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Sims2017
For personal use only SNAPSHOT AS OF 30 JUNE 2017
TOTAL NUMBER OF HOMEOWNERS
1,626 2,418Armstrong Creek2,667For personal use only CONTENTS
CHAIR’S REPORT .............................................................................................................................. 1
MANAGING DIRECTOR’S REPORT ..................................................................................................... 2
DIRECTORS’ REPORT ........................................................................................................................ 4
OPERATING AND FINANCIAL REVIEW ............................................................................................... 8
REMUNERATION REPORT .............................................................................................................. 17
AUDITORS INDEPENDENCE DECLARATION ..................................................................................... 31
CORPORATE GOVERNANCE STATEMENT ........................................................................................ 32
FINANCIAL STATEMENTS ............................................................................................................... 42
DIRECTORS’ DECLARATION ............................................................................................................ 74
INDEPENDENT AUDITORS REPORT ................................................................................................. 75
ASX ADDITIONAL INFORMATION ................................................................................................... 80
CORPORATE INFORMATION .......................................................................................................... 82
For personal use only
Chair’s Report
For the 2017 Financial Year
Dear fellow shareholders,
The Board is delighted with the Company’s performance during the 2017 financial year. The Company
recorded record sales, settlements, rates of customer referral, profitability and dividends. Our team,
led by James Kelly, have worked hard and delivered impressive results.
The Company provided guidance that new home settlements for the 2017 financial year were likely to
be in the range of 250 to 270. With effect from 1 July 2016, the Board put in place a new employee
incentive scheme designed around achieving this forecast. All employees are eligible for the incentive
scheme and this galvanised the team around a common goal that all employees could play a role in
achieving. The final outcome of 278 new home sales was ahead of our internal budgets and the Board’s
expectations which is a terrific outcome.
The Board regularly assesses whether we should alter our strategy. We discuss whether we should
consider expansion outside of Victoria. We get presented with opportunities to consider offering home
care or other services to our homeowners. Whilst we will always consider new opportunities, the Board
presently believes the most attractive return on capital will be delivered by concentrating on our
current strategy. There is enough complexity and challenge in our current business as we push towards
increasing new home settlements beyond 300 during the next few years.
The Board of Lifestyle Communities has been stable and collegiate which we believe has been a factor
in the strong financial performance of the Company. However, given the last addition to the Board was
in 2013, the Board has decided it is appropriate to implement some gradual renewal. As a result, the
Board has been considering future skill requirements and possible candidates. We expect to be able to
provide a further update to shareholders in the near future.
Finally, on behalf of the Board, I would like to thank all our homeowners, our talented team and our
shareholders for great support during the 2017 financial year as we continue our mission to dominate
our niche of providing good quality affordable accommodation for active retirees in Victoria.
Yours sincerely
Tim Poole
Chair
16 August 2017
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Managing Director’s Report
For the 2017 Financial Year
Dear fellow shareholders,
I am pleased to present to you the Lifestyle Communities Annual Report for the year ended 30 June
2017.
The 2017 financial year has seen the addition of 278 new home settlements now providing 1,626 settled
homes within our communities providing annuity income streams. We are delighted with the
acquisition of an additional site during the year located at Armstrong Creek. Armstrong Creek is located
in Geelong’s main growth corridor and will build on our growing brand within the greater Geelong
region. Our development plan remains focused in Victoria and we continue to investigate further sites
in Melbourne’s key growth corridors. As our brand has become better known we are getting more
approaches from developers who are interested in having Lifestyle Communities as part of their
development mix.
The development focus of the business is now on Shepparton, Geelong, and Berwick Waters with
Bittern and Ocean Grove both launched for sale in March 2017. Both Bittern and Ocean Grove have
sold strongly with 74 and 24 homes sold respectively. Construction is expected to commence at both
sites in the first‐half of the 2018 financial year. Lyndarum and Officer are almost sold out. Officer was
launched for sale in March 2015 and by the end of the 2017 financial year had sold 146 homes in 28
months. Berwick Waters was launched for sale in April 2016 and has seen 136 sales across 15 months
with 105 of these occuring in the 2017 financial year.
A key focus for the organisation is to increase the number of home owner referrals for new sales and
resales. Ideally we want one in two sales to be coming from referrals; in the 2016 financial year we
achieved one in three sales. The business has been working on strategies to ensure we make every
touch point with the customer a positive one and one they will remember. Pleasingly during the 2017
financial year 38% of the 278 settled new homes came from homeowner referral. More pleasing is that
of the 406 new home sales made during the 2017 financial year, 51% of these have come from
homeowner referral.
The key highlights for the 2017 financial year include:
Achieving a record 278 new home settlements and a record of 406 new homes sales. We
commence FY2018 with 345 new homes sold but not settled;
Acquiring an additional site in Armstrong Creek, Geelong;
Achieving 98 settlements at Officer during the year and being almost sold out within two and
a half years;
Achieving 105 sales at Berwick Waters during the year and welcoming our first homeowners
in May 2017;
Achieving pre‐sales of 74 at Bittern since launching the project in early March 2017;
Increasing the total number of home sites settled under management to 1,626;
Increasing the total portfolio to 2,667 home sites either under planning, development or
management;
The expansion of Lifestyle Shepparton by 34 homes due to the continued good progress with
this project;
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Net profit after tax attributable to shareholders increased by $8.4 million to $27.7 million (this
includes a $2.7 million adjustment to reflect favourable changes in investment property
valuations);
Home site annuity rentals increased by $2.7 million to $13.8 million; and
Deferred management fees (inclusive of selling and administration fees) increased by $1.6
million to $4.1 million with the settlement of 73 resale homes (2016: 52).
The Company now has twelve years of increasing annuities flowing from site rentals and deferred
management fees. The rental fees increase annually by the greater of CPI or 3.5% creating a strong
inflation linked annuity flow for future dividends.
FinalIy, we are proud to report that the Lifestyle Communities Foundation donated over $67,000 in the
2017 financial year (and in excess of $124,000 since inception). The Lifestyle Communities Foundation
was established to remember one of my co‐founders, Dael Perlov, and his significant contribution to
the business. The goal of the Foundation is to annually donate $50 for every home under management
to cancer research and support by a combination of direct donation and co‐sponsoring initiatives from
within our communites. This support at a community level is well received and enables Lifestyle
Communities to contribute at a homeowner level to a whole range of initiatives and ideas to raise
money for cancer charities. We look forward to watching the donations and community involvement
grow into the future.
Yours sincerely
James Kelly
Managing Director
16 August 2017
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Directors’ Report
The Directors present their report together with the financial report of the consolidated entity
consisting of Lifestyle Communities Limited and the entities it controlled for the financial year ended
30 June 2017 and auditor’s report thereon.
Principal activities
The principal activities of the consolidated entity during the financial year were developing and
managing affordable communities which offer homeowners an improved lifestyle. There have been no
significant changes in the nature of these activities during the financial year.
Results
The consolidated profit after income tax attributable to shareholders of Lifestyle Communities Limited
for the year ended 30 June 2017 was $27,695,112 (2016: $19,268,682).
Directors
The Directors of the Company during the financial year and until the date of this report are set out
below. All directors held their position throughout the entire year.
Tim Poole, Non‐Executive Chair (BCom, CA)
Tim was appointed a Director of Lifestyle Communities Limited on 22 November 2007 and was
appointed Chair on 31 December 2012. Tim is also a member of the HR & Remuneration Committee.
He holds a Bachelor of Commerce from the University of Melbourne and is a Chartered Accountant.
Tim has more than 16 years’ experience as a Director of ASX listed and unlisted companies across the
financial services, infrastructure, aged care and resources industries. He is currently non‐executive
Chair of Aurizon Holdings Limited and McMillan Shakespeare Limited and is a non‐executive Director
of Reece Limited. He was formerly Managing Director of Hastings Funds Management, and a non‐
executive Director of Japara Healthcare Limited and Newcrest Mining Limited.
James Kelly, Managing Director (BBldg)
James was appointed Managing Director in September 2007 and is one of the founders of Lifestyle
Communities Limited.
With over 30 years’ experience in property development and construction, James brings to Lifestyle
Communities a wealth of knowledge and experience in the property industry. Prior to establishing
Lifestyle Communities, James held several senior management roles in property and related sectors,
including CEO of Dennis Family Corporation and roles at Coles Myer and Lend Lease Corporation. James
is the founding Chair of the Residential Land Lease Alliance, the peak body for the land lease industry.
He is also on the board of the Caravan Industry Association of Australia and is Vice President of the
Victorian Caravan Parks Association. James has not held any directorships in any other listed entities
during the past three years.
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Bruce Carter, Non‐Executive Director (BCom)
Bruce is one of the founders of Lifestyle Communities Limited and was appointed as an executive
Director in September 2007, transitioning to a non‐executive Director on 1 July 2015. Bruce is also a
member of the Audit Committee.
Bruce has more than 30 years’ experience in financial and business management. He was the co‐
founder of ASX listed telecommunications company Pracom Limited, serving as joint Managing
Director from 1988 to 2002. Bruce brings to Lifestyle Communities Limited extensive knowledge and
experience of building, funding and operating ASX listed companies. Bruce has not held any
directorships in any other listed entities during the past three years.
Jim Craig, Non‐Executive Director (BEc, LLB (Hons) Adel, LLM Melb)
Jim was appointed a Director of Lifestyle Communities Limited on 31 December 2012. Jim is also a
member of the Audit Committee and Chair of the HR & Remuneration Committee.
After working as a lawyer in Australia and Japan, Jim joined Macquarie Group Limited. He held a
number of senior roles within Macquarie in the resources, infrastructure and fund management areas,
including leading Macquarie’s businesses in Europe from 2003‐2008. Jim is currently Chair of a number
of organisations including Cell Care Australia Pty Ltd, River Capital Pty Ltd and the investment
committee of AustralianSuper as well as a non‐executive Director of Australian United Investment
Company Limited and the Trustee of AustralianSuper.
Philippa Kelly, Non‐Executive Director (LLB, F Fin, FAICD)
Philippa was appointed to the board of Lifestyle Communities Limited as a non‐executive Director on
18 September 2013. Philippa is also Chair of the Audit Committee and a member of the HR &
Remuneration Committee.
Philippa is an experienced property and finance executive with over 25 years’ experience in the
corporate sector and a background in law and investment banking at Goldman Sachs. Specialising in
property for the past 19 years, she is currently Chief Operating Officer of the Juilliard Group of
Companies, one of Melbourne’s largest private property owners, managing an extensive portfolio of
commercial and retail assets. Previous experience included seven years with Federation Centres
(formerly Centro Properties Group), working on the refinancing of the Group and with responsibility
for its institutional and wholesale funds management business.
Philippa is a member of the Deakin University Council, Chair of its Finance and Business Committee
and a member of the Remuneration Committee. Philippa is also a non‐executive Director of the
Alcohol and Drug Foundation, including Chair of the Audit and Risk Committee.
Geoff Hollis, Company Secretary (BCom, CA, AGIA)
Geoff was appointed as Company Secretary on 24 November 2011. Geoff joined Lifestyle Communities
Limited in February 2010 and prior to that he spent 10 years as a Chartered Accountant in professional
practice. Geoff was appointed as a member of the Institute of Chartered Accountants in June 2004 and
has completed a Graduate Diploma of Applied Corporate Governance.
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Directors’ interests
At the date of this report, the interests of each Director in the shares and options of Lifestyle
Communities Limited were:
Director
Tim Poole
Bruce Carter
James Kelly
Jim Craig
Philippa Kelly
Fully Paid
Ordinary Shares
Options over
Ordinary Shares
1,224,607
5,079,433
12,045,566
3,000,000
65,000
‐
‐
‐
‐
‐
Dividends
A fully franked dividend of 1.5 cents per share was paid on 7 October 2016 (representing the 2016 final
dividend). A fully franked dividend of 1.5 cents per share was paid on 7 April 2017 (representing the
2017 interim dividend).
Since the end of the financial year the Directors have resolved to pay a fully franked dividend 2.0 cents
per ordinary share (representing the 2017 final dividend).
Share options
During the year 333,331 ordinary shares were issued as a result of the conversion of 333,331
Convertible Repurchase‐able Employee Shares (CRES).
The 333,331 ordinary shares issued as a result of the conversion of CRES resulted in loans to relevant
employees of $291,998 that will be recognised as paid as the loans are repaid.
There were $96,360 of CRES loans repaid during the year in respect of 110,000 CRES shares converted
to ordinary shares in prior years.
120,000 CRES were cancelled during the year.
There are no unissued ordinary shares of the Company under option or CRES as at the date of this
report.
Significant changes in the state of affairs
Refer to the Operating and Financial Review for the significant changes in the state of the affairs of the
Company.
Significant events after the balance date
There are no matters or affairs that have arisen since balance date which significantly affect or may
significantly affect the operations of the consolidated entity.
Future developments
Refer to the Operating and Financial Review for information on likely developments and the future
prospects of the Company.
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Environmental regulation
The consolidated entity’s operations are not subject to any significant Commonwealth or State
environmental regulations or laws.
Indemnification and insurance of directors and officers
During the financial year the Company paid premiums in respect of a Directors’ and Officers’ insurance
policy. The nature of the liabilities insured and premium payable under this contract of insurance has
not been disclosed in accordance with confidentiality provisions within the policy.
Proceedings on behalf of the consolidated entity
No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity.
Directors’ meetings
The number of meetings of Directors (including meetings of committees of Directors) held during the
financial year and the number of meetings attended by each of the Directors are:
Director
Tim Poole
James Kelly
Bruce Carter
Jim Craig
Philippa Kelly
Directors’ meetings
Held
11
11
11
11
11
Attended
11
11
11
11
11
Meetings of committees of directors’
Audit
Held
‐
‐
3
3
3
Attended
‐
‐
3
3
3
HR & Remuneration
Held
4
‐
‐
4
4
Attended
4
‐
‐
4
4
Corporate governance
In recognising the need for the highest standards of corporate behaviour and accountability, the
Directors of Lifestyle Communities Limited support and have adhered to the principles of corporate
governance. The Company’s corporate governance statement is contained later in this report.
Auditor independence declaration
A copy of the auditors independence declaration from the auditor of Lifestyle Communities Limited as
required under section 307C of the Corporations Act 2001 in relation to the audit for the financial year
is provided with this report.
Non‐audit services
The Company’s auditor, Pitcher Partners, provided tax compliance ($13,500), general tax advice
($19,464), fringe benefits tax advice ($7,169), land tax advice ($4,960), GST advice ($47,150), tax
structuring advice ($13,485) and other agreed upon procedures ($8,617) at a total cost of $114,345
(2016: $50,773). The Directors are satisfied that the provision of these non‐audit services is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001. The
nature and scope of these non‐audit services means that auditor independence was not compromised.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
selected amounts in the directors’ report have been rounded to the nearest one million dollars, or in
certain cases, to the nearest dollar (where indicated).
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43
42
41
34
44
48
224
38
(15)
21
43
43
40
38
84
6
21
24
21
‐
40
24
Operating and Financial Review
Overview
The Company continued to develop and manage its portfolio of affordable lifestyle communities during
the 2017 financial year. Profit after tax attributable to shareholders was $27.7 million (2016: $19.3
million). Underlying profit after tax attributable to shareholders was $25.0 million (2016: $16.9 million).
Financial and operating highlights
Key financial data
Revenue
Earnings before interest and tax
Net profit before tax
Net profit after tax
Net profit attributable to shareholders
Underlying net profit attributable to shareholders
Operating cash flow
Community cash flow(1)
Gearing(2)
Return on average capital employed(3)
Earnings per share
Diluted earnings per share
Dividend per share(4)
Measure
FY2017
FY2016
Change
Change %
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
%
%
A$ cents
A$ cents
A$ cents
100.4
41.5
40.3
27.7
27.7
25.0
17.6
10.4
21.8
18.7
26.6
26.5
3.5
70.2
29.2
28.6
20.6
19.3
16.9
(14.2)
7.5
25.6
15.5
18.6
18.5
2.5
30.3
12.3
11.8
7.1
8.4
8.1
31.8
2.9
(3.8)
3.2
8.0
8.0
1.0
Key operational data
Homes settled (gross)
Homes sold (gross)
Average realised sales price of new homes (GST incl)
Total number of homes (gross)
Total number of homes (after NCI)(5)
Total number of homeowners
Average age of homeowners
Number of resales settled(6)
Average realised sales price of resales (GST incl) (7)
76
No. of homes
185
No. of homes
17
A$’000
278
No. of homes
278
No. of homes
423
No. of people
‐
Years
21
No. of homes
65
A$’000
(1) Community cash flow comprises cash flows received from homeowner rentals and deferred management fees less
202
221
298
1,348
1,147
1,995
72
52
275
278
406
315
1,626
1,425
2,418
72
73
340
community operating costs and the net surplus/deficit provided from utilities
(2) Calculated as a ratio of net debt to net debt plus equity
(3) Calculated as a ratio of EBIT divided by average total assets less current liabilities
(4) For FY2017 includes interim dividend of 1.5 cents per share and final dividend of 2.0 cents per share
(5) Gross number of homes adjusted for share of communities owned by non‐controlling interests
(6)
Includes resales attracting a deferred management fee, there were a further eight resales settled in FY2017 (FY2016:
14 resales) that did not attract a deferred management fee as the outgoing homeowners moved out within 12
months of initial settlement in accordance with the Company’s Smart Buy Guarantee
(7) Average realised sales price of resales attracting a deferred management fee
Included in the table above are several non IFRS measures including earnings before interest and tax,
underlying net profit attributable to shareholders, community cash flow, gearing, return on average
capital employed and key operational data. These figures have not been subject to audit but have been
provided to give a better understanding of the performance of the Company during the 2017 financial
year.
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The increase in net profit after tax attributable to shareholders of $27.7 million (2016: $19.3 million)
can be mainly attributed to: increased new home settlements partly offset by lower gross margin (in
line with expectations); increased contributions from net rental income and deferred management fees
received; increased fair value adjustments from investment property revaluations; reduction in non‐
controlling interest in profit; being partly offset by increased development expenses and corporate
overheads.
Underlying profit of $25.0 million (2016: $16.9 million) excludes a $2.7 million (2016: $2.4 million) after
tax impact of investment property revaluations across the portfolio. Refer to the analysis of income
statement section on page 12 for further details.
New home settlements for the year were 278, up from 202 in the prior year, and slightly higher than
the forecast range of 250‐270 settlements. This was due to achieving the higher end of the expected
new home settlement range at Shepparton, Lyndarum, Geelong and Officer.
The Company continued to develop its communities at Shepparton, Lyndarum and Geelong. During
the year construction was completed at Officer and construction commenced at Berwick Waters.
The Company made good progress operationally with improvements in several key metrics. The total
number of homes settled increased to 1,626 homes due to 278 settlements during the year. Net
community cash flows were $10.4 million (2016: $7.5 million). This was driven by increases in rental
revenue and deferred management fees received, partly offset by increases in management expenses.
