20
20
Annual
Report
Contents
Executive Chairman’s report
FY2020 Highlights
Directors’ report
Financial statements
Notes to the financial statements
Directors’ declaration
Independent Auditor’s report
Auditor’s independence declaration
Corporate Governance Statement
Security Holder information
Corporate Directory
iv
viii
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17
21
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65
72
73
74
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2 0 2 0 Annual Report
i i i
Executive
Chairman’s Report
Financial Review
For the year ended 30 June 2020, Eureka Group Holdings
Limited (Eureka) reported a net profit after tax of $8.10 million.
This compares to a net profit before and after tax of $6.79
million in 2019.
All key financial metrics improved over the prior year:
Portfolio Highlights
•
•
•
•
•
•
Acquisition of Liberty Villas in February 2020, a 124-unit
village in Bunderberg, Queensland.
Disposal of 27 units at Terranora for total consideration of
$6.39 million and a realised gain on sale of $1.03 million.
Since balance date, a further 5 units have settled and 2 units
have exchanged generating total proceeds of approximately
$1.99 million (as at 30 September 2020).
Achieved year-end occupancy of 95%. This compares to
91% in 2019.
Solar(cid:1) energy(cid:1) enhancement(cid:1) completed(cid:1)
in 13 villages.
Subsequent to year end, the Board approved a 22-
unit expansion of the Wynnum village in Brisbane,
to be
completed by 1 July 2021.
•
•
•
share
at 3.52
Earnings per
19%.
Earnings before interest, tax and depreciation (EBITDA)
from core operations at $8.70 million, up
11%.
Net Operating Cash Flow at $7.61 million, up 60%. This
includes a one off prior year GST refund of $0.64 million.
cents, up
The result included a net gain on the revaluation of invest-
ment properties and other assets of $2.42 million, including
the Tasmanian village portfolio held in joint venture, and a
gain on the sale of Terranora units of $1.03 million.
Net debt increased by $5.85 million following the Liberty
Villas acquisition during the year (see below) and the gearing
ratio, calculated as net debt to net debt plus equity, increased
marginally to 37.7% (2019: 36.2%).
Operations Review
In the latter part of the 2019 financial year, the management
team carried out a comprehensive review of operations and
commenced a two year business plan to reset the operating
platform based on five operating pillars (the Five Pillar Plan).
The successful implementation of the first year of the business
plan has laid the foundation for the improved operating
performance and a lift in the quality of earnings as evidenced
by the net operating cash flow.
The focus on occupancy and revenue optimisation resulted in a
positive revenue trend. The redefining of support office
functions and village manager roles created a higher level of
engagement between the support office and the village
network. This has led to increased accountability across the
group and enabled village managers to elevate their interaction
within the communities in which they are located.
Net profit after tax
Income tax expense
Depreciation, amortisation & finance costs
EBITDA
Net gain on revaluation of investment property and other assets
Impairment of intangible and other assets
Gain on sale of Terranora units
Refund of prior period GST
EBITDA from core options
Net operating cashflow
Earnings per share
Dividends per share
FY2020
$’000
8,095
980
3,099
12,174
(2,418)
619
(1,031)
(644)
8,700
7,614
Cents
3.52
1.10
FY2019
$’000
6,794
--
2,991
9,785
(1,953)
--
--
--
7,832
4,745
Cents
2.95
1.00
CHANGE
19%
24%
11%
60%
19%
10%
i v
2 02 0 Annual Report
4
FY20 Recap �al‐ Business Gr
FY20 Recap - Reset The Operating Platform
Reset The Operating Platform
owth + Scaling
Exponen
Occupancy, Revenue +
Cost Initiatives
Team Culture +
Engagement
Safety, Risk +
Compliance
Improve referral network
to grow occupancy &
revenue
Cost reduc�on ini�a�ves
Increase opera�ng
intensity, accountability and
quick decision making
Training & development
strengthened to support
team through COVID-19
period
Ongoing commitment to
safety for all and
standardisa�on of policies
Procedures implemented
to mitigate COVID-19 risk
Informa�o
n Systems +
Information Systems +
Information Systems
nology
Tech
Technology
Technology
+
Improve and standardise
Applica
�ons
Applications
Applications
Customer relationship
management and data
analytics
Marketing and digital
channels to connect with
customers and decision
makers
Impact of COVID-19
During the second half of the year, Eureka responded proactively to the Coronavirus pandemic (COVID-19), given that senior
Australians are classified as a higher risk demographic.
Eureka established a COVID-19 Management Response Team and introduced a management plan for higher risk infections and
contagious illnesses within villages. The plan covered heightened hygiene practices, closure of communal areas, limiting visits to
villages, raising symptom awareness, reinforcing the ‘stay at home’ and self-isolation’ messages and ensuring a safe and stable
food supply. COVID-19 has had a profound social, economic and health impact on our daily lives. These changed circumstances
have put considerable stress on our teams and residents.
The health and wellbeing of our staff and residents in a safe, secure and comfortable environment has been the paramount
consideration in establishing and administering the management plan for COVID-19. We thank our staff who have assiduously
carried out the additional responsibilities to ensure the safety of our residents. We thank our residents, families and carers for
their co-operation and compliance during a difficult period.
Environmental, Social and Corporate
Governance (ESG)
Eureka values the contribution it makes within the social
infrastructure segment in which it operates.
to deliver on
Eureka’s focus is on creating sustainable communities.
The Board is developing an investing and environmental
sustainability strategy to guide the Group over the next
few years
its broader economic,
environmental and social goals. A key focus of the
integrate and promote greater
to
strategy will be
environmental responsibility and
resource-efficient
processes across Eureka’s operations and activities.
The Board
implementing and
communicating some of these ESG initiatives in 2021.
is committed
to
2 0
2 0 Annual Report
v
Dividend
Eureka paid the following dividends to shareholders for the
year end 30 June 2020:
•
•
an interim unfranked dividend of 0.55 cents per share
was paid on 25 March 2020; and
a final unfranked dividend of 0.55 cents per share was
paid on 25 September 2020.
Outlook
Eureka expects further benefits from the Five Pillar Plan to flow
through to the 2021 financial year including from revenue,
occupancy and cost initiatives. Implementation of an integrated
technology system is a priority in 2021. Recent new appointments
in marketing and workplace, health and safety have provided
further depth to operational management capability and resources
to deliver on the second year of the Five Pillar Plan.
The broadening of marketing activities through digital and social
media channels to connect with new networks and customers is
underway.
The Eureka group has a strong empathetic culture with its residents
and will continue to improve the customer proposition and
experience in rental villages for independent seniors.
Eureka is establishing a sound financial platform and is well
positioned to accelerate its village acquisition and development
program. The focus on the growth of Eureka’s business as a
provider of affordable rental accommodation for independent
seniors will facilitate improved cash flows and shareholder returns
on operating assets in a low risk social infrastructure framework.
Eureka is committed to the profitable expansion of the business
that will enhance shareholder value on a sustainable basis.
The Eureka group has a strong empathetic culture with its
residents and will continue to improve the customer proposition
and experience in rental villages for independent seniors.
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2 02 0 Annual Report
6
Directors and Staff
On 31 December 2019, Mr Lachlan McIntosh resigned as a
Non Executive Director. Mr McIntosh was a former Chair-
man and substantial shareholder having joined the board in
2009.
Mr Greg Paramor AO joined the board as an independent
Non Executive Director on 19 June 2020. Mr Paramor is an
experienced company director and brings extensive
expertise to the board having been involved in the real
estate and funds management industry for over 40 years.
Mr Paramor’s commercial and real estate experience will be
invaluable to Eureka as it develops and executes on its
growth strategy in the affordable seniors' independent
living sector.
With Mr Paramor’s appointment, the Eureka board now has
a well balanced skill set covering property investment and
funds management, finance,
management, property
commercial
healthcare, organisational development,
experience and corporate governance.
The senior management group has delivered on the first
stage of the business turnaround plan and set the frame-
work for further business improvement and growth in 2021.
I thank all staff for their contribution and effort during the
year. To our shareholders, the Board thank you for your
continued support during the year.
Murray Boyte
Executive Chairman
6 October 2020
2 02 0 Annual Report
v i i
8
FY2020 Highlights
11%
EBITDA
in
core operations
to $8.7M [FY19: $7.83M]
Earnings per share
19%
|
3.52 cents 2.95 cents
[FY20]
[FY19]
GROWTH
IN CORE
OPERATIONS
95%
Occupancy
from 91% [FY19]
Dividends
10%
to 1.1 cents
per share
Assets
$
145M
Includes + 13.13M
acquisition
$
37.7 %
[FY19: 36.2%]
Gearing
$
8.46M
from non-core asset disposals
REALISED
2,147
from 2,119 [FY19]
UNITS
v i i i
2 02 0 Annual Report
Our Villages
38
Owned
Eureka Presence
Under Management
C a i r n s
N o r t h Q u e e n s l a n d
C a p r i c o r n C o a s t
W i d e B a y
To o w o o m b a
C e n t r a l N e w
S o u t h W a l e s
R e g i o n a l
V i c t o r i a
S E Q u e e n s l a n d
C o ff s H a r b o u r,
M a c q u a r i e ,
o r t
P
w c a s t l e
N e
C a n b e r r a
V i c t o r i a
T a s m a n i a
S o u t h A u s t r a l i a
Eureka is committed to the profitable expansion of the business
that will enhance shareholder value on a sustainable basis.
2 02 0 Annual Report
i x
308(cid:31)(cid:30)(cid:29)(cid:31)(cid:30)(cid:29)(cid:28)(cid:28)(cid:27)(cid:31)(cid:27)(cid:28)(cid:26)(cid:25)(cid:31)(cid:26)(cid:28)(cid:24)(cid:27)(cid:31)(cid:26)(cid:28)(cid:26)(cid:28)(cid:24)(cid:31)(cid:25)(cid:28)(cid:23)(cid:22)(cid:21)(cid:31)(cid:24)(cid:28)(cid:25)(cid:27)(cid:28)(cid:31)(cid:23)(cid:28) 20
20
Financial
Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
The Directors present their report on Eureka Group Holdings Limited (the “Company”) and its controlled entities (the “Group”,
“Eureka” or the “Consolidated Entity”) for the year ended 30 June 2020 (“the year”).
DIRECTORS
The following persons were directors of the Company during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Murray Boyte
Sue Renkin
Russell Banham
Greg Paramor
Lachlan McIntosh
Appointed 19 June 2020
Resigned 31 December 2019
PRINCIPAL ACTIVITIES
The principal activities of the Group include:
•
•
Providing accommodation and services to independent senior residents; and
Providing specialist property management and caretaking services for seniors’ independent living communities.
REVIEW OF OPERATIONS AND RESULTS
The Group has reported a profit after tax for the year of $8.10 million (2019: $6.79 million) and an EBITDA1 from core
operations of $8.70 million (2019: $7.83 million). The Group’s portfolio of residential village assets performed well with
increased revenue primarily due to the acquisition of a 124-unit rental village in Bundaberg Qld, improved occupancy to 95%
(2019: 91%) across the portfolio coupled with cost savings from the installation of solar power. The Group’s results include a
gain on the sale of units at Terranora NSW, asset revaluations, a refund of prior period goods and services tax (GST) and an
increased profit contribution from the joint venture which owns and operates the Tasmanian village portfolio.
A summary of the Group’s performance and reconciliation to the Group’s EBITDA1 from core operations is shown below:
Performance Summary
Profit after income tax expense
Income tax expense
Depreciation and amortisation
Finance costs
EBITDA1
(Gain)/Loss on fair value adjustment of:
-
-
-
Impairment of intangible and other assets
Gain on sale of Terranora units
Refund of prior period GST
EBITDA1 from core operations
Investment property
Other assets
Tasmanian villages – included in Share of profit of a joint venture
Basic earnings per share
Diluted earnings per share
Consolidated
30 June 2020
$’000
8,095
980
591
2,508
12,174
30 June 2019
$’000
6,794
-
225
2,766
9,785
(1,383)
53
(1,088)
619
(1,031)
(644)
8,700
3.52
3.52
(2,253)
300
-
-
-
-
7,832
2.95
2.95
1 EBITDA (Earnings before interest, tax, depreciation and amortisation) is an unaudited non-IFRS measure, however, the Directors believe
it is a readily calculated measure that has broad acceptance and is referred to by regular users of published financial statements as a
proxy for overall operating performance. EBITDA presented has been calculated from amounts disclosed in the financial statements.
The Directors note that 30 June 2020 EBITDA includes the impact of accounting for AASB 16 Leases, whilst the 30 June 2019 results
were prepared under the previous lease accounting standard requirements; refer to notes 2 and 15 for further explanations.
Eureka owns 30 villages, 5 of which are owned in a joint venture, and has 8 villages under management, representing 2,147
units (2019: 2,119 units).
1
ANNUAL REPORT 2020
1
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
The Group has recorded an income tax expense and a net deferred tax liability for the year of $0.98 million (2019: $nil). No
cash tax will be payable until the Group has utilised its revenue tax losses, all of which have now been recognised.
Financial Position
Key financial information in relation to the Group’s financial position is shown below:
Total assets
Net assets
Cash and cash equivalents
Debt
Shares on issue
Net tangible assets per share1
Balance sheet gearing2
$’000
$’000
$’000
$’000
‘000
cents
%
Consolidated
30 June 2020
30 June 2019
145,205
85,868
2,451
54,472
230,038
35.2
36.4
133,072
81,482
3,060
49,234
230,038
33.1
35.5
1 Net tangible assets per share excludes lease right of use (ROU) assets.
2 Balance sheet gearing is calculated as interest-bearing drawn debt, net of cash, divided by total assets net of cash.
Significant balance sheet movements during the financial year were as follows:
•
•
•
A reduction in inventory ($4.33 million) due to the sale of Terranora units, the sale of other non-core assets ($2.07
million), net drawdown of debt ($5.24 million) and an increase in the value of investment properties ($16.04 million)
through acquisitions, enhancements and asset revaluations.
ROU assets ($0.72 million) and lease liabilities ($0.87 million) have been recognised at 30 June 2020 as a result of
adopting AASB 16. Further details are contained in notes 2, 15 and 19.
A deferred tax liability was recognised during the year ($0.98 million).
Acquisitions and asset management
The Group acquired a 124-unit rental village in Bundaberg, Qld for $13.13 million (excluding transaction costs), on 28 February
2020. The Group also increased its ownership in non-wholly owned villages by acquiring 7 units for $0.65 million (excluding
transaction costs).
The Group spent $1.94 million on enhancing its owned villages through capital improvements including expenditure of $0.60
million on its solar energy program.
Disposals
The Group’s program of realising non-core and underperforming assets continued during the year including:
•
•
•
settlement of 27 units at Terranora, NSW for $6.39 million;
disposal of the property located at Bowen, Qld for $1.53 million; and
the sale of two houses in Mt Gambier, SA for $0.54 million.
Terranora
During the year, 27 units were sold and settled for total consideration of $6.39 million. An additional 4 units have settled and
1 unit exchanged, totalling $1.43 million subsequent to year-end. The remaining unsold units are held in inventory and valued
at the lower of cost or net realisable value.
The Group continues to hold a vacant 4.8 hectares of land $2.30 million (2019: $2.30 million) and manager’s unit $0.60 million
(2019: $0.60 million) as investment property at fair value.
Couran Cove
The McIntosh loan was repaid in full during the year.
The West Cabin loan of $0.32 million (2019: $0.32 million), is due to be repaid upon settlement of the sale contracts for two
cabins held as security against the loan. Note 8 contains further details.
The land option, which gives the Group a first right of refusal to purchase 60 proposed cabin sites for $50,000 per site at
Couran Cove, Qld is held at its assessed fair value of $1.05 million (2019: $1.24 million). Note 9 contains further details.
ANNUAL REPORT 2020
2
2
and
ued
lion
two
t
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
Capital management – debt & equity
Debt
The Group’s National Australia Bank (NAB) facility was increased from $55.00 million to $60.00 million to partly fund the
acquisition of the new village at Bundaberg, Qld. The Group was in compliance with all banking covenants during the year.
Under the terms of its NAB debt facility, Eureka is able to deposit and withdraw funds in accordance with its working capital
needs, subject to satisfaction of the bank’s covenants. At balance date the undrawn amount under the facility was $5.53
million.
The Westpac debt facility of $1.76 million was repaid and closed during the year.
Equity
The following changes in equity occurred during the year:
•
•
•
the on-market share buy-back was extended until 16 March 2021. No shares were bought back and cancelled during
the year (2019: nil);
there were 429,362 share rights outstanding at 30 June 2020 (30 June 2019: nil). Further details are provided in the
Remuneration Report; and
dividends of $3.57 million were paid during the year as noted below.
