20
18
Annual Report
For personal use only For personal use only Contents
Chair’s Report ................................................................................................................................. 1
Managing Director’s Report ......................................................................................................... 2
Directors’ Report ............................................................................................................................ 4
Operating and Financial Review .................................................................................................. 9
Remuneration Report................................................................................................................... 16
Auditors Independence Declaration ......................................................................................... 28
Corporate Governance Statement ............................................................................................ 29
Financial Statements ................................................................................................................... 38
Directors' Declaration.................................................................................................................. 77
Independent Auditors Report .................................................................................................... 78
ASX additional information ........................................................................................................ 83
Corporate information ................................................................................................................ 85
For personal use only Chair’s Report
For the 2018 Financial Year
Dear fellow shareholders,
There have been many changes at Lifestyle Communities during a busy 2018 financial year. This included a
transformation in the Company’s Board as we welcomed three new Directors, The Hon. Nicola Roxon,
Georgina Williams and, more recently, David Blight. Nicola, Georgie and David have broadened the skills
and experience of the Board and have made an immediate and positive impact on Board discussions.
As part of the Board renewal, Bruce Carter and Jim Craig resigned from the Board during the year. As one of
the three founders of the Company and a long-term Executive Director, Bruce’s contribution to Lifestyle
Communities has been significant. Jim joined the Board in 2012 and was a key architect in the Company’s
transformative capital raising in that year. Bruce and Jim were outstanding Directors of the Company and,
on behalf of the Board, I thank them for their service and wish them well for the future.
The Company’s senior management team also experienced some change during the 2018 financial year. This
change is necessary as the Company prepares for further growth in the number of communities being
developed and managed. I would like to make a special mention of Geoff Hollis, our former Chief Financial
Officer and Company Secretary, who worked closely with the Board during his eight years with the
Company. On behalf of the Board, I would like to thank Geoff for his contribution and wish him well for the
next steps in his career.
The highlight of the 2018 financial year was the outstanding results delivered by our team. New home
settlements of 321, underlying net profit after tax of $33.8 million and underlying return on capital employed
of 19.5% are very good numbers. They reflect a clear and increasing need for our communities at the quality
but affordable part of the market and a team that is executing our plans extremely well.
We often get asked about our ability to access new land. We are not a ‘land banker’ and the Victorian
property market has been highly competitive in recent years, so shareholders are right to question whether
we can continue to access land at a fair price. Notwithstanding the competitive market, Lifestyle
Communities has been able to make three new land acquisitions during the last two financial years and buy
additional land to extend the size of our Ocean Grove community. Given the quality of our communities,
developers are increasingly prepared to sell us land from their development projects. And given we are
playing a role in developing affordable housing, councils have been providing strong planning support. We
monitor our land access risk intently and remain of the view that, in the medium to long term, we will be
able to get access to good quality land opportunities at fair prices in Victoria.
The Board believes the 2019 financial year will be another successful year for Lifestyle Communities. We are
planning on increasing the number of settlements over the record number achieved in 2018, three new
communities are expected to be launched for sale and a range of new initiatives for our homeowners are
planned at our communities.
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 2018 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
15 August 2018
1
For personal use only Managing Director’s Report
For the 2018 Financial Year
Dear fellow shareholders,
I am pleased to present to you the Lifestyle Communities Annual Report for the year ended 30 June 2018.
The 2018 financial year has seen the addition of 321 new home settlements now providing 1,947 settled
homes within our communities providing annuity income streams. We are delighted with the acquisition of
an additional site during the year located at Wollert North as well as acquiring additional land to expand our
development at Ocean Grove. We also undertook an additional and final stage at Shepparton which will
complete that project at 301 homes when sold out. Our ongoing acquisition plan remains focused in
Victoria where we can continue to build on our brand equity and we continue to investigate further sites in
Melbourne’s key growth corridors. As our brand has become established and visible, 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 on finalising the developments at Shepparton and Geelong,
maintaining the pace at Berwick Waters, Bittern and Ocean Grove, and launching new communities at
Mount Duneed, Kaduna Park and Wollert North. We also remain focused on continuing to differentiate
Lifestyle Communities against our competitors through delivering a high level of customer experience
through all the various customer touchpoints. This has resulted in 54% of our new sales during FY2018
coming from referrals.
The key highlights for the 2018 financial year include:
• Achieving 321 new home settlements; we commence FY2019 with 369 new homes sold but not
settled;
• Acquiring additional sites in Kaduna Park and Wollert North;
• Achieving 125 settlements at Berwick Waters during the year and being almost sold out within two
and a half years;
• Achieving 116 sales at Bittern and welcoming our first homeowners in May 2018;
•
•
Increasing the total number of home sites settled and under management to 1,947;
Increasing the total portfolio to 2,995 home sites either under planning, development or
management;
• Achieving 48 settlements at Lifestyle Shepparton leaving 54 homes to completely sell out our
largest community (301 homes);
• Underlying net profit after tax attributable to shareholders increased by $8.8 million to $33.8 million
(statutory net profit after tax was $52.7 million);
• Home site annuity rentals increased by $3.3 million to $17.0 million; and
• Deferred management fees realised (inclusive of selling and administration fees) remained steady at
$4.3 million due to strong resale prices despite settlements reducing to 59 (2017: 73).
2
For personal use only The Company now has thirteen 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.
During the last year we have undertaken a complete assessment of the company’s systems, processes and
human resources with a strategy to build organisational ability while also maintaining the unique
organisational culture that Lifestyle Communities has enjoyed as an organic growth business. This has
involved the implementation of new systems and processes and also a restructure of a number of positions
and roles to enable our ongoing growth and service delivery.
Finally I am pleased to announce the Lifestyle Communities foundation donated over $100,000 this year to
cancer based charities. The foundation is funded through allocating $50 for every home that we have under
management and is directed towards matching what communities raise in supporting cancer based
charities.
Yours sincerely,
James Kelly
Managing Director
15 August 2018
3
For personal use only 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 2018 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 2018 was $52,681,734 (2017: $27,695,112).
Directors
The Directors of the Company during the financial year and until the date of this report are set out below.
Tim Poole, Non-Executive Chair (BCom)
Tim was appointed as a Non-Executive Director of
Lifestyle Communities Limited on 22 November
2007 and was appointed Chair on 31 December
2012. Tim was recently appointed as Chair of the
HR & Remuneration Committee and is also a
member of the Audit Committee. He holds a
Bachelor of Commerce from the University of
Melbourne and is formerly a Chartered
Accountant.
Tim has more than 17 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.
4
For personal use only 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 20
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.
The Honourable Nicola Roxon, Non-
Executive Director (BA/LLB (Hons), GAICD)
The Honourable Nicola Roxon was appointed to
the Board of Lifestyle Communities Limited as a
Non-Executive Director on 1 September 2017. Ms
Roxon was also recently appointed as a member
of the HR & Remuneration Committee.
Ms Roxon holds a Bachelor of Arts and Bachelor
of Laws with Honours from the University of
Melbourne. Her current roles are Non-Executive
Chair of Bupa Australia and New Zealand, Non-
Executive Director of Dexus Funds Management
Limited, and Chair of the Cancer Council
Australia, the Accounting Professional and Ethical
Standards Board and Chair and Adjunct Professor
at the Sir Zelman Cowen Centre at Victoria
University.
Ms Roxon has more than 20 years’ experience
with a background in the public sector and
significant expertise in highly regulated consumer
industries and the not-for-profit sector. Ms Roxon
has deep industry knowledge of the health,
government and professional services sector in
positions including Federal Attorney General,
Federal Minister for Health and Ageing, Member
for Gellibrand and Industrial lawyer and advocate
at Maurice Blackburn and the National Union of
Workers.
Georgina Williams, Non-Executive Director
(BCom, BA)
Georgina Williams was appointed to the Board of
Lifestyle Communities Limited as a Non-
Executive on 1 September 2017. Georgina was also
recently appointed as a member of the Audit
Committee.
Georgina holds a Bachelor of Commerce and
Bachelor of Arts from the University of
Melbourne. She has previously held the roles of
Group Executive at AustralianSuper and Head of
Brand and Marketing at Bank of Melbourne.
Georgina is a Non-Executive Director of Reece
Limited and Sunsuper.
David Blight, Non-Executive Director
(BAppSc)
David Blight was appointed to the Board of
Lifestyle Communities Limited as a Non-
Executive Director on 15 June 2018.
David has more than 30 years of experience in
property investment, development and
management. He is currently the Chief Executive
Officer of ARA Australia, the Australian business
of Singapore-based ARA Asset Management
Limited. David’s previous roles include Vice
Chairman of ING Real Estate and Global
Chairman and CEO of ING Real Estate Investment
Management based in The Netherlands. He has
also held senior executive positions with
Armstrong Jones, Mirvac Group and APN
Property Group.
David is currently a Non-Executive Director of the
ASX listed Japara Healthcare Limited and
Cromwell Property Group.
Bruce Carter, Non-Executive Director
(BCom) – Resigned 21 August 2017
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 resigned as a Director of the
Company with effect from 21 August 2017.
5
For personal use only Darren Rowland (B Bus (Acc), CA),
Company Secretary
Darren was appointed as Company Secretary on
9 July 2018. Darren joined the Lifestyle
Communities team in May 2018 and has held a
number of senior finance and commercial roles;
most recently as the Head of Finance and
Commercial for the Toll Group’s Operating
Services division. Prior to joining Toll, Darren
gained valuable experience in commercial and
finance roles based in Dublin and London.
In addition to being a Chartered Accountant,
Darren also holds a Bachelor of Business
(Majoring in Accountancy) from Queensland
University of Technology.
Geoff Hollis, Company Secretary (BCom,
CA, AGIA) – Resigned 14 February 2018
Geoff was appointed as Company Secretary on
24 November 2011 and resigned with effect from
14 February 2018.
Lisa Pipito
Lisa was appointed as Company Secretary on 16
March 2018 and resigned with effect from 9 July
2018.