The Company had 2,418 people living in its communities as at the end of the 2017 financial year with
an average age of 72 years (2016: 72).
Resales (sales of previously settled and occupied homes) during the year were 73 (2016: 52). Deferred
management fee income received (inclusive of selling and administration fees) was $4.1 million (2016:
$2.5 million). As at the 30 June 2017 there were 17 resale homes available for sale across the
communities.
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Total
homes in
portfolio
228
136
182
217
301
186
141
154
164
151
216
209
193
189
2,667
Update on communities
Community
New homes
Resales
Brookfield
Seasons
Warragul
Casey Fields
Shepparton
Chelsea Heights
Hastings
Lyndarum
Geelong
Officer
Berwick Waters
Bittern
Ocean Grove
Armstrong Creek
Total
Net
sales
FY16
17
7
11
8
1
6
5
‐
‐
‐
‐
‐
‐
‐
55
Net
sales
FY17
14
1
15
14
4
11
14
‐
‐
‐
‐
‐
‐
‐
73
Net
sales
FY17
‐
‐
‐
‐
37
‐
‐
69
44
53
105
74
24
‐
406
Net
sales
FY16
‐
‐
‐
‐
49
‐
‐
39
51
51
31
‐
‐
‐
221
Settled
FY16
23
5
9
5
1
5
4
‐
‐
‐
‐
‐
‐
‐
52
Settled
FY16
‐
‐
2
2
51
27
14
43
36
27
‐
‐
‐
‐
202
Settled
FY17
12
3
16
12
5
12
13
‐
‐
‐
‐
‐
‐
‐
73
Settled
FY17
‐
‐
‐
‐
50
‐
‐
68
50
98
12
‐
‐
‐
278
Homes
sold not
settled
‐
‐
‐
‐
29
‐
‐
36
37
21
124
74
24
‐
345
Total
homes
settled
228
136
182
217
199
186
141
114
86
125
12
‐
‐
‐
1,626
Lifestyle Brookfield in Melton, Lifestyle Seasons in Tarneit, Lifestyle Warragul, Lifestyle Casey Fields
in Cranbourne, Lifestyle Chelsea Heights and Lifestyle Hastings are fully sold and settled.
Lifestyle Shepparton performed well during the year achieving 37 net sales and 50 settlements.
Given the performance at Lifestyle Shepparton a decision was made during the year to expand the
community by a further 34 homes using surplus Company owned land. This increased the size of
the community to 301 homes of which 76% are sold and 66% are settled.
Lifestyle Lyndarum in Wollert achieved 69 sales and 68 settlements during the year and has four
homes remaining to sell. The community is now 97% sold and 74% settled.
Lifestyle Geelong performed well during the year achieving 44 sales and 50 settlements. The
community is now 75% sold and 52% settled.
Lifestyle Officer achieved 53 sales and 98 settlements for the year and has five homes remaining
to sell. The community is now 97% sold and 83% settled.
The first homeowner moved into Berwick Waters in May 2017 with 12 settlements occurring across
May and June 2017. Berwick Waters achieved 105 sales during the year with 136 homes (63%)
now sold since the project was launched in April 2016.
Lifestyle Bittern achieved 74 sales since the project was launched in early March 2017. This is
ahead of Company expectations and reflects strong demand on the Mornington Peninsula. The
land at Bittern is expected to settle in the third quarter of the 2018 financial year however
construction will commence earlier by way of a licence agreement. The Company currently
expects settlements to commence in the last quarter of the 2018 financial year however this is
subject to housing construction commencing as scheduled.
Lifestyle Ocean Grove achieved 24 sales since the project was launched in late March 2017, which
is in‐line with Company expectations. The land at Ocean Grove is expected to settle in the third
quarter of the 2018 financial year however construction is expected to commence earlier by way
of a licence agreement. The Company currently expects settlements to commence in the first
quarter of the 2019 financial year.
The land for the Lifestyle Community in Armstrong Creek was acquired in March 2017 and is
contracted to settle in September 2018 with construction planned to commence soon after. The
Company currently expects settlements to commence in the first‐half of the 2020 financial year.
The development of this community is subject to planning approval.
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Analysis of income statement
Net profit after tax attributable to shareholders increased to $27.7 million (2016: $19.3 million). The
table below shows the changes to net profit attributable to shareholders from 30 June 2016 to 30 June
2017.
A$ millions
A$ millions
Net profit after tax attributable to shareholders
for the year ended 30 June 2016
Changes in revenues
Home settlement revenue
Rental revenue
Utilities revenue
Deferred management fees
Sub‐division revenue
Finance revenue
Changes in cost of sales
Changes in gains from fair value adjustments
Changes in expenses
Development expenses (sales and marketing)
Management rental expenses
Management deferred management fee expenses
Utilities expenses
Corporate overheads
Sub‐division expenses
Finance costs
Loss on disposal of assets
Increase in income tax expense
Decrease in profit after tax attributable to non‐controlling interests
Net profit after tax attributable to shareholders
for the year ended 30 June 2017
The key drivers of changes in profitability were:
Home settlement revenue and margin
25.1
2.7
0.3
1.6
0.8
(0.2)
(0.9)
(1.0)
(0.7)
‐
(0.9)
(1.1)
(0.3)
‐
19.3
30.3
(21.3)
7.7
(4.9)
(4.7)
1.3
27.7
‐
Revenue from home settlements increased to $79.9 million (2016: $54.9 million) due to an
increase in settlements to 278 (2016: 202). This was slightly higher than the forecast range of
250‐270 settlements and was due to achieving the higher end of the expected new home
settlement range at Shepparton, Lyndarum, Geelong and Officer.
‐ Home settlement gross margin reduced to 19.5% (2016: 21.5%). The margin achieved in the
second‐half of the 2017 financial year was slightly higher than first‐half of the 2017 financial
year which was in‐line with expectations. An increase in the average realised sales price to
$315k (GST inclusive) in the 2017 financial year (2016: $298k) was offset by an increase in the
average cost per home settled to $232k in the 2017 financial year (2016: $213k). The reduction
in margin is mainly due to a change in product mix and is expected to improve in the 2018
financial year as contributions from higher margin projects, such as Berwick Waters, increase.
The gross home margin represents home settlement revenue less a pro‐rata share of project
infrastructure, housing and capitalised finance costs expensed as each home settles.
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Annuity income and expenses
‐
‐
Revenue from homeowner rentals increased to $13.8 million (2016: $11.1 million) due to an
increase in homes under management and a rental increase of 3.5%.
Community management rental expenses increased to $6.3 million (2016: $5.3 million) due
to: an
in operations at Shepparton, Lyndarum, Geelong and Officer; and
commencement of management at Berwick Waters.
increase
‐ Deferred management fees received (inclusive of selling and administration fees) increased to
$4.1 million (2016: $2.5 million). There were 73 resale settlements during the year compared
to 52 in the prior year. The average realised sales price of resales increased to $340k (GST
inclusive) (2016: $275k). The 73 resale settlements achieved an average price growth of 7.5%
per annum from the acquisition date.
‐ Deferred management fee expenses increased to $1.2 million (2016: $0.5 million) primarily
due to an increase in sales and marketing activity.
Other expenses
‐
‐ Development expenses (new home sales and marketing) increased to $5.0 million (2016: $4.2
million) due to: increased employee costs due to the increased sales and settlement activity;
increased marketing support required to achieve sales and settlements; and launching Bittern
and Ocean Grove.
Corporate overheads increased to $5.8 million (2016: $4.9 million). The increase was mainly
due to: $0.2 million of expenses associated with the Company’s new employee incentive
scheme; and $0.4 million of head office wages growth due to additional executive resources
for medium term growth.
Finance costs increased to $1.2 million (2016: $0.8 million). This is mainly due to higher
average debt during the year. The Company capitalises a proportion of finance costs to
investment properties and inventories where appropriate and the balance of finance costs are
expensed. Capitalised finance costs are expensed in subsequent years through cost of sales.
‐
Fair value adjustments
‐
Total fair value adjustments have increased to $26.7 million (2016: $18.9 million). The
increase of $7.8 million includes a $3.8 million uplift ($2.7 million on an after‐tax basis) as a
result of investment property valuations. The key drivers were: rental capitalisation rates
reduced to 7.75% for all communities, down from between 8.0% ‐ 8.5% within prior
valuations (this had a favourable valuation impact of $5.4 million or $3.8 million on an after‐
tax basis); and the valuers have updated their view in relation to the long‐term expense
requirements of maintaining the communities and this has resulted in a downwards
adjustment of $1.6 million ($1.1 million on an after tax basis).
Fair value adjustments comprise changes to the fair value of investment properties. Changes
relating to investment properties represent incremental adjustments to their fair value upon
settlement of homes and reflects the discounted value of future rental and deferred
management fee revenues net of expenses as well as the fair value of undeveloped land. Refer
to Note 4 in the Company’s 2017 financial statements for further details.
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Analysis of cash flow
A$ millions
Cash flows related to operations
add Project capital expenditure (1)
Adjusted cash flows related to operations
Cash flows related to investing activities
Cash flows related to financing activities
Net movement in cash
Cash at the beginning of the period
Cash at the end of the period
FY2017
FY2016
Change
31.8
(8.5)
23.3
(15.6)
6.2
17.6
15.2
32.8
(12.8)
(2.0)
2.8
0.8
3.6
(14.2)
23.7
9.5
2.8
4.2
(7.2)
8.0
0.8
(1) Due to the Company’s legal structure, cash flows related to operations includes all gross costs of project capital
infrastructure expenditure (i.e. civil works, clubhouse and other facilities). Under some other legal structures, project
capital expenditure may be classified within investing cash flows rather than operating cash flows.
Cash flows related to operations increased to a surplus of $17.6 million (2016: deficit of $14.2 million).
The increase is mainly attributable to a $31.3 million increase in receipts from customers. Payments to
suppliers and employees were consistent (decreasing by $0.9 million) due to increased home
construction activity (bigger product) offset by a reduction in civil and infrastructure activity (timing of
site starts). In relation to home construction 269 homes were constructed in the 2017 financial year
compared to 271 in the prior year. Construction at all locations was at optimum levels to match the
278 settlements achieved.
Cash flows related to investing activities included: $11.0 million relating to the settlement of land at
Berwick Waters; $1.0 million for the deposit paid at Armstrong Creek; and $0.8 million relating to
purchases of property, plant and equipment.
Cash flows related to financing activities included: $1.0 million net proceeds from bank borrowings; and
$3.1 million for payment of dividends.
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Analysis of balance sheet
Net assets and total equity
A$ millions
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Investment properties
Other assets
Total Assets
Liabilities
Cash and cash equivalents (overdraft)
Trade and other payables
Interest‐bearing loans and borrowings
Provisions
Current tax payable
Deferred tax liabilities
Total Liabilities
Net Assets
Equity
Lifestyle Communities interest
Contributed equity and reserves
Retained earnings
Non‐controlling interests
Total Equity
FY2017
FY2016
Change
Change %
3.7
1.3
44.9
4.6
211.3
0.3
266.1
‐
(26.8)
(47.0)
(0.7)
(0.6)
(35.5)
(110.6)
155.5
65.0
90.5
‐
155.5
3.4
0.8
49.7
4.2
163.7
0.7
222.5
(2.5)
(14.4)
(46.0)
(0.6)
(0.4)
(27.3)
(91.2)
131.3
65.4
65.9
‐
131.3
0.3
0.5
(4.8)
0.4
47.6
(0.4)
43.6
2.5
(12.5)
(1.0)
(0.1)
(0.2)
(8.2)
(19.4)
24.2
(0.4)
24.6
‐
24.2
9
62
(10)
9
29
(51)
20
100
(87)
(2)
(23)
(59)
(30)
(21)
18
(1)
37
‐
18
During the year the Company’s net assets and total equity increased to $155.5 million (2016: $131.3
million) as a result of: profit during the period of $27.7 million; $0.1 million provided due to the exercise
of share options; partly offset by dividends paid of $3.1 million.
Inventories have decreased to $44.9 million (2016: $49.7 million). This reflects that home construction
and inventory levels are at optimum levels to match home settlements and civil and infrastructure
activity has reduced as projects at Lyndarum, Geelong and Officer have completed their intensive civil
and infrastructure phase.
Included within trade and other payables is a payable of $19.3 million relating to land at Bittern and
Ocean Grove with both sites due to settle in the third quarter of the 2018 financial year. The
corresponding asset is included within investment properties.
Deferred tax liabilities have increased to $35.5 million (2016: $27.3 million) representing the tax on fair
value adjustments being deferred. This liability will only be realised should an investment property be
disposed of which is highly unlikely.
The Company has surplus franking credits (after allowing for the final dividend) of $7.9 million (2016:
$6.3 million).
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Debt, gearing and liquidity
As at 30 June 2017 the Company had net debt of $43.4 million (2016: $45.2 million).
A$ millions
Net debt at 30 June 2016
Net increase in bank borrowings
Increase in cash balances / overdraft
Net movement in 2017
Net debt at 30 June 2017
45.2
1.0
(2.8)
(1.8)
43.4
The gearing ratio (net debt to net debt plus equity) of the Company as at 30 June 2017 was 21.8% (2016:
25.6%).
As at 30 June 2017 the Company has a committed facility with Westpac of $80.0 million of which $47.0
million was drawn.
Outlook and risks
Outlook
The Board is pleased with the level of settlements achieved at all communities as well as the level of
sales achieved at Berwick Waters, Bittern and Ocean Grove. The Company enters the 2018 financial
year with a record level of sales waiting for settlement.
The Company has a focused strategy to dominate the niche of affordable housing to the over 50’s
market and is currently funded and resourced to roll out a new community at least every 12 months
subject to identification of appropriate sites. The Company continues to focus on Melbourne’s growth
corridors as well as key Victorian regional centres and is currently considering a range of opportunities
but will remain disciplined in its assessment of these opportunities.
The Board confirms previous guidance that settlements for the 2018 financial year are forecast to be in
the range of 260 to 290. The Board also advises that underlying net profit after tax attributable to
shareholders and total dividends are both expected to increase in the 2018 financial year compared to
the 2017 financial year.
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Key risks
The Company’s key risk categories are:
Site selection – if the Company makes a poor site acquisition it may not generate adequate financial
returns on the investment and the objective of recovering 100% of the development costs may not be
met. The Company attempts to mitigate this risk by maintaining a detailed land acquisition strategy
and by carrying out detailed due diligence on potential new sites. The Company also uses the significant
experience it has gained from acquiring 14 sites and developing many of these during the past 14 years.
Sales and settlements – the Company is exposed to the rate of sales of new and existing homes, the
price of sales of new homes (and to a lesser extent the price of sales of existing homes) and to the
timing of settlements of new homes (revenue is only recorded when a sale of a home is settled). The
Company’s experience to date is that sales rates and realisations are closely related to the difference
between the median house price in the area and the home price in the Lifestyle Community. This factor
attracts a great deal of attention during the site selection process and also during the development of
the community.
Community roll out – management of the construction programme is important to ensure cash flow is
managed efficiently and returns are maximised. The Company mitigates this risk by taking a stage by
stage approach to construction based on a required level of pre‐sales.
Financing risk – there is a risk the Company will not achieve its growth strategy due to insufficient capital
or the inability to obtain new debt facilities. The Company may also experience re‐financing risk if all
debt facilities were cancelled in a short period of time. The Company mitigates these risks by:
maintaining a balance sheet with a reasonably low level of gearing; ensuring it complies with all debt
covenants and reporting obligations; ensuring sufficient term for debt facilities; and tightly managing
the commencement and rate of development of new communities.
Community management – it is important communities are well managed and homeowners have a high
level of satisfaction. A well managed community will: generate new sales from homeowner referrals;
add to the Lifestyle Communities brand; assist in facilitating resales of existing homes; and improve the
profitability of the community management business. The Company mitigates community
management risk by maintaining a very transparent sales and contract process, undertaking careful
selection of community management teams, maintaining community facilities to a high standard,
ensuring regular community activities and events, and maintaining the common areas and gardens to
a high standard.
Regulatory risk – the Company’s operations and business and financial model are impacted by the
Residential Tenancies Act and the Social Securities Act. Changes to this legislation could have an
adverse impact on the operating and financial performance of the Company.
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Remuneration Report (audited)
Dear fellow shareholders,
On behalf of the Board, we are pleased to present Lifestyle Communities’ Remuneration Report for the
2017 financial year.
As mentioned in the Chairman’s letter, the Board introduced an employee incentive scheme for the
2017 financial year to align the interests of staff and senior management with the objectives of the
business. In our judgement, the target that best unifies employees and benefits shareholders is an
annual new home settlement target. For the 2017 financial year the target range was set at 250 to 270
new home settlements and the business achieved 278 new home settlements with a consequently
strong profit.
For the 2018 financial year the target range has been set at 260 to 290 new home settlements and we
expect to announce the 2019 financial year employee share plan target during the 2018 financial year.
The HR & Remuneration Committee is planning to annually review the operation of this scheme to
ensure that shareholder value is being driven from the single new home settlement target and the
quantum of shares issued to employees. For the 2018 financial year, the same level of shares will be
available to senior executives and employees and the actual number awarded will depend on the
number of new home settlements achieved.
The Board believes that the business should continue to be scaled to continue the growth in annual
new home settlements and Company profitability over time. To this end, we are continuing to invest in
senior management, head office resources and various management systems to meet this objective for
the benefit of all shareholders.
The following report sets out further detail on your Company’s approach to remuneration.
Yours sincerely
Tim Poole
Chair
16 August 2017
Jim Craig
Chair, HR & Remuneration Committee
16 August 2017
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Introduction
1.
1.1 About this report
The Remuneration Report forms part of the Directors’ Report. It outlines the overall remuneration
strategy, framework and practices adopted by Lifestyle Communities Limited (the Company) and has
been prepared in accordance with Section 300A of the Corporations Act 2001 and its regulations. This
entire remuneration report is designated as audited.
1.2 Overview of contents
Contents
Section
1
2
3
4
5
6
7
8
9
10
Introduction
HR & Remuneration Committee
Details of key management personnel
Non‐executive directors’ remuneration
Executive directors and senior management remuneration
Relationship between remuneration and performance
Executive service agreements
Remuneration details
Options and CRES held by key management personnel
Remuneration report voting at Annual General Meetings
2.
HR & Remuneration Committee
2.1 Role of the HR & Remuneration Committee
As a minimum, the HR & Remuneration Committee’s role is to make recommendations to the Board
on:
the Company’s remuneration framework;
formulation and operation of employee incentive plans;
remuneration levels of executive Directors and other key management personnel; and
the level of non‐executive Director fees.
The objective is to ensure that remuneration policies and structures are fair and competitive and
aligned with the long‐term interests of the Company.
3.
