ASX RELEASE
24 October 2022
ANNUAL REPORT 2022
HMC Capital (ASX: HMC) provides the attached Annual Report 2022. It is being dispatched today to those
shareholders who have elected to receive a hard copy.
This announcement is authorised for release by the Board.
Will McMicking
Group Chief Financial Officer
+61 451 634 991
william.mcmicking@hmccapital.com.au
INVESTORS
Misha Mohl
Group Head of Strategy & IR
+61 422 371 575
misha.mohl@hmccapital.com.au
MEDIA ENQUIRIES
John Frey
Corporate Communications Counsel
+61 411 361 361
john@brightoncomms.com.au
About HMC Capital
HMC Capital is an ASX-listed diversified alternative asset manager which invests in high conviction and
scalable real asset strategies on behalf of individuals, large institutions, and super funds. HMC Capital is the
manager of HomeCo Daily Needs REIT (ASX: HDN), HealthCo Healthcare and Wellness REIT (ASX: HCW)
and HMC Capital Partners Fund I with external AUM of $5.8 billion.
In August 2022, HMC established HMC Capital Partners Fund I, an open-ended unlisted fund providing
exposure to a high-conviction investment strategy seeking to generate superior risk-adjusted returns. HMC
Capital Partners Fund I targets public and private companies in Australia and New Zealand with real asset
backing where there is potential to unlock ‘trapped’ value through improved capital allocation and portfolio
management.
Home Consortium Limited (ACN 138 990 593)
(trading as HMC Capital)
P. 1300 466 326
E. info@hmccapital.com.au
Level 7, 1 Macquarie Place, Sydney NSW
2000 www.hmccapital.com.au
Home Consortium Limited
ACN 138 990 593
2022
Annual
Report
For the year ended 30 June 2022
2
4
8
12
45
46
52
104
105
110
113
Table of
Contents
FY22 Highlights
HMC Capital Track Record
Chair and Chief Executive Officer’s Letter
Directors’ Report
Auditor’s Independence Declaration
Financial Report
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Security Holder Information
Corporate Directory
HMC Capital ABN 94 138 990 593
Our ambition is to be Australia’s
leading diversified alternative
asset manager
1
HMC Capital | Annual Report 2022 FY22
Highlights
“HMC is committed to
sustainable practices
that drive long term
value creation
and achieve a
positive impact on our
communities”
FINANCIAL
31.0cps / $91.0m
FY22 PRE-TAX FFO
+126% increase on FY21
pre-tax FFO per share
12.0cps
FY22 DPS (100% FRANKED)
Payout ratio of 39% supports strong growth outlook
and high ROE opportunities
Net Cash
STRONG BALANCE SHEET
Divested 2 remaining LFR assets on balance sheet
at 38% premium to book value
FUNDS MANAGEMENT
$5.8bn
EXTERNAL AUM1
+321% growth vs Jun 21
$4.6bn
FY22 GROSS TRANSACTIONS2
Record year of deployment highlighted by the
acquisition of Aventus
HMC Capital Partners Fund I
~$300m First Close
First investment in Sigma Healthcare up ~22%3
Established unlisted fund capability
ASX:HDN
HOMECO DAILY NEEDS REIT
249% AUM growth1
30% FFO/unit growth vs FY21
ASX200 company
$64.1m
FUNDS MANAGEMENT REVENUES
+490% YoY growth demonstrates ability to scale platform
and generate meaningful fee income
ASX:HCW
HEALTHCO HEALTHCARE & WELLNESS REIT
$650m IPO in Sep 21
Largest REIT IPO since 2014
Notes:
1. As at 30 Jun 22 for HDN and HCW. External AUM pro forma for HMC Capital Partners Fund I establishment post-balance date in Aug 22.
2.
3. As at 22 Aug 22.
Includes acquisitions and disposals by the HMC Group settled in FY22.
2
FY22 Strategic Outcomes
Our results demonstrate platform scalability and investment discipline
OUR AMBITION IS TO BE AUSTRALIA’S LEADING DIVERSIFIED
ALTERNATIVE ASSET MANAGER
EXPAND & DIVERSIFY
SOURCES OF CAPITAL
GROW AND RETAIN
ELITE TEAM
SCALE EXISTING
PLATFORM
Successfully listed HCW in Sep 21
($650m IPO)
Expanding investment &
distribution capability with key
strategic hires in FY22
Established HMC Capital Partners
unlisted fund in Aug 22 – now
available on 3 platforms
Victoria Hardie & Gavin Mullett
– HMC-CP
Building in-house distribution
capability across retail, HNW and
institutional wholesale channels
Nick Harris
– Institutional/ capital
partnerships
Two new real estate capital
partnership opportunities
announced today
Chris Boyd
– Retail distribution
Vaughan Anderson
– Risk management
$5.8bn1 of external AUM growth
underpinned by
$4.6bn2 of gross transactions
in FY22
Expanded value accretive
development pipeline to >$1bn
in listed funds
Disciplined approach to
corporate M&A opportunities
and acquisitions for managed
REITs
Well positioned to maintain growth trajectory and grow AUM beyond $10bn by 2024
Notes:
1. As at 30-Jun-22 pro forma for HMC Capital Partners Fund I establishment post-balance date in Aug 22.
2.
Includes acquisitions and disposals by the HMC Group settled in FY22.
3
HMC Capital | Annual Report 2022
HMC Capital
Track Record
Execution capability has accelerated evolution to a capital light alternative asset manager
Acquisition of
former Masters
Home Improvement
property portfolio
Commenced
process of
redeveloping
500,000sqm
of GLA
Home
Consortium
(ASX: HMC)
listed on the
ASX at $3.35
with $925m
investment
portfolio
HDN listed
on the ASX
via in-specie
distribution and
$300m IPO
HDN listed
with $844m of
assets
2016
2017-2019
Oct 19
Jul 20
Nov 20
Dec 20
HMC establishes
in-house asset
management
and development
capability
organically
Home
Consortium
Daily Needs
REIT
HMC announces
$140m
institutional
placement
and $128m of
acquisitions
to seed the
establishment of
the HomeCo Daily
Needs REIT
(ASX: HDN)
HMC
announces
$125m
institutional
placement and
$131m of
strategic
acquisitions
to seed
establishment
of new
Healthcare
REIT
Notes:
1.
2.
Includes settled and contracted acquisitions and disposals by the HMC Group.
Includes equity capital raisings only.
4
HMC added to
S&P/ASX 300
index
HDN acquires
$322m of
acquisitions and
announces $265m
entitlement offer
HMC and HDN
announce
proposed
acquisition of
Aventus Group
for $2.3bn to
create Australia’s
leading Daily
Needs REIT
HDN added to
S&P/ASX 200
index
Apr 21
Sep 21
Oct 21
Mar 22
Apr 22
Aug 22
HealthCo
(ASX: HCW)
listed on the
ASX following
$650m IPO
HDN acquires
$222m of
assets partially
funded
by $88m
institutional
placement
HMC added to
S&P/ASX 200
index
HMC announces
rebranding and
change of name
to HMC Capital
HMC Capital
Partners
Fund 1
launched
and seeded
with ~14%
strategic
stake in
Sigma
Healthcare
(ASX: SIG)
5
HMC Capital | Annual Report 2022 HMC Capital Funds Management Platform Today
Scalable growth platforms underpinned by permanent capital sources and powerful megatrends
Established
Sector focus
Capital
Fund term
Daily Needs
REIT
Partners Fund 1
Nov 20
Sep-21
Aug-22
Daily needs retail
property
Healthcare & wellness
property
High conviction strategic
stakes & private equity
ASX listed
ASX listed
Unlisted
Open-ended
Open-ended
Open-ended
HMC co-investment (%)
14.1%
20.9%
$150m commitment4
Gross asset value ($bn)1
$4.9bn
$0.7bn
~$0.3bn
FY22 AUM growth (%)2
Gearing (%)3
249%
30.6%
16%
Net cash
Available liquidity ($m)3
$380m
$413m
nm
nm
nm
Over time HMC Capital will seek a relatively balanced split of external AUM across its
target alternative asset classes
Notes:
1. As at 30-Jun-22 pro forma for HMC Capital Partners Fund I establishment post-balance date in Aug-22.
2. AUM growth since IPO in Sep-21 for HCW.
3. As at 30 Jun-22 pro forma for announced disposals.
4. Subject to the qualifications set out in the Fund information memorandum dated July 2022.
6
Growth Strategy
Well positioned to maintain growth trajectory and grow AUM beyond $10bn by 2024
Listed REITs
l ASX-listed REITs providing high quality and growing income
streams via exposure to attractive megatrends
Daily Needs
REIT
l Strong commitment to market leading governance and
manager alignment to support long-term cost of capital
l Strong balance sheets and liquidity to capitalise on >$1bn value
enhancing development pipeline across both REITs
l Disciplined approach to acquisitions to capitalise on large
addressable markets and fragmented ownership
l Today announcing two new unlisted institutional funds/capital
partnerships
Unlisted
Real Estate
New fund
opportunities
— ~$1bn last mile logistics value-add fund targeting
undervalued assets with repositioning upside
— Capital partnering opportunity for HMC’s interest in the
Camden healthcare precinct1
$8bn+
AUM
target by
2024
HMC Capital
Partners
Partners Fund 1
l Unlisted fund targeting high conviction strategic stakes and
private equity investments
l Situational capital targeting asset rich companies with trapped
value where we can influence positive change
l Targeting to grow total funds raised to over $500m over the
next 6 months and $1.5bn over time with ability to leverage
investments and co-invest with institutional wholesale capital
l Engaged domestic and offshore placement agents to support
institutional capital partnering strategy
$1.5bn+
AUM
target by
2024
Corporate
activity
l M&A opportunities which provide new scalable platforms in
target alternative sectors
l Capital partnerships for value-add opportunities including
large-scale take private transactions
$10bn+
AUM
We are currently tracking 6-12 months ahead of our previously stated AUM growth target
of $10bn by the end of 2024
Notes:
1. Stages 2 & 3.
7
HMC Capital | Annual Report 2022
Chair and
Chief Executive
Officer’s Letter
Our strategy and ambition to create Australia’s leading
ASX-listed diversified alternative asset manager is now well
underway following a period of transformational growth in
FY22. We delivered 143% growth in FFO and 321% growth
in external AUM which was underpinned by $4.6bn1 of
gross transactions.
As a manager we also demonstrated strong discipline and
alignment through our proactive response to the rising
interest rate environment and market volatility in the second
half of the financial year. We strengthened the capital
position of our real estate funds through opportunistic asset
sales which took advantage of the disconnect between
property and global capital markets.
HomeCo Daily Needs REIT completed its transformational
merger with Aventus in March 2022. The $2.3bn merger
represented a step change for the HMC Capital Group
and cemented HDN’s position as Australia’s leading Daily
Needs REIT. The integration of management platforms,
systems and teams has been successfully completed with
strong operational momentum maintained and increased
focus on unlocking the combined portfolio’s $500m+
development pipeline.
The successful listing of our HealthCo Healthcare and
Wellness REIT in September 2021 marked the largest
real estate IPO since 2014 and demonstrated the
significant investor demand for a diversified healthcare
REIT in Australia. HCW exceeded its FY22 PDS FFO
per unit forecast and is well capitalised for growth with
no debt and significant liquidity to take advantage of
attractive investment opportunities including its $500m+
development pipeline.
We also invested in our funds management platform and
capability with a number of strategic hires which have
expanded our in-house investment and distribution teams.
In August 2022, we established our third investment vehicle
– HMC Capital Partners Fund I – and our first unlisted
product after successfully raising ~$300m in challenging
market conditions.
FY22 HIGHLIGHTS
Financial highlights
l FY22 pre-tax FFO of $91.0m, up 143% on FY21
l FY22 pre-tax FFO per share of 31.0 cents, up 126%
on FY21
l Funds management revenues of $64.1m versus $10.9m
in FY21 (+490%)
l Net cash balance sheet following successful sell-down
of remaining direct property2
l Undrawn debt facilities and cash of $332.6m to support
growth strategy3
Operational highlights
l External assets under management (AUM) of $5.8bn,
up 321% on FY211
l $4.6bn of gross transactions in FY224 highlighted by
the $2.3bn acquisition of Aventus in Mar 22 and IPO
of HealthCo Healthcare & Wellness REIT in Sep 21
l Successfully launched HMC Capital Partners Fund I
in Aug 22 with ~$300m first close fund raising
l First investment for HMC Capital Partners Fund I
in Sigma Healthcare (ASX: SIG)
1. As at 30 Jun 22 pro forma for HMC Capital Partners Fund I establishment post-balance date in Aug 22.
2. Excluding HMC Capital’s direct interest in the Camden healthcare development.
Including up to $150m sponsor commitment to HMC Capital Partners Fund I.
3.
Includes acquisitions and disposals by the HMC Group settled in FY22.
4.
8
FUNDS MANAGEMENT UPDATE
Listed REITs
Daily Needs
REIT
HomeCo Daily Needs REIT
HealthCo Healthcare and
Wellness REIT
Strong FY22
results
l Successful merger integration with Aventis
l Delivered FY22 FFO of 8,85cpu, up 30% on FY21
l Strong operational intensity driving portfolio
performance
— >99% rent collection
— >99% occupancy
— +5.7% leasing spreads
l Exceeded upgraded FY22 FFO guidance
and delivered FY22 DPU in line with PDS
forecast
l Strong operational intensity driving portfolio
performance
— 100% rent collection
— >99% occupancy
Proactive
capital
management
l Disciplined approach to acquisitions in
l Disciplined approach to acquisitions in
competitive environment
competitive environment
l Fortified balance sheet with the sale of Sunshine
l Fortified balance sheet with pro forma
Coast Home for $140m representing a 6%
premium, to Dec 21 book value
l Decreased gearing to 30.6% and increased
hedging to 73.5%
— Dry powder of ~$500m
Jun 22 net cash position
— Dry powder of ~$413m
l Sale of St Mary’s for 71% premium to Dec 21
book value
l Announced on-market unit buy-back
Compelling
growth
outlook and
megatrends
l Progressing $0.5bn development pipeline
l Progressing $0.5bn development pipeline
l More compelling acquisition opportunities
l Actively working with major healthcare
starting to emerge
l Shift to omnichannel retailing is increasing
the strategic value of HDN’s last mile logistics
real estate
l Asset class is attracting greater interest from
institutional capital which is driving down
cap rates
operators to establish strategic property
partners
l Exposed to favourable structural tailwinds
supporting long-term demand for
healthcare services and infrastructure
l Significant institutional demand for
healthcare real estate
HMC Capital’s two managed REITs are well capitalised and positioned to take advantage of attractive opportunities
HMC Capital Partners
HMC Capital Partners Fund I will target undervalued asset rich companies where we can influence positive change. The fund
will pursue a high conviction strategy targeting executable situations where we can help unlock ‘trapped value’. The fund
recently made its first investment in Sigma Healthcare, a national pharmaceutical wholesaler, and has increased its strategic
stake to 17%.
9
HMC Capital | Annual Report 2022
Chair and Chief Executive Oficerrs Leeer
OUTLOOK
HMC Capital is well positioned moving into FY23 with strong momentum and a more established and diversified platform.
Our two REITs have strong balance sheets to take advantage of compelling investment opportunities including their value
enhancing development pipelines. HMC Capital Partners expands our platform into new alternative sectors including private
equity and gives us greater flexibility to deploy capital during times of market volatility and dislocation. Targeting the launch of
two new unlisted real estate fund strategies targeting daily needs and healthcare sectors will further diversify our sources of
capital and increase out exposure to these high conviction sectors.
On behalf of the Board of Directors we would like to thank our securityholders for your ongoing support of HMC Capital.
Chris Saxon
Chair
David Di Pilla
Managing Director and
Chief Executive Officer
10
Directors’ Report and
Financial Statements
— 30 June 2022
11
HMC Capital | Annual Report 2022 Directors’
Report
The directors of Home Consortium Limited (referred to hereafter as the ‘Company’ or ‘parent entity’ or ‘HCL’) present their
report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘group’, ‘HMC Capital’
or ‘HMC’) consisting of HCL and the entities it controlled at the end of, or during, the year ended 30 June 2022.
The comparative period results are for the stapled group comprising of Home Consortium Limited (ACN 138 990 593) and
Home Consortium Developments Pty Limited (ACN 635 859 700) (formerly Home Consortium Developments Limited (‘HCDL’).
As detailed in note 2 of the notes to the financial statements, the shares of HCL and HCDL were destapled on 24 December
2021. As a result, the current year results are for the stapled group until 24 December 2021 and for the destapled group from
25 December 2021 to 30 June 2022.
Directors
The following persons were directors of HCL during the whole of the financial year and up to the date of this report, unless
otherwise stated:
Chris Saxon
David Di Pilla
Zac Fried
Greg Hayes
Jane McAloon
Brendon Gale
Kelly O’Dwyer
Independent Non-Executive Chair
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Principal activities
The principal activities of the Group during the year was funds management via the ownership and management of real asset
focused funds.
Dividends
Dividends paid during the financial year were as follows:
Final dividend to shareholders registered on 3 September 2021 of 6.0 cents (2020: 7.5 cents) per
ordinary security
Interim dividend for the year ended 30 June 2022 of 6.0 cents (2021: 6.0 cents) per ordinary security
Consolidated
30 June
2022
$’000
30 June
2021
$’000
17,416
17,416
19,292
17,407
34,832
36,699
On 23 August 2022, the directors determined to pay a fully franked dividend of 6.0 cents per ordinary share. The dividends will
be paid on 7 October 2022 to eligible shareholders on the register on 2 September 2022.
12
Significant changes in the state of affairs
During the year, the Group completed or announced a number of strategic transactions to progress its funds management
initiatives. Such transactions included the following:
HealthCo Healthcare and Wellness REIT (HCW)
l Establishment of the HealthCo Healthcare and Wellness REIT (HCW), a real estate investment trust with a mandate to invest
in hospitals, aged care, childcare, government, life sciences and research and primary care and wellness property assets,
as well as other healthcare and wellness property adjacencies.
l HCW raised $650.0 million in equity and was listed on the ASX on 6 September 2021 with part of the proceeds being used
to acquire all of HMC Capital’s existing healthcare and wellness property portfolio for $480.5 million.
l HCW is externally managed by HMC Capital via its subsidiary HCW Funds Management Limited (ACN 104 438 100)
(AFSL 239882) which is also the responsible entity of HCW.
l The Group has retained a direct investment in HCW of 20.9% as at 30 June 2022.
Aventus Group transaction
l On 18 October 2021, HCL and HomeCo Daily Needs REIT (HDN) announced that HMC Capital and HDN had entered into
a binding Scheme Implementation Deed (‘SID’) with Aventus Group (AVN) to acquire all AVN securities comprising units
in Aventus Retail Property Fund and shares in Aventus Holdings Limited via schemes of arrangement subject to certain
conditions.
l The Schemes were approved by the Supreme Court of New South Wales on 22 February 2022 with the implementation date
of 4 March 2022. Refer to note 37 for details of assets and liabilities acquired by the Group and settlement of consideration.
The purchase consideration was partly settled via the issuance of 9,351,451 shares in HCL.
l Aventus Group managed a large format retail portfolio comprising of 19 properties with a fair value of $2.5 billion as at
31 December 2021 which was transferred to HDN as part of the merger. HMC Funds Management Limited, a subsidiary
of the Group, has continued, and will continue its role as the responsible entity and trustee of the merged HDN group.
l The group received an acquisition fee of $22.3 million on completion of the transaction which was received as scrip in HDN.
The group owns approximately 14.1% of the merged HDN group following the completion of the transaction which includes
the acquisition fee units.
Capital recycling
In addition to the establishment of HCW and the HDN asset sales announced in April 2021 that completed on 1 July 2021, the
Group completed $217.8 million of asset disposals during the financial year. This included the sale of 4 large format retail assets
at Coffs Harbour, Lismore, North Lakes and Gregory Hills as well as a parcel of vacant land at Richlands to HDN. In addition, the
sale of large format retail assets at Wagga Wagga, Knoxfield and Roxburgh Park were completed during the period. The group
has now disposed of all investment properties and no longer holds a direct property portfolio.
Destapling of HCL and HCDL shares
In November 2021, HMC Capital proposed a simplification of the structure of the Group from a stapled company structure to a
single company structure. The proposal was approved by shareholder vote and the shares of HCL and HCDL were destapled
on 24 December 2021.
HMC Capital Partners Fund I
In June 2022, HMC Capital lodged an initial substantial holder notice in Sigma Healthcare Limited (ASX: SIG) disclosing a
relevant and economic interest of 11.1% which has subsequently increased to 13.9%. The investment is being acquired as a seed
asset for the HMC Capital Partners Fund I (refer to matters subsequent to the end of the financial year for additional disclosure).
There were no other significant changes in the state of affairs of the Group during the financial year.