Jim Craig, Non-Executive Director (BEc,
LLB (Hons) Adel, LLM Melb) – Resigned 14
February 2018
Jim was appointed a Director of Lifestyle
Communities Limited on 31 December 2012 and
resigned as a Director of the Company with effect
from 14 February 2018.
Company Secretaries
Mark Licciardo, (B Bus(Acc), GradDip CSP,
FGIA, GAICD)
Mark was appointed as Company Secretary on 26
March 2018.
Mark is Managing Director of Mertons Corporate
Services Pty Ltd (Mertons) which provides
company secretarial and corporate governance
consulting services to ASX listed and unlisted
public and private companies.
Prior to establishing Mertons, Mark was Company
Secretary of the Transurban Group and Australian
Foundation Investment Company Limited. He has
also had an extensive commercial banking career
with the Commonwealth Bank and State Bank
Victoria. Mark is a former Chairman of the
Governance Institute Australia (GIA) in Victoria
and the Melbourne Fringe Festival, a fellow of
GIA, the Institute of Chartered Secretaries (CIS)
and the Australian Institute of Company Directors
(AICD) and a Director of ASX listed Frontier
Digital Ventures Limited, iCar Asia Limited and
Mobilicom Limited as well as several other public
and private companies.
Kate Goland, (CPA, GIA (Cert))
Kate was appointed as Company Secretary on 26
March 2018.
Kate works with Mertons Corporate Services and
is an experienced accounting and company
secretarial professional. She has demonstrated
expertise in supporting clients in meeting their
corporate obligations and ASIC compliance
requirements. She joined Mertons from BDO
where she assisted clients within the company
secretarial division. Kate is a current Company
Secretary of various public and private
companies. She has a strong understanding of
corporate compliance matters.
6
For personal use only 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
James Kelly
Philippa Kelly
The Honourable Nicola Roxon
(appointed 1 September 2017)
Georgina Williams (appointed 1
September 2017)
David Blight (appointed 15 June 2018)
Fully Paid
Ordinary Shares
Options over
Ordinary Shares
1,224,607
12,045,566
65,000
-
2,000
-
-
-
-
-
-
-
Dividends
A fully franked dividend of 2.0 cents per share was paid on 6 October 2017 (representing the 2017 final
dividend). A fully franked dividend of 2.0 cents per share was paid on 6 April 2018 (representing the 2018
interim dividend).
Since the end of the financial year the Directors have resolved to pay a fully franked dividend of 2.5 cents
per ordinary share (representing the 2018 final dividend).
Share options
There are no unissued ordinary shares of the Company under share option arrangements 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.
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.
7
For personal use only Proceedings against the Company
The Directors are not aware of any current or threatened Court proceedings of a material nature in which
the Company is directly or indirectly concerned which are likely to have a material adverse effect on the
business or financial position of the Company.
Directors’ meetings
The number of meetings of Directors (including meetings of committees of Directors) held during the time the
Director held office or was a member of the committee during the financial year and the number of meetings
attended by each of the Directors are:
Director
Tim Poole
James Kelly
Philippa Kelly
The Honourable
Nicola Roxon
(appointed 1
September 2017)
Georgina Williams
(appointed 1
September 2017)
David Blight
(appointed 15 June
2018)
Bruce Carter (resigned
21 August 2017)
Jim Craig (resigned 14
February 2018)
Directors’ meetings
Attended
11
11
10
9
Held
11
11
11
9
Meetings of committees of directors’
Audit
Held
1
-
5
-
Attended
1
-
5
-
HR & Remuneration
Attended
3
-
4
2
Held
3
-
4
2
9
1
2
7
9
1
2
6
4
-
1
4
4
-
1
2
-
-
-
3
-
-
-
3
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 ($15,000), general tax advice ($45,675)
and other agreed upon procedures ($41,360) at a total cost of $102,035 (2017: $114,345). 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).
8
For personal use only Operating and Financial Review
Overview
The Company continued to develop and manage its portfolio of affordable lifestyle communities during the
2018 financial year. Profit after tax attributable to shareholders was $52.7 million (2017: $27.7 million).
Underlying profit after tax attributable to shareholders was $33.8 million (2017: $25.0 million).
Financial and operating highlights
Key financial data
Revenue
Earnings before interest and tax
Net profit before tax
Net profit after tax
Net profit attributable to shareholders
Underlying net profit attributable to
shareholders
Operating cash flow
Community cash flow(1)
Gearing(2)
Underlying return on average capital
employed(3)
Earnings per share
Underlying earnings per share
Dividend per share(4)
Key operational data
Homes settled (gross)
Homes sold (gross)
Average realised sales price of new homes
(GST incl)
Total number of homes (gross)
Total number of homes (after NCI)(5)
Total number of homeowners
Average age of homeowners
Number of resales settled(6)
Average realised sales price of resales
(GST incl) (7)
Measure
FY2018
FY2017
Change
Change
%
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
%
%
A$ cents
A$ cents
A$ cents
No. of
homes
No. of
homes
A$’000
No. of
homes
No. of
homes
No. of
people
Years
No. of
homes
A$’000
123.6
75.8
75.5
52.9
52.7
33.8
20.6
11.7
13.3
19.5
50.4
32.3
4.5
321
293
343
1,947
1,746
2,859
72
59
356
100.4
41.5
40.3
27.7
27.7
25.0
18.4
10.4
21.8
18.7
26.6
24.0
3.5
278
406
315
1,626
1,425
2,418
72
73
340
23.2
34.3
35.2
25.2
25.0
8.8
2.2
1.3
(8.5)
0.8
23.8
8.3
1.0
43
(113)
28
321
321
441
-
(14)
16
23
83
87
91
90
35
12
13
(39)
4
90
35
29
15
(28)
9
20
23
18
-
(19)
5
(1) Community cash flow comprises cash flows received from homeowner rentals and deferred management fees less 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 underlying EBIT divided by average total assets less current liabilities
(4)
(5) Gross number of homes adjusted for share of communities owned by non-controlling interests
(6)
For FY2018 includes interim dividend of 2.0 cents per share and final dividend of 2.5 cents per share
Includes resales attracting a deferred management fee, there were a further 28 resales settled in FY2018 (FY2017: 8 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 2018 financial year.
9
For personal use only The increase in net profit after tax attributable to shareholders to $52.7 million (2017: $27.7 million) can be
mainly attributed to: increased new home settlements; increased contributions from net rental income and
deferred management fees received; increased fair value adjustments from investment property
revaluations; being partly offset by increased development expenses and corporate overheads.
Underlying profit of $33.8 million (2017: $25.0 million) excludes an $18.9 million (2017: $2.7 million) after tax
impact of independent investment property revaluations across the portfolio. Refer to the analysis of
income statement section on page 11 for further details.
New home settlements for the year were 321, up from 278 in the prior year; higher than the original guidance
of 260-290 settlements and slightly higher than the updated forecast of 310-320 settlements. This was due
to achieving the higher end of the expected new home settlement range at Shepparton, Lyndarum and
Bittern and exceeding the top end of the range at Berwick Waters and Geelong.
The Company continued to develop its communities at Shepparton, Geelong and Berwick Waters. During
the year construction was completed at Lyndarum and construction commenced at Bittern and Ocean
Grove.
The Company made good progress operationally with improvements in several key metrics. The total
number of homes settled increased to 1,947 homes due to 321 settlements during the year. Net community
cash flows were $11.7 million (2017: $10.4 million). This was driven by increases in rental revenue, partly
offset by increases in management expenses for new communities.
The Company had 2,859 people living in its communities as at the end of the 2018 financial year with an
average age of 72 years (2017: 72).
Resales (sales of previously settled and occupied homes) during the year were 59 (2017: 73). Deferred
management fee income received (inclusive of selling and administration fees) was $4.3 million (2017: $4.1
million). As at 30 June 2018 there were 17 resale homes available for sale across the communities.
Update on communities
Community
New homes
Net
sales
FY2018
Settled
FY2017
Net
sales
FY2017
Settled
FY2018
Resales
Settled
FY2018
Settled
FY2017
Net
sales
FY2018
Net
sales
FY2017
Brookfield
Seasons
Warragul
Casey Fields
Shepparton
Chelsea Heights
Hastings
Lyndarum
Geelong
Officer
Berwick Waters
Bittern
Ocean Grove
Mount Duneed
Kaduna Park
Wollert North
Total
-
-
-
-
48
-
-
40
57
26
125
25
-
-
-
-
321
-
-
-
-
50
-
-
68
50
98
12
-
-
-
-
-
278
-
-
-
-
41
-
-
1
37
5
74
116
70
-
-
-
344
-
-
-
-
37
-
-
69
44
53
105
74
24
-
-
-
406
12
3
16
12
5
12
13
-
-
-
-
-
-
-
-
-
73
14
4
10
9
4
6
7
1
-
4
-
-
-
-
-
-
59
14
1
15
14
4
11
14
-
-
-
-
-
-
-
-
-
73
15
4
14
11
12
9
9
1
-
12
-
-
-
-
-
-
87
10
Homes
sold
not
settled
-
-
-
-
21
-
-
-
17
-
72
163
96
-
-
-
369
Total
homes
settled
Total
homes in
portfolio
228
136
182
217
247
186
141
154
143
151
137
25
-
-
-
-
1,947
228
136
182
217
301
186
141
154
164
151
216
209
221
191
165
133
2,995
For personal use only •
•
•
•
•
•
•
•
•
Lifestyle Brookfield in Melton, Lifestyle Seasons in Tarneit, Lifestyle Warragul, Lifestyle Casey Fields in
Cranbourne, Lifestyle Chelsea Heights, Lifestyle Hastings, Lifestyle Lyndarum and Lifestyle Officer are
fully sold and settled.
Lifestyle Shepparton had a solid year and achieved 41 net sales and 48 settlements.
Lifestyle Geelong performed well during the year achieving 57 settlements. The community is now fully
sold and has only 21 homes remaining to settle.
