 2%) to the most recent
years’ cash flows;
the terminal value was calculated using a growth rate of 2% (2015: 2%);
cash flows have been discounted using a pre-tax discount rate of 25% (2015: 25%);
cash flows do not take into account the management of any new villages; and
cash flows are based on historical results.
The 2% growth rate for the projected cash flow is considered conservative when compared with the business activities over
the previous 12 months.
44
EGH ANNUAL REPORT 2016
44
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Reconciliation of movements in intangible assets:
Management
Rights
$’000
Rent Rolls
$’000
Goodwill
$’000
Other
intangibles
$’000
Total
$’000
Opening balance at 1 July 2014
2,734
111
1,955
Additions at cost
Impairment of management rights
Transfer to/from assets held for sale
Amortisation expense
Closing balance at 30 June 2015
534
-
(209)
(127)
2,932
1
-
-
(4)
108
-
-
-
-
1,955
Opening balance at 1 July 2015
2,932
108
1,955
Additions at cost
Impairment of management rights
Disposals
Amortisation expense
Closing balance at 30 June 2016
800
-
(33)
(151)
3,548
-
-
-
(3)
105
-
-
-
-
1,955
8
2
-
-
(1)
9
9
3
-
-
(1)
11
4,808
537
-
(209)
(132)
5,004
5,004
803
-
(33)
(155)
5,619
The remaining amortisation period on a weighted average basis of the management rights are 23 years (2015: 23 years).
15. TRADE & OTHER PAYABLES
Trade creditors and accruals
Retirement Village Resident Loans1
Capital Replacement Obligations
Acquisition related accruals
Deferred consideration
1 Retirement Village Resident Loans are measured at fair value – refer to Note 21.
16. PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
Consolidated
30 June 2016
$’000
30 June 2015
$’000
1,435
1,162
621
470
-
3,688
144
144
41
41
499
-
-
-
109
608
64
64
-
-
EGH ANNUAL REPORT 2016
45
45
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
17. OTHER FINANCIAL LIABILITIES
Current
Commercial bills – secured
Insurance funding
Finance lease
Motor vehicle loan
Non-current
Commercial bills – secured
Finance lease
Motor vehicle loan
Consolidated
30 June 2016
$’000
30 June 2015
$’000
(a)
5,087
12
8
16
5,123
356
10
24
4
394
(a)
37,374
18,904
9
10
-
9
37,393
18,913
(a) Commercial bills and advances
Terms and conditions – 30 June 2016
As at 30 June 2016, the Group has access to the following facilities:
National Australia Bank (“NAB”):
•
•
•
•
•
•
•
•
Commercial bill – secured fully drawn limit of $2,349,000. Expires on 31 January 2017. Principal repayment of $30,000
per month. Interest is payable at a variable rate on this facility (currently 4.49%).
Commercial bill – secured fully drawn limit $16,700,000. Expires on 31 December 2019. Monthly interest only
repayment. Interest on this facility has been fixed until 31 December 2019. Interest is payable at the rate of 4.98% on
$7,000,000 and 4.99% on $9,700,000.
Commercial bill – secured fully drawn limit of $2,525,000. Expires on 29 March 2018. Monthly interest only repayment.
Interest is payable at a variable rate on this facility (currently 4.44%).
Commercial bill – secured fully drawn limit of $3,700,000. Expires on 31 August 2020. Monthly interest only repayment.
Interest is payable at a fixed rate of 4.85%.
Commercial bill – secured fully drawn limit of $3,000,000. Expires on 31 August 2020. Monthly interest only repayment.
Interest is payable at a variable rate on this facility (currently 4.86%).
Commercial bill – secured fully drawn limit of $6,500,000. Expires on 31 August 2020. Monthly interest only repayment.
Interest is payable at a fixed rate on this facility of 4.97%.
Commercial bill – secured fully drawn limit of $2,800,000. Expires on 29 March 2019. Monthly interest only repayment.
Interest is payable at a variable rate on this facility (currently 4.45%).
Commercial bill – secured fully drawn limit of $2,461,250. Expires on 30 June 2019. Monthly interest only repayment.
Interest is payable at a variable rate on this facility (currently 4.39%).
Westpac Banking Corporation (“Westpac”):
•
Commercial bill – secured fully drawn limit of $2,700,000. Expires on 31 December 2016. Monthly repayment of
$100,000 per month commenced from April 2016. Interest is payable at a variable rate on this facility (currently 5.31%).