13
HMC Capital | Annual Report 2022 Directorsr Report
Review of operations and financial performance
A summary of the financial performance of the Group for the financial year ended 30 June 2022 is outlined below.
Total revenue including share of profit/loss of associates
Net profit/(loss) for the year
Funds from operations (‘FFO’)
Weighted average securities on issue (million)
FFO per security (cents)
Consolidated
30 June
2022
$’000
30 June
2021
$’000
150,094
78,832
107,262
(85,904)
89,013
293.3
30.3
35,785
273.2
13.1
The group recorded total revenue (including share of profit/loss of associates) of $150.1 million (30 June 2021: $78.8 million) and
a statutory profit after tax for the current financial year of $107.3 million compared to a loss of $85.9 million for the financial
year ended 30 June 2021. The statutory profit is primarily attributable to share of associate profit from investments in HDN
and HCW of $71.1 million and gain on sale of investment property of $28.0 million.
FFO was $89.0 million for the current financial year compared to FFO of $35.8 million for the financial year ended
30 June 2021. FFO is a financial measure which is not prescribed by Australian Accounting Standards and represents the
Group’s underlying and recurring earnings from its operations and is determined by adjusting the statutory net profit after tax
for items that are non-cash, unrealised or capital in nature. The directors consider FFO to represent the core earnings of the
Group.
Funds from operations
The table below provides a reconciliation between the net profit/(loss) after tax for the year and FFO:
Statutory profit/(loss) after tax
Profit before tax on discontinued operations
Deferred income tax expense
Depreciation expenses
Net fair value movements
Acquisition and transaction costs
Impairment expenses
Amortisation of borrowing costs
Straight-lining of rental income
Share of associate profit to FFO
Gain on investment in associates
Loss on demerger
Other adjustments
FFO
14
Consolidated
30 June
2022
$’000
30 June
2021
$’000
107,262
(85,904)
—
12,105
520
(725)
11,376
21,339
1,788
563
(48,316)
(16,900)
—
—
89,013
(9,883)
87,680
—
21,954
1,945
—
2,976
3,503
(2,846)
—
15,446
914
35,785
Summary of financial position
A summary of the Group’s financial position as at 30 June 2022 is outlined below:
Assets
Investment properties
Total assets
Net assets
Net tangible assets*
Adjusted net tangible assets **
Number of securities on issue (million)
Net tangible assets ($ per security)*
Adjusted net tangible assets ($ per security)**
Capital management
Debt facility limit
Drawn debt
Cash and undrawn debt
Gearing ratio (%)
Hedged debt (%)
Cost of debt (% p.a.)
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
188,100
912,950
982,412
846,002
710,979
659,228
710,979
691,327
691,344
299.6
2.20
2.31
290.1
2.45
2.38
275,000
315,000
—
254,750
332,555
71,944
—
—
nm
25.6%
68.7%
2.5%
*
Net tangible assets include deferred tax assets and liabilities, right-of-use assets and lease liabilities.
**
Adjusted net tangible assets exclude the following: right-of-use assets, lease liabilities, provisions and deferred tax assets and liabilities.
Financing
On 29 July 2021, the Group completed an upsize and extension of its existing three-year senior secured syndicated debt facility
to a $375.0 million senior secured syndicated debt facility expiring in November 2023 which was used to provide and guarantee
acquisition financing for the establishment of HCW. Following the establishment of HCW, the drawn debt facilities were
repaid. There were no outstanding borrowings as at 30 June 2022 and the Group reduced its facility limit to $275.0 million in
December 2021.
Property portfolio
As at 30 June 2022, the Group no longer holds a direct property portfolio (30 June 2021: $188.1 million). The reduction in
freehold investment properties was driven by the disposal of assets for $217.8 million, with capital additions and straight lining
during the period of $10.9 million and fair value adjustments of $18.8 million.
15
HMC Capital | Annual Report 2022 Directorsr Report
Matters subsequent to the end of the financial year
HMC Capital Partners Fund I
On 4 July 2022, HMC Capital’s wholly owned subsidiary HMC Investment Management Pty Limited (Manager) launched
HMC Capital Partners Fund I (the Fund), an Australian domiciled unlisted wholesale fund providing exposure to a high-
conviction investment strategies. The Fund will target public and private companies in Australia and New Zealand with real
assets. HMC Capital has committed to investing $150.0 million of equity into the Fund subject to the qualifications set out in
the Fund information memorandum dated July 2022.
As part of an early commitment incentive program, initial investors into the Fund will receive rebated management fees and
be eligible to subscribe for options in HMC Capital, subject to receiving (and making a valid application order) a prospectus in
respect of such options and compliance with relevant law. The options are proposed to be issued following approval at HMC
Capital’s next AGM which is expected to be held in November 2022.
Following HMC Capital lodging an initial substantial holder notice in Sigma Healthcare Limited (ASX: SIG) in June 2022, HMC
Capital increased its combined relevant and economic interest to 13.9%. The investment is being acquired as a seed asset for
the Fund.
No other matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the
Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
HMC Capital objectives
The group’s objective is to provide securityholders with above average risk-adjusted returns via its funds management
strategy. The group intends to achieve this objective by investing in high conviction and scalable real asset strategies on
behalf of securityholders and HMC Capital managed funds (third party capital). The group will undertake these activities
whilst maintaining an appropriate capital structure and approach to sustainability.
Risk considerations
Financial risks
The group’s performance is linked to the performance of its funds under management and property assets held by those funds,
which derive their income through leasing arrangements with tenants. The group has sought to protect this property income by
having a diversified group of national tenants that operate sustainable business models, maintaining high occupancy rates and
setting sustainable rents with its tenants.
The key economic risk for the Group’s managed property assets relates to interest rate movements and the impact of this on
property capitalisation rates and the cost of debt funding. The group seeks to mitigate this risk by investing in quality properties
through the managed funds, maintaining an appropriate capital structure with a target gearing ratio of 30% — 40% within
managed funds and having adequate interest rate hedging in place.
Sustainability and climate-related and environmental risks
Sustainability is a key element of HMC Capital’s business approach, driven by the belief that sustainable investments are aligned
to long-term value creation and should not be dilutive to returns. HMC Capital has established a sustainability subcommittee
of the HMC Capital Board that governs the Group’s sustainability strategy and initiatives across its managed funds. The group
became a signatory to the UNPRI and a GRESB participating member in February 2021. These two organisations will provide an
investment and reporting framework to help shape the Group’s future strategies and risk framework.
The geographic diversity of the Group’s managed property portfolio limits the exposure to physical climate events to localised
occurrences. The group also undertakes detailed due diligence on property acquisitions to assess environmental risks including
contamination as well as any potential exposure to climate-related events.
16
Environmental regulation
The directors are satisfied that adequate systems are in place to manage the Group’s environmental responsibility and
compliance with regulations. The directors are not aware of any material breaches of environmental regulations and, to
the best of their knowledge and belief, all activities have been undertaken in compliance with environmental requirements.
Information on directors
Name:
Title:
Chris Saxon
Independent Non-Executive Chair
Experience and expertise:
Chris is a leading Australian lawyer and was, until 2019, a partner with Baker McKenzie. Chris’s
practice included large-scale mergers and acquisition (‘M&A’) transactions across a range of
sectors, notably energy (gas, electricity, renewable), industrials, infrastructure and mining. He
has consistently been ranked as one of Australia’s foremost project and M&A lawyers and has
been lead adviser on government restructuring transactions and privatisations, major trade
sales and infrastructure projects. Chris served as Chair of Baker McKenzie Australia for five
years (2012-2017) and has held numerous leadership roles within the firm.
Other current directorships:
None
Former directorships
(last 3 years):
None
Special responsibilities:
Chair of the Remuneration and Nomination Committee
Interests in shares:
226,863 ordinary shares
Interests in rights:
24,083 share rights over ordinary shares
Name:
Title:
David Di Pilla
Managing Director and Chief Executive Officer
Experience and expertise:
David led the team that founded and established HMC Capital in 2016. David is the founder,
a director and the major shareholder of the Aurrum Aged Care group. From 2014 to 2016,
he was also a strategic advisor and director to operating subsidiaries of the Tenix Group of
Companies. David has over 20 years of experience in investment banking. From 2004 to 2015,
he was Managing Director and Senior Adviser at UBS Australia and during this time he advised
some of Australia’s largest corporations on mergers and acquisitions, debt and equity capital
market transactions.
Other current directorships:
Non-Executive Director of HomeCo Daily Needs REIT (ASX: HDN) — appointed on
18 September 2020 and Non-Executive Director of HealthCo Healthcare and Wellness REIT
(ASX: HCW) appointed on 28 July 2021.
Former directorships (last 3
years):
None
Interests in shares:
40,053,372 ordinary shares
Interests in rights:
911,949 share rights over ordinary shares
17
HMC Capital | Annual Report 2022 Directorsr Report
Name:
Title:
Zac Fried
Non-Executive Director
Experience and expertise:
Zac worked closely with David Di Pilla and the team who founded and established the consortium
to acquire the Group in 2016. Zac is the Executive Deputy Chairman of the Spotlight Group
(‘SGH’). Established in 1973, SGH owns a number of major and iconic Australian retail brands:
Spotlight, Anaconda, Mountain Designs and Harris Scarfe. SGH also controls one of Australia’s
largest privately-owned property portfolios, Spotlight Property Group, and operates a
significant family office engaged in extensive investment and philanthropic activities. With over
10,000 employees and 260 big box retail outlets across four countries with large greenfield
redevelopment opportunities, SGH is one of Australia’s leading retail and property industry
participants. Zac’s focus at SGH includes the oversight of SGH’s property development and
leasing portfolio. He has almost 30 years of retail and property industry experience and a
demonstrable track record of successful site identification, property value creation, and the
fostering of many longstanding and close lessee relationships. Zac has played the central role
at SGH in the development of many of Australia and New Zealand’s premier retail, office, and
homemaker centres. In addition to his role at SGH, Zac is the President of the Large Format
Retail Association (‘LFRA’). The LFRA is the preeminent industry association responsible for
representing the Australian retail industry interests of operators, investors, property owners,
developers and service providers that collectively generate approximately $80 billion or 25% of
all retail sales in Australia.
Other current directorships:
None
Former directorships
(last 3 years):
None
Interests in shares:
26,126,717 ordinary shares
Interests in rights:
13,156 share rights over ordinary shares
Name:
Title:
Greg Hayes
Non-Executive Director
Experience and expertise:
Greg is currently a Non-Executive Director of HomeCo Daily Needs REIT (ASX: HDN); Non-
Executive Director of Ingenia Communities (ASX: INA) & Non-Executive Director of Aurrum
Holdings Pty Ltd. Having worked across a range of industries including property, infrastructure,
energy and logistics, Greg's skills and experience include strategy, finance, mergers and
acquisitions and strategic risk management, in particular in listed companies with global
operations. Greg was previously Chief Financial Officer and executive director of Brambles
Limited, Chief Executive Officer and Group Managing Director of Tenix Pty Ltd, Chief
Financial Officer and later interim Chief Executive Officer of the Australian Gaslight Company,
Chief Financial Officer Australia and New Zealand of Westfield Holdings, Executive General
Manager, Finance of Southcorp Limited. Greg has also held Non-Executive Director roles at
Incitec Pivot Limited and The Star Entertainment Group Ltd. Greg has a Master of Applied
Finance, a Graduate Diploma in Accounting, a Bachelor of Arts, completed an Advanced
Management Programme (Harvard Business School, Massachusetts) and is a Member of
Chartered Accountants Australia and New Zealand.
Other current directorships:
Non-Executive Director of Ingenia Communities (ASX: INA); Non-Executive Director of
HomeCo Daily Needs REIT (ASX: HDN) — appointed on 16 October 2020.
Former directorships
(last 3 years):
None
Special responsibilities:
Member of the Audit and Risk Committee
Interests in shares:
10,978,088 ordinary shares
Interests in rights:
14,473 share rights over ordinary shares
18
Name:
Title:
Jane McAloon
Independent Non-Executive Director
Experience and expertise:
Other current directorships:
Jane is Chair and Non-Executive Director of Energy Australia, United Malt Group, Newcrest
Mining, Allianz Australia and is a member of the Advisory Board of Allens Linklaters. She is
also Chairman of Monash University Foundation. Jane has worked in the natural resources,
energy, infrastructure and utility industries for over 25 years. She was President Governance
and Group Company Secretary at BHP Billiton for nine years during which she worked on
key strategic issues, corporate transactions, as well as market, regulatory and reputational
matters. Prior to this she was a senior executive at AGL Energy Limited. Jane worked in
executive leadership roles with the NSW Government Cabinet Office and the Energy, Rail and
Natural Resources Departments. She previously worked in private legal practice. Her previous
appointments include Viva Energy, Port of Melbourne, Civil Aviation Safety Authority, Cogstate
Limited, Healthscope Limited, Bravery Trust, Defence Reserves Services Council, Referendum
Council on Constitutional Recognition for Aboriginal and Torres Strait Islander Peoples and
the Australian War Memorial. Jane has a Bachelor of Economics (Hons) and Bachelor of Laws
from Monash University, a Grad Dip Corporate Governance and was awarded a Monash
University Fellowship in 2018.
Non-Executive Director of Energy Australia — appointed 19 December 2012, United Malt
Group — appointed 13 February 2020, Allianz Australia Ltd — appointed 1 July 2020, Newcrest
Mining Limited — appointed 1 July 2021.
Former directorships
(last 3 years):
Special responsibilities:
Viva Energy Group Limited (ASX: VEA) — retired in August 2021, GrainCorp Limited (ASX:
GNC) — 23 March 2020; Cogstate Limited (ASX: CGS) — 21 October 2019.
Chair of the Audit and Risk Committee, member of the Remuneration and Nomination
Committee and member of the Sustainability Committee
Interests in shares:
200,888 ordinary shares
Interests in rights:
16,109 share rights over ordinary shares
Name:
Title:
Brendon Gale
Independent Non-Executive Director
Experience and expertise:
Brendon is a leading Australian sporting administrator and is the current Chief Executive
Officer and Executive Director of the Richmond Football Club, one of the largest and most
diversified sports businesses in Australia. He is also an experienced company director,
having previously served on the board of the Victorian Equal Opportunity and Human
Rights Commission and is a current director of the Richmond Football Club Ltd and Aligned
Leisure Pty Ltd. Brendon is experienced in leading high performing and profitable consumer
businesses, operating in multi stakeholder environments, involving significant public investment.
He has a proven track record in shaping positive corporate culture and setting the tone from
the top through the alignment of purpose, values and strategy. Brendon holds a Master’s
Degree in Arts and Bachelor of Laws from Monash University, has completed the Advanced
Management Program at Harvard Business School and is a Graduate of the Australian Institute
of Company Directors.
Other current directorships:
None
Former directorships
(last 3 years):
Special responsibilities:
None
Chair of the Sustainability Committee and member of the Remuneration and Nomination
Committee
Interests in shares:
250,307 ordinary shares
Interests in rights:
14,274 share rights over ordinary shares
19
HMC Capital | Annual Report 2022 Directorsr Report
Name:
Title:
Kelly O'Dwyer
Independent Non-Executive Director
Experience and expertise:
Kelly is a Non-Executive Director of Equity Trustees, HealthCo Healthcare and Wellness
REIT and Barrenjoey Capital Partners Group Holdings Pty Ltd. Kelly previously served in the
Australian Parliament as a Senior Cabinet Minister holding several key economic portfolios
including Minister for Jobs and Industrial Relations; Minister for Revenue and Financial Services;
Minister for Small Business; and Assistant Treasurer. She also served on the Cabinet’s Budget
Committee (the Expenditure Review Committee) and held the portfolios of Minister for Women;
as well as Minister Assisting the Prime Minister with the Public Service. Prior to entering
Parliament, Kelly worked in law, government and finance and brings insights across a range of
sectors including funds management, superannuation, workplace relations, foreign investment,
law and banking. Kelly is a member of the School Council at Caulfield Grammar School and
a member of the Hospice Rebuild Capital Fundraising Committee for Very Special Kids.
Kelly holds a Bachelor of Laws (Hons) and Bachelor of Arts from The University of Melbourne.
Other current directorships:
Non-Executive Director of EQT Holdings Limited (ASX:EQT) and Non-Executive Director of
HealthCo Healthcare and Wellness REIT (ASX: HCW) appointed on 1 August 2021.
Kelly became a director of EQT Holdings Limited (ASX: EQT) in March 2021. Equity Trustees
Limited (which is a subsidiary of EQT Holdings Limited) (ETL) is the custodian of assets of
HomeCo Daily Needs REIT and the HealthCo Healthcare and Wellness REIT (both of which
are managed by HMC Capital) under custody agreements for arm’s length market-based
fees. Equity Trustees Wealth Limited (ETWL), another subsidiary of EQT, is also assisting HMC
Capital on taking steps to advance the establishment of the HMC Capital Foundation for arm’s
length market-based fees. With respect to both engagements, Kelly did not participate in the
decision to appoint an Equity Trustees subsidiary.
Former directorships
(last 3 years):
None
Special responsibilities:
Member of the Audit and Risk Committee and member of the Sustainability Committee.
Interests in shares:
39,066 ordinary shares
Interests in rights:
9,569 share rights over ordinary shares
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
20
Company secretary
Andrew Selim joined the Group in 2017 and is Group General Counsel and Company Secretary. He is responsible for all legal,
compliance and governance activities of the Group. Andrew has over 20 years of local and international experience in real
estate and corporate law. Before joining the Group, Andrew was Senior Legal Counsel and Company Secretary at GPT Group.
Prior to that, he was a Senior Associate at Allens Linklaters. Andrew holds a Master of Laws, Bachelor of Laws (Honours) and
Bachelor of Science (Advanced), all from the University of Sydney. He is a Member of the Governance Institute of Australia, a
Member of the Association of Corporate Counsel Australia and is a Member of the Australian Institute of Company Directors.
He previously sat on the Law Society of NSW In-House Corporate Lawyers Committee. Andrew has also been recognised in
The Legal 500 GC Powerlist and Doyles as a leading in-house lawyer.
Meetings of directors
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year
ended 30 June 2022, and the number of meetings attended by each director were:
Full
Board
Attended
Full
Board
Held
Remuneration
and
Nomination
Committee
Attended
Remuneration
and
Nomination
Committee
Held
Audit
and Risk
Committee
Attended
Audit
and Risk
Committee
Held
Sustain-
ability
Committee
Attended
Sustain-
ability
Committee
Held
Chris Saxon
David Di Pilla*
Zac Fried
Greg Hayes
Jane McAloon
Brendon Gale
Kelly O’Dwyer
13
13
13
13
13
13
13
13
13
13
13
13
13
13
4
4
—
—
4
4
—
4
4
—
—
4
4
—
—
6
—
6
6
—
6
—
6
—
6
6
—
6
—
4
—
—
4
4
4
—
4
—
—
4
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
* David Di Pilla attended remuneration and nomination, audit and risk and sustainability committee meetings by invitation.
Shares under option
There were no shares issued on the exercise of options or unissued ordinary shares of HCL under option outstanding at the date
of this report.
Shares under share rights
There were 2,559,167 unissued ordinary shares of HCL under performance rights at the date of this report. The rights are
exercisable at $Nil exercise price.
No person entitled to exercise the share rights had or has any right by virtue of the share right to participate in any share issue
of HCL or of any other body corporate.
21
HMC Capital | Annual Report 2022 Directorsr Report
Shares issued on the exercise of options
There were no ordinary shares of HCL issued on the exercise of options during the year ended 30 June 2022 and up to the date
of this report.
Shares issued on the exercise of performance rights
145,072 ordinary shares of HCL were issued on the exercise of performance rights during the year ended 30 June 2022 and up
to the date of this report. The performance rights were exercised at an exercise price of $Nil per share.
Indemnity and insurance of officers
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 Company 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.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, agreed to indemnify the auditor of the Company or any
related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in
respect of a contract to insure the auditor of the Company or any related entity.
Proceedings on behalf of HCL
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
HCL, or to intervene in any proceedings to which HCL is a party for the purpose of taking responsibility on behalf of HCL for all
or part of those proceedings.
22
Remuneration report
Letter from the Chair of the Remuneration and Nomination Committee
Dear Shareholders,
On behalf of the Board of Directors (the ‘Board’) and as Chair of the Remuneration and Nomination Committee, I am pleased
to present HMC Capital’s remuneration report for the year ended 30 June 2022 (‘FY22’).
Remuneration Philosophy and Framework
The Group’s executive remuneration philosophy is to ensure that reward for performance is competitive and appropriate
for the results delivered. The remuneration framework is built on rewarding exceptional effort where value is created
for shareholders and includes benchmarked total remuneration comprising fixed remuneration (‘FR’) (base salary and
superannuation), short-term incentive plan (‘STIP’) and long-term incentive plan (‘LTIP’).