Impact of AASB 16 Leases
The Group adopted AASB16 Leases from 1 July 2019 using the modified retrospective method, whereby the Group has
recognised the cumulative effect of initially applying this standard as an adjustment to the opening balance of equity as at
1 July 2019 and has not restated comparatives, as permitted under the specific transition provisions in the standard. The
leases relate to office space, office equipment and a number of residential units which the Group sub-leases. The adoption of
AASB 16 Leases has resulted in a decrease in operating expenses and an increase in depreciation and finance costs. Given
the effect of the new accounting standard on the year end results and balance sheet at 30 June 2020, the Directors have
included the following tables. Further information on the impact of the new Leases standard is described in note 2 and 15.
Impact on Consolidated Statement of Financial Position
30 June
2019
$’000
Adjustment
on adoption
of AASB 16
$’000
1 July
2019
$’000
Transactions
during the
year
$’000
Assets
Right of use assets
Total assets
Liabilities
Other financial liabilities
Total liabilities
Net assets
Equity
Share capital
Accumulated losses
Total equity
-
133,072
49,490
51,590
81,482
94,352
(12,870)
81,482
Impact on Statement of Profit and Loss and Other Comprehensive Income
Lease expense1
Depreciation expense
Interest expense
Net profit before and after tax
Impact on Consolidated Statement of Cashflows
Cashflows from operating activities
Cashflows from financing activities
Net cashflows
-
-
-
-
-
-
-
880
880
880
133,952
1,029
1,029
50,519
52,619
(149)
81,333
-
(149)
(149)
94,352
(13,019)
81,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(158)
(158)
(162)
(162)
4
-
4
4
(268)
216
48
(4)
220
(220)
-
1 Lease expense is an unaudited non-IFRS measure and is the expense that would have been recognised under AASB117 if
AASB16 had not been applied.
3
ANNUAL REPORT 2020
3
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group, other than those addressed in the Directors’ Report and
in Note 33.
DIVIDENDS
Dividends paid during the year were as follows:
Final dividend for 2019: 1.0 cent per share (2018: nil)
Interim dividend for 2020: 0.55 cents per share (2019: nil)
Total dividends paid
30 June 2020
$’000
30 June 2019
$’000
2,300
1,265
3,565
-
-
-
A final dividend of 0.55 cents per share, amounting to $1.27 million, was declared at the date of signing these financial
statements and is payable on 25 September 2020. The financial effect of this dividend has not been brought to account in the
financial statements for the year ended 30 June 2020 and will be recognised in subsequent financial reports.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the 2021 financial year, Eureka is committed to:
•
•
•
•
Further expanding its core business of providing rental accommodation for independent seniors through the
active management of existing assets, the acquisition of additional villages and units, and the realisation of
development opportunities, including an expansion of the Group’s village in Wynnum, Qld;
Improving the performance of the existing portfolio with continued focus on maintaining and improving
occupancy through the ongoing strengthening of our relationships within our communities;
Implementing operational efficiencies, cost reduction and streamlined support services through process and
systems improvements across our villages and support office;
Recycling of capital through the divestment of the Group’s non-core assets.
MATERIAL BUSINESS RISKS
The Board is committed to monitoring and mitigating business risks faced by the Group, including the following key risks that
have the potential to materially impact its financial prospects:
•
•
•
Covid-19 - during the second half of the year, the Board has overseen the Group’s response to the COVID-19 pandemic.
The health, safety and wellbeing of Eureka’s staff, residents and families and the local communities in which it operates
is paramount to the Company. The Group acknowledges that many of its residents have a higher risk of serious illness
if they were to contract Covid-19, due to their age and propensity for underlying health issues. The Group has
implemented a range of best practice and preventative measures as recommended by the relevant authorities to protect
the health and well-being of all concerned and to minimise the risk of infection and transmission amongst residents and
staff. The independent-living nature of the accommodation in Eureka’s villages means that residents are able to self-
isolate readily and effectively to minimise the risk of viral transmission. Further, having a village network that is
geographically widespread through predominantly regional centres of Australia means there are no village clusters,
mitigating the risk of Covid-19 spreading from one village to another. The Group continues to closely monitor information
and recommendations in relation to Covid-19.
Acquisition risk – acquiring villages has and will continue to be a source of growth for the Group. Identifying properties
that meet the Group’s target performance hurdle rate and sit within the risk appetite set by the Board is critical to the
Group’s performance. The Group’s Board and management is experienced in acquiring properties and conducts
comprehensive analysis and due diligence as part of its acquisition process.
Changes in Government funding (pension, rent assistance and National Disability Insurance Scheme (NDIS)) – the Group
provides affordable rental accommodation predominantly to seniors and many of the villages’ residents are reliant on
government funding in the form of pensions or rent assistance and NDIS. An adverse change in government funding,
ANNUAL REPORT 2020
4
4
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
may have a direct impact on village occupancy, profitability and asset values. The Group manages its village and support
office costs having regard to occupancy levels.
•
Demand for non-core products and assets under review – the Group has exposure to non-core investments at Terranora
NSW (property) and Couran Cove Qld (loans) and various other assets under review (property & management rights).
The Group’s successful exit from these investments is dependent on sales occurring at forecast values within an
acceptable timeframe.
SUBSEQUENT EVENTS
Details of events that occurred after the end of the financial year are contained in Note 33.
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.
INFORMATION ON DIRECTORS
The details of each Director’s qualifications, experience and special responsibilities for those in office during the year are:
Name:
Title:
Qualifications:
Experience & expertise:
Other listed company directorships:
Former directorships (last 3 years)
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience & expertise:
Murray Boyte
Executive Chairman
BCA, MAICD, CMInstD, CA
Murray holds a Bachelor of Commerce and Administration from the Victoria University
in Wellington and is a member of the Australian Institute of Company Directors, the
Institute of Directors of New Zealand and Chartered Accountants Australia & New
Zealand.
Murray has over 35 years’ experience in merchant banking and finance, undertaking
company reconstructions, mergers and acquisitions in Australia, New Zealand, North
America and Hong Kong. In addition, Murray has held executive positions and
Directorships in the transport, horticulture, financial services, investment, health
services and property industries. He was the Chief Executive Officer of ASX listed
Ariadne Australia Limited from 2002 to 2015.
Abano Healthcare Group Limited (NZX), National Tyre & Wheel Limited (ASX: NTD)
and Hillgrove Resources Ltd (ASX: HGO).
Nil
Chair of the Board, Member of the Audit & Risk Committee, Member of the Nomination
& Remuneration Committee.
250,000
Nil
Sue Renkin
Non-Executive Director
RN, MBA, FCDA, GradDip Corp Gov, MAICD
Sue holds a Master of Business Administration from Monash University, a Graduate
Diploma in Corporate Governance from UNE and attended Harvard Business School
for a course on Competition and Strategy.
Sue enjoyed almost thirty years as CEO for private hospitals, emergency services and
not for profit entities. She now operates a portfolio career as a non-executive director
and executive coach and mentor.
Sue is Chair of Executive Growth, a Director of GMHBA Health Insurance, a Director
of the National Imaging Facility’s Governing Board, Chair of the South Eastern
Melbourne Primary Health Network and a strategic advisor to McKenzie Aged Care
Group. She is also a previous Telstra Business Woman of the year.
Other listed company directorships: Nil
Nil
Former directorships (last 3 years)
Chair of the Nomination & Remuneration Committee, Member of the Audit & Risk
Special responsibilities:
Committee until 14 August 2020.
Nil
Nil
Interests in shares:
Interests in options:
5
ANNUAL REPORT 2020
5
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
Name:
Title:
Qualifications:
Experience & expertise:
Russell Banham
Non-Executive Director
B. Com, GAICD, FCA
Russell has a Bachelor of Commerce degree, is a Graduate Member of the Australian
Institute of Company Directors and is a fellow of the Institute of Chartered Accountants
Australia and New Zealand.
Russell is an experienced company director with a demonstrated history of working in
various industries including mining & metals, property development and management,
manufacturing and gaming and hospitality. He is skilled in financial management, risk
management and corporate governance. He was an audit partner and had functional
leadership responsibilities at Deloitte, Ernst & Young and Andersen.
Russell currently serves as an independent non-executive director of HKSE listed
MGM China Holdings Limited, LSE listed National Atomic Company Kazatomprom
and Wiggins Island Coal Export Terminal Pty Ltd. He is also a member of the Audit
and Risk Management Committee of the Queensland Audit Office.
Other listed company directorships: MGM China Holdings Limited (HKSE); National Atomic Company Kazatomprom (LSE
Former directorships (last 3 years)
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience & expertise:
and AIX)
Nil
Chair of Audit & Risk Committee, Member of the Nomination & Remuneration
Committee (appointed 1 January 2020).
Nil
Nil
Greg Paramor AO
Non-Executive Director (appointed 19 June 2020)
FAPI, FAICD, FRICS
Greg has extensive property expertise with more than 40 years’ experience in the real
estate and fund management industry. He was the co-founder of Growth Equities
Mutual, Paladin Australia and the James Fielding Group. He was the CEO of Mirvac
Group between 2004 and 2008 before becoming the Managing Director of Folkestone
Limited, a specialist property funds management group.
Greg is currently a non-executive director of ASX-listed Charter Hall Group, a board
member of the Sydney Swans, the Chair of BackTrack Youth Works, a Trustee of The
Nature Conservancy (Australia) and a board member of the Garvan Research
Foundation.
He was awarded an Officer in the General Division (AO) of the Order of Australia in
January 2015.
Other listed company directorships: Charter Hall Group Ltd (ASX: CHC).
Former directorships (last 3 years)
Special responsibilities:
Interests in shares:
Interests in options:
Folkestone Limited
Member of Audit & Risk Committee (appointed 14 July 2020)
4,700,000
Nil
Name:
Title:
Qualifications:
Experience & expertise:
Lachlan McIntosh
Non-Executive Director (resigned 31 December 2019)
B Com, CA
Lachlan has a Bachelor of Commerce degree and is a Member of Chartered
Accountants Australia and New Zealand.
Lachlan 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: Nil
Former directorships (last 3 years)
Special responsibilities:
Interests in shares:
Interests in options:
Onterran Limited (ASX: OTR).
Member of the Audit & Risk Committee (until 31 December 2019), Member of the
Nomination & Remuneration Committee (until 31 December 2019).
Nil
Nil
ANNUAL REPORT 2020
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Eureka Group Holdings Limited and controlled entities
Directors’ Report
COMPANY SECRETARY
Laura Fanning, B. Bus, CA, GradDip Corp Gov
Laura is a Chartered Secretary and Chartered Accountant with more than 20 years’ financial, governance and commercial
experience. Laura is currently the Company Secretary at National Tyre & Wheel Limited and has previously held Chief
Financial Officer and Company Secretary roles at National Veterinary Care Limited and Unity Pacific Group Limited, as well
as senior management positions in other listed and unlisted companies. She has gained broad financial and secretarial
experience across several industries including funds management, property, veterinary services, wholesale distribution and
franchising.
DIRECTORS AND MEETINGS ATTENDED
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board Committee held during the
year, and the number of meetings attended by each Director were:
Name
Murray Boyte
Sue Renkin
Russell Banham
Greg Paramor
Lachlan McIntosh
Directors’
Meetings
Audit & Risk Committee
Meetings
Held1
17
17
17
1
6
Attended
17
17
17
1
2
Held1
9
9
9
-
4
Attended
9
9
9
-
4
Nomination &
Remuneration
Committee Meetings
Held1
Attended
4
4
4
4
4*
4*
-
-
1
2
1 Number of meetings held while a director during the financial year
* Attended 2 by invitation only
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for Eureka’s non-executive directors, executive directors and
other key management personnel (“KMP”) for the year ended 30 June 2020. The information provided in this remuneration
report has been audited as required by Section 308(3C) of the Corporations Act 2001.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
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 policy 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 comprises remuneration determined having regard to industry practice and the
need to attract and retain appropriately qualified 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 remuneration and
reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good
remuneration governance practices:
•
•
•
•
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage/alignment of executive compensation, and
transparency.
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Directors’ Report
The Nomination & Remuneration Committee is responsible for determining and reviewing remuneration arrangements for the
Group’s directors and executives and making recommendations to the Board for consideration and approval. 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.
The reward framework is designed to align executive reward to shareholders' interests. The Board considers that it should
seek to enhance shareholders' interests by:
•
•
•
having economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
Additionally, the reward framework should seek to enhance executives' interests by:
•
•
•
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Executive remuneration
The Group aims to reward executives based on their position and responsibilities, with a level and mix of remuneration which
has both fixed and variable components.
The executive remuneration for the Executive Chairman was determined by the Nomination & Remuneration Committee,
having regard to the additional responsibilities required in his executive capacity. It comprises fixed remuneration only.
For other executives, the remuneration framework includes the following components:
•
•
•
Fixed remuneration – comprising base salary, superannuation contributions and other benefits, having regard to
comparable market benchmarks. Executives may receive their fixed remuneration in the form of cash or other fringe
benefits where it does not create any additional costs to the Group and provides additional value to the executive;
STI program – an ‘at risk’ component of remuneration where, if individual and Group performance measures are met,
senior executives will be awarded cash bonuses equal to a percentage of their fixed remuneration. Performance
measures include financial and non-financial KPIs and, commencing from the year ending 30 June 2021, include a
financial gateway hurdle. The percentage of fixed remuneration received as an STI will be capped, but may vary,
between individuals and depending on the level of performance achieved. 100% of the STI is paid as cash; and
LTI program – an ‘at risk’ component of remuneration for senior executives where 100% is awarded as equity
instruments (e.g. options and share rights) which are subject to certain performance and service conditions. The
number of equity instruments to be awarded will be determined by the Board having regard to the overall amount of
executive remuneration.
The combination of these comprises the executives’ total remuneration. The Board believes that this remuneration framework
ensures that remuneration outcomes link to company performance and the long-term interests of shareholders.
All executives have detailed job descriptions with identified key performance indicators against which annual reviews are
undertaken.
Short term incentives (STIs)
Senior executives’ entitlement to an STI is based upon achievement of agreed performance objectives including:
•
Financial performance
• Operational performance
•
• Workplace health and safety
•
Strategic and innovative initiatives
Risk mitigation and management.
Actual performance criteria may vary between executives, having regard to their roles and responsibilities.
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
The Board applies the following general principles when determining and measuring performance targets and any STI
incentive:
STI Pool
Structure
The size of the STI pool is determined by the Board, upon advice from the Nomination &
Remuneration Committee, having regard to individual employment contracts.
In consultation with the Nomination & Remuneration Committee, the Board assesses the
Group’s financial performance and the performance of KMP against agreed performance
objectives.
60% of the STI to be linked to the achievement of budgeted EBITDA1 from core
operations financial hurdles; and
40% of the STI to be linked to the achievement of non-financial performance objectives in
the categories noted above.
For the proportion of the STI linked to financial performance, entitlement is based
on the following tiers:
Performance targets
Entitlement
Financial hurdle
75% of the financial portion
Achievement of budgeted EBITDA from
core operations
90% of the financial portion
Budget exceeded between 5% and 15%
100% of the financial portion
Budget exceeded by at least 15%
The Board retains discretion in relation to the impact that non-recurring or unusual
items may have on achievement of the STIs.
Financial gateway
Achievement of budgeted EBITDA from core operations (introduced from the year ending
30 June 2021)
1 Refer to page 1 for further explanation on calculation of EBITDA.
During the year, 79% of the total STI pool available for KMP was awarded, including 90% of the financial portion based on
the budgeted EBITDA from core operations being exceeded by between 5% and 15%. Across the Group, 85% of the total
STI pool was awarded.
The actual amount received by executives, as a result of achieving the above financial hurdle and any non-financial KPIs, are
listed in the remuneration tables below.
Long term incentives (LTIs)
Equity instruments may be granted under the Omnibus Equity Plan (OEP) which was adopted on 23 November 2017. Each
equity instrument entitles the participant to subscribe for one ordinary share in the Company. The specific terms of a grant
are set out in an offer from the Company to the executive which contains details of the application price (if any), the expiry
date, the exercise price, the vesting date, any applicable performance conditions and other specific terms.
Share rights
During the year, 429,362 share rights were issued to the Chief Operating Officer pursuant to the OEP on the following specific
key terms:
•
The Vesting Date of the share rights is 30 September 2022, subject to meeting the following performance and
service conditions;
Performance condition – total shareholder return (TSR) compound annual growth rate (CAGR) hurdle, to be tested
on the Vesting Date:
TSR CAGR1
Less than 7% per annum
At least 7% but less than 10%
At least 10% but less than 15%
At least 15%
% of Rights to vest
0%
50%
70% to 100% on a straight-line basis
100%
1 TSR CAGR is an unaudited non-IFRS measure.
Service condition – the employee must remain employed by the Group from the Grant Date until the Last Vesting
Date.