Details of Key Management Personnel
Position
Commencement date
Non‐executive directors
Tim Poole
Bruce Carter
Jim Craig
Philippa Kelly
Chair of the Board
Non‐executive Director
Member – HR & Remuneration Committee
22 November 2007
Non‐executive Director
Member – Audit Committee
Founder
Non‐executive Director
Member – Audit Committee
Chair – HR & Remuneration Committee
Non‐executive Director
Chair – Audit Committee
Member – HR & Remuneration Committee
31 December 2012
18 September 2013
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Executive director
James Kelly
Other executives
Michael Imbesi
Managing Director
Founder
Construction Manager
21 March 2005
Chris Paranthoiene
Development and Acquisition Manager
13 March 2007
Geoff Hollis
Chief Financial Officer and Company
Secretary
15 February 2010
Sam Cohen
Operations Manager
3 October 2011
Non‐executive directors’ remuneration
4.
4.1 Fixed fees
All non‐executive Directors are paid fixed fees for their services to the Company. The level of fees are
set to enable the Company to attract and retain Directors of high calibre, whilst incurring a cost that is
reasonable having regard to the size and complexity of the Company.
The aggregate amount of fees paid is within the overall amount approved by shareholders in a general
meeting. The last determination was made at the Annual General Meeting held in November 2007 at
which shareholders approved an aggregate amount of $1,000,000 per annum.
Fixed fees paid to Directors during the 2017 financial year are set out in section 8.
4.2 Review of non‐executive Directors’ fees
The HR & Remuneration Committee annually reviews the level of fees paid to non‐executive Directors.
Fees payable to the Chair are currently set at $100,000 per annum. Fees paid to the other non‐executive
Directors are $55,000 per annum plus an additional $5,000 per annum for each committee Chair.
Executive Directors and senior management remuneration
5.
5.1 Framework
The Company’s executive remuneration framework consists of the following elements:
fixed remuneration; and
performance linked remuneration (using equity incentives).
In determining executive remuneration the Board aims to ensure that remuneration practices are:
Competitive and reasonable, enabling the Company to attract and retain key talent;
Aligned to the Company’s strategic and business objectives and the creation of shareholder
value; and
Transparent and acceptable to shareholders.
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5.2 Determining fixed remuneration
Managing Director
The total remuneration for the Managing Director (inclusive of superannuation) is $450,000 and has
not changed during the 2017 financial year. This fixed remuneration includes a $20,000 car allowance
as compensation for the high level of travel required between the Company’s communities. The
Managing Director does not participate in any short term or long term incentive plans.
Senior management
Fixed remuneration for senior management is reviewed annually or on promotion. Fixed remuneration
is benchmarked against market data for comparable roles.
5.3 Equity incentive scheme
As foreshadowed in the Company’s 2016 Remuneration Report, the Company has put in place an equity
incentive scheme (EIS) with effect from 1 July 2016.
Pursuant to the incentive scheme, fully paid ordinary shares in the Company, acquired on‐market, will
be issued to eligible employees on reaching new home settlement targets as follows:
Settlement targets
FY2017
250 to 270
FY2018
260 to 290
Should settlement targets be achieved, ordinary shares will be issued as follows:
Key management personnel and other senior management (on a pro‐rata basis based on
standard hours) will receive: 10,000 shares if the low point of the target is reached; 15,000
shares if the mid‐point is reached; and 20,000 shares if the high point is reached or exceeded.
All other eligible employees (on a pro‐rata basis based on standard hours) will receive: 500
shares if the low point of the target is reached; 1,000 shares if the mid‐point is reached; and
1,500 shares if the high point is reached or exceeded.
In relation to the 2017 financial year, 278 new home settlements were achieved meaning the high point
of the target was exceeded.
To be eligible to fully participate in the incentive scheme, employees will need to have been employed
by the Company on 1 July of the target year with shares to be allocated in September following the end
of the target year. Employees commencing employment with the Company after 1 July of the target
year are entitled to a pro‐rata incentive. Shares allocated to key management personnel and other
senior management have the following service (or escrow) conditions: 25% of shares have no service
requirements; 25% have a one‐year service requirement; and the remaining 50% have a two‐year
service requirement. The allocation relating to all other employees will not have a service requirement
and will be allocated provided they are employed by the Company at the date of allocation.
For accounting purposes, shares will be measured based on the valuation (share price) at grant date
and then expensed recognising any service period. For the shares allocated to key management
personnel and other senior management, 25% of the expense will be recognised in the target year, 25%
in the year following the target year and the remaining 50% in the second year following the target
year. All other shares will be recognised and expensed over a period incorporating the target year and
any further time to allotment following the target year.
The operation of the equity incentive scheme is conducted through an Employee Share Trust
administered by an independent third party, Smartequity Pty Ltd.
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5.4 Short‐term incentives
The equity incentive scheme provides an element of short‐term incentive to key management
personnel and other senior management as 25% of shares allocated have no service requirements.
This is a change from the original structuring of the scheme as outlined in the 2016 Remuneration
Report. The original structuring had no short‐term incentive with all shares allocated having a service
requirement of one or two years for the 2017 target year and two or three years for the 2018 target
year. The Board altered the structuring such that 25% of each target year’s shares have no service
requirement to ensure the equity incentive scheme better meets the objective of attracting and
retaining key talent. As the new scheme was being implemented, the Board decided the service
requirements were too excessive and would not provide sufficient incentive and retention for key
management personnel and other senior management.
5.5 Long‐term incentives
The equity incentive scheme provides a long‐term incentive to key management personnel and other
senior management as 25% of shares allocated have a one‐year service requirement and 50% of shares
allocated have a two‐year service requirement. The use of ordinary shares also provides strong long
term alignment between employees and shareholders.
In prior years the Company has utilised an Employee Share Loan Plan (ESLP) and a Senior Executives
and Directors Share Option Plan (ESOP) to retain key talent. No shares or options were issued pursuant
to these plans during the 2017 financial year and there is no intention to issues any further shares or
options pursuant to these plans.
Refer to section 9 for details of shares issued pursuant to the ESLP held by key management personnel.
Relationship between remuneration and performance
6.
The Company’s current remuneration framework, outlined in sections 4 and 5, was historically based
primarily on providing fixed remuneration. The new equity incentive scheme provides a basis for
additional performance linked remuneration in addition to fixed remuneration.
There was significant debate and consideration by the Board and HR & Remuneration Committee as to
the appropriate performance conditions for the equity incentive scheme. Ultimately, new home
settlements was chosen as the only performance condition as new home settlements is the main driver
of earnings growth and the creation of shareholder value. It is also a simple measure, it is easy to
measure and it is one that all employees can play a role in achieving.
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The role each group of the Company’s employees in delivering new home settlements is described in
the following table:
Department
Acquisitions
Total
staff
1
Marketing
5
Construction
13
Sales
24
Operations
36
Customer
Contact
Finance
3
4
Impact on settlements
Supported by the Managing Director, the acquisitions department is incentivised by
the ability to influence the future settlement pipeline.
Although the marketing department have long‐term strategies for growing enquiries
they have a short‐term ability to directly impact enquiries leading to sales and
settlements.
The construction department is responsible for ensuring efficiency within the
construction programme to meet settlements based on sales demand. Whilst also
having a direct impact on short‐term settlements they are increasingly responsible for
driving customer referral as they are highly customer focused.
The sales department directly influence conversion of enquiries to sales and then
move those sales though to settlement. The sales department is also a key part of
increasing customer referral.
The operations department is responsible for the seamless experience of our
homeowners at move‐in date and work closely with the sales and construction
departments. By providing a high level of customer service the operations team
promote referral and therefore future sales and settlements.
The customer contact department was established in January 2017 and has had an
immediate impact. The conversion of new enquiries to appointment with sales
consultants as well as conversion of older leads has improved greatly leading to higher
sales and settlements.
The finance department ensure sufficient funding is in place for future acquisitions and
delivering the construction programme.
The Board and HR & Remuneration Committee considered a range of factors in setting the target
range for the 2017 financial year. Prior to the commencement of the financial year, the Company had
provided guidance that the expected new home settlement range for the 2017 financial year was 250
to 270 so this was a logical starting point. The Company’s budget for new home settlements was also
within this range, with the top end of the range higher than budget. Analyst forecasts for new home
settlements were also within this range with the analyst average approximately equivalent to the
midpoint of the range.
The following table shows key performance indicators for the Company over the last five years:
Performance measure
Net profit after tax attributable to
members ($million)
Net profit (change from prior year) (%)
Dividends declared & paid (fully franked) (cents)
Diluted earnings per share (cents)
Closing share price (30 June)
Share price increase / (decrease)
STI paid to KMP
FY2017
FY2016
FY2015
FY2014
FY2013
$27.70
43.7%
3.5
26.51
$4.05
39.2%
$19.27
15.7%
2.5
18.47
$2.91
19.3%
$10,000
$10,000
$16.65
35.6%
1.5
16.11
$2.44
52.5%
$ ‐
$12.28
76.4%
‐
12.00
$1.60
105.1%
$ 6.96
5.6%
0.5
9.40
$0.78
(2.5%)
$ ‐
$ 10,000
New home settlements
278
202
240
210
149
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Executive service agreements
7.
7.1 Executive Directors
The HR & Remuneration Committee refreshed the Managing Director’s executive service agreement
during the 2014 financial year. This was executed on 8 December 2013 with an effective date of 1
September 2013.
Significant conditions
Under the terms of the agreement, the contract may be terminated by either party giving three months
written notice. The Company may terminate the contract at any time without notice if serious
misconduct has occurred. The Managing Director has a three month restrictive period post
termination.
7.2 Senior management
Employment agreements for senior management were refreshed during the 2017 financial year. All
senior management have consistent key terms of employment.
Significant conditions
Under the terms of all agreements, the contracts may be terminated by either party giving three
months written notice. The Company may terminate the contracts at any time without notice if serious
misconduct has occurred.
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8. Remuneration details
8.1 Compensation of directors and key management personnel for the year ended 30 June 2017
30 June 2017
Short term
Post‐employment
Share based
payment
Share based
payment
Total
performance
related %
Total
Salary
& fees
$
Cash
bonus
$
Non‐monetary
Other
Super
$
$
$
Retirement
benefits
$
EIS
$
ESLP
$
Cash
bonus
%
Shares
%
$
Directors
Tim Poole
James Kelly
Bruce Carter
Jim Craig(1)
Philippa Kelly
Key management personnel
Michael Imbesi(2)
Chris Paranthoiene
Geoff Hollis
Sam Cohen
91,324
408,958
47,945
57,500
52,511
658,238
175,114
198,326
222,356
180,822
776,618
Total
1,434,856
‐
‐
‐
‐
‐
‐
‐
9,132
‐
‐
9,132
9,132
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
8,676
35,000
4,555
‐
4,989
53,219
14,261
18,284
21,124
14,803
68,471
121,690
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
12,950
12,950
12,950
38,850
38,850
‐
‐
‐
‐
‐
‐
4,434
4,434
6,651
2,217
17,736
17,736
‐
‐
‐
‐
‐
‐
‐
3.8
‐
‐
1.0
0.5
‐
‐
‐
‐
‐
‐
2.3
7.2
7.5
7.2
6.2
3.4
100,000
443,958
52,500
57,500
57,500
711,458
193,809
243,126
263,081
210,792
910,808
1,622,266
(1) Fees were paid to Bellwether Holdings Pty Ltd, an entity controlled by Jim Craig.
(2) Michael Imbesi did not receive share based payments pursuant to the equity incentive scheme (EIS) as he tendered a letter of resignation on 3 August 2017.
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8.2 Compensation of directors and key management personnel for the year ended 30 June 2016
30 June 2016
Short term
Post‐employment
Long term
Share based
payment
Total
performance
related %
Total
Salary
& fees
$
Cash
bonus
$
Non‐monetary
Other
Super
$
$
$
Retirement
benefits
$
Incentive
plans
$
Options/
ESLP
$
Cash
bonus
%
Shares
%
$
Directors
Tim Poole
James Kelly
Bruce Carter(1)
Jim Craig(2)
Philippa Kelly
Key management personnel
Michael Imbesi
Chris Paranthoiene
Geoff Hollis(3)
Sam Cohen
82,192
396,317
49,562
55,000
50,228
633,299
167,567
172,260
194,824
166,996
701,647
Total
1,334,946
‐
‐
‐
‐
‐
‐
‐
9,132
‐
‐
9,132
9,132
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
7,808
22,678
5,086
‐
4,772
40,344
13,544
15,807
18,508
13,628
61,487
101,831
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
10,895
10,895
16,343
5,448
43,582
43,582
‐
‐
‐
‐
‐
‐
‐
4.4
‐
‐
1.1
0.6
‐
‐
‐
‐
‐
‐
5.7
5.2
7.1
2.9
5.3
2.9
90,000
418,995
54,648
55,000
55,000
673,643
192,006
208,094
229,675
186,072
815,848
1,489,491
(1) Bruce Carter’s standard directors fees for the 2016 financial year inclusive of superannuation were $50,000, a payment of outstanding leave liabilities was also paid during the year
reflecting the transition from executive to non‐executive director on 1 July 2015.
(2) Fees were paid to Bellwether Holdings Pty Ltd, an entity controlled by Jim Craig.
(3) For comparative purposes note that Geoff Hollis took one month unpaid leave during the year.
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9. Options and CRES held by Key Management Personnel
9.1 Options and CRES on issue (issued as remuneration)
The terms and conditions of each grant of options or CRES affecting remuneration in the current or
future reporting periods are as follows:
Plan
Number
of options
granted
ESLP
266,667
ESLP
266,667
ESLP
266,666
ESLP
40,000
ESLP
40,000
ESLP
40,000
Grant
date
Vesting
date
Expiry
date
Exercise
price
Value per
option at
grant date
$0.207
Performance
hurdles
achieved
%
Vested
Yes
100%
$0.876
22 May
2018
22 May
2018
22 May
2018
Cancelled
22 May
2013
22 May
2013
22 May
2013
22 July
2015
22 July
2015
22 July
2015
22 May
2015
22 May
2016
22 May
2017
22 July
2017
22 July
2018
22 July
2019
$0.876
$0.216
Yes
100%
$0.876
$0.220
Yes
100%
$2.696
$0.608
N/A
N/A
Cancelled
$2.696
$0.608
N/A
N/A
Cancelled
$2.696
$0.608
N/A
N/A
As at the date of this report, there were no unissued ordinary shares under option or CRES.
No option holder has any right under the options to participate in any other share issue of the Company.
There were no alterations to the terms and conditions of options granted as remuneration since their
grant date. During the year 333,331 ordinary shares were issued as a result of the conversion of
333,331 CRES. During the year 120,000 CRES were cancelled as a result of a cessation of employment.
For details on the valuation of the options, including models and assumptions used, please refer to
Note 24 of the Company’s 2017 financial statements.
9.2 Share based payments issued to key management personnel as remuneration
Shares (pursuant to the equity incentive scheme) expensed to key management personnel as
remuneration:
Name
Number
Plan
Year of
grant
Vesting
year
Geoff Hollis
Chris
Paranthoiene
Sam Cohen
2017
2017
2017
2017
2017
2017
2017
2017
2018
2019
2017
2018
2019
2017
EIS
EIS
EIS
EIS
EIS
EIS
EIS
5,000
5,000
10,000
5,000
5,000
10,000
5,000
Value at
grant date
$12,950
$12,950
$25,900
$12,950
Total
vested
5,000
‐
‐
5,000
Vested
%
100%
‐
‐
100%
$12,950
$25,900
$12,950
‐
‐
5,000
‐
‐
100%
5,000
10,000
Note: all shares will be issued on 29 September 2017. It is estimated that a total of 80,000 shares will be issued to
senior management under the EIS with a further 77,180 shares issued to other employees.
$12,950
$25,900
2018
2019
2017
2017
EIS
EIS
‐
‐
‐
‐
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Equity Incentive Scheme terms and conditions
Fully paid ordinary shares in the Company, acquired on‐market, will be issued to eligible employees on
reaching new home settlement targets for FY2017 and FY2018, should settlement targets be achieved,
ordinary shares will be issued as follows:
Key management personnel and other senior management (on a pro‐rata basis based on
standard hours) will receive: 10,000 shares if the low point of the target is reached; 15,000
shares if the mid‐point is reached; and 20,000 shares if the high point is reached or exceeded.
All other eligible employees (on a pro‐rata basis based on standard hours) will receive: 500
shares if the low point of the target is reached; 1,000 shares if the mid‐point is reached; and
1,500 shares if the high point is reached or exceeded.
To be eligible to fully participate in the incentive scheme, employees will need to have been employed
by the Company on 1 July of the target year with shares to be allocated in September following the end
of the target year. Employees commencing employment with the Company after 1 July of the target
year are entitled to a pro‐rata incentive. Shares allocated to key management personnel and other
senior management have the following service (or escrow) conditions: 25% of shares have no service
requirements; 25% have a one‐year service requirement; and the remaining 50% have a two‐year
service requirement. The allocation relating to all other employees will not have a service requirement
and will be allocated provided they are employed by the Company at the date of allocation.
For accounting purposes, shares will be measured based on the valuation (share price) at grant date
and then expensed recognising any service period. For the shares allocated to key management
personnel and other senior management, 25% of the expense will be recognised in the target year, 25%
in the year following the target year and the remaining 50% in the second year following the target
year. All other shares will be recognised and expensed over a period incorporating the target year and
any further time to allotment following the target year.
Options and CRES issued to key management personnel as remuneration
Name
Year of
grant
Vesting
year
Plan
Number
Value at
grant date
Total
vested
Vested
%
Tim Poole
Geoff Hollis
Michael
Imbesi
Chris
Paranthoiene
Sam Cohen
2010
2010
2013
2013
2013
2010
2013
2013
2013
2010
2013
2013
2013
2013
2013
2013
2012
2012
2015
2016
2017
2012
2015
2016
2017
2012
2015
2016
2017
2015
2016
2017
ESOP
ESOP
ESLP
ESLP
ESLP
ESOP
ESLP
ESLP
ESLP
ESOP
ESLP
ESLP
ESLP
ESLP
ESLP
ESLP
125,000
125,000
100,000
100,000
100,000
100,000
66,667
66,667
66,666
50,000
66,667
66,667
66,666
33,334
33,333
33,332
$54,375
$54,375
$20,700
$21,600
$22,000
125,000
125,000
100,000
100,000
100,000
$43,500
$13,800
$14,400
$14,667
100,000
66,667
66,667
66,666
$21,750
$13,800
$14,400
$14,667
$6,900
$7,200
$7,333
50,000
66,667
66,667
66,666
33,334
33,334
33,332
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Total
number
exercised
125,000
125,000
100,000
100,000
100,000
100,000
66,667
66,667
66,666
50,000
66,667
‐
133,333
33,334
33,334
33,332
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9.3 Number of options and CRES held by key management personnel
2017
Name
Balance
at
1‐Jul‐16
Granted
as
remun‐
eration
Exercised
Balance
at
30‐Jun‐17
Total
vested
30‐Jun‐17
Total
exercise‐
able
30‐Jun‐17
Total
unexerci‐
sable
30‐Jun‐17
Key Management
Personnel
Geoff Hollis
Michael Imbesi
Chris
Paranthoiene
Sam Cohen
100,000
66,666
133,333
33,332
‐
‐
‐
‐
100,000(1)
66,666(1)
133,333(2)
33,332(1)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(1) Exercised during the 2017 financial year, value per share at exercise date was $3.99.
