Annual Report
for the year ended 30 June 2021
Lifestyle Communities Limited
ABN: 11 078 675 153
Our story
and purpose
When we bought our first site in 2003, there was a determination
from our founders to create something that was different; to build
communities that created a fulfilling lifestyle and a new-found sense
of purpose for our homeowners. That motivation has driven significant
growth from the humble beginnings of our inception to the creation of
24 communities (and growing) across Victoria.
It was in 2003 at Melbourne café Giorgio’s, that
James Kelly, Dael Perlov and Bruce Carter sowed the
first seed of the business—to create affordable and
sustainable communities for the over 50s market.
Their motivation to build homes that encompassed
interactive and engaging urban design, coupled with
exceptional resort-style facilities, was foreign to the
existing retirement housing market. The landscape at
the time was expensive with sub-standard amenities,
and in nearly every instance, the homeowner was
secondary to the purpose of the community. Armed
with extensive research and a passion to create
something truly revolutionary, Lifestyle Communities
was born with a purpose to be socially and ethically
responsible in creating affordable, homeowner-centric
communities for retiring Australians.
Our first site was purchased in Brookfield (Melton) in
2004 with the intention to build 229 homes. A home
designer was appointed, and the business adopted a
design and service philosophy that still serves us to this
day: “You never get a second chance to make a first
impression”.
In 2006 we acquired more land in Shepparton and
from there, two more sites were acquired across
Victoria. Our community-focused business model
resonated strongly across the market to the extent that
we floated on the Australian Stock Exchange in 2007
(ASX: LIC).
Our first shareholder remains on the register today with
investors attracted to not only the ethical operating
model, but the balanced returns resulting from our 90-
year land lease model. We also run a capital disciplined
model working with existing shareholder equity to
organically grow the business into the future.
We now have 24 communities in various stages of
management or development and are currently geared
to buy at least 2 new sites every year. Our unique
heritage and outstanding record of achievement are
driven by our strong values-based culture established
almost 20 years ago, standing the test of time, and
resonating to this day.
Ever mindful of the adage “A customer may forget
what you told them, but they will never forget how
you made them feel”, we are committed to making
our growing portfolio of over 4000 homeowners
feel included, empowered, respected, engaged, and
valued. Their story is integral to our continued success
and growth and drives the strong referral rate that
Lifestyle experiences today.
We will continue to be a business for purpose with a
passion to deliver high quality affordable houses to our
customers as well as long term sustainable returns to
shareholders. That is what we do.
Clubhouse at Mount Duneed
Lifestyle Mount Duneed
Contents
Chair and Managing Director’s Review
Directors’ report
Remuneration report
Auditor’s 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
The Director’s Declaration
ASX Additional Information
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CHAIR AND MANAGING DIRECTOR’S REVIEW
Chair and Managing Director’s
Review
For the 2021 Financial Year
Dear fellow shareholders,
We are pleased to present the 2021 Lifestyle
Communities Annual Report and set out the progress
we made during the year to meet our objective of
being the most customer centric and innovative
provider of provider of high-quality affordable housing
for those looking to downsize in Victoria.
With a stringent lockdown imposed nine days into the
new financial year, the challenges experienced through
2020 continued and were significant for all of Victoria
and for Victorian businesses. Lifestyle Communities
was no exception, with home inspections, sales
appointments and market launches unable to be
conducted in person for more than half the year.
Our operating communities and homeowners were
also affected with community facilities shut down in
accordance with Government directions.
Our team responded well to the rapidly changing
environment, with construction activity continuing
largely on schedule and our office-based team
members adapting to working from home. Our sales
and marketing team continued their push into digital
channels, interspersed with face-to-face interactions as
restrictions allowed. While sales were flat year on year,
this was a solid achievement given the length of the
lockdowns and restrictions on people’s movement.
Our community operations team has done a terrific
job keeping our homeowners informed and engaged
throughout the pandemic. Although some adjustments
were necessary to keep homeowners safe and to
comply with public health orders, our community
managers remained on-site and provided constant
communication and support to homeowners
through wellness, safety, and connection initiatives.
Pleasingly, we were able to conduct our community
meetings in person at each community in September,
re-establishing the personal connection with all
homeowners.
In many ways, the pandemic has highlighted the
benefits and importance of the Lifestyle Communities
model of living. Community character came to the fore
during lockdowns as homeowners in our communities
showed generosity of spirit to look out for one another
in what were very challenging circumstances. We
would like to take this opportunity to thank everyone
that took the time to check on a neighbour, wave from
the front porch, drop off a cooked meal, share a laugh,
or just generally help keep an eye out for their fellow
Victorians.
Despite the disruption, the team opened four new
clubhouses and welcomed first homeowners to
three new communities at Wollert, Deanside, and St
Leonards. This level of activity has never previously
been achieved in the Company’s history and we
are very proud of what the team has delivered. Our
development activity is currently focused on our
newest communities at Mount Duneed, Kaduna Park,
Wollert, Deanside, and St Leonards. Planning activities
continue at Tyabb, Pakenham, Clyde and Woodlea and
our latest project, Lifestyle Meridian at Clyde North,
commenced construction in July 2021.
At the same time, we have continued to evolve our
housing and facilities to keep pace with the needs
of our market and customers. This has involved
replanning the footprint and spaces within our
clubhouses and reallocating lot sizes to meet the
demands of the baby boomer for bigger homes, all
without compromising density. Our service delivery
continues to evolve to meet the changing expectations
of our homeowners. Our newest community, Lifestyle
Meridian, will include our first ever micro grid which
will substantially reduce the cost of electricity for
homeowners through a combination of community
solar and a centralised battery system. This will be the
first of its kind for a land lease community in Australia.
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Lifestyle Communities Annual Report 2021
CHAIR AND MANAGING DIRECTOR’S REVIEW
During the year we undertook a materiality assessment
on environment, social and governance initiatives
seeking feedback from key stakeholders to help
prioritise our focus and develop a strategy for
implementation within our business. The outcome of
the assessment prioritised the social aspects of our
business model and delivering on our core purpose
of affordable and sustainable housing. The micro grid
is an example of the steps we are taking to improve
our environmental impact without compromising
our core purpose. With that balance in mind, we are
pleased to announce our plan to achieve operational
carbon neutrality by no later than 2035. Our plan will
incorporate year on year reductions in our carbon
footprint and will seek to leverage projects like the
micro grid to improve environmental outcomes whilst
managing the cost of the transition.
Lifestyle Communities ended the year with 2,784
settled homes across 18 communities. Over the
year we increased our total portfolio of completed
homes, homes under development, and homes yet
to be developed to 2,094 with the acquisition of an
additional site at Woodlea and an adjacent site to our
St Leonards community, increasing the community size
to 359 homes. We have a strong pipeline of new land
acquisitions which will support the growth of Lifestyle
for years to come.
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 with the possibility of an additional site
over and above this as we continue to investigate
opportunities in Melbourne’s key growth corridors.
An increased number of resales, strong price growth in
established communities, and the growing sustainable
rental annuity stream, underpinned a 15.1% rise in
recurring revenue. This increase in cash flow from
community operations has enabled the Company to
declare a final dividend of 5.0 cents per share, bringing
the full year dividend to 8.0 cents per share, an
increase of 45.5% from FY20.
Our team has shown commitment and resilience
throughout the past year to achieve the pleasing results
outlined in this report. Although trading conditions
remain volatile, we are well placed to benefit from the
upswing in demand for enquiry and inspections leading
to increased sales rates that has been evident post the
emergence of prior lockdowns.
After joining the Board four years ago, Georgina
Williams has advised that she intends to retire with
effect from 31 August. Georgina’s contribution to the
Board during that time has been significant, and on
behalf of all Board members and management, we
offer Georgina our very best wishes for the future.
We are pleased to announce the Lifestyle
Communities foundation donated over $127,000 this
year to cancer-based charities. The foundation is
funded through allocating $50 for every home that we
have under management at the start of each year 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 2021
financial year
James Kelly
Managing Director
18 August 2021
Philippa Kelly
Chair
18 August 2021
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Lifestyle Wollert Clubhouse
DIRECTORS’ REPORT
Directors’ report
Our business
Lifestyle Communities builds, owns, and operates
land lease communities which provide affordable
housing options to Australians over 50. Developed as
an affordable housing solution for Australia’s ageing
population, Lifestyle Communities’ land lease model
allows working, semi-retired, and retired people over
50, to downsize from their family home to free up
equity in retirement, whilst enjoying resort style living
including pools, gyms, clubhouse, cinema, lawn bowls,
tennis and much more.
The Directors are pleased to 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 2021 and the auditor’s report thereon.
There were no significant changes in the nature of the
Group’s principal activities during the financial year.
How we operate
24 24 Communities – 18 in
operation and 6 in planning
or development
2,790+ affordable homes
under management
Australian-based Board
50% female, 50% male
4,000+ homeowners live in
our communities
117 Employees –
67% female, 33% male
5,000+ homes in
our portfolio
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Lifestyle Communities Annual Report 2021
Our Values
Our customer
is our only
truth
Be constantly
curious
Do it from
the heart
Deliver.
Delight.
Everyday
Own it,
sort it
Play as
a team
DIRECTORS’ REPORT
6
Lifestyle Kaduna Park
Our Board and Governance
The Board is accountable to securityholders and
responsible for demonstrating leadership and oversight
so that the operations of Lifestyle Communities
are managed effectively. The Board’s governance
objectives are to:
• Uphold and support the culture and values of
Lifestyle Communities.
• Positively contribute to the performance
of the Company, including the creation of
shareholder value; and
• Increase the confidence of all stakeholders
including homeowners, security holders,
Employees, suppliers, and the broader community
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Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Philippa Kelly (Chair)
Non Executive Director
(LLB, F Fin, FAICD)
James Kelly
Managing Director
(BBldg)
Philippa has been a Director of Lifestyle Communities
Limited since September 2013 and was appointed
Chair in August 2019.
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. James has not held
any directorships in any other listed entities during the
past three years.
Philippa is also a member of the Audit
Committee (Chair until August 2019), and
Remuneration Committee
Philippa has more than 20 years’ experience in senior
operational and leadership roles within the property
sector. She was formerly Chief Operating Officer
of the Juilliard Group, one of Melbourne’s largest
private property owners. Previously she was Head of
Institutional Funds Management of Centro Properties
Group (now Vicinity Centres).
Philippa has a background in law and investment
banking, specialising in IPOs and mergers and
acquisitions. She has extensive experience
across property and finance, governance and risk
management.