•
•
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Eureka Group Holdings Limited and controlled entities
Directors’ Report
•
•
TSR includes share price appreciation, capital returns and dividends. Share price appreciation is determined as
being the difference between the base VWAP of 28.88 cents (being the volume weighted average price of shares
over the 5 trading days immediately after the release of Eureka’s results for the year ended 30 June 2019 on 31
August 2019) and vesting VWAP (the volume weighted average price of shares over the 5 trading days
immediately after the release of Eureka’s results for the year ended 30 June 2022).
Exercise price - $nil
The last day on which the share rights may be exercised is 30 September 2024, at which time the rights expire and lapse.
At 30 June 2020 there were 429,362 share rights outstanding (2019: Nil).
(b) DETAILS OF REMUNERATION
The names of persons who were key management personnel of Eureka at any time during the financial year are shown in the
following table. At the date of this report and during the year, the key management personnel of the Group are:
Name
Directors
Murray Boyte
Sue Renkin
Russell Banham
Greg Paramor
Role
Period in role
Executive Chair
24 November 2017 – ongoing
Non-Executive Director
24 November 2017 – ongoing
Non-Executive Director
21 November 2018 – ongoing
Non-Executive Director
19 June 2020 – ongoing
Lachlan McIntosh
Non-Executive Director
20 July 2009 – 31 December 2019
Executives
Cameron Taylor
Tracey Campion
Chief Operating Officer
18 March 2019 – ongoing
Chief Financial Officer
21 January 2019 – ongoing
Details of the remuneration of the Group's key management personnel for the years ended 30 June 2020 and 30 June 2019
are set out in the following tables:
Short term
Post
employment
Salary/
fees
$
Bonus
$
Non-
monetary
$
Super-
annuation
$
Share
based
payments
$
Termin-
ation
benefits
$
Total
$
% of LTI
that was
achieved
30 June 2020
Directors
Murray Boyte1
314,997
Sue Renkin
Russell Banham
Greg Paramor2
Lachlan McIntosh2
67,123
68,493
1,967
35,000
Directors Total
487,580
-
-
-
-
-
-
Executives
Tracey Campion
Cameron Taylor
217,405
21,699
309,403
71,454
Executives Total
526,808
93,153
Total
1,014,388
93,153
-
-
-
-
-
-
1,436
1,436
2,872
2,872
21,003
6,377
6,507
187
-
34,074
22,579
29,729
52,308
86,382
-
-
-
-
-
-
-
4,775
4,775
4,775
-
-
-
-
-
-
100
-
-
-
-
-
-
-
-
-
-
336,000
73,500
75,000
2,154
35,000
521,654
263,119
416,797
679,916
1,201,570
1 Murray Boyte’s remuneration includes his chairman’s fee of $120,000 per annum and an additional $216,000 per annum for the period he
is Executive Chair.
2 Key management personnel for part of the year only.
3 Disclosure in remuneration includes executive’s annual remuneration as per their service agreement as well as accrued leave entitlements.
The STIs will be paid subsequent to year-end.
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
Short term
Post
employment
Salary/
fees
$
Bonus
$
Non-
monetary
$
Super-
annuation
$
Share
based
payments
$
Termin-
ation
benefits
$
Total
$
% of LTI
that was
achieved
30 June 2019
Directors
Murray Boyte1
324,082
Sue Renkin
Lachlan McIntosh
Russell Banham2
Nirmal Hansra2
59,361
65,000
36,600
25,000
Directors Total
510,043
Executives
Tracey Campion2
Cameron Taylor2
91,540
82,768
Paul Cochrane2
139,452
Executives Total
313,760
Total
823,803
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,531
5,639
-
3,477
-
29,647
8,075
6,084
13,062
27,221
56,868
-
-
-
-
-
-
-
-
(11,967)
(11,967)
(11,967)
-
-
-
-
-
-
-
-
-
-
-
344,613
65,000
65,000
40,077
25,000
539,690
99,615
88,852
140,547
329,014
868,704
-
-
-
-
-
-
-
-
1 Murray Boyte’s remuneration includes his chairman’s fee of $120,000 per annum and an additional $216,000 per annum for the period he
is Executive Chair.
2 Key management personnel for part of the year only.
3 Disclosure in remuneration includes executive’s annual remuneration as per their service agreement as well as accrued leave entitlements.
The proportion of remuneration linked to performance and the fixed proportion (at maximum performance levels) are as
follows:
Directors
Murray Boyte
Sue Renkin
Russell Banham
Greg Paramor
Lachlan McIntosh
Executives
Tracey Campion
Cameron Taylor
Fixed remuneration
At Risk - STI
At Risk - LTI
2020
2019
2020
2019
2020
2019
100%
100%
100%
100%
100%
83%
60%
100%
100%
100%
-
100%
-
-
-
-
-
-
-
17%
16%
-
-
-
-
-
-
-
-
-
-
-
-
-
24%
-
-
-
-
-
-
-
The proportion of cash bonus paid/payable or forfeited:
Executives
Tracey Campion
Cameron Taylor
Cash bonus paid/payable
Cash bonus forfeited
2020
2019
2020
2019
54%
92%
-
-
46%
8%
-
-
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ANNUAL REPORT 2020
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Eureka Group Holdings Limited and controlled entities
Directors’ Report
(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 $450,000 in aggregate which provides the Board with flexibility
to appoint additional directors to broaden the skill base of the Board collectively.
The table below summarises Board and Committee fees payable to non-executive directors (inclusive of superannuation):
Board fees
Chair
Non-executive director
Committee fees payable to Chair of Committees (from 1 January 2020)
Audit and Risk
Remuneration and Nomination
Annualised Board and Committee fees as at 30 June 2020
$120,000
$70,000
$10,000
$7,000
$347,000
Other than the introduction of Committee Chair fees from 1 January 2020, there was no increase in non-executive fees during
the year.
Directors may also be reimbursed for travelling and other expenses incurred in connection with their Company duties.
(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. In addition, the Executive Chair has received written confirmation of additional remuneration of $18,000 per month
($216,000 per year) for the additional responsibility and time required to fulfil the executive chairman role, payable during his
time in this role. Remuneration and other terms of employment for the Chief Operating Officer, Chief Financial Officer and
other key management personnel are formalised in service agreements.
The details of these agreements for executive key management personnel are as follows. There was no change to the
agreements during the year, other than the award of share rights as noted below:
Cameron Taylor (Chief Operating Officer)
Agreement commenced 18 March 2019
Term of the Agreement:
The agreement has no fixed term and may be terminated by either the Company or Mr Taylor with 2 months’ notice or without
notice by the Company in the event of a material breach or misconduct by Mr Taylor.
Details:
Mr Taylor’s remuneration comprises a base salary of $285,000 (inclusive of 9.5% superannuation), additional car allowance
of $25,000 and certain benefits such as car parking, mobile phone expenses and use of laptop. His remuneration also
comprises additional short-term incentives of up to 30% of his base salary and long term incentives in the form of share rights.
During the year, the Board determined to award Mr Taylor share rights based on 40% of his base salary and car allowance.
Mr Taylor is responsible for management of the Group’s operations and reports to the Executive Chairman.
Tracey Campion (Chief Financial Officer)
Agreement commenced 21 January 2019
Term of the Agreement:
The agreement has no fixed term and may be terminated by either the Company or Ms Campion with 2 months’ notice or
without notice by the Company in the event of a material breach or misconduct by Ms Campion.
Details:
Ms Campion’s remuneration comprises a base salary of $220,000 (inclusive of 9.5% superannuation) and certain benefits
such as car parking, mobile phone expenses and use of laptop. Her remuneration also comprises additional short-term
incentives of up to 20% of her base salary. Her entitlement to long term incentives is currently being considered by the Board.
Ms Campion is responsible for the accounting and finance functions of the Company and its associated companies. Ms
Campion reports to the Chief Operating Officer.
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
(e) RELATIONSHIP BETWEEN REMUNERATION POLICY AND COMPANY PERFORMANCE
The Group’s current remuneration policy provides executives with a base level of remuneration as well as ‘at-risk’ components
that are aligned with shareholder returns. The STI program is weighted towards EBITDA1 and therefore earnings per share.
The LTI program is weighted towards total shareholder returns.
The following table shows key metrics for the past 5 years of the Company. The improvement in earnings per share, share
price and total shareholder return from 2018 to 2020 are reflective of the changes made to the previous remuneration
framework and includes the effectiveness of the current policy.
Total revenue and other income ($’000)
Net Profit/(loss) after tax ($’000)
EBITDA1 from core operations ($’000)
Earnings per share (cents per share)
Share price at year end ($)
Dividend per share (cents per share)
Total shareholder return (% of share price at start of year)
KMP remuneration ($’000)
KMP remuneration as a % of total revenue and income
2020
26,068
8,095
8,700
3.52
0.325
1.55
31.0
1,202
4.61
2019
23,394
6,794
7,832
2.95
0.26
0.00
(7.1)
868
3.71
2018
23,212
2017
25,427
(276)
6,942
(0.12)
0.28
0.00
6,538
5,931
2.84
0.37
0.00
(24.3)
(53.2)
2016
20,114
10,467
- 2
5.19
0.79
0.00
54.9
1,445
1,042
1,040
6.23
4.10
5.17
1 EBITDA (Earnings before interest, tax, depreciation and amortisation) is an unaudited non-IFRS measure however, the Directors believe
that it is a readily calculated measure that has broad acceptance and is used by regular users of published financial statements as proxy for
overall operating performance. EBITDA from core operations has been calculated from amounts disclosed in the financial statements and is
explained in the Directors’ report for the year and prior year.
2 EBITDA from core operations was not a reported measure in 2016. To enable some comparison, EBITDA prior to asset revaluations was
$7.29 million.
(f) REMUNERATION CONSULTANTS
The Group did not engage any remuneration consultants during the 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 2019
Acquired
during the year
Disposed
during the year
Other changes
during the year
Balance
30 June 2020
KMP
Directors
Murray Boyte
Sue Renkin
Russell Banham
Greg Paramor
250,000
-
-
-
Lachlan McIntosh
6,700,138
Executives
Cameron Taylor
Tracey Campion
Total
-
-
6,950,138
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,700,0001
250,000
-
-
4,700,000
(6,700,138)
-
-
-
-
-
-
-
-
(6,700,138)
4,700,000
4,950,000
1 Represents an interest in shares held at the time of appointment as a director.
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Directors’ Report
Share rights held
Details of share rights over ordinary shares in the Company, that were granted as compensation to key management
personnel during the reporting period, are set out below.
The Black-Scholes methodology was used for the valuation of the share rights.
KMP
Number of share
rights granted
during 2020
Grant date
FV at grant
date per
share right
Exercise
price per
share right
Value of share
rights granted
in the year
Expiry date
Cameron Taylor
429,362
27-May-20
$0.28
-
$120,221
30-Sep-24
The Vesting Date of the share rights is 30 September 2022, subject to meeting the performance and service conditions.
Options held
There were no options granted as compensation to key management personnel during the year.
Reconciliation of share rights held by key management personnel
The table below shows how many share rights were granted, vested and forfeited during the year.
KMP
Balance at start
of year
Granted during
year
Vested
Forfeited
Balance at end of
year (unvested)
Cameron Taylor
-
429,362
-
-
429,362
(h) LOANS TO/FROM KEY MANAGEMENT PERSONNEL
The McIntosh loan, a loan assumed by Mr McIntosh in his personal capacity in August 2018, was repaid in full during the year.
Interest accrued on the loan at an average rate of 8.14% per annum resulting in an interest charge of $0.01 million (2019:
$0.02 million) and repayments of $0.32 million (2019: $0.06 million) were received during the year. As at 30 June 2020 the
balance outstanding was $nil (2019: $0.31 million).
The West Cabin Loan is a loan secured by a real property mortgage over two cabins at Couran Cove, Qld, for which Mr
McIntosh is a guarantor in his personal capacity. This loan for $0.32 million remains unpaid as at 30 June 2020 (2019: $0.32
million), but is no longer considered a related party transaction as Mr McIntosh resigned and ceased to be a related party on
31 December 2019.
Further details about these loans are contained in Note 8.
There were no other loans to any director or other key management personnel at any time during the year and prior year.
(i) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
As noted above, Mr McIntosh ceased to be a related party on 31 December 2019. Amounts disclosed below are for
transactions that occurred while he was a director and a related party.
Griffith Scenic Village Pty Ltd
Griffith Scenic Village Pty Ltd, an entity associated with Mr McIntosh, paid the Group management fees of $3,301 on
commercial terms (2019: $7,038). As at 30 June 2020 the amount outstanding from Griffith Scenic Village Pty Ltd was $nil
(2019: $nil).
Griffith Scenic Village Pty Ltd, an entity associated with Mr McIntosh, was paid $11,089 for a manager’s unit rental fees on
commercial terms (2019: $22,178). As at 30 June 2020 the amount outstanding to Griffith Scenic Village Pty Ltd, as a related
party transaction, was $nil (2019: $nil).
During the year, the Group recognised lease liabilities associated with a right of use asset provided by Griffith Scenic Village
Pty Ltd. The lease liabilities outstanding at 30 June 2020 are no longer considered to be liabilities to a related party (2019:
$nil).
ANNUAL REPORT 2020
14
14
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
Leisure Living Gladstone Pty Ltd
Leisure Living Gladstone Pty Ltd, an entity associated with Mr McIntosh, paid the Group management fees of $9,625 on
commercial terms (2019: $16,411). As at 30 June 2020 the amount outstanding from Leisure Living Gladstone Pty Ltd was
$nil (2019: $nil).
Leisure Living Gladstone Pty Ltd, an entity associated with Mr McIntosh, was paid $14,615 for a manager’s unit rental fees
on commercial terms (2019: $29,229). As at 30 June 2020 the amount outstanding to Leisure Living Gladstone Pty Ltd, as a
related party transaction, was $nil (2019: $nil).
During the year, the Group recognised lease liabilities associated with a right of use asset provided by Leisure Living
Gladstone Pty Ltd. The lease liabilities outstanding at 30 June 2020 are no longer considered to be liabilities to a related party
(2019: $nil).
22 Resolution Pty Ltd
22 Resolution Pty Ltd, an entity associated with Mr McIntosh, earned $50,000 in consulting fees (2019: $33,000). At 30 June
2020, the amount outstanding to Mr McIntosh was $nil (2019: $33,000).
Other
The Group divested its investment in a property located in Bowen, Qld for $1.53 million. The property was sold at market
value, based upon an independent external valuation, to an entity related to Mr McIntosh.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION & SHARE RIGHTS
There were 429,362 share rights on issue as at the date of this report.
INDEMNIFICATION AND INSURANCE OF OFFICERS
During or since the end of the financial year, the Company has indemnified the directors and executives of the Company for
costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is
a lack of good faith.
During the financial year, the Group paid a premium in respect of a contract to insure the directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure
of the nature of the liability and the amount of the premium.
INDEMNIFICATION AND INSURANCE OF AUDITORS
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.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave 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.
NON-AUDIT SERVICES
Ernst & Young were engaged to review and advise the Group on GST and tax related matters during the year. Details of the
amounts paid or payable to the auditor for non-audit services provided during the year are set out in Note 31.
The Directors are satisfied that the provision of the non-audit services 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 31 do not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit & Risk Committee to ensure they do not impact the
impartiality 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.
15
ANNUAL REPORT 2020
15
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Report
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF ERNST & YOUNG
No officers of the Company were partners of Ernst & Young at the time they undertook the audit of the Company.
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 Investment Commission, relating to ‘rounding-off’. The amounts
contained in the financial and directors’ report have been rounded to the nearest $1,000 (where rounding is applicable) where
noted ($’000).
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 72.
AUDITOR
Ernst & Young continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
Murray Boyte
Executive Chair
Dated in Brisbane this 21st day of August 2020.
ANNUAL REPORT 2020
16
16
2020 Annual Report Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2020
Note
30 June 2020
$’000
30 June 2019
$’000
Rental income
Catering income
Service and caretaking fees
Total revenue
Finance income
Other income
Total revenue and other income
Property expenses
Employee expenses
Finance costs
Marketing expenses
Depreciation & amortisation
Other expenses
Total operating expenses
Share of profit of a joint venture
Net gain/(loss) on change in fair value of:
Investment property
Other assets
Impairment of:
Intangibles
Other assets
Total other items
Profit before income tax expense
Income tax expense
Profit after income tax expense
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)
3
3
3
3
4
4
4
12
13
9
5
26
26
16,874
4,223
3,712
24,809
36
1,223
26,068
(11,705)
(3,027)
(2,508)
(95)
(591)
(1,758)
(19,684)
1,980
1,383
(53)
(80)
(539)
2,691
9,075
(980)
8,095
-
-
-
8,095
3.52
3.52
15,847
4,257
3,132
23,236
57
101
23,394
(11,780)
(2,327)
(2,766)
(187)
(225)
(1,980)
(19,265)
712
2,253
(300)
-
-
2,665
6,794
-
6,794
-
-
-
6,794
2.95
2.95
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. The Directors note that
the 30 June 2020 results include the impact of accounting for AASB 16 Leases, whilst the 30 June 2019 results were prepared under the previous lease accounting
standard requirements; refer to notes 2 and 15 for further explanations.