(2) Exercised during the 2017 financial year, 66,667 exercised with the value per share at exercise date being
$3.38 and 66,666 exercised with the value per share at exercise date being $3.99.
2016
Name
Directors
Tim Poole
Key Management
Personnel
Geoff Hollis
Michael Imbesi
Chris
Paranthoiene
Sam Cohen
Balance
at
1‐Jul‐15
Granted
as
remun‐
eration
Exercised
Balance
at
30‐Jun‐16
Total
vested
30‐Jun‐16
Total
exercise‐
able
30‐Jun‐16
Total
unexerci‐
sable
30‐Jun‐16
125,000
‐
125,000(1)
‐
‐
‐
‐
‐
‐
‐
‐
100,000
66,666
100,000(2)
66,667(2)
100,000
66,666
200,000
133,333
133,333
66,666
‐
‐
‐
‐
‐
33,334(2)
133,333
33,332
66,667
‐
66,667
‐
66,666
33,332
(1) Exercised during the 2016 financial year, value per share at exercise date was $1.95.
(2) Exercised during the 2016 financial year, value per share at exercise date was $2.00.
For further details relating to options and CRES, please refer to Note 24 of the Company’s 2017 financial
statements.
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9.4 Shareholdings of key management personnel
2017
Name
Directors
Bruce Carter
James Kelly
Tim Poole
Jim Craig
Philippa Kelly
Key Management
Personnel
Geoff Hollis
Michael Imbesi
Chris
Paranthoiene
Sam Cohen
2016
Name
Directors
Bruce Carter
James Kelly
Tim Poole
Jim Craig
Philippa Kelly
Key Management
Personnel
Geoff Hollis
Michael Imbesi
Chris
Paranthoiene
Sam Cohen
Balance at
1‐Jul‐16
Off‐market
transfer
On‐market
transactions
Exercise of
options
Balance at
30‐Jun‐17
7,079,433
13,045,566
1,224,607
4,000,000
65,000
200,000
237,334
116,667
66,668
‐
‐
‐
‐
‐
‐
‐
‐
‐
(2,000,000)
(1,000,000)
‐
(1,000,000)
‐
(110,000)
(100,000)
(25,000)
‐
‐
‐
‐
‐
‐
5,079,433
12,045,566
1,224,607
3,000,000
65,000
100,000
66,666
133,333
33,332
190,000
204,000
225,000
100,000
Balance at
1‐Jul‐15
Off‐market
transfer
On‐market
transactions
Exercise of
options
Balance at
30‐Jun‐16
8,579,433
14,045,566
1,080,460
4,000,000
65,000
‐
‐
19,147
‐
‐
(1,500,000)
(1,000,000)
‐
‐
‐
‐
‐
125,000
‐
‐
7,079,433
13,045,566
1,224,607
4,000,000
65,000
244,712
170,667
116,667
33,334
‐
‐
‐
‐
(144,712)
‐
‐
‐
100,000
66,667
‐
33,334
200,000
237,334
116,667
66,668
10. Remuneration report voting at Annual General Meetings
Lifestyle Communities Limited received more than 99% of votes in support of its remuneration report
for the 2017 financial year.
Page 29
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Signed in accordance with a resolution of the directors.
On behalf of the Board
Tim Poole
Chair
16 August 2017
James Kelly
Managing Director
16 August 2017
Page 30
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LIFESTYLE COMMUNITIES LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF LIFESTYLE COMMUNITIES LIMITED
In relation to the independent audit for the year ended 30 June 2017, to the best of my knowledge and
belief there have been:
(i)
(ii)
no contraventions of the auditor independence requirements of the Corporations Act 2001; and
no contraventions of APES 110 Code of Ethics for Professional Accountants.
P A JOSE
Partner
Date 16 August 2017
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle
An independent member of Baker Tilly International
31
For personal use only Corporate Governance Statement
The Company is committed to implementing and maintaining good corporate governance practices.
This Statement outlines the main features of the Company’s corporate governance framework and
governance practices, and the extent to which the Company has followed the recommendations of the
ASX Corporate Governance Council (the ASX Principles and Recommendations) during the 2017
financial year.
This Statement is current as at 16 August 2017 and has been approved by the Board of the Company.
All charters and other policies referred to in this statement are available on the Company’s website at
www.lifestylecommunities.com.au.
Lay solid foundations for management and oversight
1.
Board functions
The Company has a Board Charter which describes the roles and responsibilities of the Board.
The primary role of the Board is to create shareholder value by setting the strategic direction of the
Company. Matters reserved for the Board include:
•
•
•
•
•
•
•
•
•
setting the strategic direction of the Company;
approving and monitoring operating budgets and major capital expenditure;
overseeing the integrity of the Company's financial reporting;
overseeing the management of the Company’s debt facilities;
overseeing the Company’s risk management strategy and approval of the risk management
framework;
selecting, appointing, and where necessary removing, the Managing Director;
delegating responsibility to the Managing Director, and setting the limits of delegation from
the Managing Director to other management;
appointing committees to assist in the oversight of the Company; and
reviewing Board performance.
The Board has delegated other matters and the day to day management of the Company to the
Managing Director, James Kelly, and established cascading delegated authority levels for senior
management and employees. The Managing Director is also responsible for implementing the
Company's strategic plan within the Company's risk management framework and ensuring accurate
information is provided to the Board.
The Chair, Tim Poole, is primarily responsible for facilitating effective Board meetings by encouraging
contribution from all Directors and by promoting constructive and respectful relations between
management and the Board.
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Director appointment, election and re‐election
Vetting is undertaken before new Directors are appointed, elected or re‐elected to the Board to ensure
they are appropriate candidates. This includes background checks, such as for bankruptcy. Information
included in respect of recommendation 2.4 (below) further describes the process undertaken by the
Board and the information considered in relation to appointing a person as a Director.
For the election or re‐election of Directors at Annual General Meetings, the notice of meeting sets out
for shareholders information on candidates, including details of any other directorships and whether
they are considered to be independent.
Director and Senior Executive agreements
The Company has a written agreement with each Director and senior executive clearly outlining the
terms of their appointment.
For non‐executive Directors the agreement includes the Company's expectations concerning
involvement with
individual committees, remuneration, circumstances under the Company's
constitution in which a Director’s office becomes vacant, indemnity and insurance arrangements,
access to corporate information, confidentiality and a requirement to comply with Company policies.
For the Managing Director and senior executives the agreement includes similar material (where
relevant) as well as a description of the position, roles and responsibilities, the term of appointment,
resignation and termination processes, and entitlements on resignation or termination. Further details
of the key terms for the employment agreements for the Managing Director and senior executives are
set out in the Remuneration Report.
Company Secretary
The Company Secretary, Geoff Hollis, has a direct reporting line to the Chair of the Board to ensure that
the Board and its committees function efficiently and effectively. The responsibilities of the Company
Secretary include advising on governance matters such as Board and committee policies, supporting
meetings by preparing agendas and minutes, and communicating with ASIC and the ASX.
Diversity
The Company values diversity and recognises the benefits it brings to the organisation. The Company
has developed a Diversity Policy to take advantage of a workforce comprised of people with a diverse
range of skills, backgrounds and experience.
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The Company supports diversity in its workforce by:
Treating all employees fairly and with respect and dignity as detailed in the Code of Conduct;
Actively and promoting a working environment that values diversity and tolerance of
differences;
Ensuring that applicants and employees of all backgrounds are encouraged to apply for, and
have fair opportunity to be considered for all available roles;
Ensuring that the Company’s policies encourage diversity and address specific barriers to
groups of employees, such as those with domestic responsibilities, by making reasonable
provision for the special needs of these employees, by means such as the Flexible Working
Arrangements, Parental Leave and Other Leave Standards, and recognising and rewarding
innovative strategies to accommodate diverse groups within the workforce;
Setting, reviewing and reporting annually, measurable objectives; and
Complying with all anti‐discrimination and equal opportunity legislation.
Gender diversity is of particular importance as the Company has over 40% of homes occupied by single
females and over 60% the Company’s homeowners are female. The Company has the following
objectives in relation to gender diversity which are assessed by the HR & Remuneration Committee
annually:
• Objective 1: female representation on the Board at all times;
• Objective 2: female representation within the senior management team; and
• Objective 3: 50% or more female employees across its workforce.
This seeks to ensure adequate female representation across all of the Company's business practices.
There is a particular emphasis on gender diversity in the sales and community management functions
of the Company.
During the 2017 financial year each of the three objectives were achieved.
Measuring performance
The Company has an informal evaluation process for Board and committee performance which focuses
on the role of the Board, its size and composition, the procedures and practices of the Board and
meeting arrangements. The evaluation also includes an assessment of the future requirements of the
Board in relation to the skills and experience required to ensure that Board composition is appropriate
for the needs of the Company.
Individual non‐executive Director performance is assessed by the Chair informally to ensure that the
Director continues to operate effectively within the Board. This may involve discussions with the
Director and with other members of the Board, and considering the Director's:
skills, experience, performance and contributions to the Board, committees and other aspects
of the Company;
degree of independence; and
availability to attend and prepare for Board and committee meetings.
An evaluation of the Board, committees and individual directors was undertaken during the 2017
financial year.
The Company has an on‐going evaluation process for senior management. The HR & Remuneration
Committee and Managing Director sets performance objectives for senior executives necessary to
achieve the strategic objectives of the Company. Performance of senior executives is assessed annually
by the Managing Director.
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Structure the Board to add value
2.
Board selection process and induction
The Board believes that the composition, including selection, appointment, renewal and retirement of
members, is of such importance that it is the role of the Board as a whole to manage.
In considering the nomination and appointment of new Directors, the Board assesses candidates with
regard to their experience in the industry, as well as more generally, and their skills, qualifications,
personal qualities and background. In addition, in selecting new Directors, the Board looks for
candidates with skills that complement and balance those of the existing Directors.
The Board reviews succession planning and senior leadership development on at least an annual basis.
Details of the number of Board meetings and attendance at those meetings are set out on page 9 of
the Directors' Report.
The mix of skills and diversity that the Company seeks to achieve on the Board includes:
•
•
•
•
•
•
•
accounting, finance and capital markets;
property development, construction and management;
asset management;
information technology;
financial and business management;
sales and marketing; and
legal, tax and regulatory.
The Board has an induction program for newly‐appointed non‐executive Directors. This provides
including written materials, briefings, training on accounting principles (where
orientation
appropriate), site visits and educational opportunities designed to make them familiar with the
Company and better equipped to perform their duties. This seeks to build an understanding of the
Company's business, the markets in which it operates, customers, suppliers, employees and community
residents.
Directors are also encouraged to attend external director education programs to develop and maintain
their skills and knowledge.
Independence
The Board comprises Tim Poole, Jim Craig and Philippa Kelly as independent non‐executive Directors,
Bruce Carter as a non‐executive Director and James Kelly as Managing Director. Details of their
qualifications, experience and length of service are set out on pages 4 and 5 of the Directors’ Report.
The Board considers an independent Director to be a non‐executive Director who is not a member of
management and who is free of any business or other relationship that could materially interfere with
– or could reasonably be perceived to materially interfere with – the independent exercise of their
judgement as a Director of the Company.
Tim Poole, Jim Craig and Philippa Kelly are considered to be independent under this definition. Further,
none of the aforementioned non‐executive Directors have an interest, position, association or
relationship of the type described in item 2.3 of the ASX Principles and Recommendations. Bruce Carter
is not considered independent as he transitioned from executive to non‐executive Director on 1 July
2015. The Board assesses independence at least annually.
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The Chair of the Board, Tim Poole, is an independent Director. James Kelly is the Company's Managing
Director.
Act ethically and responsibly
3.
The Company recognises that its reputation is one of its most valuable assets to build long‐term value
for its shareholders. The Company’s Code of Conduct applies to its Directors, senior executives and
employees.
The Company is committed to promoting and maintaining a high standard of corporate ethics and
business integrity. As stated in the Company's Code of Conduct, all Directors, senior executives and
employees must act with integrity and professionalism and be scrupulous in the proper use of Company
information, funds, equipment and facilities. Directors, senior executives and employees are to
exercise fairness, equity, proper courtesy, consideration and sensitivity in dealing with customers,
employees and other stakeholders. See also the information in respect of recommendation 7.4 below.
The Code of Conduct is a detailed statement concerning:
•
•
•
•
•
•
•
responsibilities of all Directors, senior executives and employees;
practices to promote the best interests and reputation of the Company;
confidentiality;
Company property;
conflicts of interests;
public statements;
policies for preventing the acceptance or offering of bribes or other forms of unlawful or
unethical payments or inducements;
• measures to encourage the reporting of unlawful or unethical behaviour;
•
•
compliance; and
breaches of the Code.
The Company has a Securities Trading Policy. Under the Company’s Securities Trading Policy, Directors,
senior executives and employees must not trade in any securities of the Company at any time when
they are in possession of unpublished, price sensitive information in relation to those securities.
Provided dealing would not otherwise contravene the insider trading provisions of the Corporations
Act, Directors, senior executives and employees can deal in securities of the Company outside of the
following prohibited periods:
from 1 January to the opening of trading on the second Business Day after the Company’s half‐
yearly results are announced to the ASX;
from 1 July to the opening of trading on the second Business Day after the Company’s annual
results for that year are announced to the ASX;
from the opening of trading on the date that is two weeks prior to the AGM to the opening of
trading on the first Business Day after the close of the AGM; and
any additional period, as specified by the Board.
Trading within a prohibited period can only occur with the prior approval from the Chair.
The Code of Conduct encourages the reporting of unlawful and unethical behaviour and protects
whistle‐blowers. Any employee who makes a complaint and complies with the reporting process will
not be disadvantaged or prejudiced in any way.
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All complaints are treated as confidential. Directors, senior executives and employees can report
straight to the Managing Director, Company Secretary or the Chair of the Audit Committee if they
believe their immediate supervisor may be implicated.
Directors, senior executives and employees must avoid any personal, financial or other interest that
may conflict with their duties and responsibilities to the Company. Any interest that may constitute a
conflict of interest must be promptly disclosed to the Managing Director, Company Secretary or the
Chair of the Audit Committee.
Safeguard integrity in corporate reporting
4.
Audit Committee
The Company has an Audit Committee that consists of three members, Philippa Kelly, Jim Craig and
Bruce Carter, two of which are independent non‐executive Directors (see Recommendation 2.1). All
three Committee members have and maintain very good financial literacy. Further information on their
skills, qualifications and experience is set out on pages 4 and 5 of the Directors’ Report.
The Chair of the Audit Committee is Philippa Kelly, and she is not the Chair of the Board.
Details of the number of Audit Committee meetings and attendance at those meetings are set out on
page 7 of the Directors' Report.
The Audit Committee has adopted a formal Charter, which is available on the Company's website. The
Charter sets out the Audit Committee’s composition, responsibilities and powers to ensure the
adequacy of the Company’s financial reporting. The Audit Committee oversees the Company’s internal
financial controls and the appointment of the external auditor. The Audit Committee will consider
matters relevant to the preparation of the Company's financial statements for approval by the Board.
It also monitors the external auditor’s ongoing independence, effectiveness and scope of work, as well
as the rotation of the audit engagement partner. The Audit Committee may seek advice from external
consultants or specialists where it considers necessary.
External auditor
The external auditor, Pitcher Partners, was appointed in November 2008 and was selected based on
having the necessary skills, objectivity and independence. This appointment is reviewed by the Board
annually. The Company's policy on audit rotation requires the partner managing the audit for the
external auditor be changed within a period of five years.
The Company's external auditor is invited to attend meetings of the Audit Committee when
appropriate, including meetings without management being present.
Approval of financial statements
As part of the Company's financial assurance processes, the Directors receive a declaration from the
Managing Director and the Chief Financial Officer before approving financial statements for a full year
or half year period.
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The declaration confirms to the Directors that, in the opinion of the Managing Director and the Chief
Financial Officer:
•
•
•
the Company’s financial records have been properly maintained in accordance with the
Corporations Act;
the financial statements and the notes for the financial period or year comply with the
accounting standards and give a true and fair view of the financial position and performance
of the Company; and
the declaration is founded on a sound system of risk management and internal control and
that the system is operating effectively in all material respects in relation to financial reporting
risks.
Annual General Meeting
The Company holds a general meeting each year and copies of presentations are lodged with the ASX
and made available on the Company's website. Shareholders have the opportunity to ask questions at
the meeting and meet informally with Directors after the meeting.
The Company's external auditor attends the general meeting each year and is available to answer
questions from shareholders regarding the conduct of the audit, the preparation and content of the
auditor’s report, the accounting policies adopted by the Company in the preparation of its financial
statements and the independence of the auditor in relation to the conduct of the audit. The Company
considers this is an important safeguard for the integrity of the Company’s financial reporting process.
Make timely and balanced disclosure
5.
Continuous disclosure
ASX Listing Rule 3.1 requires the Company to inform the ASX immediately once the Company is or
becomes aware of any information concerning it that a reasonable person would expect to have a
material effect on the price or value of the Company’s shares. Procedures are in place to ensure that
items which potentially require announcement to the ASX are promptly notified to relevant parties for
approval. Depending upon content, either the Board, Managing Director or Company Secretary is
responsible for authorising market releases. All market releases are posted to the Company’s website.
The Company takes the spirit of its continuous disclosure obligations seriously and issues market
releases during the year to satisfy these obligations. All ASX announcements are available on the
Company’s website.
Respect the rights of security holders
6.
Company’s website
The Company's website is one of the Company’s key communication tools.
The Company endeavours to keep the website up‐to‐date and accurate in order to provide information
about the Company’s performance and governance to investors. The Company values transparency in
all areas of operation, and understands that quality disclosure can foster the trust and confidence of
shareholders and investors.
The Company encourages shareholders to take an active interest in the Company, and publishes
information about the Company’s history, current projects and corporate structure.
Page 38
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The following key documents are available for shareholders on the Company’s website under the
‘Investor Information’ section:
corporate profile and biographical information of Directors;
Board Charter;
Audit Committee Charter;
HR and Remuneration Committee Charter;
Communications Policy;
Code of Conduct;
Securities Trading Policy;
Diversity Policy;
Annual Reports;
financial statements;
notices of Annual General Meetings;
investor presentations;
operational updates; and
announcements lodged with the ASX.
Communication with shareholders
The Company recognises the timeliness, convenience and environmental advantages of electronic
communication. Shareholders have the option of communicating with the Company electronically.
Shareholders who wish to update their communication preferences should contact the Company's
share registry.
The Annual General Meeting allows the Company to provide shareholders with a greater understanding
of the Company’s operations, governance, performance and prospects, and gives shareholders the
opportunity to raise questions or concerns.