The loans are secured by:
• Registered mortgages over its managers’ units and other real estate at its Communities (carrying amount of
$92,758,611);
• Guarantee and indemnity given by EGH and its controlled entities ($31,045,250); and
•
Fixed and floating charges over the assets of EGH and its controlled entities (carrying amount of $110,701,756).
As at 30 June 2016, the Group had the following banking covenants:
• Minimum interest cover of 2.25 times as measured for the 3 month period ending on each quarter.
• Minimum capital adequacy of 30% as measured on a daily basis and reported quarterly.
• Minimum EBITDA of each of the freehold villages shall be as follows: Elizabeth Vale $202,300, Avenell Heights
$172,550, Whyalla $165,750, Mackay $269,025, Smithfield $96,475, Elizabeth Vale 2 $153,000, Lismore $229,500,
EGH ANNUAL REPORT 2016
46
46
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Mildura $129,625, Albury $108,800 Mt Gambier $127,500, Rockhampton 1 $160,650 and Rockhampton 2 $212,299,
Wynnum $182,750, Terranora $168,128 and Salisbury $286,875.
The Group complied with its covenants through 30 June 2016.
Terms and conditions – 30 June 2015
As at 30 June 2015, the Group has access to the following facilities with the National Australia Bank (“NAB”):
• Commercial bill – secured fully drawn limit of $2,709,000 (2014: $3,069,000). Expires on 31 January 2017. Principal
repayment of $30,000 per month. Interest is payable at a variable rate on this facility.
• Commercial bill – secured fully drawn limit $16,700,000 (2014: $3,800,000). Expires on 31 December 2019. Monthly
interest only repayment. Interest on this facility has been fixed until 31 December 2019. Interest is payable at the rate
of 4.99% on $7,000,000 and 4.98% on $9,700,000.
The loans are secured by:
• Registered mortgages over its managers’ units and other real estate at its Communities (carrying amount of
$39,689,242);
• Guarantee and indemnity given by EGH and its controlled entities ($20,947,000); and
•
Fixed and floating charges over the assets of EGH and its controlled entities (carrying amount of $51,834,144).
As at 30 June 2015, the Group had the following banking covenants:
• Minimum interest cover of 2.25 times as measured for the 3 month period ending on each quarter.
• Minimum capital adequacy of 30% as measured on a daily basis and reported quarterly.
• Occupancy levels at Mackay, Cairns, Bundaberg, Elizabeth Vale and Whyalla shall not fall below 80% for these
properties and reported half yearly; and
• EBITDA for Lismore Lake Holiday Park on a half yearly basis at a minimum of $215,000 per half year.
The Group complied with its covenants through 30 June 2015.
18. SHARE CAPITAL
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy is entitled to one vote, and on a poll, each share is entitled to one vote.
Ordinary shares have no par value and the company does not have a limited amount of authorised capital.
Balance at start of year
Shares issued from conversion of convertible notes at $0.06
Shares issued at $0.10 for acquisition of management rights
Shares issued from conversion of convertible notes at $0.10
Shares issued at $0.15 for cash
Shares issued at $0.15 for acquisition of
villages 1
Shares issued at $0.25 for cash
Shares issued at $0.25 for acquisition of
villages 2
Shares issued at $0.45 for cash
Shares issued at $0.54 for cash
Shares issued at $0.54 for cash
Shares issued at $0.58 for acquisition of
villages 3
Shares issued at $0.75 for cash
Consolidated
30 June 2016
Number
30 June 2016
$’000
30 June 2015
Number
30 June 2015
$’000
188,099,927
68,248
98,349,930
46,035
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,003,877
12,255,383
1,758,620
3,782
6,618
1,020
16,666,666
12,500
10,833,332
1,000,000
2,250,000
9,333,333
14,999,999
20,000,000
4,000,000
650
100
225
1,400
2,250
5,000
1,000
27,333,333
12,300
-
-
-
-
-
-
-
-
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Capital raising costs
On issue at end of the year
-
(1,308)
-
225,784,473
90,860
188,099,927
(712)
68,248
1 These shares were issued as part of the non-cash consideration paid to acquire the Easy Living Unit Trust and Easy Living
(Bundaberg) Unit Trust during the prior period.
2
These shares were issued as part of the non-cash consideration paid to acquire Elizabeth Vale Scenic Village Pty Ltd
during the prior period.