Philippa is currently a Non-Executive Director of
oOh!media and Hub Australia. Philippa is a Deputy
Chancellor of Deakin University and Chair of its
Finance and Business Committee.
Directors have been in office since the start of the financial year to the date
of this report unless otherwise stated.
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DIRECTORS’ REPORT
The Honourable Nicola Roxon
Non Executive Director
(BA/LLB (Hons), GAICD)
Georgina Williams
Non Executive Director
(BCom, BA, 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 Chair of the Remuneration and
Nominations Committee.
Nicola’s current roles are Independent Chair of HESTA,
Chair of VicHealth and a Director of Dexus and Health
Justice Australia. Ms Roxon also chairs the ESG
Committee of Dexus.
Her previous non executive roles include 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.
Georgie is a professional director and serves on a
number of Boards and was appointed to the Board of
Lifestyle Communities as a Non Executive Director on
1 September 2017.
As well as Lifestyle Communities she is currently
a director on People’s Choice, Sunsuper and UN
Women Australia. On both Lifestyle and People’s
Choice Georgie also serves as a member of the
Audit committee. She is a member of the Corporate
Governance committee at People’s Choice, the
Investment committee and the Member Outcomes
committee of Sunsuper and Chairs Corporate
Plans Committee.
Georgie has over 25 years experience in Banking and
Superannuation including roles as Chief Executive
Officer, Food and Wine Victoria; Group Executive
Engagement, Advocacy and Brand at Australian Super;
and Head of Brand and Marketing at the Bank of
Melbourne. She has also held a number of executive
positions at NAB over many years in both Australia
and the United Kingdom, which included roles in the
commercial banking, wealth, strategy and marketing
departments.
She was recognised as one of Australia’s Top 50
CMO’s in 2016 by CMO Magazine. She currently
serves as a judge on the Top 50 CMO panel 2020
determining Australia’s top marketers.
Directors have been in office since the start of the financial year to the date
of this report unless otherwise stated.
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Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Mark Blackburn
Non Executive Director
(Dip of Bus (Acc) GAICD)
David Blight
Non Executive Director
(BAppSc)
Mark was appointed to the Board of Lifestyle
Communities Limited as a Non-Executive Director
on 1 December 2019. He is also Chair of the
Audit Committee.
Mark retired as Group CFO and Company Secretary of
McMillan Shakespeare in December 2020.
He has 23 years’ experience as a CFO in both listed
and unlisted companies in the financial services,
manufacturing, and mining sectors.
In particular, Mark has expertise in financial
management and advice, the management of financial
risks, capital management as well as leading key
strategic projects including acquisitions and divestures.
David Blight was appointed to the Board of Lifestyle
Communities Limited as a Non-Executive Director on
15 June 2018.
David has more than 35 years of experience in
property investment, development and management
in Australia and globally. He is currently the Co founder
and CEO 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 also a Non-Executive Director of the
ASX listed Japara Healthcare Limited and various
private companies.
Directors have been in office since the start of the financial year to the date
of this report unless otherwise stated.
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DIRECTORS’ REPORT
Company Secretaries
Darren Rowland
(B Bus (Acc), CA, GAICD)
Melissa Norris
(LLB (Hons), BSc (Hons), LLM, AGIA ACG (CS), GAICD)
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.
Melissa was appointed as Company Secretary on 1
September 2020 and has held a number of senior legal
and governance roles. She brings experience from
a range of industries including FMCG, retail, mining
and healthcare. A registered lawyer and Chartered
Company Secretary, Melissa has also graduated from
the AICD Company Director’s Course and holds a
Graduate Diploma in Applied Corporate Governance
with the Governance Institute of Australia.
Mark Licciardo
Resigned September 2020.
Director’s interests
Director
James Kelly
Philippa Kelly
The Honourable Nicola Roxon
Georgina Williams
David Blight
Mark Blackburn
There are no outstanding options over ordinary shares issued to Directors
Fully paid
ordinary shares
9,077,001
75,000
6,000
8,000
5,000
2,400
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Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Our Approach to Corporate
Governance and Risk
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 ASX principles of
corporate governance. The Company’s Corporate
Governance Statement is published on its website at
LifestyleCommunities.com.au.
Corporate Governance Framework
The roles, responsibilities and accountabilities of
the Board and Board Committees are articulated
in the Board and Board Committee Charters,
which are available on the Company’s website at
LifestyleCommunities.com.au. The framework is
summarised below:
Board
(including risk and ESG)
Delegation
Accountability
Independent
Assurance
• External audit
• Legal or other
professional
advice
Delegation
Review, oversight
and reporting
Managing
Director
Remuneration
and Nomination
Committee
Audit
Committee
Provide review on
financial components of
Remuneration Report
12
DIRECTORS’ REPORT
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:
Director’s Meetings
Audit Committee
Remuneration and
Nomination Committee
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
11
11
11
11
11
11
11
11
10
11
11
11
4
-
-
4
-
4
4
-
-
4
-
4
4
-
4
-
4
-
4
-
4
-
4
-
Philippa Kelly
James Kelly
The Honourable Nicola Roxon
Georgina Williams
David Blight
Mark Blackburn
The Honourable Nicola Roxon was unable to attend a meeting which was convened at short notice due to the announcement of the
stage 4 lockdown in Victoria in July 2020.
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Lifestyle Communities Annual Report 2021
The team getting excited at the Kaduna Park clubhouse grand opening
DIRECTORS’ REPORT
Our Approach to Risk
At Lifestyle Communities, we recognise we have a
duty of care to our homeowners, Employees, investors,
and the wider community to ensure all risks in our
communities and business are appropriately managed.
At the forefront of our approach is our culture. As a
‘Business for Purpose’ we are focused on exceeding
expectations and maintaining a level of professional
and personal conduct that delights our customers,
teammates, investors and the broader community.
Lifestyle Communities recognises that making business
decisions which involve calculated risks, and managing
these risks within sensible tolerances, is fundamental
to creating long term value for security holders and
meeting commitments to Lifestyle Communities’
homeowners, Employees, business partners and
the communities in which it does business. Lifestyle
Communities conducts risk assessments at critical
decision points during the investment and operational
phases of our business to identify, manage and monitor
risks in meeting target returns.
We will take commercial risks where we have the
capability to manage those risks and we recognise
the importance of building and fostering a risk
aware culture. Through setting standards, adopting
processes and undertaking training, we aim to develop
a disciplined and constructive control environment in
which all team members understand their roles and
obligations and take responsibility for risks and controls
in their area of authority.
Lifestyle Communities’ risk management
framework consists of multiple layers:
1. Our Culture: All Employees are responsible
for managing risk through identification,
assessment, and treatment of risks. This includes
the implementation, active management
and compliance with appropriate processes,
procedures, checklists and other controls.
2. Our Leadership Team: Responsible for developing
the risk management framework and for adapting
it to changes in the business and the external
environment in which the Group operates
(including physical and regulatory changes which
might impact our social and environmental
performance). Members of the Leadership
Team are jointly responsible for building risk
management capabilities throughout the business
through actively engaging with Employees in risk
management processes and supporting training
initiatives.
3. Internal Controls and Reporting: The Group’s
internal control processes are in place to ensure
that information is reported to the Leadership
Team, and the Board of Directors of the Company
(“Board”) if appropriate, on a regular basis.
4. The Board and Board Committees: The Board
oversees our risk management framework and
delegates particular focus areas to the respective
committees.
5. External Audit: Our external auditor provides
regular and independent assessment on the
effectiveness of financial controls and processes
in connection with the preparation of Lifestyle
Communities’ financial statements and governance
disclosures. External Audit also provides an opinion
on the accuracy, validity and reliability of disclosed
data and information.
The Company’s key risk categories include:
Covid 19
There are high levels of uncertainty regarding the
duration and impact of the Covid 19 global health
pandemic on the Victorian property market and its
associated impact on the Company’s settlements
and resales. There remains ongoing risk to our
homeowners, team members, suppliers, and our
supply chain. There also remains risk of shut down
of our facilities, development sites and broader parts
of the economy. Given the experience to date, the
Company has well established response plans in place
and will continue to monitor the situation closely.
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 23 sites and
developing most of these during the past 18 years.
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Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
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 program 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 presales.
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 refinancing risk if its debt facility is
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. The Company tightly manages
the commencement and rate of development of new
communities.
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. 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.
Cyber Risk
The Company recognises the increasing risk of cyber-
attacks as more and more systems and processes are
moved online and into the cloud. Cyber threats could
potentially interrupt business operations and lead to
a loss of productivity and loss of business records,
including customer data. This could cause reputational
and financial damage. During the year, the Company
implemented a number of recommendations made by
KPMG following the cyber health check it undertook
in FY20. This included moving file servers into the
Azure data centre, enabling biometric passwords and
multi-factor authentication, and rolling out mandatory
training for all Employees. The Company will continue
to undertake cyber risk mitigation activities and system
improvements on a rolling basis.
Community management
It is important our 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.
Climate Change
As with all Australian sites, the Company’s properties
are exposed to the impacts of climate change. We
acknowledge that tragic events such as the recent
bushfires and floods in Australia are linked to a
changing climate and similar events are likely in the
future. During the year, Lifestyle Communities worked
with independent environmental consultants, WSP, to
complete a high-level climate change risk assessment
to better understand the potential impacts of various
climate scenarios, to identify opportunities to mitigate
long-term impacts and, ultimately, to influence the
location, design and management of existing and
future communities. The risk assessment modelled
a number of potential physical hazards that may
impact the business assuming global temperatures
16
DIRECTORS’ REPORT
rise by 3.7 degrees by 2100. These hazards include
increasing temperatures and heatwaves, intense
rainfall, storms and hail, bushfires, floods, drought, and
coastal inundation. There are also risks of increased
operating costs as the economy transitions to a low
carbon future.
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, scope and
timing of these non-audit services means that auditor
independence was not compromised.
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.
Non audit services
The Company’s auditor, PricewaterhouseCoopers
was appointed on the 18th November 2019. During
FY21, the Company spent an additional $104,000 with
PricewaterhouseCoopers on advice in relation to the
Company’s tax affairs and equity incentive scheme.
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.
17
Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Board Effectiveness
Lifestyle Communities is committed to having
a Board whose members have the capacity to
act independently of management and have the
collective skills and diversity of experience necessary
to optimise the long term financial performance of
Lifestyle Communities to deliver long term sustainable
profitable returns to shareholders. The Board
undertakes an annual review of its effectiveness across
a range of dimensions to identify strengths and areas
for development.