Lifestyle Berwick Waters outperformed expectations and achieved 125 settlements during the year,
which brings total settlements to 137 since the project was launched in April 2016.
Lifestyle Bittern achieved 25 settlements in May and June. Demand for this community is strong with 116
net sales achieved during the year. The land at Bittern is expected to settle in the first quarter of the
2019 financial year.
Lifestyle Ocean Grove has achieved 96 net sales since the project was launched in March 2017.
Construction has commenced, and the Company currently expects first settlements in December this
year. The land at Ocean Grove is expected to settle in the second quarter of the 2019 financial year.
The land for the Lifestyle Community in Mount Duneed (Armstrong Creek) was acquired in March 2017
and is expected to settle in the first quarter of FY2019. Construction is planned to commence soon after,
with planning approval having been received. This community was launched for sale in August 2018 and
first settlements are expected in the first-half of FY2020.
The land for the Lifestyle Community in Kaduna Park was acquired in August 2017 and, subject to
receipt of planning approval, is due to settle in the third quarter of FY2019.
The land for the Lifestyle Community in Wollert North was acquired in April 2018 and is due to settle in
the fourth quarter of FY2019.
Analysis of income statement
Net profit after tax attributable to shareholders increased to $52.7 million (2017: $27.7 million). The table
below shows the changes to net profit attributable to shareholders from 30 June 2017 to 30 June 2018.
A$ millions
A$ millions
Net profit after tax attributable to shareholders
for the year ended 30 June 2017
Changes in revenues
Home settlement revenue
Rental revenue
Utilities revenue
Deferred management fees
Sub-division revenue
Finance revenue
Total changes in revenues
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
Increase in profit after tax attributable to non-controlling interests
Net profit after tax attributable to shareholders
for the year ended 30 June 2018
20.2
3.2
0.5
0.2
(0.9)
-
(0.8)
(1.5)
(0.4)
(0.6)
(2.0)
1.1
-
-
27.7
23.2
(15.5)
30.7
(3.3)
(9.9)
(0.2)
52.7
11
For personal use only The key drivers of changes in profitability were:
Home settlement revenue and margin
-
-
Revenue from home settlements increased to $100.1 million (2017: $79.9 million) due to an increase
in settlements to 321 (2017: 278). This was higher than the original forecast range of 260-290
settlements and was due to achieving strong results at Shepparton, Lyndarum, Officer, Geelong,
Berwick Waters and Bittern.
Home settlement gross margin increased to 20.3% (2017: 19.5%). An increase in the average realised
sales price to $343k (GST inclusive) in the 2018 financial year (2017: $315k) was offset by an increase
in the average cost per home settled to $249k (2017: $232k). Changes in margin are mainly due to
changes in product mix. 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.
Annuity income and expenses
-
Revenue from homeowner rentals increased to $17.0 million (2017: $13.8 million) due to an increase
in homes under management and a rental increase of 3.5%.
-
- Community management rental expenses increased to $7.8 million (2016: $6.3 million) due to: an
increase in operations at Shepparton, Lyndarum, Geelong, Officer and Berwick Waters, and
commencement of management at Bittern.
Deferred management fees received (inclusive of selling and administration fees) increased to $4.3
million (2017: $4.1 million). There were 59 resale settlements during the year compared to 73 in the
prior year. The average realised sales price of resales increased to $356k (GST inclusive) (2017:
$340k). The 59 resale settlements achieved an average price growth of 8.9% per annum from the
acquisition date.
Deferred management fee expenses increased to $1.7 million (2017: $1.2 million) due to an increase
in sales and marketing resources to provide organisational capability for medium term growth.
-
Other expenses
-
Development expenses (new home sales and marketing) increased to $5.8 million (2017: $5.0
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 $7.7 million (2017: $5.8 million). The increase was mainly due to:
$1.3 million of head office wages growth due to additional resources to provide organisational
capability for medium term growth and $0.2 million of expenses associated with the Company’s
new employee incentive scheme.
Finance costs decreased to $0.3 million (2017: $1.2 million). This is mainly due to lower debt levels
during the year and the majority of interest costs being expensed to developments through cost of
sales. The Company capitalises a proportion of finance costs to investment properties and
inventories where appropriate and the balance of finance costs are expensed.
-
Fair value adjustments
-
Total fair value adjustments have increased to $57.4 million (2017: $26.7 million). The increase of
$30.7 million includes a $27 million uplift ($18.9 million on an after-tax basis) as a result of changes
to investment property valuation assumptions by the independent valuers. The key drivers were:
rental capitalisation rates reduced to 7.5% for all communities, down from 7.75% in prior valuations;
and the valuers have updated their view in relation to the long-term resale prices and therefore the
carrying value of deferred management fees.
Fair value adjustments comprise changes to the fair value of investment properties. Changes
relating to investment properties represent incremental adjustments to their fair value upon
settlement of homes and reflects the discounted value of future rental and deferred management
fee revenues net of expenses as well as the fair value of undeveloped land. Refer to Note 4 in the
Company’s 2018 Financial Statements for further details.
12
For personal use only Analysis of cash flow
A$ 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
FY2018
FY2017 Change
2.3
11.6
13.9
8.8
(8.9)
20.6
26.8
47.4
(4.0)
(11.6)
5.0
3.6
8.6
18.3
15.2
33.5
(12.8)
(2.7)
2.8
0.8
3.6
(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 $20.6 million (2017: surplus of $18.3 million). The
increase is mainly attributable to a $27.0 million increase in receipts from customers. Payments to suppliers
and employees increased by $23.9 million due to increased home construction activity. In relation to home
construction 291 homes were constructed in the 2018 financial year compared to 269 in the prior year.
Cash flows related to investing activities included: $1.3 million relating to the deposit on land at Kaduna
Park; $0.5 million for the deposit paid in respect of the land acquisition in Wollert North; and $1.5 million
relating to purchases of property, plant and equipment.
Cash flows related to financing activities included: $7.0 million net repayment of bank borrowings; $1.1
million for the purchase of treasury shares related to the employee incentive scheme; $0.6 million proceeds
from the repayment of employee loans for CRES; and $4.2 million for the payment of dividends.
Analysis of balance sheet
Net assets and total equity
A$ millions
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Investment properties
Other assets
Total Assets
Liabilities
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
Total Equity
FY2018
FY2017
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
4.9
(1.1)
(5.5)
1.0
92.3
0.5
92.1
(33.0)
7.0
(0.1)
(0.5)
(16.4)
(43.0)
49.1
0.6
48.5
49.1
132
(85)
(12)
22
44
167
35
123
(15)
14
83
46
39
32
1
54
32
8.6
0.2
39.4
5.6
303.6
0.8
358.2
(59.8)
(40.0)
(0.8)
(1.1)
(51.9)
(153.6)
204.6
65.6
139.0
204.6
13
For personal use only During the year the Company’s net assets and total equity increased to $204.5 million (2017: $155.5 million)
as a result of: profit during the period of $52.7 million; $0.6 million provided due to the repayment of CRES
loans; partly offset by dividends paid of $4.2 million.
Inventories have decreased to $39.4 million (2017: $44.9 million). This reflects that home construction and
inventory levels are adjusted to match home settlements. 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 liability of $48.9 million. This reflects that new home
settlements were higher during the year than new homes constructed.
Deferred tax liabilities have increased to $51.9 million (2017: $35.5 million) representing the tax on fair value
adjustments being deferred. This liability will only be realised should an investment property be disposed of
on an individual basis which the Company views as unlikely.
The Company has surplus franking credits (after allowing for the final dividend) of $13.3 million (2017: $7.9
million).
Debt, gearing and liquidity
As at 30 June 2018 the Company had net debt of $31.4 million (2017: $43.4 million).
A$ millions
Net debt at 30 June 2017
Net decrease in bank borrowings
Increase in cash balances / overdraft
Net movement in 2018
Net debt at 30 June 2018
43.4
(7.0)
(5.0)
(12.0)
31.4
The gearing ratio (net debt to net debt plus equity) has decreased to 13.3% (2017: 21.8%) due to the timing of
the settlements for land at Ocean Grove and Bittern.
As at 30 June 2018 the Company has a committed facility with Westpac of $120.0 million of which $40.0
million was drawn.
Outlook and risks
Outlook
The Company has been very satisfied with the rate of construction, sales and settlements across the
communities currently under development during the 2018 financial year. The Company was particularly
pleased with the level of sales achieved at Berwick Waters, Bittern and Ocean Grove. The Company enters
the 2019 financial year with 369 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 Company advises that settlements for the 2019 financial year are forecast to be in the range of 310 to
350. The Company also advises that underlying net profit after tax attributable to shareholders and total
dividends are both expected to increase in the 2019 financial year compared to the 2018 financial year.
14
For personal use only Key risks
The Company’s key risk categories include:
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 comprehensive 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 16 sites and developing most of these during the past 15 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 it’s debt
facility was 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 remaining 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 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.
15
For personal use only Remuneration Report (audited)
Dear Shareholders,
On behalf of the Board, we are pleased to present Lifestyle Communities’ Remuneration Report for the 2018
financial year.
We 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 2018 financial year
the target range was set at 260 to 290 new home settlements and our team achieved 321 new home
settlements, resulting in a 35% increase in underlying net profit after tax and a 29% increase in dividends.
Importantly, these financial results were achieved alongside an increase in our customer referral rate for
new sales to 55%.
For the 2019 financial year the target range has been set at 310 to 350 new home settlements and we expect
to announce the 2020 financial year employee share plan targets during the 2019 financial year.
The HR & Remuneration Committee reviews the operation of this scheme annually 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 2019 financial year, the same level of shares will be available to senior
executives and employees.
The Board believes that the business should continue to be scaled to continue the growth in annual new
home settlements 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 the Company’s approach to remuneration.
Yours sincerely
Tim Poole
Chair
15 August 2018
16
For personal use only 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
Section
1
2
3
4
5
6
7
8
9
10
Contents
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 held by key management personnel
Remuneration report voting at Annual General Meetings
HR & Remuneration Committee
2.
