For personal use only 2019 Highlights
551
Lifestylers walked for
Mother’s Day Classic
18
Communities
and growing
3,346
Homeowners
and growing
2,284
Homes occupied
3
Electric
Town
Cars
Option of
Smart Homes
introduced
2
New sites
acquired
744
Cats, dogs and
other pets
For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Contents
Consolidated Financial Statements
Corporate Information
Chairman and Managing Director's Review
Directors' Report
Auditors Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Independent Auditor's Report
ASX Additional Information
Page
2
3
6
25
27
28
29
30
31
63
64
69
The accompanying notes form part of these financial statements.
For personal use only
Corporate Information
Lifestyle Communities Limited
ABN 11 078 675 153
Registered Office
Directors
Company Secretaries
Principal Place of Business
Share Registry
Solicitors
Auditors
Level 1, 9-17 Raglan Street
South Melbourne VIC 3205
Australia
Telephone 61 3 9682 2249
Tim Poole – Non-executive Chairman
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 1, 9-17 Raglan Street
South Melbourne VIC 3205
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
Pitcher Partners
Accountants Auditors & Advisors
Level 13, 664 Collins Street
Docklands VIC 3008
Australia
The accompanying notes form part of these financial statements.
2
For personal use only
Chairman and Managing Director’s Review
For the 2019 Financial Year
Dear fellow shareholders,
We are pleased to present to you the Lifestyle Communities Annual Report for the year ended 30 June 2019 and to set out the progress
we have made towards meeting our objective of being the leading provider of good quality affordable accommodation for active retirees
in Victoria.
The 2019 financial year has seen the addition of 337 new home settlements now providing 2,284 settled homes within our communities.
We are delighted with the acquisition of two additional sites located at Plumpton and Tyabb as well as acquiring additional land to expand
our development at Wollert. We were also very pleased to execute new funding agreements with The Commonwealth Bank of Australia,
National Australia Bank and HSBC Bank Australia to secure $225 million of senior debt facilities under a common terms deed. Our land
acquisition plan remains focused in Victoria where we continue to build on our brand and referral network. We have the capacity to
secure two new sites per year and we continue to investigate opportunities in Melbourne's key growth corridors.
Our development activity is currently focused on closing out final settlements at Shepparton, Geelong, Berwick Waters and Bittern,
maintaining the pace at Ocean Grove and Mount Duneed, and commencing construction at Kaduna Park, Wollert, Plumpton and Tyabb.
We also remain focused on continuing to differentiate Lifestyle Communities by delivering a high level of customer experience through
the many customer touchpoints. This has resulted in 54% of our new sales during FY19 coming from referrals.
The key highlights for the 2019 financial year include:
•
•
•
•
•
•
•
Achieved 337 new home settlements. We commence FY20 with 239 new homes sold but not settled;
Acquired additional sites in Plumpton and Tyabb;
Acquired an additional parcel of land at Wollert extending the size of the community to 246 homes;
Achieved 152 settlements at Bittern during the year;
Increased the total number of home sites settled and under management to 2,284;
Increased the total portfolio to 3,563 home sites either under planning, development or management;
Underlying net profit after tax attributable to shareholders increased by $7.3 million (or 21.6%) to $41.1 million (statutory net profit
after tax was $55.1 million);
• Home site annuity rentals increased by $3.6 million to $20.5 million; and
• Deferred management fees realised (inclusive of selling and administration fees) remained steady at $4.2 million due to strong resale
prices despite settlements attracting a DMF reducing to 53 (2018: 59).
The Company has delivered fourteen 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 annuity flow for future dividends.
The accompanying notes form part of these financial statements.
3
For personal use only
Growing annuity income streams
$26,000,000
$24,000,000
$22,000,000
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Site Rental Fees
Deferred Management Fees
During FY19 we have continued to build the Company’s capability and resources and improve systems and processes while maintaining
the unique organisational culture that Lifestyle Communities has enjoyed as an organic growth business. This, coupled with an increase in
the Company’s senior debt facilities and a property market that is providing more opportunities, should allow new home settlements to
increase materially in FY21 and beyond.
The Company’s Board has remained stable during FY19. However, long serving Director and Chair, Tim Poole, will retire at the
conclusion of the August 2019 Board meeting. Tim has overseen and made a significant contribution towards the growth of the company
during his twelve years on the Board. As part of the board's succession plan, the Chair will pass to Philippa Kelly who has been a Non-
Executive Director since September 2013. Philippa has a deep understanding of our business and was Chair of the Audit and Risk
Committee.
We are pleased to announce the Lifestyle Communities foundation donated over $100,000 this year to cancer-based charities as well as
winning an award for the largest team participating in the Mother's Day Classic with over 500 homeowners, employees and their families
supporting this great cause. 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.
Finally, on behalf of the Board, we would like to thank all our homeowners, our talented team and our shareholders for great support
during the 2019 financial year.
Yours sincerely,
James Kelly
Managing Director
14 August 2019
Tim Poole
Chair
14 August 2019
The accompanying notes form part of these financial statements.
4
For personal use only Engaging our
Communities
For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
The directors present their report together with the financial report of the consolidated entity consisting of Lifestyle Communities Limited
and the entities it controlled (the Group), for the year ended 30 June 2019 and the auditor's report thereon.
Principal activities and significant changes in nature of 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 were no significant changes in the nature of the Group's principal activities during the financial year.
Results
The consolidated profit of the Group for the financial year after providing for income tax amounted to $ 55,063,201 (2018: $52,681,734).
Information on directors
The names, qualifications, experience and special responsibilities of each person who has been a director during the year and to the date
of this report are:
Tim Poole, Non-Executive Chair (BCom)
James Kelly, Managing Director (BBldg)
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 is the Chair of the HR &
Remuneration Committee and is a member of the Audit Committee.
He holds a Bachelor of Commerce from the University of Melbourne
and is formerly a Chartered Accountant.
Tim is an experienced Director of ASX listed and unlisted companies
across the financial services, infrastructure, property 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 was appointed Managing Director in September 2007 and is
one of the founders of Lifestyle Communities Limited.
With over 40 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.
Philippa Kelly, Non-Executive Director (LLB, F Fin, FAICD)
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 is also 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.
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 Non-executive Director of ASX listed,
private and not-for-profit organisations. Philippa is a Deputy
Chancellor of Deakin University, Chair of its Finance and Business
Committee and a member of the Remuneration
Committee. Philippa was previously a Non-executive Director of
the Alcohol and Drug Foundation.
Philippa held senior executive operational roles within ASX listed and
unlisted businesses for the past 20 years and most recently was Chief
Operating Officer of the Juilliard Group, one of Melbourne’s largest
private property owners. She has specific expertise in property,
listed investment and managed funds, finance and in repositioning
and developing the strategic direction of businesses in a range of
sectors.
Philippa has a background in law, investment banking and mergers
and acquisitions.
Lifestyle Communities Annual Report
6
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
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 is also 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
Independent Chair of HESTA and Non-Executive Director of
Dexus Funds Management Limited. She was previously Chair of
Bupa, Cancer Council Australia, the Accounting Professional and
Ethical Standards Board and an 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 15 years in politics she held many
relevant positions including Federal Attorney General and Federal
Minister for Health and Ageing. She worked previously as an
Industrial lawyer and advocate at Maurice Blackburn and the
National Union of Workers.
Company Secretaries
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.
Mark Licciardo, (B Bus(Acc), GradDip CSP, FGIA, GAICD)
Kate Goland, (CPA, GIA (Cert))
Mark is the founder and 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. As a former company
secretary of ASX 50 companies, Transurban Group and Australian
Foundation Investment Company Limited, his expertise includes
working with boards of directors in the areas of corporate
governance, administration and company secretarial matters.
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.
He is also the former Chairman of the Governance Institute of
Australia Victoria division, Academy of Design (LCI Melbourne)
and Melbourne Fringe Festival and is a current non-executive
director of a number of public and private companies. Mr
Licciardo is currently a director of Frontier Digital Ventures
Limited and Mobilicom Limited, ASX listed entities. He was
recently a Director of iCar Asia Limited.
Darren Rowland (B Bus (Acc), CA), Company Secretary
Darren was appointed as Company Secretary on 9 July 2018.
Darren joined the Lifestyle Communities team as Chief Financial
Officer in May 2018 and has previously held a number of senior
finance and commercial roles with Toll Holdings Limited
predominantly in the resources and marine logistics industries.
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.
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Lifestyle Communities Annual Report
7
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Directors’ Interests
Director
Tim Poole
James Kelly
Philippa Kelly
The Honourable Nicola Roxon
Georgina Williams
David Blight
Dividends
Fully Paid
Ordinary Shares
Options over
Ordinary Shares
1,224,607
12,077,001
65,000
-
2,000
-
-
-
-
-
-
-
A fully franked dividend of 2.5 cents per share was paid on 5 October 2018 (representing the 2018 final dividend). A fully franked dividend
of 2.5 cents per share was paid on 5 April 2019 (representing the 2019 interim dividend).
Since the end of the financial year the Directors have resolved to pay a fully franked dividend of 3.0 cents per ordinary share (representing
the 2019 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 state of affairs
Refer to the Operating and Financial Review for the significant changes in the state of the affairs of the Company.
Events after the reporting date
No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the
operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.
Future developments
Refer to the Operating and Financial Review for information on likely developments and the future prospects of the Company.
Environmental issues
The Group's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or
territory of Australia.
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 directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the
directors’ and officers’ liability and legal expenses insurance contracts as such disclosure is prohibited under the terms of the contract.
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.