Communications with analysts, investors, media and others
The Managing Director, James Kelly and the Chief Financial Officer and Company Secretary, Geoff Hollis,
generally deal with analysts, investors, media and others, taking account of regulatory guidelines
including those issued by the ASX on continuous disclosure. The presentations on the 30 June and 31
December results and other presentations are sent to the ASX and are available promptly on the
Company’s website. A teleconference held in respect of the 30 June and 31 December presentations
is conducted on the afternoon of the release.
The Company’s Communications Policy is available on the Company’s website.
Recognise and manage risk
7.
The Company considers risk management as a core principle of sound corporate governance. The
Company recognises the importance of managing risk and controlling its business activities in a manner
which enables it to protect established value, identify and capitalise on opportunities to create value,
enhance resilience to external events and avoid or reduce risks which may cause injury or loss.
Page 39
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Risk management
In view of its size and operational structure, the Board considers that it is able to oversee the Company's
risk management framework efficiently and effectively without establishing a risk committee (stand‐
alone or part of the responsibilities of the audit committee).
A formal risk register has been developed and approved by the Board. The register identifies specific
risks at an operational and strategic level and provides the framework for the reporting and monitoring
of material risks across the Company.
The full Board is responsible for oversight of the Company’s risk management and control framework.
The Board receives periodic reports from management on risk management matters.
The Company has disclosed its current material business risks within the Operating and Financial
Review on page 16 of the Annual Report.
The Company’s risk management processes and systems that were in place over the reporting period
include:
robust planning and budgeting process providing a long‐term financial model that enables
the Board to review timely financial forecasts as well as analyse future opportunities and
sensitivities. The Board also receives regular forecasts in relation to the liquidity of the
business;
comprehensive site selection process that requires Board approval of any acquisition case
prior to any land acquisition. The Board is then notified and approves any changes
(positive or negative) to the acquisition case prior to the commencement of construction;
a system of delegated authorities that cascades authority levels for expenditure and
commitments from the Board, the delegation to the Managing Director and further
cascading of authorities from the Managing Director to the rest of the organisation;
maintaining insurance cover appropriate to the size and nature of the Company’s
operations to reduce the financial impact of any significant insurable losses;
establishing a risk register which identifies the material risks facing the Company and
which is regularly reviewed and updated. This includes providing a risk rating, assessment
of the key controls in place to manage the risk and the person(s) responsible for
implementing and reviewing controls; and
all members of the senior management team report to the Board on financial and non‐
financial matters and meet with the Board at least quarterly.
Internal audit
The Company does not have a formal internal audit function. In view of the size of the Company, such
a function is not considered necessary or appropriate at this time. A natural control mechanism exists
in companies of this size as the Board works closely with the staff and, because the transactional volume
is small, the Directors have a detailed knowledge of the Company.
During the 2017 financial year the Company commenced process improvements in relation to the
following areas: accounts payable and purchase order systemisation; new payroll and HR management
system; fixed assets reporting; and monthly reporting processes. These improvements are anticipated
to be completed during the 2018 financial year.
Page 40
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Environmental risk management
The Company's risk register (described above), identifies specific risks for the Company at an
operational and strategic level.
The sustainability of the Company's business could also be adversely impacted by the way in which the
Company conducts its business and the effects on the Company's residents, employees, suppliers as
well as the Company's shareholders.
The Board has regard to economic, environmental and social sustainability risks. It does so by
considering:
• what issues are important to the sustainability of the Company's business;
•
• whether it is in the interests of the Company to adopt particular measures having regard to
how those issues could be addressed; and
the materiality of the risk addressed and the likely costs of doing so or failing to do so.
This process is applied by the Board as part of its annual planning and budget approval process, when
setting the Company's strategy and when considering significant transactions for the Company.
By having regard to economic, environmental and social sustainability risks in the manner described
above, the Board seeks to ensure that it acts in the best interests of the Company.
Remunerate fairly and responsibly
8.
Remuneration Committee
The Company has an HR & Remuneration Committee that consists of three members, Jim Craig, Philippa
Kelly and Tim Poole who are all independent non‐executive Directors (see Recommendation 2.1). The
Chair of the HR and Remuneration Committee is Jim Craig, and he is not the Chair of the Board.
Details of the number of HR & Remuneration Committee meetings and attendance at those meetings
are set out on page 7 of the Directors' Report.
The HR & Remuneration Committee has adopted a formal Charter which is available on the Company's
website. The Charter sets out the HR & Remuneration Committee’s responsibilities including oversight
and approval of the human resources and remuneration policies and practices of the Company. The
HR & Remuneration Committee may seek advice from external consultants or specialists where it
considers necessary.
Details of remuneration
Details of remuneration of Directors, the Managing Director and senior management are included in
the Remuneration Report on pages 24 and 25 of the 2017 Annual Report and in notes 24 and 26 to the
financial statements (set out on pages 68 and 69 of the 2017 Annual Report).
Page 41
For personal use only
Consolidated Statement of Profit or loss and other Comprehensive income
For the year ended 30 June 2017
Development revenue
Home settlement revenue
Cost of sales
Gross profit from home settlements
Management and other revenue
Rental revenue
Deferred management fees
Utilities revenue
Sub-division revenue
Finance revenue
Total management and other revenue
Fair value adjustments
less expenses
Development expenses (sales and marketing)
Management rental expenses
Management deferred management fee expenses
Utilities expenses
Corporate overheads
Sub-division expenses
Loss on disposal of assets
Finance costs
Profit before income tax
Income tax expense
Net profit from continuing operations
Profit is attributable to:
Members of the parent
Non-controlling interests
Total comprehensive income for the year
Total comprehensive income is attributable to:
Members of the parent
Non-controlling interests
Note
2017
$
2016
$
6
5
6
6
6
7
79,941,727
54,877,337
(64,360,083)
(43,080,471)
15,581,644
11,796,866
13,751,895
4,112,152
1,662,257
925,000
17,122
20,468,426
11,074,970
2,508,705
1,385,214
95,455
209,884
15,274,228
26,664,208
18,924,865
(5,039,082)
(6,263,887)
(1,231,412)
(1,663,379)
(5,774,937)
(1,194,475)
(31,898)
(1,181,811)
(4,175,959)
(5,259,487)
(540,369)
(1,657,542)
(4,871,622)
(95,455)
-
(842,529)
40,333,397
28,552,996
(12,636,296)
(7,937,280)
27,697,101
20,615,716
27,695,112
1,989
19,268,682
1,347,034
27,697,101
20,615,716
27,697,101
20,615,716
27,695,112
1,989
19,268,682
1,347,034
27,697,101
20,615,716
Earnings per share for profit attributable to the ordinary equity holders of the
parent entity:
Basic earnings per share
Diluted earnings per share
22
22
cents
26.555
26.505
cents
18.586
18.474
The above statement should be read in conjunction with the accompanying notes.
Page 42
For personal use only
Consolidated Statement of Financial Position
For the year ended 30 June 2017
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Investment properties
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Bank overdraft
Trade and other payables
Current tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
Members' interest in equity
Non-controlling interest
TOTAL EQUITY
Note
2017
$
2016
$
9
10
11
12
11
13
14
9
15
7
16
17
16
7
18
19
19
20
3,653,118
1,324,805
34,368,842
320,888
39,667,653
3,352,040
819,425
35,548,272
650,553
40,370,290
10,564,461
4,590,889
211,294,274
226,449,624
14,197,573
4,227,618
163,676,707
182,101,898
266,117,277
222,472,188
12,364
26,844,367
574,467
316,016
27,747,214
47,000,000
374,094
35,471,964
82,846,058
2,558,487
14,364,641
360,801
251,792
17,535,721
46,000,000
311,074
27,320,528
73,631,602
110,593,272
91,167,323
155,524,005
131,304,865
63,204,070
1,801,816
90,518,119
155,524,005
-
63,822,710
1,561,850
65,920,305
131,304,865
-
155,524,005
131,304,865
The above statement should be read in conjunction with the accompanying notes.
Page 43
For personal use only
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Balance at 1 July 2015
Profit for the year
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Net distributions to non-controlling interests
Issue of shares - exercise of options
Employee share schemes
Dividends paid
Contributed
equity
$
Reserves
$
Retained
earnings
$
Non-
controlling
interest
$
Total equity
$
63,027,710
1,493,481
49,246,482
-
113,767,673
-
-
-
795,000
-
-
795,000
-
-
19,268,682
1,347,034
20,615,716
19,268,682
1,347,034
20,615,716
-
-
68,369
-
68,369
-
-
-
(2,594,859)
(1,347,034)
-
-
-
(1,347,034)
795,000
68,369
(2,594,859)
(2,594,859)
(1,347,034)
(3,078,524)
Balance as at 30 June 2016
63,822,710
1,561,850
65,920,305
-
131,304,865
Profit for the year
Total comprehensive income for the
year
Transactions with owners in their
capacity as owners:
Net distributions to non-controlling interests
Treasury shares purchased
Employee share schemes
Issue of shares - exercise of options
Dividends paid
-
-
-
(715,000)
-
96,360
-
-
-
-
-
239,966
-
-
27,695,112
1,989
27,697,101
27,695,112
1,989
27,697,101
-
-
30,058
-
(3,127,356)
(1,989)
-
-
-
(1,989)
(715,000)
270,024
96,360
(3,127,356)
(618,640)
239,966
(3,097,298)
(1,989)
(3,477,961)
Balance as at 30 June 2017
63,204,070
1,801,816
90,518,119
-
155,524,005
The above statement should be read in conjunction with the accompanying notes.
Page 44
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Consolidated Cash Flow Statement
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Interest paid
Note
2017
$
2016
$
107,772,898
(84,067,078)
(4,271,195)
17,122
(1,807,002)
76,445,342
(84,947,737)
(3,753,146)
209,884
(2,150,799)
Net cash flows provided by / (used in) operating activities
21
17,644,745
(14,196,456)
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from long-term deposit
Purchase of investment properties
13(a)
(768,823)
-
(11,997,725)
(1,043,609)
5,000,000
(1,155,105)
Net cash flows provided by / (used in) investing activities
(12,766,548)
2,801,286
Cash flows from financing activities
Proceeds from exercise of options / CRES shares
Proceeds from external borrowings
Repayment of external borrowings
Distributions paid to non-controlling interests
Dividends paid
96,360
19,500,000
(18,500,000)
-
8(a)
(3,127,356)
795,000
23,110,819
(13,712,038)
(3,409,351)
(2,594,859)
Net cash flows provided by / (used in) financing activities
(2,030,996)
4,189,571
Net increase / (decrease) in cash held
Cash at the beginning of the financial year
2,847,201
(7,205,599)
793,553
7,999,152
Cash at the end of the financial year
9
3,640,754
793,553
The above statement should be read in conjunction with the accompanying notes.
Page 45
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Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies adopted by the consolidated entity in the preparation and presentation
of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a) Basis of preparation
This financial report
Standards,
Corporations Act 2001 .
is a general purpose financial report,
Interpretations and other authoritative pronouncements of
that has been prepared in accordance with Australian Accounting
the Australian Accounting Standards Board and the
The financial report covers Lifestyle Communities Limited and controlled entities as a consolidated entity. Lifestyle Communities
Limited is a company limited by shares, incorporated and domiciled in Australia. Lifestyle Communities Limited is a for-profit entity
for the purpose of preparing the financial statements.
The financial report was authorised for issue by the directors as at the date of the director's report.
Compliance with IFRS
The consolidated financial statements of Lifestyle Communities Limited also comply with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Historical Cost Convention
The financial report has been prepared under the historical cost convention, as modified by revaluation to fair value for certain
classes of assets as described in the accounting policies.
Significant accounting estimates
The preparation of the financial report requires the use of certain estimates and judgements in applying the entity's accounting
policies. Those estimates and judgements significant to the financial report are disclosed in Note 2.
(b) Principles of consolidation
The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity
and of all entities which the parent entity controls. The group controls an entity when it is exposed, or has rights, to variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist.
inter-company balances and transactions, including any unrealised profits and losses have been eliminated on consolidation.
All
Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control ceases.
Equity interests in a subsidiary not attributable, directly or indirectly, to the group are presented as non-controlling interests.
Non-controlling interests in the results of subsidiaries are shown separately in the Consolidated Statement of Profit or loss and other
Comprehensive income and consolidated Statement of Financial Position respectively.
(c) Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, bank overdrafts and short-term deposits with an original maturity of
three months or less held at call with financial institutions.
(d) Inventories
Inventories are measured at the lower of cost and net realisable value.
Inventories include housing units built but not sold as well as
capitalised civils and infrastructure, wages and holding costs. With effect from 1 January 2009 sales contract terms were changed
and inventories include civil and infrastructure costs.
Inventories are classified as either current or non-current assets pursuant to the
timing of their anticipated sale.
Page 46
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Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the
economic benefits will flow to the consolidated entity and the revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
(i) Home settlement revenue
Revenue from home settlements is recognised when there is persuasive evidence, usually in the form of settlement of the home,
indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity
and quality of the goods has been determined, the price is fixed and generally ownership has passed. The consolidated entity
considers all risks and rewards as transferred to the customer upon receipt of final settlement.
(ii) Interest revenue
Interest revenue is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to
the financial assets.
(iii) Rental revenue
Rental revenue from investment properties is derived from home owners and is accounted for on a straight-line basis over the lease
term.
(iv) Utilities revenue
Utilities revenue is derived from homeowners and is billed monthly and recorded as revenue in the month of billing.
(v) Deferred management fee
The deferred management fee is receivable upon a resident selling their home. Revenue is recorded upon the resale settlement of
the home.
For all contracts entered into prior to 1 January 2009, the fee payable is 15% on the resale value of the unit and after a period of
occupation of a year and one day.
For all contracts entered into post 1 January 2009, the fee payable is up to 20% (the fee accumulates by 4% per year over 5 years up
to 20%) on the resale value of the unit.
(vi) Sub-division revenue
Sub-division revenue is derived from land sold that is surplus to requirements for the residential communities. Sub-division revenue
is recognised upon the exchange of an unconditional contract or if the contract is conditional once those conditions have been
satisfied.
All revenue is stated net of the amount of goods and services tax (GST).
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Property under development is not depreciated. The depreciable amounts of all other fixed assets are depreciated over their
estimated useful lives commencing from the time the asset is held ready for use.
Depreciation is calculated on a straight-line basis (prior year included some diminishing value assets) over the estimated useful life of
the assets as follows:
2017 2016
Buildings 40 years 40 years
Plant and equipment 4 to 25 years 2 to 13 years
Computer equipment 2 to 3 years 2 to 9 years
Motor vehicles 4 to 7 years 4 to 7 years
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year
end.
Page 47
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Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Investment properties
Investment properties are measured initially at cost, including transaction costs.
Investment properties include undeveloped land and
land subject to residential site lease agreements. Subsequent to initial recognition, investment properties are re-measured at fair
value, which reflects market conditions. Gains or losses arising from changes in the fair values of investment properties are
recognised in profit or loss in the year in which they arise.
Investment properties are derecognised either when they have been disposed of or when the investment property is permanently
withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of
an investment property are recognised in profit or loss in the year of retirement or disposal.
(h) Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so
as to reflect the risks and benefits incidental to ownership.
Operating leases
Lease payments for operating leases are recognised as expenses on a straight-line basis over the term of the lease.
(i) Impairment
in accordance with AASB 136
life are not amortised but are tested annually for impairment
Assets with an indefinite useful
Impairment of Assets. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or
circumstances arise that indicate that the carrying amount of the asset may be impaired.
An impairment loss is recognised where the carrying amount of the asset or cash generating unit exceeds its recoverable amount.
The recoverable amount of an asset cash generating unit is defined as the higher of its fair value less costs of disposal and value in
use.
(j) Borrowing costs
Borrowing costs can include interest, amortisation of discounts or premiums relating to borrowings, and ancillary costs incurred in
connection with arrangement of borrowings.
Borrowing costs are expensed as incurred, except for borrowing costs incurred as part of the cost of the construction of a qualifying
asset which are capitalised until the asset is ready for its intended use or sale. Acceptance fees are amortised over the life of the
facility.
Page 48
For personal use only Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Income tax
Current income tax expense or revenue is the tax payable on the current period's taxable income based on the applicable income tax
rate adjusted by changes in deferred tax assets and liabilities.
Deferred tax balances
Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to
be recovered or liabilities are settled. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in
a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only when it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation
The parent entity and its wholly owned subsidiaries have implemented tax consolidation and have formed an income tax-consolidated
group from 18 March 2011. This means that: each entity recognises their own current and deferred tax amounts in respect of the
transactions, events and balances of the entity; and the parent entity is assumes the current tax liabilities and deferred tax assets arising
in respect of tax losses, arising in the subsidiary, and recognises a contribution to (or distribution from) the subsidiaries. The tax
consolidated group also has a tax sharing agreement in place to limit the liability of subsidiaries in the tax-consolidated group, arising
under the joint and several liability provisions of the tax consolidation system, in the event of default by the parent entity to meet its
payment obligations.
(l) Employee benefits
(i) Short-term employee benefit obligations
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled wholly within
twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid
when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual
leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Long-term employee benefit obligations
The provision for employee benefits in respect of long service leave and annual leave which, are not expected to be settled wholly within
twelve months of reporting date, are measured at the present value of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date.
Employee benefit obligations are presented as current liabilities in the statement of financial position if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is
expected to occur.
(iii) Retirement benefit obligations
Defined contribution superannuation plan
The consolidated entity makes contributions to defined contribution superannuation plans in respect of employee services rendered
during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are
received.
(iv) Share based payments
The consolidated entity operates an employee share loan scheme (ESLP) and an equity incentive scheme (EIS). Refer to Note 24 for
further information.
For the ESLP, convertible repurchase-able employee shares (CRES) are issued to employees. For accounting purposes CRES are
treated like options until the time of vesting. At the time of vesting an interest-free limited recourse loan is made to the participant with
the value reflected as equity. The CRES are then convertible to ordinary shares at the discretion of the participant prior to their expiry
with the loan being due and payable on or before expiry of the CRES. The fair value of the equity to which employees become entitled
is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account.
The number of employee share loans expected to vest is reviewed and adjusted at each reporting date such that the amount recognised
for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that
eventually vest. There are no further plans to issue CRES pursuant to the ESLP.
For the EIS, the Company provides a contribution to an Employee Share Trust for the estimated number of shares relating to the
relevant financial year. The Employee Share Trust purchases shares on-market and issues the relevant shares to participating
employees within three months of the end of the financial year. As the shares have not vested the contribution is recognised as
treasury shares within contributed equity. The fair value of the equity to which employees become entitled is measured at grant date
and recognised as an expense over the vesting period, with a corresponding increase to an equity account.
Page 49
For personal use only Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable
from the Australian Taxation Office.
In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as
part of an item of the expense. Where applicable receivables and payables in the statement of financial position are shown inclusive of
GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
(n) Financial instruments
Classification
The consolidated entity classifies its financial instruments in the following categories: financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose
for which the instruments were acquired. Management determines the classification of its financial instruments at initial recognition.
Non-derivative financial instruments
Non-derivative financial instruments consist of trade and other receivables, cash and cash equivalents, loans and borrowings, and trade
and other payables.