The Board models its activity on the best
practice guidance set out in the ASX Principles
and Recommendations, as described in the
Company’s Corporate Governance Statement
available on the Company website at
www.lifestylecommunities.com.au.
Board Composition
The Board currently comprises one Executive Director
and five Non Executive Directors. The membership of
the Board is reviewed periodically having regard to the
ongoing and evolving needs of Lifestyle Communities.
The Board considers a number of factors when
filling vacancies including qualifications, skills and
experience, independence, tenure and diversity.
Board Skills Matrix
The Board has identified a range of core skills and
experience that will assist the Board collectively to fulfil
its oversight role effectively. The Board believes that it
has the right experience and skills currently to oversee
the high standard of corporate governance, integrity
and accountability required of a professional and
ethical organisation as shown in the diagram below:
E
C
N
R I E
E
P
People
SKILLS A N D E X
Leadership
Finance
and Capital
Management
Mergers &
Acquisition
Technology
including Digital
Legal and
Compliance
Customer
Engagement
Sales & Consumer
Marketing
Property
Development
Property
Investment and
Management
25%
50%
75%
Risk
Management
100%
Female 50%
Strategy
Corporate
Governance
Workplace Health
and Safety
Government Affairs
& Public Policy
5.8 Years
E
G
A
R
E
V
E
R
U
N
E
Male 50%
G E N D E R A
T
18
DIRECTORS’ REPORT
Operating and Financial Review
Overview
The Company continued to successfully develop and manage its portfolio of affordable
communities during the 2021 financial year. Profit after tax attributable to shareholders was
$91.1 million (2020: $42.8 million).
Financial and Operating Highlights
FY21
FY20
Change
Change (%)
Key financial data
Revenue
Earnings before interest and tax
Net profit before tax
Net profit after tax
Operating cash flow
Community cash flow1
Gearing2
Earnings per share
Total dividend per share
Homes settled
Homes sold3
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
A$ millions
%
A$ cents
A$ cents
No. of homes
No. of homes
Average realised sales price new homes (GST incl)
A$’000
Total number of homes (gross)
Total number of homes (after NCI)4
Total number of homeowners
Average age of homeowners
Number of resales settled5
No. of homes
No. of homes
No. of people
Years
No. of homes
Average realised sales price resales (GST incl)6
A$’000
1. 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.
2. Calculated as a ratio of net debt to net debt plus equity.
3. Net sales represent deposits on new homes less cancellations.
4. Gross number of homes adjusted for share of communities owned by non
5.
controlling interests (NCI).
Includes resales attracting a deferred management fee, there were a
further 16 resales settled in FY21 (FY20: 22 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.
6. Average realised sales price of resales attracting a deferred
7.
management fee.
Included in the table above are several non IFRS measures including
earnings before interest and tax, 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 2021
financial year.
138.7
129.1
130.6
91.1
(31.9)
19.5
33.2
87.3
8.0
255
247
485
2,792
2,591
4,014
75
105
404
127.3
62.5
61.1
42.8
5.7
16.2
30.6
41.0
5.5
253
280
410
2,537
2,336
3,681
73
80
391
11.4
66.6
69.5
48.3
(37.6)
3.3
2.6
46.3
2.5
2
(33)
75
255
255
333
2
25
13
9.0%
106.6%
113.7%
112.9%
(659.6%)
20.4%
8.5%
112.9%
45.5%
0.8%
(11.8%)
18.3%
10.1%
10.9%
9.0%
2.5%
31.3%
3.3%
Fair Value Adjustments
At Lifestyle Communities our homeowners purchase
a proportionate share of the clubhouse, pool,
recreational facilities, and all associated infrastructure
when they purchase their home. This helps us build
a sense of community, shared ownership, and pride
in where our homeowners live. Due to this operating
model, the cost of this infrastructure is capitalised
to inventory during development and then classified
as costs of goods sold upon settlement. The initial
addition to the Lifestyle Communities Balance Sheet is
the cost of the underlying land and this is classified as
an investment property.
19
Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
The Company’s Investment Property Valuation
Policy requires that each asset in the portfolio must
be externally valued at least every two years by an
independent external valuer who is considered an
industry specialist in valuing these types of investment
properties. The independent valuer can only value an
investment property on three consecutive occasions.
For FY21, eleven of eighteen operating communities
have been externally valued by independent valuers
Colliers, M3, and ValuedCare. For the remaining
communities, the Directors have estimated the fair
value internally utilising inputs from the independent
valuations.
The fair value adjustment typically comprises three
components:
1. The value uplift created when a customer settles
on their home and acquires their share of the
infrastructure, which in turn delivers an ongoing
annuity income stream in the form of the land
rental and deferred management fee.
2. The uplift created as a result of the contractual
rent increase applied to settled homes each year.
3. Changes in fair market values due to changes
in valuation assumptions used by independent
valuers and Directors. These typically include
external market factors outside of Lifestyle
Communities’ control such as rent capitalisation
rates, external market price growth assumptions
and other available market data.
In FY21, the Company recorded a fair value increase of
$108.6 million pre-tax and $76.0 million post tax. The
breakdown of the fair value increase for FY21 into the
components above is as follows:
Uplift in value arising from settled
homes during the year (255 new home
settlements FY20: 253)
The uplift created as a result of the
contractual rent increase
Movements as a result of changes to
valuation assumptions
Total Fair Value Adjustment
FY21
$ million
FY20
$ million
21.6
22.6
8.8
78.2
108.6
-
16.3
38.9
A combination of new home settlements achieved in
FY21, a continued compression in capitalisation rates
for land lease assets, and movements in the residential
property market, has resulted in a $108.6 million uplift
in the value of the Company’s property portfolio (FY20:
$38.9 million). Capitalisation rates on the annuity rental
stream have compressed from a range of 6.25% to
6.5%, to a range of 5.5% to 5.75% across the portfolio.
In FY20 the uplift typically created as a result of the
rental increase was nil. This reflected the embargo
on rent increases legislated by the Victorian State
Government during the Covid 19 pandemic. More
information on the valuation of the Company’s
investment properties is contained in Note 3.1 of the
financial statements.
Dividends
A fully franked dividend of 2.5 cents per share was
paid on 8 October 2020 (representing the 2020 final
dividend). A fully franked dividend of 3.0 cents per
share was paid on 7 April 2021 (representing the 2021
interim dividend).
Since the end of the financial year the Directors
have resolved to pay a fully franked dividend of 5.0
cents per ordinary share (representing the 2021
final dividend).
Our Response to Covid-19
Like all businesses, Lifestyle Communities was
affected by Covid-19 from early March 2020. Our
philosophy in managing the impact of restrictions
was to focus on the health and wellbeing of our team,
our homeowners, and our communities as a priority.
The business operated throughout four separate
lockdowns during the year and implemented several
measures to adapt to the constantly evolving global
health pandemic:
Our Operating Communities
Covid-19 is particularly challenging for our
homeowners, many of whom are in the higher risk
demographic. Safety and security of our homeowners
remains our highest priority and in response we acted
swiftly to implement appropriate safety protocols.
Community facilities were closed and re-opened
in accordance with the advice of Government
Authorities. Our Community management teams
remained onsite to assist our homeowners during
periods of lockdown. Our Wellness program rotated
from physical activities and engagement events when
conditions allowed, to an online Wellness presence to
assist our homeowners to remain active and engaged
during periods of lockdown. This included a range of
online activities aimed at reducing loneliness during
isolation. All communities continue to operate under
Covid-safe practices and respond to Government
advice as appropriate.
20
DIRECTORS’ REPORT
Our Development Sites
All development sites adapted very quickly to
Covid-safe operating practices and construction
continued throughout the period albeit with some
restrictions and adjusted work practices. In addition to
maintaining construction progress, our development
team prepared and enacted contingency plans when
lockdowns were in place. Due to these measures,
our developments remain largely on track, and we
were able to proceed with clubhouse openings at
Mount Duneed, Kaduna Park, Wollert and Deanside
during the year.
Our Sales and Marketing
Our team embraced a mix of face-to-face and virtual
sales techniques with continued use of the “zoom
room” proving popular for virtual appointments and
consultations. Onsite inspections and display suite
tours continued where restrictions permitted with
a mix of virtual, one-on-one appointments, and
normal operations all deployed during the period.
We have embraced the learnings during Covid and
are currently offering customers a choice of the
type of engagement that best suits their individual
circumstances and needs.
Our Support Office
Our office-based team has transitioned to working
from home and back again several times throughout
the year. We have created a virtual office to encourage
continued cross-functional engagement with both
work related and social activities ongoing to nurture
and adapt our culture.
Our Funding and Balance Sheet
In June 2020 we extended the Company’s debt
facilities, increasing the headroom by $50 million and
extending the tenor such that the next refinancing
event is in March 2024. The increased facilities
enabled us to continue to acquire land during the
uncertain trading period and add additional sites to our
development pipeline.
Our Suppliers
A key part of Lifestyle Communities’ success is
through our suppliers, who help us deliver our
customer commitments and the highest levels of
customer service. Our suppliers are predominantly
local, small businesses who have grown as Lifestyle
Communities has grown. They collectively employ
hundreds of people and were equally affected by the
pandemic. Lifestyle Communities remained committed
to its suppliers, held rates firm, and continued to
pay weekly. Our commitment to our suppliers is
being reciprocated as restrictions have eased and
demand for qualified tradespeople is increasing across
the market.
Job Keeper Program
The Company’s revenue reduced by more than 30%
in March 2020 compared to March 2019 and as such
the Company qualified for the Federal Government’s
Job Keeper program from April 2020 through to
September 2020. The Company received $1.66 million
during this period ($802k in FY21 and $858k in FY20).
The grant was used to ensure that all our team were
retained during the period of significant disruption
from July to October when sales offices were shut,
office-based staff were sent home, development
capacity was reduced, and financial and operating
results were significantly affected. Our focus during
lockdown was to prepare the business to bounce back
quickly when restrictions were eased. Maintaining our
talented team was critical to the business’ performance
post lockdown.
The Company’s dividend policy sizes the
dividend based on cash flow generated by
operating communities. It explicitly excluded the
JobKeeper grant.
Our Land Acquisition Strategy
The Company remained active in the land acquisition
market during the period, acquiring two new
sites at Woodlea and St Leonards, securing the
future development pipeline. The Company has
sufficient headroom in its debt facility to continue
to pursue acquisition opportunities that meet our
investment criteria.