Lifestyle Communities Annual Report
8
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Meetings of Directors
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:
Directors' Meetings
Audit Committee
HR & Remuneration
Committee
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
12
12
12
12
12
12
12
12
12
12
12
11
5
-
5
-
5
-
5
-
5
-
5
-
1
-
1
1
-
-
1
-
1
1
-
-
Tim Poole
James Kelly
Philippa Kelly
The Honourable Nicola Roxon
Georgina Williams
David Blight
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
published on its website at LifestyleCommunities.com.au.
Auditor's independence declaration
The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended 30 June 2019
has been received and can be found on page 25 of the consolidated financial report.
Non-audit services
The Company’s auditor, Pitcher Partners, provided tax compliance ($24,615) and general tax advice ($225,190) at a total cost of $249,805
(2018: $102,035). 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.
Lifestyle Communities Annual Report
9
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Operating and Financial Review
The Company continued to develop and manage its portfolio of affordable lifestyle communities during the 2019 financial year. Profit after
tax attributable to shareholders was $55.1 million (2018: $52.7 million). Underlying profit after tax attributable to shareholders was $41.1
million (2018: $33.8 million).
Revenue
Earnings before interest and tax
Net profit before tax
Net profit after tax
Underlying net profit after tax1
Operating cash flow
Community cash flow2
Gearing3
Underlying return on average capital employed4
Earnings per share
Underlying earnings per share
Total dividend per share
Measure
FY19
FY18
Change
Change %
A$ millions
146.8
123.6
23.2
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
%
%
A$ cents
A$ cents
A$ cents
81.1
79.7
55.1
41.1
5.8
12.5
27.1
19.1
52.7
39.3
5.5
75.8
75.5
52.9
33.8
20.6
11.7
13.3
19.8
50.4
32.3
4.5
5.3
4.2
2.2
7.3
(14.8)
0.8
13.8
(0.7)
2.3
7.0
1.0
18.8
7.0
5.6
4.2
21.6
(71.8)
6.8
103.8
(3.5)
4.6
21.7
22.2
Measure
FY19
FY18
Change
Change %
Homes settled (gross)
Homes sold (gross)
No. of homes
No. of homes
Average realised sales price new homes (GST incl)
A$’000
Total number of homes (gross)
Total number of homes (after NCI)5
Total number of homeowners
Average age of homeowners
Number of resales settled6
Average realised sales price resales (GST incl)7
No. of homes
No. of homes
No. of people
Years
No. of homes
A$’000
337
209
401
2,284
2,083
3,346
73
53
395
321
293
343
1,947
1,746
2,859
72
59
356
16
(84)
58
337
337
487
1
(6)
39
5
(29)
17
17
19
17
1.4
(10)
11
1.
2.
3.
4.
5.
6.
7.
Underlying net profit FY19 $41.1 million (FY18 $33.8 million) excludes non-cash fair value increases driven by changes to the valuation assumptions
used by independent valuers FY19 $14.0 million (FY18 $19.1 million)
Community cash flow comprises cash flows received from homeowner rentals and deferred management fees less community operating costs
and the net surplus/deficit from providing utilities
Calculated as a ratio of net debt to net debt plus equity
Calculated as a ratio of underlying EBIT divided by a three year rolling average of total assets less current liabilities
Gross number of homes adjusted for share of communities owned by non-controlling interests
Includes resales attracting a deferred management fee. There were a further 18 resales settled in FY19 (FY18: 28 resales) that did not attract a
deferred management fee as the outgoing homeowners sold their home within 12 months of initial settlement in accordance with the Company’s
Smart Buy Guarantee
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 2019 financial year.
Lifestyle Communities Annual Report
10
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Update on communities
Community
New homes
Resales
Settled
FY19
Settled
FY18
Net
sales
FY19
Net
sales
FY18
Settled
FY19
Settled
FY18
Net
sales
FY19
Net
sales
FY18
Homes
sold
not settled
Total
homes
settled
Total
homes in
portfolio
Brookfield
Seasons
Warragul
Casey Fields
Shepparton
Chelsea Heights
Hastings
Lyndarum
Geelong
Officer
Berwick Waters
Bittern
Ocean Grove
Mount Duneed
Kaduna Park
Wollert
Plumpton
Tyabb
-
-
-
-
25
-
-
-
20
-
72
152
68
-
-
-
-
-
-
-
-
-
48
-
-
40
57
26
125
25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
41
-
-
-
4
-
3
17
59
41
47
18
-
-
-
-
1
37
5
74
116
70
-
-
-
-
-
11
3
9
11
2
9
5
7
5
7
2
-
-
-
-
-
-
-
15
4
14
11
12
9
9
1
-
12
-
-
-
-
-
-
-
-
10
1
10
9
6
10
6
2
5
5
1
1
-
-
-
-
-
-
14
4
10
9
4
6
7
1
-
4
-
-
-
-
-
-
-
-
-
-
-
-
16
-
-
-
1
-
3
26
87
41
47
18
-
-
228
136
182
217
272
186
141
154
163
151
209
177
68
-
-
-
-
-
228
136
182
217
300
186
141
154
164
151
216
209
220
191
172
246
265
185
Total
337
An update on each of the communities as at 30 June 2019 is as follows:
321
344
209
71
87
66
59
239
2,284
3,563
•
•
•
•
•
•
•
•
•
•
•
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 completed construction during FY19. There are 11 homes remaining for sale and 28 homes remaining to settle.
Lifestyle Geelong is now fully sold and has one home left to settle.
Lifestyle Berwick Waters has seven homes remaining for settlement. Of these, four homes have been retained as display homes to
assist with marketing at Kaduna Park.
Lifestyle Bittern is fully sold and achieved 152 settlements in FY19. There are 32 homes remaining to settle and six of these have been
retained to assist with marketing for Tyabb.
Lifestyle Ocean Grove has achieved 155 sales and 68 settlements to date. The clubhouse at Ocean Grove was officially opened during
May 2019.
The land for the Lifestyle Community in Mount Duneed (Armstrong Creek) settled in September 2018. This community was launched
for sale in August 2018 and first settlements are expected to commence in December 2019.
The land for the Lifestyle Community in Kaduna Park was settled in May 2019. Whilst some preliminary site works have started,
commencement of construction at Kaduna Park remains subject to receipt of a planning permit which is expected to be received in
the first quarter of FY20.
The initial parcel of land for the Lifestyle Community in Wollert was acquired in April 2018 with an additional adjacent site acquired in
October 2018 which extended the size of the community to 246 homes. The second parcel of land settled in June 2019 with the first
parcel due to settle in August 2019. Commencement of construction remains subject to receiving a planning permit which is
expected to be received during FY20.
The land for the Lifestyle Community in Plumpton was acquired in December 2018 and is due to settle in September 2019.
Commencement of construction remains subject to receiving a planning permit which is expected to be received in the second half
of FY20.
The contracts for the acquisition of land for the Lifestyle Community in Tyabb were executed in March 2019. The contracts are
conditional on obtaining a planning permit. Settlement is expected to occur at the end of 2020 with construction anticipated to
commence soon after.
Lifestyle Communities Annual Report
11
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Outlook
The Company has a focused strategy to service the niche of providing good quality affordable housing to the over 50’s market and is
currently funded and resourced to acquire up to two new sites per year 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.
Due to a highly competitive property market in Victoria during the last 12 to 18 months, the Company enters FY20 with one less project
than planned. The Company has also experienced some delays in receiving planning permits for new communities at Kaduna Park and
Wollert. New home settlements for FY20 are forecast to be in the range of 270 to 310 and established home settlements attracting a
deferred management fee are forecast to be 60 to 80. The expected increase in established home sales and site rental annuities means
the Company is confident that total dividends will increase in FY20 compared to the 2019 financial year.
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 18 sites and developing most of these during the past 16 years.
Sales and settlements – the Company is exposed to the rate of sales of new and existing homes, the sales price of new homes (and to a
lesser extent the sales price 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 is a critical determiner in the site selection process
and the acquisition case.
Community Development – the Company is exposed to various risks inherent in developing greenfield projects. Effective management of
the construction programme is important to ensure; high quality product is delivered; cash flow is managed efficiently and returns are
maximised. The Company mitigates this risk by implementing a robust project governance framework, using a panel of trusted suppliers,
and 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 its debt facility was cancelled in a short period of time. The
Company mitigates these risks by: maintaining a Statement of Financial Position with a reasonably low level of gearing; ensuring it
complies with all debt covenants and reporting obligations; ensuring sufficient remaining term for debt facilities; in the most recent debt
refinancing introducing different maturity dates 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 and
safety. A well-managed community will: provide a safe living environment for homeowners; 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 Compliance and Governance – the Company seeks to avoid reputational and compliance incidents by implementing a strong
operating and control environment and seeking professional advice in relation to the management of its legal compliance and tax
affairs. The Company’s operations, business, and financial model are specifically impacted by how the provisions of the Residential
Tenancies Act 1997 (Vic), the Social Security Act 1991 (Commonwealth) and a number of other legislative schemes are currently
interpreted and administered by the relevant regulatory authorities. Changes to the current administrative practice or specific legislative
amendments, could have an adverse impact on the operating and financial performance of the Company. Further, some aspects of the
taxation treatment of our relatively new asset class are being formally considered by the tax authorities for the first time. It is possible that
any view formed by the tax authorities or the Courts that is inconsistent with the Company’s current treatment may adversely impact the
Company’s operating and financial performance. The Company takes an active role in engaging with, and providing submissions to, the
relevant regulatory bodies through its membership and participation in the Victorian Caravan Parks Association and the Residential Land
Lease Alliance.