17
ANNUAL REPORT 2020
17
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Financial Position
AS AT 30 JUNE 2020
30 June 2020
$’000
30 June 2019
$’000
Note
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventory
Loans receivable
Other assets
Non-current assets held for sale
Total current assets
Non-Current Assets
Inventory
Loans receivable
Joint Venture Investment
Investment property
Property, plant and equipment
Right of use assets
Intangible assets
Other assets
Total non-current assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Provisions
Other financial liabilities
Deferred tax liability
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Share capital
Equity reserve
Accumulated losses
Total Equity
22
6
7
8
9
10
7
8
12
13
14
15
16
9
17
18
19
18
19
5
20
20
2,451
316
3,778
396
750
7,691
483
8,174
1,102
353
5,955
121,443
594
722
4,177
2,685
137,031
3,060
391
9,215
698
1,464
14,828
519
15,347
-
414
4,661
105,406
659
-
5,348
1,237
117,725
145,205
133,072
2,125
523
752
3,400
73
54,884
980
55,937
1,672
416
2,372
4,460
12
47,118
-
47,130
59,337
51,590
85,868
81,482
94,352
5
(8,489)
85,868
94,352
-
(12,870)
81,482
The consolidated statement of financial position is to be read in conjunction with the accompanying notes. The Directors note that the 30 June 2020 results include
the impact of accounting for AASB 16 Leases, whilst the 30 June 2019 results were prepared under the previous lease accounting standard requirements; refer
to notes 2 and 15 for further explanations.
ANNUAL REPORT 2020
18
18
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2020
Note
30 June 2020
$’000
30 June 2019
$’000
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers & employees
Interest received
Interest paid
Net cash provided by Operating Activities
22(b)
Cash Flows from Investing Activities
Payments for additions to investment property
Payments for additions to inventory
Payments for property, plant & equipment
Payments for intangible assets
Payments made to sell inventory
Payments made to sell non-current assets held for sale
Payment of residential obligation loans
Proceeds from sale of inventory
Proceeds from sale of investment properties
Proceeds from the sale of intangible assets
Proceeds from the sale of property, plant & equipment
Proceeds from repayments of loans provided
Proceeds from sale on non-current assets held for sale
Net cash provided by/(used) in Investing Activities
Cash Flows from Financing Activities
Proceeds from borrowings
Repayment of borrowings
Payment of dividends
Principal portion of lease payments
Payments of transaction costs related to borrowings
Net cash provided by/(used in) Financing Activities
7
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
22(a)
25,783
(15,884)
43
(2,328)
7,614
(16,585)
(407)
(17)
(12)
(462)
(27)
(99)
5,738
1,525
-
-
208
540
(9,598)
15,500
(10,263)
(3,565)
(209)
(88)
1,375
(609)
3,060
2,451
23,925
(17,150)
3
(2,033)
4,745
(1,589)
(1,270)
(61)
-
-
-
-
2,550
-
606
4
1,660
1,100
3,000
-
(6,605)
-
-
(66)
(6,671)
1,074
1,986
3,060
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes. The Directors note that the 30 June 2020 results include the
impact of accounting for AASB 16 Leases, whilst the 30 June 2019 results were prepared under the previous lease accounting standard requirements; refer to
notes 2 and 15 for further explanations.
19
ANNUAL REPORT 2020
19
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2020
Share
Capital
$’000
Accumulated
Losses
$’000
Equity
Reserves
$’000
Total
$’000
Note
For the year ended 30 June 2020
Balance at 1 July 2019
Opening adjustment on adoption of AASB 16 Leases
Balance at 1 July 2019 (Restated)
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends paid
Share based payments
21
20
Balance at 30 June 2020
For the year ended 30 June 2019
Balance at 1 July 2018
Profit for the year
Total comprehensive income for the year
94,352
-
94,352
-
-
-
-
94,352
(12,870)
(149)
(13,019)
8,095
(4,924)
(3,565)
-
(8,489)
-
-
-
-
-
-
5
5
81,482
(149)
81,333
8,095
89,428
(3,565)
5
85,868
94,352
(19,664)
-
-
6,794
6,794
12
74,700
-
-
6,794
6,794
Transactions with owners in their capacity as owners:
Cancellation of share rights and options
Balance at 30 June 2019
-
94,352
-
(12,870)
(12)
-
(12)
81,482
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes. The Directors note that the 30 June 2020 results
include the impact of accounting for AASB 16 Leases, whilst the 30 June 2019 results were prepared under the previous lease accounting standard requirements;
refer to notes 2 and 15 for further explanations.
ANNUAL REPORT 2020
20
20
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
1. INTRODUCTION
The financial statements cover Eureka Group Holdings Limited and its subsidiaries (“Eureka”, the “Group” or the
“Consolidated Entity”) for the year ended 30 June 2020. Eureka Group Holdings Limited is a company incorporated and
domiciled in Australia. Eureka is a for-profit entity for the purposes of preparing the financial statements.
The Group’s operations and principal activities comprise ownership and property management of senior independent living
communities.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000)
unless otherwise stated.
The registered office of the company is Suite 2D, 7 Short St, Southport QLD 4215.
The financial report was authorised for issue on 21 August 2020 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 Eureka 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 applied AASB 16 Leases for the first time. The nature and effect of the changes as a result of adoption of this
new accounting standard is described below.
Other new accounting standards, amendments to accounting standards, and interpretations have been published that are
not mandatory for the current reporting period and are not expected to have a material impact on the Group’s future
financial reporting.
AASB 16 Leases
The new standard is effective for annual periods beginning on or after 1 January 2019. Details of the impact of this adoption
on the Group’s consolidated financial statements are described below.
The Group has adopted AASB 16 using the modified retrospective approach whereby the Group has recognised the
cumulative effect of initially applying this standard as an adjustment to the opening balance of equity as at 1 July 2019.
Accordingly, the Group has not restated comparative balances in this set of financial statements.
AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires
lessees to account for leases under a single on-balance sheet model similar to the accounting for finance leases under
AASB 117 Leases. The standard includes two recognition exemption for leases – lease of “low-value” assets and leases
with a lease term of 12 months or less.
Under AASB 16, a contract is a lease or contains a lease if the contract conveys the right to contract the use of an identified
asset for a period of time in exchange for consideration. The distinction between finance and operating leases is eliminated
for lessees Both finance leases and operating leases will result in the recognition of a right-of-use asset and a
corresponding lease liability on the balance sheet. The ROU assets for these leases were measured on a retrospective
basis as of lease commencement date and the assets depreciated on a straight-line basis over the term of each lease.
The associated liabilities were measured at the present value of the remaining lease payments, discounted using the
lessee’s incremental borrowing rate at 1 July 2019.
21
ANNUAL REPORT 2020
21
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
On transition, the Group elected to apply the following practical expedients:
•
•
•
•
•
Application of a single incremental borrowing rate to a portfolio of leases with reasonably similar characteristics;
Application of the short-term lease exemption to leases with a lease term that ends within 12 months of the date
of initial application;
Application of the low value assets exemption for assets with a value less than $5,000;
Excluding initial direct costs from the measurement of the ROU asset at the date of initial application; and
Use of hindsight in determining the lease term if the contract contains options to extend or terminate the lease.
Right of Use (ROU) assets
The Group recognises ROU assets at the commencement date of the lease i.e. the date the underlying asset is available
for use. ROU assets are initially measured at cost, comprised of the initial measurement of the related lease liability, any
lease payments made at or before the commencement of the contract, less any lease incentives received, any initial direct
costs and any restoration costs. Subsequently the asset is measured at cost less any accumulated depreciation and
impairment losses and adjusted for certain re-measurements of the lease liability. ROU assets are depreciated over the
shorter period of either the useful life of the underlying asset or the lease term.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments
made. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, or as
appropriate, changes in the assessment of whether an extension option is reasonably certain to be exercised.
Key judgements and estimates in applying AASB 16
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include
renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease
term, which affects the measurement of the lease liabilities and ROU assets recognised.
The incremental borrowing rate is the estimated rate of the interest that the Group would have to pay to borrow over a
similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset
in a similar economic environment.
Depreciation of ROU assets is calculated using the straight-line method to allocate their costs, net of their residual value,
over their estimated useful lives being the lesser of the remaining lease term or the life of the underlying asset.
Sub-leases
The Group’s sub-leases continue to be classified as operating leases and expensed on a straight-line basis over the term
of the lease.
Leases
The Group has lease contracts for various items of equipment and property. On adoption of AASB 16, the Group
recognised lease liabilities in relation to these leases which had previously been classified as ‘operating leases’ under the
principles of AASB 117. These liabilities were measured at the present value of remaining lease payments, discounted
using the lessee’s incremental borrowing rate as on 1 July 2019.
The weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 4.18%.
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments disclosed as at 30 June 2019
as follows:
Operating lease commitments as at 30 June 2019
Discounted using the incremental borrowing rate
Add: other lease commitment
Less: low-value leases not recognised
Lease liabilities as at 1 July 2019 (under AASB 16)
$’000
1,385
1,008
56
(35)
1,029
ANNUAL REPORT 2020
22
22
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
The associated ROU assets for leases were measured on a retrospective basis as if the AASB 16 standard had been
applied since the lease commencement date, discounted using the lessee’s incremental borrowing rate at the date of initial
application. Consequently, lease liabilities exceeded the ROU assets’ carrying amount on 1 July 2019 by $0.15 million
which has been adjusted in retained earnings on 1 July 2019.
Effect of adoption of AASB 16
The following table summarises the impact on transition to AASB 16 on 1 July 2019:
Assets
Right of use assets
Total assets
Liabilities
Other financial liabilities
Total liabilities
Net assets
Equity
Share capital
Retained earnings
Total equity
30 June 2019
$’000
Adjustment on
adoption of
AASB 16
$’000
1 July 2019
$’000
-
133,072
49,490
51,590
81,482
94,352
(12,870)
81,482
880
880
1,029
1,029
149
-
(149)
(149)
880
133,952
50,519
52,619
81,333
94,352
(13,019)
81,333
The application of AASB 16 has no cash effect to the Group and the changes are for financial reporting purposes only.
As a result of initially applying AASB 16, for the leases that were previously classified as operating leases, the Group
recognised $0.88 million of right of use assets and $1.03 million of lease liabilities in the consolidated statement of financial
position on 1 July 2019. The lease term and amount were modified on two of the ROU assets during the year 30 June
2020. Refer to note 15.
Each lease payment is now allocated between the liability and the finance cost. Previously, lease payments were expensed
in full to the profit or loss. The finance cost is now charged over the lease period, from transition date, so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The ROU asset is depreciated
over the lease term, from lease commencement date, on a straight-line basis. During the year ended 30 June 2020, the
Group recognised $0.22 million of depreciation charges and $0.05 million of interest costs from these leases.
The adoption of AASB 16 has impacted the consolidated statement of cash flows with the reclassification of the lease
liability portion of the lease payments from operating to financing activities.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an
expense in the consolidated statement of profit or loss. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise of office equipment.
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 2020 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.
ANNUAL REPORT 2020
23
23
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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.
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.
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.
ANNUAL REPORT 2020
24
24
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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 income tax expense, 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 by 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.
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
Trade and other receivables are recognised initially at original invoice amount, and subsequently adjusted for Expected
Credit Loss (ECL). An ECL allowance is recognised by analysing the age of outstanding balances and applying historical
default percentages. Historical loss rates are adjusted to reflect forward-looking observable data affecting the ability of
customers to settle debts.
INVESTMENT PROPERTY
Investment property comprises land and/or buildings held to earn rental income and/or for capital appreciation. In
accordance with applicable accounting standards, the buildings, including plant and equipment, are not depreciated.
Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment
property is stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes
in the fair values of investment property are recognised in profit or loss in the period in which they arise.
Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment
property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in
use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance
with the policy stated under property, plant and equipment up to the date of change in use.
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Transfers are made to (or from) investment property to inventory only when there is a change in use. For a transfer from
investment property to inventory, the deemed cost for subsequent accounting is the fair value at the date of change in use.
If inventory becomes an investment property, the Group accounts for it in accordance with the policy stated under inventory
up to the date of change in use.
Transfers are made to (or from) investment property from intangibles only when there is a change in use in the underlying
asset. For a transfer from investment property to intangibles, the deemed cost for subsequent accounting is the fair value
at the date of change in use. If an intangible (management rights) becomes an investment property, the Group accounts
for it in accordance with the policy stated under intangibles up to the date of change in use.
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.
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.
INVESTMENT IN JOINT VENTURE
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
The considerations made in determining joint control are similar to those necessary to determine control over subsidiaries.
The Group’s investments in its joint venture are accounted for using the equity method. Under the equity method, the
investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise
changes in the Group’s share of net assets of the joint venture since the acquisition date. Goodwill relating to the joint
venture is included in the carrying amount of the investment and is not tested for impairment separately.
The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. Any change in
other comprehensive income (OCI) of those investees is presented as part of the Group’s OCI. In addition, when there
has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes,
when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between
the Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint
venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When
necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on
its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that
the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of the joint venture and its carrying value, and then recognises the loss
as ‘Share of profit of a joint venture’ in the statement of profit or loss.
Upon loss of significant influence over the joint control, the Group measures and recognises any retained investment at its
fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of
the retained investment and proceeds from disposal 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
Plant and equipment
Rate
6-33%
Method
Straight-line or
Diminishing value
Buildings
2.5%
Straight-line
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
INTANGIBLE ASSETS
Only intangible assets that have been purchased or paid for by the Group are recognised in the accounts.
Management rights have a finite life and are carried at the lower of cost less accumulated amortisation and accumulated
impairment losses and are tested annually for impairment. The management rights are amortised using the straight-line
method over their estimated useful life. If the contractual or other legal rights of the management rights can be renewed,
the useful life of the intangible asset includes the renewal period if there is evidence to support renewal by the entity without
significant cost. Otherwise the management rights are amortised over the life of the contract.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense
category that is consistent with the function of the intangible assets.
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.
Other intangible assets relate to website development which is amortised using the straight-line method over 3-10 years
being the estimated useful life.
Intangible assets with indefinite useful lives are not amortised, but tested for impairment annually, either individually or at
the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite
life continues to be supportable.
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
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, 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.
ANNUAL REPORT 2020
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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.
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
Current and non-current financial assets and liabilities within the scope of AASB 9 are classified as fair value through profit
or loss, fair value through other comprehensive income or amortised cost. The Group determines the classification of its
financial assets and liabilities at initial recognition with the classification depending on the purpose for which the asset or
liability was acquired or issued. Financial assets and liabilities are initially recognised at fair value plus directly attributable
transaction costs, unless their classification is at fair value through profit or loss. They are subsequently measured at fair
value or amortised cost using the effective interest method.
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 it relates.
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.
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.
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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 not expected to 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.
Share based payments
Employees of the Group receive remuneration in the form of share-based payments, whereby employees render services
as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other capital
reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting
period). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit in the statement of profit or loss for a period represents the
movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of
equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value.
Any other conditions attached to an award, but without an associated service requirement, are considered to be non-
vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing
of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as
vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or
service conditions are satisfied.
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 loans do not meet the solely
payments of principal and interest criteria. 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 between one
to 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.
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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 use or 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.
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
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases
of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing
the right to use the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any
lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term
and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also
subject to impairment. Refer to the accounting policy on Impairment of non-financial assets.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease
term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a
rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date where the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used
to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in Financial liabilities.
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of plant and equipment (i.e. leases
that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low
value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line
basis over the lease term.
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are
classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is
included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease
term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are
earned.
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
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 regularly and review in detail the current cash position and cash flow forecasts having regard
to planned expansions and asset disposals 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.
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly
attributable costs is recognised as a deduction from equity.
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, ESTIMATES AND ASSUMPTIONS
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.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial statements are:
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 selling 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) Valuations undertaken by accredited external independent valuers;
b) Acquisition price paid for the property;
c) 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
d) Capitalised income projections based upon a property’s estimated maintainable earnings and capitalisation
rate.
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Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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.
The returns from the Group’s investment property include rental income and income from provision of ancillary services,
including 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 assessing qualitative factors, which include
both operational and legislative considerations, and quantitative factors, which includes comparing:
•
•
the fair value of the ancillary services to the total income generated from the property; and
the profit generated from ancillary services to the total profit generated from the property
Properties that do not meet this criteria are classified as property, plant and equipment.