21
Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Update on communities
Community
Brookfield
Seasons
Warragul
Casey Fields
Shepparton
Chelsea Heights
Hastings
Lyndarum
Geelong
Officer
Berwick Waters
Bittern
Ocean Grove
Mount Duneed
Kaduna Park
Wollert North
Deanside
Tyabb
St Leonards
Meridian
Pakenham East
Clyde
Woodlea
Phillip Island
Total
New homes
Resales
Settled
FY21
Settled
FY20
Net sales
FY21
Net sales
FY20
Settled
FY21
Settled
FY20
Net sales
FY21
Net sales
FY20
New
homes
sold not
settled
Total
homes
settled
Total
homes in
portfolio
-
-
-
-
8
20
-
-
-
1
-
7
32
117
57
19
-
-
-
-
-
-
34
55
91
36
24
7
9
21
58
44
34
82
12
10
6
14
19
8
13
6
9
5
7
15
12
2
13
8
5
12
17
7
12
5
7
4
5
14
10
2
-
-
-
-
12
-
-
-
-
-
4
6
60
71
48
41
38
-
-
-
-
14
3
10
10
7
11
7
5
5
7
9
11
3
-
-
-
-
-
-
-
-
19
4
7
10
5
8
7
5
3
6
9
12
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
21
38
67
48
-
75
-
-
228
136
182
217
300
186
141
154
164
151
216
209
219
112
110
36
24
-
7
-
-
228
136
182
217
300
186
141
154
164
151
216
209
220
191
169
246
266
240
359
274
175
230
180
260
255
253
248
280
121
102
138
99
250
2,792
5,094
An update on each of the communities in planning or
development at 30 June 2021 is as follows:
• Lifestyle Shepparton settled the last home
during the year.
• Construction of Ocean Grove is complete. The last
home settled in July 2021.
• Lifestyle Mount Duneed launched for sale in August
2018 and first settlements occurred in December
2019. The construction of the clubhouse and
community facilities is complete. The community
is 70% sold.
• Construction commenced at Lifestyle Kaduna Park
in July 2019 and first homeowners were settled
in May 2020. Construction of the clubhouse and
community facilities was completed in February
2021. Kaduna Park is 88% sold.
• Lifestyle Wollert commenced construction in
October 2019 and welcomed first homeowners in
November 2020. The construction of the clubhouse
and community facilities is complete and was
opened in May 2021. Wollert is 42% sold.
• Lifestyle Deanside was rebranded from Plumpton
during the year to better reflect the emerging
suburb. Construction commenced in February
2020 and we welcomed first homeowners in
February 2021. Construction of the clubhouse and
community facilities is complete and was opened to
homeowners in June 2021. Deanside is 27% sold.
• 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. The initial permit
application was rejected by council and the
22
DIRECTORS’ REPORT
Company has lodged an appeal with VCAT. The
hearing concluded in May 2021, and we are
awaiting the outcome.
• Lifestyle St Leonards was acquired in November
2019 and construction commenced in August
2020. We welcomed first homeowners in June
2021 which was two months ahead of plan. In June
2021 we acquired the site next door which allowed
us to increase the community to 359 homes and
introduce additional community facilities. The
combined community is 23% sold.
• The land for the future Lifestyle Community
in Pakenham was acquired in February 2020.
The contract is subject to planning approval
and is expected to deliver first customer homes
settlements in FY24.
• The land for the future community in Clyde North,
Lifestyle Meridian, was acquired in May 2020
and settled in early July 2021. Civil works have
commenced, and the community will be launched
for sale in September 2021.
• The land for the future community at Clyde was
acquired in June 2020 on 3 year settlement terms.
• The land for the future community at Woodlea
is due for settlement in December 2022.
Construction is planned to commence soon after.
• The contract for the future community on Phillip
Island was signed in August 2021.
Environmental, Social
and Governance
From the beginning, Lifestyle Communities has been a
business for purpose. At our heart is our values-based
culture, developed to inspire our people to innovate
and create memorable customer experiences. Lifestyle
Communities was born with a purpose to be socially
responsible in creating affordable, homeowner-centric
communities for Australians over 50.
There are numerous environmental and social benefits
underpinning the business. These include:
• Community living promotes inclusion and
reduces loneliness
• Lifestyle Communities’ affordable homes allow
homeowners to free up equity by downsizing. This
helps improve living standards in retirement and
reduces financial anxiety
• Downsizing releases established housing stock
in Melbourne’s outer suburbs where demand is
currently outstripping supply. These homes are
typically purchased by first home buyers.
23
Lifestyle Communities Annual Report 2021
• The footprint of Lifestyle Communities’ homes is
much smaller, the designs are more modern, and
use newer technology than established housing
stock in the outer suburbs. This results in lower
energy use and less greenhouse gas emissions.
• The density of our communities is much greater
than in traditional suburbs. This helps reduce
urban sprawl
• All Lifestyle Communities come with a fully electric
town car and a mini-bus free for homeowner use
at no additional charge. This helps reduce cost of
living, promotes car pooling and shared transport,
reduces traffic and greenhouse emissions
• Each Lifestyle Communities development
contributes millions of dollars to the local economy,
creates local employment, and provides ongoing
support to local businesses
Lifestyle Communities now has over 4,000
homeowners occupying 2,792 homes and a pipeline to
develop at least another 2,300+ homes over the next
3 – 5 years.
Board and Executive Responsibility
The Board has overall responsibility for environment,
social and governance (ESG). Our Managing
Director and Chief Financial Officer lead our internal
ESG working group which includes members of
the Executive Team and subject matter experts
from various parts of the business. The working
group focuses on
• Investigating and reporting on ESG
opportunities and risks
• Developing our ESG strategy for approval
by the Board
• Driving the implementation of ESG initiatives
and targets
Materiality Assessment
During the year we undertook a materiality assessment
on environment, social and governance initiatives
seeking feedback from key stakeholders to help
prioritise our focus and develop a strategy for
implementation within our business. The outcome of
the assessment prioritised the social aspects of our
business model and delivering on our core purpose of
affordable and sustainable housing. A summary of the
outcomes of the materiality assessment is presented
on the next page.
DIRECTORS’ REPORT
Customer
Satisfaction
Employee
Engagement
Affordable
Housing
Homeowner
Health & Wellbeing
Health &
Safety
Reduce
GHG footprint
GHG
Efficient
Facilities
Materiality Assessment
Feedback sought from key
stakeholders.
The process assisted to priortise
our focus and strategy.
Social aspects a clear priority
underpinned by our core purpose
to delivery affordable and
sustainable housing.
Efficient Houses
Board & Exec
ESG responsibility
Diversity
Public ESG
reporting
Climate
Change Risk
Social
Environmental
Governance
Affordable Housing
Our mission is to enable working, semi-retired and
retired people over 50 to live an independent life at an
affordable price.
1. You never get a second chance at a first
impression; and
2. A customer may forget what you told them, but
they will never forget how you made them feel.
Our product and operating model have been
deliberately designed to address inequality in housing
options for Australia’s ageing population. For those
members of society with limited superannuation and
savings, creating a high quality, yet affordable housing
option allows our homeowners to free up some of
the equity in their home and help fund a comfortable
standard of living in retirement. We will never deviate
from this mission.
Customer Satisfaction
Lifestyle Communities prides itself on our customer
centric culture created from the ground up and
nurtured through 18 years of organic growth. We have
two adages that form the backbone of everything we
do. They are:
Our customer centric culture is evident from the very
first meeting with prospective customers. Our sales
team are recruited from service based industries, not
real estate, and we do not pay sales commissions.
This ensures that the sales process is thoughtful,
considered, and not pressured.
Our customer information packs are transparent and
this is reinforced through a comprehensive set of
Q&A’s. We encourage all of our customers to engage
with their families to talk through their options; we
won’t take deposits at the first meeting. To ensure
our homeowners fully understand what they are
committing to, we sit down with every customer
to explain the agreements in detail and answer any
questions before signing. In 2020 we undertook a
24
DIRECTORS’ REPORT
project to completely re-write all of our customer
agreements to use positive, easy to understand
language, and avoid legal jargon. We have shared
our contracts with others in the industry and actively
encourage them to adopt similar approaches to
promote transparency and readability.
Our comprehensive touchpoint wheel maps every
interaction with our customers and focuses our team
on creating memorable experiences when in contact
with customers. The quantity of these touchpoints
and service moments have evolved over the years and
is now a large contributor to our sales in both new
and established communities. One way we measure
the success of our customer experience strategy is
by monitoring the percentage of sales that come via
referral from an existing customer. Our referral rate for
FY21 was over 50%
Whilst we strive for excellence always, we understand
and acknowledge that from time to time, things may
not always go to plan. Therefore, we have created
a unique customer engagement process to ensure
customer complaints and issues are heard and dealt
with in a fair, consistent, timely, and courteous manner.
Every community has its own Homeowners Committee
which is elected by the community to engage with
Lifestyle Communities and advocate on their behalf.
We actively seek feedback to ensure we learn from
our mistakes and improve our service as a result. The
below describes the various avenues available for
customers to raise issues or complaints:
Community managers
Available on-site
Regional Operations
Managers
Head of Community
Operations
Managing Director
Available by phone/email and attend
Homeowner Committee meetings at each
community quarterly or by invitation of the
committee
Available by phone/email and attends
Homeowner Committee meetings quarterly
for all communities
Available by phone/email and attends every
community every 6 months to host a meeting
of all homeowners
Each of the team members noted above share their
contact details with all homeowners and in addition
to the above structured engagements, are available
to meet and discuss homeowner issues on an ad-hoc
basis as required.
25
Lifestyle Communities Annual Report 2021
Lock and leave homes are great at holiday time
DIRECTORS’ REPORT
All complaints are recorded in the complaints register
which is reviewed on a monthly basis. The Board
receives reporting on customer complaints including
periodic themes and trends, and specific updates on
any material matters
Homeowner Health and Wellbeing
Our Wellness Program
The Lifestyle Communities wellness program makes it
easy to get involved in a range of activities that support
health and wellbeing. Our dedicated full-time wellness
team deliver a variety of activities, seminars and events
offering relevant and targeted support for people over
50. Our hotly contested Spring and Autumn sporting
carnivals see hundreds of homeowners competing
across a range of sports including lawn bowls, darts,
croquet, pool, and much more. Teams from each
community compete with winners proceeding to
regional finals and ultimately the grand final.
Social Committees
Social committees are established at all communities
and run by volunteers. The social committees arrange
a wide variety of activities and are a great way to foster
inclusiveness, promote active lifestyles, and reduce
loneliness.