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.
17
For personal use only 3.
Details of Key Management Personnel
Position
Non-Executive
Directors
Tim Poole
Philippa Kelly
The Honourable
Nicola Roxon
Georgina Williams
David Blight
Bruce Carter (resigned
21 August 2017)
Jim Craig (resigned 14
February 2017)
Executive director
James Kelly
Other executives
Darren Rowland
Chris Paranthoiene
Sam Cohen
Yvonne Slater
Michael Imbesi
(resigned 25 August
2017)
Geoff Hollis (resigned
16 March 2018)
Chair of the Board
Non-Executive Director
Chair – HR & Remuneration Committee
Member – Audit Committee
Non-Executive Director
Chair – Audit Committee
Member - HR & Remuneration
Committee
Non-Executive Director
Member – HR & Remuneration
Committee
Non-Executive Director
Member – Audit Committee
Non-Executive Director
Non-Executive Director
Member – Audit Committee
Non-Executive Director
Commencement
date
22 November 2007
18 September 2013
1 September 2017
1 September 2017
15 June 2018
Founder
31 December 2012
Member – Audit Committee
Chair – HR & Remuneration Committee
Managing Director
Founder
Chief Financial Officer and Company
Secretary
Head of Acquisitions and Development
Head of Operations
Head of Development Delivery
Construction Manager
21 May 2018
13 March 2007
3 October 2011
8 January 2018
21 March 2005
Chief Financial Officer and Company
Secretary
15 February 2010
18
For personal use only 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 2018 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 $125,000 per annum. Fees paid to the other Non-Executive
Directors are $80,000 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.
•
Determining fixed remuneration
5.2
Managing Director
The total remuneration for the Managing Director (inclusive of superannuation) is $530,000 and 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.
19
For personal use only 5.3 Equity incentive scheme
Pursuant to the equity incentive scheme (EIS), 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
310 to 350
FY2019
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 2018 financial year, 321 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.
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.
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.
Refer to section 9 for details of shares issued pursuant to the EIS held by key management personnel.
20
For personal use only 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.
When the EIS was introduced, there was significant debate and consideration by the Board and HR &
Remuneration Committee as to the appropriate performance conditions for the 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.
The role each group of the Company’s employees plays in delivering new home settlements is described in
the following table:
Department
Acquisitions
Total
staff
1
Marketing
Development
and delivery
3
10
Sales
22
Operations
36
Customer
Contact
Finance
3
5
Impact on settlements
Supported by the Managing Director, the acquisitions executive is
incentivised by the ability to influence the future settlement pipeline.
Although the marketing team have long-term strategies for growing
enquiries they have a short-term ability to directly impact enquiries leading
to sales and settlements.
The development team 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 team directly influence conversion of enquiries to sales and then
move those sales though to settlement. The sales team is also a key part of
increasing customer referral.
The operations team is responsible for the seamless experience of our
homeowners at move-in date and work closely with the sales and
construction teams. By providing a high level of customer service the
operations team promote referral and therefore future sales and
settlements.
The customer contact team was established in January 2017 and had an
immediate and ongoing 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 team ensure sufficient funding is in place for future acquisitions
and for delivering the construction programme.
The Board and HR & Remuneration Committee considered a range of factors in setting the target settlement
range for the 2018 financial year. Prior to the commencement of the financial year, the Company had
provided guidance that the expected new home settlement range for the 2018 financial year was 260 to 290
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.
21
For personal use only The following table shows key performance indicators for the Company over the last five years:
Performance measure
Underlying net profit after tax attributable to
members ($million)
Net profit (change from prior year) (%)
Dividends declared & paid (fully franked)
(cents)
Underlying diluted earnings per share (cents)
Closing share price (30 June)
Share price increase / (decrease)
STI paid to KMP
FY2018
FY2017
FY2016
FY2015
FY2014
$33.8
35.2%
4.5
32.3
$5.85
44.4%
$25.0
29.5%
3.5
26.5
$4.05
39.2%
$19.3
15.6%
2.5
18.5
$2.91
19.3%
$10,000
$10,000
$10,000
$16.7
35.8%
1.5
16.1
$2.44
52.5%
$ -
$12.3
76.4%
-
12.0
$1.60
105.1%
$ -
New home settlements
321
278
202
240
210
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
The employment agreements for the senior management team were refreshed during the 2018 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.
22
For personal use only Remuneration details
8.
8.1
30 June 2018
Compensation of directors and key management personnel for the year ended 30 June 2018
Short term
Post-employment
Salary
& fees
$
Cash
bonus
$
Non-
monetary
$
Other
Super
$
$
Retirement
benefits
$
Directors
Tim Poole
James Kelly
Philippa Kelly
David Blight (appointed 15 June 2018)
Nicola Roxon (appointed 1 September 2017)
Georgina Williams (appointed 1 September
2017)
Bruce Carter (resigned 21 August 2017)
Jim Craig (resigned 14 February 2018)(1)
112,325
530,464
76,153
-
60,929
60,929
9,337
48,125
898,262
Key management personnel
Darren Rowland (appointed 21 May 2018)
29,094
-
-
-
-
-
-
-
-
Chris Paranthoiene
Sam Cohen
Yvonne Slater (appointed 8 January 2018)
Michael Imbesi (resigned 25 August 2017) (2)
Geoff Hollis (resigned 16 March 2018) (2)
Total
292,191
9,050
196,434
101,777
44,818
170,380
-
-
-
-
834,694
9,050
1,732,956
9,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,212
30,447
61,659
10,670
-
7,234
-
5,788
5,788
887
-
30,367
2,764
27,133
16,185
8,760
5,791
19,079
79,712
61,659
110,079
Fees were paid to Bellwether Holdings Pty Ltd, an entity controlled by Jim Craig.
(1)
(2) Other payments made to Michael Imbesi and Geoff Hollis relate to leave payouts upon resignation.
23
Share
based
payment
EIS
$
Total
performance
related %
Total
Cash
bonus
%
Shares
%
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,256
-
-
-
-
-
-
-
-
-
-
25,900
2.6
25,900
3,256
-
9,189
67,501
67,501
-
-
-
-
0.9
0.5
-
-
-
-
-
-
-
-
-
9.3
7.3
10.9
2.9
-
4.0
6.4
3.4
122,995
530,464
83,387
-
66,717
66,717
10,224
48,125
928,629
35,114
354,274
238,519
113,793
81,821
229,095
1,052,616
1,981,245
For personal use only 8.2
Compensation of directors and key management personnel for the year ended 30 June 2017
30 June 2017
Short term
Post-employment
Salary
& fees
$
Cash
bonus
$
Non-
monetary
$
Other
Super
$
$
Retirement
benefits
$
Share
based
payment
EIS
Share
based
payment
ESLP
$
$
Total
performance
related %
Total
Cash
bonus
%
Shares
%
$
Directors
Tim Poole
James Kelly
Bruce Carter
Jim Craig(1)
Philippa Kelly
91,324
408,958
47,945
57,500
52,511
658,238
Key management personnel
Michael Imbesi(2)
175,114
-
-
-
-
-
-
-
Chris Paranthoiene
198,326
9,132
Geoff Hollis
Sam Cohen
222,356
180,822
-
-
776,618
9,132
Total
1,434,856
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
100,000
443,958
52,500
57,500
57,500
711,458
193,809
243,126
263,081
210,792
910,808
3.4
1,622,266
Fees were paid to Bellwether Holdings Pty Ltd, an entity controlled by Jim Craig.
(1)
(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.
24
For personal use only Options held by Key Management Personnel
9.
9.1 Share based payments issued to key management personnel as remuneration
Shares (pursuant to the equity incentive scheme) expensed to key management personnel as remuneration
Plan Number
Value at
grant date
Total vested
Vested %
Name
Darren
Rowland
Chris
Paranthoiene
Sam Cohen
Yvonne Slater
Geoff Hollis
Financial
Year of
grant
2018
Financial
year of
vesting
2019
2018
2018
2017
2017
2017
2018
2018
2018
2017
2017
2017
2018
2018
2018
2018
2018
2018
2017
2019
2020
2018
2018
2019
2019
2019
2020
2018
2018
2019
2019
2019
2020
2019
2019
2020
2018
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
625
$3,256
625
1,250
5,000
5,000
10,000
5,000
5,000
10,000
5,000
5,000
10,000
5,000
5,000
10,000
625
625
1,250
5,000
$3,256
$6,513
$12,950
$12,950
$25,900
$12,950
$12,950
$25,900
$12,950
$12,950
$25,900
$12,950
$12,950
$25,900
$3,256
$3,256
$6,513
$12,950
2018
Note: all shares that vest in 2019 will be issued on 28 September 2018.
5,000
2017
EIS
$12,950
-
-
-
-
-
-
5,000
100%
5,000
100%
-
-
-
-
-
-
-
-
5,000
5,000
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000
5,000
100%
100%
For further details relating to the EIS, please refer to Note 24 of the Company’s 2018 Financial Statements.
25
For personal use only -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,224,607
12,045,566
65,000
-
-
2,000
5,079,433(1)
3,000,000(1)
-
197,341
85,000
195
204,000(1)
140,000(1)
Balance at
30-Jun-17
1,224,607
12,045,566
65,000
5,079,433
3,000,000
Shareholdings of Directors and key management personnel
9.2
2018
Name
Balance at
1-Jul-17
Off-market
transfer
On-market
transactions
Exercise of
options
Balance at
30-Jun-18
Directors
Tim Poole
James Kelly
Philippa Kelly
David Blight (appointed 15
June 2018)
Nicola Roxon (appointed 1
September 2017)
Georgina Williams
(appointed 1 September
2017)
Bruce Carter (resigned 21
August 2017)
Jim Craig (resigned 14
February 2018)
Key Management
Personnel
Darren Rowland (appointed
21 May 2018)
Chris Paranthoiene
Sam Cohen
Yvonne Slater (appointed 8
January 2018)
Michael Imbesi (resigned 27
August 2017)
Geoff Hollis (resigned 16
March 2018)
1,224,607
12,045,566
65,000
-
-
-
5,079,433
3,000,000
-
225,000
100,000
-
204,000
190,000
(1) Balance correct as at resignation date
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000
-
-
-
(27,659)
(15,000)
195
-
(50,000)
2017
Name
Directors
Tim Poole
James Kelly
Philippa Kelly
Bruce Carter
Jim Craig
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
-
(1,000,000)
-
(2,000,000)
(1,000,000)
1,224,607
13,045,566
65,000
7,079,433
4,000,000
200,000
237,334
116,667
66,668
-
-
-
-
-
-
-
-
-
(110,000)
(100,000)
(25,000)
-
100,000
66,666
133,333
33,332
190,000
204,000
225,000
100,000
Remuneration report voting at Annual General Meetings
10.