Lifestyle Communities Annual Report
12
For personal use only
Putting the extra
in the ordinary
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
1.
Introduction
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
Contents
1
2
3
4
5
6
7
8
9
10
Introduction
HR & Remuneration Committee
Details of key management personnel
Non-executive directors’ remuneration
Executive directors and senior management remuneration
Relationship between remuneration and performance
Executive service agreements
Remuneration details
Options held by key management personnel
Remuneration report voting at Annual General Meetings
2. HR & Remuneration Committee
2.1 Role of the HR & Remuneration Committee
As a minimum, the HR & Remuneration Committee’s role is to make recommendations to the Board on:
•
•
•
•
the Company’s remuneration framework;
formulation and operation of employee incentive plans;
remuneration levels of executive Directors and other key management personnel; and
the level of non-executive Director fees.
The objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term
interests of the Company.
Lifestyle Communities Annual Report
14
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
3. Details of Key Management Personnel
Non-Executive Directors
Position
Commencement date
Tim Poole
Philippa Kelly
Chair of the Board
Non-Executive Director
Chair – HR & Remuneration Committee
Member – Audit Committee
22 November 2007
Non-Executive Director
Chair – Audit Committee
Member - HR & Remuneration Committee
18 September 2013
Non-Executive Director
The Honourable Nicola Roxon
Member - HR & Remuneration Committee
1 September 2017
Georgina Williams
David Blight
Executive Director
James Kelly
Other executives
Darren Rowland
Chris Paranthoiene
Sam Cohen
Yvonne Slater
Richard Parker
Non-Executive Director
Member – Audit Committee
1 September 2017
Non-Executive Director
15 June 2018
Position
Managing Director
Position
Commencement date
Founder
Commencement date
Chief Financial Officer and Company
Secretary
21 May 2018
Head of Acquisitions and Development
13 March 2007
Head of Operations
Head of Development Delivery
Head of Sales
3 October 2011
8 January 2018
11 January 2016
Lifestyle Communities Annual Report
15
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
4. Non-Executive Directors’ remuneration
4.1 Fixed fees
All Non-Executive Directors are paid fixed fees for their services to the Company. The level of fees is 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 to Non-Executive Directors 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 2019 financial year are set out in section 8.
4.2 Review of Non-Executive Director's 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 (including superannuation). Fees paid to the other Non-Executive Directors are $80,000 per annum
plus an additional $5,000 per annum for each committee Chair.
5.
Executive Directors and senior management remuneration
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.
5.2 Determining fixed remuneration
Managing Director
The total remuneration for the Managing Director (inclusive of superannuation) is $579,592 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.
Lifestyle Communities Annual Report
16
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
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
Low
Medium
High
FY20
270
290
310
FY19
310
330
350
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.
Senior management personnel will receive: 2,000 shares if the low point of the target is reached; 3,000 shares if the mid-point is
reached; and 4,000 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 2019 financial year, 337 new home settlements were achieved meaning the mid-point of the target was achieved.
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 and remain employed up until the shares are allocated. Shares are allocated in September following the end of the target year
and after the completion of the independent audit. 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 will be issued in September following completion of the audit;
25% have a one-year service and ongoing performance requirements; and
50% have two-year service and ongoing performance requirements.
Shares allocated to senior management personnel have the following service (or escrow) conditions:
•
•
50% of shares will be issued in September following completion of the audit; and
50% have a one-year service and ongoing performance requirements.
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, the fair value has been determined at the grant date for employees employed prior to 1 July and at
commencement date of employees that joined the Company during the year. The expense will be recognised over the vesting periods
noted above.
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 and are awarded within three months after the end of the financial year.
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.
Lifestyle Communities Annual Report
17
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
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 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, the new home settlements metric was chosen as the only performance
condition as new home settlements are 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 HR & Remuneration Committee has
discussed whether a second performance condition should be introduced in the future. The decision was made to retain one condition for
FY20, however, this matter will be further considered during the year.
The role each group of the Company’s employees plays in delivering new home settlements is described in the following table:
Department
Total staff Impact on settlements
Acquisitions
Marketing
1
Supported by the Managing Director, the acquisitions
executive is incentivised by the ability to influence the future
settlement pipeline.
8
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.
Development and delivery
11
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.
Sales
Operations
Customer Contact
23
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.
35
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.
3
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.
Finance
6
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 2019 financial
year. Prior to the commencement of the financial year, the Company had provided guidance that the expected new home settlement
range for the 2019 financial year was 310 to 350. 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.
Lifestyle Communities Annual Report
18
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
The following table shows the gross revenue, profits and dividends for the last five years for the Company, as well as the share prices at
the end of the respective financial years.
Performance measure
FY19
FY18
FY17
FY16
FY15
Underlying net profit after tax attributable to members
($million)
Underlying Net profit (change from prior year) (%)
41.10
21.6%
33.80
35.2%
25.00
29.5%
19.30
15.6%
16.70
35.8%
Performance measure
FY19
FY18
FY17
FY16
FY15
Dividends declared & paid (fully franked) (cents)
Underlying diluted earnings per share (cents)
Closing share price (30 June)
Share price increase / (decrease)
New home settlements
5.5
52.7
6.63
13.3%
337
4.5
32.30
5.85
44.4%
321
3.5
26.50
4.05
39.2%
278
2.5
18.50
2.91
19.3%
202
1.5
16.10
2.44
52.5%
240
7.
Executive service agreements
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. The agreement is an ongoing contract which is reviewed
annually.
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 2019 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.
Lifestyle Communities Annual Report
19
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
Remuneration details
8.
The following table of benefits and payment details, in respect to the financial year, the components of remuneration for each member of the key management personnel of the Group.
2019
Directors
Tim Poole
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Key management personnel
Darren Rowland
Chris Paranthoiene
Sam Cohen
Yvonne Slater
Richard Parker
Total
Lifestyle Communities Annual Report
Short term
Post-employment
Share
based
payment
Total performance
related %
Salary &
fees
$
Bonus
$
Non-
monetary
Other
Super
Retirement
benefits
$
$
$
$
EIS
$
Cash
bonus
%
Total
Shares
$
%
114,155
575,000
77,626
73,059
73,059
73,059
985,958
325,000
325,000
194,550
220,913
203,082
1,268,545
2,254,503
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,845
4,592
7,374
6,941
6,941
6,941
-
43,634
-
-
-
-
-
25,490
25,371
16,107
19,087
16,858
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
53,761
69,180
69,180
53,761
69,180
-
102,913
-
315,062
-
146,547
-
315,062
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,000
579,592
85,000
80,000
80,000
80,000
- 1,029,592
13.3
404,251
16.5
419,551
24.7
279,837
18.3
293,761
23.9
289,120
18.7 1,686,520
11.6
2,716,112
20
For personal use only
Remuneration Report (audited)
For the year ended 30 June 2019
2018
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 25 August 2017)
Geoff Hollis (resigned 16 March 2018)
Total
Lifestyle Communities Annual Report
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Short term
Post-employment
Share
based
payment
Total performance
related %
Salary $
fees
Cash
bonus
Non-
monetary
Other
Super
Retirement
benefits
$
$
$
$
$
$
EIS
$
Cash
bonus
%
Shares
Total
%
$
112,325
530,464
76,153
-
60,929
60,929
9,337
48,125
898,262
29,094
-
-
-
-
-
-
-
-
-
-
292,191
9,050
196,434
101,777
44,818
170,380
-
-
-
-
834,694
9,050
1,732,956
9,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,212
10,670
-
7,234
-
5,788
5,788
887
-
30,367
2,764
27,133
16,185
8,760
5,791
30,447
19,079
61,659
79,712
61,659
110,079
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,866
43,167
43,167
12,866
-
9,189
121,255
121,255
-
-
-
-
-
-
-
-
-
-
2.6
-
-
-
-
0.9
0.5
-
-
-
-
-
-
-
-
122,995
530,464
83,387
-
66,717
66,717
10,224
48,125
-
928,629
28.7
44,724
11.6
371,541
16.9
255,786
10.4
123,403
-
81,821
0.0
229,095
0.1 1,106,370
0.1 2,034,999
21
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
Shares held by Key Management Personnel
9.
9.1 Share based payments issued to key management personnel as remuneration
The number of ordinary shares in Lifestyle Communities Limited awarded or vested person (pursuant to the equity incentive scheme) to
each key management of the Group during the financial year is as follows:
Name
Darren Rowland
Chris Paranthoiene
Sam Cohen
Yvonne Slater
Richard Parker
Financial
Year of
grant
Financial
year of
vesting
Plan
Number
Value at
grant date
$
Total
vested
Vested
%
2018
2018
2018
2019
2019
2019
2017
2018
2018
2018
2019
2019
2019
2017
2018
2018
2019
2019
2019
2019
2018
2018
2018
2019
2019
2019
2017
2018
2018
2018
2019
2019
2019
2019
2019
2020
2020
2020
2021
2019
2019
2019
2020
2020
2020
2021
2019
2019
2020
2020
2020
2020
2021
2019
2019
2020
2020
2020
2021
2019
2019
2019
2020
2020
2020
2021
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
EIS
625
625
3,256
3,256
625
625
1,250
6,513
3,750
21,787
3,750
21,787
7,500
43,575
-
-
-
-
10,000
25,900
10,000
5,000
12,950
5,000
5,000
12,950
5,000
10,000
25,900
3,750
21,787
3,750
21,787
3,750
43,575
-
-
-
-
10,000
25,900
10,000
5,000
12,950
5,000
10,000
12,950
5,000
5,000
25,900
5,000
21,787
10,000
21,787
625
43,575
625
625
3,256
3,256
1,250
6,513
3,750
21,787
3,750
21,787
7,500
43,575
-
-
-
-
625
625
-
-
-
-
10,000
25,900
10,000
5,000
12,950
5,000
5,000
12,950
5,000
10,000
25,900
3,750
21,787
3,750
21,787
7,500
43,575
-
-
-
-
100
100
-
-
-
-
100
100
100
-
-
-
-
100
100
100
-
-
-
-
100
100
-
-
-
-
100
100
100
-
-
-
-
For further details relating to the EIS, please refer to Note 5.3 of the Company’s 2019 Financial Statements.