3
These shares were issued as part of the non-cash consideration paid to acquire Rockham Two Unit Trust during the
period.
Options
No options were issued during the period.
19. CASH FLOW INFORMATION
(a) Reconciliation of cash
Cash at bank and on hand
Consolidated
30 June 2016
$’000
30 June 2015
$’000
6,841
5,154
(b) Reconciliation of profit/(loss) for the year to net cash flow from operating activities
Profit/(loss) for the year
Depreciation and amortisation
Impairment – management rights
Impairment – assets held for sale
Asset revaluation
(Gain)/loss on sale of management rights and managers units
Other income
Forgiveness of debt
(Increase)/decrease in:
- Trade and other receivables
- Inventories
- Other current assets
Increase/(decrease) in:
- Trade and other payables
- Provisions
Net cash flow from/(used in) operating activities
48
Consolidated
30 June 2016
30 June 2015
$’000
$’000
10,467
268
-
-
(4,041)
(450)
-
-
(2,848)
(10)
(39)
772
121
4,240
3,105
166
-
47
(874)
(299)
(72)
(50)
62
(10)
(106)
(76)
26
1,919
EGH ANNUAL REPORT 2016
48
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
(c) Non cash investing and financing activities
During the financial year ended 30 June 2016, the Group entered into the following non-cash investing and financing
activities which are not reflected in the consolidated statement of cash flows:
•
•
•
The Group assumed borrowings of $2,525,000 and issued $1,020,000 of shares as part of the acquisition of
Rockhampton 2 village;
The Group assumed borrowings of $3,000,000 as part of the acquisition of Mt Gambier 2 village; and
The Group acquired $357,200 of plant and equipment with non-cash consideration.
In the prior financial year, the Group entered into the following non-cash investing and financing activities which are not
reflected in the consolidated statement of cash flows:
•
•
•
•
•
The Group issued $100,000 of shares for acquisition of management rights;
The Group issued $3,250,000 of shares for acquisition of villages;
The Group assumed borrowings of $3,700,000, investments of $235,124 and unitholder loans of $323,145 as part
of the acquisition of Bundaberg and Elizabeth Vale 1;
The Group acquired property, plant and equipment of $148,000 as settlement of trade receivables; and
The Group assumed borrowings of $1,640,000 as part of the acquisition of Elizabeth Vale Scenic Village Pty Ltd.
20. FINANCIAL INSTRUMENTS
Overall policy
The Board of Directors have overall responsibility for the establishment and oversight of the risk management framework.
The Board of Directors are responsible for developing and monitoring risk management policy. Risk management policy is to
identify and analyse the risks faced by the entity, to set limits and controls, and to monitor risks and adherence to limits. Risk
management policy and systems are reviewed regularly to reflect changes in market conditions and Group’s activities. The
Group aims to develop a disciplined and constructive control environment in which all employees understand their roles and
obligations.
a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and amounts due from the senior
independent living communities in accordance with management agreements in place.
Credit risk arises principally from the Group’s cash and cash equivalents, receivables and other loans.
Maximum exposure to credit risk
Cash and cash equivalents
Trade and other receivables
Loans receivable
Consolidated
30 June 2016
$’000
30 June 2015
$’000
6,841
3,434
605
10,880
5,154
306
625
6,085
Cash and cash equivalents
Deposits of cash are only held with approved banks and financial institutions. The Group currently banks with National
Australia Bank.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristic of each customer or resident. The
Group has a diverse range of customers and residents and therefore there is no significant concentration of credit risk with
any single counterparty or group of counterparties.
The Directors have established a credit policy under which each new customer is analysed individually for creditworthiness
before the Group does business with them. The Group monitors and follows-up its accounts receivable to ensure collections
are being made promptly in accordance with contractual terms and conditions and actively pursues amounts past due.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect
to trade and other receivables. The Group has no concentrations of credit risk that have not been provided for. A significant
component of trade debtors that are past due and greater than 90 days ageing are either on a payment plan or considered
recoverable. The Group has not provided for the remaining amounts past due as management believes these amounts will
be received.