Inventory
Inventory consists of property being sold as part of a capital disposal program and is valued at the lower of cost and net
realisable value.
Net realisable value is the estimated selling price of the inventory, less estimated costs of completion and the estimated
costs necessary to make the sale.
Goodwill
Goodwill is allocated to the property management cash-generating unit (CGU). The Group tests the carrying value of
goodwill on an annual basis to assess for any impairment, or more frequently, if events or changes in circumstances
indicate impairment. The recoverable amount of the CGU is 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 16 for further information.
Amortisation of Management Rights
Management rights are amortised over their estimated useful life. If the contractual or other legal rights of the management
rights can be renewed, the useful life of the intangible asset includes the renewal period if there is evidence to support
renewal by the entity without significant cost. Otherwise the management rights are amortised over the life of the contract.
For strata-titled villages (where units are individually owned by third parties) where management rights are attached, the
Group generally 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 considers the expected usage of the assets, the legal rights over
the asset and the renewal period of the management rights agreements. Where there is evidence to support renewal of
the management rights, the amortisation period is 40 years, similar to the life of the property the management rights are
attached to, otherwise the amortisation period is the term of the management rights agreement.
For single-owner villages (where all units in the village are owned by a single third party) where management rights are
attached, the 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 it does not own or have any sort of tenure
in respect of the managers unit and a single vote of the owner can elect to not renew Eureka’s management rights contract.
The amortisation period and the amortisation method for management rights are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation period or method, as appropriate.
Recovery of Receivables
At each reporting date the Group assesses the recoverability of trade, loan and other receivables by reference to the
expected future cash flows, the credit worthiness of the borrowers and the value of security provided. For trade and other
receivables, the Group applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Group
does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting
date.
ANNUAL REPORT 2020
32
32
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Non-Current Amount Receivable and Associated Option over property
Options over property are initially measured at cost. Subsequent to acquisition, options continue to be recorded at cost,
however are tested for impairment on an annual basis. Impairment is tested by reference to the assessed value of the
underlying property assets or final cash settlement alternatives. Impairment losses are recorded as incurred. Should these
options not be exercised and this asset revert back to a receivable it will be assessed for impairment as a loan receivable
at that point in time. Refer to Note 9 for significant assumptions made in the assessment of impairment for this asset.
Bartercard
Bartercard assets are initially recorded at cost. At each balance date an assessment is made of the cash equivalent value
obtainable on the expenditure of Bartercard. If this value exceeds cost, no adjustment is made, however if the cash price
equivalent is less than cost, an impairment charge is made to this asset.
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
Deferred tax assets are recognised for deductible temporary differences and income tax losses. These assets are only
recognised if the Group considers it probable that future taxable amounts will be available to utilise those temporary
difference assets. Judgement is required in assessing the availability of income tax losses primarily involving the
satisfaction by the relevant Group entities of legislative requirements at each reporting date by the Group including for
certain years satisfaction of the “Same Business Test” as defined in S.165-210 of the Income Tax Assessment Act 1997.
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 significant unobservable inputs as disclosed in Note 24.
Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate
(IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation
when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they
need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s
functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available
and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).
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 32. 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 joint ventures 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.
33
ANNUAL REPORT 2020
33
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
3. REVENUE
Rental income
16,874
15,847
Consolidated
30 June 2020
$’000
30 June 2019
$’000
Revenue from contracts with customers
Catering – managed properties
Catering – owned properties
Total catering income
Service fees
Caretaking fees
Total service and catering fees
1,544
2,679
4,223
2,822
890
3,712
1,602
2,655
4,257
2,334
798
3,132
Total revenue from contracts with customers
7,935
7,389
Total revenue
24,809
23,236
Other Income
Gain on sale of inventory1
Gain on sale of investment property
Gain on sale of intangibles
Other income
Total other income
1 Refer to note 7 for further information.
Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of goods and services over time
and at a point in time in Australia.
Timing of revenue recognition
At a point in time
Over time
Total
1,031
3
-
189
1,223
-
-
69
32
101
30 June 2020
$’000
30 June 2019
$’000
4,223
3,712
7,935
4,257
3,132
7,389
ANNUAL REPORT 2020
34
34
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
4.
ITEMS INCLUDED IN PROFIT
Profit before income tax expense includes the following specific items:
Finance cost
-
Interest and finance charges paid/payable for financial liabilities not at fair
value through profit or loss
Total finance cost
Depreciation
- Plant & equipment
- Buildings
- Motor vehicles
- Right of use assets
Total depreciation
Amortisation
- Management rights
- Rent rolls
- Other
Total amortisation
Total depreciation and amortisation
Defined contribution superannuation expense
Consolidated
30 June 2020
$’000
30 June 2019
$’000
2,508
2,508
2,766
2,766
39
33
10
216
298
285
3
5
293
591
451
50
17
7
-
74
146
3
2
151
225
393
Employee expenses
3,027
2,327
5.
INCOME TAX
The major components of income tax expense for the years ended
30 June 2020 and 2019 are:
Consolidated Statement of Profit or Loss
Current income tax
Deferred income tax
Income tax expense reported in the Statement of Profit or Loss
Consolidated
30 June 2020
$’000
30 June 2019
$’000
-
980
980
-
-
-
35
ANNUAL REPORT 2020
35
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
A reconciliation of income tax expense and the profit before tax multiplied by the applicable tax rate of 30% is as
follows:
Profit before tax
Income tax calculated at 30%
Tax effect of permanent differences
Recognition of net deferred tax assets not previously recognised
Income tax expense reported in the Statement of Profit or Loss
Recognised in the Statement of Financial Position
Deferred tax assets
Tax losses - revenue
Net (assessable) and deductible differences on sundry items
Deferred tax liabilities
Investment properties, property, plant and equipment
Net deferred tax liability
Not recognised in the Statement of Financial Position
Unrecognised deferred tax assets
Tax losses - capital
Tax losses - revenue
Net (assessable) and deductible differences on sundry capital 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 2020
$’000
30 June 2019
$’000
9,075
6,794
2,722
2,038
(20)
(1,722)
980
-
(2,038)
-
Consolidated
30 June 2020
$’000
30 June 2019
$’000
8,665
167
(9,812)
(980)
968
-
504
1,472
1,828
(1,828)
1,472
(356)
1,472
7,122
945
(8,067)
-
-
1,828
-
1,828
4,205
-
(2,774)
397
(2,377)
1,828
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, including for certain years satisfaction of the “Same Business Test” as defined in S.165-210 of the Income
Tax Assessment Act 1997;
the Group earns taxable income in future periods; and
applicable tax laws are not changed, causing the losses to be unavailable.
ANNUAL REPORT 2020
36
36
b.
c.
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
6. TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors
Consolidated
30 June 2020
$’000
30 June 2019
$’000
192
124
316
88
303
391
Trade receivables are non-interest bearing unless otherwise stated and are generally on 30 day terms. Expected credit
loss was considered not material during the year.
7.
INVENTORY
Balance at beginning of reporting period
Additions – Terranora units
Disposals – Terranora units
Disposals – Couran Cove units
Transfer to investment properties
Balance at end of reporting period
Current
Non-current
Consolidated
30 June 2020
$’000
30 June 2019
$’000
9,215
463
(4,798)
-
-
4,880
3,778
1,102
4,880
11,783
412
(380)
(2,000)
(600)
9,215
9,215
-
9,215
Inventory comprises of property being sold as part of the Group’s capital disposal program. At 30 June 2020, the Group’s
inventory balance comprises unit properties at Terranora NSW. During the year, 27 units at Terranora were sold for total
consideration of $6.39 million (which comprised of $0.65 million in Bartercard and the balance in cash). The Bartercard
received had a face value of $0.93 million, however has been recorded at its assessed fair value of $0.65 million on initial
recognition. The total gain on the sale of units was $1.03 million, consisting of total consideration of $6.39 million less
associated costs of $5.36 million. The costs of development at Terranora are capitalised to the inventory as incurred.
Current inventory is expected to be realised within 12 months via sales to third parties. Non-current inventory is expected
to be realised within two years via sales to third parties.
The sale of the Couran Cove units was completed in the prior year.
37
ANNUAL REPORT 2020
37
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
8. LOANS RECEIVABLE
Vendor finance 1
McIntosh Loan 2
West Cabin Loan 3
Current
Non-current
Consolidated
30 June 2020
$’000
30 June 2019
$’000
434
-
315
749
396
353
749
486
306
320
1,112
698
414
1,112
1
2
3
The Group acquired a loan book as part of the purchase of Elizabeth Vale Scenic Village Pty Ltd in 2015. Security
for the loans consists of a first ranking mortgage over the property to which the loan pertains. The loans have maturity
dates of between 2.7 and 3.8 years and interest is payable on these loans at a rate of between 5.50%-6.25% per
annum.
The McIntosh loan (refer Note 28) was repaid in full during the year.
The West Cabin Loan is a secured loan to CCH Developments No 1 Pty Ltd (CCH) in its personal capacity and as
trustee of the CCH Developments No 1 Trust for $0.32 million. No interest accrues on this loan.
The loan is secured by a real property mortgage over two existing cabins owned by CCH and is guaranteed by
Onterran Ltd (Onterran) and Mr Lachlan McIntosh in his personal capacity. Mr McIntosh was a director of Eureka until
31 December 2019, is the Executive Chairman of Onterran Ltd and a director of CCH. Recourse against CCH in
respect of the loan is limited to the two existing cabins.
The loan is expected to be repaid upon settlement of the sale contracts for the two cabins held as security against the
loan. Eureka has reserved its rights under the loan agreement and the security.
The Directors consider that the amount owed is recoverable, due to the validity and enforceability of the real property
mortgages held by Eureka and the personal guarantee provided by Mr McIntosh.
9. OTHER ASSETS
Current
Prepayments and other assets 1
Bartercard 2
Non-current
Bartercard 2
Other 3
Consolidated
30 June 2020
$’000
30 June 2019
$’000
450
300
750
1,635
1,050
2,685
409
1,055
1,464
-
1,237
1,237
ANNUAL REPORT 2020
38
38
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
1 Amounts included relate to prepaid expenses and deposits for assets.
2 Bartercard is an alternative currency and operates as a trade exchange. The Group has utilised Bartercard in the current
reporting period and in recent years. At 30 June 2020, the Bartercard carrying value was $1.94 million (2019: $1.76 million
comprising $1.05 million in Other assets and $0.71 million in Investment Property). During the year, the Group received
Bartercard valued at $0.65 million from the sale of Terranora units, expended $0.12 million and recorded an impairment
expense of $0.35 million on the remaining Bartercard balance. Amounts classified in current is based on expected
utilisation of Bartercard in the next 12 months.
3 A loan to CCH Developments No 1 Pty Ltd (CCH) secured by a real property mortgage over land owned by CCH relating
to 60 proposed cabin sites at Couran Cove, Qld. This loan is guaranteed by Onterran Ltd (Onterran). No interest accrues
on this loan.
Eureka has a right of first refusal to purchase the proposed cabin sites for $50,000 per site. The purchase price is to be
paid by way of set off against the loan on settlement. The right can be exercised until the repayment date for the loan,
which is on 31 August 2020. Eureka has the option to extend the repayment date, and the time in which it can exercise
its right of first refusal, to 31 August 2023.
In order for Eureka to realise value from this agreement, Eureka intends to reach arrangements for developers to construct
dwellings on the proposed cabin sites and ultimately acquire the sites from Eureka. Eureka’s interests will be protected
by its mortgage under any such arrangements with developers.
Although the intention is to recover this loan in full, the directors have assessed its fair value to be $1.05 million at 30
June 2020 (2019: $1.24 million). An additional impairment expense of $0.19 million has been recorded in the year ended
30 June 2020 (2019: $nil).
Fair value hierarchy disclosures for the land options have been provided in Note 24.
Total impairment on other assets of $0.54 million includes impairment for Bartercard $0.35 million and land option of $0.19
million.
10. NON-CURRENT ASSETS HELD FOR SALE
Current
Non-current assets held for sale
Consolidated
30 June 2020
$’000
30 June 2019
$’000
483
483
519
519
The balance at 30 June 2020 comprised two managers’ units in Village Life Caboolture. The sale of two residential houses
in Mt Gambier was completed during the year for a total consideration of $0.54 million.
39
ANNUAL REPORT 2020
39
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
11.
INVESTMENT IN SUBSIDIARIES
Country of
Incorporation
Comptons Caboolture Pty Ltd
Comptons 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 3) Pty Ltd
Eureka Care Communities (Salisbury) Pty Ltd
Eureka Care Communities (Wynnum) Pty Ltd
Eureka Care Communities Unit Trust
Eureka Cascade Gardens Pty Ltd
Eureka Cascade Gardens (Albert Gardens) Pty Ltd
Eureka Cascade Gardens (Ayr) Pty Ltd
Eureka Cascade Gardens (Belgian Gardens) Pty Ltd
Eureka Cascade Gardens (Bowen) Pty Ltd
Eureka Cascade Gardens (Broken Hill) Pty Ltd
Eureka Cascade Gardens (Cairns) Pty Ltd
Eureka Cascade Gardens (Couran Cove) Pty Ltd
Eureka Cascade Gardens (Gladstone) 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 Cascade Gardens (Terranora) Pty Ltd
Eureka Cascade Gardens (Tivoli) Pty Ltd
Eureka Cascade Gardens (Townsville) Pty Ltd
Eureka Group Care Pty Ltd
Eureka Liberty Villas Pty Ltd1
Eureka Living Pty Ltd
Eureka Property Pty Ltd
Eureka Whitsunday Pty Ltd
Fig Investments Pty Ltd
Rockham Two Pty Ltd
SCV Leasing Pty Ltd
SCV Manager Pty Ltd
SCV No. 1 Pty Ltd
The Trustee for Rockham Unit Trust
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Equity Holding
30 June 2020
%
100%
30 June 2019
%
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%
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%
100%
100%
100%
1 Eureka Liberty Villas Pty Ltd was formerly Eureka Care Communities (Mount Gambier 2) Pty Ltd
There are no significant restrictions on the Company’s ability to access or use the assets and settle the liabilities of the
Group.
ANNUAL REPORT 2020
40
40
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
12. JOINT VENTURE INVESTMENT
The Group has a 50% Joint Venture (JV) interest in each of Affordable Living Services Unit Trust and Affordable Living
Unit Trust, a Joint Venture (JV) which owns five retirement villages in Tasmania. The Group’s interest in the JV is accounted
for using the equity method in the consolidated financial statements. The accounting policies adopted by the JV are
consistent with the Group’s accounting policies. Summarised financial information of the JV, based on management
accounts, and a reconciliation with the carrying amount of the investment in the consolidated financial statements are set
out below:
Movements in aggregate carrying amount:
Opening balance
Share of profit from JV1
Cash distribution received
Closing balance
30 June 2020
$’000
30 June 2019
$’000
4,661
1,980
(686)
5,955
4,672
712
(723)
4,661
1 Share of profit from JV included a 50% share of the increase in the fair value of the Tasmanian village property assets of
$1.09 million (2019: $nil).
Summarised statement of financial position of Affordable Living Unit Trust:
Current assets, including cash and cash equivalents
Non-current assets1
Current liabilities2
Non-current liabilities3
Equity
Group’s share in equity – 50%
30 June 2020
$’000
30 June 2019
$’000
172
21,146
(523)
(8,885)
11,910
5,955
125
18,844
(483)
(9,166)
9,320
4,660
Group’s carrying amount of the investment
5,955
4,660
1 Non-current assets includes investment property of $21.14 million (2019: $18.84 million).
2 Current liabilities includes borrowings of $0.30 million (2019: $0.30 million), repayable within 12 months.
3 Non-current liabilities includes long term borrowings of $8.88 million (2019: $9.16 million).
Summarised statement of profit or loss of Affordable Living Unit Trust:
Revenue
Cost of Sales
Finance costs
Profit before tax
Income tax expense1
Profit for the year
Total comprehensive income for the year
Group’s share of profit for the year
30 June 2020
30 June 2019
$’000
6,177
(1,908)
(335)
3,934
-
3,934
3,934
1,967
$’000
3,611
(1,733)
(456)
1,422
-
1,422
1,422
711
1 Eureka and its JV partner are presently entitled to the net income of the trust for tax purposes. As a result, there is no
tax payable or expensed in the JV.