Lifestyle Communities Annual Report
22
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Remuneration Report (audited)
For the year ended 30 June 2019
9.2
Shareholdings of Directors and key management personnel
30 June 2019
Directors
Tim Poole
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Key management personnel
Darren Rowland
Chris Paranthoiene
Sam Cohen
Yvonne Slater
Richard Parker
30 June 2018
Directors
Tim Poole
James Kelly
Philippa Kelly
David Blight (appointed 15 June 2018)
Nicola Roxon (appointed 1 September 2018)
Georgina Williams (appointed 1 September 2018)
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)
Balance at
beginning of
year
On-market
transactions
Balance at
end of year
1,224,607
-
1,224,607
12,045,566
- 12,045,566
65,000
-
-
2,000
-
-
-
-
65,000
-
-
2,000
-
1,250
1,250
197,341
(16,000)
181,341
85,000
20,000
105,000
195
1,250
1,445
10,000
16,500
26,500
Balance at
beginning of
year
On-Market
transactions
Balance at
end of year
1,224,607
12,045,566
65,000
-
-
-
-
1,224,607
-
12,045,566
-
-
-
65,000
-
-
2,000
2,000
5,079,433
-
5,079,433
3,000,000
- 3,000,000
-
-
-
225,000
(27,659)
197,341
100,000
(15,000)
85,000
-
195
195
204,000
-
204,000
190,000
(50,000)
140,000
10. Remuneration report voting at Annual General Meetings
Lifestyle Communities Limited received more than 95.78% of votes in support of its remuneration report at the 2018 Annual General
Meeting.
Remuneration report ends.
Lifestyle Communities Annual Report
23
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Directors' Report
For the year ended 30 June 2019
Signed in accordance with a resolution of the Board of Directors:
Tim Poole
Chair
Dated 14 August 2019
James Kelly
Managing Director
Lifestyle Communities Annual Report
24
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 2019, 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.
This declaration is in respect of Lifestyle Communities Limited and the entities it controlled during the year
N R BULL
Partner
Date 14 August 2019
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 13, 664 Collins Street, Docklands VIC 3008
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 For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2019
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
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit from continuing operations
Profit attributable to:
Members of the parent entity
Non-controlling interests
Total comprehensive income for the half year
Total comprehensive income attributable to:
Members of the parent entity
Non-controlling interests
Note
2019
$
2018
$
119,270,205
100,114,866
(89,716,228)
(79,815,755)
29,553,977
20,299,111
20,539,317
16,963,810
2.1(a)
4,192,677
4,346,907
2,818,577
2,121,865
-
20,273
50,087
11,544
27,570,844
23,494,213
2.2
55,732,362
57,396,731
(6,212,127)
(5,835,906)
2.1(d)
2.1(e)
(9,169,649)
(7,752,814)
(2,614,718)
(1,677,119)
(3,270,966)
(2,266,073)
(9,843,826)
(7,771,760)
(673,238)
(99,126)
2.1(b)
(1,421,634)
(307,315)
79,651,025
75,479,942
2.4
(24,587,824)
(22,577,027)
55,063,201
52,902,915
55,063,201
52,681,734
-
221,181
55,063,201
52,902,915
55,063,201
52,681,734
-
221,181
55,063,201
52,902,915
52.7
52.7
50.4
50.4
Earnings per share for profit attributable to the ordinary equity holders of the parent entity:
Basic earnings per share (cents)
Diluted earnings per share (cents)
The above statement should be read in conjunction with the accompanying notes.
Lifestyle Communities Annual Report
27
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Consolidated Statement of Financial Position
As at 30 June 2019
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
Trade and other payables
Current tax liabilities
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
Total equity attributable to equity holders of the Company
Non-controlling interest
TOTAL EQUITY
Note
2019
$
2018
$
4.3
2.6
3.3
2.7
3.3
3.4
3.1
2.8
2.4
5.2
4.4
5.2
2.4
4.5
4.6
4.6
4,981,887
8,585,136
605,316
227,152
34,776,702
33,232,275
1,824,549
815,510
42,188,454
42,860,073
13,881,826
6,206,662
7,642,027
5,576,406
399,750,455
303,572,686
421,274,308
315,355,754
463,462,762
358,215,827
37,405,769
59,808,214
973,934
1,132,103
888,517
667,254
39,268,220
61,607,571
100,000,000
40,000,000
132,100
165,774
69,370,783
51,888,520
169,502,883
92,054,294
208,771,103
153,661,865
254,691,659
204,553,962
63,641,422
63,808,144
2,196,251
1,727,770
188,853,986
139,018,048
254,691,659
204,553,962
-
-
254,691,659
204,553,962
The above statement should be read in conjunction with the accompanying notes.
Lifestyle Communities Annual Report
28
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
2019
Contributed
equity
Reserves
Note
$
$
Retained
earnings
$
Non-controlling
interest
Total equity
$
$
Balance at 1 July 2018
Profit for the year
Total comprehensive income for the year
63,808,144
1,727,770
139,018,048
-
204,553,962
-
-
-
55,063,201
-
55,063,201
-
55,063,201
-
55,063,201
Transactions with owners in their
capacity as owners
Treasury shares purchased
Vesting of treasury shares
Employee share scheme expense
Dividends paid or provided for
4.5
4.5
5.3
4.7
(547,889)
-
381,167
(419,799)
888,280
-
-
-
(5,227,263)
-
-
-
-
(547,889)
(38,632)
888,280
(5,227,263)
Balance at 30 June 2019
63,641,422
2,196,251
188,853,986
-
254,691,659
2018
Balance at 1 July 2017
Profit for the year
Contributed
equity
Reserves
Retained
earnings
Non-controlling
interest
Total equity
Note
$
$
$
$
$
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
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
6.2
4.5
4.5
4.5
5.3
4.7
-
-
-
(534,091)
-
-
-
-
533,725
(533,725)
604,440
-
459,679
-
-
-
(4,181,805)
(221,181)
-
-
-
-
-
(221,181)
(534,091)
-
604,440
459,679
(4,181,805)
Balance 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.
Lifestyle Communities Annual Report
29
-
-
-
-
-
-
-
-
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Interest paid
Note
2019
$
2018
$
146,374,079
134,791,374
(130,279,294)
(107,247,348)
(7,029,004)
(5,067,510)
123,044
11,544
(3,405,465)
(1,936,684)
Net cash provided by operating activities
2.5
5,783,360
20,551,376
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of investment properties
Net cash used in investing activities
Cash flow from financing activities
Proceeds from CRES shares
Purchase of treasury shares
Proceeds from external borrowings
Repayment of external borrowings
Dividends paid
Net cash provided by/ (used in) financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of financial year
(2,760,947)
(1,530,213)
(60,615,700)
(2,430,000)
(63,376,647)
(3,960,213)
-
604,440
(782,699)
(1,069,416)
60,000,000
2,000,000
-
(9,000,000)
(5,227,263)
(4,181,805)
53,990,038
(11,646,781)
(3,603,249)
4,944,382
8,585,136
3,640,754
4.3
4,981,887
8,585,136
The above statement should be read in conjunction with the accompanying notes.
Lifestyle Communities Annual Report
30
For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
1 How we have prepared this report
1.1 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.
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.
1.2 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.
Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures.
1.3 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.
(a) Significant accounting judgments
Income tax
(i)
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.
Lifestyle Communities Annual Report
31
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(ii) 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.
(b) Significant accounting estimates and assumptions
(i) 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.
(ii) 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. Refer to Note 5.3 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.
2 How we have performed this year
2.1 Profit from continuing operations
Profit from continuing operations before income tax has been determined after the following specific revenues and expenses:
Revenues
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:
(i) Home settlement revenue
Revenue from home settlements is recognised when there is persuasive evidence, usually in the form of settlement of the home,
indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity and
quality of the goods has been determined, the price is fixed and generally ownership has passed. The consolidated entity considers all
risks and rewards as transferred to the customer upon receipt of final settlement.
(ii) Interest revenue
Interest revenue is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to the
financial assets.
(iii) Rental revenue
Rental revenue from investment properties is derived from homeowners 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 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 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.
The Company offers a Smart Buy Guarantee whereby no deferred management fee is payable by homeowners that moveout for whatever
reason in the first 12 months. 4.4% of homeowners that settled in FY19 used the Smart Buy Guarantee (and therefore didn’t pay a deferred
management fee) compared with 6.9% in FY18.
(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.
Lifestyle Communities Annual Report
32
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
All revenue is stated net of the amount of goods and services tax (GST).
(a) Deferred management fee
Deferred management fees received
Selling and administration fees
Total
Expenses
(b) Finance costs expensed
2019
$
2018
$
3,431,238
3,522,666
761,439
824,241
4,192,677
4,346,907
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.
Interest on secured loans
Other interest expense
Amortisation of loan facility fees
Total
(c) Finance costs capitalised
Finance costs expensed excludes interest capitalised as part of inventory:
Interest on secured loans
2019
$
2018
$
1,168,068
200,396
650
252,916
24,313
82,606
1,421,634
307,315
2019
$
2018
$
2,237,397
1,781,199
Interest on development debt has been capitalised at the prevailing facility interest rate and is expensed through cost of sales as a
pro-rata amount per home settled.