The Board strives to ensure that executive reward satisfies key criteria consistent with good reward governance practices, such
as competitiveness and fairness, acceptability to shareholders, performance alignment of executive compensation, sustainable
asset management as well as transparency and clarity.
Overview of FY22 Performance
The Board considers that the Group has performed strongly in FY22 to execute its funds management initiatives and each
member of the management team has contributed significantly to this strategy.
Funds under external management increased by $4.16 billion or 299% during FY22 from $1.39 billion as at 30 June 2021 to
$5.55 billion as at 30 June 2022. This increase was driven by two major transactions being:
l Establishment of the HealthCo Healthcare and Wellness REIT (‘HCW’), a healthcare focused real estate investment trust that
raised $650.0 million in equity and listed on the ASX in September 2021. HCW is externally managed by HMC Capital; and
l Acquisition of the Aventus property portfolio by HomeCo Daily Needs REIT (externally managed by HMC Capital). Aventus
owns a national property portfolio of 19 properties which were valued at $2.5 billion as at 31 December 2021.
The Group also delivered on its value accretive objectives with respect to financial performance and total shareholder returns
with key highlights including:
l FY22 FFO (pre-tax) of $91.0 million or 31.0 cents per share, representing a 126% increase vs. FY21 FFO (pre-tax) per share.
This materially exceeded FY22 FFO (pre-tax) guidance of 18.5 cents per share provided in August 2021; and
l 73% total shareholder return from inception (HMC Capital’s ASX listing in October 2019) to 30 June 2022, representing 80%
outperformance versus the S&P/ASX 200 A-REIT index and 62% outperformance versus the S&P/ASX 200 index*.
* TSR methodology based on 30-day closing start and end price. HMC start price based on ASX IPO share price of $3.35.
FY22 Remuneration Outcomes
During FY22 the Board again reviewed the remuneration structure of the Executive KMP to ensure remuneration continued
to align and reflect the rapid increase in the size of the Company and the complexity of the Group’s business, including the
increased emphasis on the development of the Group’s diversified alternative asset management business, HMC Capital
Partners. Benchmarking continued to show that FR for some Executive KMP was positioned well below the median of the
key comparator groups and their incentive opportunity was also positioned below the median of comparable organisations.
To ensure key executives were retained, and that they were appropriately incentivised to continue to grow the Company, the
following key remuneration changes were made during FY22. They continue to demonstrate the strong alignment between
Group performance and executive remuneration outcomes.
l The FR to the Managing Director and Chief Executive Officer (MD&CEO) increased by 37%, but his FR remains significantly
below benchmarked comparator groups.
l The FR to the Chief Operating Officer (COO) and Chief Financial Officer (CFO) increased by 14% and 13% respectively.
l Both the CFO and COO have had their target STIP increased to 50% with an opportunity of 75% at stretch, and LTIP
opportunity increased to 50%.
23
HMC Capital | Annual Report 2022 Directorsr Report
l As in FY20 and FY21 the Managing Director and Chief Executive Officer did not participate in the STIP in FY22.
l STIP outcomes for the other Executive KMP were assessed relative to delivery of the Group’s FFO per share and a number of
individual KPIs which were determined to have been successfully met, resulting in STIP payments of 91% of target to the COO
(61% of his maximum opportunity) and 91% of target to the CFO (61% of his maximum opportunity). This demonstrates the
stretch nature of the STIP KPIs that apply to the COO and CFO.
l No LTIP awards vested during FY22 as the first LTIP awards were made in post IPO of the Group in FY20 and have a
three-year performance period.
l The only change to Non-Executive Director fees was an increase to Committee Chair fees to reflect increased workload
from $20,000 to $30,000 (except for the Remuneration & Nominations Committee where the Board Chair holds this role).
Looking Forward to FY23
Each year the Board benchmarks the Executive KMP roles against comparator groups based on both market capitalisation and
industry comparators. To reflect these findings, to better align with market, and to reflect the increased size and complexity of
the business in terms of market capitalisation, FUM and expansion of the business into alternative asset management the Board
has determined to make the following changes to Executive KMP for FY23:
l An increase in the Fixed Remuneration (FR) of the Managing Director and Chief Executive Officer by 32%. This increase
reflected that Mr Di Pilla’s fixed remuneration is significantly below the median of both comparator groups (despite
an increase in FY22). The Board is determined to increase the MD&CEO’s fixed remuneration closer to the median of
the market, given his critical role in the Company and the value he brings to the Group. There is no change to his STIP
opportunity as it has been Mr Di Pilla’s practice to decline participation in the STIP. Mr Di Pilla’s LTIP opportunity in FY23
will remain unchanged as a percentage of FR;
l The COO, Mr Sharma will receive a 9% increase in his fixed remuneration, and target STI and maximum LTI opportunities
will increase from 50% to 60% of fixed remuneration. This change reflects Mr Sharma’s new role as Chief Executive Officer
of the HomeCo Daily Needs REIT, from 1 July 2022, whose size significantly increased in March 2022 with the acquisition by
HDN of 100% of the units of the Aventus Trust.
l The CFO, Mr McMicking will receive an 11% increase in his fixed remuneration, and his target STI and maximum LTI
opportunities will increase from 50% to 60% of fixed remuneration. The increase to fixed remuneration reflects the
benchmarking undertaken by the Board which showed the CFO’s fixed remuneration and total target remuneration well
below median of both market capitalisation and industry comparator groups. It also reflects the increased complexity of
the Group, post-merger with Aventus and the development of HMC Capital Partners.
l There will be no increase to any director board or committee fees for FY23.
l The Board is reviewing the introduction for STI deferral for a portion of the FY23 STIP for Executive KMP. The final quantum
and terms of the STI deferral will be set out in the FY23 Remuneration Report.
l HMC Capital will introduce a new Mandatory Shareholding Policy for Non-Executive Directors, Executive KMP and selected
senior management. Details of the new Policy will be set out in the FY23 Remuneration Report.
Overall, the Board aims to ensure that the Group’s remuneration platform is market competitive, aligns performance measures
with the achievement of the Group’s strategic objectives, reflects the growing complexity of the Group’s operations and is fair to
all stakeholders.
We will continue to review and assess the effectiveness of our remuneration framework in order to motivate and retain our
Executive KMP and other senior executives.
Chris Saxon
Chair of the Board
Chair of the Remuneration and Nomination Committee
23 August 2022
24
Remuneration report (audited)
1. Key Management Personnel
The remuneration report details the key management personnel (‘KMP’) remuneration arrangements for the Group, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the HMC
Capital Group, directly or indirectly, including all directors.
The Managing Director and Chief Executive Officer (MD&CEO) and other senior executives considered KMP are collectively
referred to as the Executive KMP of HMC Capital. All KMP were KMP for the full year unless noted otherwise.
Non-Executive Directors
Role
Chris Saxon
Zac Fried
Chair and Non-Executive Director
Non-Executive Director
Brendon Gale
Independent Non-Executive Director
Greg Hayes
Non-Executive Director
Jane McAloon
Independent Non-Executive Director
Kelly O’Dwyer
Independent Non-Executive Director
Executive KMP
Role
David Di Pilla
Sid Sharma
Managing Director and Chief Executive Officer
Chief Operating Officer
Will McMicking
Chief Financial Officer
25
HMC Capital | Annual Report 2022 Directorsr Report
2. Executive Remuneration Governance and Structure
The following diagram illustrates HMC Capital’s remuneration governance:
SHAREHOLDERS
BOARD
The Board reviews, challenges and approves the recommendations of the Remuneration and Nomination Committee
around policy, performance, and remuneration arrangements for Non-Executive Directors and Executive KMP of
the Group.
REMUNERATION AND NOMINATION COMMITTEE
EXTERNAL ADVISORS
The Board and Committee may
seek advice from independent
experts and advisors if required.
In FY22 no remuneration
recommendation, as defined in
the Corporations Act, relating
to Executive KMP remuneration
was received from external
advisors.
Members
Three independent Non-Executive Directors who are all
independent of management:
l Chris Saxon (Committee Chair)
l Jane McAloon
l Brendan Gale
Role
To support and advise the Board in fulfilling its responsibilities to
shareholders and employees of the Group by ensuring that:
l Non-Executive Directors and Executive KMP of the Group are
remunerated fairly, appropriately and transparently;
l Remuneration policies and outcomes of the Group strike an
appropriate balance between the interests of the Group’s
shareholders and rewarding and motivating executives and
employees in order to secure the long-term benefits from their
energy, drive and loyalty; and
l Short-and long-term incentives are linked to the achievement of
key financial metrics, creation of sustainable shareholder returns
and achievement of the Company’s sustainability objectives.
26
3. Executive Remuneration Principles and Structure
The diagram below shows the principles used to determine the nature and amount of executive remuneration paid as well as
how remuneration is structured to reward executives with a mix of both fixed (FR) and variable (STIP and LTIP) components.
REMUNERATION PRINCIPLES
Be strategically aligned
Be market competitive
Enhance shareholders’ interests:
Enhance executives’ interests:
l Focus on sustained growth in shareholder wealth,
l Reward capability and experience.
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 including sustainability goals; and
l Attract, reward and retain high calibre executives.
l Reflect competitive reward for contribution to growth in
shareholder wealth; and
l Provide a clear structure for earning rewards.
FIXED
VARIABLE
Fixed remuneration
Short-term incentive
Long-term incentive
Base salary plus
superannuation
Annual cash payment
opportunity
Rights to shares
DELIVERY METHOD
REWARDS FOR
Performance, skills, and
capabilities
Performance over a 12-month
period against agreed key
business objectives
Growth in total shareholder
return relative to key
comparators and achieving
forecast FFO over three-year
performance period
IS
Fixed
At risk
At risk
LINKED TO
PERFORMANCE
HOW MEASURED
Market aligned (both by
market capitalisation
and industry comparator
groups) base salary
commensurate with role
size and complexity
Performance against key
attributes of position
Key performance metric
combination of critical
business measures and
individual achievement of
key performance indicators
(‘KPIs’). FFO and behavioural
gateways must be met before
any STI is payable
Performance against critical
key business metric FFO per
share targets and individual
KPIs.
Key performance conditions
aligned with long-term
business goals and
shareholder value creation
50% – Relative TSR
vs ASX300 A-REIT
comparator group
50% – aggregate FFO1 per
share vs 3 year target pool
1. FFO excludes leasehold FFO prior to the sale in FY21.
27
HMC Capital | Annual Report 2022 Directorsr Report
Executive KMP have their remuneration benchmarked regularly by the Remuneration and Nomination Committee.
In benchmarking these roles, the Committee typically uses benchmarks comprising several groups of comparable companies.
In FY22 these included:
l A Market Capitalisation comparator group — companies in the S&P/ASX 200 with comparable average market cap in the
range of 50%-200% of HMC Capital’s market capitalisation; and
l A selected industry specific comparator group comprising 11-12 ASX listed companies who are a mix of diversified financial
and A-REIT companies. These are companies with whom HMC Capital competes for capital and people. It also now includes
a number of companies with whom the Company competes in the area of alternative asset management.
Each of the relevant Executive KMP’s total remuneration is made up of a mix of Fixed Remuneration and Variable
Remuneration, as set out below.
The remuneration structures for executives and Non-Executive Directors are structured and disclosed separately, in alignment
with the fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations.
Remuneration Mix — FY22
Executive KMP total target remuneration is broken down into the following three remuneration elements.
Table 1: Executive KMP remuneration mix for FY22
David Di Pilla
33%
0%
Sid Sharma
Will McMicking
50%
50%
25%
25%
67%
25%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
¢ FR – Cash ¢ STI – Cash ¢ LTI - Equity
28
4. Executive Short-term Incentive Plan (‘STIP’)
Term
Rationale
Eligibility
Details
The HMC Capital STIP is designed to attract, motivate and retain the Executive KMP and key employees who
participate by providing an opportunity to be rewarded for outperformance based on performance against key
critical business metrics over the FY22 financial year
All Executive KMPs are eligible to participate in the STIP. The Board may also invite other selected employees to
participate from time to time.
Opportunity
The MD&CEO has elected not to participate in the FY22 STIP (as in prior years).
Other Executive KMP have a target opportunity of 50% and a maximum opportunity of 75% of their annual fixed
remuneration (base salary + superannuation).
Performance Period The performance period for the Plan is the 12 months ending 30 June 2022.
Gateways
Unless the below Gateways are met, no STI is payable for Executive KMP:
1. HMC Group FFO Gateway
FY22 FFO per share of 18.5 cents (pre-tax)
2. HDN & HCW Fund FFO Gateways
HDN FY22 FFO per unit of 8.3 cents
HCW FY22 FFO per unit of 4.32 cents
3. Behavioural gateway
Every STIP eligible employee must demonstrate they have met and
continue to comply with HMC Group values as set out in the Code of
Conduct.
Performance
conditions
The FY22 STIP is subject to the following performance conditions tested over the performance period:
l the Group’s FFO per share guidance; and
l individual KPIs agreed with each member of the KMP. KPIs vary according to the areas of responsibility for
each STIP participant.
In determining STIP performance the Board will consider performance against the HMC Capital Sustainability
Commitments. Failure to achieve appropriate progress will result in the dial-down of STI outcomes for some or
all employees.
Vehicle
STIP awards are typically delivered in cash unless the Board determines otherwise.
Discretion
The Board retains the right to apply discretion when determining annual STI outcomes. No such overriding
discretion was applied in FY22.
FY22 Executive KMP STIP Performance and outcomes
For the FY22 all performance gateway metrics for Executive KMP participating the in the STIP were met as follows:
Performance category
Metric
FY22
Performance Outcome
Met/Not met
1. HMC Group FFO Gateway
FY22 FFO per share of 18.5 cents
(pre-tax)
31.0 cents per share
2. HDN & HCW Fund Gateways
HDN FY22 FFO per unit of 8.3 cents
HCW FY22 FFO per unit of 4.32 cents
8.85 cents per unit
5.10 cents per unit
3. Behavioural gateway
Every STIP eligible employee must demonstrate they have met and continue
to comply with HMC Group values as set out in the Code of Conduct.
Met
Met
Met
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HMC Capital | Annual Report 2022 Directorsr Report
All Executive KMP, aside from the MD&CEO (who does not participate in the STIP), share the same KPI of ensuring the Group
performs in accordance with or exceeds ASX FFO per share guidance. In addition, each Executive KMP eligible for an STI has
metrics that are specific to their role. The following tables sets out the role-specific metrics and performance outcomes. Where
metrics are commercially sensitive an appropriate overview of the metric has been provided.
Chief Operating Officer, Sid Sharma
Performance category Metric
FY22 STIP Outcome
91% of target
1. Financial
l Delivery of FFO per unit growth above gateway
across HMC Group entities
HMC Capital FFO (pre-tax) Performance of 31.0c per
share significantly exceeded target of 18.5c per share.
2. Developments
l Delivery of existing projects, increasing
Development pipeline met.
3. Systems
development pipeline and delivery of accretive
acquisitions
l Delivery of operating systems to support growth
(especially designed to improve returns for the
REITs)
Systems delivered and metrics met.
4. Other
l Variety of other KPIs including metrics relating to
growth and ESG strategy
Metrics largely met, but some tracking slightly behind
schedule.
Chief Financial Officer, Will McMicking
Performance category Metric
FY22 STIP Outcome
91% of target
1. Financial
l Delivery of FFO per unit growth above gateway
across HMC Group entities
HMC Capital FFO (pre-tax) Performance of 31.0c per
share significantly exceeded target of 18.5c per share.
2. FUM
l Increase in FUM across HMC Group
Stretch FUM target not reached despite funds under
external management increasing by $4.16 billion.
3. Systems
4. Other
l Delivery of operating systems to support growth
(including in the finance, IT and reporting areas)
Systems delivered and metrics met.
l Variety of other KPIs including those relating to
people, growth in capability in key areas.
Significant progress made in a number of key areas
but targets not fully met.
The Board views the FY22 STIP outcomes as appropriate. They reflect the extremely strong FFO performance, but also the
stretch nature of the KPIs that apply in the STIP program.
The following table shows the actual STI outcomes for Executive KMP as a percentage of their maximum STIP opportunity.
Table 2: Executive KMP
Executive KMP
Sid Sharma
Will McMicking
30
STIP awarded / Forfeited %
FY22
FY21
61% / 39%
100% / 0%
61% / 39%
100% / 0%
In addition to the above KPIs, the Board has also taken into account performance against the HMC Capital Sustainability
Commitments. The Board has reviewed the progress noted below against the Commitments, which supports the FY22 STIP
outcomes (with no dial-down of FY22 outcomes required).
Category
Commitment
Environment
Climate Action — To actively minimise carbon emissions
l Decarbonisation strategy has progressed:
— An additional 19 assets have the Smart Energy Management installation progressing, and investigations
across more assets progressing.
— Solar photovoltaics feasibilities progressing, following completed installation at Marsden Park asset.
— Data management system implemented.
Green future — To champion the preservation and restoration of the natural environment
l Green Building ratings instituted across new developments as appropriate including, Green Star, and NABERS.
WELL building rating system under review for new HCW assets.
l NABERS Energy and Water ratings completed across 11 operational assets, and an additional 7 underway.
l Minimum sustainability design standards being finalized across developments.
l Waste management strategy under development.
Social
Connection — To respond to local and regional essential community needs as they relate to health, wellness and
daily services
l Social Impact Framework “Needs Assessment” incorporated into acquisition due diligence process.
l Establishment of the “HMC Capital Foundation” is well progressed with Equity Trustees to be appointed as
Trustee, and the trust deed to be finalised for registration shortly.
l Needs assessments across HMC Capital Group managed assets defined, with a focus on our communities
“Young People under 18”.
Respect — To respect the inherent dignity, safety, diversity and human rights of all people we touch
l Progress towards our 50% FY25 diversity targets across our workforce, leadership and Boards as follows,
have been met: from FY21 of 43% to 51% in FY22.
Governance
Alignment — To have the skills, environment and culture that support and propel HMC Capital’s ambition and
Sustainability Commitments
l ESG KPI’s introduced for the leadership team.
l Upskilling on ESG across the workforce through lunch and learns.
Accountability — To earn and keep the trust of our key stakeholders through transparent communication, processes
and by doing what we say we will do
l FY21 Sustainability commitments produced
l FY21 Sustainability report published
l Response to the GRESB Benchmark for HDN submitted.
l Green Labels being rolled out progressively across portfolios as appropriate.
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HMC Capital | Annual Report 2022 Directorsr Report
5. Executive Long-term Incentive Plan (‘LTIP’)
Term
Plan
Rationale
Eligibility
Instrument
Opportunity
Details
FY22 LTIP awards are made under the HMC Capital Employee Equity Plan (EEP).
The EEP is designed to align executive rewards with shareholder expectations and to incentivise and
retain the Executive KMP and key employees by providing an opportunity to be rewarded based on
performance.
All Executive KMPs are eligible to participate in the EEP. The Board may also invite other selected
employees to participate from time to time.
Performance rights are granted by the Company for nil consideration. Each performance right is a right
to receive one fully paid share in the Company.
The LTIP opportunity is set as a percentage of Fixed Remuneration (FR).
The MD&CEO received a grant of performance rights based on a maximum stretch value of 200% of his
FR. Other Executive KMP grants are based on 50% of FR.
Allocation Methodology
The number of performance rights awarded is determined by dividing the maximum opportunity by the
five-day volume weighted average price of a share over the 5 trading days following announcement of
the Company’s FY21 full-year results.
Performance Period
The performance period for the FY22 awards is the three-year period commencing 1 July 2021 to
30 June 2024.
Performance conditions
For the FY22 awards the performance measures are 50% relative TSR and 50% aggregate FFO per share.
Relative TSR
Relative TSR is measured against a comparator group of S&P/ASX 300 A-REITs. The vesting schedule is
as follows.
Performance scale
Below 50th percentile
At the 50th percentile (threshold)
At or above the 75th percentile (maximum)
Percentage of
rights to vest
Nil
50%
100%
Rights will vest on a straight-line basis if the Company’s TSR performance is between the
50th and 75th percentile of the comparator group.
Company’s FFO
The FFO condition is measured by the aggregate of the annual FFO pool tested against the aggregated
disclosed annual FFO target pool. The vesting schedule is as follows.
Performance scale
Below 97.5% of target FFO
At the 97.5% of target FFO (threshold)
At or above 100% of target FFO (maximum)
Percentage of
rights to vest
Nil
50%
100%
Rights will vest on a straight-line basis if the Company’s FFO performance is between 97.5% and 100%
of target.
32
Term
Details
Performance conditions
continued
Vesting Date
Disclosure of performance outcomes
In the FY24 Remuneration Report the Board will set out how HMC Capital has performed against these
targets. The FY22 FFO (pre-tax) target component is 18.5c per share, and the FY23 FFO target will be
disclosed in the FY23 Remuneration Report.