Our Ambassador Program
We understand it can be daunting moving into a new
community and forming new friendship groups. Our
ambassador program matches new homeowners
with volunteers within the community to ease social
anxiety and ensure new homeowners enjoy not just the
facilities on offer but also the many benefits of living
within an engaged and inclusive community.
Employee Engagement and Development
We know that if we expect our team to deliver
the highest levels of customer experience to our
homeowners then we must deliver a commensurate
Employee experience. Each year, we conduct an
Employee survey to measure Employee engagement
and gather valuable feedback from our team. The
ability to maintain Employee engagement and
productivity during these challenging times is crucial
to our overall performance. In the most recent survey,
our team’s average score was 9.0 out of 10, consistent
with 9.0 in the previous survey. We continue to look for
new and interesting ways to engage our team and have
embraced the many opportunities technology gives us
to interact. Whilst lockdown forced us to adapt, there
have been many initiatives that have stayed with us as
restrictions have eased. In particular, introducing an all-
company video call every Monday morning is a great
way to communicate, share major milestones, keep in
touch with our team, and celebrate our successes.
Our learning and development program includes a
mix of online, in-classroom, and on-the-job training
facilitated by both internal and external subject matter
experts. All teams are regularly trained in core skills
relevant to their role as well as core competencies
required for any role. These include the customer
journey, company policies, core systems, cyber
security, and modern slavery. In FY21 Lifestyle
Communities spent $117,000 on over 200 external
training and development courses for our team.
Health, Wellbeing, and Safety
Our team is critical to our success and their
health, wellbeing and safety is of utmost priority.
Throughout FY21 our team embraced the challenging
circumstances and implemented new systems and
processes to ensure the business continued to
grow whilst maintaining our focus on the health and
wellbeing of our team.
In FY21 we achieved zero fatality and life changing
injuries in our business, which was consistent with
the previous years. Our team is empowered to
constructively raise issues and to intervene or stop
work if they feel unsafe or witness unsafe practices.
During the year, our People and Capability team
facilitated external training to equip our team with
numerous tools to cope with a range of circumstances
which can be challenging to our team’s mental
health. This includes dealing with difficult situations
and coping with grief. Our externally managed and
confidential Employee assistance program is free for
all team members and available 24 hours per day,
7 days per week.
Lifestyle Communities operates solely in Victoria,
Australia. All Employees are engaged under contracts
that comply with national Employment standards and
are regularly reviewed for alignment with all relevant
awards. Our code of conduct ensures that team
members enjoy a working environment which protects
human rights, prohibits discrimination, promotes
inclusion, grants rights of freedom of association,
and aligns with Australian employment laws and
regulations.
Diversity and Inclusion
Lifestyle Communities is committed to developing
diversity in its workplace by providing an environment
in which recruitment, appointments, advancement and
opportunities are considered on a fair and equitable
27
Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
basis. Lifestyle Communities does not tolerate
discrimination, vilification, harassment or victimisation
within its workforce, and has developed an Employee
Code of Conduct to provide guidance on the expected
behaviours of all Employees. This Policy reinforces
Lifestyle Communities’ values and culture, and aligns
with our mission to work as a connected, respectful
and supportive team and to operate with heart in
everything we do.
Lifestyle Communities recognises the value of
attracting and retaining Employees with diverse
backgrounds, knowledge, experience and abilities. We
believe that embracing such diversity contributes to
better Group performance due to the many benefits
arising from diversity, including:
• A broader pool of Employees
Accepting diversity in recruitment and
advancement increases the available labour pool
for selection;
• Accessing different perspectives and ideas
Engaging persons from diverse backgrounds
enables different approaches to problem solving
and decision making; and
• Improving efficiency and retention
Engaging workplace diversity and inclusion will
foster a culture whereby persons from different
backgrounds are valued, providing motivation for
increased retention and productivity.
Gender diversity is of particular importance to Lifestyle
Communities as over 40% of homes are occupied by
single females and over 60% of our homeowners are
female. It is the Group’s policy to have 50% female
representation on the Board.
Lifestyle Communities has developed targets for
female representation in the leadership team and
across the team as a whole, which are designed
to reflect an appropriate gender balance that best
supports the Lifestyle Communities customer. These
targets, and the Group’s progress toward meeting
them are presented below:
Employee
group
Board
Target
Actual at 30 June 2021
50% female, 50% male
50% female, 50% male
Executive Team 40% female, 40% male,
37% female, 63% male
20% any gender
Entire Workforce 40% female, 40% male,
67% female, 33% male
20% any gender
In addition, through its team development program,
Lifestyle Communities is able to identify emerging
leaders who show high leadership potential. Emerging
leaders are given focused training and mentoring
to accelerate their cultural and business leadership
capabilities. The pool presently comprises 67% women
and 33% men, helping to secure a strong pipeline for
the future.
Responsible Supply Chain Management
As a business for purpose, Lifestyle Communities
has always taken an ethical approach to partnering
with our suppliers. We are proud of the many local
businesses we work with and that have grown with us
over the years. During FY21 we launched our Supplier
Code of Conduct. This document clearly outlines how
we do business. It makes clear how we should behave,
what we expect of our business partners, and how
we expect them to treat their business partners. Our
supplier code of conduct has eight core principles:
1. We are committed to safety
2. We comply with laws and regulations
3. We treat people with dignity and respect
4. We act with honesty and integrity, upholding
ethical standards
5. We are committed to true and fair, transparent,
financial dealings
6. We undertake responsible sourcing activities
and consider sourcing solutions that minimise
environmental and social impacts
7. We have a responsibility to safeguard our
reputation, property, assets, and information
8. We proactively manage risk
In FY21 Lifestyle Communities lodged its first Modern
Slavery Statement which included a commitment that
we are opposed to slavery in all its forms, servitude,
forced or compulsory labour, human trafficking, debt
bondage, and child labour. We will continue to develop
and improve our efforts during FY22.
Our Code of Conduct and Modern Slavery Statement
are underpinned by our Procurement Policy, a copy of
which is available on our website.
Lifestyle team members and our suppliers are
encouraged to discuss any concerns with their
Lifestyle Communities contact or anyone from our
Senior Leadership Team. Our Whistleblower policy is
also a safe and confidential way to report concerns or
misconduct. Any form of retaliation against a person
using the Whistleblower policy in good faith will not be
tolerated. A copy of our Whistleblower policy and how
to report a concern is available on our website.
28
DIRECTORS’ REPORT
Greenhouse Gas Emissions
During the year, we engaged independent
sustainability consultants WSP to conduct our first ever
greenhouse gas emissions inventory.
The GHG Protocol is the world’s most widely used
greenhouse gas accounting standards for companies.
Under the Protocol, GHG Emissions are broken into
3 categories and there are guidelines provided in
the international GHG Protocol, which is used as the
standard guide for organisations in Australia when
reporting GHG emissions. Given homes are owned
by the homeowners, who pay for the electricity they
use, homeowner electricity is classed as a Scope
3 emission. Community facilities are under the
management of Lifestyle Communities; therefore the
electricity use of these areas is classed as a Scope
2 emission for Lifestyle Communities reporting.
The relevant sources for Lifestyle Communities
listed below:
• Scope 1 Direct emissions – On-site gas use by LIC,
fuel used for LIC vehicles
• Scope 2 Purchased electricity – Electricity used by
LIC managed facilities
• Scope 3 Indirect emissions – Energy used by
homeowners in LIC Communities
The table below shows total organisation greenhouse
gas emissions for the 2019 and 2020 calendar years:
(Tonnes)
Scope 1 (direct emissions)
Scope 2 (Lifestyle electricity)
Scope 3 (homeowner electricity)
Total
Homes under management
(end of year)
GHG emissions per home (tonnes)
2020
432
1,479
6,482
8,393
2,625
3.35
2019
400
1,938
6,069
8,407
2,393
3.68
Y-o-y
change
+ 8%
− 24%
+ 7%
−0.2%
232
− 9%
Notes
1. The shift between scope 2 and scope 3 emissions was driven by Victoria’s
lockdown in 2020 as community facilities were closed and homeowners
spent more time at home.
2. Absolute emissions decreased marginally during the period due to
improved efficiency of new communities coming online
3. Carbon Intensity per home, which adjusts for the increasing number of
homes under management, reduced by 9%
As part of the scope of works, we also asked WSP
to compare the average greenhouse gas emissions
of a Lifestyle house to the average greenhouse gas
emissions of a typical home in Melbourne’s outer
suburbs (reflective of the homes our customers are
moving out of). The comparison is presented below:
Average greenhouse gas
emissions of a Lifestyle house
compared to a typical home in
Melbourne’s out suburbs.
Average
Lifestyle House
3.35 tonnes
of carbon per annum
5.2 tonnes
of carbon per annum
Typical 1-person
house in the suburbs
8.1 tonnes
of carbon per annum
Typical 2-person
house in the suburbs
The “typical” house above refers to an average home in
Broadmeadows Victoria with no pool, using gas for heating and
cooking, modelled using the Governments energy made easy website:
energymadeeasy.gov.au.
29
Lifestyle Communities Annual Report 2021
DIRECTORS’ REPORT
Net Zero Future
As can be seen above, the emissions intensity of our
communities continues to improve as we develop
new communities and embrace new technology,
increase solar installations, and improve building design
techniques.
Pathway to net zero emissions
We are pleased to announce our target to achieve net
zero operational emissions for scope, 1, 2 and 3 by no
later than the year 2035. The plan to achieve this is
outlined below:
Define CO2 footprint
Embed energy efficiency in new developments
Increased efficiency of operational assets
Electrification of services
On-site energy generation
Off-site energy
generation
Offsetting
programmes
2035
r
a
e
y
/
2
O
C
2020
Predicted total emissions from building
Emissions limit
Target 0% CO2 emissions
We have selected 2035 as the most appropriate target
for Lifestyle for the following reasons:
Lifestyle is already progressed on this path.
Achievements to date include:
• We feel it strikes the right balance between
committing to improving our environmental impact
and managing the associated costs of the transition
• The straight-line target will commit us to taking
• CO2 footprint complete
• Energy efficient design continuously reviewed and
improved with each new community developed
• All Lifestyle Communities developed after 2016
positive steps each year
• It allows us to take advantage of new technology
being developed in this area over the next 10 – 15
years which will assist to further mitigate the costs
of transition to a zero-carbon economy
• We feel it is achievable.
include 100% electric homes (no-gas)
• Our existing communities include significant on-site
solar generation
• Lifestyle Meridian will be our first community to
include a solar powered community micro-grid with
centralised battery storage
30
Setting the pace at Mount Duneed
DIRECTORS’ REPORT
The Lifestyle Communities Foundation
In 2014, one of the founding directors of Lifestyle
Communities, Dael Perlov, passed away from
pancreatic cancer at the age of 46. In 2015, we set up
the Lifestyle Communities Foundation in his memory.