The ageing of trade receivables and other receivables at the reporting date was:
Due 0-30 days
Past due 30-60 days
Past due 60-90 days
Past due 90 + days
30 June 2016
30 June 2015
Gross amount
receivable
$’000
Provision for
Impairment
$’000
Gross amount
receivable
$’000
Provision for
Impairment
$’000
1,099
637
574
1,222
3,532
-
-
-
(98)
(98)
102
39
45
141
327
-
-
-
(21)
(21)
Loans receivable
The Group’s exposure to credit risk is limited to the vendor finance book balance which was part of the acquisition of
Elizabeth Vale Scenic Village Pty Ltd during the prior year. The loan book consists of 10 individual loan contracts. The
Group manages the units which are being held as security for the loans. Repayments are received monthly in accordance
with the individual contracts or alternative agreed arrangements in place.
Where applicable, an allowance for impairment has been made, that represents the estimate of impairment losses in respect
to the loans receivable. The Group has no concentrations of credit risk that have not been provided for.
Loans receivable
Current
Non-current
b) Liquidity risk
30 June 2016
Gross amount
receivable
$’000
Provision for
Impairment
$’000
66
539
605
-
(98)
(98)
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due.
This process involves the review and updating of cash flow forecasts and, when necessary, the obtaining of credit standby
arrangements and loan facilities. There are no unused borrowing facilities at the reporting date.
The tables below shows the Group’s financial liabilities classified into relevant maturity groupings based on their contractual
maturities.
30 June 2016
Trade and other payables
Commercial bills
Other financial liabilities
Total
Contractual
cash flows
$’000
Less than 6
months
$’000
Consolidated
6 - 12
months
$’000
1 – 2 years
$’000
More than 2
years
$’000
3,688
50,562
55
54,305
3,688
6,203
25
9,916
-
921
12
933
-
4,313
16
4,329
-
39,125
2
39,127
50
EGH ANNUAL REPORT 2016
50
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
30 June 2015
Trade and other payables
Commercial bills
Other financial liabilities
Total
c) Market risk
Contractual
cash flows
$’000
Less than 6
months
$’000
Consolidated
6 - 12
months
$’000
1 – 2 years
$’000
More than 2
years
$’000
608
23,324
47
23,979
499
706
15
1,220
109
654
5
768
-
1,193
21
1,214
-
20,771
6
20,777
Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income or the value of its
holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return.
d) Interest rate risk
The Group’s exposure to market interest rates arises from long term borrowings in the form of Commercial Bills. Borrowings
issued at variable rates expose the Group to interest rate risk. $15,835,250 of the commercial bills are at variable rates while
$26,900,000 is fixed (refer to note 17). The variable portion of the debt does not expose the group to any material interest
rate risk.
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of
existing positions, alternative financing, alternate hedging positions and the mix of fixed and variable interest rates.
21. FAIR VALUE MEASUREMENTS
Fair value hierarchy
The Group’s assets and liabilities are measured or disclosed at fair value, using a three level hierarchy, based on the lowest
level of input that is significant to the entire fair value measurement, being:
•
•
•
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at
the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly
Level 3: Unobservable inputs for the asset or liability
There were no transfers between levels during the financial year. The Group’s policy is to recognise transfers into and
transfers out of fair value hierarchy levels as at the end of the reporting period.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
Fair value of financial instruments (unrecognised)
The Group has a number of financial assets and financial liabilities (loans receivable, commercial bills, convertible notes,
loans from key management personnel and shareholder loans) which are not measured at fair value in the statement of
financial position. The fair values are not materially different to their carrying amounts, since the interest receivable/payable
is either close to current market rates or the instruments are short-term in nature, and therefore have not been disclosed.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Consolidated – 2016
Assets
Investment properties
Total assets
Liabilities
Retirement Village Resident Loans
Total liabilities
Consolidated – 2015
Assets
Investment properties
Total assets
Liabilities
Retirement Village Resident Loans
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
86,472
86,472
86,472
86,472
1,162
1,162
1,162
1,162
39,689
39,689
39,689
39,689
-
-
-
-
Valuation techniques for fair value measurements categorised within level 2 and level 3
At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into
account the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair
value estimates.
Investment properties have been valued using 2 methods, the capitalisation method and direct comparison approach. Under
the capitalisation method, fair value is estimated using assumptions regarding the expectation of future benefits. The
capitalisation method involves estimating the expected income projections of the property into perpetuity and applying a
capitalisation rate. The capitalisation rate is based on current market evidence. Future income projections take into account
occupancy, rental income and operating expenses. Under the direct comparison approach, key inputs are the recent sales
of comparable units in comparable villages. All resulting fair value estimates for properties are included in level 3.