(d) Management rental expenses
Management expenses attributable to communities
Surplus application to joint venture partners
Total
2019
$
2018
$
8,449,073
6,713,934
720,576
1,038,880
9,169,649
7,752,814
Lifestyle Communities Annual Report
33
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(e) Management deferred management fee expenses
Deferred management fee sales and marketing expenses
Surplus application to joint venture partners
Total
2019
$
2018
$
1,894,209
1,094,589
720,509
582,530
2,614,718
1,677,119
(f) Depreciation, amortisation and impairment
The Company reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. At the end
of this reporting period, the Directors have determined that there was no adjustment required to the Group’s property, plant and
equipment useful lives. Full details of the Company’s depreciation accounting policy can be found at note 3.4.
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.
Depreciation
2.2 Fair Value Adjustments
Fair value adjustments - Investment Properties
Other fair value adjustments
Total
Note
3.4
2019
$
2018
$
703,698
544,696
2019
$
2018
$
55,732,362
60,226,305
-
(2,829,574)
55,732,362
57,396,731
(a) Fair value adjustments - investment properties
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
Other fair value adjustments relate to transactions incurred that are not directly relating to investment properties but are fair value in
nature.
Lifestyle Communities Annual Report
34
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
2.3 Earning per share
The following reflects the income and weighted average number of shares used in the basic and diluted earnings per share computations:
(a) Earnings used in calculating earnings per share
Net profit
(b) Weighted average number of shares
2019
$
2018
$
55,063,201
52,681,734
2019
$
2018
$
Weighted average number of ordinary shares for basic earnings per share
104,545,131
104,545,131
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.
2.4 Income Tax Expense
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.
(a) The major components of tax expense (income) comprise:
Current tax
Deferred income tax
Under/(over) provision in respect of prior years
2019
$
2018
$
6,870,836
5,552,614
17,482,263
16,951,880
-
72,533
Deferred tax movement- booked through equity (contribution to the employee share trust)
234,725
-
Total
24,587,824
22,577,027
Lifestyle Communities Annual Report
35
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(b) Deferred income tax expense included in income tax expense comprises
Decrease / (increase) in deferred tax assets
Increase in deferred tax liabilities
Total
(c) Reconciliation of income tax to accounting profit:
Accounting profit before tax
Tax
Add / (less):
Tax effect of:
- Share options expensed during year
- Non-controlling interests
- Tax loss adjustments
- Under provision for income tax in prior year
- Other
Income tax expense
(d) Current tax
Current tax relates to the following:
Opening balance
Income tax payable
Tax payments
Under provision in prior year
Current tax liabilities
2019
$
2018
$
423,741
(332,676)
17,058,522
17,284,556
17,482,263
16,951,880
2019
$
2018
$
79,651,025
75,479,942
30.00%
30.00%
23,895,308
22,643,983
266,484
-
-
-
426,032
139,027
(133,263)
(160,257)
72,533
15,004
24,587,824
22,577,027
2019
$
2018
$
1,132,103
574,467
6,870,836
5,552,614
(7,029,005)
(5,067,511)
-
72,533
973,934
1,132,103
Lifestyle Communities Annual Report
36
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(e) Deferred tax
Deferred tax assets
Capital raising costs
Tax losses
Provision for employee entitlements
Accruals and business expenses
Credited to equity - purchase of treasury shares
Deferred tax assets
Deferred tax liabilities
Interest capitalised
Investment property fair value adjustments
Deferred tax liabilities
Net deferred tax liability
(f) Deferred tax assets not brought to account
Capital tax losses
2.5 Cash Flow Information
(a) Reconciliation of result for the year to cashflows from operating activities
Operating profit after income tax
Cash flows excluded from profit attributable to operating activities
Non-cash flows in profit:
-Depreciation
-Amortisation
-Share based payments
-Fair value adjustment
Changes in assets and liabilities:
- (Increase)/decrease in trade and other receivables
- (Increase) in other assets
- (Increase)/decrease in inventories
- Increase/(decrease) in trade and other payables
- Increase in provisions
- Increase/(decrease) in current tax
- Increase in deferred tax
Net cash flow from operating activities
2019
$
2018
$
12,236
274,344
306,185
18,354
921,103
249,908
1,455,141
1,247,328
340,253
375,207
2,388,159
2,811,900
836,394
497,581
70,922,548
54,202,839
71,758,942
54,700,420
69,370,783
51,888,520
324,241
240,000
2019
$
2018
$
55,063,201
52,902,915
703,698
252,916
888,280
544,696
82,606
459,679
(55,732,362)
(57,396,731)
(378,164)
520,425
(1,009,039)
-
(9,219,592)
5,494,366
(2,297,261)
187,589
(158,169)
290,985
142,918
557,636
17,482,263
16,951,881
5,783,360
20,551,376
Lifestyle Communities Annual Report
37
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
2.6 Trade and other receivables
Other receivables
2019
$
2018
$
605,316
227,152
(a) 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.
2.7 Other current assets
Security deposits
Other assets
Prepayments
Total
2019
$
2018
$
787,271
958,750
78,528
401,836
343,634
70,040
1,824,549
815,510
(a) 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.
2.8 Trade and other payables
Trade payables
Customer deposits
GST payable
Other payables and accruals
Contracted land
Deferred revenue
Total
Note
(a)
(b)
(c)
(c)
(e)
(f)
2019
$
2018
$
1,486,479
1,839,570
637,900
2,177,715
402,911
481,421
5,428,500
6,277,594
29,323,325
48,877,906
126,654
154,008
37,405,769
59,808,214
(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) 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,
Lifestyle Communities Annual Report
38
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
activities, which are disclosed as operating cash flows.
(d) 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 and professional fees related to the GST audit currently being conducted by
the Australian Taxation Office. For further details see Note 7.3.
(e) Contracted land
Includes amounts payable on two parcels of land for contracts entered prior to the reporting date (including stamp duty). All contracts are
expected to settle in the 2020 financial year.
(f) 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.
2.9 Segment Information
Operating segments are reported based on internal reporting provided to the Managing Director who is the Group's chief operating
decision maker.
The consolidated entity operates within one operating segment, being the property development and management industry. As a result,
disclosures in the Consolidated Financial Statements and notes are representative of this segment.
3 Our business assets
3.1
Investment properties
Investment properties are measured initially at cost, including transaction costs. Investment properties include undeveloped land and land
subject to residential site lease agreements. Subsequent to initial recognition, investment properties are re-measured at fair value, which
reflects market conditions. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss
in the year in which they arise.
Investment properties at fair value
(a) Reconciliation of carrying amounts at the beginning and end of the period
Opening balance
Additions (contracted land and capitalised costs)
Net unrealised gain from fair value adjustments
Closing balance
2019
$
2018
$
399,750,455
303,572,686
2019
$
2018
$
303,572,686
211,294,274
40,445,407
32,052,107
55,732,362
60,226,305
399,750,455
303,572,686
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 independent valuations.
Rates were taken directly from independent valuations for the six communities independently valued in the current year. In the remaining
communities (independently valued in the prior year) the directors have adjusted the rental capitalisation rates to reflect those adopted by
the independent valuers. Weekly rental rates were taken directly from the valuations for the six communities independently valued in the
current year. In relation to the remaining 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.
Lifestyle Communities Annual Report
39
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
Investment properties (continued)
3.1
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 an independently assessed discount rate.
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 4.4.
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
Investment properties at cost
3.2 Fair value measurements
(a) Fair value hierarchy
2019
$
2018
$
158,084,175
117,836,765
Assets and liabilities measured and recognised at fair value have been determined by the following fair value measurement hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: Input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Inputs for the asset or liability that are not based on observable market data
30 June 2019
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
30 June 2018
Recurring Fair Value Measurements
Investment properties
Total assets measured at fair value
Level 1
Level 2
Level 3
$
$
$
Total
$
-
-
-
-
-
-
-
-
399,750,445
399,750,445
399,750,445
399,750,445
303,572,686
303,572,686
303,572,686
303,572,686
(b) Valuation techniques and inputs used in level 3 fair value measurements
Investment properties
(i)
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.
Lifestyle Communities Annual Report
40
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(c) Significant unobservable inputs used in level 3 fair value measurements
Investment properties
(i)
Rental capitalisation rates - rates were taken directly from the valuations for the six communities independently valued in the current year.
In relation to the remaining 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 - for all communities the Directors have adjusted the weekly rental rates adopted in prior year valuations 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 ($)
Adopted
Per valuations
196.44 - 202.92
196.44 - 202.92
Anticipated % expenses (as a percentage of rental income)
28.0% - 42.2%
28.0% - 42.2%
Rental capitalisation rate (%)
Rental values per unit ($)
Deferred management fee discount rates (%)
Deferred management fee values per unit ($)
Valuation of undeveloped land (per hectare) ($'million)
7.0%
7.0%
84,730 - 108,341
84,730 - 108,341
13.00% - 13.25%
13.00% - 13.25%
31,229 - 89,247
31,229 - 89,247
0.19 - 2.20
0.19 - 2.20
(d) Valuation processes used for level 3 fair value measurements
Investment properties
(i)
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 independent valuations to assess whether rental capitalisation rates
and weekly rental income should be adjusted. These adjustments are assessed 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.
Lifestyle Communities Annual Report
41
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(e) 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.