Performance rights will vest when the Board determines the performance relative to the performance
conditions (around the release of the FY24 results to the ASX). Rights are exercisable the day after
vesting and each participant will have until one month after the full-year results are announced for FY26
to exercise their rights.
Service condition
Unless the Board determines a different treatment:
i.
If a participant ceases to be an employee due to resignation (or termination for cause) all unvested
rights will automatically lapse.
ii. If a participant ceases employment for any other reason, all unvested rights (which may be pro-rated
by the Board for time elapsed since the start of the Performance Period) will remain “on-foot” and
will be performance tested at the end of the relevant Performance Period. To the extent that the
relevant performance conditions are satisfied, the Rights will vest at the original Vesting Date.
Dividends
Rights do not carry a right to vote or to dividends.
Change of control
In the event of change of control, unless the Board determines otherwise, a pro-rata number of the
participant’s unvested awards will vest to the extent that the conditions have been satisfied.
Clawback
The EEP provides the Board with broad clawback powers if the Board considers the participant’s
conduct, capability or performance justifies the variation. No clawback power has been exercised to
date.
Securities Trading Policy
The HMC Capital Group’s Securities Trading Policy prevents participants from entering into transactions
or arrangements, including by way of derivatives or similar financial products which operate to limit the
economic risk relating to awards made under the EEP which either have not vested or have vested but
remain subject to a holding lock or other restriction on dealing.
Recognition awards
To reward employee performance in relation to the establishment of the HomeCo Daily Needs REIT and the HealthCo
Healthcare and Wellness REIT the Group made a one-off grant of rights to all Executive KMP (other than the MD&CEO),
executives and other staff in March 2022. Non-executive Directors did not participate in the grant.
The rights were capped at $750,000 in total value with the allocation price based on the VWAP of HMC Capital securities for
the five (5) trading days commencing 1 September 2021. The maximum value of any rights award to any employee (including to
Executive KMP) was $50,000.
The rights vested on 30 June 2022, although will not be capable of being exercised until after the release of the FY22 full-year
results (in August 2022). Participants will have until 30 September 2023 to exercise their vested rights and acquire the relevant
number of HMC Capital shares. If a participant ceases employment with HMC Capital prior to the vesting date (30 June 2022)
as a result of voluntary resignation or termination for cause, the unvested rights will lapse.
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HMC Capital | Annual Report 2022 Directorsr Report
Legacy Equity awards
There have been no prior year LTIP awards vesting in FY22 given the listing of the Company from 11 October 2019 and the first
LTIP awards were made in FY20. The current unvested LTIP awards are set out below. The key terms and vesting outcomes for
the FY20 LTIP is discussed further in section 7 below.
FY21 LTIP
The FY21 LTIP awards were made in FY21 and have a three-year performance period from 1 July 2020 to 30 June 2023.
The performance conditions and other key terms and conditions for the FY21 LTIP awards are the same as outlined above for
the FY22 LTIP awards.
FY20 COVID-19 Grant
The Company provided a one-off grant of share rights as compensation for the reduction in FY20 cash remuneration for
Executive KMP and director’s fees for Non-Executive Directors. The number of rights granted was calculated by dividing the
cash remuneration forgone by the ‘VWAP’ of HMC Capital’s securities over the twenty trading days following HMC Capital’s
ASX trading update on 7 May 2020.
The FY20 COVID-19 Grant share rights have a two-year vesting period and vest on 30 September 2022. There is a service
condition for rights for Non-Executive Directors requiring them to hold office on the vesting date. Rights held by Executive
KMP have both a service and performance condition. Executive KMPs must continue to be employed on the vesting date and
HMC Capital’s share price reaching a VWAP of $3.35 over a 20-trading day period following the Group’s FY22 full-year results
announcement. The Rights are exercisable until August 2025.
IPO Rights Allocation
The Company awarded a one-off grant of Rights under the EEP in October 2019 to all HMC Capital employees (including all
Executive KMP other than David Di Pilla and Will McMicking) to promote their retention upon listing, provide equity participation
and enhance engagement over the longer term. The Rights have a vesting period of three years following the date of issue
and vest on 14 October 2022. The rights are not subject to any performance conditions other than the participants’ continued
employment over the vesting period. The Rights will vest and automatically convert to Shares (or the cash equivalent, at the
discretion of the Board).
Top-up awards in respect of the Capital Reduction for awards prior to FY22
Top-up awards for all unvested rights was approved by the Board, and, where required, approved by shareholders at the
Company’s FY20 AGM. These awards were made to compensate Executive KMP and Non-Executive Directors for the capital
reduction in the Company’s share capital approved by shareholders at the FY20 AGM associated with the establishment of the
HomeCo Daily Needs REIT. Whilst shareholders received a distribution in specie of REIT units, rights holders were not entitled
to participate in the Capital Reduction. Accordingly, to preserve the value of any unvested rights, additional rights were issued
on the same terms and conditions as the original rights held by the participants. Top-up awards were made in respect of
FY20 LTIP awards, FY20 COVID-19 Grant awards, the IPO Rights Allocation and the FY21 LTIP award made to the Managing
Director and Chief Executive Officer. The top-up awards were all made in January 2021.
The formulae used to determine the number of additional rights to be issued was as follows:
The adjusted number of Rights following the grant of additional Rights will be calculated using the methodology approved by
the Board by using the following formula:
HomeCo VWAP following the Implementation Date + Unit VWAP following the Implementation Date
HomeCo VWAP following the Implementation Date
Where:
“HomeCo WVAP” is the volume weighted average price of a HMC Capital share over 5 trading days
“Unit VWAP” is the volume weighted average price of a HomeCo Daily Needs REIT unit over 5 trading days
34
Impact of Restructure and De-stapling on equity awards
In December 2021 all necessary regulatory and securityholder approvals for the simplification of HMC Capital from a stapled
company structure (being HCL and HCDL) to a single Company structure (HCL) were obtained. This resulted in the transfer
of HCDL shares to HCL, with HCDL then delisted, so that the entire business of HMC Capital was held by HCL from that time.
This required certain amendments to the EEP and Non-Executive Director Equity Plan (NEDEP) purely to reflect this restructure.
However, following this simplification each participant holding awards under either the EEP or NEDEP otherwise held the same
number of awards on the same terms (including any vesting conditions) as applicable to the participant’s relevant awards prior
to the restructure.
6. Non-Executive Directors’ Remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-Executive Director’s
fees and payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination
Committee may, from time to time, receive advice from independent remuneration consultants to ensure Non-Executive
Director’s fees and payments are appropriate and in line with the market.
Subject to ASX listing rules, HMC Capital may from time to time determine the maximum aggregate remuneration to be
provided to the directors in a general meeting. In the 2020 Annual General Meeting shareholders approved an increase in the
maximum director fee pool to $1,200,000 per annum. The FY22 Non-Executive Director fees are set out below.
Table 3: Non-Executive Director fees
Board
Committee*
Chair
Member
Committee
Chair
Member
FY22 Fee**
$250,000
$100,000
$30,000
$10,000
* Comprising the Audit and Risk Committee, Remuneration and Nomination Committee and Sustainability Committee. However, as the Board Chair is also the
Chair of the Remuneration and Nomination Committee he did not receive any additional fee for chairing this Committee.
** Non-Executive Director fees are paid inclusive of 10% superannuation.
In addition, HMC Capital Non-Executive Directors serving on the Boards of HMC Capital managed funds will be paid Board
and Committee fees commensurate with other Board members (which are to be reimbursed by the respective HMC Capital
managed fund).
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HMC Capital | Annual Report 2022 Directorsr Report
HMC Capital has established a Non-Executive Director Equity Plan (NEDEP) which was approved by shareholders at the 2020
Annual General Meeting. The key terms of the NEDEP are as follows:
Term
Plan
Rationale
Eligibility
Instrument
Opportunity
Details
Awards are made under the NEDEP.
The purpose of the NEDEP is to provide the opportunity for Non-Executive Directors to acquire Rights to
receive Shares through sacrificing a portion of their annual remuneration (Fee Sacrifice Rights) thereby:
l allowing Non-Executive Directors to become shareholders and share in the success of the Company;
l aligning the interests of Non-Executive Directors with those of shareholders; and
l allowing Non-Executive Directors the opportunity to acquire Shares in a tax-effective manner.
All Non-Executive Directors are eligible to participate in the NEDEP.
Fee sacrifice rights are granted by the Company for nil consideration. Each right is a right to receive one
fully paid share in the Company.
Under the NEDEP Non-Executive Directors can voluntarily elect to acquire rights, in lieu of up to 50% of
their annual Board fees in any 12-month period.
Allocation methodology
The following formulae is used to calculate the number of Fee Sacrifice Rights issued.
No. of Rights = A/B
Where:
A = the amount of remuneration that a Non-Executive Director wishes to sacrifice for the relevant
period.
B = the volume weighted average price (VWAP) of a share over the 5 trading days following the
Company’s half or full-year results announcement for the relevant period.
Vesting period
Fee Sacrifice Rights will automatically vest and Restricted Shares will then be allocated to the Non-
Executive Director on or around the first trading day of the next available trading window after the
Rights date of issue.
Disposal restrictions
The Restricted Shares issued to the Non-Executive Directors are subject to disposal restrictions until the
Non-Executive Director retires from the Board.
Mandatory share-holding
requirement
It is a requirement of appointment that Non-Executive Directors acquire a shareholding of HMC Capital
shares equivalent to two times their annual Board fees within three years of appointment.
Dividends
Fee Sacrifice Rights do not carry any dividend or voting rights prior to vesting into Restricted Shares.
36
7. FY23 Remuneration
Executive KMP remuneration
The fixed remuneration (FR) of the Managing Director and Chief Executive Officer will increase by 32% in FY23. This increase
reflected that Mr Di Pilla’s FR is significantly below the median of both comparator groups (despite an increase in FY22).
The Board is determined to increase the MD&CEO’s fixed remuneration closer to the median of the market, given his critical
role in the Company and the value he brings to the Group. There is no change to his STIP opportunity as it has been Mr Di Pilla’s
practice to decline participation in the STIP. Mr Di Pilla’s LTIP opportunity in FY23 will remain unchanged as a percentage of FR
(at 200%).
The COO, Mr Sharma will receive a 9% increase in his FR, and his target STI and maximum LTI opportunities will increase from
50% to 60% of FR. This change reflects Mr Sharma’s new role as CEO of the HomeCo Daily Needs (HDN) REIT, from 1 July 2022,
whose size significantly increased in March 2022 with the acquisition by HDN of 100% of the units of the Aventus Trust.
The CFO, Mr McMicking will receive an 11% increase in his FR, and his target STI and maximum LTI opportunities will increase
from 50% to 60% of FR. The increase to FR reflects the benchmarking undertaken by the Board which showed the CFO’s FR and
total target remuneration well below median of both market capitalisation and industry comparator groups. It also reflects the
increased complexity of the Group, post-merger with Aventus and the development of HMC Capital Partners.
Executive Short-term incentive Plan
The Board is currently reviewing the structure of the FY23 STI Plan. Any changes to the structure of the FY23 plan for the CEO
of the HDN REIT and the CFO will be disclosed in the FY23 Remuneration Report.
Executive Long-term incentive Plan
The FY20 LTIP awards will vest in August 2022 (after the FY22 results are released to the ASX), based on performance from
14 October 2020 to 30 June 2022. This award is split into two equal tranches, each with a separate performance hurdle.
Fifty percent (50%) of the award has a relative TSR hurdle and 50% a FFO hurdle measuring aggregate FFO performance
over the performance period.
The relative TSR hurdle measures the performance of HMC Capital against a comparator group of S&P/ASX 300 A-REITS as at
the commencement of the performance period. During this period the HMC Capital TSR was 73%, putting it significantly above
the 75th percentile of the comparator group, resulting in 100% of this tranche vesting.
The FFO performance hurdle measures the actual Company Freehold FFO performance for each of the three years in the performance
period against its annual FFO targets, as disclosed in its FFO guidance to the ASX for each relevant financial year. Over the performance
period including FY20, FY21 and FY22 the Company delivered FFO of 8.7c, 13.1c (post-tax) and 31.0c (pre-tax) per share, in aggregate
52.8c per share, against forecast FFO of 38.97c per share for the same period (with the FFO forecasts being 7.67c, 12.8c (post-tax) and
18.5c (pre-tax) respectively). This actual aggregate FFO result delivered is 135% above the target FFO pool for the period and will result in
100% of this tranche vesting. Each participant has until one month after the FY24 awards are announced to exercise their rights.
FY23 LTIP awards
The Board has determined that the structure of the FY23 awards will be similar to that outlined in Section 5 relating to the
FY22 awards. The only proposed significant change is the change in the comparator group for the relative TSR tranche from
the S&P/ASX 300 A-REITS to the S&P/ASX 200 A-REITS. This reflects HMC Capital’s increase in size and complexity and its
inclusion in the S&P/ASX 200 A-REITS index.
New minimum shareholding requirements
The Board agreed at its June 2022 meeting to introduce a new minimum shareholding policy which will apply to all Non-
executive Directors (replacing the existing requirements), all Executive KMP and selected other senior executive. This new policy
will be implemented in FY23 and details reported in the FY23 Remuneration Report.
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HMC Capital | Annual Report 2022 Directorsr Report
8. Employment agreements
Remuneration and other terms of employment for Executive KMP are formalised in employment agreements which outline their
duties and remuneration. All agreements are open ended (i.e., ongoing until notice is provided by either party).
Key terms of the agreements are set out below.
Table 4: Executive KMP key employment terms
Executive KMP
Managing Director and Chief Executive Officer
Other Executive KMP
Notice Period
— Company
Notice Period
— Executive KMP
6 months
6 months
6 months
6 months
The Managing Director and Chief Executive Officer employment agreement contains post-employment restraints including
non-compete clauses and restrictions against soliciting and enticing customers. The restrictions operate for up to 12 months
post-employment and the enforceability of these restraints is subject to all usual legal restrictions. The Group may summarily
terminate the employment agreement in certain circumstances, including acts of serious misconduct, gross negligence, a serious
breach of the employment agreement or bankruptcy.
Other than prescribed notice periods, there are no special termination benefits payable under the employment agreements.
All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001.
9. Details of remuneration for the financial year
Amounts of remuneration
Details of the remuneration expense of KMP of the Group for the current and previous financial year are set out in the
following tables.
38
Remuneration for Executive KMP for FY22 and FY21
Table 5: Executive KMP total remuneration (statutory disclosures)
Short-term benefits
Post-
employment
Base
Salary*
Cash
Bonus
Annual
leave
Super-
annuation
Long-
term
benefits
Long
service
leave
Share-based
payments
Share
benefits
Rights
benefits
Total
Current Executive KMP
David Di Pilla, Managing Director and Chief Executive Officer
FY22
FY21
682,139
487,316
—
—
90,999
25,433
19,794
28,056
Sid Sharma, Chief Operating Officer
FY22
FY21
526,432
250,000
29,288
24,333
461,800
193,800
19,735
23,845
Will McMicking, Chief Financial Officer
FY22
FY21
Former Executive KMP
426,432
205,000
3,220
24,162
373,925
120,000
11,261
22,793
Andrew Selim, General Counsel and Company Secretary
FY21^
371,698
118,041
11,556
21,786
Andrew Boustred, Development Director
FY21^
273,491
88,530
4,207
21,061
Total Remuneration
FY22
FY21
1,635,003 455,000
123,507
73,929
1,968,230
520,371
66,553
117,541
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
860,808
1,659,379
429,276
964,442
441,433
1,271,486
260,110
959,290
182,302
841,117
64,823
592,802
—
100,727
623,808
—
83,514
470,803
— 1,484,543
3,771,982
—
938,450
3,611,145
Explanatory notes to the Remuneration for Executive KMP for FY22 and FY21 table are below.
* For David Di Pilla Base salary also includes the FBT car parking expense of $2,853.
^ The FY21 remuneration shown represents remuneration until the date the executives ceased to be a KMP, being 18 June 2021.
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HMC Capital | Annual Report 2022 Directorsr Report
Remuneration for Non-Executive Directors for FY22 and FY21
Table 6: Non-Executive Director total remuneration (statutory disclosures)
Short-term
benefits
Post-
employment
Long-term
benefits
Share-based payments
Total
Cash Fees^
Super-
annuation
Long service
leave
Share
benefits
Rights
benefits
Chris Saxon, Chair
FY22
FY21
Zac Fried
FY22
FY21
Brendon Gale
FY22
FY21
Greg Hayes
FY22
FY21
Jane McAloon
FY22
FY21
Kelly O’Dwyer^^
FY22
FY21
Total Remuneration
FY22
FY21
102,100
22,804
86,016
16,579
40,840
41,324
57,187
50,457
9,122
8,714
12,772
9,585
44,924
10,034
50,457
9,585
73,763
78,170
49,012
31,180
1,188
1,880
10,946
5,939
367,826
337,604
66,866
52,282
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
125,000
249,905
105,040
207,635
50,000
99,962
62,432
112,470
70,000
139,958
60,658
120,700
55,000
109,958
62,876
122,918
75,000
149,951
61,546
141,596
60,000
119,958
122,839
159,958
435,000
869,692
475,391
865,277
Explanatory notes to the Remuneration for Non-Executive KMP for FY22 and FY21 table are below.
^ All Non-Executive Directors participate in the Non-Executive Director Equity Plan and receive a portion of their fees in Fee Sacrifice Rights, which are expensed
and shown under the Rights Benefits column. Fee Sacrifice Rights awarded in FY21 vested into shares during the current 2022 financial year. The FY22 Rights
benefits includes the value each Director sacrificed during FY22 to acquire Rights under the NEDEP.
^^ Ms O’Dwyer’s FY21 Rights benefits includes a one-off grant of 23,735 share rights to Ms O’Dwyer, as per her Consultancy Agreement prior to election to the
Board. The number of Rights she was issued was based on her grant value divided by $3.16, being the VWAP of a Share over the 5 trading days following
announcement of the Company’s FY20 full-year results. The Rights were granted under the NEDEP and were not subject to any performance conditions and
were subject to Ms O’Dwyer continuing to hold office as a director.
40
Non-Executive Director’s salaries are 100% fixed. The fixed and variable remuneration proportions for Executive KMPs for
FY22 is as follows:
Table 7: Executive KMP mix of fixed and variable remuneration (based on statutory remuneration table)
Executive KMP
David Di Pilla
Sid Sharma
Will McMicking
Fixed
Remuneration %
Variable
remuneration %
(included STIP and
LTIP payments
48%
46%
54%
52%
54%
46%
10. Share-based compensation
Share rights
The terms and conditions of each award of rights over ordinary Shares affecting remuneration of directors and other KMP in
this financial year are set out below. Rights granted have a $nil exercise price and carry no dividend or voting rights.
Table 8: FY22 KMP rights awards
Award details and recipient
Grant Date
Fair value at
grant date
Number
of Rights
awarded
Estimated
Vesting
date
FY22 LTIP (Executive KMP)
14/3/2022
$5.13#
27/08/2024
— David Di Pilla
— Sid Sharma
— Will McMicking
223,189
43,840
35,870
FY22 NEDEP Fee Sacrifice rights
14/3/2022
$6.58
26/08/2022
— Chris Saxon
— Zac Fried
— Brendon Gale
— Greg Hayes
— Jane McAloon
— Kelly O’Dwyer
19,936
7,974
11,164
8,772
11,962
9,569
Recognition Rights (Executive KMP, excluding MD&CEO)
14/3/2022
$6.58
30/6/2022
— Sid Sharma
— Will McMicking
7,184
7,184
Maximum
value to be
recognised
in future
years*
$1,004,848
$197,378
$161,495
—
—
—
—
—
—
—
—
* The entire value of the FY22 NEDEP KMP rights awards and Recognition Rights were expensed in FY22.
# This is the weighted average fair value. The fair value of the relative TSR hurdled performance rights was calculated at $4.03 and the fair value of FFO hurdled
performance rights was calculated at $6.22.