The level 3 assets significant unobservable inputs and sensitivity are as follows:
Description
Valuation
technique
Significant
unobservable
inputs
Investment properties
– Retirement Villages
Capitalisation
method (1)
Capitalisation rate
Stabilised
occupancy
Range
(weighted
average)
5.67%-
14.00%
(10.90%)
68%-98%
(88%)
Relationship of unobservable input
to fair value
Capitalisation has an inverse
relationship to valuation.
Occupancy has a direct correlation to
valuation (i.e. the higher the
occupancy, the greater the value).
Investment properties
–
individual village
units
Direct
comparison
approach
Comparable sales
evidence
N/A
Comparable sales evidence has a
direct relationship to valuation.
(1) Significant increases (decreases) in any of the significant unobservable valuation inputs under the capitalisation method would result in a
significantly higher(lower) fair value measurement.
Fair value measurements using significant unobservable inputs (level 3)
Movements in level 3 asset items during the current and previous financial year are set out in note 12.
The Group has determined, as the transaction relating to Retirement Village Resident Loans was at arm’s length and at 28
June 2016, that it represented fair value at 30 June 2016.
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Valuation processes
Independent valuations have been obtained for three Retirement Villages at 30 June 2016 and were used as the basis for
determining their fair values. Selection criteria include market knowledge, experience and qualifications, reputation,
independence and whether professional standards are maintained.
Where an independent valuation has not been performed on an investment property as at 30 June 2016, management has
estimated the fair values by performing internal valuations based on valuations performed by an independent valuer
commissioned by the Group when acquiring the properties. Management commissioned an independent expert as at 30
June 2016 to provide commentary on the market conditions, recent transactions and capitalisation rates for each of the
villages owned by the Group. Based on the independent report, all capitalisation rates remained the same as at the time of
acquisition. Increases in valuation were specifically based on increased earnings achieved by Eureka during its term of
ownership.
22. COMMITMENTS
a) Operating leases: group as lessee
Non‑cancellable operating leases
The group leases various managers’ units under non-cancellable operating leases expiring within two to twenty-five years.
The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Within 1 year
Greater than 1 year but not longer than 5 years
Greater than 5 years
Consolidated
30 June 2016
$’000
30 June 2015
$’000
164
491
951
1,606
259
829
1,432
2,520
The amount disclosed for the lease of office space does not include any adjustments for CPI or market rental reviews.
b) Capital expenditure
The Group had no capital commitments for property, plant and equipment as at 30 June 2016.
As at 30 June 2016, the Group had a contractual capital commitment for the acquisition of investment property totalling
$75,000 less the deposit paid of $10,000. This commitment was not recognised as a liability as the relevant assets had not
yet been received.
23. EARNINGS PER SHARE
Net profit/(loss) used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares used in calculating basic
earnings per share
Adjustments made to ordinary shares & potential ordinary shares as a result of
convertible notes
Weighted average number of ordinary shares & potential ordinary shares used
in calculating diluted earnings per share
Eureka Group Holdings Limited and controlled entities
Basic earnings per share
Notes to the Financial Statements
Diluted earnings per share
FOR THE YEAR ENDED 30 JUNE 2016
30 June 2016
$’000
10,467
30 June 2015
$’000
3,105
Thousands
Thousands
201,505
138,769
-
-
201,505
138,769
5.19 cents
2.24 cents
5.19 cents
2.24 cents
For the year ended 30 June 2016, there were no dilutive transactions to be included in the diluted earnings per share
calculation.
EGH ANNUAL REPORT 2016
53
53
EGH ANNUAL REPORT 2016
54
EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
24. RELATED PARTY TRANSACTIONS
(a) Key management personnel compensation
Short term employee benefits
Post-employment benefits
Share-based payments
Other long term benefits
Termination benefits
Total
Consolidated
30 June 2016
30 June 2015
$’000
$’000
1,026
18
-
-
-
902
20
-
-
-
1,044
922
Detailed disclosures relating to key management personnel are set out in the remuneration report within the Directors'
Report.