Non-derivative financial instruments are initially recognised at fair value, plus directly attributable transactions costs (if any). After initial
recognition, non-derivative financial instruments are measured as described below.
Loans and receivables
Loans and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate
method.
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans
and borrowings.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Financial liabilities
Financial liabilities include trade payables, other creditors and loans from third parties.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.
(o) Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures.
(p) Rounding of amounts
The parent entity and the consolidated entity have applied the relief available under ASIC Corporations (Rounding in Financial /
Directors' Reports) Instrument 2016/191 and accordingly, the amounts in the consolidated financial statements and in the directors'
report have been rounded to the nearest dollar.
Page 50
For personal use only Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Accounting standards issued but not yet effective at 30 June 2017
The following standards and interpretations have been issued at the reporting date but are not yet effective. The directors'
assessment of the impact of these standards and interpretations is set out below.
(i) AASB 15: Revenue from Contracts with Customers (applicable for annual reporting periods commencing on or after 1 January
2018)
AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being for entities to
recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is,
payment) to which the entity expects to be entitled in exchange for those goods or services. The five step approach is as follows:
step 1 - identify the contracts with the customer; step 2 - identify the separate performance obligations; step 3 - determine the
transaction price; step 4 - allocate the transaction price; and step 5 - recognise revenue when a performance obligation is satisfied.
AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously
addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element
arrangements.
The changes in revenue recognition requirements in AASB 15 are not expected to materially impact the timing and amount of
revenue recorded in the financial statements. There may be additional disclosure requirements which have not yet been quantified.
(ii) AASB 9: Financial Instruments (applicable for annual reporting periods commencing on or after 1 January 2018)
Significant revisions to the classification and measurement of financial assets, reducing the number of categories and simplifying
the measurement choices, including the removal of impairment testing of assets measured at fair value. The amortised cost model
is available for debt assets meeting both business model and cash flow characteristics tests. All investments in equity instruments
using AASB 9 are to be measured at fair value.
AASB 9 amends measurement rules for financial liabilities that the entity elects to measure at fair value through profit and loss.
Changes in fair value attributable to changes in the entity’s own credit risk are presented in other comprehensive income.
Revised disclosures about an entity’s hedge accounting have also been added to AASB 7 Financial Instruments: Disclosures .
Impairment of assets is now based on expected losses in AASB 9 which requires entities to measure: the 12-month expected credit
losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months
after the reporting date); or full lifetime expected credit losses (expected credit losses that result from all possible default events over
the life of the financial instrument.
The changes in AASB 9 are not expected to materially impact the measurement of financial instruments recorded in the financial
statements. There may be additional disclosure requirements which have not yet been quantified.
(iii) AASB 16: Leases (applicable for annual reporting periods commencing on or after 1 January 2019)
AASB 16 will replace AASB 117: Leases and introduces a single lessee accounting model that will require a lessee to recognise
right-of-use assets and lease liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
Right-of-use assets are initially measured at their cost and lease liabilities are initially measured on a present value basis.
Subsequent to initial recognition:
- right-of-use assets are accounted for on a similar basis to non-financial assets, whereby the right-of-use asset is accounted for in
accordance with a cost model unless the underlying asset is accounted for on a revaluation basis, in which case if the underlying
asset is:
- investment property, the lessee applies the fair value model in AASB 140: Investment Property to the right-of-use asset; or
- property, plant or equipment, the lessee can elect to apply the revaluation model in AASB 116: Property, Plant and Equipment to
all of the right-of-use assets that relate to that class of property, plant and equipment; and
- lease liabilities are accounted for on a similar basis as other financial liabilities, whereby interest expense is recognised in respect
of the liability and the carrying amount of the liability is reduced to reflect lease payments made.
AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, under AASB 16 a lessor would
continue to classify its leases as operating leases or finance leases subject to whether the lease transfers to the lessee substantially
all of the risks and rewards incidental to ownership of the underlying asset, and would account for each type of lease in a manner
consistent with the current approach under AASB 117.
Although the directors anticipate that the adoption of AASB 16 may have an impact on the Group’s accounting for its operating
leases, it is impracticable at this stage to provide a reasonable estimate of such impact.
Page 51
For personal use only Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 2: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts
in the financial statements. Management continually evaluates its estimates in relation to assets, liabilities, contingent liabilities,
revenue and expenses. Management bases its estimates on historical experience and on other various factors it believes to be
reasonable under the circumstances.
The estimates and assumptions based on future events have a significant inherent risk, and where future events are not anticipated
there could be a material impact on the carrying amounts of the assets and liabilities in future periods, as discussed below.
(i) Significant accounting judgments
Income tax
Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in the income tax legislation and the
anticipation that the group will derive sufficient future assessable income to enable the benefit to be realised and comply with the
conditions of deductibility imposed by the law.
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable
profits will be available to utilise those temporary differences.
Consolidation of subsidiaries
The Company consolidates its interests in joint venture entities Cameron Street Developments Pty Ltd and Lifestyle Chelsea Heights
Pty Ltd in accordance with AASB 10 Consolidated Financial Statements requirements. The Company is exposed to variable returns
and is able to influence these returns via the power over the investee due to the structure of the arrangements with its joint venture
entities.
(ii) Significant accounting estimates and assumptions
Valuation of investment properties
The Group values investment properties at fair value. Fair value is determined by a combination of the discounted annuity streams
associated with the completed and settled home units and the fair value of the undeveloped land.
Inputs for the fair value of investment
properties are derived from independent and Directors' valuations and are adjusted to reflect actual rental income.
Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value of the EIS is measured based on the share price at grant date and the fair value of
the ESLP is determined using the Black-Scholes model. Refer to Note 24 for further detail. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next
annual reporting period but may impact expenses and equity.
NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES
The Group’s principal financial instruments comprise loan notes, bank loans, finance leases, cash and term deposits, trade and other
receivables and trade payables.
The Group manages its exposure to key financial risk, including interest rate risk in accordance with the Group's financial risk
management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting future financial
security.
The main risks arising from the Group’s financial instruments are interest rate risk, market risk, credit risk and liquidity risk. The Group
uses different methods to measure and manage different types of risks to which it is exposed. These include market forecasts for
interest rates. Liquidity risk is monitored through the development of future rolling cash flow forecasts. These procedures are sufficient
to identify when mitigating action might be required.
Page 52
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES (continued)
The Board reviews and agrees policies for managing each of these risks as summarised as follows:
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates to the Group’s long-term debt obligations. The level of
debt is disclosed in Note 17.
In August 2015 the Group re-financed a $27.6 million long-term loan facility that was subject to variable interest rates with an $80
million facility that is subject to variable interest rates.
Long-term debt obligations
As at balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk
(being the bank bill business rate):
Financial assets
Cash and cash equivalents
Financial liabilities
Bank overdraft
Secured loans - bank finance
Net exposure
2017
$
2016
$
3,653,118
3,352,040
12,364
47,000,000
47,012,364
2,558,487
46,000,000
48,558,487
(43,359,246)
(45,206,447)
If interest rates had moved and been effective for the period, as illustrated in the table below, with all other variables held constant,
post tax profit and equity would have been affected as follows:
Consolidated
+1% (100 basis points)
-1% (100 basis points)
Post Tax Profit
Higher/(Lower)
2017
$
2016
$
Equity
Higher/(Lower)
2017
$
2016
$
(303,515) (316,445) (303,515) (316,445)
303,515 316,445 303,515 316,445
When determining the parameters for a possible change in interest rate risk, management has taken into consideration the current
economic environment at balance sheet date and historical movements.
A proportion of the impact on post tax profit is deferred due to the capitalisation of interest to inventory which is recognised when units
are sold.
Market risk
At balance date, the Group has no financial instruments exposed to material market risks other than interest rate risk.
Page 53
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES (continued)
Risk exposure and responses (continued)
Credit risk
There are no significant concentrations of credit risk within the Group.
Credit risk arises from the financial assets for the Group, which comprise cash and cash equivalents, and trade and other receivables.
The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying
amount of these instruments. Exposure at balance date has been assessed as minimal as the financial assets have been assessed as
having a high likelihood of being received.
Liquidity risk
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of a bank facility. The Group
ensures that there is sufficient liquidity within the bank facility by maintaining internal credit requirements that are more conservative
than the financier.
The Group's debt as at balance date is outlined at Note 17.
The table below represents the undiscounted contractual settlement terms for financial instruments and management expectation for
settlement of undiscounted maturities.
The remaining contractual maturities of the Group's financial liabilities are:
6 months or less (1)
6-12 months (2)
1-2 years
2-3 years
3-4 years (3)
4-5 years
2016
2017
$
$
14,364,641
7,588,567
19,255,800
-
- -
- -
47,000,000
-
- 46,000,000
60,364,641
73,844,367
(1) This amount is represented by the following financial liabilities:
- $1,022,250 relates to customer deposits which typically convert to settlement within six months or less.
- $1,265,795 relates to deferred revenue which will be bought to account within six month or less.
- $5,300,522 relates to trade and other payables, refer to Note 15 for further detail.
(2) This amount is represented by the following financial liabilities:
- $12,102,300 relates to a contractual obligation for the unconditional contract to purchase land in Ocean Grove.
- $7,153,500 relates to a contractual obligation for the unconditional contract to purchase land in Bittern.
(3) On 26 August 2015 the company re-financed its bank facilities with Westpac Banking Corporation securing an $80,000,000 facility
with the first drawdown occurring on 25 September 2015. This facility is subject to internal credit management procedures whereby
funds drawn are allocated between development debt (capitalised to inventory) and pre-development debt (expensed). Development
debt includes funding for inventory and pre-development debt includes funding for undeveloped land. As at 30 June 2017 total debt
was $47,000,000 with $18,717,722 allocated to development debt and $28,282,278 allocated to pre-development debt (as at 30 June
2016 total debt was $46,000,000 with $33,607,940 allocated to development debt and $12,392,060 allocated to pre-development debt).
The Group has met all required covenants since the arrangements commenced and therefore expects that all current arrangements will
continue until the sooner of repayment or expiry.
Page 54
For personal use only Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 4: FAIR VALUE MEASUREMENTS
(a) Fair value hierarchy
Assets and liabilities measured and recognised at fair value have been determined by the following fair value measurement hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Inputs for the asset or liability that are not based on observable market data
30-Jun-17
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
30-Jun-16
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
Level 1
$
-
-
Level 1
$
-
-
Level 2
$
-
-
Level 2
$
-
-
Level 3
$
211,294,274
211,294,274
Level 3
$
163,676,707
163,676,707
Total
$
211,294,274
211,294,274
Total
$
163,676,707
163,676,707
(b) Valuation techniques and inputs used in level 3 fair value measurements
(i) Investment properties
The fair value of investment properties is determined by a combination of inputs from independent valuations and Directors' valuations.
Fair value is determined by a combination of the discounted annuity streams associated with the completed home units and the fair
value of the undeveloped land. Inputs, including discount rates, deferred management fee annuity value, and management expense
rates are derived from independent valuations. Rental capitalisation rates are derived from a combination of independent and Directors'
valuations. Some inputs relating to the rental annuity streams are adjusted to reflect appropriate data relating to the rental at those
communities that weren't valued in the current year. The fair value of undeveloped land is based on inputs from independent
valuations. Inputs from independent valuations are provided by property valuers who are industry specialists in valuing these types of
investment properties.
Investment properties have been classified as level 3 as it is an internally generated calculation that contains some non-observable
market inputs. The company does not adjust some of the major inputs obtained from the independent valuations such as discount
rates, the deferred management fee annuity values, and the management expense rates.
(c) Significant unobservable inputs used in level 3 fair value measurements
Rental capitalisation rates - rates were taken directly from the valuations for the six communities independently valued in the current
year. In relation to the remaining seven communities (independently valued in the prior year) the Directors have adjusted the rental
capitalisation rates to reflect those adopted by the independent valuers.
Deferred management fee annuity - the valuation for this component is taken directly from independent valuations.
Rental annuity - weekly rental rates were taken directly from the valuations for the six communities independently valued in the current
year. In relation to the remaining seven communities (independently value in the prior year) the Directors have adjusted the rate
adopted in the prior year by inflation to reflect annual rent increases.
Undeveloped land - the valuation for this component is taken from inputs within the independent valuations.
Below is a summary of the significant unobservable inputs utilised across the portfolio, including the inputs obtained from the
independent valuations:
Weekly rentals ($)
Anticipated % expenses (as a percentage of rental income)
Rental capitalisation rates (%)
Rental values per unit ($)
Deferred management fee discount rates (%)
Deferred management fee values per unit ($)
Valuation of undeveloped land (per hectare) ($'million)
Per valuations
Adopted
174.13 - 188.12
180.22 - 188.12
30.0% - 41.5%
30.0% - 41.5%
7.75%
7.75%
72,549 - 87,472
72,549 - 87,472
13.00% - 14.25% 13.00% - 14.25%
21,262 - 46,083
21,262 - 46,083
0.17 - 1.75
0.17 - 1.75
Page 55
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 4: FAIR VALUE MEASUREMENTS (continued)
(d) Reconciliation of recurring level 3 fair value movements
(i) Investment properties
Opening balance
Additions (contracted land and capitalised costs)
Net unrealised gain from fair value adjustments
Closing balance
2017
$
2016
$
163,676,707
19,818,775
27,798,792
211,294,274
132,757,442
11,994,400
18,924,865
163,676,707
Gains and losses are recognised in the statement of comprehensive income within fair value adjustments.
(e) Valuation processes used for level 3 fair value measurements
(i) Investment properties
The Company obtains independent valuations of each community at least every two years. The Company uses the independent
valuers' inputs in relation to the rental and deferred management fee annuity streams for communities valued in the current year. For
those communities valued in the prior year the Directors utlise inputs from independent valuations to assess whether rental
capitalisation rates and weekly rental income should be adjusted. These adjustments are assessed at each period end. The
directors assess the value attributed to undeveloped land annually. Land contracted in any period is recognised at cost until the first
valuation is obtained.
(f) Sensitivity analysis for recurring level 3 fair value measurements
(i) Investment properties
The impact of changes to the inputs that affect the valuation of investment properties is assessed below:
Rental income
Rental is contractually fixed to increase by the greater of CPI or 3.5% annually. Therefore it is unlikely that there will be any material
sensitivities in relation to rental income.
Management expense as a percentage of rental income
+2%
-2%
Rental capitalisation rate
+0.50%
-0.50%
Deferred management fee per unit
+5%
-5%
Land prices (undeveloped land)
+10%
-10%
Post Tax Profit
Higher/(Lower)
2017
$
2016
$
Equity
Higher/(Lower)
2017
$
2016
$
(2,582,472)
2,582,472
(1,947,205)
1,947,205
(2,582,472)
2,582,472
(1,947,205)
1,947,205
(5,147,094)
5,857,038
(3,774,935)
4,272,198
(5,147,094)
5,857,038
(3,774,935)
4,272,198
2,031,444
(2,031,444)
1,441,886
(1,441,886)
2,031,444
(2,031,444)
1,441,886
(1,441,886)
2,782,406
(2,782,406)
2,084,286
(2,084,286)
2,782,406
(2,782,406)
2,084,286
(2,084,286)
NOTE 5: FAIR VALUE ADJUSTMENTS
Net unrealised gain from fair value adjustments - investment properties (Note 14) (a)
Other fair value adjustments (b)
27,798,792
(1,134,584)
26,664,208
18,924,865
-
18,924,865
(a) Fair value adjustment results from restating communities to their fair value at balance date. This income represents incremental
adjustments to the fair value of investment properties upon settlement of units and reflects the discounted value of future rental and
deferred management fee revenues net of expenses as well as the fair value of undeveloped land.
(b) Other fair value adjustments relate to transactions incurred that are not directly relating to investment properties but are fair value
in nature.
Page 56
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 6: PROFIT FROM CONTINUING OPERATIONS
Profit from continuing operations before income tax has been determined after the following specific revenues and expenses:
2017
$
2016
$
Revenues
(i) Deferred management fee
Deferred management fees received
Selling and administration fees
Expenses
(i) Finance costs expensed
Bank loans
Other
Amortisation of loan facility fees
3,471,230
640,922
4,112,152
2,044,930
463,775
2,508,705
893,213
213,543
75,055
1,181,811
708,196
-
134,334
842,529
(ii) Finance costs capitalised
Finance costs expensed excludes the following interest capitalised as part of inventory:
Bank loans
Interest has been capitalised at the prevailing facility interest rate and is expensed through costs of sales as a pro-rata amount per
home settled.
1,107,820
1,247,543
(iii) Management rental expenses
Management expenses attributable to communities
Surplus applicable to joint venture partners
(iv) Management deferred management fee expenses
Deferred management fee sales and marketing expenses
Surplus applicable to joint venture partners
(v) Plant and equipment
Depreciation (Note 13)
Write-off of plant and equipment (Note 13)
(vi) Employee benefits expense
Wages and salaries
Defined contribution superannuation expense
Share based payments expense
Movement in employee provisions
5,209,778
1,054,109
6,263,887
4,289,730
969,757
5,259,487
577,429
653,983
1,231,412
438,473
31,899
470,372
5,072,679
428,504
270,024
127,244
5,898,451
348,689
191,680
540,369
339,995
-
339,995
4,036,162
340,825
68,369
139,080
4,584,436
Page 57
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 7: INCOME TAX
(a) Components of tax expense
Current tax
Deferred income tax
Over provision in prior years
(b) Deferred income tax expense included in income tax expense comprises
Decrease / (increase) in deferred tax assets
Increase in deferred tax liabilities
(c) Reconciliation between tax expense recognised in the income statement and tax expense
Accounting profit before tax
At the statutory income tax rate of 30% (2015:30%)
Add / (less):
Share based payments
Non-controlling interests accounting and tax adjustments
Capital loss adjustments
Other
Income tax expense
(d) Current tax
Current tax relates to the following:
Opening balance
Income tax
Tax payments
Over provision
Current tax liabilities
(e) Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Borrowing costs
Capital raising costs
Capital losses
Inventory
Tax losses
Provision for employee entitlements
Accruals & business expenses
Deferred tax liabilities
The balance comprises:
Interest capitalised
Receivables
Investment property fair value adjustments
Net deferred tax liability
(e) Deferred tax assets not brought to account
Capital tax losses
2017
$
2016
$
4,484,861
8,151,436
-
12,636,296
2,431,998
5,630,702
(125,420)
7,937,280
(69,772)
8,221,207
8,151,436
(26,770)
5,657,472
5,630,702
40,333,397
28,552,996
12,100,019
8,565,899
81,007
(6,943)
240,000
222,213
12,636,296
20,510
(517,737)
-
(131,392)
7,937,280
360,801
4,484,861
(4,271,195)
-
574,467
1,807,369
2,431,998
(3,753,146)
(125,420)
360,801
-
35,702
241,872
41,794
719,977
207,033
697,521
1,943,900
70,298
107,075
465,831
-
889,425
168,860
172,639
1,874,128
1,003,416
277,500
36,134,948
37,415,864
1,249,347
-
27,945,309
29,194,656
35,471,964
27,320,528
240,000
-
Page 58
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 8: DIVIDENDS
(a) Dividends
2017
$
2016
$
Dividends paid $0.030 per share (2016: $0.025 per share) fully franked
3,127,356
2,594,859
(b) Dividends declared after balance date and not
recognised
Since balance date the directors have recommended a
dividend of 2.0 cents per share fully franked at 30%
Balance of franking account on a tax paid basis at balance date adjusted for
franking credits arising from payment of current tax payable and franking
debits arising from the payment of dividends declared at balance date:
NOTE 9: CASH & CASH EQUIVALENTS
CURRENT ASSETS
Cash at bank and on hand
Short-term deposits
CURRENT LIABILITIES
Bank overdraft
NET CASH
NOTE 10: TRADE AND OTHER RECEIVABLES
CURRENT
Other receivables
Land proceeds receivable (a)
2,090,903
1,563,177
7,927,602
6,340,221
3,653,118
-
3,653,118
3,145,540
206,500
3,352,040
12,364
2,558,487
3,640,754
793,553
399,805
925,000
1,324,805
819,425
-
819,425
(a) Land proceeds receivable relates to an unconditional contract that was signed prior to balance date and is expected to settle
within six months or less. The land being sold is surplus land at Casey Fields that is unable to be incorporated within the current
community.