41
ANNUAL REPORT 2020
41
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Summarised statement of financial position of Affordable Living Services Unit Trust:
Current assets, including cash and cash equivalents
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group’s share in equity – 50%
Group’s carrying amount of the investment
30 June 2020
$’000
30 June 2019
$’000
-
-
-
-
-
-
-
87
3
(88)
-
2
1
1
Summarised statement of profit or loss of Affordable Living Services Unit Trust:
Revenue
Cost of Sales
Finance costs
Profit before tax
Income tax expense1
Profit for the year
Total comprehensive income for the year
Group’s share of profit for the year
30 June 2020
$’000
30 June 2019
$’000
386
(360)
-
26
-
26
26
13
440
(438)
-
2
-
2
2
1
1 Eureka and its JV partner are presently entitled to the net income of the trust for tax purposes. As a result, there is no tax
payable or expensed in the JV.
The joint venture had no contingent liabilities or commitments as at 30 June 2020 (2019: nil).
13. INVESTMENT PROPERTY
Consolidated
30 June 2020
$’000
30 June 2019
$’000
Investment properties at fair value
121,443
105,406
Movements in investment properties:
Balance at beginning of year
Acquisitions 1
Disposals 2
Capital expenditure
Transfer of Bartercard deposit to other assets
Transfer to non-current assets held for sale
Transfer from intangibles – management rights 3
Transfer from inventory – Terranora Manager’s residence
Net increment due to fair value adjustment
Balance at end of year
105,406
14,667
(1,516)
1,941
(714)
(534)
810
-
1,383
121,443
100,756
177
-
1,620
-
-
-
600
2,253
105,406
ANNUAL REPORT 2020
42
42
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
1 Includes the acquisition of a 124-unit rental village in Bundaberg, Qld, acquired on 28 February 2020.
2 During the year, the Group divested its investment in a property located in Bowen, Qld for cash consideration of $1.53
million. The village was sold at market value, based upon an independent external valuation, to an entity related to Mr
McIntosh, a director during the year.
3 Management rights held in relation to villages and units that are wholly owned by the Group, for which no external revenue
stream exists and which were previously classified as intangibles, have been reclassified to investment property and are
included in the fair value of the respective properties.
The Group’s investment properties are shown individually in the table below and consist of 25 (2019: 25) retirement village
assets along with associated manager’s units and other rental units. The Group considers investment properties reside in
one class of asset, being seniors’ rental villages.
At 30 June 2020, the Group undertook a review of the fair value of all investment properties held and recorded a net
revaluation gain of $1.38 million (2019: $2.25 million). This adjustment related to all assets in the asset class and was
based on inputs and assumptions disclosed in Note 24. Four properties were due for an independent external valuation
by 30 June 2020 under the Group’s accounting policy and requirements of its financing facility. Due to the outbreak of
COVID-19 and visitor restrictions at the villages, these independent valuations have been postponed. A waiver has been
received from the Group’s lender to extend the independent valuations due date to 31 December 2020. These four
properties have been internally valued using the earnings methodology and capitalisation rates disclosed in Note 24. The
recorded fair value of these properties at 30 June 2020 was $7.20 million (2019: $7.12 million).
The net change in fair value is recognised in profit or loss in the reporting period in which the assessment is made.
Fair value hierarchy disclosures for investment properties have been provided in Note 24.
Amounts recognised in profit or loss for investment property:
Rental income
Catering income
Direct operating expenses generating rental and catering income
Net gain on revaluation of investment property to fair value
Consolidated
30 June 2020
$’000
30 June 2019
$’000
16,874
2,679
(9,894)
1,383
15,847
2,655
(9,982)
2,253
The Group has no restrictions on the realisability of its investment property and has a contractual obligation to complete a
solar energy enhancement program. There are no other contractual obligations to either purchase, construct or develop
investment properties or for repairs, maintenance and enhancements. Certain assets are pledged as security for
borrowings – Refer to Note 19(a).
43
ANNUAL REPORT 2020
43
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Details of investment properties are as follows:
Property
Location
Acquisition
date
Carrying
amount
Carrying
amount
30 Jun 20
30-Jun-19
$’000
$’000
Ayr QLD
Belgian Gardens QLD
Bilambil Heights NSW
Bowen QLD
Broken Hill NSW
Bundaberg QLD
Bundaberg QLD
Caboolture QLD
Caboolture QLD
Cairns QLD
Koinonia Village
92 Primrose Street Belgian Gardens
61 Marana Street Bilambil Heights (Terranora)
Bowen Village
Broken Hill Village
Avenell Village on Vasey Bundaberg
3 Ovens Street Bundaberg
Lot 43 134-136 King Street Caboolture (manager’s unit)
80 134-136 King Street Caboolture (manager’s unit)
Cascade Gardens Cairns
Lot 51 Christie Downs Community Centre (manager’s unit) Christie Downs SA
Elizabeth Vale SA
Elizabeth Vale Scenic Village 1
Elizabeth Vale SA
Elizabeth Vale Scenic Village 2
Frenchville QLD
Rockhampton Village 1
Frenchville QLD
Rockhampton Village 2
Gladstone QLD
15/8 Wicks Street, New Auckland
Gympie QLD
Freshwater Villas
Hackham SA
Lot 49 Hackham Community Centre (manager’s unit)
Hackham SA
Lot 97 144 Main South Road Hackham
Lavington NSW
33 Mardross Court Lavington
Lismore NSW
Lismore Village
Mackay QLD
Cascade Gardens Mackay
Margate QLD
43 Macdonnell Court Margate
Mildura VIC
344 San Mateo Avenue Mildura
Mt Gambier SA
Mt Gambier 2 Retirement Village
Orange NSW
Albert Street Gardens Village
Salisbury East SA
Salisbury
Shepparton VIC
60 Poplar Avenue Shepparton
Southport QLD
7 Meron Street Southport
Tivoli QLD
Lot 6,8,9,20,21&22 56A Moores Pocket Road Tivoli
Townsville QLD
Galilee Lodge
Whyalla SA
Myall Place Retirement Village
Wynnum QLD
40 Federation Street Wynnum
Various
Investment Property Enhancements
Aug-17
Jun-16
Dec-15
Dec-15
Dec-16
Oct-14
Feb-20
May-14
Jan-15
Jul-14
Dec-14
Oct-14
Apr-15
Oct-15
Dec-15
Sep-16
Jul-17
Oct-14
May-15
Jun-15
May-15
Apr-14
Jun-16
Jun-15
Dec-15
Sep-16
Feb-16
Jun-15
Jun-16
Mar-15
Aug-17
Jan-15
Oct-15
Jun-17
1,296
1,469
2,900
-
2,609
5,202
14,017
-
-
4,773
301
5,902
4,760
3,810
5,733
50
4,428
266
285
4,741
5,816
9,344
4,866
4,595
3,363
5,724
4,883
4,674
4,261
452
929
4,404
5,590
-
1,260
1,382
2,900
1,543
2,016
5,060
-
268
271
4,680
301
5,662
4,740
3,010
5,520
50
4,400
266
285
4,700
5,657
9,156
4,217
4,550
3,314
5,338
4,094
4,290
4,233
541
922
4,527
5,540
714
121,443
105,406
ANNUAL REPORT 2020
44
44
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
14. PROPERTY, PLANT & EQUIPMENT
Buildings at cost
Accumulated depreciation
Plant & equipment at cost
Accumulated depreciation
Motor Vehicles at cost
Accumulated depreciation
Total property, plant & equipment
Consolidated
30 June 2020
$’000
30 June 2019
$’000
619
(234)
385
320
(163)
157
81
(29)
52
594
619
(202)
417
302
(124)
178
81
(17)
64
659
Reconciliation of movements in property, plant & equipment:
Opening balance at 1 July 2018
Additions at cost
Disposals
Depreciation expense
Closing balance at 30 June 2019
Opening balance at 1 July 2019
Additions at cost
Depreciation expense
Closing balance at 30 June 2020
Buildings
$’000
Plant &
Equipment
$’000
Motor
Vehicle
$’000
Total
$’000
434
-
-
(17)
417
417
-
(32)
385
211
17
-
(50)
178
178
18
(39)
157
37
41
(7)
(7)
64
64
-
(12)
52
682
58
(7)
(74)
659
659
18
(83)
594
45
ANNUAL REPORT 2020
45
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
15. RIGHT OF USE ASSETS
Right of use assets have arisen upon adoption of AASB 16 Leases from 1 July 2019. Refer to note 2 for further information.
Leased property
Adjustment on adoption of AASB 16 on 1 July 2019
Modification on leases
Depreciation expense
Closing balance at 30 June 2020
Leased equipment
Adjustment on adoption of AASB 16 on 1 July 2019
Depreciation expense
Closing balance at 30 June 2020
Total Right of use assets at 30 June 2020
Income received from sub-leasing right of use assets was $0.03 million for the year.
16. INTANGIBLE ASSETS
Management rights – at cost
Accumulated amortisation and impairment
Net
Rent rolls – at cost
Accumulated amortisation
Net
Other intangibles – at cost
Accumulated amortisation
Net
Goodwill
Total intangible assets
30 June 2020
$’000
869
58
(213)
714
11
(3)
8
722
Consolidated
30 June 2020
$’000
30 June 2019
$’000
3,547
(1,430)
2,117
140
(49)
91
25
(11)
14
1,955
4,177
4,695
(1,404)
3,291
140
(45)
95
41
(34)
7
1,955
5,348
ANNUAL REPORT 2020
46
46
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
The Group’s business activities include the ownership and management (through management rights agreements) of
seniors’ rental accommodation throughout Australia. The Group’s intangible assets are management rights and goodwill.
These intangible assets were separately classified in accordance with accounting standards following village acquisitions.
During the year, management rights held in relation to villages that are wholly owned by the Group, for which no external
revenue stream exists and which were previously classified as intangibles, have been reclassified to investment property
and are included in the fair value of the respective properties.
Impairment tests for Goodwill
Goodwill is monitored by the Board of Directors (who are identified as the chief operating decision makers) based upon
the net profit of the villages that Eureka manages, after allowing for overhead costs attributable to the management of
these villages. Goodwill has been allocated to the property management cash generating unit.
The Group tests goodwill for 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 (2019: 2%) to the most recent
year's cash flows;
the terminal value was calculated using a growth rate of 2% (2019: 2%);
cash flows have been discounted using a pre-tax discount rate of 15% (2019: 15%);
cash flows do not take into account the management of any new villages; and
cash flows are based on historical results and any potential impact of Covid-19.
Reconciliation of movements in intangible assets:
Management
Rights
$’000
Rent Rolls
$’000
Goodwill
$’000
Other
intangibles
$’000
Total
$’000
Opening balance at 1 July 2018
Additions at cost
Disposals 1
Amortisation expense
Closing balance at 30 June 2019
Opening balance at 1 July 2019
Additions at cost
Disposals (cost)
Disposals (accumulated amortisation)
Impairment expense
Transfer to investment property
Amortisation expense
Closing balance at 30 June 2020
3,437
-
-
(146)
3,291
3,291
-
-
-
(80)
(810)
(284)
2,117
98
-
-
(3)
95
95
-
-
-
-
-
(4)
91
1,955
-
-
-
1,955
1,955
-
-
-
-
-
-
1,955
545
-
(536)
(2)
7
7
12
(28)
28
-
-
(5)
14
6,035
-
(536)
(151)
5,348
5,348
12
(28)
28
(80)
(810)
(293)
4,177
The remaining amortisation period for the management rights, on a weighted average basis, is 12 years (2019: 12 years).
1 In the prior year, the Group divested of certain trading and operating licences.
47
ANNUAL REPORT 2020
47
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
17. TRADE & OTHER PAYABLES
Trade creditors and accruals
Retirement Village Resident Loans
Acquisition related accruals
Consolidated
30 June 2020
$’000
30 June 2019
$’000
2,123
2
-
2,125
1,367
98
207
1,672
The carrying amounts of trade and other payables are considered to be the same as their fair value, due to their
short term nature.
18. PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
19. OTHER FINANCIAL LIABILITIES
Current
Accrued interest
Commercial bills – secured 1
Lease liability 2
Insurance funding
Non-current
Commercial bills – secured 1
Lease liability 2
Borrowing costs
1 Commercial bills - secured
Consolidated
30 June 2020
$’000
30 June 2019
$’000
523
523
73
73
416
416
12
12
Consolidated
30 June 2020
$’000
30 June 2019
$’000
467
-
221
64
752
54,472
646
(234)
54,884
499
1,763
-
110
2,372
47,471
-
(353)
47,118
As at 30 June 2020, the Group has access to National Australia Bank (“NAB”) facilities with the following terms:
• Maximum limit of $60.00 million (2019: $55.00 million). Interest is payable at a fixed rate of 4.87% on $35.00
million and at variable rates (currently 2.16%) on the remaining drawn amount. A facility fee of 0.90% applies to
any undrawn amount. The facility expires on 31 December 2021. Quarterly interest only payments are required.
At 30 June 2020, total drawings on the facility were $54.47 million (2019: $47.47 million).
ANNUAL REPORT 2020
48
48
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
The NAB facilities are secured by a first priority general security over all present and future acquired property. As at 30
June 2020, the Group’s property assets, with a carrying value of $126.81 million (2019: $115.15 million), have been
pledged by the Group.
The commercial bill facilities are subject to covenants which are commensurate with normal secured lending terms.
The Group complied with its covenants throughout the current and prior year.
During the year, a commercial loan of $1.76 million previously provided by Westpac Banking Corporation was repaid in
full. Interest was payable at a variable rate on this facility. The facility was closed during the year.
2 Lease liabilities have arisen upon adoption of AASB 16 Leases from 1 July 2019. Refer to note 2 for further information.
20. 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 beginning and end of year
Consolidated
30 June 2020
Number
230,037,638
30 June 2020
$’000
94,352
30 June 2019
Number
230,037,638
30 June 2019
$’000
94,352
Share Buy Back
The Company extended the share buy back period for a further 1 year from 16 March 2020. No ordinary shares were
bought back and cancelled during the year (2019: nil).
Equity Reserves
Share based payments
The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to
employees, including key management personnel, as part of their remuneration. Refer to Note 27 for further details of
these plans.
As at 1 July 2018
Share options and share rights forfeited during the year
At 30 June 2019
Share-based payments expense during the year
At 30 June 2020
21.
DIVIDENDS
Cash dividends on ordinary shares declared and paid:
Final dividend for 2019: 1.0 cent per share (2018: nil)
Interim dividend for 2020: 0.55 cents per share (2019: nil)
49
Share based
payments
$000
12
(12)
-
5
5
30 June 2020
$’000
30 June 2019
$’000
2,300
1,265
3,565
-
-
-
ANNUAL REPORT 2020
49
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Since 30 June 2020, the Board has declared a final dividend of 0.55 cents per share, amounting to $1.27 million
payable on 25 September 2020. The record date is 1 September 2020. The financial effect of this dividend has not
been brought to account in the financial statements for the year ended 30 June 2020 and will be recognised in
subsequent financial reports.
22. CASH FLOW INFORMATION
(a) Reconciliation of cash
Cash at bank and on hand
(b) Reconciliation of profit before tax to net cash flow from operating activities
Profit after tax
Depreciation and amortisation
Gain on revaluation – investment properties and other assets
Impairment of intangibles and other assets
Share of profit of joint venture
Distribution received from joint venture
Gain on sale of investment property
Gain on sale of intangibles
Gain on sale of inventory
Loss on sale of property, plant and equipment
Non-cash purchases
(Increase)/decrease in:
- Trade and other receivables
- Other current assets
- Equity reserve
Increase/(decrease) in:
- Trade and other payables
- Provisions
- Other financial liabilities
- Deferred tax liability
Consolidated
30 June 2020
$’000
30 June 2019
$’000
2,451
3,060
Consolidated
30 June 2020
30 June 2019
$’000
$’000
8,095
591
(1,330)
619
(1,980)
686
(3)
-
(1,031)
-
38
(76)
(71)
(5)
979
168
(46)
980
6,794
225
(1,953)
-
(712)
723
-
(69)
-
3
11
(260)
(11)
12
(4)
20
(34)
-
Net cash flow from operating activities
7,614
4,745
(c) Non-cash investing and financing activities
During the year, the Group received Bartercard dollars of $0.65 million (2019: nil) and acquired goods and services of
$0.06 million with Bartercard dollars (2019: nil). The Group paid director’s fees and other fees of $0.14 million to Mr
McIntosh (2019: $0.13 million) which were offset against the McIntosh loan balance during the year.
ANNUAL REPORT 2020
50
50
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
23.
FINANCIAL INSTRUMENTS
Overall policy
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
The Board of Directors is responsible for developing and monitoring the Group’s risk management policy 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 the 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 residents and amounts due from the
seniors’ independent living communities in accordance with management agreements in place.
Credit risk arises principally from the Group’s cash and cash equivalents, receivables, other assets and loans receivable.