41
HMC Capital | Annual Report 2022 Directorsr Report
Share rights holding
The number of share rights (including rights granted and vested as part of the compensation during the financial year) over
ordinary shares in HMC Capital held during the financial year by each Non-Executive Director and Executive KMP of the Group,
including their personally related parties, are set out below:
Table 9: FY22 Rights holdings by KMP
Non-Executive Directors
Chris Saxon
Zac Fried
Brendon Gale
Greg Hayes
Jane McAloon
Kelly O’Dwyer
Executive KMP
David Di Pilla
Sid Sharma
Will McMicking
Rights held
at 30 June
2021
Granted in
FY22
Vested and
exercised in
FY22
Lapsed or
expired in
FY22
Rights held
at 30 June
2022
36,409
19,936
(32,262)
23,618
21,546
24,137
22,583
39,066
7,974
11,164
8,772
11,962
9,569
688,760
223,189
363,209
51,024
119,946
43,054
(18,436)
(18,436)
(18,436)
(18,436)
(39,066)
—
—
—
—
—
—
—
—
—
—
—
—
24,083
13,156
14,274
14,473
16,109
9,569
911,949
414,233
163,000
Additional information
The factors that are considered to affect total shareholder return (‘TSR’) are summarised below:
Table 10: Factors impacting Group performance
Share price at reporting date ($)
Dividends (cents per security)
FFO post-tax (cents per security)
TSR of HMC Capital (%)**
TSR of S&P/ASX 300 A-REIT Index (%)**
30 June
2022
30 June
2021
30 June
2020
IPO listing
price
11 October
2019
$4.51*
$5.44*
$3.00
$3.35
12.0
30.3
(14.3%)
(10.8%)
12.0
13.1
113.2%
30.6%
12.0
6.0
(9.4%)
(21.8%)
n/a
n/a
n/a
n/a
* Excludes the 0.5 HDN in-specie units received for every 1 HMC security (HDN IPO price of $1.33 = $0.67 value per HMC security).
** TSR for year to 30 June 2020 is from 11 October 2019 (ASX listing date).
42
11. Additional disclosures relating to KMP
KMP Shareholdings
The number of shares in HMC Capital held during the financial year by each Non-Executive Director and Executive KMP,
including their personally related parties, are set out below:
Table 11: Shareholdings of key management personnel
Non-Executive Directors
Chris Saxon
Zac Fried
Brendon Gale
Greg Hayes
Jane McAloon
Kelly O’Dwyer
Executive KMP
David Di Pilla
Sid Sharma
Will McMicking
Non-Executive Directors
Chris Saxon
Zac Fried
Brendon Gale
Greg Hayes
Jane McAloon
Executive KMP
David Di Pilla
Sid Sharma
Will McMicking
Balance held at
30 June 2021
Acquired
Vested
Balance held at
30 June 2022
Sold
175,776
18,825
32,262
24,536,064
1,572,217
231,871
—
10,190,683
768,969
165,175
17,277
18,436
18,436
18,436
18,436
—
—
39,066
37,310,930
2,742,442
—
—
2,606,437
196,344
—
—
—
—
—
—
—
—
—
—
—
—
226,863
26,126,717
250,307
10,978,088
200,888
39,066
40,053,372
—
2,802,781
Balance held at
30 June 2020
Acquired
Vested
Balance held at
30 June 2021
Sold
165,175
10,601
20,432,049
4,104,015
221,270
10,601
9,086,183
1,104,500
165,175
—
33,127,978
4,182,952
—
—
2,321,060
314,691
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
175,776
24,536,064
231,871
10,190,683
165,175
37,310,930
—
(29,314)
2,606,437
Other transactions
There are a number of related party transactions between KMP and the Group as disclosed in the notes to the Financial
Statements. The terms and conditions of these transactions are considered to be no more favourable than those which it is
reasonable to expect would have been adopted if dealing with an unrelated individual at arm’s length in the same circumstances.
This concludes the remuneration report, which has been audited in accordance with section 308(3c) of the Corporations Act 2001.
43
HMC Capital | Annual Report 2022 Directorsr Report
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 32 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 32 to the financial statements do not compromise the
external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
l all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
l none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of PricewaterhouseCoopers
There are no officers of the Company who are former partners of PricewaterhouseCoopers.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191 relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Instrument to the nearest hundred thousand dollars, unless otherwise stated.
Related party confirmation
The directors confirm that since listing the Company has complied with, and continues to comply with, its Related Party
Transaction Policy which is publicly available.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Chris Saxon
Chair
23 August 2022
David Di Pilla
Director
44
Auditor’s Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Home Consortium Limited for the year ended 30 June 2022, I declare
that 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 Home Consortium Limited and the entities it controlled during the
period.
Scott Hadfield
Partner
PricewaterhouseCoopers
Sydney
23 August 2022
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
45
HMC Capital | Annual Report 2022 Financial Report
30 June 2022
Contents
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the Security
Holders of Home Consortium Limited
Security Holder Information
Corporate Directory
47
49
50
51
52
104
105
110
113
46
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2022
Revenue
Revenue from continuing operations
Other income
Share of profits of associates and joint ventures accounted for using the equity method
Gain recognised on investments in associates
Other income
Interest revenue
Change in assets/liabilities at fair value through profit or loss
Expenses
Impairment expenses
Property expenses
Corporate expenses
Loss on demerger
Acquisition and transaction costs
Finance costs
Profit/(loss) before income tax expense from continuing operations
Income tax expense
Profit/(loss) after income tax expense from continuing operations
Profit after income tax expense from discontinued operations
Profit/(loss) after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit/(loss) for the year is attributable to:
Non-controlling interest
Owners of Home Consortium Limited
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
Non-controlling interest
Continuing operations
Discontinued operations
Owners of Home Consortium Limited
Consolidated
30 June
2022
$’000
30 June
2021
$’000
Note
6
16
16
7
16
8
8
9
10
78,592
69,397
71,148
16,900
100
255
8,940
—
405
90
28,755
(21,954)
(21,339)
(14,354)
(21,572)
—
(11,376)
(5,773)
121,336
(14,074)
107,262
—
—
(23,994)
(10,983)
(15,446)
(1,945)
(10,910)
(6,400)
(89,387)
(95,787)
9,883
107,262
(85,904)
—
—
107,262
(85,904)
30,013
77,249
4,087
(89,991)
107,262
(85,904)
30,013
—
30,013
4,087
—
4,087
77,249
(99,874)
—
77,249
9,883
(89,991)
107,262
(85,904)
Non-controlling interest (‘NCI’) represents the results of HCDL for the period that it was stapled to HCL.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
47
HMC Capital | Annual Report 2022 Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2022
Earnings per security for profit/(loss) from continuing operations
Basic earnings per security
Diluted earnings per security
Earnings per security for profit from discontinued operations
Basic earnings per security
Diluted earnings per security
Earnings per security for profit/(loss)
Basic earnings per security
Diluted earnings per security
Consolidated
30 June
2022
Cents
30 June
2021
Cents
26.34
26.16
(36.55)
(36.55)
—
—
3.62
3.62
26.34
26.16
(32.93)
(32.93)
40
40
40
40
40
40
Earnings per security above is attributable to equity holders of the Company.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
48
Consolidated Statement of Financial Position
as at 30 June 2022
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Derivative financial instruments
Assets classified as held for sale
Total current assets
Non-current assets
Investment property — freehold
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Right-of-use assets
Convertible notes
Other assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefit obligations
Lease liabilities
Income tax
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Equity attributable to the owners of Home Consortium Limited
Non-controlling interest
Total equity
Consolidated
30 June
2022
$’000
30 June
2021
$’000
Note
11
12
13
25
14
15
16
17
18
19
20
13
9
21
22
23
9
23
24
25
9
26
27
57,555
16,174
18,533
14,425
106,687
—
106,687
—
608,712
3,140
186,774
4,806
2,282
549
—
806,263
912,950
22,777
4,797
717
1,984
30,275
3,628
—
—
485
32,560
36,673
66,948
846,002
11,694
6,125
13,563
—
31,382
478,592
509,974
188,100
263,878
—
—
277
548
—
19,635
472,438
982,412
13,354
1,137
205
1,707
16,403
72
253,111
1,847
—
—
255,030
271,433
710,979
5,036,746
(1,227,485)
(2,963,259)
846,002
—
846,002
3,710,382
4,013
(3,007,503)
706,892
4,087
710,979
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
49
HMC Capital | Annual Report 2022 Consolidated Statement of Changes in Equity
for the year ended 30 June 2022
Consolidated
Contributed
equity
$’000
Profits
reserve
$’000
Share-
based
payments
reserve
$’000
Accumu-
lated
losses
$’000
Non-
controlling
interest*
$’000
Total
equity
$’000
Balance at 1 July 2020
3,607,986
38,584
472
(2,917,512)
—
729,530
Profit/(loss) after income tax expense
for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction
costs (note 26)
Capital distribution (note 26)
Dividends paid (note 28)
Share-based payments
Balance at 30 June 2021
—
—
—
291,996
(189,600)
—
—
3,710,382
—
—
—
—
—
(36,699)
—
1,885
—
—
—
—
—
—
1,656
(89,991)
4,087
(85,904)
—
—
—
(89,991)
4,087
(85,904)
—
—
—
—
—
—
—
—
291,996
(189,600)
(36,699)
1,656
2,128
(3,007,503)
4,087
710,979
Consolidated
Contributed
equity
$’000
Profits
reserve
$’000
Share-based
payments
reserve
$’000
NCI
reserve
$’000
Accumulated
losses
$’000
Non-
controlling
interest*
$’000
Total
equity
$’000
Balance at 1 July 2021
3,710,382
1,885
2,128
— (3,007,503)
4,087
710,979
Profit after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
—
—
—
Contributions of equity, net of
transaction costs (note 26)
1,326,364
Share-based payments
Transfer from NCI on
de-stapling (note 27)
Destapling transaction costs
Other
Dividends paid (note 27)
Dividends paid (note 28)
—
—
—
—
—
—
Balance at 30 June 2022
5,036,746
—
—
—
—
—
—
—
—
(1,885)
—
—
—
—
—
—
—
—
77,249
30,013
107,262
—
—
—
77,249
30,013
107,262
(478)
(1,265,167)
3,404
—
—
—
—
—
—
34,100
(1,472)
—
—
—
—
—
—
—
(58)
—
(32,947)
5,054
(1,232,539)
(2,963,259)
—
—
(34,100)
—
—
—
—
—
60,719
3,404
—
(1,472)
(58)
(1,885)
(32,947)
846,002
*Non-controlling interest represents the contributed retained earnings of HCDL.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
50
Consolidated Statement of Cash Flows
for the year ended 30 June 2022
Cash flows from operating activities
Receipts from vendors and tenants (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Other income — lease mitigation account
Interest paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Payments for investments
Payment for investment property — freehold
Payment for investment property — leasehold
Payment for derivative financial assets
Payments for convertible notes
Payment for equity accounted investments
Payment for plant and equipment
Proceeds from disposal of investment property
Proceeds from deposits
Distributions received
Proceeds from demerger
Note
42
37
Cash balance held by subsidiary on disposal of discontinued operations
10
Net cash from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities and surrenders
Dividends paid
Borrowing costs paid
Net cash (used in)/from financing activities
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
28
11
Consolidated
30 June
2022
$’000
30 June
2021
$’000
52,422
(45,151)
—
(3,959)
(1,707)
69,618
(46,199)
11,000
(11,761)
—
1,605
22,658
(78,504)
(117,972)
—
—
(9,916)
(317,224)
—
(5,800)
(10,986)
(1,734)
(176,616)
(3,344)
718,570
—
16,928
—
—
—
(548)
(87,437)
—
69,000
1,383
3,119
204,954
(18,538)
336,426
(151,091)
—
275,637
(1,538)
(5,241)
429,750
153,500
(684,500)
(264,750)
(352)
(34,832)
(698)
(11,895)
(36,699)
—
(292,170)
110,552
45,861
11,694
57,555
(17,881)
29,575
11,694
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
51
HMC Capital | Annual Report 2022 Notes to the Consolidated
Financial Statements
Note 1. General information
The financial statements cover HMC Capital as a group consisting of Home Consortium Limited (ACN 138 990 593)
(the ‘Company’, ‘parent entity’ or ‘HCL’) and the entities it controlled at the end of, or during, the financial year. The financial
statements are presented in Australian dollars, which is the Group’s functional and presentation currency.
The comparative period results are for the stapled group comprising of HCL and Home Consortium Developments Pty Limited
(‘HCDL’) (ACN 635 859 700) (formerly Home Consortium Developments Limited). As detailed in note 2 below, the shares of
HCL and HCDL were destapled on 24 December 2021. As a result, the current period results are for the stapled group until
24 December 2021 and for the destapled group from 25 December 2021 to 30 June 2022.
HCL is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal
place of business is:
Level 7
Gateway
1 Macquarie Place
Sydney NSW 2000
A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not
part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 23 August 2022. The
directors have the power to amend and reissue the financial statements.
Note 2. Destapling of Home Consortium Developments Limited
The shares of HCL were stapled to the shares in HCDL to form stapled securities such that shares in HCL and HCDL had to be
purchased or sold together. The stapled securities, known as HMC, were admitted to the official list of the Australian Securities
Exchange (‘ASX’) on 11 October 2019.
During the periods HCL and HCDL were stapled, the financial statements presented both the financial statements and
accompanying notes of HCL and its controlled entities and HCDL jointly as permitted by ASIC Corporations (Stapled Group
Reports) Instrument 2015/838. HCL was the deemed parent of the stapled group in accordance with AASB 3 ‘Business
Combinations’. The contributed equity and retained earnings of HCDL were shown as a non-controlling interest in the financial
statements even though the equity holders of HCDL (the acquiree) are also equity holders in HCL (the acquirer) by virtue of the
stapling arrangement.
On 10 December 2021, the securityholders of HCL and HCDL approved the destapling of securities. Eligible securityholders
then received approximately 1.65 HCL shares for each HMC stapled share they held on 17 December 2021. HCL acquired,
in consideration for the issue of HCL shares, all of the HCDL shares. HCL shares were then consolidated on the basis that
approximately every 2.65 HCL shares were converted into 1 HCL share so that eligible securityholders now hold one HCL share
for each HCL stapled share they held. HCDL was delisted from the ASX on 29 December 2021.
These consolidated financial statements are presented as a continuation of the existing group with HCL as the accounting
parent entity. The acquisition constitutes a transaction amongst owners, where previously they held their interest through
HCL and HCDL (the non-controlling interest), and after the transaction they hold all of their interest directly through HCL.
The impact of this transaction has been recognised in equity whereby the difference between the fair value of shares issued
and the non-controlling interest of HCDL is recognised in the non-controlling interest (‘NCI’) reserve (refer note 27).
HCDL was converted from being an unlisted public company to a proprietary company on 25 June 2022.
52
Note 3. Significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting
Standards and Interpretations did not have any significant impact on the financial performance or position of the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation
of certain financial assets and liabilities, including derivative financial instruments, and revaluation of investment properties at
fair value through profit or loss.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are
disclosed in note 4.
Parent entity information
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 36.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of HCL as at 30 June 2022 and the
results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The group controls an entity when the Group 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. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
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.
53
HMC Capital | Annual Report 2022 Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as
the internal reports provided to the Chief Operating Decision Makers (‘CODM’), which is the Board of Directors. The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
Revenue recognition
The group recognises revenue as follows:
Property rental income
Property rental income is recognised on a straight-line basis over the lease term for leases with fixed rate or guaranteed
minimum rent review clauses.
Other property income
Other property income represents direct and indirect outgoings. The group recognises direct and indirect outgoings based on
actual costs incurred in accordance with the terms of the related leases on an accrual basis and billed monthly in arrears. Actual
costs reflect the service provided. The amount of recoveries revenue is determined by the actual cost incurred and the terms in
the lease. The outgoings recovered are recognised over the period the services are provided.
Other property income includes recoveries from tenants recognised in accordance with AASB 15 ‘Revenue from contracts with
customers’.
Management fee income
Management fees comprise investment management and property management fees for properties managed on behalf of
third parties.
Investment management fees are recognised over time based on a percentage of Gross Asset Value (GAV) of the investment
being managed. Acquisition fees and disposal fees are recognised at a point in time as a percentage of purchase or disposal
values on completion of the service.
Property management fees are recognised over time based on the percentage of gross income. New tenant and lease renewal
fees are recognised at a point in time as a percentage of annual rental on the successful execution of tenancy agreements.
Development management fees are recognised over time based on a percentage of the development costs.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.
Distribution income
Revenue is recognised when the Group’s right to receive the payment is established, which is generally when the directors of the
investee approve the dividends.
Government grants
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with
the costs that they are intended to compensate.
Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
54
Notes to the Consolidated Financial Statements30 June 2022 Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
l when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
l when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
HCL (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under
the tax consolidation regime (‘HCL Tax consolidation group’). The head entity and each subsidiary in the tax consolidated
group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the
‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the
tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither
a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Discontinued operations
A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to
dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results
of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive
income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group’s
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group’s normal operating cycle; it is held primarily
for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right
to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as
non-current.
Deferred tax assets and liabilities are always classified as non-current.
55
HMC Capital | Annual Report 2022 Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Debts that are known to be
uncollectable are written off when identified.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. Movements in fair value are recognised directly in profit or loss.
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 continued use. They are measured at the lower of their carrying
amount and fair value less costs of disposal. 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 non-current assets and assets of disposal
groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal
of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously
recognised.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses
attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented
separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held
for sale are presented separately on the face of the statement of financial position, in current liabilities.
Investment in associates
Associates are entities over which the Group has significant influence but not control or joint control. Investments in associates
are accounted for using the equity method. Under the equity method, the share of the profits or losses of the associate is
recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments
in associates are carried in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net
assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither
amortised nor individually tested for impairment. Dividends received or receivable from associates reduce the carrying amount
of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured
long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the associate.
The group discontinues the use of the equity method upon the loss of significant influence over the associate and recognises
any retained investment at its fair value. Any difference between the associate’s carrying amount, fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
56
Notes to the Consolidated Financial Statements30 June 2022 Investment in joint ventures
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 consent of the parties sharing control.
The group’s investments in its joint ventures are accounted for using the equity method. Under the equity method, the
investment in the 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 financial statements of the joint venture are prepared using the same accounting
policies and for the same reporting period as the Group.
Convertible notes
Convertible notes are accounted for on an amortised cost basis.
Investment properties
Investment properties are initially recognised at cost, including transaction costs, and are subsequently remeasured annually
at fair value. Movements in fair value are recognised directly to profit or loss. Investment properties are derecognised when
disposed of or when there is no future economic benefit expected. Gains or losses resulting from the disposal of freehold
property is measured as the difference between the latest carrying value of the asset at the date of disposal and is recognised
when control over the property has been transferred.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their
expected useful lives as follows:
Fixtures, fittings and equipment
3 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leasing costs and tenant incentives
Leasing costs
Leasing costs are costs that are directly associated with negotiating and arranging an operating lease (including commissions,
fees and costs of preparing and processing documentation for new leases). These costs are capitalised and amortised on a
straight-line basis over the term of the lease.
Tenant incentives
Incentives such as cash, rent-free periods, lessee or lessor owned fit-outs may be provided to lessees to enter into a lease.
These incentives are capitalised and are amortised on a straight-line basis over the term of the lease as a reduction of rental
income. The carrying amount of the tenant incentives is reflected in the fair value of investment properties.
57
HMC Capital | Annual Report 2022 Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, an estimate of costs expected
to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at
the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets
are not amortised and are subsequently measured at cost less any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Management rights
Management rights acquired in a business combination are not amortised, on the basis of indefinite life, which is reassessed
every year. Instead, they are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired, and are carried at cost less accumulated impairment losses.
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted.
The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less
any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under
residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur,
and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed
in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made
to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
58
Notes to the Consolidated Financial Statements30 June 2022 Finance costs
Finance costs are expensed in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it
is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate
bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to directors and employees.
Equity-settled transactions are awards of shares, rights over shares or options over shares, that are provided to directors and
employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield
and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the
Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of
the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss
for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are
considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any
remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is
treated as if they were a modification.
59
HMC Capital | Annual Report 2022 Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date; and assumes that the transaction will take place either: in the principal market;
or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best
use. Valuation techniques used to measure fair value are those that are appropriate in the circumstances and which maximise
the use of relevant observable inputs and minimise 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.
Contributed capital
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.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
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 the 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 acquirer.
60
Notes to the Consolidated Financial Statements30 June 2022 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.
Earnings per security
Basic earnings per security
Basic earnings per security is calculated by dividing the profit attributable to the owners of HCL, excluding any costs of servicing
equity other than ordinary securities, by the weighted average number of ordinary securities outstanding during the financial
year, adjusted for bonus elements in ordinary securities issued during the financial year.
Diluted earnings per security
Diluted earnings per security adjusts the figures used in the determination of basic earnings per security to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary securities and the
weighted average number of additional ordinary securities that would have been outstanding assuming conversion of all
dilutive potential ordinary securities.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Comparatives
Comparatives in the financial statements have been realigned to the current year presentation. There was no effect on the
results of operations for the year.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Group for the annual reporting period ended 30 June 2022. The group’s assessment of
the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below.
Classification of liabilities as current or non-current (AASB 2020-1, AASB 2020-6)
A narrow-scope amendment to AASB 101 ‘Presentation of Financial Statements’ was issued by the AASB (based on the IASB
amendment) to clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end
of the reporting period. The amendment may affect the classification of some liabilities that can be converted to equity and for
liabilities where the intentions of management were used to determine the classification. The effective date was originally for
annual reporting periods commencing from 1 January 2022 but it has been deferred to 1 January 2023. The group has not yet
assessed the impact but does not expect that it will be significant.