Fair value and credit risk
Due to the short term nature of other receivables, their carrying amount is assumed to approximate their fair value. The maximum
exposure to credit risk is the fair value of receivables.
NOTE 11: INVENTORIES
CURRENT
Housing
Civils & infrastructure
NON-CURRENT
Housing
Civils & infrastructure
TOTAL INVENTORIES
21,263,729
13,105,113
34,368,842
19,333,323
16,214,949
35,548,272
46,243
10,518,218
10,564,461
1,625,640
12,571,933
14,197,573
44,933,303
49,745,845
(a) Inventory expense
Inventories recognised as an expense for the year ended 30 June 2017 totalled $64,360,083 for the Group (2016: $43,080,471). The
expense has been included in the cost of sales line item.
Page 59
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 12: OTHER CURRENT ASSETS
Security deposits
Other assets
Prepayments
2017
$
2016
$
160,456 189,067
159,273 252,306
1,159
209,180
320,888 650,553
Fair value and credit risk
Due to the short term nature of other current assets, their carrying amount is assumed to approximate their fair value. The maximum
exposure to credit risk is the fair value of other current assets.
NOTE 13: PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliation of carrying amounts at the beginning and end of the period
Year end 30 June 2017
At 1 July 2016 net of accumulated
depreciation
Additions
Write-off
Transfers / change in depreciation rate (i)
Depreciation charge for the year
At 30 June 2017 net of accumulated
depreciation
At 30 June 2017
Cost
Accumulated depreciation
Net carrying amount
Year end 30 June 2016
At 1 July 2015 net of accumulated
depreciation
Additions
Transfer (i)
Depreciation charge for the year
At 30 June 2015 net of accumulated
depreciation
At 30 June 2016
Cost
Accumulated depreciation
Net carrying amount
Buildings
$
Plant and
equipment
$
Computer
equipment
$
Motor
vehicles
$
Total
$
1,985,542
1,697,329
164,280
380,467
4,227,618
49,126
-
(8,198)
(54,842)
366,308
(30,853)
(45,628)
(247,768)
208,083
(1,046)
9,125
(70,074)
145,306
-
109,521
(65,789)
768,823
(31,899)
64,821
(438,473)
1,971,628
1,739,388
310,368
569,505
4,590,889
2,233,149
(261,521)
1,971,628
2,462,180
(722,792)
1,739,388
462,549
(152,181)
310,368
871,191
(301,686)
569,505
6,029,069
(1,438,180)
4,590,889
1,263,814
1,125,844
98,389
306,383
2,794,430
38,502
729,573
(46,347)
739,723
-
(168,238)
124,402
-
(58,511)
140,982
-
(66,899)
1,043,609
729,573
(339,995)
1,985,542
1,697,329
164,280
380,467
4,227,618
2,184,023
(198,481)
1,985,542
2,589,508
(892,179)
1,697,329
506,412
(342,132)
164,280
718,959
(338,493)
380,467
5,998,902
(1,771,285)
4,227,618
(i) the fixed asset register was streamlined for depreciation type / rate consistency across all asset sub-categories during the year.
Page 60
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 14: INVESTMENT PROPERTIES
2017
$
2016
$
Investment properties at fair value
211,294,274
163,676,707
(a) Reconciliation of carrying amounts at the beginning and end of the period
Opening balance as at 1 July
Additions
Net gain from fair value adjustments
Closing balance as at 30 June
163,676,707
19,818,775
27,798,792
211,294,274
132,757,442
11,994,400
18,924,865
163,676,707
Investment properties are carried at fair value, which has been determined by a combination of inputs from independent valuations
and Directors' valuations. Fair value is determined by a combination of the discounted annuity streams associated with the completed
home units and the fair value of the undeveloped land. Inputs, including discount rates, deferred management fee annuity value, and
management expense rates are derived from independent valuations. Rental capitalisation rates are derived from a combination of
independent and Directors' valuations, rates were taken directly from independent valuations for the six communities independently
valued in the current year. In the remaining communities (independently valued in the prior year) the directors have adjusted the
rental capitalisation rates to reflect those adopted by the independent valuers. Weekly rental rates were taken directly from the
valuations for the six communities independently valued in the current year. In relation to the remaining seven communities
(independently value in the prior year) the Directors have adjusted the rate adopted in the prior year by inflation to reflect annual rent
increases. The fair value of the land is based on independent valuations. Inputs from independent valuations are provided by
property valuers who are industry specialists in valuing these types of investment properties.
The fair value represents the amount at which the assets could be exchanged between a knowledgeable willing buyer and a
knowledgeable willing seller in an arms length transaction at the date of the valuation, in accordance with Australian Accounting
Standards. In determining fair value, the expected net cash flows applicable to each property have been discounted to their present
value using a market determined, risk-adjusted, discount rate applicable to the respective asset.
All rental income and deferred management fee income disclosed in the income statement was generated from investment
properties. All management expense relates to investment properties that generated rental income.
Investment properties are subject to a first charge, forming, in part, the security of the Group’s loans as disclosed in Note 17.
The investment properties are at various stages of development and are subject to further development until fully completed.
(b) Carrying amount of investment properties if the cost method had been applied
86,546,962
66,728,187
NOTE 15: TRADE AND OTHER PAYABLES
CURRENT
Trade payables (a)
Customer deposits (b)
GST payable
Other payables and accruals (c)
Contracted land (d)
Deferred revenue (e)
1,459,544
1,022,250
885,932
2,955,046
19,255,800
1,265,795
26,844,367
1,005,733
878,575
391,673
945,765
10,934,750
208,145
14,364,641
(a) Trade payables
Trade payables are non-interest bearing and are normally settled on 7 to 30 day terms. Due to the short term nature of trade
payables, their carrying amount is assumed to approximate their fair value.
(b) Customer deposits
These represent deposits received from customers that are recognised as revenue upon home settlement.
(c) Other payables
Other payables are non-traded payables, are non-interest bearing and have an average term of 30 days.
(d) Contracted land
Includes $11,340,000 payable on the settlement of land at Ocean Grove (scheduled to settle in the second-half of the 2018 financial
year), $6,730,000 payable on the settlement of land at Bittern (scheduled to settle in the second-half of the 2018 financial year) and
$1,185,800 accrued stamp duty due upon settlement of both parcels.
(e) Deferred revenue
These represent cash received upon the payment of rental and home settlement invoices that relates to a future financial period and
will be recognised as income within the next financial year.
Page 61
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 16: PROVISIONS
CURRENT
Employee provisions
NON-CURRENT
Employee provisions
NOTE 17: INTEREST-BEARING LOANS AND BORROWINGS
NON-CURRENT
Secured loans - bank finance
For terms and conditions attached to each type of borrowing, refer to section (c)
2017
$
2016
$
316,016
251,792
374,094
311,074
47,000,000
46,000,000
(a) Secured loans - bank finance maturity
As at reporting date the company has drawn $47,012,364 comprising a facility a loan of $47,000,000 and a bank overdraft of $12,364
of the $80,000,000 facility with Westpac Banking Corporation. The facility has an expiry of greater than one year, expiring on 26
August 2020.
(b) Fair values
Unless disclosed below, the carrying amount of the Group's current and non-current borrowings approximate their fair value.
(c) Terms and conditions
(i) Bank overdraft
As at reporting date the company has a bank overdraft of $12,364. The Company has a $5,000,000 overdraft sub-limit as part of the
$80,000,000 facility with Westpac Banking Corporation.
(i) Non-current secured loans - bank finance
As at reporting date the company has drawn $47,000,000 in addition to the bank overdraft of $12,364. The $80,000,000 facility
agreement was signed on 26 August 2015. The facility has an expiry of greater than one year, expiring on 26 August 2020.
The Group has met all required covenants since the arrangements commenced and therefore expects that all current arrangements will
continue until the sooner of repayment or expiry.
(d) Assets pledged as security
The $80,000,000 facility held with Westpac Banking Corporation is secured by the following:
- General Security Deeds between Westpac Banking Corporation and Lifestyle Communities Limited, Lifestyle Investments 1 Pty Ltd,
Lifestyle Developments 1 Pty Ltd, Lifestyle Management 1 Pty Ltd, Brookfield Village Development Pty Ltd, Brookfield Village
Management Pty Ltd, Lifestyle Investments 2 Pty Ltd, Lifestyle Developments 2 Pty Ltd, Lifestyle Management 2 Pty Ltd and Lifestyle
Communities Investments Cranbourne Pty Ltd.
Mortgage by Lifestyle Investments 1 Pty Ltd over Melton, Tarneit and Warragul properties.
Mortgage by Lifestyle Investments 2 Pty Ltd over the Shepparton, Hasting, Wollert, Geelong, Officer, and Berwick Waters properties.
(e) Defaults and breaches
During the current or prior year there have been no defaults or breaches of any banking covenants as set out in the Business Finance
Agreements with Westpac.
Page 62
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 18: CONTRIBUTED EQUITY
104,545,131 Ordinary shares (2016: 104,211,800 Ordinary shares)
Nil Convertible repurchase-able employee shares (CRES) (2016: 453,331 CRES)
174,086 Treasury shares (2016: nil)
2017
$
2016
$
63,919,070
63,822,710
-
(715,000)
63,204,070
-
-
63,822,710
(i) Reconciliation of Ordinary shares
Opening balance
Repayment of CRES loan
Issue of shares - conversion of CRES to ordinary shares
Issue of shares - conversion of options to ordinary shares
Closing balance
2017
2016
Number
104,211,800
-
333,331
-
104,545,131
$
63,822,710
96,360
-
-
63,919,070
Number
102,961,799
$
63,027,710
-
200,001
1,050,000
104,211,800
-
-
795,000
63,822,710
(ii) Reconciliation of CRES
Opening balance
Conversion to ordinary shares
Issue of CRES shares
Cancellation of CRES shares
Closing balance
(ii) Reconciliation of Treasury shares
Opening balance
Purchase of treasury shares
Closing balance
2017
2016
Number
$
Number
453,331
(333,331)
-
(120,000)
-
2017
Number
-
174,086
174,086
-
-
-
-
-
-
$
(715,000)
(715,000)
533,332
(200,001)
120,000
-
453,331
2016
Number
-
-
-
$
$
-
-
-
-
-
-
-
-
(a) Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
(b) CRES
800,000 convertible repurchase-able employee shares were issued on 22 May 2013 pursuant to the employee share loan plan
approved at the 2012 AGM. All CRES have now been converted to ordinary shares. The conversion of 800,000 CRES to ordinary
shares has crystallised a non-recourse loan with selected employees. This loan will only be brought to account upon settlement of the
loan by the employee. Loans in respect of 110,000 CRES were brought to account in FY2017 (FY2016: nil). For further information
relating to the value prescribed to the CRES refer to Note 24.
120,000 CRES shares issued in the prior year were cancelled in the current year due to a cessation of employment.
(c) Treasury shares
Treasury shares represent shares purchased by an Employee Share Trust that have not been issued to employees at balance date
pursuant to the Equity Incentive Scheme.
(d) Capital management
When managing capital, management's objective is to ensure the entity continues as a going concern as well as to maintain optimal
returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the entity by assessing the cost of equity (share issue), cost of debt (borrowings) or a combination of
both.
Dividends
As a general principle, the Directors of Lifestyle Communities intend to declare dividends out of post tax, operating cash flow generated
from community management. In FY2017 community management cash flows delivered a sufficient surplus to declare and pay an
interim fully franked dividend of 1.5 cent per share ($1,564,179) and declare a final fully franked dividend of 2.0 cents per share
($2,090,903).
Considerations in determining the level of free cash flow from which to pay dividends include: operating cash flow generated from
community management; the projected tax liability of Lifestyle Communities Limited; the level of corporate overheads attributable to
community roll out; the level of interest to be funded from free cash flow; and additional capital needs of the development business.
The Group is not subject to externally imposed capital requirements.
Page 63
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 19: RETAINED EARNINGS AND RESERVES
(a) Movements in retained earnings were as follows:
Balance 1 July
Net profit
Transfer from reserves
Dividends paid
(b) Reserves
Opening balance
Option expense (CRES)
Other share based payments expense (EIS)
Reversal to retained earnings due to cancelled CRES
Closing balance
2017
$
2016
$
65,920,305
27,695,112
30,058
(3,127,356)
90,518,119
49,246,482
19,268,682
-
(2,594,859)
65,920,305
Share based payments
reserve
$
2017
1,561,850
23,010
247,014
(30,058)
1,801,816
$
2016
1,493,481
68,369
-
-
1,561,850
The option reserve is used to record the fair value of options / CRES issued to employees as part of their remuneration as well as
expenses pursuant to the Equity Incentive Scheme. Refer Note 24 for further details.
NOTE 20: NON-CONTROLLING INTERESTS
Interest in:
Retained earnings
Details of subsidiaries with non-controlling interests
-
-
(a) The Group has a 50% interest (2015: 50%) in the subsidiary entity, Cameron Street Developments Unit Trust, whose principal
activity is the development of a master planned residential village. The Group's voting power is equal to its ownership interest. The
entity is registered and operates in Australia.
Cameron Street Developments Unit Trust commenced its operations in November 2010.
(i) Summarised financial information for subsidiary:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
2017
$
2016
$
446,051
-
446,051
446,051
-
446,051
477,523
-
477,523
477,523
-
477,523
-
-
The joint venture arrangement provides significant restrictions on the use of assets and liabilities to protect the non-controlling interest.
There are many key decisions that require agreement from non-controlling interests including: entering into unbudgeted capital
commitments greater than $50,000; sales and purchases of assets that are greater than 10% of total assets; and substantial alteration
to the strategic direction of the activities.
Revenues
Expenses
Net profit after tax from continuing operations
Profit allocated to non-controlling interest
4,455
(3,221)
1,234
653,320
(464,541)
188,779
617
94,389
Page 64
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 20: NON-CONTROLLING INTERESTS (continued)
Details of subsidiaries with non-controlling interests (continued)
(ii) Summarised financial information for subsidiaries' cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net cash flows
(iii) Summarised financial information for subsidiaries' trust distributions:
Trust distributions
(iv) Summarised financial information for subsidiaries' contingent liabilities:
Bank guarantees
Bank guarantees are funded by the subsidiaries and are secured by term deposits.
2017
$
2016
$
(30,238)
-
(300,838)
(331,076)
454,315
(4,169)
(383,341)
66,805
1,234
188,779
-
100,000
(b) The Group has a 50% interest (2015: 50%) in the subsidiary entity, Lifestyle Chelsea Heights Unit Trust, whose principal activity is
the development of a master planned residential village. The Group's voting power is equal to its ownership interest. The entity is
registered and operates in Australia.
Lifestyle Chelsea Heights Unit Trust commenced its operations in 22 December 2011.
(i) Summarised financial information for subsidiary:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
8,330
-
8,330
8,330
-
8,330
-
111,630
-
111,630
111,630
-
111,630
-
The joint venture arrangement provides significant restrictions on the use of assets and liabilities to protect the non-controlling interest.
There are many key decisions that require agreement from non-controlling interests including: entering into unbudgeted capital
commitments greater than $50,000; sales and purchases of assets that are greater than 10% of total assets; and substantial alteration
to the strategic direction of the activities.
Revenues
Expenses
Net profit after tax from continuing operations
Profit allocated to non-controlling interest
(ii) Summarised financial information for subsidiaries' cash flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net cash flows
(iii) Summarised financial information for subsidiaries' trust distributions:
Trust distributions
(v) Summarised financial information for subsidiaries' contingent liabilities:
Bank guarantees
Bank guarantees are funded by the subsidiaries and are secured by term deposits.
4,306
(1,562)
2,744
8,342,057
(5,836,768)
2,505,289
1,372
1,252,645
(21,496)
(85,232)
-
(106,728)
3,898,397
(31,220)
(5,269,303)
(1,402,126)
2,744
2,505,289
-
106,182
Page 65
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 21: CASH FLOW STATEMENT RECONCILIATION
a) Reconciliation of net cash flows from operating activities to operating profit
Operating profit after income tax
Adjustment for non-cash items:
Depreciation
Amortisation
Write-off of plant and equipment
Share option expense
Fair value adjustment
Add back/(subtract) changes in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Increase/(decrease) in current tax
Increase in deferred tax
Net cash flow from operating activities
NOTE 22: EARNINGS PER SHARE
The following reflects the income and weighted average number of shares used in the basic and
diluted earnings per share computations:
(a) Earnings used in calculating earnings per share
For basic and diluted earnings per share:
Net profit
(b) Weighted average number of shares
2017
$
2016
$
27,697,101
20,615,716
373,653
75,055
31,899
270,024
(26,664,208)
339,995
134,334
-
68,369
(18,924,865)
(914,098)
7,445,552
837,419
127,244
213,667
8,151,438
17,644,745
(102,771)
(20,051,895)
(598,551)
139,080
(1,446,568)
5,630,701
(14,196,456)
27,695,112
19,268,682
Weighted average number of ordinary shares for basic earnings per share
104,292,165
103,673,650
Effect of dilution:
Share options
198,250
629,841
Weighted average number of ordinary shares adjusted for dilution
104,490,415
104,303,491
There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of
ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial
statements.