The Foundation supports fundraising activities across
all communities, focused on raising funds for cancer
based charities. Lifestyle Communities contributes
$50 for each occupied home in our communities each
year and matches dollar for dollar funds raised by our
homeowners for cancer based charities.
Tax Contribution Summary
In addition to providing affordable housing solutions to
Australia’s ageing population, Lifestyle Communities
contributes to the Australian economy, through various
taxes levied at federal, state and local government
level. In FY21 these totalled more than $14.3 million and
were either borne by Lifestyle Communities as a cost
of our business or collected and remitted as part of our
broader contribution to the Australian Taxation System.
Detailed below are the taxes paid and / or collected
and remitted for the 2021 financial year:
In 2021, the Lifestyle Foundation donated a total of
$127,000 to cancer-based charities.
Across our communities, major events such as
The Biggest Morning Tea, World’s Greatest Shave,
Movember, have been hosted with amazing results.
Equally individuals have raised funds by taking part
in external events such as Relay for Life, Good Friday
Appeal, The Mother’s Day Classic, and the Starlight
Children’s Foundation. Other charities supported
include the Cancer Council, Peter MacCallum Cancer
Centre, Monash Children’s Cancer Centre, Royal
Children’s Hospital, the Australian Melanoma Research
Foundation and many more.
Our Approach to Tax
Lifestyle Communities manages its tax affairs in a
transparent, equitable and commercially responsible
manner, whilst having full regard to all relevant tax
laws, regulations and tax governance processes.
Our Tax Governance Framework sets out the key
principles adopted by Lifestyle Communities’ which
are summarised as follows:
• Maintain compliance with all relevant tax laws,
regulations, and tax governance processes, to
demonstrate good corporate citizenship
• A low tax risk appetite that ensures Lifestyle
Communities remains a sustainable business and a
reputable and attractive investment proposition
• A commitment to engage and maintain
relationships with tax authorities that are open,
transparent and co operative
• An operating and trading business based in
Australia, with no strategic intentions of engaging
in any tax planning involving the use of offshore
entities or low tax jurisdictions.
• Income Tax: $5.8 million
• Net GST: ($3.0) million
• PAYG Withholding: $4.0 million
• State Taxes (including Payroll Tax, Land Tax, Stamp
Duty, and Growth Area Infrastructure Contribution):
$6.2 million
• Fringe Benefits Tax: $0.1 million
• Local council rates and levies: $1.2 million
Note: GST was a net refund in FY21 due to the timing of construction costs
and settlements
Executive Confirmations
The Managing Director and the Chief Financial Officer
have provided a written statement to the Board that:
1.
In accordance with the Corporations Act 2001
(“the Act”) section 295A, we, the undersigned,
declare that to the best of our knowledge and
belief, and in each of our opinions:
(a)
the financial records of the consolidated entity
for the financial year have been properly
maintained in accordance with section 286
of the Act;
(c)
(b) the financial statements and associated notes
of the consolidated entity for the financials
year comply with the accounting standards as
required by section 296 of the Act;
the financial statements and associated notes
for the financial year give a true and fair view of
the financial position of the consolidated entity
as at 30 June 2021 and of its performance
for the period as required by section 297
of the Act;
(d) there are reasonable grounds to believe that
the Company will be able to pay its debts as
and when they become due and payable; and
(e) any other matters that are prescribed by the
regulation for the purposes of this declaration
in relation to the financial statements and the
associated notes of the consolidated entity for
the financial year are also satisfied.
32
Outlook for FY22 and Beyond
The Company has a focused strategy to service the
niche of providing high quality affordable housing to
the downsizer market and is currently funded and
resourced to acquire at least 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.
The Company enters FY22 with 250 new homes sold
and awaiting settlement and, with the land already in
the pipeline, has the ability to deliver 1,100 to 1,300
new home settlements over the next 3 years. Resale
settlements attracting a DMF are anticipated to be in
the range of 450 to 550 over the next 3 years. There
remains a risk that sales and settlements may be
negatively affected by the ongoing uncertainty and
restrictions in relation to the Covid-19 pandemic and
its impact on the property market and supply chain
in Victoria.
The Company’s balance sheet and debt position
is robust. The Company will have access to over
$145 million in cash and undrawn facilities which is
sufficient to support the current development pipeline
and continued acquisition of new sites. The next
refinancing is due in June 2025. Operating cash flow is
underpinned by the ongoing rental annuities from our
2,792 homes under management.
We are excited to launch Lifestyle Meridian for sale
in September 2021. This project will see the next
evolution of housing and clubhouse designs and will
also feature a first of its kind rooftop solar + centralised
battery community micro-grid. During FY22 we will
also upgrade our technology platform, implementing
Salesforce and SAP Business ByDesign to support
continued growth.
DIRECTORS’ REPORT
2. Also, in accordance with ASX Corporate
Governance Council Best Practice
Recommendations 4.2 and 7.2, with regard to
the system of risk management and internal
compliance and control of the consolidated entity
for the year, to the best of our knowledge and
belief, and in each of our opinions:
i.
ii.
the statements given in paragraph (1)
above are founded on a sound system of
risk management and internal compliance
and control which, in all material respects,
implements the policies adopted by the Board
of Directors of the Company;
the risk management and internal compliance
and control systems of the consolidated
entity are operating effectively, in all material
respects; and
iii. subsequent to 30 June 2021, no changes or
other matters have arisen that would have a
material effect on the operation of the risk
management and internal compliance and
control system of the consolidated entity.
Events after reporting date
In July 2021, the Company completed planned
settlements on contracted land parcels at Wollert
and Clyde. These settlements were funded out of
existing debt facilities and increased the drawn debt to
$227 million.
On the 12th of August, the Company executed a
contract to acquire an additional site at Phillip Island.
The land is expected to settle in September 2021 with
construction anticipated to commence in mid-2022.
As part of its continued focus on capital management,
the Company has agreed terms with its lending group,
The Commonwealth Bank of Australia, National
Australia Bank and HSBC Bank Australia, to extend
the headroom in its debt facility by $100 million. The
combined facility limit will be $375 million. All other
material terms and covenants remain unchanged. The
additional headroom will be used to fund the continued
acquisition and development of new sites.
The Group had no other matters or circumstances
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.
33
Lifestyle Communities Annual Report 2021
Richard and Donna, the stars of our marketing campaign
Remuneration report
Remuneration Report
REMUNERATION REPORT
Our culture
SIO N
SIO N
S
S
A
A
P
P
UC C E SSES
UC C E SSES
S
S
G
G
N
N
I
I
T
T
A
A
CELEBR
CELEBR
N
N
IO
IO
T
T
I
I
N
N
G
G
O
O
REC
REC
IN N O VATIO
IN N O VATIO
N
N
E M
E M
P OWER
P OWER
M
M
E
E
N
N
T
T
N S I V ENES
N S I V ENES
O
O
P
P
S
S
E
E
S
S
R
R
C
C
A
A
R
R
E
E
Led from the top, our culture is shaped
by the team living and breathing these
behavioural traits, allowing us to deliver
an amazing place to work and provide a
wonderful experience to our homeowners.
E
E
M
M
P
P
A
A
T
T
H
H
Y
Y
K
K
I
I
N
N
D
D
N
N
ESS
ESS
GE
GE
A
A
U
U
G
G
N
N
A
A
POSITIVE L
POSITIVE L
Y
Y
T
T
I
I
A
A
L
L
I
I
B
B
PPROACHA
PPROACHA
T
T
A
A
K
K
IN
IN
G R
G R
ISKS
ISKS
LIST
LIST
ENING
ENING
37
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
How we operated
67% women
117
otal Emp l o y
T
e es
Gender split for emerging leaders
66.7%
33.3%
Women
Men
Gender split for executive team
33% men
Final Employee
engagement score of
of
9 10out
207
External courses attended
by team members for
professional development
37.5%
62.5%
Breakdown of
employees by age
Women
Men
18–25
2
1.7% of the workforce
Gender split for the Board
50%
50%
26–35
36–45
46–55
56–65
Women
Men
65+
6
5.1%
27
27
23.1%
23.1%
31
26.5%
24
20.5%
38
REMUNERATION REPORT
Remuneration report
For our people, and the impact on their remuneration,
we were conscious of keeping them employed and
motivated to use lockdown constructively. Lifestyle
was pleased to retain its team during the period and, in
addition, to also focus on recruiting the best talent in
the market. This gives us confidence the team is well
positioned to deliver great results for the future.
The Lifestyle team continued to trade throughout the
year and was able to adapt to the rapidly changing
environment. Their ongoing focus on nurturing our
homeowners and prospective customers, driving
project delivery, and gearing up for the post lockdown
sales period was a tribute to them.
Our construction team adopted Covid-safe practices
and implemented contingency plans to keep the
developments on track.
Our sales and marketing team continued their push
into digital, interspersed with face-to-face interactions
as restrictions allowed.
And our community operations team did a terrific
job keeping our homeowners informed and engaged
throughout the pandemic. Although some adjustments
were necessary to keep homeowners safe and to
comply with public health orders, our community
management team were still able to operate
throughout the lockdown and provide support to
homeowners through wellness, safety, and connection
initiatives.
We continued to build a strong pipeline of new land
acquisitions which will support the growth of Lifestyle
for years to come.
Dear Shareholders,
On behalf of the Board, I am pleased to present the
Lifestyle Communities Remuneration Report for the
2021 financial year. This report sets out Lifestyle
Communities’ approach to remuneration and its link to
performance.
COVID-19 Impact
As noted in the letter from our Chair and Managing
Director, the impact of COVID-19 and consequent
lockdowns and restrictions over FY21 was significant
for all of Victoria and for Victorian businesses.
Lifestyle Communities was no exception, with
particular limitations imposed on inspections, sales
and marketing processes, and our office-based
team members. Our operating communities and
homeowners were also impacted with community
facilities shut down in accordance with Government
directions.
39
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
FY21 Remuneration
Despite the team’s focus and versatility, the Board took
a cautious approach to remuneration in this uncertain
environment and froze salaries across the business.