Rental expense rate
+2%
-2%
Rental capitalisation rate
+0.50%
-0.50%
Deferred management fee per unit
+5%
-5%
Land prices (undeveloped land)
+10%
-10%
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2019
$
2018
$
2019
$
2018
$
(4,465,964)
(3,415,472)
(4,465,964)
(3,415,472)
4,465,964
3,336,621
4,465,964
3,336,621
(9,937,497)
(7,008,103)
(9,937,497)
(7,008,103)
11,466,343
7,924,779
11,466,343
7,924,779
4,106,731
3,464,013
4,106,731
3,464,013
(4,106,731)
(3,464,013)
(4,106,731)
(3,464,013)
5,786,125
4,059,691
5,786,125
4,059,691
(5,786,125)
(4,059,691)
(5,786,125)
(4,059,691)
Lifestyle Communities Annual Report
42
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
Inventories
3.3
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.
Current
Housing
Civils and infrastructure
Total current
Non-current
Housing
Civils and Infrastructure
Total non-current
Total
2019
$
2018
$
21,470,409
19,421,030
13,306,293
13,811,245
34,776,702
33,232,275
4,650,453
41,926
9,231,373
6,164,736
13,881,826
6,206,662
48,658,528
39,438,937
(a) Inventory expense
Inventories recognised as an expense for the year ended 30 June 2019 totalled $89,716,228 for the Group (2018: $79,815,755). The expense
has been included in the cost of sales line item. Inventory expense includes $27,953,534 for a share of the community infrastructure sold
with each home (FY18 $26,810,436).
3.4 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
2019
40 years
4 to 25 years
2 to 3 years
4 to 7 years
2018
40 years
4 to 25 years
2 to 3 years
4 to 7 years
Lifestyle Communities Annual Report
43
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
(a) Movements in carrying amounts of property, plant and equipment
Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current
financial year:
Buildings
$
Plant and
Equipment
Motor Vehicles
Computer
Equipment
$
$
$
Total
$
Year ended 30 June 2019
Balance at the beginning of the year
2,420,926
2,085,307
728,713
341,460
5,576,406
Additions
Disposals
Depreciation
735,411
1,568,269
232,975
455,505
2,992,160
-
(222,841)
-
-
(222,841)
(78,665)
(354,152)
(97,348)
(173,533)
(703,698)
Balance at the end of the year
3,077,672
3,076,583
864,340
623,432
7,642,027
At 30 June 2019 Cost
Accumulated depreciation
Net Carrying Amount
3,473,773
4,250,415
1,339,396
1,055,521
10,119,105
(396,101)
(1,173,832)
(475,056)
(432,089)
(2,477,078)
3,077,672
3,076,583
864,340
623,432
7,642,027
Buildings
$
Plant and
Equipment
Motor Vehicles
Computer
Equipment
$
$
$
Total
$
Year ended 30 June 2018
Balance at the beginning of year
1,971,628
1,739,388
569,505
310,368
4,590,889
Additions
Depreciation expense
505,213
652,313
235,226
137,461
1,530,213
(55,915)
(306,394)
(76,018)
(106,369)
(544,696)
2,420,926
2,085,307
728,713
341,460
5,576,406
At 30 June 2018 Cost
Accumulated depreciation
Net Carrying Amount
2,738,362
3,114,495
1,106,417
600,010
7,559,284
(317,436)
(1,029,188)
(377,704)
(258,550)
(1,982,878)
2,420,926
2,085,307
728,713
341,460
5,576,406
Lifestyle Communities Annual Report
44
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
4 How we fund the business and manage risks
4.1 Capital Management
When managing capital, the Company’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. The Company 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.
4.2 Financial Risk Management Objectives and 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.
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.
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.
Lifestyle Communities Annual Report
45
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
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 4.4.
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
Secured loans - bank finance
Net exposure
2019
$
2018
$
4,981,887
8,585,136
100,000,000
40,000,000
95,018,113
31,414,864
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)
Equity
Higher/(Lower)
2019
$
2018
$
2019
$
2018
$
(574,583)
(219,904)
(574,583)
(219,904)
574,583
219,904
574,583
219,904
When determining the parameters for a possible change in interest rate risk, management has taken into consideration the current
economic environment at balance sheet date and historical movements.
A proportion of the impact on post tax profit is deferred due to the capitalisation of interest to inventory which is recognised when units
are sold.
Market risk
At balance date, the Group has no financial instruments exposed to material market risks other than interest rate risk.
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.
Lifestyle Communities Annual Report
46
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
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 4.4.
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 less1
6-12 months
1-2 years
2-5 years2
Total
2019
$
2018
$
37,405,769
42,519,214
-
-
17,289,000
-
100,000,000
40,000,000
137,405,769
99,808,214
(1) This amount is represented by the following financial liabilities:
- $637,900 relates to customer deposits which typically convert to settlement within six months or less (2018: $2,177,715).
- $126,654 relates to deferred revenue which will be bought to account within six month or less (2018: $154,008).
- $7,322,591 relates to trade and other payables, refer to Note 2.8 for further detail (2018: $8,598,585).
- $29,323,325 relates to amounts payable on two 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) 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.
4.3 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.
Cash and cash equivalents
4.4
Interest-bearing loans and borrowings
Secured loans - bank finance
2019
$
2018
$
4,981,887
8,585,136
2019
$
2018
$
100,000,000
40,000,000
Lifestyle Communities Annual Report
47
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(a) Secured loans - bank finance maturity
On 28 March 2019, the Company executed contracts with The Commonwealth Bank of Australia, National Australia Bank and HSBC Bank
Australia to secure $225,000,000 of senior debt facilities under a common terms deed. The new facilities comprise a $60,000,000
tranche with a maturity of three years and a $165,000,000 tranche with a maturity of five years and replaces the previous $120,000,000
facility with Westpac Banking Corporation.
As at reporting date the company has drawn $100,000,000 of the $225,000,000 facility. See note (c) 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
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 $225,000,000 facility is secured by the following:
General Security Deeds between The Commonwealth Bank of Australia, National Australia Bank, HSBC Bank Australia and:
- Lifestyle Communities Limited
- Lifestyle Investments 1 Pty Ltd
- Lifestyle Management 1 Pty Ltd
- Lifestyle Developments 1 Pty Ltd
- Lifestyle Investments 2 Pty Ltd
- Lifestyle Management 2 Pty Ltd
- Lifestyle Developments 2 Pty Ltd
- Lifestyle Communities Investments Cranbourne Pty Ltd
- Brookfield Village Management Pty Ltd; and
- Brookfield Village Development Pty Ltd.
Mortgage granted by Lifestyle Investments 1 Pty Ltd over the properties at Melton, Tarneit and Warragul.
Mortgage granted by Lifestyle Investments 2 Pty Ltd over the properties at Shepparton, Hastings, Wollert, Geelong, Officer, Berwick
Waters, Bittern, Ocean Grove, Mount Duneed, Kaduna Park and Wollert North.
(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 The Commonwealth Bank of Australia, National Australia Bank and HSBC Bank Australia.
Lifestyle Communities Annual Report
48
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
4.5 Contributed equity
104,545,131 Ordinary shares (30 June 2018: 104,545,131)
230,401 Treasury shares (30 June 2018: 237,231)
Total
(i)
Reconciliation of ordinary shares
Opening balance
Repayment of CRES loan
Closing balance
(ii) Reconciliation of treasury shares
Opening balance
Purchase of treasury shares
Vesting of employee shares
Closing balance
2019
$
2018
$
64,523,267
64,523,510
(881,845)
(715,366)
63,641,422
63,808,144
2019
2018
Number
$
Number
$
104,545,131
64,523,510
104,545,131
63,919,070
-
-
-
604,440
104,545,131
64,523,510
104,545,131
64,523,510
2019
2018
Number
$
Number
$
237,231
(715,366)
150,000
(547,889)
(156,830)
381,410
230,401
(881,845)
174,086
180,325
(117,180)
237,231
(715,000)
(534,091)
533,725
(715,366)
(a) Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
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.
Lifestyle Communities Annual Report
49
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
4.6 Retained earnings and reserves
(a) Movements in retained earnings were as follows
Opening balance
Profit for the year
Dividends paid
Closing balance
(b) Reserves
Opening balance
Share based payments expense
Vesting of employee shares
Closing balance
4.7 Dividends
(a) Dividends
2019
$
2018
$
139,018,048
90,518,119
55,063,201
52,681,734
(5,227,263)
(4,181,805)
188,853,986
139,018,048
2019
$
2018
$
1,727,770
1,801,816
888,280
459,679
(419,799)
(533,725)
2,196,251
1,727,770
2019
$
2018
$
Dividends paid 5.0 cents per share (2018: 4.0 cents per share) fully franked
5,227,263
4,181,805
Dividends declared after balance date and not recognised
Since balance date the directors have approved a dividend of 3.0 cents per share (2018: 2.5 cents per
share) fully franked at 30%
3,136,354
2,613,628
(b) Franking account balance
Franking account balance
2019
$
2018
$
17,542,713
13,301,326
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.
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Lifestyle Communities Annual Report
50
For personal use only
Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(c) Dividend considerations
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 FY19 community management cash flows delivered a sufficient surplus to declare and pay an interim
fully franked dividend of 2.5 cent per share ($2,613,628) and declare a final fully franked dividend of 3.0 cents per share ($3,136,354).
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.
5 How we remunerate our employees and auditors
5.1 Employee benefits expense
(i) Short-term employee benefit obligations
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled wholly within
twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid
when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual
leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Long-term employee benefit obligations
The provision for employee benefits in respect of long service leave and annual leave which are not expected to be settled wholly within
twelve months of reporting date, are measured at the present value of the estimated future cash outflow to be made in respect of services
provided by employees up to the reporting date.