(b) Other transactions with key management personnel
(i) Loans from key management personnel
Shareholder loan: Kathlac Pty Ltd
Balance at beginning of the year
Increase in loan amount
Loan repayments made
Interest charged
Balance at end of the year
Convertible Note: Kathlac Pty Ltd
Balance at beginning of the year
Interest charged
Interest paid
Conversion of convertible notes to shares
Balance at end of the year
Convertible Note: Ignition Capital and Ignition Capital 2 Pty Ltd
Balance at beginning of the year
Interest charged
Interest paid
Conversion of convertible notes to shares
Balance at beginning of the year
54
-
410
(411)
1
-
-
-
-
-
-
-
-
-
-
-
100
490
(596)
6
-
51
1
(2)
(50)
-
410
13
(23)
(400)
-
EGH ANNUAL REPORT 2016
55
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
(ii) Purchases from entities controlled by key management personnel:
The Group acquired the following goods and services from entities that are controlled by members of the Group’s key
management personnel:
Consulting fees
Commission
Rent
Underwriting fees
Capital raising fees
Amounts outstanding at the end of the reporting period in relation to these
transactions (included in Trade and other payables)
(iii) Fees received from entities controlled by Key Management Personnel:
Consolidated
30 June 2016
30 June 2015
$’000
$’000
398
10
91
-
347
272
-
23
101
-
159
6
The Group received fees for the following services from entities that are controlled by members of the Group’s Key
Management Personnel:
Caretaking and management fees
Amounts outstanding at the end of the reporting period in relation to these
transactions (included in Trade and other receivables)
16
25
57
25
(iv) Terms and conditions
All transactions were made on commercial terms and conditions and at market rates. Outstanding balances are unsecured
and are repayable in cash.
25. ULTIMATE PARENT ENTITY
The parent entity within the group is Eureka Group Holdings Limited, which is the ultimate parent entity within Australia.
26. CONTINGENCIES
There are no contingent liabilities or contingent assets at 30 June 2016 that require disclosure in the financial report.
27. OPERATING SEGMENTS
Identification of reportable operating segments and principal services
For the period ended 30 June 2016, the Group is organised into two operating segments, all located in Australia:
• Rental Villages – Ownership of senior’s rental villages; and
• Property Management - Management of seniors independent living communities.
The results not included in the two operating segments identified are treated as:
• Unallocated – Represents the consulting fees charged, corporate services functions costs, inventory, cash
balances and capital replacement funds.
The operating segments have been identified based on reports reviewed by the Board of Directors (who are identified as the
chief operating decision makers) who are responsible for assessing performance and determining the allocation of
resources. There is no aggregation of operating segments and the Board of Directors views each segments performance
based on profit after tax. The accounting policies adopted for internal reporting to the chief operating decision makers are
consistent with those adopted in the financial statements.
EGH ANNUAL REPORT 2016
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EGH annual report 2016Eureka Group Holdings Limited and controlled entitiesFor personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Segment information is prepared in conformity with the accounting policies of the group as discussed in note 2 and
Accounting Standard AASB 8.
No reporting or reviews are made of cash flows and as such this is not measured or reported by segment.
Consolidated - 30 June 2016
Rental
Villages
$’000
Property
Management
$’000
Unallocated
$’000
Total
$’000
Revenue
Interest revenue
Other revenue
Total Revenue
Expenses
Interest expense
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Segment Assets
Segment Liabilities
12,222
-
4,041
16,263
6,088
1,601
7,689
8,575
-
8,575
87,908
43,137
6,438
-
450
6,888
3,426
-
3,426
3,462
-
3,462
6,380
2,528
446
314
244
1,004
2,4411
132
2,573
(1,570)
-
(1,570)
17,0352
724
19,106
314
4,735
24,155
11,955
1,733
13,688
10,467
-
10,467
111,323
46,389
1 Included within unallocated expenses is employee benefits expense of $1.37m and other administrative expenses of $1.07m.
2 Included within unallocated assets is inventory of $6.27m, trade and other receivables of $2.83m, cash balances of $6.84m and capital
replacement funds of $0.62m.
Non-cash and other significant items included in profit above:
Gain on revaluation of investment property
Gain on sale of management rights
Depreciation & amortisation
Impairment of receivables
Segment acquisitions:
Acquisition of property, plant and equipment
Acquisition of investment property
Acquisition of intangibles
Acquisition of inventory
4,041
-
(50)
(39)
72
42,742
-
-
-
490
(175)
(7)
29
-
800
-
-
-
(43)
(52)
367
-
3
6,300
4,041
490
(268)
(98)
468
42,742
803
6,300
Rental
Villages
$’000
Property
Management
$’000
Unallocated
$’000
Total
$’000
4,490
920
5,410
1,944
576
2,520
6,361
441
6,802
4,655
172
4,827
-
-
-
1,6501
110
1,760
10,851
1,361
12,212
8,249
858
9,107
EGH ANNUAL REPORT 2016
57
Consolidated - 30 June 2015
Revenue
Other revenue
Total Revenue
Expenses
Interest expense
Total expenses
56
Eureka Group Holdings Limited and controlled entitiesEGH annual report 2016For personal use only
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
Profit before income tax expense
Income tax expense
Profit after income tax expense
Segment Assets
Segment Liabilities
2,890
-
2,890
40,543
16,888
1,975
-
1,975
5,863
2,757
(1,760)
-
(1,760)
5,4282
334
1 Included within unallocated expenses is employee benefits expense of $0.72m and other administrative expenses of $0.93m.