61
HMC Capital | Annual Report 2022 Note 4. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation
to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events, management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Fair value measurement hierarchy
The group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the
lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable
inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore
which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted
cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs.
Goodwill and other indefinite life intangible assets
The group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and
other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note
3. The recoverable amounts of cash-generating units have been determined based on fair value less cost to sell 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.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and taxable losses only if the Group considers it is
probable that future taxable amounts will be available to utilise those temporary differences and taxable losses.
The group assesses the recoverability of deferred tax assets at each reporting date. In making this assessment, the Group considers,
in particular, the future business plans, reasons for past losses, whether the unused tax losses resulted from identifiable causes which
are unlikely to recur and if any tax planning opportunities exist in the period in which the taxable losses can be utilised. The recognised
net deferred tax liability of $32.6 million (2021: asset of $19.6 million) comprises $5.7 million (2021: $10.9 million) of carry forward tax
losses and $6.5 million (2021: $9.0 million) of deductible temporary differences. The group has made a judgement that they will be
able to generate sufficient taxable profits over the foreseeable future, based upon its future business plans.
Valuation of derivative financial instruments
The fair value of derivative financial instruments is estimated using valuation techniques which includes assumptions of future
events and significant estimates. The fair value of derivatives at the reporting date may differ if there is volatility in market rates
and or prices.
Note 5. Operating segments
Identification of reportable operating segments
The group is organised into three operating segments: Investments (renamed from Freehold properties), Funds management
and Corporate (renamed from Other). During the previous financial year, the Group disposed of the former Masters Hardware
leasehold properties via the sale of Home Consortium Leasehold Pty Ltd and its subsidiaries to Home Investment Consortium
Trust (‘HICT’). Refer note 10 ‘Discontinued operations’ for further information. As a result, the comparatives include Leasehold
properties as a separate segment consisting of the discontinued operations.
The operating segments are based on the internal reports that are reviewed by the Chief Operating Decision Makers (‘CODM’)
in assessing performance and in determining the allocation of resources.
62
Notes to the Consolidated Financial Statements30 June 2022 The CODM monitor the performance of the business on the basis of Funds from Operations (‘FFO’) for each segment. FFO
represents the Group’s underlying and recurring earnings from its operations, and is determined by adjusting the statutory
net profit after tax for items which are non-cash, unrealised or capital in nature. The accounting policies adopted for internal
reporting to the CODM are consistent with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis. The group only operates in Australia.
Operating segment information
Investments
$’000
Funds
management
$’000
Corporate
$’000
Total
$’000
Acquisition and transaction costs
(1,711)
(9,665)
Consolidated — 30 June 2022
Revenue
Property rental income
Other property income
Management fee income
Total revenue
FFO (before income tax)
Depreciation expenses
Net fair value movements
Impairment expenses
Amortisation of borrowing costs
Straight-lining of rental income
Share of associate profit (adjusted)
Gain on investment in associates
Profit/(loss) before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Total assets includes:
Investments in associates
Liabilities
Segment liabilities
Total liabilities
13,303
1,201
—
14,504
58,299
—
725
—
—
64,088
64,088
53,734
—
—
(21,339)
(1,788)
(563)
48,316
16,900
98,839
—
—
—
—
—
—
—
—
—
13,303
1,201
64,088
78,592
(21,052)
90,981
(520)
—
—
—
—
—
—
—
(520)
725
(11,376)
(21,339)
(1,788)
(563)
48,316
16,900
44,069
(21,572)
121,336
(14,074)
107,262
680,130
223,996
8,824
912,950
912,950
608,712
—
—
608,712
5,688
46,553
14,707
66,948
66,948
63
HMC Capital | Annual Report 2022 Investments
$’000
Leasehold
properties*
$’000
Funds
management
$’000
Corporate
$’000
Total
$’000
Profit from discontinued operations
—
9,883
Share of associate profit (adjusted)
Net fair value movements
Acquisition and transaction costs
Amortisation of borrowing costs
Straight-lining of rental income
Other adjustments
2,846
(21,954)
(1,716)
(2,976)
(3,503)
(914)
—
—
—
—
—
—
Profit/(loss) before income tax expense
(3,608)
9,883
8,191
(10,983)
47,053
11,489
—
58,542
40,055
(15,446)
3,985
215
—
4,200
—
—
—
—
10,855
10,855
8,420
—
—
—
—
(229)
—
—
—
—
—
—
—
(10,983)
—
—
—
—
—
—
—
—
51,038
11,704
10,855
73,597
37,492
(15,446)
9,883
2,846
(21,954)
(1,945)
(2,976)
(3,503)
(914)
3,483
(89,387)
(85,904)
Consolidated — 30 June 2021
Revenue
Property rental income
Other property income
Management fee income
Total revenue
FFO (before income tax)
Loss on demerger
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Total assets includes:
Investments in associates
Liabilities
Segment liabilities
Total liabilities
946,855
—
13,526
22,031
982,412
263,878
264,017
—
—
—
4
982,412
—
263,878
7,412
271,433
271,433
* Revenue from leasehold properties is included in profit from discontinued operations in the consolidated statement of profit or
loss and other comprehensive income.
64
Notes to the Consolidated Financial Statements30 June 2022 Note 6. Revenue
From continuing operations
Property rental income
Other property income
Management fee income
Revenue from continuing operations
Consolidated
30 June
2022
$’000
30 June
2021
$’000
13,303
47,053
1,201
11,489
64,088
10,855
78,592
69,397
Disaggregation of revenue
The revenue from property rental income is recognised on a straight-line basis over the lease term. Other property income
and management fee income is recognised over time as services are rendered. All revenue is generated within Australia.
Revenue from operating segments is set out in note 5.
Note 7. Change in assets/liabilities at fair value through profit or loss
Net fair value gain/(loss) on investment properties — freehold
Net fair value (loss)/gain on remeasurement of derivatives
Realised gain on disposal of investment property
Consolidated
30 June
2022
$’000
30 June
2021
$’000
5,003
(23,058)
(4,278)
28,030
1,104
—
28,755
(21,954)
65
HMC Capital | Annual Report 2022 Note 8. Expenses
Profit/(loss) before income tax from continuing operations includes the following specific expenses:
Finance costs
Interest and finance charges on borrowings
Interest and finance charges on lease liabilities
Amortisation of borrowing costs*
Interest expense — other
Finance costs expensed
Superannuation expense
Consolidated
30 June
2022
$’000
30 June
2021
$’000
3,962
7,440
23
1,788
—
19
2,976
475
5,773
10,910
Defined contribution superannuation expense
1,100
519
Employee benefits expense excluding superannuation
Employee benefits expense excluding superannuation
17,995
7,657
Acquisition and transaction costs
Transaction and group reorganisation costs
11,376
1,945
* Amortisation of borrowing costs includes $1.3 million (2021: $1.3 million) written off upon refinancing and limit reduction of debt facility (refer note 24).
Government grants
During the financial year, the Group repaid the Australian government JobKeeper support payments amounting to $0.3 million
(2021: receipts of $0.2 million). These had been recognised as government grants in the financial statements and initially
recorded as a deduction in corporate expenses and subsequently reversed.
66
Notes to the Consolidated Financial Statements30 June 2022 Note 9. Income tax
Income tax expense
Current tax
Deferred tax movements
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease in deferred tax assets
Numerical reconciliation of income tax expense and tax at the statutory rate
Consolidated
30 June
2022
$’000
30 June
2021
$’000
1,969
1,707
12,105
87,680
14,074
89,387
12,105
87,680
Profit/(loss) before income tax expense from continuing operations
121,336
(6,400)
Profit before income tax expense from discontinued operations
Tax at the statutory tax rate of 30%
Permanent differences and others
Utilisation of tax losses
Derecognition of deferred tax assets
Income tax expense
—
121,336
36,401
(27,544)
5,217
—
9,883
3,483
1,045
1,743
9,426
77,173
14,074
89,387
67
HMC Capital | Annual Report 2022 Deferred tax (liability)/asset
Deferred tax (liability)/asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Investment property
Lease liabilities
Management rights
Right-of-use assets
Others
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax asset/(liability)
Movements:
Opening balance
Charged to profit or loss
Credited to equity
Additions through business combinations (note 37)
Derecognised upon sale of leasehold portfolio
Closing balance
Consolidated
30 June
2022
$’000
30 June
2021
$’000
5,732
10,949
—
(223)
1,449
(41,231)
(1,466)
(2,073)
(37,589)
83
—
(83)
3,425
14,151
5,029
(32,560)
5,484
19,635
19,635
141,157
(12,105)
(87,680)
—
(40,090)
1,561
—
—
(35,403)
(32,560)
19,635
68
Notes to the Consolidated Financial Statements30 June 2022 Provision for income tax
Provision for income tax
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at statutory tax rates
Consolidated
30 June
2022
$’000
30 June
2021
$’000
1,984
1,707
Consolidated
30 June
2022
$’000
30 June
2021
$’000
2,511,680
2,530,852
753,504
759,256
Included within the amount debited to profit or loss for the year ended 30 June 2021 is reversal of tax losses of $139.2 million
that no longer qualify for recognition. Tax losses carried forward at 30 June 2022 represent losses incurred by the Group since
the IPO date and are subject to the Continuity of Ownership Test.
The group has not brought to account $2,511.7 million (2021: $2,530.9 million) of tax losses, which includes the benefit
arising from tax losses incurred prior to HCL’s IPO. The benefits of unused tax losses will only be brought to account
(with the recognition of a deferred tax asset) when there is convincing evidence that it is probable that they will be realised.
Given the change in ownership on IPO and subsequent changes to the underlying business, the likelihood of this is considered
to be remote.
This benefit of tax losses will only be obtained if:
l the Group derives future assessable income of a nature and an amount sufficient to enable the benefit from the deductions
for the losses to be realised;
l the Group continues to comply with the conditions for deductibility imposed by tax legislation, in particular the Group
continues to meet the Business Continuity Test or Similar Business Test; and
l no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
69
HMC Capital | Annual Report 2022 Note 10. Discontinued operations
On 20 November 2020, the Group disposed of the former Masters Hardware leasehold properties (Leasehold segment) via
the sale of Home Consortium Leasehold Pty Ltd and its subsidiaries to foundation shareholder Home Investment Consortium
Company Pty Limited as trustee for the Home Investment Consortium Trust (‘HICT’). The leasehold interest had a net asset
position of $35.5 million and was sold for a nominal $1 consideration.
The impact of the discontinued operations on the comparative period statement of profit or loss is provided below.
Financial performance information
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
—
—
—
—
—
—
—
4,200
47,283
(6,107)
45,376
—
45,376
(35,493)
—
(35,493)
9,883
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
4,042
(12,817)
(8,775)
Total revenue
Total other income
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Loss on disposal of subsidiary
Income tax expense
Loss on disposal after income tax expense
Profit after income tax expense from discontinued operations
Cash flow information
Net cash from operating activities
Net cash used in investing activities
Net decrease in cash and cash equivalents from discontinued operations
70
Notes to the Consolidated Financial Statements30 June 2022 Carrying amounts of assets and liabilities disposed
Cash and cash equivalents
Trade and other receivables
Investment properties — leasehold
Deferred tax assets
Total assets
Trade and other payables
Provisions
Lease liabilities
Total liabilities
Net assets
Details of the disposal
Total sale consideration*
Carrying amount of net assets disposed
Loss on disposal before income tax
Loss on disposal after income tax
* Nominal sale consideration of $1 was settled on disposal of leasehold operations.
Note 11. Cash and cash equivalents
Current assets
Cash at bank
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
—
—
—
—
—
—
—
18,538
34,123
79,446
35,403
167,510
8,017
2,000
122,000
132,017
35,493
Consolidated
30 June
2022
$’000
—
—
—
—
30 June
2021
$’000
—
(35,493)
(35,493)
(35,493)
Consolidated
30 June
2022
$’000
30 June
2021
$’000
57,555
11,694
71
HMC Capital | Annual Report 2022 Consolidated
30 June
2022
$’000
30 June
2021
$’000
16,431
(263)
16,168
6
16,174
6,287
(792)
5,495
630
6,125
Consolidated
30 June
2022
$’000
30 June
2021
$’000
473
1,938
16,122
—
3,776
432
8,477
878
18,533
13,563
549
—
19,082
13,563
Note 12. Trade and other receivables
Current assets
Trade receivables
Allowance for expected credit losses
Accrued income
Note 13. Other assets
Current assets
Prepayments
Other deposits
Other receivables
Other current assets
Non-current assets
Capitalised borrowing costs
72
Notes to the Consolidated Financial Statements30 June 2022 Note 14. Assets classified as held for sale
Investment property
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
478,592
During the previous financial year, the Group entered into conditional agreements to sell a 100% interest in a portfolio of seven
large format retail assets (‘LFR Portfolio’) to HDN for a total purchase price of $266.4 million less estimated costs of the bonus
unit issue of $8.9 million. HDN unitholder approval was obtained at an extraordinary general meeting on 16 June 2021 and
settlement occurred on 1 July 2021.
Ten other properties with a value of $221.1 million were seeded into HCW which is a separate listed entity established during the
current financial year (refer note 16).
Note 15. Investment property — freehold
Consolidated
30 June
2022
$’000
30 June
2021
$’000
Non-current assets
Investment property — freehold — at fair value
—
188,100
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and previous financial year are
set out below:
Opening balance
Acquisitions and additions
Disposals
Transfer to HDN upon demerger
Transfer to assets held for sale (note 14)
Capitalised expenditure
Straight-lining and amortisation
Net gain/(loss) from fair value adjustments
Closing balance
188,100
1,013,750
—
284,548
(217,838)
(69,000)
—
—
(584,200)
(478,592)
11,492
48,155
(563)
(3,503)
18,809
(23,058)
—
188,100
Refer to note 30 for further information on fair value measurement.
During the financial year, the Group sold five investment properties to HDN for a total consideration of $114.9 million.
73
HMC Capital | Annual Report 2022 Lessor commitments
Minimum lease commitments receivable but not recognised in the financial statements:
Within one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
—
—
—
—
11,706
11,518
11,048
9,791
7,980
45,619
97,662
Note 16. Investments accounted for using the equity method
Establishment of HealthCo Healthcare and Wellness REIT (HCW)
During the financial year, the Group established HCW, a Trust registered with the Australian Securities and Investment
Commission (‘ASIC’) and listed on the Australian Securities Exchange (‘ASX’).
HCW was a subsidiary of HCL as at 30 June 2021. In September 2021, HCW issued new equity units for $650 million with HCL
subscribing for $130 million (20%). HCW repaid the net inter-company loans from HCL (reflecting costs spent in relation to
the properties in the portfolio which were owned and seeded by HCL). HCL derecognised assets classified as held for sale of
$221.1 million as at 30 June 2021, recognised a $2.2 million rental guarantee payable, and recognised investment property gains
of $13.7 million as part of this transaction.
The fair value of the investment in HCW as at the date when control was lost, being $146.9 million, was calculated using the
volume-weighted average price (‘VWAP’) of HCW shares as traded on the ASX over the first five trading days after listing.
This resulted in a gain of $16.9 million upon the recognition of the investment in associate. The investment in HCW is accounted
for as an investment in associate using the equity method of accounting.
Camden joint ventures
During the financial year, the Group entered into a joint venture arrangement with HCW and a third party to acquire and
develop three separate parcels of land which are owned by the following special purpose vehicles — The George Trust, General
Medical Precinct Trust and Life Sciences Medical Precinct Trust.
The George Trust and General Medical Precinct Trust were initially capitalised at 25%, 25% and 50% by HMC, HCW and the third
party, respectively. Life Sciences Medical Precinct Trust was initially capitalised at 30%, 30% and 40% by HMC, HCW and the
third party, respectively.
Future capital expenditure is to be funded by HMC and HCW in equal contributions.
74
Notes to the Consolidated Financial Statements30 June 2022 Details of investments in associates and joint ventures at the reporting date are provided below:
Non-current assets
Associate — HomeCo Daily Needs REIT
Associate — HealthCo Healthcare and Wellness REIT
Joint venture — The George Trust
Joint venture — General Medical Precinct Trust
Joint venture — Life Sciences Medical Precinct Trust
Consolidated
30 June
2022
$’000
30 June
2021
$’000
443,194
263,878
136,924
17,150
2,511
8,933
—
—
—
—
608,712
263,878
Interests in associates and joint ventures
Interests in associates and joint ventures are accounted for using the equity method of accounting. Information relating to
associates that are material to the Group are set out below:
Name
HomeCo Daily Needs REIT
HealthCo Healthcare and Wellness REIT
The George Trust
General Medical Precinct Trust
Life Sciences Medical Precinct Trust
Principal place of business/
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Ownership interest
30 June
2022
%
30 June
2021
%
14.1%
28.5%
20.9%
40.3%
25.0%
30.2%
—
—
—
—
75
HMC Capital | Annual Report 2022 Summarised financial information
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
HDN
30 June
2022
$’000
30 June
2021
$’000
HCW
30 June
2022
$’000
Joint
ventures
30 June
2022
$’000
52,622
268,785
55,995
1,042
4,803,567
1,121,640
637,602
87,002
4,856,189
1,390,425
693,597
88,044
117,067
31,515
1,601,375
425,778
1,718,442
457,293
17,213
22,294
39,507
3,137,747
933,132
654,090
5,876
—
5,876
82,168
Summarised statement of profit or loss and other comprehensive income
Revenue and fair value changes
488,255
62,052
64,269
Expenses
Profit before income tax
Other comprehensive income
Total comprehensive income
Reconciliation of the Group's carrying amount
(153,143)
(30,720)
(14,657)
335,112
31,332
49,612
—
—
—
335,112
31,332
49,612
Opening carrying amount
263,878
—
Fair value of investments acquired during the year
—
174,154
—
—
—
—
—
—
—
—
—
Additional investments acquired during the year
146,243
87,481
136,094
28,594
Share of profit after income tax
60,911
8,940
10,237
Share of distributions paid/payable
(19,922)
(6,697)
(4,968)
HDN bonus unit reduction
Impairment expenses
Fair value gain on investments in HCW
(7,916)
—
—
—
—
—
—
(21,339)
16,900
—
—
—
—
—
Closing carrying amount
443,194
263,878
136,924
28,594
76
Notes to the Consolidated Financial Statements30 June 2022 A $21.3 million impairment to the carrying value of the investment in HCW has been recognised for the year ended
30 June 2022. The investment has been reduced to its recoverable amount which has been based on the net tangible assets
per unit of HCW as at 30 June 2022.
Commitments
Committed at the reporting date but not recognised as liabilities:
Capital expenditure
Property acquisitions
Note 17. Property, plant and equipment
Non-current assets
Fixtures, fittings and equipment — at cost
Less: Accumulated depreciation
Consolidated
30 June
2022
$’000
30 June
2021
$’000
116,582
34,400
127,558
274,000
Consolidated
30 June
2022
$’000
30 June
2021
$’000
3,320
(180)
3,140
—
—
—
Reconciliations
Reconciliations of the written down values at the beginning and end of the current financial year are set out below:
Consolidated
Balance at 1 July 2021
Additions
Depreciation expense
Balance at 30 June 2022
Furniture,
fittings and
equipment
$’000
—
3,320
(180)
3,140
77
HMC Capital | Annual Report 2022 Note 18. Intangible assets
Non-current assets
Goodwill
Management rights
Consolidated
30 June
2022
$’000
30 June
2021
$’000
49,337
137,437
186,774
—
—
—
Reconciliations
Reconciliations of the written down values at the beginning and end of the current financial year are set out below:
Consolidated
Balance at 1 July 2021
Additions through business combinations (note 37)
Balance at 30 June 2022
Goodwill
$’000
—
49,337
49,337
Management
rights
$’000
—
Total
$’000
—
137,437
186,774
137,437
186,774
Impairment testing
Goodwill and management rights with an indefinite useful life are tested annually for impairment or when there are indicators
of impairment. Goodwill and management rights are considered to be impaired if their recoverable amount is less than their
carrying amount. As part of annual impairment testing goodwill, generated as a result of the recognition of deferred tax on
management rights acquired in a business combination, is offset against a corresponding and equal deferred tax liability when
calculating the carrying value of the cash generating unit.
No impairment expense was recognised for the year ended 30 June 2022.
The recoverable amount of goodwill and management rights was determined using the fair value less cost to sell approach and
valued using discounted cash flow projections. Key assumptions adopted in the discounted cash flow valuation are as follows:
Cash flows
Discount rate (post-tax)
Terminal growth rate
10 years
7.6%
3.0%
Cash flow projections were based on financial budgets for the year ending 30 June 2023. Cash flows beyond the projected
period are extrapolated using estimated growth rates.