Employee benefit obligations are presented as current liabilities in the Statement of Financial Position if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is
expected to occur.
(iii) Retirement benefit obligations
Defined contribution superannuation plan
The consolidated entity makes contributions to defined contribution superannuation plans in respect of employee services rendered
during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are
received.
(iv) Share based payments
The consolidated entity operates an equity incentive scheme (EIS). Refer to Note 5.3 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.
Wages and salaries
Defined contribution superannuation expense
Share based payments expense
Movement in employee provisions
Total
2019
$
2018
$
8,594,288
7,901,690
618,074
888,280
187,589
545,159
459,679
142,918
10,288,231
9,049,446
Lifestyle Communities Annual Report
51
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
5.2 Employee provisions
Current
Employee provisions
Non-current
Employee provisions
5.3 Share-based payments
(a) Recognised share-based payment expenses
Expenses arising pursuant to the EIS
2019
$
2018
$
888,517
667,254
132,100
165,774
2019
$
2018
$
888,280
459,679
(b) 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.
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 and remain employed up until the shares are allocated. Shares are allocated in September following the end of the target year
and after the completion of the independent audit. Employees commencing employment with the Company after 1 July of the target year
and entitles 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 will be issued in September following completion of the audit;
25% have a one-year service and ongoing performance requirements; and
50% have two-year service and ongoing performance requirements.
Shares allocated to senior management personnel have the following service (or escrow) conditionals:
•
•
50% of shares will be issued in September following completion of the audit; and
50% have a one-year service and ongoing performance requirements.
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.
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 shares on-market. The Employee Share Trust has an
independent share plan trustee and is not considered to be controlled by the Company.
Lifestyle Communities Annual Report
52
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(c) Shares granted pursuant to the EIS
The following tables outlines shares granted pursuant to the EIS:
Senior management
Other staff
Total
Number of
shares 2019
Number of
shares 2018
Number of
shares 2019
Number of
shares 2018
'000
'000
'000
'000
Number of
shares 2019
Number of
shares 2018
Outstanding at the beginning of the year
Granted during the year
Vested during the year
130,000
101,250
60,000
90,000
89,575
72,045
15,436
89,575
219,575
173,295
75,436
179,575
(80,000)
(20,000)
(89,575)
(15,436)
(169,575)
(35,436)
Cancelled during the year
(15,000)
-
-
-
(15,000)
-
Outstanding at the reporting date
136,250
130,000
72,045
89,575
208,295
219,575
(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
Cancelled during the year
Outstanding at the reporting date
Number of
shares 2019
$
2019
$
Number of
shares 2018
$
2018
$
219,575
173,295
(169,575)
(15,000)
208,295
3.13
5.78
3.13
4.06
5.09
75,436
179,575
(35,436)
-
219,575
2.87
3.36
2.87
-
3.13
5.4 Key Management Personnel Remuneration
Key Management Personnel remuneration included within employee expenses for the year is shown below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
2019
$
2018
$
2,254,503
1,803,665
146,549
315,062
110,079
121,255
2,716,114
2,034,999
Richard Parker (Head of Sales) has been included in the Key Management Personnel for the 2019 financial year.
Lifestyle Communities Annual Report
53
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
5.5 Auditors remuneration
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.
122,804
111,500
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.
Total
249,805
102,035
372,609
213,535
2019
$
2018
$
The auditor of Lifestyle Communities Limited is Pitcher Partners.
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54
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
6 How we structure the business
6.1 Related party disclosures
(a) Ultimate parent
Lifestyle Communities Limited is the ultimate Australian parent entity.
(b) Subsidiaries
*The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.
Country of
incorporation
% Equity
Interest
Carrying value of parent entity's
interest
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)
2019 2018
2019
%
%
$
2018
$
100
100
8,751,551
8,751,551
Australia
Australia
Australia
100
100
100
100
Australia
100
100
Australia
100
100
Australia
100
100
Brookfield Development Trust (Trustee: Brookfield Village
Development Pty Ltd)
Australia
100
100
Lifestyle Communities Investments
Cranbourne Pty Ltd
Cameron Street Developments Pty Ltd
Cameron Street Developments Unit Trust
Australia
100
100
Australia
50
50
(Trustee: Cameron Street Developments Pty Ltd)
Australia
50
50
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
(c) Loans from related parties
There are no loans from related parties.
Australia
100
100
Australia
100
100
Australia
100
100
Australia
50
50
Australia
50
50
Australia
100
100
Australia
100
100
Australia
Australia
100
100
100
100
(d) Transactions with related parties
There were no transactions with related parties in the current or prior years.
-
-
3
3
-
-
-
-
-
2
2
2
-
-
120
120
3
3
-
-
3
3
-
-
-
-
-
2
2
2
-
-
120
120
3
3
8,751,809
8,751,809
Lifestyle Communities Annual Report
55
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
6.2 Non-controlling interests
Details of subsidiaries with non-controlling interests
(a) Cameron Street Developments Unit Trust
The Group has a 50% interest (2018: 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
Current assets
Total assets
Current liabilities
Current liabilities
Net assets
2019
$
2018
$
-
-
-
-
444,709
444,709
444,709
-
The joint venture arrangement provides significant restrictions on the use of assets and liabilities to protect the non-controlling interest.
There are many key decisions that require agreement from non-controlling interests including: entering into unbudgeted capital
commitments greater than $50,000; sales and purchases of assets that are greater than 10% of total assets; and substantial alteration to
the strategic direction of the activities.
Revenues
Expenses
Net profit after tax from continuing operations
Profit allocated to non-controlling interest
(ii) Summarised financial information for subsidiaries' trust distributions:
Trust distributions
2019
$
2018
$
-
-
-
36
444,673
444,709
2019
$
2018
$
-
222,355
2019
$
2018
$
-
444,709
Lifestyle Communities Annual Report
56
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
(b) Lifestyle Chelsea Heights Unit Trust
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 on 22 December 2011.
(i) Summarised financial information for subsidiary:
Current assets
Current assets
Total assets
Current liabilities
Current liabilities
Total liabilities
Net assets
2019
$
2018
$
-
-
-
-
-
8,330
8,330
8,330
8,330
-
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 loss after tax from continuing operations
Loss allocated to non-controlling interest
(ii) Summarised financial information for subsidiaries' trust distributions:
Trust distributions
2019
$
2018
$
-
-
-
9
(2,357)
(2,348)
2019
$
2018
$
-
(1,174)
2019
$
2018
$
-
(2,348)
Lifestyle Communities Annual Report
57
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
6.3 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 as they are part of a Closed Group as defined by the Corporations Act 2001:
- Lifestyle Communities Limited
- Lifestyle Investments 2 Pty Ltd
- Lifestyle Developments 2 Pty Ltd
- Lifestyle Management 2 Pty Ltd
- Lifestyle Communities Investments Cranbourne Pty Ltd
- Lifestyle Investments 1 Pty Ltd
- Lifestyle Management 1 Pty Ltd
- Lifestyle Developments 1 Pty Ltd
- Brookfield Village Management Pty Ltd
- Brookfield Village Development Pty Ltd
Pursuant to the abovementioned legislative instrument, the Company and each of the subsidiaries entered into a Deed of Cross
Guarantee on the 19th of June 2015 or have been added as parties to the Deed of Cross Guarantee by way of an Assumption Deed dated
the 4th of June 2019. 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 Consolidated Statement of Profit and Loss and Other Comprehensive Income and Consolidated Statement of Financial Position for
the Closed Group are the same as the financial statements for Lifestyle Communities Limited and its controlled entities.
Lifestyle Communities Annual Report
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
6.4 Parent entity
Required disclosures relating to Lifestyle Communities Limited as a parent entity:
Consolidated Statement of Financial Position
Assets
Current assets
Total Assets
Liabilities
Current liabilities
Total Liabilities
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Net profit
Total comprehensive income
2019
$
2018
$
138,478,903
97,487,482
140,142,974
107,144,764
2,503,505
220,056
69,221,402
39,850,505
62,514,600
63,451,129
2,196,251
6,210,721
1,727,770
2,115,360
70,921,572
67,294,259
8,037,672
1,263,774
8,037,672
1,263,774
Information not recognised in the financial statements
7
7.1 Lessor Commitments
Operating lease commitments receivable
The Group has entered 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:
- no later than 1 year
- between 1 year and 5 years
- greater than 5 years
Total minimum lease payments
2019
$
2018
$
23,691,790
19,640,361
94,767,161
78,561,444
1,919,880,982
1,597,919,783
2,038,339,933
1,696,121,588
Minimum lease payments were determined by measuring the current year's rentals and measuring this over the standard 90-year lease
agreement.
Lifestyle Communities Annual Report
59
For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
7.2 Leasing Commitments
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 lease commitments payable
Lease payments for operating leases are recognised as expenses on a straight-line basis over the term of the lease. The Group has entered
a commercial property lease with its landlord for office premises. The lease has an initial term of five years from the commencement date
being 1 February 2019.
Future minimum rentals payable under non-cancellable operating leases as at balance date were as follows:
- not later than one year
- between one year and five years
Total
Contracted construction commitments
Payable not later than one year
2019
$
2018
$
167,265
636,321
166,441
305,142
803,586
471,583
7,036,855
14,975,592
7.3 Contingencies
The GST audit being conducted by the Australian Taxation Office ( ATO) continued throughout the period. The ATO issued a position
paper during the period and notified the Company that, in its view:
1.
2.
The Company is not entitled to input tax credits on land acquisitions; and
The Company is not entitled to input tax credits on its community infrastructure expenditure.