Lifestyle Communities Limited received more than 99% of votes in support of its remuneration report at the
2017 Annual General Meeting.
26
For personal use only Directors’ Report
Signed in accordance with a resolution of the directors.
On behalf of the Board
Tim Poole
Chair
James Kelly
Managing Director
Melbourne, 15 August 2018
27
For personal use only 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 2018, 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 15 August 2018
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
28
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 2018 financial year.
This Statement is current as at 15 August 2018 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 Board is responsible for the overall corporate governance of the Company. 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.
29
For personal use only Director appointment, election and re-election
The Board is responsible for ensuring it is comprised of individuals who are best able to
discharge the responsibilities of Directors having regard to the law and the best standards of
governance. 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
Each Company Secretary 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.
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
innovative strategies to
Leave and Other Leave Standards, and recognising and rewarding
accommodate diverse groups within the workforce;
• Setting, reviewing and reporting annually, measurable objectives; and
• Complying with all anti-discrimination and equal opportunity legislation.
30
For personal use only 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.
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.
The Company has an on-going evaluation process for senior management. The HR & Remuneration
Committee and Managing Director set 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.
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 Company supports the appointment of Directors who bring a wide range of business and professional
skills and experience. While the Company does not have or disclose a formal skills matrix it does consider
Directors attributes prior to any appointment. The qualifications, skills, experience and expertise relevant to
the position of Director held by each Director in office at the date of the Annual Report and their attendance
at Board and Committee meetings is included in the Directors’ Report. The Board has an extensive range of
knowledge and skills with relevant experience as detailed in the Annual Report.
31
For personal use only 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 orientation
including written materials, briefings, training on accounting principles (where 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 assesses independence at least annually. The Board considers Tim Poole, Philippa Kelly, The
Honourable Nicola Roxon, Georgina Williams and David Blight as Independent Non-Executive Directors,
being the majority of members of the Board. Details of their qualifications, experience and length of service
are set out in the Directors’ Report.
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.
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 has a Code of Conduct which 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.
32
For personal use only •
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.
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 currently consists of the following members; Philippa Kelly, Tim
Poole and Georgina Williams, who are considered Independent, Non-Executive Directors. All three
Committee members have and maintain very good financial literacy. Further information on their skills,
qualifications and experience are set out in the Directors’ Report.
The Chair of the Audit Committee is Philippa Kelly who is not the Chair of the Board.
Details of the number of Audit Committee meetings and attendance at those meetings are also set out in 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.
33
For personal use only 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.
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.
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.
34
For personal use only 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 uses its website,
annual report, market disclosures and media announcements to communicate with its shareholders, as well
as encourages participation at general meetings.
The Company endeavours to keep the website up-to-date and accurate to provide information about the
Company’s performance and governance to investors. The Company values transparency in all areas of
operations 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.
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 Joint Company Secretary, Darren
Rowland, 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.
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. The Company shall
review this position periodically.
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 in
the Annual Report.
35
For personal use only •
•
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.
During the 2018 financial year the Company continued process improvements in relation to the following
areas: accounts payable and purchase order systemisation; new payroll and HR management systems; fixed
assets reporting; and monthly reporting processes. These improvements are anticipated to be continuously
reviewed and improved during the 2019 financial year.
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 the
how those issues could be addressed; and
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.
36
For personal use only Remunerate fairly and responsibly
8.
Remuneration Committee
The Company has an HR & Remuneration Committee that currently consist of the following members, Tim
Poole, Philippa Kelly and The Honourable Nicola Roxon, who are considered Independent, Non-Executive
Directors. The Chair of the HR & Remuneration Committee is Tim Poole who is also the Chair of the Board.
Details of the number of HR & Remuneration Committee meetings and attendance at those meetings are set
out in 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 section of the Annual Report.
37
For personal use only Financial Statements
Consolidated Statement of Profit or loss and other Comprehensive income
For the year ended 30 June 2018
Note
2018
$
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
6
5
6
6
6
7
100,114,866
79,941,727
(79,815,755)
(64,360,083)
20,299,111
15,581,644
16,963,810
4,346,907
2,121,865
50,087
11,544
23,494,213
13,751,895
4,112,152
1,662,257
925,000
17,122
20,468,426
57,396,731
26,664,208
(5,835,906)
(7,752,814)
(1,677,119)
(2,266,073)
(7,771,760)
(99,126)
-
(307,315)
(5,039,082)
(6,263,887)
(1,231,412)
(1,663,379)
(5,774,937)
(1,194,475)
(31,898)
(1,181,811)
75,479,942
40,333,397
(22,577,027)
(12,636,296)
52,902,915
27,697,101
52,681,734
221,181
27,695,112
1,989
52,902,915
27,697,101
52,902,915
27,697,101
52,681,734
221,181
27,695,112
1,989
52,902,915
27,697,101
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
50.391
50.391
cents
26.555
26.505
The above statement should be read in conjunction with the accompanying notes.
38
For personal use only Consolidated Statement of Financial Position
For the year ended 30 June 2018
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
2018
$
2017
$
9
10
11
12
11
13
14
9
15
7
16
17
16
7
18
19
19
20
8,585,136
227,152
33,232,275
815,510
42,860,073
3,653,118
1,324,805
34,368,842
320,888
39,667,653
6,206,662
5,576,406
303,572,686
10,564,461
4,590,889
211,294,274
315,355,754
226,449,624
358,215,827
266,117,277
-
59,808,214
1,132,103
667,254
61,607,571
40,000,000
165,774
51,888,520
92,054,294
12,364
26,844,367
574,467
316,016
27,747,214
47,000,000
374,094
35,471,964
82,846,058
153,661,865
110,593,272
204,553,962
155,524,005
63,808,144
1,727,770
139,018,048
204,553,962
-
204,553,962
63,204,070
1,801,816
90,518,119
155,524,005
-
155,524,005
The above statement should be read in conjunction with the accompanying notes.
39
For personal use only Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Contributed
equity
$
Reserves
$
Retained
earnings
$
Non-
controlling
interest
Total equity
$
$
Balance at 1 July 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 scheme expense
Repayment of employee share scheme
loans
Dividends paid
-
-
-
-
-
-
27,695,112
1,989
27,697,101
27,695,112
1,989
27,697,101
-
(1,989)
(1,989)
(715,000)
-
96,360
-
-
239,966
-
-
-
30,058
-
(3,127,356)
-
-
-
-
(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
52,681,734
221,181
52,902,915
52,681,734
221,181
52,902,915
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
Issue of shares - exercise of options
Repayment of employee share scheme
loans
Employee share scheme expense
Dividends paid
-
-
-
-
-
-
(534,091)
533,725
604,440
-
(533,725)
-
-
-
-
-
(221,181)
(221,181)
-
-
-
-
-
(534,091)
-
604,440
459,679
(4,181,805)
-
-
459,679
-
-
(4,181,805)
604,074
(74,046)
(4,181,805)
(221,181)
(3,872,958)
Balance as at 30 June 2018
63,808,144
1,727,770
139,018,048
-
204,553,962
The above statement should be read in conjunction with the accompanying notes.
40
For personal use only Consolidated Cash Flow Statement
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Interest paid
Note
2018
$
2017
$
134,791,374
(107,247,348)
(5,067,510)
11,544
(1,936,684)
107,772,898
(83,352,078)
(4,271,195)
17,122
(1,807,002)
Net cash flows provided by operating activities
21
20,551,376
18,359,745
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of investment properties
13(a)
(1,530,213)
(2,430,000)
(768,823)
(11,997,725)
Net cash flows used in investing activities
(3,960,213)
(12,766,548)
Cash flows from financing activities
Proceeds from exercise of options / CRES shares
Purchase of treasury shares
Proceeds from external borrowings
Repayment of external borrowings
Dividends paid
604,440
(1,069,416)
2,000,000
(9,000,000)
(4,181,805)
96,360
(715,000)
19,500,000
(18,500,000)
(3,127,356)
8(a)
Net cash flows used in financing activities
(11,646,781)
(2,745,996)
Net increase in cash held
4,944,382
2,847,201
Cash at the beginning of the financial year
3,640,754
793,553
Cash at the end of the financial year
9
8,585,136
3,640,754
The above statement should be read in conjunction with the accompanying notes.
41
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The following are the 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 is a general purpose financial report, that has been prepared in accordance with
Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.
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 financial report complies 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.
All inter-company balances and transactions, including any unrealised profits and losses have been
eliminated on consolidation. 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.
42
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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. Inventories are
classified as either current or non-current assets pursuant to the timing of their anticipated sale.
(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:
Home settlement revenue
(i)
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.
Interest revenue
(ii)
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 recorded as revenue in the
respective month.
(iv) Utilities revenue
Utilities revenue is billed to homeowners monthly and recorded as revenue in the respective month.
(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.
Due to the Company’s Smart Buy Guarantee, no deferred management fee is payable if the home is sold
within the first 12 months.
(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).
43
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows:
Buildings
Plant and equipment
Computer equipment
Motor vehicles
2018
40 years
4 to 25 years
2 to 3 years
4 to 7 years
2017
40 years
4 to 25 years
2 to 3 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.