2 Included within unallocated assets is cash of $5.15m.
Non-cash and other significant items included in profit above:
Gain on revaluation of investment property
874
Forgiveness of debt
Gain on sale of management rights
Depreciation & amortisation
Impairment of receivables
-
-
-
-
Segment acquisitions:
Acquisition of property, plant and equipment
Acquisition of investment property
148
31,836
-
50
299
(150)
(47)
68
-
-
-
-
(16)
-
23
-
3,105
-
3,105
51,834
19,979
874
50
299
(166)
(47)
239
31,836
28.
REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services
provided by the auditor of the company and its related practices:
(i) Audit and other assurance services – Ernst and Young
Audit and review of financial statements
(ii)
Audit and other assurance services –BDO Audit Pty Ltd 1
Audit and review of financial statements
(iii) Other Services – BDO Audit Pty Ltd
Accounting advice
1 Outgoing auditor
Consolidated
30 June 2016
30 June 2015
$
$
79,000
-
72,475
107,000
-
5,000
151,475
112,000
EGH ANNUAL REPORT 2016
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2016
29. PARENT ENTITY DISCLOSURES
Information relating to Eureka Group Holdings Limited (parent entity):
Results of the parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the year
Financial position of parent entity at year-end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Share capital
Accumulated losses
Total equity
Consolidated
30 June 2016
30 June 2015
$’000
$’000
810
-
810
77,411
5,618
83,029
2,837
32,397
35,234
46,985
810
47,795
(1,248)
-
(1,248)
35,882
7,989
43,871
593
18,904
19,497
68,248
(43,874)
24,374
Guarantees entered into by the parent entity
The parent entity has provided financial guarantees in respect of the commercial bills amounting to $31,045,250 and is
secured by:
• Registered mortgages over managers’ units and other real estate at its Communities;
• Guarantee and indemnity given by EGH and its controlled entities; and
•
Fixed and floating charges over the assets of EGH and its controlled entities.
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2016 or 30 June 2015. For information about
guarantees given by the parent entity, please see above.
Contractual commitments for capital items
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2016.
30. SUBSEQUENT EVENTS
The Group has completed the due diligence and gone unconditional on 17 August 2016 on the acquisition of 55-unit village
in Orange, NSW known as Albert Street Gardens for $5.12m.
On 8 July 2016, the Company’s Share Purchase Plan (‘SPP’) was finalised. Due to overwhelming support from shareholders
the SPP was oversubscribed. The Board decided to increase the size of the SPP from $2.5m to $3.95m and allotted shares
on 14 July 2016 at 75 cents per share.
Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2016 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 subsequent financial years.
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Directors’ Declaration
FOR THE YEAR ENDED 30 JUNE 2016
In accordance with a resolution of the directors of Eureka Group Holdings Limited, I state:
1.
In the opinion of the Directors of Eureka Group Holdings Limited (the “company”):
a. The accompanying financial statements and notes are in accordance with the Corporations Act 2001,
including:
i. giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance
for the financial year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001;
b. There are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable; and
c. The financial statements and notes thereto are in accordance with International Financial Reporting
Standards as disclosed in Note 2.
2. This declaration has been made after receiving the declarations required to be made to the directors in accordance
with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.
On behalf of the Board
Robin Levison
Executive Chairman
Dated in Brisbane this 25th day of August, 2016
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Eureka Group Holdings Limited and controlled entities
Corporate Governance Statement
The Board has prepared a corporate governance statement that set outs the key corporate governance practices
approved by the Board and to which both the Board collectively and the Directors individually are committed.
In formulating and adopting its corporate governance principles, the Directors have adopted and other than where
explicitly stated complies with ASX Corporate Governance Principles and Recommendations, 3rd Edition and is current
as at 30 June 2016.