The Company’s position remains that it is entitled to an input tax credit for a part of the GST incurred on its land acquisitions and an input
tax credit for the full amount of GST incurred on its community infrastructure expenditure. The Company has come to this view after
taking independent advice from relevant subject matter experts, including senior counsel. During FY19 the ATO issued a notice of
assessment for $670,000 which related to the input tax credit claimed on the purchase of the land for Lifestyle Lyndarum in June 2014.
The Company immediately paid and lodged an objection to that assessment. By mutual agreement, the ATO and the Company have
agreed to pause the objection process whilst the GST audit is completed. At the ATO's request, the Company agreed to extend the audit
period. The Company will continue to engage with the ATO and has not increased the size of its provision since 30 June 2018.
7.4 Events Occurring After the Reporting Date
The consolidated financial report was authorised for issue on 14 August 2019 by the board of directors.
No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the
operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
7.5 Change in Accounting Policy
(a) Financial Instruments - Adoption of AASB 9
AASB 9 replaces AASB 139: Financial Instruments: Recognition and Measurement. The key changes introduced by AASB 9 in relation to
the accounting treatment for financial instruments include:
•
•
•
•
•
simplifying the general classifications of financial assets into those measured at amortised cost and those measured at fair value;
permitting entities to irrevocably elect, on initial recognition, for gains and losses on equity instruments not held for trading to be
presented in other comprehensive income (OCI);
simplifying the requirements for embedded derivatives, including removing the requirement to separate and measure embedded
derivatives at fair value, in relation to embedded derivatives associated with financial assets measured at amortised cost;
requiring entities that elect to measure financial liabilities at fair value, to present the portion of the change in fair value arising from
changes in the entity’s own credit risk in OCI, except when it would create an ‘accounting mismatch’;
introducing a new model for hedge accounting that permits greater flexibility in the ability to hedge risk, particularly with respect to
Lifestyle Communities Annual Report
60
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ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
non-financial items; and
•
Introducing a new ‘expected credit loss’ impairment model (replacing the ‘incurred loss’ impairment model of previous accounting
standard).
The application of AASB 9 has not materially impacted the classification and measurement of the group’s financial assets and financial
liabilities.
(b) Revenue from Contracts with Customers - Adoption of AASB 15
AASB 15 provides (other than in relation to some specific exceptions, such as lease contracts and insurance contracts) a single source of
accounting requirements for all contracts with customers, thereby replacing all current accounting pronouncements on revenue. The core
principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to a customer in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the previous
accounting standard, AASB 118 Revenue, revenue from the sale of goods was recognised when the significant risks and rewards of
ownership of the goods transferred to the buyer, and revenue from the rendering of services was recognised by reference to the stage of
completion of the transaction at the end of the reporting period.
The Group’s recognition and measurement of revenue from contracts with customers has not changed as a result of the introduction of
the new standard.
Further details of the group’s accounting policies in relation to accounting for revenue from contracts with customers under AASB 15 are
contained in note 2.
Change in accounting policy in future periods
7.6
The Australian Accounting Standards Board (AASB) has issued a number of new and amended Accounting Standards and Interpretations
that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not
to early adopt any of these new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that
are relevant to the Group but applicable in future reporting periods is set out below.
Lifestyle Communities Annual Report
61
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Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
Notes to the Financial Statements
For the year ended 30 June 2019
AASB 16: Leases
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:
(a)
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:
i.
ii.
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
(b)
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.
AASB 16 mandatorily applies to annual reporting periods commencing on or after 1 January 2019 and will be first applied by the Group in
the financial year commencing 1 July 2019.
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. The Company expects to record a right of use asset of approximately $1.2
million and a corresponding lease liability of approximately $1.1 million in relation to the lease on its support office space in South
Melbourne.
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ABN: 11 078 675 153
Directors' Declaration
The directors of the Company declare that:
1.
the consolidated financial statements and notes for the year ended 30 June 2019 are in accordance with the Corporations Act 2001
and:
comply with Accounting Standards, which, as stated in basis of preparation Note 1.1 to the consolidated financial statements,
a.
constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and
b.
2.
give a true and fair view of the financial position and performance of the consolidated group;
the Chief Executive Officer and Chief Finance Officer have given the declarations required by Section 295A that:
the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the
a.
Corporations Act 2001;
b.
the consolidated financial statements and notes for the financial year comply with the Accounting Standards; and
c.
3.
the consolidated financial statements and notes for the financial year give a true and fair view.
in the directors' opinion, there are reasonable grounds to believe that the Company 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 companies which are party to the deed of cross guarantee
identified in Note 6.3 will be able to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed.
This declaration is made in accordance with a resolution of the Board of Directors.
Tim Poole
Chair
James Kelly
Managing Director
Melbourne, 14 August 2019
Lifestyle Communities Annual Report
63
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 2019, 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) giving a true and fair view of the Company’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
(b) 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 Company 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 13, 664 Collins Street, Docklands VIC 3008
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
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
Valuation of investment properties - $399.7m
How our audit addressed the key audit matter
Refer to Note 3.1
This is the largest asset on the balance
sheet, representing 86% of total assets. Our
audit effort is largely focused on this balance
due to the size and subjectivity of inputs.
The valuation of the investment properties
held at fair value is based on key inputs and
assumptions employed by the valuers and
where applicable may be supported by data
provided by management.
The Group engages external independent
valuers to undertake valuations of each
investment property at least every 2 years,
with desktop valuations being obtained for
the properties off-cycle.
Our procedures included:
•
•
•
•
valuation
the key
Evaluating the external property valuations
obtained by management and identifying
and assessing
inputs and
assumptions used in the valuation;
Comparing
and
inputs
assumptions to observable historic data
where available;
Ensuring that there
in
assumptions applied to valuations across
communities;
Conducting interviews with the valuation
expert to evaluate their competence,
capabilities and document their approach
and methodology applied to the valuation.
is consistency
An independent Victorian Partnership ABN 27 975 255 196
Level 13, 664 Collins Street, Docklands VIC 3008
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 2019, 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 have 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 13, 664 Collins Street, Docklands VIC 3008
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
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.
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
An independent Victorian Partnership ABN 27 975 255 196
Level 13, 664 Collins Street, Docklands VIC 3008
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
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 14 to 23 of the directors’ report for the
year ended 30 June 2019. In our opinion, the Remuneration Report of Lifestyle Communities Limited,
for the year ended 30 June 2019 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.
N R BULL
Partner
14 August 2019
PITCHER PARTNERS
Melbourne
An independent Victorian Partnership ABN 27 975 255 196
Level 13, 664 Collins Street, Docklands VIC 3008
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
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 5 August 2019.
(a)
Distribution of equity securities
(i)
Ordinary share capital
104,545,131 fully paid ordinary shares are held by 2,567 individual shareholders
(b)
Substantial shareholders
The number of substantial shareholders and their associates are set out below:
Fully paid
ordinary shareholders
James Kelly
Cooper Investors Pty Ltd
Washington H. Soul Pattinson
and Company Limited (WHSP)
Pengana Capital Group Limited
Number
Percentage
Current at (last
notification date)
12,077,001
11.55
17 July 2019
7,896,352
7.55
9 February 2017
7,465,093
7,465,093
7.14
7.14
5 February 2019
5 February 2019
AustralianSuper
5,727,700
5.48
28 September 2016
Australian Foundation Investment Company Limited
5,470,436
5.22
27 April 2016
Perlov family
5,386,637
5.15
16 September 2016
BT Investment Management Limited
5,299,706
5.07
14 March 2018
Voting rights
All ordinary shares carry one vote per share without restriction.
(c)
The number of shareholders by range of shares and unmarketable parcel holders
Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 and over
Unmarketable Parcels
Minimum $ 500.00 parcel at $6.63 per share
Lifestyle Communities Annual Report
Total holders
Units
% of issued capital
1,071
928
266
247
55
Minimum
Parcel Size
75
440,279
2,436,312
2,023,451
7,427,477
92,217,612
Holders
195
0.42
2.33
1.94
7.10
88.21
Units
3,216
69
For personal use only Lifestyle Communities Limited and Controlled Entities
ABN: 11 078 675 153
(d)
Twenty largest holders of quoted equity securities
Number held
% of issued
shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MASONKELLY PTY LTD
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
DAKEN INVESTMENTS PTY LTD
KELLY SUPERANNUATION FUND PTY LTD
TRACEY RYAN INVESTMENTS PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
SANDHURST TRUSTEES LTD
ARMADA INVESTMENTS PTY LTD
MIRRABOOKA INVESTMENTS LIMITED
AUST EXECUTOR TRUSTEES LTD
NETWEALTH INVESTMENTS LIMITED
BELLWETHER INVESTMENTS PTY LTD
B S CARTER INVESTMENTS PTY LTD
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN SHAREHOLDER NOMINEES PTY LTD
11,501,656
10,262,063
9,573,730
9,116,265
8,650,955
5,398,609
5,228,014
5,149,539
2,116,801
1,977,650
1,816,101
1,676,885
1,608,229
1,421,101
1,369,398
1,317,363
1,204,619
1,161,439
920,000
768,435
11.00
9.82
9.16
8.72
8.27
5.16
5.00
4.93
2.02
1.89
1.74
1.60
1.54
1.36
1.31
1.26
1.15
1.11
0.88
0.74
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
82,238,852
78.66
Securities exchange
The Company is listed on the Australian Securities Exchange.
Lifestyle Communities Annual Report
70
For personal use only
LIFESTYLE COMMUNITIES LIMITED
Level 1, 1-17 Raglan Street
South Melbourne VIC 3205
Ph: (03) 9682 2249
www.lifestylecommunities.com.au
For personal use only