Maximum exposure to credit risk
Cash and cash equivalents
Trade and other receivables
Loans receivable
Bartercard
Other assets
Consolidated
30 June 2020
$’000
30 June 2019
$’000
2,451
316
749
1,935
1,050
6,501
3,060
391
1,112
1,055
1,237
6,855
Cash and cash equivalents
Deposits of cash are only held with approved banks and financial institutions. The Group 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 counterparty or resident.
The Group has a diverse range of counterparties and residents and therefore there is no significant concentration of credit
risk with any single counterparty or group of counterparties. Exposure to credit risk is limited with the majority of residents
supported by the government pension.
The Group has a credit policy under which each new counter party or resident is analysed individually for creditworthiness
before the Group enters into a services agreement 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.
Where applicable, an allowance for impairment is 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. The 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 amounts past due as management believes these amounts will be received.
51
ANNUAL REPORT 2020
51
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
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
Consolidated
30 June 2020
Gross amount
receivable
$’000
30 June 2019
Gross amount
receivable
$’000
240
-
9
67
316
391
-
-
-
391
Loans receivable
The Group’s exposure to credit risk arises from the vendor finance loans which were part of the acquisition of Elizabeth
Vale Scenic Village Pty Ltd and the West Cabin loan as detailed in Note 8. The vendor finance 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
relation to the loan amount loans receivable. The Group has no concentrations of credit risk that have not been provided
for.
Loans receivable
Current
Non-current
Consolidated
30 June 2020
Gross amount
receivable
$’000
30 June 2019
Gross amount
receivable
$’000
396
353
749
698
414
1,112
Bartercard
Bartercard is an alternative currency and operates as a trade exchange. Bartercard is recorded at cost less any
accumulated impairment, or at fair value, where Bartercard has been advanced to suppliers in exchange for future supply
of goods. Eureka will no longer receive Bartercard dollars. The use of Bartercard dollars to purchase goods and services
is actively managed to reduce this exposure.
Other assets
The Couran Cove option is a right of first refusal for the Group to purchase proposed cabin sites at Couran Cove to offset
against a $3.00 million loan receivable from CCH Developments No 1 Pty Ltd. It is secured by a real property mortgage
over the proposed cabin sites. Refer Note 9 for further details.
b) Liquidity risk
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 has 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 especially in relation to financing of proposed investment property acquisitions.
The Group had unused borrowing facilities of $5.53 million at the reporting date.
ANNUAL REPORT 2020
52
52
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
The tables below show the Group’s financial liabilities classified into relevant maturity groupings based on their contractual
maturities.
30 June 2020
Trade and other payables
Commercial bills 1
Other financial liabilities
Total
30 June 2019
Trade and other payables
Commercial bills 1
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
2,123
58,201
1,256
61,580
2,123
1,555
185
3,863
-
1,087
100
1,187
-
55,559
128
55,687
-
-
843
843
Contractual
cash flows
$’000
Less than 6
months
$’000
Consolidated
6 - 12
months
$’000
1 – 2 years
$’000
More than 2
years
$’000
1,367
55,315
110
56,792
1,367
3,406
110
4,883
-
-
-
1,110
2,218
48,581
-
-
-
1,110
2,218
48,581
1 This amount includes estimated interest during the contractual period.
c) Market risk
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. At 30 June 2020, $19.47 million of the Group’s commercial
bills are at variable rates while $35.00 million is fixed (refer to Note 19).
The Group regularly reviews its interest rate exposure, taking into account potential renewals of existing finance facilities,
alternative financing, hedging options and the mix of fixed and variable interest rates.
24. FAIR VALUE MEASUREMENTS
Fair value hierarchy
Investment properties, other assets (land option) and retirement village resident loans payable are measured at fair value,
using a three level hierarchy, based upon 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.
53
ANNUAL REPORT 2020
53
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Fair value of financial instruments (unrecognised)
The Group has a number of financial assets and financial liabilities (loans receivable and commercial bills) 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.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Consolidated – 2020
Assets
Other assets – land option
Investment property
Total assets
Liabilities
Retirement Village Resident Loans
Total liabilities
Consolidated – 2019
Assets
Other assets – land option
Investment property
Total assets
Liabilities
Retirement Village Resident Loans
Total liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,050
121,443
122,493
1,050
121,443
122,493
2
2
2
2
1,237
105,406
106,643
1,237
105,406
106,643
98
98
98
98
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 may be valued using two 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.
Valuation processes
Independent valuations have been obtained for a number of investment property assets during the year ended 30 June
2020 in accordance with the Group’s accounting policy and were used as the basis for determining their related fair values.
Valuer selection criteria include market knowledge, experience and qualifications, reputation, independence and whether
professional standards are maintained.
Where an independent valuation was not performed on an investment property as at 30 June 2020, management has
estimated the fair values by performing internal valuations based upon an income capitalisation method taking into account
the most recent external valuation undertaken by an independent valuer.
Retirement village resident loans are measured as the ingoing contribution less deductions over time for the period of
tenancy as a percentage of the length of expected residence term. Although the expected average residency term is
between one to ten years, these obligations are classified as current liabilities, as required by the Accounting Standards,
because the Group does not have an unconditional right to defer settlement to more than twelve months after reporting
date. The liability is stated net of accrued deferred management fees at reporting date, because the Group’s contract with
residents require net settlement of those obligations. These are included in trade payables.
The land option valuation is based on the net present value of the loan over the period it is expected to be realised, using
a discount rate of 30%. Given the probability of the loan being realised between 3-5 years, it has been classified as a non-
current other asset.
ANNUAL REPORT 2020
54
54
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
The level 3 assets significant unobservable inputs and sensitivity are as follows:
Description
Valuation
technique
Significant
unobservable
inputs
Range
(weighted average)
Other assets –
land option
Net present value
(NPV)
Discount pre-tax
rate
2020
30%
2019
35%
Time frame of
realisation
3 – 5 years
4 years
Relationship of
unobservable input to fair
value
A change in the discount rate
would result in the following
impact on NPV:
+5%: NPV decreases by
$147,000 (2019: $90,000)
- 5%: NPV increases by
$178,000 (2019: $119,000)
A change in the timeframe
for realisation would result in
the following impact on NPV:
+1 year: NPV decreases by
$242,000 (2019: $315,000)
- 1 year: NPV increases by
$315,000 (2019: $437,000)
Investment
properties –
Retirement
Villages
Capitalisation
method 1
Capitalisation
rate
8.25%-11.38%
(10.04%) 2
8.25%-
11.00%
(10.22%) 2
Capitalisation rate has an
inverse relationship to
valuation.
Stabilised
occupancy
87%-100%
(95%)
85%-100%
(93%)
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
N/A
Comparable sales evidence
has a direct relationship to
valuation.
Retirement
village resident
loans
Ingoing
contribution less
deductions for
length of stay
Estimated length
of stay of
residents
1 – 10 years
1– 10 years The longer the length of stay,
the lower the value of
resident loans.
1
2
Significant changes in any of the significant unobservable valuation inputs under the capitalisation method would result in a
significantly lower or higher fair value measurement.
Excludes three complexes with a capitalisation rate range of 6% to 6.5% and a village in which National Disability Insurance Scheme
services revenue is earned with a capitalisation rate of 16%.
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 9, 13 and 17.
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ANNUAL REPORT 2020
55
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
25. COMMITMENTS AND CONTINGENCIES
The Group had no material commitments as at 30 June 2020.
The Group has given bank guarantees to various landlords as at 30 June 2020 of $0.05 million (2019: $0.05 million).
From time to time Eureka may be subject to various claims and litigation from third parties during the ordinary course of
its business. The directors have given consideration to such matters which are, or may, be subject to claims or litigation at
year end and, unless specific provisions have been made, are of the opinion that no material contingent liability for such
claims exists.
26. EARNINGS PER SHARE
Basic earnings per share is determined by dividing profit attributable to the ordinary shareholders by the weighted
average number of ordinary shares on issue during the year.
Diluted earnings per share is determined by dividing profit attributable to the ordinary shareholders by the weighted
average number of ordinary shares and dilutive potential ordinary shares on issue during the year.
Net profit after tax used in calculating basic and diluted earnings per
share
Weighted average number of ordinary shares used in calculating basic
earnings per share
30 June 2020
$’000
30 June 2019
$’000
8,095
6,794
#’000
230,038
#’000
230,038
Effects of dilution from share rights1
41
-
Weighted average number of ordinary shares & potential ordinary shares
used in calculating diluted earnings per share
230,079
230,038
Basic earnings per share
Diluted earnings per share
3.52 cents
3.52 cents
2.95 cents
2.95 cents
1 The share rights (refer to Note 27) are unquoted securities. Conversion to ordinary shares and vesting to executives is
subject to performance and service conditions.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of authorisation of these financial statements.
27. SHARE BASED PAYMENTS
During the period ended 30 June 2020 the following equity instruments were issued:
Share rights
The Company has a long term incentive (LTI) plan pursuant to which share rights were granted to key management
personnel during the year, subject to service and performance conditions.
A total of 429,362 share rights were issued during the year (2019: nil) with an exercise price of $nil (2019: $nil). The share
rights vest on 30 September 2022, subject to the satisfaction of performance and service conditions.
The share rights do not have any voting rights, rights to dividends, rights to capital and have no entitlement to participate
in new issues offered to ordinary shareholders of the company.
The fair value of the share rights is estimated at the grant date using the Black Scholes pricing model, taking into account
the terms and conditions on which the share rights were granted.
There are no cash settlement alternatives. The Group accounts for the share rights as an equity settled plan.
2 0 2 0 Annual Report
ANNUAL REPORT 2020
56
56
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Options
During the prior year, 500,000 options granted to the former Chief Financial Officer lapsed as a result of his resignation.
Share based payment expense
The expense recognised during the year is shown in the following table:
Expense arriving from equity-settled share based payment transactions
Total expense arising from share-based payment transactions
Movements during the year
30 June 2020
$’000
30 June 2019
$’000
5
5
(12)
(12)
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
rights during the year:
Share rights
30 June 2020
Number
2020 WEAP
30 June 2019
Number
2019 WAEP
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
-
429,362
-
429,362
-
-
-
-
319,375
-
(319,379)
-
-
-
-
-
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
options during the year:
Options
30 June 2020
Number
2020 WEAP
30 June 2019
Number
2019 WEAP
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
-
-
-
-
-
-
-
-
500,000
$0.33
-
(500,000)
-
-
-
-
No options were issued during the year or outstanding at 30 June 2020.
The following table list the inputs to the model used to value the share rights issued during the year:
Grant date
Expiry date
Share price at grant date ($)
Exercise price ($)
Fair value of right ($)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share rights (years)
Model used
2020
Share rights
27 May 2020
30 September 2024
0.315
0.00
0.28
3.5
32.15
0.26
4.35
Black Scholes
The expected volatility reflects the assumption that the historical volatility over the last 12 months will be an indication of
the expected future volatility of the company’s share price, which may not necessarily be the actual outcome.
57
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57
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
28. RELATED PARTY TRANSACTIONS
(a) Key management personnel compensation
Short term employee benefits
Post-employment benefits
Other employee benefits
Total
Consolidated
30 June 2020
30 June 2019
$’000
$’000
1,110
86
5
1,201
824
57
(12)
869
Detailed disclosures relating to key management personnel are set out in the remuneration report within the Directors'
Report.
(b) Other transactions with related parties
(i) Sales and purchases
The following table shows the income earned, expenses incurred and balances arising from related party transactions
during the year:
Sales to/(purchases from)
related parties
Amounts owed by/(to) related
parties 1
30 June 2020
$’000
30 June 2019
$’000
30 June 2020
$’000
30 June 2019
$’000
282
13
(26)
(50)
262
23
(51)
(33)
24
-
-
-
29
-
-
(33)
Joint venture
Management fees
Director-related entities 2
Management fees
Rent (manager’s units)
Consulting fees
1 The amounts are classified as trade receivables and trade payables, respectively.
2 The Group transacted with parties related to a director, Mr Lachlan McIntosh, during the year. Mr McIntosh ceased to
be a director and related party on 31 December 2019 and as such no transaction or balance date amounts for the period
after 31 December 2019 are disclosed.
All transactions were made on commercial terms and conditions and at market rates. Outstanding balances are unsecured
and are repayable in cash.
(ii) Loan to a director, Mr McIntosh
Balance at beginning of reporting period
Loans advanced
Loan repayments received 1
Net interest charged
Balance at end of reporting period
Consolidated
30 June 2020
$’000
30 June 2019
$’000
306
-
(319)
13
-
-
350
(61)
17
306
1 Loan repayments included director’s fees and other fees of $0.14 million (2019: $0.13 million) which were offset against
the loan balance during the year.
Mr McIntosh has provided a personal guarantee in respect to the West Cabin Loan. Refer to Note 8 for further details.
ANNUAL REPORT 2020
58
58
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
(iii) Lease liabilities associated with right of use assets provided by related parties
As a result of the application of AASB 16 Leases, the Group recognised lease liabilities associated with right of use assets
provided by related parties. The Group is the lessee for leases associated with two managers’ units in entities associated
with Mr McIntosh. As Mr McIntosh ceased to be a director and related party at 31 December 2019, there are no lease
liabilities associated with right of use assets provided by related parties at 30 June 2020.
(iv) Other material transactions with director related entities
During the year, the Group divested its investment in a property located in Bowen, Qld for $1.53 million. The property was
sold at market value, based upon an independent external valuation, to an entity related to Mr McIntosh.
29. ULTIMATE PARENT ENTITY
The parent entity within the group is Eureka Group Holdings Limited, which is the ultimate parent entity within Australia.
30. OPERATING SEGMENTS
Identification of reportable operating segments and principal services
The Group is organised into two operating segments located in Australia:
Rental Villages – ownership of seniors’ rental villages; and
Property Management - management of seniors’ independent living communities.
•
•
The operating segments have been identified based upon reports reviewed by the Board of Directors, who are identified
as the chief operating decision makers and 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.
Segment information is prepared in conformity with the accounting policies of the Group as discussed in Note 2 and
Accounting Standard AASB 8.
59
ANNUAL REPORT 2020
59
2020 Annual Report
Rental
Villages 1
$’000
Property
Management 2 Unallocated 3
$’000
$’000
Total
$’000
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows are not measured or reported by segment.
Consolidated - 30 June 2020
Revenue
Interest revenue
Other income
21,426
3,383
-
50
-
-
Total revenue and other income
21,476
3,383
Expenses
Interest expense
Total operating expenses
Net gain/(loss) on change in fair value of:
Investment property
Other assets
Share of profit of a joint venture
Impairment of intangibles and other assets
Total other items
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Profit/(loss) after income tax expense
Segment Assets
Segment Liabilities
Non-cash and other significant items included in profit:
Gain on revaluation of investment property
Loss on revaluation of other assets
Impairment of intangibles and other assets
Depreciation & amortisation
Amortisation of borrowing costs
Share of profit of joint venture
(9,894)
(2,460)
(12,354)
1,383
(53)
1,980
-
3,310
12,432
(3,730)
8,702
129,236
60,131
1,383
(53)
-
(82)
(207)
1,980
(2,222)
(45)
(2,267)
-
-
-
(80)
(80)
1,036
(311)
725
4,977
1,393
-
-
(80)
(380)
-
-
-
36
1,173
1,209
(5,060)
(3)
(5,063)
-
-
-
(539)
(539)
(4,393)
3,061
(1,332)
10,992
(2,187)
-
-
(539)
(129)
-
-
24,809
36
1,223
26,068
(17,176)
(2,508)
(19,684)
1,383
(53)
1,980
(619)
2,691
9,075
(980)
8,095
145,205
59,337
1,383
(53)
(619)
(591)
(207)
1,980
ANNUAL REPORT 2020
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60
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated - 30 June 2020
Segment acquisitions:
Rental
Villages
$’000
Property
Management
$’000
Unallocated
$’000
Total
$’000
Acquisition of property, plant and equipment
Acquisition and subsequent expenditure of
investment property
Additions to inventory
-
16,608
-
-
-
-
18
-
463
18
16,608
463
1 Rental villages includes the investment in the Joint Venture.
2 Property management includes management rights.
3 Unallocated includes Terranora inventory and the profit on sale of units, Couran Cove and other loans receivable, Bartercard, cash, support
office costs and corporate overheads. Segment liabilities include a deferred tax asset which is netted off against deferred tax liabilities in
the Group balance sheet.