(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.
(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
Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance
with AASB 136 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.
44
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
(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 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.
45
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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 equity incentive scheme (EIS). Refer to Note 24 for further information.
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.
The Company previously operated an employee share loan scheme (ESLP). For the ESLP, convertible
repurchase-able employee shares (CRES) were issued to employees. For accounting purposes CRES were
treated like options until the time of vesting. At the time of vesting an interest-free limited recourse loan
was made to the participant with the value reflected as equity. The CRES were 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 was 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 was 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.
(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.
46
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
47
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1:
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Accounting standards issued but not yet effective at 30 June 2018
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 Company has assessed the revenue recognition requirements in AASB 15 and has determined there will
be no material impact to the timing and amount of revenue recorded in the Financial Statements.
(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 Company has assessed the changes to AASB 9 and has determined that they will not materially impact
the measurement of financial instruments recorded in the Financial Statements.
48
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
The Company has assessed the recognition requirements in AASB 16 and has determined there will be no
material impact to the timing and amount of expenses recorded in the Financial Statements.
49
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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.
50
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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.
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 primarily to the Group’s long-
term debt obligations. The level of debt is disclosed in Note 17.
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
2018
$
2017
$
8,585,136
3,653,118
-
40,000,000
12,364
47,000,000
40,000,000
47,012,364
(31,414,864)
(43,359,246)
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)
2018
$
2017
$
Equity
Higher/(Lower)
2018
$
2017
$
(219,904)
219,904
(303,515)
303,515
(219,904)
219,904
(303,515)
303,515
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.
51
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 3:
FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES (continued)
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.
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)
3-4 years
4-5 years
2018
$
42,519,214
17,289,000
-
40,000,000
-
-
99,808,214
2017
$
7,588,567
19,255,800
-
-
47,000,000
-
73,844,367
(1) This amount is represented by the following financial liabilities:
- $2,177,715 relates to customer deposits which typically convert to settlement within six months or less
(2017: $1,022,250).
- $154,008 relates to deferred revenue which will be bought to account within six month or less (2017:
$1,265,795).
- $8,598,585 relates to trade and other payables, refer to Note 15 for further detail (2017: $5,300,522).
- $31,588,906 relates to amounts payable on three parcels of land for contracts entered into prior to the
reporting date (including stamp duty) expected to settle within six months of the reporting date.
(2) This amount relates to amounts payable on two parcels of land for contracts entered into prior to the
reporting date (including stamp duty), expected to settle between six to twelve months after the reporting
date.
52
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 3:
FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES (continued)
(3) On 29 November 2017 the company executed an agreement with Westpac to add a $40,000,000 tranche
to the existing $80,000,000 facility. 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 2018 total debt was $40,000,000 with $35,506,181
allocated to development debt and $4,493,819 allocated to pre-development debt (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).
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.
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; and
Level 3: Inputs for the asset or liability that are not based on observable market data.
30-Jun-18
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
30-Jun-17
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
-
-
Level 1
$
Level 2
$
-
-
-
-
303,572,686
303,572,686
303,572,686
303,572,686
Level 3
$
Total
$
211,294,274
211,294,274
211,294,274
211,294,274
(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.
53
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
(c) Significant unobservable inputs used in level 3 fair value measurements
Rental capitalisation rates - rates were taken directly from the valuations for the eleven communities
independently valued in the current year. In relation to 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.
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 eleven communities
independently valued in the current year. In relation to the remaining communities (independently valued 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 ($)
Adopted
190.02 - 195.57
27.7% - 45.0%
7.50%
72,647 - 98,333
13.00% - 14.00%
31,224 - 88,172
Per valuations
190.02 - 195.57
27.7% - 45.0%
7.50%
72,647 - 98,333
13.00% - 14.00%
31,224 - 88,172
Valuation of undeveloped land (per hectare) ($'million)
0.19 - 2.20
0.19 - 2.20
(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
2018
$
2017
$
211,294,274
163,676,707
32,052,107
60,226,305
303,572,686
19,818,775
27,798,792
211,294,274
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
utilise inputs from current 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.
54
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
(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.
Post Tax Profit
Higher/(Lower)
2018
$
2017
$
Equity
Higher/(Lower)
2018
$
2017
$
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%
(3,415,472)
3,336,621
(2,582,472)
2,582,472
(3,415,472)
3,336,621
(2,582,472)
2,582,472
(7,008,103)
(5,147,094)
(7,008,103)
(5,147,094)
7,924,779
5,857,038
7,924,779
5,857,038
3,464,013
(3,464,013)
2,031,444
(2,031,444)
3,464,013
(3,464,013)
2,031,444
(2,031,444)
4,059,691
(4,059,691)
2,782,406
(2,782,406)
4,059,691
(4,059,691)
2,782,406
(2,782,406)
NOTE 5:
FAIR VALUE ADJUSTMENTS
Net unrealised gain from fair value adjustments - investment properties (Note 14) (a)
Other fair value adjustments (b)
2018
$
2017
$
60,226,305
(2,829,574)
27,798,792
(1,134,584)
57,396,731
26,664,208
(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.
55
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 6:
PROFIT FROM CONTINUING OPERATIONS
Profit from continuing operations before income tax has been determined after the following specific
revenues and expenses:
Revenues
(i) Deferred management fee
Deferred management fees received
Selling and administration fees
Expenses
Finance costs expensed
(i)
Bank loans
Other
Amortisation of loan facility fees
(ii) Finance costs capitalised
Finance costs expensed excludes the following interest capitalised as part of
inventory:
Bank loans
2018
$
2017
$
3,522,666
824,241
4,346,907
3,471,230
640,922
4,112,152
200,396
24,313
82,606
307,315
893,213
213,543
75,055
1,181,811
1,781,199
1,107,820
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.
(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
6,713,934
5,209,778
1,038,880
7,752,814
1,054,109
6,263,887
1,094,589
577,429
582,530
1,677,119
653,983
1,231,412
544,696
-
544,696
438,473
31,899
470,372
7,901,690
545,159
459,679
142,918
9,049,446
5,072,679
428,504
270,024
127,244
5,898,451
56
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 7:
INCOME TAX
(a) Components of tax expense
Current tax
Deferred income tax
Under 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
2018
$
2017
$
5,552,614
16,951,880
72,533
22,577,027
4,484,861
8,151,436
-
12,636,296
(332,676)
17,284,556
16,951,880
(69,772)
8,221,207
8,151,436
(c) Reconciliation between tax expense recognised in the Statement of Profit or Loss and tax expense calculated
per the statutory income tax expense
Accounting profit before tax
75,479,942
40,333,397
At the statutory income tax rate of 30% (2017:30%)
22,643,983
12,100,019
Add / (less):
Share based payments
Non-controlling interests
Tax loss adjustments
Under provision in prior years
Other
Income tax expense
(d) Current tax
Current tax relates to the following:
Opening balance
Income tax payable
Tax payments
Under provision in prior years
Current tax liabilities
(e) Deferred tax
Deferred tax relates to the following:
Deferred tax assets
The balance comprises:
Capital raising costs
Inventory
Tax losses
Provision for employee entitlements
Accruals & business expenses
Credited to equity - purchase of treasury shares
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
57
139,027
(133,263)
(160,257)
72,533
15,004
22,577,027
81,007
(6,943)
240,000
-
222,213
12,636,296
574,467
5,552,614
(5,067,511)
72,533
1,132,103
360,801
4,484,861
(4,271,195)
-
574,467
18,354
-
921,103
249,908
1,247,328
375,207
2,811,900
35,702
41,794
961,849
207,033
697,522
-
1,943,900
497,581
-
54,202,839
54,700,420
1,003,416
277,500
36,134,948
37,415,864
51,888,520
35,471,964
240,000
240,000
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 8:
DIVIDENDS
(a) Dividends
Dividends paid $0.04 per share (2017: $0.030 per share) fully franked
4,181,805
3,127,356
2018
$
2017
$
(b) Dividends declared after balance date and not recognised
Since balance date the directors have approved a dividend of 2.5
cents per share fully franked at 30% (2017: 2.0 cents per share)
2,613,628
2,090,903
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:
13,301,326
7,927,602
NOTE 9:
CASH & CASH EQUIVALENTS
CURRENT ASSETS
Cash at bank and on hand
CURRENT LIABILITIES
Bank overdraft
NET CASH
NOTE 10: TRADE AND OTHER RECEIVABLES
CURRENT
Other receivables
Land proceeds receivable (a)
8,585,136
8,585,136
3,653,118
3,653,118
-
12,364
8,585,136
3,640,754
227,152
-
227,152
399,805
925,000
1,324,805
(a) Land proceeds receivable relates to an unconditional contract that was signed prior to
balance date and was expected to settle within six months or less. The land being
sold was surplus land at Casey Fields that was 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.
58
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 11:
INVENTORIES
CURRENT
Housing
Civils & infrastructure
NON-CURRENT
Housing
Civils & infrastructure
TOTAL INVENTORIES
2018
$
2017
$
19,421,030
21,263,729
13,811,245
33,232,275
13,105,113
34,368,842
41,926
6,164,736
6,206,662
46,243
10,518,218
10,564,461
39,438,937
44,933,303
Inventory expense
(a)
Inventories recognised as an expense for the year ended 30 June 2018 totaled $79,815,755 for the Group
(2017: $64,360,083). The expense has been included in the cost of sales line item.
NOTE 12:
OTHER CURRENT ASSETS
Security deposits
Other assets
Prepayments
401,836
343,634
70,040
815,510
160,456
159,273
1,159
320,888
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.