The Company's ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to
the relevant disclosures in the statement Corporate Governance Statement, the Company's 2016 Annual Report and
other relevance governance documents and materials on the Company's website, are provided in the corporate
governance section of the Company's website at http://www.eurekagroupholdings.com.au/governance/. The
Company's Corporate Governance Statement together with the ASX Appendix 4G and this Annual Report, were also
lodged with the ASX on 25 August 2016.
Owing to the size of the Group and the transition necessary to grow and fund the business, the Board has five Directors
of which three are non-executive Directors with one Director who is independent. The independent Director is chairman
of the two board committees and the committees are made up of non-executive Directors. Whilst this composition does
not fully comply with its charter and ASX recommendations, the Board believes the experience and skill set of the non-
executive Directors ensures both independent judgement and oversight of management is exercised by a majority of the
Board.
The Board has also established the following charters that are available on the Company’s website:
• Board Charter
• Audit & Risk Committee Charter
• Nomination & Remuneration Committee Charter
• Share Trading Policy
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Eureka Group Holdings Limited and controlled entities
Corporate Directory
Postal Address
Unit 7, 486 Scottsdale Drive, Varsity Lakes, QLD 4227
Board of Directors
Robin Levison ( Executive Chairman)
Lachlan McIntosh
Nirmal Hansra
Greg Rekers
Kerry Potter
Company Secretary
Oliver Schweizer
Solicitors
Romans & Romans Lawyers
609 Logan Rd,
Greenslopes QLD 4120
Tel: 07 3847 3333
Fax: 07 3847 3336
Mills Oakley
Level 14
145 Ann Street
Brisbane QLD 4000
Tel: 07 3228 0400
Fax: 07 3012 8777
Auditors
Ernst & Young111 Eagle St
Brisbane Qld 4000
Tel: 07 3011-3333
Fax: 07 3011-3344
Share Registry
Link Market Services – Brisbane
Level 12, 300 Queen Street
Brisbane Qld 4000
Call Centre: 02 8280-7454
Fax: 07 3228-4999
Listing Details
ASX Limited Brisbane
Code: Shares – EGH
Australian Business Number
15 097 241 159
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Security Holder Information
Distribution of Securities as at 22 August 2016
Number
of
Securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total Security
Holders
No of
Shareholders
287
409
214
493
180
1,583
Marketable Shares
There were 196 holders of less than a marketable parcel of 667
shares holding a total of 51,212 shares.
Voting Rights
Ordinary Shares carry voting rights of one vote per share. Options
carry no voting rights.
Twenty Largest Ordinary Shareholders as at 22 August 2016
No of Ordinary
Shares Held
% of Issued
Share Capital
National Nominees Limited
J P Morgan Nominees Australia Limited
Robin Levison (through controlled entities)
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Lachaln McIntosh (through controlled entities)
HSBC Custody Nominees (Australia) Limited
Wavet Fund No 2 Pty Ltd
Richard Mews (through controlled entities)
Sandhurst Trustees Ltd
Brazil Farming Pty Ltd
Kerry Potter (through controlled entities)
PPK Investment Holdings Pty Ltd
Mr Alister Charles Wright
Greg Rekers (through controlled entities)
Armada Trading Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 3
UBS Nominees Pty Ltd
G & P Investments (NSW) Pty Limited
Moat Investments Pty Ltd
Total
30,441,929
26,663,680
12,590,808
12,587,422
12,529,589
11,916,166
11,326,536
7,920,000
4,882,713
4,779,646
3,773,333
2,906,442
2,438,000
2,420,000
2,140,608
1,818,937
1,750,099
1,743,323
1,670,000
1,612,217
13.18%
11.54%
5.54%
5.45%
5.42%
5.16%
4.90%
3.43%
2.11%
2.07%
1.63%
1.26%
1.06%
1.05%
0.93%
0.79%
0.76%
0.75%
0.72%
0.70%
157,911,448
68.35%
Securities in which Directors have a Relevant Interest at 22 August
2016
Ordinary Shares
Options
Robin Levison
Lachlan McIntosh
Nirmal Hansra
Greg Rekers
Kerry Potter
Total
12,590,808
11,916,166
583,334
2,140,608
2,906,442
30,137,358
-
-
-
-
-
-
65
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All photo’s included in this AR are actual photo’s of Eureka residents and villages.
For personal use only