We were determined to retain and support our team
and believe the remuneration freeze was fair and well
understood by the team.
Each year, the Board sets a target range for new
home settlements which is the backbone of the
equity incentive scheme and drives growth across the
organisation. The single new home settlement target
continued to drive performance across the business
and support good behavioural outcomes.
Acknowledging the circumstances of FY21 the targets
were set at 170 to 230 new home settlements and the
maximum number of options available were reduced
by 40%, compared to FY20. This approach was
designed to ensure our team remained motivated and
incentivised, even in disrupted circumstances, and
continued to drive returns for shareholders.
We believe these changes for FY21 ensured core
Lifestyle principles were maintained and our
remuneration approach was ‘fit for purpose’.
Happily, the Victorian housing market rebounded
strongly once lockdown conditions were eased.
The timeframe for selling and settling established
housing stock compressed significantly and resulted
in a pull forward of settlements. Again, the team
adapted quickly to ensure new homes were available
for settlement and this resulted in 255 new homes
settlements being achieved, exceeding the high-end of
our settlement range.
Our Team
I’d like to take this opportunity to record the Board’s
thanks to the whole Lifestyle Communities team for
their approach to an unprecedented and challenging
operational environment. The pandemic stress-tested
our culture and performance delivery, and the team
rose above uncertainty to meet the challenge and
propel the business forward. Thank you to James
and the leadership team for supporting all Employees
through the pandemic. We know the situation had an
impact not just on their work at Lifestyle Communities
but also extended to their families and the broader
community and we want to acknowledge their thought
and commitment to the business, our customers and
each other.
The following report sets out further detail on the
Company’s approach to remuneration.
Yours sincerely
The Honourable Nicola Roxon
Non Executive Director, Chair of the Remuneration and
Nominations Committee
18 August 2021
40
REMUNERATION REPORT
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 audited.
Remuneration and Nomination Committee
2.
2.1 Role of the Remuneration and
Nomination Committee
The objective of the Committee is to ensure that
remuneration policies and structures are fair,
competitive, and aligned with the long-term interests
of the Company. A copy of the Committee’s charter is
available on the Lifestyle Communities website.
The Remuneration and Nomination Committee’s key
responsibilities are to make recommendations to
the Board on:
• The Company’s remuneration framework;
• Formulation and operation of Employee
incentive plans;
3. Details of Key Management Personnel
Commencement
date
18 September 2013
Directors
Position
Philippa Kelly
Chair of the Board
(appointed 14 August 2019)
Non-Executive Director
Member Audit Committee
Member Remuneration and
Nomination Committee
The Honourable
Nicola Roxon
Non-Executive Director
1 September 2017
Chair Remuneration and
Nomination Committee
Georgina Williams Non-Executive Director
1 September 2017
Member Audit Committee
David Blight
Non-Executive Director
15 June 2018
Member Remuneration and
Nomination Committee
Mark Blackburn
Non-Executive Director
1 December 2019
Chair Audit Committee
Executive
Director
James Kelly
Managing Director
Founder, 2003
Other Executive KMP
• Remuneration levels of the Managing Director and
Chris Paranthoiene Head of Acquisitions and
13 March 2007
Development
Richard Parker
Head of Sales
11 January 2016
Yvonne Slater
Head of Development Delivery 8 January 2018
Darren Rowland
Chief Financial Officer and
Company Secretary
21 May 2019
Simon Goninon
Head of Community
Operations
30 March 2020
There were no changes to key management personnel
during the year.
other key management personnel; and
• The level of Non-Executive Director fees.
2.2 Change to the Remuneration Committee
The Remuneration Committee was amended to the
Remuneration and Nomination Committee in FY21 to
reflect the following additional objective:
• Oversight of the selection, appointment, and
reappointment of Directors to the Board
2.3 The Use of External Advisors
Remuneration consultants are engaged from time to
time to provide independent information and guidance
on remuneration for Directors and the Executive Team.
The independent consultants facilitate discussion,
conduct external benchmarking, and provide
commentary on a number of remuneration issues
and structures. Any advice provided by independent
consultants is used as a guide and is not a substitute
for the considerations and procedures of the Board
and the Remuneration and Nominations committee.
During FY21, no recommendations in relation to the
remuneration of Directors or the Executive Team were
provided as part of these engagements.
41
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
4. Our People and Culture Strategy
Lifestyle Communities has built a strong customer
centric culture throughout the business. This has been
achieved through a clearly defined set of values that
we use for recruiting, and also for measuring our team.
The 4 pillars of this strategy are:
Our Recruitment
Our People
To find, attract, and imbed
market-leading senior talent
who embody our culture and
values, delivering business
priorities aligned to strategy.
Our recruitment ensures our
talent have the required skills,
experience, behaviours and
commitment to purpose—
allowing homeowners to live
a bigger life. We will never
compromise on this strategy.
Our thoughtful investment
in nurturing our people
directly results in our team
delivering impactful and
meaningful experiences to
our homeowners.
We are focused on attracting,
engaging, nurturing,
growing, retaining and
rewarding our team.
We create an environment
where individuals feel valued
for their contribution to
business outcomes.
• A result in the red would require immediate
performance or behaviour intervention and a clear
action plan.
• A result in the orange indicates moderate
performance overall or a team member taking on
new learning objectives.
• A result in the green indicates a team member who
is delivering outcomes to the highest standards
consistently and delivers further value.
The ROADMAP process ensures that performance
concerns are identified, addressed, and rectified
appropriately to ensure optimum capability of all
team members driven and managed by our Senior
Leadership team. Note, the established ROADMAP
process is used as a behavioural gate for the equity
incentive scheme.
Performance Matrix
Our Remuneration
Our Performance
Our complete remuneration
process keeps us competitive
in the market—retaining
leading talent and rewarding
and recognising the
performance and behaviours
of our team and individual
performance towards
the overall achievement
of company targets and
sustainable value for
stakeholders.
In addition to our individual
performance measures
through our ROADMAP
process, we closely and
continually monitor our
customer referral rate, our
team engagement survey
results and our recruitment
and retention outcomes.
Each of these areas provide
a complete snapshot of the
achievement of our People
and Culture Strategy.
5. Capability and Performance
The capability and performance of our team is
assessed using the internal ROADMAP process. The
process includes six-monthly reviews and quarterly
check-ins. Our team are measured equally on their
competency and performance as well as their
demonstrated values and behaviours. Their overall
result in the annual appraisal is mapped on the
performance matrix shown to the right.
6.
Structure of Executive Directors and
Executive Team Remuneration
6.1 Framework
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, straightforward, and acceptable to
shareholders.
42
REMUNERATION REPORT
6.2 Components of Executive Remuneration
Component
Fixed remuneration
Performance measurement process
How we set fixed remuneration
Base salary, superannuation, and other
benefits.
Performance is reviewed annually using
the ROADMAP process. Performance is
assessed with regard to the individual’s
competency in their role and also their
displayed values and behaviours.
Fixed remuneration is benchmarked against market
data for comparable roles, industry peers and
similarly sized publicly listed companies. A formal
benchmarking exercise is undertaken every second
year, or sooner where there is a material role
change.
In addition to external benchmarking, fixed
remuneration is structured to ensure that high
quality talent is attracted and retained, and is
suitably motivated to meet Lifestyle Communities’
strategic, cultural, and business objectives.
Variable remuneration
Performance measurement process
Relationship between remuneration and
company performance
Equity Incentive Scheme (EIS)
The equity incentive scheme provides an
element of short-term and long-term incentive
to the Executive Team. 25% of the options
have a one-year service condition and will
vest following completion of the audit and
confirmation by the Board.
The remaining 75% have deferred vesting
conditions and are subject to ongoing
competency and behavioural requirements.
Achievement of new home settlement
target range set by the Board each
financial year.
Team members are required to
continuously demonstrate minimum levels
of values and behaviours throughout the
performance and deferred vesting periods.
The Board retains clawback rights if these
standards are not met.
The Board and Remuneration Committee consider a
range of factors in setting the annual target range
for the EIS. This includes the Company’s budget for
new home settlements and analyst forecasts.
New Home Settlements was chosen as the sole
operational performance metric because it is the
main driver of earnings growth and the creation of
shareholder value under the Lifestyle Communities
business model. It is also simple, easy to measure,
and it is one that all Employees can play a role in
achieving.
6.3 Structure of the Equity Incentive Scheme
Each year, the Board determine a target range for New
Home Settlements and the amount of equity that will
be made available to the Executive team, Emerging
Leaders, and other team members for the upcoming
financial year. Equity is issued to team members in the
form of conditional rights to receive ordinary shares
(“options”).
If a behavioural target is not met, all options granted
under the scheme will be forfeited. If the behavioural
gate is met, the number of options that vest under
a particular year’s scheme depends on whether the
lower, mid-point or upper New Home Settlement
target is reached in that financial year. If the lower
target is not reached, all options granted under the
scheme are forfeited.
To be eligible to fully participate in the incentive
scheme, team members must have been employed
by the Company on 1 July of the target year and
remain employed up until the options vest. Options
are typically issued in the first quarter of each financial
year to existing team members, any team members
commencing employment with the Company after
1 July of the target year are entitled to a pro-rata
incentive.
The options allocated to the Executive and other
emerging leaders are subject to a staggered vesting
program that seeks to provide short to mid-term Group
performance incentives. The use of deferred equity
provides further alignment between the interests of
senior management and shareholders by supporting
the maintenance of share value.
Options allocated to the Executive Team (excluding
the Managing Director) have the following service (or
escrow) conditions:
• 25% of options have a one-year service condition,
competency and behavioural requirements, and
will vest following completion of the audit and
confirmation by the Board;
• 25% have a two-year service and ongoing
competency and behavioural requirements; and
• 50% have three-year service and ongoing
competency and behavioural requirements.
43
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
Options allocated to emerging leaders have the
following service (or escrow) conditions:
• 50% of options have a one-year service
requirement, competency and behavioural
requirements, and will vest following completion of
the audit and confirmation by the Board; and
• 50% have a two-year service and ongoing
competency and behavioural requirements.
The allocation relating to all other team members
requires them to meet minimum levels of values and
behaviours and be employed by the Company at the
time of vesting, which occurs after the completion of
the audit and confirmation by the Board.
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
administered by an independent third party, Link
Market Services. The Employee share trust related to
the FY17 and FY18 equity incentive schemes continues
to be administered by Smartequity Pty Ltd.