59
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 13:
PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliation of carrying amounts at the beginning and end of the period
Year end 30 June 2018
Buildings
Plant and
equipment
Computer
equipment
$
$
$
Motor
vehicles
$
Total
$
At 1 July 2017 net of accumulated
depreciation
Additions
Depreciation charge for the
year
At 30 June 2018 net of
accumulated depreciation
At 30 June 2018
Cost
Accumulated depreciation
Net carrying amount
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
1,971,628
1,739,388
310,368
569,505
4,590,889
505,213
652,313
137,461
235,226
1,530,213
(55,915)
(306,394)
(106,369)
(76,018)
(544,696)
2,420,926
2,085,307
341,460
728,713
5,576,406
2,738,362
3,114,495
600,010
1,106,417
7,559,284
(317,436)
(1,029,188)
(258,550)
(377,704)
(1,982,878)
2,420,926
2,085,307
341,460
728,713
5,576,406
1,985,542
1,697,329
164,280
380,467
4,227,618
49,126
-
366,308
(30,853)
208,083
(1,046)
145,306
-
768,823
(31,899)
(8,198)
(45,628)
9,125
109,521
64,820
(54,842)
(247,768)
(70,074)
(65,789)
(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)
6,029,069
(1,438,180)
569,505
4,590,889
(i) During the year ended 30 June 2017, the fixed asset register was streamlined for depreciation type / rate
consistency across all asset sub-categories.
60
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 14:
INVESTMENT PROPERTIES
2018
$
2017
$
Investment properties at fair value
303,572,686
211,294,274
(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
211,294,274
32,052,107
60,226,305
163,676,707
19,818,775
27,798,792
303,572,686
211,294,274
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 eleven
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 eleven
communities independently valued in the current year. In relation to the remaining communities
(independently valued 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 inputs from 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 arm’s 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 Statement of Profit or Loss 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
117,836,765
86,546,962
61
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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)
2018
$
2017
$
1,839,570
2,177,715
481,421
6,277,594
48,877,906
154,008
59,808,214
1,459,544
1,022,250
885,932
2,955,046
19,255,800
1,265,795
26,844,367
(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.
Also included in other payables is a provision for GST payable following the GST Business Systems Review
performed during the period, by the Australian Taxation Office. For further details see Note 27 (b).
(d) Contracted land
Includes amounts payable on five parcels of land for contracts entered into prior to the reporting date
(including stamp duty). All contracts are expected to settle in the 2019 financial year.
(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.
NOTE 16:
PROVISIONS
CURRENT
Employee provisions
NON-CURRENT
Employee provisions
667,254
316,016
165,774
374,094
62
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 17: INTEREST-BEARING LOANS AND BORROWINGS
NON-CURRENT
Secured loans - bank finance
2018
$
2017
$
40,000,000
47,000,000
For terms and conditions attached to each type of borrowing, refer to section (c).
(a) Secured loans - bank finance maturity
As at reporting date the company has drawn $40,000,000 of a $120,000,000 facility it has with Westpac
Banking Corporation (2017: $47,000,000). See note (c)(ii) below for further details of the borrowing facility.
(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 $Nil (2017: $12,364). The Company has a
$5,000,000 overdraft sub-limit as part of the $120,000,000 facility with Westpac Banking Corporation.
(ii) Non-current secured loans - bank finance
On 29 November 2017 the company executed an agreement with Westpac Banking Corporation to add a
$40,000,000 tranche to the existing $80,000,000. The $40,000,000 tranche has the same covenants and
other requirements as the original $80,000,000 facility. The $120,000,000 facility has an expiry of greater
than one year, with the original $80,000,000 expiring on 26 August 2020 and the $40,000,000 expiring on
29 November 2020.
As at reporting date the company has drawn $40,000,000 of the $120,000,000 facility.
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 $120,000,000 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, Hastings, 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.
63
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 18:
CONTRIBUTED EQUITY
104,545,131 Ordinary shares (2017: 104,545,131
Ordinary shares)
237,231 Treasury shares (2017: 174,086)
(i) Reconciliation of Ordinary shares
Opening balance
Repayment of CRES loan
Issue of shares - conversion of CRES to ordinary
shares
2018
Number
104,545,131
-
-
2018
$
64,523,510
(715,366)
63,808,144
2017
$
63,919,070
(715,000)
63,204,070
2017
$
63,919,070
604,440
Number
104,211,800
-
$
63,822,710
96,360
Closing balance
104,545,131
64,523,510
(ii) Reconciliation of Treasury shares
2018
Opening balance
Purchase of treasury shares
Vesting of employee shares
Closing balance
Number
174,086
180,325
(117,180)
237,231
$
(715,000)
(534,091)
533,725
(715,366)
-
333,331
104,545,131
-
63,919,070
2017
Number
$
-
174,086
-
174,086
-
(715,000)
-
(715,000)
(a) Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
(b) 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.
(c) 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 FY2018 community management cash
flows delivered a sufficient surplus to declare and pay an interim fully franked dividend of 2.0 cent per share
($2,090,903) and declare a final fully franked dividend of 2.5 cents per share ($2,613,628).
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.
64
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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)
Vesting of employee shares
Reversal to retained earnings due to vested/cancelled options (CRES)
Closing balance
2018
$
2017
$
90,518,119
52,681,734
-
(4,181,805)
65,920,305
27,695,112
30,058
(3,127,356)
139,018,048
90,518,119
Share based payments reserve
$
2018
1,801,816
-
459,679
(533,725)
-
1,727,770
$
2017
1,561,850
23,010
247,014
-
(30,058)
1,801,816
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
Details of subsidiaries with non-controlling interests
(a) The Group has a 50% interest (2017: 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
2018
$
2017
$
444,709
-
444,709
444,709
-
444,709
446,051
-
446,051
446,051
-
446,051
-
-
65
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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
2018
$
36
444,673
444,709
2017
$
4,455
(3,221)
1,234
Profit allocated to non-controlling interest
222,355
617
(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:
-
-
-
-
(30,238)
-
(300,838)
(331,076)
Trust distributions
444,709
1,234
(iv) Summarised financial information for subsidiaries' contingent liabilities:
Bank guarantees
-
-
Bank guarantees are funded by the subsidiaries and are secured by term deposits.
(b) The Group has a 50% interest 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
2018
$
2017
$
8,330
-
8,330
8,330
-
8,330
-
8,330
-
8,330
8,330
-
8,330
-
66
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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
2018
$
2017
$
9
(2,357)
(2,348)
4,306
(1,562)
2,744
Profit/(loss) allocated to non-controlling interest
(1,174)
1,372
(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
-
-
-
-
(21,496)
(85,232)
-
(106,728)
(iii) Summarised financial information for subsidiaries' trust distributions:
Trust distributions
(2,348)
2,744
(v) Summarised financial information for subsidiaries' contingent liabilities:
Bank guarantees
-
-
Bank guarantees are funded by the subsidiaries and are secured by term deposits.
67
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 21:
CASH FLOW STATEMENT RECONCILIATION
a) Reconciliation of net cash flows from operating activities to operating profit
Operating profit after income tax
52,902,915
27,697,101
2018
$
2017
$
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
544,696
82,606
-
373,653
75,055
31,899
459,679
(57,396,731)
270,024
(26,664,208)
520,425
5,494,366
290,985
142,918
557,636
16,951,881
(914,098)
7,445,552
1,552,419
127,244
213,667
8,151,438
20,551,376
18,359,745
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
52,681,734
27,695,112
Weighted average number of ordinary shares for basic earnings per share
104,545,131
104,292,165
Effect of dilution:
Share options
-
198,250
Weighted average number of ordinary shares adjusted for dilution
104,545,131
104,490,415
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.
68
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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
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
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
% Equity interest
2017
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Australia
100%
100%
Australia
100%
100%
Australia
100%
100%
Australia
50%
50%
Australia
50%
50%
Australia
Australia
Australia
Australia
100%
100%
100%
50%
100%
100%
100%
50%
Australia
50%
50%
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
Carrying value of parent
entity’s interest
2018
$
2017
$
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.
69
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 24:
SHARE-BASED PAYMENTS
2018
$
2017
$
(a) Recognised share-based payment expenses
The expense recognised for employee services received during the year is shown in the table below:
Expenses arising pursuant to the EIS
Expenses arising pursuant to the
ESLP
Total
459,679
247,014
-
23,010
459,679
270,024
(b) Types of share-based payment plans
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
were 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 25% 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 $459,679 (2017: $247,014) has been recorded in the 2018 financial year to reflect the number
of shares that vested during the 2018 financial year.
The design 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.
Employee Share Loan Plan, 'ESLP'
The purpose of the ESLP was 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 last of the outstanding CRES were
exercised in the year ended 30 June 2017 and loans amounting to $604,440 were settled in the year. As at
the reporting date, no CRES were outstanding and all loans had been repaid. The Directors do not intend to
issue any further CRES under the ESLP.
70
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
(c) Shares granted pursuant to the EIS
The following table outlines shares granted pursuant to the EIS:
Senior management
Other staff
Total
Number of
shares 2018
'000
Number of
shares 2017
'000
Number of
shares 2018
'000
Number of
shares 2017
'000
Number of
shares 2018
'000
Number of
shares 2017
'000
60,000
-
15,436
-
75,436
-
90,000
(20,000)
130,000
80,000
(20,000)
60,000
89,575
(15,436)
89,575
77,180
(61,744)
15,436
179,575
(35,436)
219,575
157,180
(81,744)
75,436
Outstanding at the
beginning of the year
Granted during the year
Vested during the year
Outstanding at the
reporting date
(d) Average share price at measurement date under the EIS
The following table illustrates the number (No.) and weighted average share price at measurement date
(WASP) of, and movements in, EIS shares during the year:
Outstanding at the beginning of the year
Granted during the year
Vested during the year
Outstanding at the reporting date
2018
No.
75,436
179,575
(35,436)
219,575
2018
WASP
A$
2.87
3.36
2.87
3.13
2017
No.
-
157,180
(81,744)
75,436
2017
WASP
A$
-
2.87
2.87
2.87
(e) 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 issued during the year:
2018
No.
2018
WAEP
A$
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
NOTE 25:
SEGMENT INFORMATION
-
-
-
-
-
-
-
2017
No.