Consolidated - 30 June 2019
Revenue
Interest revenue
Other income
Rental
Villages
$’000
Property
Management
$’000
19,866
3,370
-
10
-
-
Total revenue and other income
19,876
3,370
Unallocated
$’000
Total
$’000
(2,177)
-
(4,340)
-
(2,177)
(4,340)
Expenses
Interest expense
Total operating expenses
Net gain on change in fair value of:
Investment property
Other assets
Share of profit of a joint venture
Total other items
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Segment Assets
Segment Liabilities
Non-cash and other significant items included in profit:
Gain on revaluation of investment property
Depreciation & amortisation
Amortisation of borrowing costs
Loss on revaluation of other assets
Share of profit of joint venture
(9,982)
(2,766)
(12,748)
2,253
(300)
712
2,665
9,793
-
9,793
112,283
51,131
2,253
(74)
(232)
(300)
712
61
-
-
-
-
1,193
-
1,193
5,892
104
-
(151)
-
-
-
-
57
91
148
-
-
-
-
(4,192)
-
(4,192)
14,897
355
23,236
57
101
23,394
(16,499)
(2,766)
(19,265)
2,253
(300)
712
2,665
6,794
-
6,794
133,072
51,590
-
-
-
-
-
2,253
(225)
(232)
(300)
712
ANNUAL REPORT 2020
61
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated - 30 June 2019
Segment acquisitions:
Acquisition of property, plant and equipment
Acquisition and subsequent expenditure of
investment property
Additions to inventory
Rental
Villages
$’000
Property
Management
$’000
Unallocated
$’000
Total
$’000
-
1,797
-
-
-
-
58
-
564
58
1,797
564
1 Rental villages includes the investment in the Joint Venture.
2 Property management includes management rights.
3 Unallocated includes Terranora inventory and the profit on sale of units, Couran Cove and other loans receivable, Bartercard, cash, support
office costs, corporate overheads and tax.
31.
REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided
by the auditor of the company and its related practices:
Fees to Ernst & Young (Australia)
Fees for auditing the statutory financial report of the parent covering the group
and auditing the statutory financial reports of any controlled entities
Fees for assurance services that are required by legislation to be provided by
the auditor
Fees for other assurance and agreed-upon-procedures services under other
legislation or contractual arrangements where there is discretion as to whether
the service is provided by the auditor or another firm
Fees for other services:
GST advice
Tax advice
Total fees to Ernst & Young (Australia)
Fees to other overseas member firms of Ernst & Young (Australia)
Fees for auditing the financial report of any controlled entities
Total fees to overseas member firms of Ernst & Young (Australia)
Consolidated
30 June 2020
30 June 2019
$
$
146,100
145,454
-
-
-
20,900
167,000
-
-
-
-
7,000
-
152,454
-
-
Total auditor’s remuneration
167,000
152,454
ANNUAL REPORT 2020
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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2020
32.
PARENT ENTITY DISCLOSURES
Information relating to Eureka Group Holdings Limited (parent entity):
Results of the parent entity
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income/(loss) 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
Equity reserve
Accumulated losses
Total equity
30 June 2020
30 June 2019
$’000
$’000
5,303
-
5,303
1,915
93,848
95,763
895
55,218
56,113
94,353
5
(54,708)
39,650
(4,915)
-
(4,915)
4,355
81,571
85,926
887
47,118
48,005
94,353
-
(56,432)
37,921
Guarantees entered into by the parent entity
The parent entity has not provided financial guarantees in relation to the debts of its subsidiaries.
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020. Refer to Note 25 for further details.
Contractual commitments for capital items
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020.
33. SUBSEQUENT EVENTS
Subsequent to year end, the following significant transactions have occurred:
•
•
Terranora NSW -– the settlement of 4 units, totalling $1.13 million was completed, with an additional 1 unit
exchanged for $0.30 million, totalling $1.43 million.
Dividend – the Company declared a final dividend in respect of the year of 0.55 cents per share, payable on 25
September 2020 amounting to $1.27 million.
Other than the above mentioned items, no other matter or circumstance has arisen since 30 June 2020 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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2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Directors’ Declaration
FOR THE YEAR ENDED 30 JUNE 2020
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 2020 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 2020.
On behalf of the Board
Murray Boyte
Executive Chair
Dated in Brisbane this 21st day of August 2020.
ANNUAL REPORT 2020
64
64
2020 Annual Report Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of Eureka Group
Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Eureka Group Holdings Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 2020, the consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, notes to the
financial statements, including a summary of significant accounting policies, and the directors'
declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants including Independence Standards (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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ANNUAL REPORT 2020 | 65
2020 Annual Report Recognition and Valuation of Investment Properties
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
• Assessing significant investment property
acquisitions made during the year as to whether
they were correctly classified as an asset or
business acquisition. In doing so, we analysed
related contracts of purchase and settlement
statements.
• Evaluating the Group’s assessment of properties
classified as investment properties under
Australian Accounting Standards, with
consideration as to how significant returns are
derived from these assets.
• We agreed investment properties to applicable
title and other documents evidencing ownership.
• Assessing the Group’s fair value determination of
investment properties. In doing so, we performed
the following procedures:
• Assessed the sustainable earnings for each
property, including occupancy assumptions,
in particular changes made as a result of
COVID-19.
Considered the capitalisation rates of
properties by region with the involvement of
our real estate valuation specialists.
• Holding discussions with management to
•
understand the impact that COVID-19 has had on
the Group’s investment properties. This included
considerations of the impact that COVID-19 has
had on key assumptions such as the future
maintainable earnings and capitalisation rates.
• Evaluating the compliance of the note disclosures
with Australian Accounting Standards including
specific uncertainties arising from the COVID-19
pandemic.
The recognition and valuation of investment
properties was a key audit matter due to the
value of the recorded asset (30 June 2020:
$121,443,000) relative to total assets and the
degree of estimation and judgement required to
be made by the Group, specifically concerning
classification and determination of fair value.
The Group assesses whether new acquisitions
are classified as an asset acquisition (individual
acquisitions of investment property assets) or
business acquisitions. Investment properties are
assessed each year by the Group to determine if
they continue to meet the requirements under
Australian Accounting Standards to be classified
as investment property.
All investment properties are recorded at their
fair value. Fair values are determined every six
months by reference to independent valuations
or internal valuations with reference to current
market conditions. Changes in fair values are
recognised in the consolidated statement of
comprehensive income. Assumptions used in
valuations have been impacted by the economic
uncertainty resulting from the COVID-19
pandemic and are critical to the assessment of
fair value. Significant assumptions used in the
valuation of the Group’s investment property are
inherently subjective and in times of economic
uncertainty the degree of subjectivity is higher
than it might otherwise be.
At 30 June 2020 the property market, and
broader economy, were significantly impacted by
the restrictions and economic uncertainty
resulting from the COVID-19 pandemic. Given
the market conditions at the balance date, it has
not been possible for independent valuers to
undertake independent valuations under the
Group’s three-year independent valuation cycle
for four properties. As a result, we consider the
property valuations and the related disclosures
in the financial statements to be particularly
significant to our audit. For the same reasons we
consider it important that attention is drawn to
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2020 Annual Report the Notes 2 and 13 of the financial report
disclosing the investment property assets and
Note 24 disclosing the assumptions used in the
valuation of these assets.
Impairment Testing of Intangible Assets
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
• Evaluating the Group’s assessment of impairment
indicators for management letting rights.
• Evaluating the Group’s assessment of Cash
Generating Units.
• Testing the mathematical accuracy of the
impairment model.
• Considering the accuracy of the Group’s historical
cash flow forecasts. We agreed the forecasts to
Board approved budgets and compared those
forecasts to previously achieved results and
considered any adjustments required for current
trading and market activities, such as the impact
of COVID-19.
• Assessing the key assumptions within the
impairment model including the growth rate and
discount rate.
• Applying our knowledge of the business and
corroborating our work with external information
where possible, including published earnings
multiples for similar assets, specifically
management letting rights based on profitability
and tenure.
• Assessing the adequacy of the fair value
disclosures included in Note 16 to the financial
report.
Impairment testing of intangible assets was a key
audit matter due to the value of the recorded
asset (30 June 2020: $4,177,000) and the
degree of estimation required to be made by the
Group in calculating the value-in- use using
discounted cash flow forecasts.
Note 16 of the financial report discloses the
Group’s intangible assets and the key
assumptions used in testing these assets for
impairment, including those used in the cash
flow forecasts.
The Group performs an annual impairment
assessment of goodwill, while amortising
intangible assets, such as management letting
rights, are assessed for indicators of impairment.
The recoverable amount has been determined
based on a value in use model with discounted
cash flows, estimates and other significant
judgments regarding future projections which
have been impacted by the economic uncertainty
resulting from the COVID-19 pandemic and are
critical to the assessment of impairment.
Significant assumptions used in the impairment
testing referred to above are inherently
subjective and in times of economic uncertainty
the degree of subjectivity is higher than it might
otherwise be. Based on the size of the asset and
the judgement involved in determining the
recoverable amount, we have considered this a
key audit matter.
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2020 Annual Report Non-Core Assets
Why significant
The Group is in the process of realising a number
of non-core assets. These assets are:
•
•
•
Couran Cove Land Option (Note 9) -
$1,050,000
Loan Receivable from former related
parties (Note 8) - $315,000
Terranora Unit Inventory (Note 7) -
$4,880,000
These assets are material to the Group, require
judgment in determining the appropriate
accounting treatment and in assessing their
carrying value. As a result, this was considered
to be a key audit matter.
The Group assessed the recoverability of these
assets as follows:
•
•
The Couran Cove Land Option has been
carried at fair value based on estimates
of future cash flows expected to be
received from the land assets. Future
projections have been impacted by the
economic uncertainty resulting from the
COVID-19 pandemic and are critical to
the assessment of value. Significant
assumptions used in the valuation
assessment referred to above are
inherently subjective and in times of
economic uncertainty the degree of
subjectivity is higher than it might
otherwise be. Based on the size of the
asset and the judgement involved in
determining the recoverable amount, we
have considered this a key audit matter.
Loan Receivable from former related
parties has been assessed based on
expected future cash flows, the credit
worthiness of the borrowers and the
value of security provided. The
borrowers are expected to settle the
loan using the proceeds from the sale of
real property. However, given the
uncertainty resulting from the COVID-19
pandemic, the sale contracts have been
How our audit addressed the key audit matter
Our audit procedures concerning the land option
included the following:
• Reviewing contractual terms and other legal
correspondence in the period to assess if the
Group has legal title to the assets.
• Comparing key market-derived estimates,
including expected selling price, to external data,
where available. This includes consideration of
the impact of COVID-19 has had on the expected
selling price of the land.
• Understanding changes and developments in the
asset in the period.
• Performing sensitivity analyses to assess the
range of acceptable recoverable value estimates.
• Testing the mathematical accuracy of the models.
• Assessing the adequacy of the related disclosure
in the financial report.
Our audit procedures relating to loan receivable
included the following:
• Reviewing the loan agreement.
• Reviewing legal correspondence to confirm the
existence of the loan and its terms.
• Reviewing management’s assessment of
recoverability of the loan, including
creditworthiness of the borrowers, and security
on the loan.
• Assessing the adequacy of the provision for
expected credit losses including any uncertainties
arising from the COVID-19 pandemic.
• Testing the mathematical accuracy of the interest
calculation.
• Assessing the adequacy of the related disclosure
in the financial report.
Our audit procedures concerning the Terranora
inventory included the following:
• Testing additions and disposals to supporting
documentation and bank statements on a sample
basis.
• Testing management’s estimated costs of
completion and realisation based on recent
transactions.
• Assessing the adequacy of the related disclosure
in the financial report.
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68
2020 Annual Report For all assets above we evaluated management’s
assessment of whether the asset is likely to be
realised within 12 months of the balance date.
•
extended resulting in the extension of
the repayment of the receivable.
The Terranora asset has been assessed
to be capital inventory and is carried at
the lower of cost and net realisable
value. The net realisable value has been
assessed by management using external
independent valuations and estimates of
cost to complete (building works) and
realise this asset.
The Group has also assessed the expected time
frames for recovery of these assets in order to
determine their recording as either current or
non-current assets.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2020 Annual Report, but does not include the financial report and
our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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2020 Annual Report Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
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70
2020 Annual Report From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of Eureka Group Holdings Limited for the year ended 30
June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Brad Tozer
Partner
Brisbane
21 August 2020
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2020 Annual Report Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of Eureka Group
Holdings Limited
As lead auditor for the audit of the financial report of Eureka Group Holdings Limited for the financial
year ended 30 June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Eureka Group Holdings Limited and the entities it controlled during the
financial year.
Ernst & Young
Brad Tozer
Partner
21 August 2020
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72
2020 Annual Report Eureka Group Holdings Limited and controlled entities
Corporate Governance Statement
The Company’s directors and management are committed to achieving and demonstrating the highest standards of
corporate governance.
The Company has prepared a Corporate Governance Statement which sets out the corporate governance practices that
were in operation during the financial year.
The Board has adopted
the ASX Corporate Governance Principles and Recommendations (3rd Edition)
(‘Recommendations’) to the extent considered appropriate for the size and nature of the Group’s operations. The
Corporate Governance Statement identifies any Recommendations that have not been followed and provides reasons for
not following those Recommendations.
The Company’s Corporate Governance Statement and key policies can be found on its website:
https://www.eurekagroupholdings.com.au/investors/corporate-governance/.
73
ANNUAL REPORT 2020
73
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Security Holder Information
Distribution of Securities as at 12 August 2020
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
332
193
102
290
140
1,057
Substantial Holders as at 12 August 2020
NAOS Asset Management Limited
Cooper Investors Pty Limited
Tribeca Investment Partners
Charter Hall Property Securities Management Limited
Sunsuper Pty Ltd
Salt Funds Management
Total
Marketable Shares
There were 353 holders of less than a marketable parcel of 1,351
shares holding a total of 108,382 shares.
Voting Rights
Ordinary Shares carry voting rights of one vote per share. Options
and share rights carry no voting rights.
No of Ordinary
Shares Held
% of Issued
Share Capital
45,736,198
32,934,541
25,365,406
15,800,658
14,632,669
11,792,176
146,261,648
19.88
14.32
11.03%
6.87
6.36
5.13
63.58
Twenty Largest Ordinary Shareholders as at 12 August 2020
No of Ordinary
Shares Held
% of Issued
Share Capital
National Nominees Limited
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
One Managed Investment Funds Limited
Tolani Estate Pty Ltd
Mr Alister C Wright
H & G Limited
Mr Richard Mews & Mrs Wee Khoon Mews
Equipment Company of Australia Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
HIDIV Pty Ltd
Graeme Webb Holdings Pty Ltd
NEJA Pty Ltd
UBS Nominees Pty Ltd
Gold Tiger Investments Pty Ltd
Acadia Park Pty Ltd
Wulguru Townsville Pty Ltd
Condon Townsville Pty Ltd
EXLDATA Pty Ltd
Citicorp Nominees Pty Ltd
Total
96,778,654
20,464,628
17,688,584
8,000,000
4,400,000
3,650,000
3,195,359
2,188,607
2,185,360
2,018,372
1,898,075
1,770,000
1,750,000
1,500,000
1,500,000
1,425,000
1,283,334
1,283,334
1,207,507
1,176,950
42.07
8.90
7.69
4.38
1.91
1.59
1.39
0.95
0.95
0.88
0.83
0,77
0.76
0.65
0.65
0.62
0.56
0.56
0.52
0.51
177,563,991
77.19
ANNUAL REPORT 2020
74
74
2020 Annual Report
Eureka Group Holdings Limited and controlled entities
Corporate Directory
Registered Address & Contact Details
Registered Address
Postal Address
Phone number
Website
Email
Suite 2D 7 Short St, Southport QLD 4215
PO Box PO Box 10819, Southport BC QLD 4215
07 5568 0205
www.eurekagroupholdings.com.au
info@eurekagroupholdings.com.au
Board of Directors
Murray Boyte (Executive Chair)
Russell Banham
Sue Renkin
Greg Paramor AO
Chief Operating Officer
Chief Financial Officer
Senior Management
Cameron Taylor
Tracey Campion
Company Secretary
Laura Fanning
Solicitors
Jones Day
Riverside Centre
Level 31/123 Eagle Street
Brisbane QLD 4000
Tel: 07 3085 7000
Fax: 07 3085 7099
Mills Oakley
Level 7
151 Clarence Street
Sydney NSW 2000
Tel: 02 8289 5800
Fax: 02 9247 1315
Auditors
Ernst & Young
111 Eagle St
Brisbane Qld 4000
Tel: 07 3011 3333
Fax: 07 3011 3344
Share Registry
Link Market Services – Brisbane
Level 21, 10 Eagle Street
Brisbane Qld 4000
Call Centre: 02 8280 7454
Fax: 07 3228 4999
Securities Exchange Listing
ASX Limited
ASX Code: EGH (ordinary shares)
Australian Business Number
15 097 241 159
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ANNUAL REPORT 2020
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2020 Annual Report
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ABN 15 097 241 159
Level 2, 7 Short Street,
Southport Qld 4215
P: (07) 5568 0205
F: (07) 5302 6605
E: info@eurekagroupholdings.com.au