Terminal growth rates are estimated based on the expected long-term earnings growth and macro-economic factors.
Discount rates applied to cash flow projections are calculated by reference to the Group’s weighted average cost of capital.
Discount rates are adjusted for risks specific to the cash generating unit.
78
Notes to the Consolidated Financial Statements30 June 2022
Sensitivity analysis
A 50 basis point increase/decrease in the discount rate would result in a $186.8 million decrease/$232.9 million increase in the
recoverable value of the cash generating unit.
A 50 basis point increase/decrease in the terminal growth rate would result in a $168.5 million increase/$135.4 million decrease
in the recoverable value of the cash generating unit.
Note 19. Right-of-use assets
Non-current assets
Right-of-use assets
Less: Accumulated amortisation
Consolidated
30 June
2022
$’000
30 June
2021
$’000
4,887
(81)
4,806
585
(308)
277
The group leases office premises under an agreement expiring in five years, with an option to extend. The lease has various
escalation clauses.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2020
Amortisation expense
Balance at 30 June 2021
Additions
Amortisation expense
Balance at 30 June 2022
For other AASB 16 lease-related disclosures refer to the following:
l note 8 for details of interest on lease liabilities and other lease expenses;
l note 23 and note 42 for details of lease liabilities at the beginning and end of the reporting period;
l note 29 for the maturity analysis of lease liabilities; and
l consolidated statement of cash flows for repayment of lease liabilities.
Office
premises
$’000
466
(189)
277
4,887
(358)
4,806
79
HMC Capital | Annual Report 2022 Note 20. Convertible notes
Non-current assets
Convertible notes
Consolidated
30 June
2022
$’000
30 June
2021
$’000
2,282
548
Convertible notes represent an investment in a related party and derive interest at a variable rate plus a margin. The convertible
notes have a 7-year term and may be converted between a date that is five years after the commencement date and the
maturity date.
Note 21. Trade and other payables
Consolidated
30 June
2022
$’000
30 June
2021
$’000
3,198
265
15,783
3,531
4,267
1,132
7,636
319
22,777
13,354
Consolidated
30 June
2022
$’000
30 June
2021
$’000
1,038
3,759
4,797
410
727
1,137
Current liabilities
Trade payables
Rent received in advance
Accrued expenses
Other payables
Refer to note 29 for further information on financial instruments.
Note 22. Employee benefit obligations
Current liabilities
Annual leave
Other employee benefits
80
Notes to the Consolidated Financial Statements30 June 2022 Note 23. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Refer to note 29 for maturity analysis of lease liabilities.
Note 24. Borrowings
Non-current liabilities
Senior secured bank debt
Capitalised borrowing costs
Consolidated
30 June
2022
$’000
30 June
2021
$’000
717
205
3,628
4,345
72
277
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
254,750
(1,639)
253,111
Refer to note 29 for further information on financial instruments.
Capitalised borrowing costs of $0.5 million as at 30 June 2022 have been disclosed as other non-current assets in note 13.
On 29 July 2021, the Group completed an upsize and extension of its existing three-year senior secured syndicated debt
facility to a $375.0 million senior secured syndicated debt facility expiring in November 2023. The facility limit was reduced to
$275.0 million in December 2021. The bank loans are secured by assets held by the Group. The interest comprises a base rate
plus a variable margin, determined by the prevailing loan to valuation ratio.
81
HMC Capital | Annual Report 2022 Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Senior secured bank debt
Used at the reporting date
Senior secured bank debt
Unused at the reporting date
Senior secured bank debt
Consolidated
30 June
2022
$’000
30 June
2021
$’000
275,000
315,000
—
254,750
275,000
60,250
Compliance with loan covenants
The group has complied with the financial covenants of its debt facilities during the financial year ended 30 June 2022 and
30 June 2021.
Note 25. Derivative financial instruments
Current assets
Derivative asset — equity total return swap
Non—current liabilities
Derivative liability — interest rate swap
Refer to note 29 for further information on financial instruments.
Refer to note 30 for further information on fair value measurement.
Consolidated
30 June
2022
$’000
30 June
2021
$’000
14,425
—
—
14,425
(1,847)
(1,847)
82
Notes to the Consolidated Financial Statements30 June 2022 Note 26. Contributed equity
Consolidated
30 June
2022
Shares
30 June
2021
Shares
30 June
2022
$’000
30 June
2021
$’000
Ordinary shares — fully paid
299,617,806
290,121,283
5,036,746
3,710,382
Movements in ordinary share capital
Details
Balance
Issue of shares (at $2.88 per ordinary share)
Date
1 July 2020
7 July 2020
Shares
$’000
197,912,426
3,607,986
48,611,111
140,000
Issue of shares (at $2.83 per ordinary share)
28 July 2020
3,758,565
10,637
Issue of shares (at $2.88 per ordinary share)
2 September 2020
6,944,444
20,000
Capital distribution on demerger of HomeCo Daily Needs REIT
26 November 2020
—
(189,600)
Issue of shares (at $3.80 per ordinary share)
10 December 2020
32,894,737
125,000
Share issue transaction costs, net of tax
—
(3,641)
Balance
30 June 2021
290,121,283
3,710,382
Issue of shares on vesting of share rights
27 August 2021
145,072
478
Share issue upon acquisition of HCDL (refer note 2)
17 December 2021
478,994,382
1,265,167
Share consolidation (refer note 2)
17 December 2021
(478,994,382)
—
Issue of shares on acquisition of Aventus Holdings Limited (refer note 37)
4 March 2022
9,351,451
60,784
Share issue transaction costs, net of tax
—
(65)
Balance
30 June 2022
299,617,806
5,036,746
Until 24 December 2021, the issued shares of the Group were made up of stapled securities comprising of one share of
HCL and one share of HCDL. As noted in note 2, the stapled securities were destapled effective from 24 December 2021.
Ordinary shares
Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to securityholders should
the company be wound up in proportions that consider both the number of shares held and the extent to which those shares
are paid up. The fully paid ordinary shares have no par value and HCL does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
83
HMC Capital | Annual Report 2022 Share buy-back
There is no current on-market share buy-back.
Capital risk management
The group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for security holders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as
total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to security holders,
return capital to security holders, issue new shares or sell assets to reduce debt.
The group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the prior year.
Note 27. Reserves
Profits reserve
Share-based payments reserve
Non-controlling interest (‘NCI’) reserve
Consolidated
30 June
2022
$’000
—
5,054
(1,232,539)
30 June
2021
$’000
1,885
2,128
—
(1,227,485)
4,013
Profits reserve
In the prior year, the profits reserve was an amount arising from previous years profits and retained as a separate reserve to be
used for distribution as dividends in future years.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration.
Non-controlling interest reserve
The reserve is used to recognise the difference between the amount of the adjustment to non-controlling interests in HCDL and
any consideration paid or received attributable to HCL on de-stapling from the Group.
84
Notes to the Consolidated Financial Statements30 June 2022 Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Profits
reserve
$’000
38,584
(36,699)
—
1,885
(1,885)
—
—
—
—
—
—
Consolidated
Balance at 1 July 2020
Dividends paid (note 28)
Share-based payments
Balance at 30 June 2021
Dividends paid
Share-based payments
Transfer to contributed equity on vesting of rights (note 26)
Transfer from contributed equity on destapling (note 26)
Transfer from non-controlling interest
Destapling transaction costs
Balance at 30 June 2022
Note 28. Dividends
Dividends
Dividends paid during the financial year were as follows:
Share-
based
payments
reserve
$’000
NCI
reserve
$’000
Total
$’000
39,056
(36,699)
1,656
4,013
(1,885)
3,404
(478)
—
—
—
—
—
—
—
(1,265,167)
(1,265,167)
34,100
34,100
(1,472)
(1,472)
5,054
(1,232,539)
(1,227,485)
472
—
1,656
2,128
—
3,404
(478)
—
—
—
Final dividend to shareholders registered on 3 September 2021
of 6.0 cents (2020: 7.5 cents) per ordinary security
Interim dividend for the year ended 30 June 2022 of 6.0 cents (2021: 6.0 cents) per ordinary security
Consolidated
30 June
2022
$’000
30 June
2021
$’000
17,416
17,416
19,292
17,407
34,832
36,699
85
HMC Capital | Annual Report 2022 On 23 August 2022, the directors determined to pay a fully franked dividend of 6.0 cents per ordinary share. The dividends will
be paid on 7 October 2022 to eligible shareholders on the register on 2 September 2022.
Franking credits
Consolidated
30 June
2022
$’000
30 June
2021
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
12,889
21,355
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
l franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
l franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
l franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Note 29. Financial instruments
Financial risk management objectives
The group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The group’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the financial performance of the Group. The group uses derivative financial instruments such as interest rate swap contracts
to hedge certain risk exposures. The group uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of interest rate risk and ageing analysis for credit risk.
Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors
(‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group’s operating units. Finance
reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The group is not exposed to any significant foreign currency risk.
Price risk
The group’s main exposure to price risk arises from the total return equity swap (equity swap) disclosed in note 25 to the
financial statements. The fair value of the equity swap is dependent upon the price of Sigma Healthcare Limited (ASX: SIG)
a company listed on the Australian Securities Exchange.
A 10% increase/decrease in the share price of SIG would result in a $8.3 million increase/decrease in the fair value of the equity
swap assuming all other variables are held constant. This would also result in a $5.8 million increase/decrease in net profit after
tax and equity.
86
Notes to the Consolidated Financial Statements30 June 2022 Interest rate risk
The group’s main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the
Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value risk. The policy is to maintain
approximately 50% of borrowings at fixed rates using interest rate swaps to achieve this when necessary.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts outstanding:
Consolidated
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
30 June 2022
30 June 2021
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$’000
Balance
$’000
0.66%
—
—
—
—
1.87%
254,750
0.89%
(175,000)
79,750
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
An official increase/decrease in interest rates of 50 (2021: 50) basis points would have an adverse/favourable effect on profit
before tax of $Nil (2021: $0.4 million) per annum. The percentage change is based on the expected volatility of interest rates
using market data and analysts forecasts.
Interest rate swap
In the prior year, the Group had an interest rate swap contract with a notional principal amount of $175.0 million. The maturity
date of the interest rate swap contract was October 2022. The interest rate swap hedges the Group’s risk against an increase in
variable interest rates. However, hedge accounting is not applied.
During the financial year, the Group novated its interest rate swap contract to HDN for consideration of $0.2 million.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The group has a strict code of credit, including obtaining agency credit information, confirming references and setting
appropriate credit limits. The group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to
credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of
those assets, as disclosed in the statement of financial position and notes to the financial statements. The group does not hold
any collateral.
The group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the
use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all
tenants of the Group based on recent experience, historical collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the
failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments
for a period greater than one year.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and
available borrowing facilities to be able to pay debts as and when they become due and payable.
The group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Refer to note 24 for details of unused borrowing facilities at the reporting date.
87
HMC Capital | Annual Report 2022 Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
1 year or
less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5
years
$’000
Remaining
contractual
maturities
$’000
Consolidated — 30 June 2022
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing — variable
Bank loans
Interest-bearing — fixed rate
Lease liability
Total non-derivatives
Consolidated — 30 June 2021
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing — variable
Bank loans
Interest-bearing — fixed rate
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
3,198
3,531
—
—
1,815
761
—
—
—
869
9,413
922
1,683
3,026
3,026
—
—
—
—
—
3,198
3,531
2,576
4,817
14,122
1 year or
less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Over 5
years
$’000
Remaining
contractual
maturities
$’000
4,267
319
—
—
4,741
256,157
215
72
9,542
256,229
1,553
1,553
461
461
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,267
319
260,898
287
265,771
2,014
2,014
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
88
Notes to the Consolidated Financial Statements30 June 2022 Note 30. Fair value measurement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated — 30 June 2022
Assets
Derivative financial instruments
Total assets
Consolidated — 30 June 2021
Assets
Investment property — freehold
Investment property — held for sale
Total assets
Liabilities
Derivative financial instruments
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
—
—
14,425
14,425
—
—
Level 1
$’000
Level 2
$’000
Level 3
$’000
14,425
14,425
Total
$’000
—
—
—
—
—
—
—
—
1,847
1,847
188,100
188,100
478,592
478,592
666,692
666,692
—
—
1,847
1,847
Assets held for sale are measured at fair value on a non-recurring basis.
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables approximate their fair values due to their
short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the
current market interest rate that is available for similar financial liabilities.
89
HMC Capital | Annual Report 2022 Valuation techniques for fair value measurements categorised within level 2 and level 3
The basis of the valuation of investment properties is fair value. Independent valuations are obtained on a rotational basis
to ensure each property is valued at least once every 24 months by an independent external valuer. Valuations are based on
current prices in an active market for similar properties of the same location and condition, subject to similar leases and take
into consideration occupancy rates and returns on investment.
For properties not independently valued during the reporting period, a directors’ valuation is carried out to determine the
appropriate carrying value of the property as at the date of the report. Where directors’ valuations are performed, the
valuation methods include using the discounted cash flow method and the capitalisation method.
Derivative financial instruments have been valued using observable market inputs. This valuation technique maximises the use
of observable market data where it is available and relies as little as possible on entity specific estimates.
Level 3 assets and liabilities
The level 3 assets and liabilities unobservable inputs and sensitivity are as follows:
Description
Investment property — freehold and
held for sale
Unobservable inputs
(i) Capitalisation rate
(ii) Discount rate
(iii) Terminal yield
(iv) Rental growth
Range
(weighted average)
30 June 2022
Nil
Nil
Nil
Nil
Range
(weighted average)
30 June 2021
4.8% to 8.0% (6.5%)
5.5% to 9.0%
(7.1%)
5.3% to 8.3% (6.6%)
2.0% to 3.5% (2.7%)
A higher capitalisation rate, discount rate or terminal yield will lead to a lower fair value. A higher growth rate will lead to a
higher fair value. The capitalisation rate is the most significant input into the valuation of investment property and therefore
most sensitive to changes in valuation. A 25 (2021: 25) basis point change in capitalisation rate would increase/decrease fair
value by $ Nil (2021: $26.9 million).
Note 31. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Consolidated
30 June
2022
$
30 June
2021
$
2,581,336
2,892,758
140,795
169,823
1,919,543
1,413,841
4,641,674
4,476,422
Short-term employee benefits
Post-employment benefits
Share-based payments
90
Notes to the Consolidated Financial Statements30 June 2022 Note 32. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor
of the Company, and unrelated firms:
Audit services — PricewaterhouseCoopers
Audit or review of the financial statements
Other services — PricewaterhouseCoopers
Other assurance services
Review of destapling shareholder booklet
Total remuneration to PricewaterhouseCoopers
Other auditors
Audit or review of the financial statements
Other services
Other assurance services
Total remuneration to other auditors
Note 33. Contingent liabilities
The group had no contingent liabilities as at 30 June 2022 and 30 June 2021.
Consolidated
30 June
2022
$
30 June
2021
$
392,416
408,733
8,731
8,160
76,500
—
85,231
8,160
477,647
416,893
18,000
13,000
31,000
—
—
—
91
HMC Capital | Annual Report 2022 Note 34. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities:
Capital expenditure
Property acquisitions
Note 35. Related party transactions
Parent entity
Home Consortium Limited is the parent entity of the Group.
Subsidiaries
Interests in subsidiaries are set out in note 38.
Associates
Interests in associates are set out in note 16.
Consolidated
30 June
2022
$’000
30 June
2021
$’000
26,950
17,556
—
125,045
26,950
142,601
Key management personnel
Disclosures relating to key management personnel are set out in note 31 and the remuneration report included in the
directors’ report.
Related party transactions with HealthCo Healthcare and Wellness REIT (‘HCW’)
HCW Funds Management Limited (Responsible Entity) was appointed as the responsible entity of HCW during the financial
year. The Responsible Entity has appointed HMC Property Management Pty Limited (the ‘Property Manager’) and HMC
Investment Management Pty Ltd (the ‘Investment Manager’) to provide certain asset management, investment management
and development management services to HCW in accordance with an Investment Management and Property and
Development Management Agreement (‘Management Agreements’). The Responsible Entity, Property Manager and
Investment Manager are wholly owned subsidiaries of the Group. Refer note 16 for details of the establishment of HCW.
92
Notes to the Consolidated Financial Statements30 June 2022 Related party transactions with HomeCo Daily Needs REIT (‘HDN’)
HMC Funds Management Limited was appointed as the responsible entity of HDN in the previous financial year.
The Responsible Entity has appointed HMC Property Management Limited (the ‘Property Manager’) and HMC Investment
Management Pty Ltd (the ‘Investment Manager’) to provide certain asset management, investment management and
development management services to HDN in accordance with an Investment Management and Property and Development
Management Agreement (‘Management Agreements’). The Responsible Entity, Property Manager and Investment Manager
are wholly owned subsidiaries of the Group.
Material related party transactions entered during the financial year are disclosed below:
Consolidated
30 June
2022
$
30 June
2021
$
Sale of goods and services:
Property rental and other property income derived from director and shareholder related entities
839,970
6,700,113
Investment management and property management fees derived from HDN and HCW
62,607,034
10,118,036
Responsible Entity expenses reimbursed from HDN and HCW
Management fees derived from director and KMP related entity
Payment for goods and services:
1,981,868
288,946
918,750
1,248,790
Payment for office space, associated costs and reimbursement of expenses to a director related entity
—
43,749
Payment for settlement adjustments relating to tenant rent and property expenses
2,192,165
1,962,001
Other transactions:
(i) Rental guarantee expenses payable to HDN and HCW
2,689,997
475,000
(ii)
Receipts from HDN and HCW (reimbursement of property deposits, capital expenditure and IPO
transaction costs)
(iii) Sub underwriter fee
(iv) Sale of 50% interest in Proxima (Southport) QLD to HCW
(v) Novation of interest rate swap to HDN
15,392,422
26,140,642
—
405,000
5,000,000
198,791
—
—
Settlement of assets classified as held for sale
Refer to note 14 for assets classified as held for sale for properties that were later settled during the financial year to HCW and HDN.
Settlement of investment properties
Refer to note 15 for investment properties that were disposed during the financial year to HDN.
93
HMC Capital | Annual Report 2022 Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Trade receivables from the director and shareholder related entities
Receivables from HDN and HCW
Receivables from director and KMP related entity
Current payables:
Payables to HDN and HCW
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Consolidated
30 June
2022
$
30 June
2021
$
56,474
496,117
22,300,644
6,251,806
55,000
1,593,661
—
—
Consolidated
30 June
2022
$
30 June
2021
$
Non-current receivables:
Convertible notes in a director and KMP related entity
2,281,500
548,000
All related party receivables are considered to be recoverable.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
94
Notes to the Consolidated Financial Statements30 June 2022 Note 36. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income/(loss)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Profits reserve
Share-based payments reserve
Accumulated losses
Total equity
Parent
30 June
2022
$’000
30 June
2021
$’000
49,061
(89,220)
49,061
(89,220)
Parent
30 June
2022
$’000
30 June
2021
$’000
11,141
12,011
2,079,380
977,526
9,536
9,536
4,455
259,691
5,036,746
3,710,382
24,821
4,837
1,885
2,128
(2,996,560)
(2,996,560)
2,069,844
717,835
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021.
Capital commitments — Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 3, except for the following:
l Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
l Investments in associates are accounted for at cost, less any impairment, in the parent entity.
l Dividends received from subsidiaries and distributions received from associates are recognised as other income by the
parent entity.
95
HMC Capital | Annual Report 2022 Note 37. Business combinations
Aventus Holdings Limited (‘AHL’)
On 4 March 2022, the Group acquired 100% of the ordinary shares of AHL for the total consideration of $143.7 million. AHL was
listed on the Australian Securities Exchange and its activities included management of large format retail property assets.
The acquired business contributed revenues of $5.0 million to the Group for the period from 4 March 2022 to 30 June 2022.
If the acquisition occurred on 1 July 2021, the full-year contributions would have been revenues of $17.4 million.
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Management rights
Trade and other payables
Provision for income tax
Deferred tax liabilities
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash consideration paid
Home Consortium Limited shares issued
Acquisition costs expensed to profit or loss
Cash used to acquire business, net of cash acquired:
Cash consideration
Less: cash and cash equivalents acquired
Net cash used
Fair value
$’000
4,440
2,395
137,437
(8,896)
(16)
(40,090)
(879)
94,391
49,337
143,728
82,944
60,784
143,728
3,519
82,944
(4,440)
78,504
The goodwill of $49.3 million comprises of $8.1 million relating to the profitability of the acquired business and the
synergistic opportunities that will arise from the acquisition plus $41.2 million relating to deferred tax liabilities recognised
for management rights.
The values identified in relation to the acquisition of AHL are provisional as at 30 June 2022.