Page 66
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 23: RELATED PARTY DISCLOSURES
(a) Subsidiaries
The consolidated financial statements include the financial statements of Lifestyle Communities Limited and the subsidiaries listed in
the following table:
Name
Country of
incorporation
% Equity interest
2016
2017
Lifestyle Investments 1 Pty Ltd
Lifestyle Developments 1 Pty Ltd
Lifestyle Management 1 Pty Ltd
Lifestyle Seasons Pty Ltd
Lifestyle Cranbourne Pty Ltd
Brookfield Management Trust (Trustee: Brookfield
Village Management Pty Ltd)
Brookfield Development Trust (Trustee: Brookfield
Village Development Pty Ltd)
Lifestyle Communities Investments Cranbourne Pty
Ltd
Cameron Street Developments Pty Ltd
Cameron Street Developments Unit Trust (Trustee:
Cameron Street Developments Pty Ltd)
Lifestyle Investments 2 Pty Ltd
Lifestyle Developments 2 Pty Ltd
Lifestyle Management 2 Pty Ltd
Lifestyle Chelsea Heights Pty Ltd
Lifestyle Chelsea Heights Unit Trust (Trustee: Lifestyle
Chelsea Heights Trust Pty Ltd)
Lifestyle Warragul Pty Ltd
Lifestyle Shepparton Pty Ltd
Lifestyle Whirakee Pty Ltd
Lifestyle Parks Australia Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
100%
50%
50%
100%
100%
100%
100%
Carrying value of parent
entity’s interest
2017
$
2016
$
8,751,551
8,751,551
3
3
2
2
2
-
-
-
-
-
-
-
-
-
3
3
2
2
2
-
-
-
-
-
-
-
-
-
120
120
3
3
8,751,809
120
120
3
3
8,751,809
(b) Ultimate parent
Lifestyle Communities Limited is the ultimate Australian parent entity.
(c) Loans from related parties
There are no loans from related parties.
(d) Transactions with related parties
There were no transactions with related parties in the current or prior years.
Page 67
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 24: SHARE-BASED PAYMENTS
(a) Recognised share-based payment expenses
2017
$
2016
$
The expense recognised for employee services received during the year is shown in the table below:
Expenses arising pursuant to the ESLP
Expenses arising pursuant to the EIS
Total
23,010
247,014
270,024
68,369
-
68,369
(b) Types of share-based payment plans
Employee Share Loan Plan, 'ESLP'
The purpose of the ESLP is to provide eligible employees with an opportunity to acquire convertible repurchase‐able employee
shares ("CRES") in the Company and, by virtue of the fact that CRES are convertible into ordinary shares in the Company, thereby
enable them to participate in any growth in the value of the Company, encouraging them to improve the longer term performance of
the Company and its returns to shareholders, and to motivate and retain them. The issue of a CRES involves the granting of a
financial assistance loan to each participant for each CRES issued. The loan is due and payable on or before expiry of the CRES.
The ESLP was approved at the Company's 2012 AGM and 920,000 CRES shares have been issued under this plan to date, with
120,000 of these being cancelled in the financial year. The ESLP is available for selected employees but excludes directors.
It is
current policy not to issue further CRES under the ESLP.
When a participant ceases employment prior to the vesting of their CRES shares, the CRES are forfeited and the employee loan is
written off against CRES capital. The contractual life of each CRES share granted is five years. The vesting conditions require that the
owner of the CRES share has completed continuous service requirements with the Company since date of issue. There are no cash
settlement alternatives.
Equity Incentive Scheme, 'EIS'
The purpose of the EIS is to offer all employees (excluding Directors) the ability to obtain shares in the Company and enable them to
participate in any growth in the value of the Company, encouraging them to improve the longer term performance of the Company and
its returns to shareholders, and to motivate and retain them. Under this scheme, employees are offered ordinary shares in the
Company by way of share units issued by the share plan trustee in the Employee Share Trust.
There are two concurrent schemes, one for the senior management team and another for all other employees. Shares are offered in
September each year based on the business successfully meeting pre-determined home settlement targets in the prior financial year.
The first shares pursuant to this scheme will be issued in September 2017. Senior management shares have service conditions
whereby 100% of shares in respect of the 2017 financial year will be issued in September 2017 however 75% will be subject to a
service condition until September 2018 and then a further 50% will be subject to a service condition until September 2019 when all
shares will vest to the employees. The other scheme has no service requirements. An expense of $247,014 has been recorded in the
2017 financial year to reflect the estimated number of shares that will be issued in September 2017 in respect of home settlement
targets met in the 2017 financial year.
The fundamentals of the scheme was approved by the board of directors in the 2016 financial year and was formally adopted by the
board of directors in the 2017 financial year. The scheme will not result in new shares in the Company being issued. The Company
will make a cash contribution to the share plan trustee who will arrange the purchase of the required amount of shares on-market. The
Employee Share Trust has an independent share plan trustee and is not considered to be controlled by the Company.
(c) Share based payment expense pursuant to the EIS
The following table outlines expenses recognised pursuant to the EIS:
Shares earned in respect of the 2017 financial year
Vested at 30 June 2017
Average share price at measurement date ($)
Value recorded as share based payments expense ($)
Senior
management
20,000
20,000
2.59
51,800
Others
Total
77,180
61,744
3.16
195,214
97,180
81,744
3.02
247,014
Page 68
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 24: SHARE-BASED PAYMENTS (continued)
(d) Summaries of options and CRES granted
The following table illustrates the number (No.) and weighted average exercise price (WAEP) of, and movements in, share options
Outstanding at the beginning of the year
CRES issued during the year
Options exercised during the year
CRES exercised during the year
CRES cancelled during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
No.
453,331
-
-
(333,331)
(120,000)
-
-
2017
WAEP
A$
2016
No.
2016
WAEP
A$
1.358
-
-
0.876
2.696
-
1,583,332
120,000
(1,050,000)
(200,001)
-
453,331
-
66,667
0.797
2.696
0.757
0.876
-
1.358
0.876
(e) Weighted average remaining contractual life
The weighted average remaining contractual life for the share options and CRES outstanding as at 30 June 2017 is nil years (2016:
2.5).
(f) Range of exercise price
The range of exercise prices for options and CRES outstanding at the end of the year was nil (2016: $0.876 to $2.696).
(g) Weighted average fair value of options and CRES granted during the year
There were no options or CRES granted in the current year. The prior year weighted average fair value of CRES granted was $0.608.
(h) Option and CRES pricing models:
The fair value of the equity-settled share options granted under the 2011 ESOP, the 2013 ESLP (CRES) and the 2013 issue of options
to Bellwether Investments Pty Ltd for services is estimated as at the date of grant using a Black-Scholes Model taking into account the
terms and conditions upon which the options/CRES were granted.
Dividend yield (%)
Expected volatility (%) (4 year historical monthly)
Risk-free interest rate (%)
Vesting period at issue (years)
Time to expiry at issue (years)
Option/CRES exercise price ($)
Weighted average share price at measurement date ($)
ESOP
FY2011
ESLP (CRES)
FY2013
Options for
services
FY2013
ESLP (CRES)
FY2016
0%
67%
5.28%
2
5
$0.650
$0.700
3%
41%
2.81%
2, 3, 4
5
$0.876
$0.700
5%
43%
2.73%
-
5
$0.800
$0.700
3%
28%
2.20%
2, 3, 4
5
$2.696
$2.451
The expected volatility was determined by reference to the Group's individual historical volatility and is based on a four year monthly
calculation.
NOTE 25: SEGMENT INFORMATION
Operating segments are reported based on internal reporting provided to the Managing Director who is the Group's chief operating
decision maker.
The consolidated entity operates within one operating segment, being the property development and management industry. As a
result disclosures in the consolidated financial statements and notes are representative of this segment.
NOTE 26: KEY MANAGEMENT PERSONNEL
Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
2017
$
2016
$
1,443,988
121,690
56,586
1,622,264
1,344,078
101,831
43,582
1,489,491
There were no changes to employees defined as key management personnel during the 2017 financial year.
Page 69
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 27: COMMITMENTS AND CONTINGENCIES
(a) Commitments
2017
$
2016
$
Operating lease commitments receivable – Group as lessor
The Group has entered into commercial property leases with its residents in relation to its investment property portfolio, consisting of
the Group's land. The residential site leases provide for future lease commitments receivable as disclosed below.
These non-cancellable leases have remaining terms of between 82 and 90 years and are transferable. All leases include a clause to
enable upward revision of the rental charge on an annual basis according to prevailing market conditions.
Future minimum rentals receivable under non-cancellable operating leases as at balance date were as follows:
Within one year
After one year but not more than five years
After more than five years
Total minimum lease payments
15,665,465
62,661,862
1,278,233,029
1,356,560,356
12,581,362
50,325,446
1,030,380,327
1,093,287,134
Minimum lease payments were determined by measuring the current years rentals and measuring this over the standard 90 year lease
agreement.
Operating lease commitments payable - Group as lessee
The Group has entered into commercial property lease with its landlord for office premises. The contract provides for future lease
commitments payable as disclosed below.
The lease has an initial term of four years from the commencement date being 1 May 2014.
Future minimum rentals payable under non-cancellable operating leases as at balance date were as follows:
Within one year
After one year but not more than five years
Total minimum lease payments
Contracted construction commitments
Payable not later than one year
(b) Contingencies
166,441
-
166,441
162,464
135,386
297,850
4,290,530
5,080,611
(i) The Australian Taxation Office is continuing to undertake the GST Business Systems Review with the Company as part of their usual
review process. The Company has made a voluntary disclosure upon review of its lodgements with the ATO. The Australian Tax Office
is yet to finalise their review and as a result, the Directors remain unable to form a view on whether any additional GST liability will be
incurred.
(ii) Bank guarantees (secured by term deposits)
-
206,182
Page 70
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Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 28: AUDITORS REMUNERATION
The auditor of Lifestyle Communities Limited is Pitcher Partners.
Amounts received or due and receivable for current auditors:
An audit or review of the financial report of the entity and any other entity
in the consolidated group.
Other services in relation to the entity and any other entity in the
consolidated group - tax compliance, general tax advice, GST advice
and other agreed upon procedures.
NOTE 29: PARENT ENTITY DISCLOSURES
Required disclosures relating to Lifestyle Communities Limited as a parent entity:
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity:
Contributed equity
Reserves:
Option reserve
Accumulated profits / (losses)
Total equity
Net profit
Total comprehensive income
2017
$
2016
$
113,000
115,984
114,345
50,773
227,345
166,757
99,201,418
118,797,183
96,179,594
113,856,573
1,585,496
49,114,890
3,752,740
50,219,113
69,682,293
63,637,460
62,847,055
63,465,695
1,801,816
1,561,850
5,033,422
69,682,293
(1,390,085)
63,637,460
9,520,807
16,289,454
9,520,807
16,289,454
Subsequent to year end Lifestyle Developments 2 Pty Ltd, a subsidiary of Lifestyle Communities Limited, declared a dividend of
$20,000,000. This ensures that there are sufficient retained earnings within Lifestyle Communities Limited to declare its dividend.
NOTE 30: SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
There are no matters or affairs that have arisen since balance date which significantly affect or may significantly affect the operations
of the consolidated entity.
Page 71
For personal use only
Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 31: DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 17 December 2016, the wholly-owned
subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial
reports, and Directors' reports.
It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of
the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001 . If a winding up occurs under other provisions of the Act, the
Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given
similar guarantees in the event that the Company is wound up.
The parties subject to the Deed are:
- Lifestyle Communities Limited
- Lifestyle Investments 2 Pty Ltd
- Lifestyle Developments 2 Pty Ltd
The Deed was executed on 19 June 2015. Lifestyle Developments 2 Pty Ltd obtained relief pursuant to the Instrument for the year
ended 30 June 2017 (and prior year). Lifestyle Investments 2 Pty Ltd is ineligible for relief pursuant to the Class Order for the year
ended 30 June 2017 (and prior year) as it was a small proprietary company.
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the Company and
controlled entities which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee,
for the year ended 30 June 2017 (including prior year comparatives) is set out as follows:
(a) Consolidated Statement of Comprehensive Income of the closed group
Development revenue
Home settlement revenue
Cost of sales
Gross profit from home settlements
Management and other revenue
Rental revenue
Management fee income
Trust distributions
Finance revenue
Total management and other revenue
Fair value adjustments
less Expenses
Development expenses
Management expenses
Corporate overheads
Finance costs
Loss on disposal of assets
Profit before income tax
Income tax expense
Net profit from continuing operations
Profit is attributable to:
Members of the parent
Non-controlling interests
2017
$
2016
$
79,726,920
45,247,665
(64,160,895)
(36,671,617)
15,566,025
8,576,048
3,889,191
490,961
1,372
8,081
4,389,605
1,627,355
760,098
1,252,644
134,178
3,774,275
23,161,070
14,350,213
(4,951,534)
(3,889,191)
(5,770,625)
(1,154,756)
(4,848)
(3,994,273)
(1,627,355)
(4,850,339)
(612,831)
-
27,345,746
15,615,738
(6,868,673)
(4,606,034)
20,477,073
11,009,704
20,477,073
11,009,704
-
-
20,477,073
11,009,704
Page 72
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Notes to the Financial Statements
For the year ended 30 June 2017
NOTE 31: DEED OF CROSS GUARANTEE (continued)
(b) Summary of movements in consolidated retained earnings of the closed group
Balance 1 July
Dividends paid
Net profit
(c) Consolidated Statement of Financial Position of the closed group
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Other financial assets
Investment properties
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Bank overdraft
Trade and other payables
Current tax payable
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
2017
$
2016
$
17,294,345
(3,127,356)
20,477,073
34,644,062
8,879,500
(2,594,859)
11,009,704
17,294,345
3,617,285
115,841
34,817,532
-
441,679
38,992,337
10,564,461
1,736,532
8,893,334
129,070,031
150,264,358
2,886,063
1,781
34,982,475
-
611,225
38,481,544
15,085,060
1,481,389
8,893,334
84,567,276
110,027,059
189,256,695
148,508,603
12,364
25,110,022
574,467
316,016
26,012,869
155,300
47,000,000
374,094
16,064,484
63,593,878
2,558,487
6,978,478
360,801
251,792
10,149,558
155,300
46,000,000
311,073
9,213,767
55,680,140
89,606,747
65,829,698
99,649,948
82,678,905
63,204,070
1,801,816
34,644,062
99,649,948
63,822,710
1,561,850
17,294,345
82,678,905
Page 73
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Directors' Declaration
The directors declare that the:
1.
In the directors' opinion, the financial statements and notes thereto, as set out on pages 42 to 73, are in
accordance with the Corporations Act 2001, including:
(a) complying with Australian Accounting Standards and the Corporations Regulations 2001 , and other mandatory
professional reporting requirements;
(b) as stated in Note 1(a), the consolidated financial statements also comply with International Financial Reporting
Standards; and
(c) giving a true and fair view of
the financial position of
the consolidated entity as at 30 June 2017 and its
performance for the year ended on that date.
2.
In the directors' opinion there are reasonable grounds to believe that Lifestyle Communities Limited will be able to
pay its debts as and when they become due and payable.
At the date of this declaration, there are reasonable grounds to believe that the members of the closed group identified
in Note 31 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 31.
This declaration has been made after receiving the declarations required to be made by the chief executive officer and
the managing director to the directors in accordance with section 295A of the Corporations Act 2001 for the financial
year ending 30 June 2017.
This declaration is made in accordance with a resolution of the Directors.
Tim Poole James Kelly
Chairman Managing Director
Melbourne, 16 August 2017
Page 74
For personal use only
LIFESTYLE COMMUNITIES LIMITED
AND CONTROLLED ENTITIES
ABN 11 078 675 153
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LIFESTYLE COMMUNITIES LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Lifestyle Communities Limited “the Company” and its
controlled entities “the Group”, which comprises the consolidated statement of financial position as
at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated cash flow statement for the year
then ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
75
For personal use only LIFESTYLE COMMUNITIES LIMITED
AND CONTROLLED ENTITIES
ABN 11 078 675 153
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LIFESTYLE COMMUNITIES LIMITED
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 of the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties ‐ $211.3m
Refer to Note 14
This is the largest asset on the balance sheet,
representing 79% of total assets. Our audit
effort has increased in this area as the Group’s
investment property portfolio has grown in
recent years.
In particular, there is significant focus in
ensuring the underlying investments are valued
appropriately.
The valuation of the investment properties held
at fair value is based on key inputs and
assumptions noted in the valuation. Judgement
is applied to a number of the key inputs
including:
management fee expense percentages;
capitalisation rates; and
the value of deferred management
fees.
The Group engages external independent
valuers to undertake valuations of each
investment property every 2 years.
It is due to the size of the balance and use of
key input and assumption judgements that this
is a key area of audit focus.
Our procedures included amongst others:
the
key
external property
Evaluating
valuations obtained by management
and performing an assessment as to the
appropriateness of key
inputs and
assumptions used in the valuation;
Challenging
inputs and
the
assumptions provided by management
to the external valuers;
Comparing movements between key
inputs and assumptions in valuations
from prior periods to ensure they were
line with our knowledge and
in
expectation of the specific property and
the
applicable market
conditions;
Reviewing the properties which were
not subject to an external valuation, and
comparing the inputs to those used in
the prior period and indicators from
current external valuations.
overall
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
76
For personal use only LIFESTYLE COMMUNITIES LIMITED
AND CONTROLLED ENTITIES
ABN 11 078 675 153
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LIFESTYLE COMMUNITIES LIMITED
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters 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 has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
77
For personal use only LIFESTYLE COMMUNITIES LIMITED
AND CONTROLLED ENTITIES
ABN 11 078 675 153
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LIFESTYLE COMMUNITIES LIMITED
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
78
For personal use only LIFESTYLE COMMUNITIES LIMITED
AND CONTROLLED ENTITIES
ABN 11 078 675 153
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
LIFESTYLE COMMUNITIES LIMITED
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 17 to 30 of the directors’ report for the
year ended 30 June 2017. In our opinion, the Remuneration Report of Lifestyle Communities Limited,
for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
P A JOSE
Partner
16 August 2017
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 19, 15 William Street, Melbourne VIC 3000
Liability limited by a scheme approved under Professional Standards Legislation
Pitcher Partners is an association of independent firms
Melbourne | Sydney | Perth | Adelaide | Brisbane| Newcastle
An independent member of Baker Tilly International
79
For personal use only
ASX additional information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in
this report is as follows. The information is current as at 15 August 2017.
(a) Distribution of equity securities
(i)
Ordinary share capital
104,545,131 fully paid ordinary shares are held by 1,927 individual shareholders
(b) Substantial shareholders
Fully paid
ordinary shareholders
Number
Percentage
James Kelly
12,045,566
11.52%
Cooper Investors Pty Ltd
7,896,352
Commonwealth Bank of Australia
6,092,157
AustralianSuper
Australian Foundation Investment
Company Limited
5,727,700
5,470,436
Perlov Family
5,386,637
WH Soul Pattinson / Pengana
5,282,014
BT Investment Management
5,218,147
7.55%
5.85%
5.48%
5.22%
5.15%
5.07%
5.00%
53,119,009
50.81%
Voting rights
All ordinary shares carry one vote per share without restriction.
Current at (last
notification date)
15 August 2017
9 February 2017
8 May 2015
28 September 2016
27 April 2016
16 September 2016
5 April 2017
29 August 2016
Page 80
For personal use only
(c) Twenty largest holders of quoted equity securities
Rank Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
J P MORGAN NOMINEES AUSTRALIA LIMITED
MASONKELLY PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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