453,331
-
-
(333,331)
(120,000)
-
2017
WAEP
A$
1.358
-
-
0.876
2.696
-
-
-
-
-
-
-
-
-
-
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.
71
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 26:
KEY MANAGEMENT PERSONNEL
Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
2018
$
2017
$
1,803,665
110,079
67,501
1,981,245
1,443,988
121,690
56,586
1,622,264
There were no changes to roles defined as key management personnel during the 2018 financial year.
NOTE 27: COMMITMENTS AND CONTINGENCIES
(a) Commitments
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 81 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
19,640,361
78,561,444
1,597,919,783
1,696,121,588
15,665,465
62,661,862
1,278,233,029
1,356,560,356
Minimum lease payments were determined by measuring the current year's 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. The company
has exercised an option to extend the original term by a further three years.
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
166,441
305,142
471,583
166,441
-
166,441
14,975,592
4,290,530
72
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
(b) Contingencies
The Australian Taxation Office finalised the GST Business Systems Review during the period and notified the
Company that it has identified risks which it would like to examine further under audit. The audit will cover
the period from 1 June 2014 through 28 May 2018. The risks as advised by the ATO are:
The Company is not entitled to input tax credits on land acquisitions; and
The Company may not be entitled to all the input tax credits on its community infrastructure
expenditure.
1.
2.
The Company’s position remains that it is entitled to a proportion of the input tax credits associated with its
land acquisitions and a full claim for input tax credits on its community infrastructure expenditure. The
Company has come to this view after taking independent advice from relevant subject matter experts.
Nevertheless, noting the ATO’s current view that the Company is not entitled to input tax credits on land
acquisition, the Company has increased the size of its provision as at 30 June 2018 for GST claimed on Land
Acquisitions in the relevant period; the provision is included in accruals and other payables (see Note 15(c)).
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.
2018
$
2017
$
111,500
113,000
102,035
114,345
213,535
227,345
73
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
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/(loss)
Total comprehensive income
2018
$
2017
$
97,487,482
99,201,418
107,144,764
118,797,183
220,056
1,585,496
39,850,505
49,114,890
67,294,259
69,682,293
63,451,129
62,847,055
1,727,770
1,801,816
2,115,360
5,033,422
67,294,259
69,682,293
1,263,744
9,520,807
1,263,744
9,520,807
Subsequent to year end Lifestyle Investments 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.
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
74
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 31:
DEED OF CROSS GUARANTEE (continued)
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 2018 (and prior year). Lifestyle Investments 2 Pty Ltd also obtained
relief pursuant to the Instrument for the year ended 30 June 2018 (and was ineligible for relief in the 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 2018 (including
prior year comparatives) is set out as follows:
(a) Consolidated Statement of Comprehensive Income of the closed group
2018
$
2017
$
Development revenue
Home settlement revenue
Cost of sales
100,113,741
79,726,920
(80,261,807)
(64,160,895)
Gross profit from home settlements
19,851,934
15,566,025
Management and other revenue
Rental revenue
Deferred management fees
Trust distributions
Finance revenue
Total management and other revenue
Fair value adjustments
less Expenses
Development expenses (sales and marketing)
Management rental 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
361,544
29,952
221,181
9,661
622,338
3,889,191
490,961
1,372
8,081
4,389,605
47,892,145
23,161,070
(5,832,117)
(3,802)
(7,797,042)
(295,780)
-
(4,951,534)
(3,889,191)
(5,770,625)
(1,154,756)
(4,848)
54,437,676
27,345,746
(15,619,308)
(6,868,673)
38,818,368
20,477,073
38,818,368
-
20,477,073
-
38,818,368
20,477,073
75
For personal use only Notes to the Financial Statements
For the year ended 30 June 2018
NOTE 31:
DEED OF CROSS GUARANTEE (continued)
(b) Summary of movements in consolidated retained earnings of the closed group
2018
$
2017
$
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 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
76
34,644,062
(4,181,805)
38,818,368
69,280,625
17,294,345
(3,127,356)
20,477,073
34,644,062
8,524,642
61,382,554
33,240,605
921,381
104,069,182
3,617,285
115,841
34,817,532
441,679
38,992,337
6,206,662
2,343,970
8,893,334
211,833,386
10,564,461
1,736,532
8,893,334
129,070,031
229,277,352
150,264,358
333,346,534
189,256,695
-
119,657,266
1,132,103
667,254
121,456,623
-
40,000,000
165,774
36,907,599
77,073,373
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
198,529,996
89,606,747
134,816,539
99,649,948
63,808,144
1,727,770
69,280,625
134,816,539
63,204,070
1,801,816
34,644,062
99,649,948
For personal use only Directors' Declaration
The directors declare that the:
1.
are in accordance with the Corporations Act 2001, including:
In the directors' opinion, the Financial Statements and notes thereto, as set out on pages 38 to 76,
complying with Australian Accounting Standards and the Corporations Regulations 2001, and other
(a)
mandatory professional reporting requirements;
as stated in Note 1(a), the consolidated Financial Statements also comply with International Financial
(b)
Reporting Standards; and
giving a true and fair view of the financial position of the consolidated entity as at 30 June 2018 and
(c)
its performance for the year ended on that date.
In the directors' opinion there are reasonable grounds to believe that Lifestyle Communities Limited
2.
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 2018.
This declaration is made in accordance with a resolution of the Directors.
Tim Poole
Chairman
Melbourne, 15 August 2018
James Kelly
Managing Director
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
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 2018, 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 2018 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
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
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 ‐ $303.6m
Refer to Note 14
This is the largest asset on the balance sheet,
representing 84.7% 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 at least 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
Evaluating
external property
valuations obtained by management
and performing an assessment as to the
inputs and
appropriateness of key
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
79
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
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 2018, 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
80
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
81
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 16 to 26 of the directors’ report for the
year ended 30 June 2018. In our opinion, the Remuneration Report of Lifestyle Communities Limited,
for the year ended 30 June 2018, 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
15 August 2018
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
82
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 6 August 2018.
(a) Distribution of equity securities
(i)
Ordinary share capital
104,545,131 fully paid ordinary shares are held by 2,426 individual shareholders
(b) Substantial shareholders
Fully paid
ordinary shareholders
Number
Percentage
James Kelly
12,045,566
Cooper Investors Pty Ltd
7,896,352
Washington H. Soul Pattinson
6,363,178
and Company Limited (WHSP)
Pengana Capital Group Limited 6,363,178
AustralianSuper
Australian Foundation
Investment Company Limited
Perlov family
Investment Management
BT
Limited
5,727,700
5,470,436
5,386,637
5,299,706
11.52%
7.55%
6.09%
6.09%
5.48%
5.22%
5.15%
5.07%
Voting rights
All ordinary shares carry one vote per share without restriction.
Current at (last
notification date)
15 August 2017
9 February 2017
5 June 2018
5 June 2018
28 September 2016
27 April 2016
16 September 2016
14 March 2018
83
For personal use only (c) Twenty largest holders of quoted equity securities
Rank Name
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
MASONKELLY PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT
COMPANY LIMITED
DAKEN INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
MIRRABOOKA INVESTMENTS LIMITED
TRACEY RYAN INVESTMENTS PTY LTD
KELLY SUPERANNUATION FUND PTY LTD
SANDHURST TRUSTEES LTD
AMCIL LIMITED
ARMADA INVESTMENTS PTY LTD
B S CARTER INVESTMENTS PTY LTD
EQUITAS NOMINEES PTY LIMITED
Units
% of
Units
13,458,960
12.87
10,781,292
10.31
9,116,265
7,657,898
7,256,044
5,470,436
5,149,539
5,061,875
2,690,133
2,320,000
2,116,801
1,784,389
1,714,048
1,608,229
1,579,433
1,500,000
8.72
7.32
6.94
5.23
4.93
4.84
2.57
2.22
2.02
1.71
1.64
1.54
1.51
1.43
AUST EXECUTOR TRUSTEES LTD
1,244,355
1.19
CITICORP NOMINEES PTY LIMITED
ABN AMRO CLEARING SYDNEY NOMINEES PTY
LTD
926,000
0.89
825,585
0.79
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
AUSTRALIAN SHAREHOLDER NOMINEES PTY LTD
768,435
0.74
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
83,029,717
79.42
(d) The number of shareholders by range of units and unmarketable parcel holders
Range of Units Snapshot
Composition : ORD
Range
Total holders
Units % of Issued Capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Rounding
958
886
269
260
53
404,313
2,362,970
2,046,954
7,568,579
92,162,315
Unmarketable Parcels
Minimum $ 500.00 parcel
at $6.00 per unit
Total
2,426
104,545,131
Minimum
Parcel Size
84
Holders
192
Units
3,561
0.39
2.26
1.96
7.24
88.16
0.01
100.00
84
For personal use only Corporate information
Lifestyle Communities Limited
ABN 11 078 675 153
Registered office
Directors
Company secretary
Level 2, 25 Ross Street
South Melbourne Vic 3205
Australia
Tim Poole – Non-Executive Chair
James Kelly – Managing Director
Philippa Kelly – Non-Executive Director
The Honourable Nicola Roxon - Non-Executive
Director
Georgina Williams - Non-Executive Director
David Blight – Non-Executive Director
Mark Licciardo
Kate Goland
Darren Rowland
Level 2, 25 Ross Street
Principal place of business
South Melbourne VIC 3205
Share registry
Lawyers
Bankers
Auditors
Australia
Computershare Investor Services Pty Limited
Yarra Falls 452 Johnston Street,
Abbotsford VIC 3067
Telephone 61 3 9415 5000
Fax 61 3 9473 2500.
Investor queries (within Australia) 1300 850 505
Thomson Geer
Level 39, 525 Collins Street
Melbourne VIC 3000
Australia
Westpac Banking Corporation Limited
Level 7, 150 Collins Street
Melbourne VIC 3000
Australia
Pitcher Partners
Accountants Auditors & Advisors
Level 13, 664 Collins Street
Docklands VIC 3008
Australia
85
For personal use only