96
Notes to the Consolidated Financial Statements30 June 2022 Note 38. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in
accordance with the accounting policies described in note 3:
Name
Subsidiaries of Home Consortium Limited:
Home Consortium Property Pty Ltd
Home Consortium Property Trust
Aventus Holdings Limited
HMC Capital Partners Trust A
HMC Capital Partners Trust B
HMC Capital Partners Trust C
Subsidiaries of Home Consortium Developments Pty Limited
(HCDL)*
HomeCo Childcare Pty Ltd**
HMC Funds Management Limited**
HMC Investment Management Pty Ltd**
HMC Property Management Pty Ltd**
HCW Funds Management Limited**
HMC Capital Funds Management Pty Ltd**
Home Consortium Developments Property Trust
Principal place of business/
Country of incorporation
Ownership interest
30 June
2022
%
30 June
2021
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—
—
—
—
100%
100%
100%
100%
—
—
—
100%
* As detailed in note 2, HCDL was de-stapled from the HMC group during the year. HCL obtained 100% control of HCDL and its subsidiaries from 24 December
2021.
** Entity is a 100% owned subsidiary of HCDL.
Note 39. Deed of cross guarantee
HCL and its wholly owned subsidiaries are parties to a deed of cross guarantee under which each company guarantees the
debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare
financial statements and Directors’ report under ASIC Legislative Instrument 2016/785.
HCL and its wholly owned subsidiaries represent a ‘Closed Group’ for the purposes of the Instrument, and as there were no
other parties to the deed of cross guarantee that are controlled by HCL, they also represented the ‘Extended Closed Group’.
The statement of profit or loss and other comprehensive income for the year ended 30 June 2022 and statement of financial
position as at 30 June 2022 are the same as the Group and therefore have not been separately disclosed.
97
HMC Capital | Annual Report 2022
Note 40. Earnings per security
Earnings per security for profit/(loss) from continuing operations
Profit/(loss) after income tax
Non-controlling interest
Profit/(loss) after income tax
Consolidated
30 June
2022
$’000
30 June
2021
$’000
107,262
(95,787)
(30,013)
(4,087)
77,249
(99,874)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
293,292,529
273,245,680
Adjustments for calculation of diluted earnings per share:
Rights over ordinary shares
2,017,991
—
Weighted average number of ordinary shares used in calculating diluted earnings per share
295,310,520 273,245,680
Cents
26.34
Cents
(36.55)
26.16
(36.55)
Consolidated
30 June
2022
$’000
30 June
2021
$’000
—
—
—
9,883
—
9,883
Cents
Cents
—
—
3.62
3.62
Basic earnings per security
Diluted earnings per security
Earnings per security for profit from discontinued operations
Profit after income tax
Non-controlling interest
Profit after income tax
Basic earnings per security
Diluted earnings per security
98
Notes to the Consolidated Financial Statements30 June 2022 Earnings per security for profit/(loss)
Profit/(loss) after income tax
Non-controlling interest
Profit/(loss) after income tax
Basic earnings per security
Diluted earnings per security
Consolidated
30 June
2022
$’000
30 June
2021
$’000
107,262
(85,904)
(30,013)
(4,087)
77,249
(89,991)
Cents
26.34
Cents
(32.93)
26.16
(32.93)
Nil (2021: 1,869,816) share rights over ordinary shares have been excluded from the calculation of diluted earnings per security
as they are anti-dilutive.
Note 41. Share-based payments
The share-based payment expense for the year was $3.4 million (2021: $1.7 million).
Share rights
The following share rights are issued to employees and key management personnel of the Group.
Share rights issued in the 2022 financial year
During the financial year, the Group made a number of equity awards. These included the FY22 LTIP (which has predetermined
relative total shareholder return and aggregated FFO performance hurdles and also service conditions), NEDEP fee sacrifice
rights (which upon vesting are only subject to disposal restrictions), recognition rights awards (service conditions only) and a
number of sign-on awards to newly appointed executives in compensation for equity awards forgone from prior employers
(service conditions only).
99
HMC Capital | Annual Report 2022 Set out below are summaries of share rights granted under the plans:
30 June 2022
Plan details
Grant date
Estimated
vesting date
Balance at
the start of
the year
Granted
Exercised
—
—
—
—
—
—
—
—
—
(145,072)
FY20 LTIP
14/10/2019
27/08/2022
436,485
IPO employee grant
14/10/2019
14/10/2022
344,319
FY20 COVID-19 grant
25/08/2020 30/09/2022
262,567
FY21 LTIP (MD & CEO)
25/11/2020
27/08/2023
376,083
25/11/2020
27/08/2021
145,072
FY21 NEDEP fee sacrifice
rights
FY21 LTIP (Executive KMP,
excluding MD & CEO)
18/01/2021
27/08/2023
305,290
33,054
FY22 LTIP
14/03/2022
28/08/2024
FY22 NEDEP fee sacrifice
rights
14/03/2022
25/08/2022
Recognition rights
14/03/2022
30/06/2022
Sign-on award
14/03/2022
01/04/2024
Sign-on award
14/03/2022
25/08/2022
Sign-on award
14/03/2022
27/08/2023
Sign-on award
14/03/2022
31/01/2024
Sign-on award
19/05/2022
26/04/2023
Sign-on award
19/05/2022
26/04/2024
Sign-on award
19/05/2022
26/04/2025
—
—
—
—
—
—
—
—
—
—
508,115
69,377
107,041
37,500
25,235
14,399
9,885
20,172
20,172
20,172
Expired/
forfeited/
other
Balance at
the end of
the year
—
436,485
(8,695)
335,624
—
—
—
—
262,567
376,083
—
338,344
(19,130)
488,985
—
69,377
(2,874)
104,167
—
—
—
—
—
—
—
37,500
25,235
14,399
9,885
20,172
20,172
20,172
—
—
—
—
—
—
—
—
—
—
—
1,869,816
865,122
(145,072)
(30,699)
2,559,167
30 June 2021
Plan details
Grant date
Estimated
vesting date
Balance at
the start of
the year
Granted
Exercised
FY20 LTIP
14/10/2019
27/08/2022
374,627
IPO employee grant
14/10/2019
14/10/2022
300,000
FY20 COVID-19 grant
25/08/2020 30/09/2022
FY21 LTIP (MD & CEO)
25/11/2020
27/08/2023
FY21 NEDEP fee sacrifice
rights
FY21 LTIP (Executive KMP,
excluding MD & CEO)
25/11/2020
27/08/2021
18/01/2021
27/08/2023
—
—
—
—
—
—
262,567
376,083
145,072
305,290
674,627
1,089,012
—
—
—
—
—
—
—
Expired/
forfeited/
other*
Balance at
the end of
the year
61,858
436,485
44,319
344,319
—
—
—
—
262,567
376,083
145,072
305,290
106,177
1,869,816
*
Includes 110,655 top-up awards that were made for existing awards during FY21, as these awards have been added to their original awards.
100
Notes to the Consolidated Financial Statements30 June 2022 There are 104,167 share rights that are vested and exercisable as at 30 June 2022 (2021: Nil). The weighted average remaining
contractual life of share rights outstanding at the end of the financial year was 0.9 years (2021: 1.5 years).
For the share rights granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Plan details
Grant date
Vesting
date
Share
price at
grant date
$
Expected
volatility
%
Dividend
yield
%
Risk-free
interest
rate
%
Fair
value at
grant date
$
FY21 LTI awards
— Relative TSR
FY21 LTI awards
— Freehold FFO
FY22 LTI awards
— Relative TSR
FY22 LTI awards
— Freehold FFO
FY22 NEDEP
fee sacrifice rights
14/03/2022
26/08/2023
6.58
40.0%
2.3%
1.0%
14/03/2022
26/08/2023
6.58
40.0%
2.3%
1.0%
6.22
6.37
14/03/2022
26/08/2024
6.58
38.0%
2.3%
1.5%
4.03
14/03/2022
26/08/2024
6.58
38.0%
2.3%
1.5%
14/03/2022
26/08/2022
Recognition rights
14/03/2022
30/06/2022
Sign-on award
14/03/2022
01/04/2024
Sign-on award
14/03/2022
26/08/2022
Sign-on award
14/03/2022
26/08/2023
Sign-on award
14/03/2022
31/01/2024
Sign-on award
19/05/2022
26/04/2023
Sign-on award
19/05/2022
26/04/2024
Sign-on award
19/05/2022
26/04/2025
6.58
6.58
6.58
6.58
6.58
6.58
5.74
5.74
5.74
40.0%
40.0%
40.0%
40.0%
40.0%
40.0%
38.0%
38.0%
38.0%
—
—
2.3%
—
2.3%
2.3%
2.3%
2.3%
2.3%
0.8%
0.2%
1.3%
0.3%
0.9%
1.2%
1.2%
2.5%
2.8%
6.22
6.58
6.58
6.28
6.58
6.37
6.31
5.62
5.49
5.36
101
HMC Capital | Annual Report 2022 Note 42. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax expense for the year
Adjustments for:
Depreciation expenses
Impairment expenses
Share-based payments expenses
Share of profit from associates and joint ventures
Net gain on disposal of investment property
Net fair value adjustment to investment property — freehold
Net fair value adjustment on remeasurement of derivative financial assets
Gain recognised on investments in associates
Straight-lining of rental income
Amortisation of capitalised borrowing costs
Management fees not received in cash
Change in operating assets and liabilities, net of effects from purchase of controlled entities:
Increase in trade and other receivables
Decrease in deferred tax assets
(Increase)/decrease in other operating assets
Increase/(decrease) in trade and other payables
Decrease in derivative liabilities
Increase/(decrease) in other operating liabilities
Net cash from operating activities
Consolidated
30 June
2022
$’000
30 June
2021
$’000
107,262
(85,904)
520
21,339
3,404
—
—
1,656
(71,148)
(8,940)
(28,030)
—
(5,003)
23,058
6,324
(16,900)
563
1,788
—
—
(3,503)
2,976
(22,300)
—
(7,653)
(5,151)
12,105
123,083
(3,212)
1,496
1,351
(22,834)
(1,847)
(1,279)
3,042
(2,000)
1,605
22,658
102
Notes to the Consolidated Financial Statements30 June 2022
Non-cash investing and financing activities
Additions to the right-of-use assets
Shares issued in relation to business combinations (note 37)
Shares issued on acquisition of property
Capital distribution on demerger of HDN
Units acquired in HDN
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2020
Net cash used in financing activities
Transfer to investment property — leasehold
Disposal of leasehold property
Balance at 30 June 2021
Net cash used in financing activities
Acquisition of leases
Balance at 30 June 2022
Consolidated
30 June
2022
$’000
4,887
60,784
30 June
2021
$’000
—
—
—
—
20,000
(189,600)
140,272
—
205,943
(169,600)
Senior
secured
bank debt
$’000
Lease
liabilities
$’000
Total
$’000
366,000
143,077
509,077
(111,250)
(11,895)
(123,145)
—
—
(8,905)
(8,905)
(122,000)
(122,000)
254,750
277
255,027
(254,750)
(334)
(255,084)
—
—
4,402
4,345
4,402
4,345
Note 43. Events after the reporting period
HMC Capital Partners Fund I
On 4 July 2022, HMC Capital’s wholly owned subsidiary HMC Investment Management Pty Limited (Manager) launched HMC
Capital Partners Fund I (the Fund), an Australian domiciled unlisted wholesale fund providing exposure to a high-conviction
investment strategies. The Fund will target public and private companies in Australia and New Zealand with real assets.
HMC Capital has committed to investing $150.0 million of equity into the Fund subject to the qualifications set out in the Fund
information memorandum dated July 2022.
As part of an early commitment incentive program, initial investors into the Fund will receive rebated management fees and
be eligible to subscribe for options in HMC Capital, subject to receiving (and making a valid application order) a prospectus in
respect of such options and compliance with relevant law. The options are proposed to be issued following approval at HMC
Capital’s next AGM which is expected to be held in November 2022.
Following HMC Capital lodging an initial substantial holder notice in Sigma Healthcare Limited (ASX: SIG) in June 2022, HMC Capital
increased its combined relevant and economic interest to 13.9%. The investment is being acquired as a seed asset for the Fund.
No other matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the
Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
103
HMC Capital | Annual Report 2022 Directors’
Declaration
In the directors’ opinion:
l the attached financial statements and notes of Home Consortium Limited comply with the Corporations Act 2001, the
Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
l the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 3 to the financial statements;
l the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2022
and of its performance for the financial year ended on that date;
l 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
l at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 39 to the HMC financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001, from the
Chief Executive Officer and Chief Financial Officer for the year ended 30 June 2022.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Chris Saxon
Chair
23 August 2022
David Di Pilla
Director
104
Independent Auditor’s Report
to the security holders of Home Consortium Limited
Independent Auditor’s Report
Independent auditor’s report
To the members of Home Consortium Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Home Consortium Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2022
the consolidated statement of profit or loss and other comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information
the Directors’ declaration.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
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 & 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.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999
Liability limited by a scheme approved under Professional Standards Legislation.
105
HMC Capital | Annual Report 2022 Independent Auditorrs Report
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial report as a whole, taking into account the geographic and management structure of the Group, its
accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $4.2 million, which represents approximately 0.5%
of the Group’s net assets.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report
as a whole.
● We chose Group net assets because, in our view, it is a common benchmark for entities with a high level of growth.
We utilised a 0.5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
● The Group engagement team directed the involvement of the component audit team who performed an audit of the
financial information of Healthco Healthcare and Wellness REIT (“HCW”). The component engagement team of
HomeCo Daily Needs REIT (‘HDN’) is the Group engagement team and as such, all other procedures outside those
performed over HCW were performed by the Group team.
●
For the work performed by the component audit team, we considered the level of involvement we needed to have in
their audit work to be able to evaluate whether sufficient appropriate audit evidence had been obtained as a basis for
our opinion on the Group’s financial report as a whole. This included active dialogue during the audit with the
component audit team and consideration of the results of their work.
106
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report for the current period. The key audit matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in
that context.
Key audit matter
How our audit addressed the key audit matter
Investments accounted for using the equity
method
Refer to note 16 of the financial report
The carrying value of the associates accounted for under
the equity method at 30 June 2022 totalled $580.1 million
and comprised $443.2 million for HomeCo Daily Needs
REIT (‘HDN’) and $136.9 million for HealthCo Healthcare
and Wellness REIT (‘HCW’).
In accordance with Australian Accounting Standards,
interests in associates need to be assessed for indicators
of impairment at the reporting date. If indicators of
impairment exist, the recoverable amount for each
investment needs to be estimated.
We have considered this a key audit matter due to the
financial significance of the associates, the level of
judgement required to determine the fair value of the
investment properties they hold and the complexity and
judgements required in determining their recoverable
amount.
The significant judgments included discounted cash flow
analysis, the capitalisation method or the use of
observable inputs that require significant adjustments
based on unobservable inputs.
●
Our audit procedures on associates accounted for using
the equity method included, amongst others:
● Reperforming the equity method of accounting
●
calculations by reference to underlying investee
financial information.
Evaluating the assessment made by the Group of
whether there were any indicators of impairment.
Where such indicators exist, evaluating, with the help
of our valuation subject matter experts, the impairment
assessment methodologies and the significant
assumptions used. In addition, we tested the
mathematical accuracy of the model on a sample
basis.
● Considering the professional competence of the
component auditors and performing procedures to
obtain sufficient evidence that the component auditors’
work was adequate for our audit. This included
understanding the audit procedures performed by the
component auditors over investment properties, with a
focus on evaluating their work over the methodology
and key assumptions such as the capitalisation rate,
discount rate, market rents, terminal yield and capital
expenditure adopted by management.
Assessing the reasonableness of the relevant
disclosures in the financial reports in light of the
requirements of Australian Accounting Standards.
Business Combination
Refer to note 37 of the financial report
On 4 March 2022 the Group acquired 100% of the
ordinary shares of Aventus Holdings Limited ('Aventus')
whose activities included investment and management of
large format retail property assets.
This was a key audit matter due to the complexity of the
valuation methods adopted in calculating the intangible
assets acquired and the consequent accounting
treatment.
Our audit procedures on the business combination
included, amongst others:
● Understanding and evaluating the Group’s
accounting treatment and process to identify the
intangible assets.
● With the assistance of our valuation subject matter
experts, assessing the appropriateness of the
methods used and assumptions made by the Group
in determining the value of the acquired intangible
assets.
107
HMC Capital | Annual Report 2022 Independent Auditorrs Report
Key audit matter
How our audit addressed the key audit matter
●
●
Assessing the appropriateness of assumptions made
by the Group in determining the value of the identified
tangible assets and liabilities acquired.
Agreeing the consideration paid to relevant
supporting documents.
● Recalculating the goodwill balance.
● Recalculating the deferred tax impact of the
●
accounting entries posted.
Assessing the reasonableness of the relevant
disclosures in the financial reports in light of the
requirements of Australian Accounting Standards.
Other information
The Directors of the Company are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2022, but does not include the financial
report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we
obtained included the Directors’ report, Security Holder information and Corporate directory. We expect the
remaining other information to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not express an
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, 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.
When we read the other information not yet received, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the Directors and use our professional judgement to
determine the appropriate action to take.
Responsibilities of the Directors for the financial report
The Directors 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 determines is necessary to enable the preparation of the financial report that gives a true and
fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related 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.
108
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 the
financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This
description forms part of our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 12 to 30 of the Directors' report for the year ended
30 June 2022.
In our opinion, the remuneration report of Home Consortium Limited for the year ended 30 June 2022 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors 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.
PricewaterhouseCoopers
Scott Hadfield
Partner
Sydney
23 August 2022
109
HMC Capital | Annual Report 2022 Security Holder
Information
The security holder information set out below was applicable as at 28 July 2022.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Ordinary securities
Number
of holders
of securities
% of total
securities
issued
900
1,126
710
745
60
0.11
1.13
1.78
5.85
91.13
3,541
100.00
—
—
110
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Home Investment Consortium Trust*
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
GOAT Properties Pty Ltd
Aurrum Holdings Pty Ltd
Netwealth Investments Limited
UBS Nominees Pty Ltd
BBFIT Investments Pte Limited
Bridgebox Pty Ltd
CW Property Nominees Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Longmorn Pty Ltd
BNP Paribas Nominees Pty Ltd
SG Foundation Investments Pty Ltd
Doux Argent Pty Ltd
RRI Investments Pty Ltd
* Home Investment Consortium Trust holding includes all subsidiaries.
Ordinary securities
Number
held
90,354,537
76,845,654
29,856,578
11,667,833
8,410,296
8,356,688
7,596,973
7,010,418
3,743,101
3,693,480
3,103,125
2,759,639
2,238,806
1,867,101
1,561,086
1,350,000
1,206,963
1,071,014
901,899
870,247
% of total
securities
issued
30.16
25.65
9.96
3.89
2.81
2.79
2.53
2.34
1.25
1.23
1.04
0.92
0.75
0.62
0.52
0.45
0.40
0.36
0.30
0.29
264,465,438
88.26
111
HMC Capital | Annual Report 2022 Security Holder Information
Unquoted equity securities
Share rights
Substantial security holders
Substantial holders in the Company are set out below:
Home Investment Consortium Trust*
* Home Investment Consortium Trust holding includes all subsidiaries.
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
2,559,167
44
Ordinary securities
Number
held
% of total
securities
issued
90,354,537
30.16
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
There are no other classes of equity securities.
Restricted securities
Class
Expiry date
Ordinary securities
Upon retirement from the Board
Number
of securities
101,493
112
Corporate
Directory
Directors
Chris Saxon
David Di Pilla
Zac Fried
Greg Hayes
Jane McAloon
Brendon Gale
Kelly O’Dwyer
Company secretary
Andrew Selim
Registered office and Principal place of
business
Level 7
Gateway
1 Macquarie Place
Sydney NSW 2000
Share register
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Telephone: 1300 554 474
Auditor
PricewaterhouseCoopers
Tower One, International Towers Sydney
Level 17, 100 Barangaroo Avenue
Barangaroo NSW 2000
Stock exchange listing
Home Consortium Limited shares are listed on the Australian
Securities Exchange (ASX code: HMC)
Website
https://www.hmccapital.com.au/
Corporate Governance Statement
The directors and management are committed to conducting
the business of Home Consortium Limited in an ethical
manner and in accordance with the highest standards of
corporate governance. Home Consortium Limited has
adopted and has fully complied with the ASX Corporate
Governance Principles and Recommendations
(Fourth Edition) (‘Recommendations’).
The group’s Corporate Governance Statement, which
sets out the corporate governance practices that were in
operation during the financial year and ASX Appendix 4G
are approved and released to the ASX on the same day
the Annual Report is released. The Corporate Governance
Statement and Home Consortium Limited’s other corporate
governance policies and charters can be found on its website
at https://hmccapital.com.au/investor-centre.
113
HMC Capital | Annual Report 2022