The following additional governance practices apply to
the equity incentive scheme:
whether vesting occurs or not (regardless of
whether and how the performance conditions have
been satisfied) and the treatment of the options in
specific circumstances over the life of the options.
• The Board can apply clawback on vested and
unvested options or forfeit these awards.
• The Board has the ability to determine, if a Change
of Control Event has occurred or is likely to
occur, the manner in which a Participant’s Awards
(whether vested or unvested) will be dealt with.
• A participant may not sell, assign, transfer, grant
a security interest over or otherwise deal with
options that have been granted to them, unless the
Board approves.
• The Securities Trading policy prohibits Employees
from dealing in Lifestyle Communities securities
while in possession of price-sensitive information
that is not generally available to the public. The
policy requires all Employees to first obtain consent
from the Chief Financial Officer prior to trading.
The Managing Director and the Executive Team
are required to obtain consent from the Chair prior
to trading. The policy also prohibits entering into
any derivative or margin lending arrangements over
Lifestyle Communities securities at any time.
• The addition of the Values and Behaviours
gateway as a pre-qualification to the entitlement
to participate in the EIS reinforces the Board and
Executive Team’s commitment to maintaining
our customer centric culture and appropriate
behaviours.
• The Board has absolute discretion to determine
how options are awarded. The Board also has
absolute discretion as to who will participate, the
quantum, the conditions attaching to the award,
The Board reviews the structure, targets, vesting
conditions and outcomes delivered by the equity
incentive scheme each year.
Year 1
FY21
(Performance
period)
Year 2
FY22
(Deferred vesting)
Year 3
FY23
(Deferred vesting)
d
n
a
l
i
a
r
u
o
v
a
h
e
b
g
n
o
g
n
O
i
Fixed Remuneration
Variable Remuneration Equity Incentive Scheme
Base salary, superannuation
and other benefits
Employee
100%
(vest
Sept 2021)
Emerging
Leaders
50%
(vest
Sept 2021)
Executive
25%
(vest
Sept 2021)
Emerging
Leaders
50%
(vest
30 June
2022)
Executive
25%
(vest
30 June
2022)
Executive
50%
(vest
30 June
2023)
s
t
n
e
m
e
r
i
u
q
e
r
y
c
n
e
t
e
p
m
o
c
44
REMUNERATION REPORT
6.4 The relationship between remuneration and company performance
The following table demonstrates the link between the Company’s remuneration structure and
its performance over the last 5 years.
Performance measure
Statutory profit after tax
Dividends declared and paid (fully franked) (cents)
Closing share price (30 June)
Share price increase / (decrease)
Employee share scheme expense
New home settlements in the Year
Total Homes Settled
Total Portfolio (Settled and Unsettled)
Unit
$m
cps
$
%
$m
Homes
Homes
Homes
FY21
91.1
8.0
15.6
64.2%
1.4
255
2,792
4,834
FY20
42.8
5.5
9.5
43.9%
0.3
253
2,537
4,494
FY19
55.1
5.5
6.6
11.9%
0.9
337
2,284
3,563
FY18
52.7
4.5
5.9
43.9%
0.5
321
1,947
2,995
FY17
27.7
3.5
4.1
41.4%
0.3
278
1,626
2,667
Remuneration Details for FY21
7.
Noting the high levels of uncertainty due to the
ongoing impact of the Covid-19 global health
pandemic, the Board determined to freeze all increases
to fixed remuneration for all team members and
Directors during FY21. The only changes to fixed
remuneration applied during the year were as a result
of changes in role or scope.
7.1 Managing Director
The total remuneration for the Managing Director
(inclusive of superannuation) is $600,000 and
includes a $20,000 car allowance as compensation
for the high level of travel required between the
Company’s communities. The Managing Director
does not participate in any short term or long-term
incentive plans.
In FY20 the salary of the Managing Director was
independently benchmarked, and the Board resolved
to increase it in line with comparable roles in the
market. The Board notes that this salary is low in the
market, however the salary of the Managing Director
remained unchanged throughout FY21 due to the
ongoing COVID-19 uncertainty and consistent with
the freeze on pay increases for the whole team. An
increase will be applied during FY22.
There were no significant changes to the Managing
Director’s service agreement during FY21.
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 Executive Team
As with the whole team, fixed remuneration for the
Executive Team remained unchanged in FY21 due to
the ongoing COVID-19 uncertainty. The allocation
of options under the Equity Incentive Scheme was
reduced by 40%, commensurate with the constrained
sales environment in Victoria due to lockdown
restrictions. Further information is detailed below at
section 7.3.
There were no significant changes to Executive Team
service agreements during FY21.
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.
7.3 COVID-19 impact on the Equity Incentive
Scheme for FY21
The EIS for FY21 was approved by the Board in June
2020 as part of the typical budget cycle. However,
the scheme was not implemented as planned because
Victoria entered a stage 4 lockdown on the 7th of July.
Forecasting was very difficult during this period due to
the high level of uncertainty regarding when lockdown
restrictions would be eased and when the business
could return to full service.
Lockdown restrictions eased on the 28th of October
and the position was reassessed at that time. In
November 2020, the Board adopted a revised scheme
for FY21 which included targets that took account of
the impact of lockdown and a 40% reduction to the
number of options allocated
45
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
8.3 Non-Executive Directors’ Share
Holding Policy
Lifestyle Communities introduced a new policy in
FY20 which requires that all Non-Executive Directors
hold a minimum shareholding in Lifestyle Communities
equivalent to 100% of their annual base fee.
Non-Executive Directors are required to acquire their
target shareholding independently. The shareholding
does not comprise part of the remuneration package.
Non-Executive Directors have five years in which to
purchase their shareholding requirement. The five-
year period will commence from the later of the date
the policy is adopted, or the Non-Executive Director
takes up their position. Once the equivalent of a Non-
Executive Director’s annual base fee has been acquired
in shares, the Non-Executive Director does not need
to adjust shareholdings when there is an adjustment
of the share price. On reappointment to the Lifestyle
Communities Board, each Non-Executive Director
must reassess their shareholding and top up to the
new base fee.
9.
Remuneration Details of Key
Management Personnel
In this Annual Report, remuneration outcomes are
presented based on the requirements of accounting
standards (which has the benefit of being readily
comparable with other companies) as well as the
actual “take-home” pay received by Executive key
management personnel (being cash, other benefits
and the value of equity exercised during the relevant
financial year).
Differences can arise based on options which carry
a deferred vesting and exercise period. Options are
expensed over the vesting period based on their fair
value when originally granted to the Executive. This
may be significantly different to their value, if and
when, the incentive vests to that Executive.
The following options were issued in relation to
the FY21 equity incentive scheme. The revised
performance range for FY21 was 190 – 230 new home
settlements, with a commensurate 40% reduction
(from FY20) in the number of options achievable. 255
new home settlements were achieved during FY21
and therefore the high end of the range was achieved.
Vesting of the options is deferred in accordance with
the vesting conditions outlined in section 6.4.
No. of options available
Low tier
Mid tier
High tier
Executive team
Senior leadership
All other team members
6,000
1,200
300
9,000
1,800
600
12,000
2,400
900
8. Non Executive Directors’ remuneration
8.1 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.
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.
8.2 Review of Non-Executive Director’s fees
In FY20 the fees for Non-Executive Directors were
independently benchmarked, and the Board resolved
to increase them in line with comparable roles in the
market. The Board notes the current level of fees
are low in the market, however the fees remained
unchanged throughout FY21 due to the ongoing
COVID-19 uncertainty and consistent with the freeze
on pay increases for the balance of the business. The
increase will be applied in FY22 and remains well
within the shareholder approved aggregate noted in
section 8.1.
46
REMUNERATION REPORT
The following table discloses the remuneration of the Directors and key
management personnel of the Company for the 2021 financial year and for
the previous financial year.
$000’s
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Mark Blackburn
Consolidated remuneration
Key management personnel
Darren Rowland
Chris Paranthoiene
Yvonne Slater
Richard Parker
Simon Goninon
* Appointed 30 March 2020
Sam Cohen
* Resigned 27 March 2020
Consolidated remuneration
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Salary
and fees
Annual and
long service
leave (1)
Super
Equity-based
payments (2)
575
575
114
111
80
77
85
77
73
73
78
45
1,005
958
345
345
325
325
248
248
294
293
229
40
180
1,442
1,432
44
18
9
7
9
(3)
22
7
18
11
4
38
40
100
25
25
11
11
0
3
0
7
7
7
7
4
50
58
25
25
25
25
22
22
26
25
21
4
11
118
111
81
32
81
38
81
32
81
38
66
(72)
391
68
Performance
related
Take
home pay (3)
Total
600
644
125
122
80
80
85
84
80
80
85
49
1,055
1,059
470
411
438
397
348
324
408
375
327
48
-
-
-
-
-
-
-
17.3%
7.8%
18.5%
9.7%
23.3%
9.9%
19.9%
10.2%
20.3%
0.0%
156
1,991
1,711
(46.3%)
20%
4.0%
600
600
125
122
80
80
85
84
80
80
85
49
1,055
1,015
370
370
350
350
270
270
320
318
250
44
0
11
1,560
1,363
1. Annual leave and long service leave represents movements in provisions.
2. Equity based payments represents the fair value of the options granted to key management personnel in FY19, FY20 and FY21 determined by allocating the
grant date value on a straight-line basis over the period from the grant date to the vesting date.
3. Take home pay is a non-IFRS measure which includes salary and fees, super, and the cash value of any options exercised during the year (measured at
the closing share price on the day of exercise or the termination date for anyone that departs during the year). These figures have been audited and are
provided to give a better understanding of remuneration of Directors and Key Management Personnel.
47
Lifestyle Communities Annual Report 2021
Taking a dip
REMUNERATION REPORT
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49
Lifestyle Communities Annual Report 2021
REMUNERATION REPORT
Shares
$000
Directors
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Mark Blackburn
Management
Darren Rowland
Chris Paranthoiene
Simon Goninon
Yvonne Slater
Richard Parker
Shares held at the
beginning of the year
Purchased
on market
Options
exercised
Sold
Shares held at the
end of the year
1,000
10,577,001
75,000
5,000
5,000
8,000
2,400
2,500
116,341
0
2,695
10,000
(1,500,000)
(3,114)
9,077,001
75,000
5,000
6,000
8,000
2,400
2,500
113,227
0
2,695
10,000
11. Remuneration report voting at Annual
General Meeting
Lifestyle Communities Limited received 98.88% of
votes in support of its remuneration report at the 2020
Annual General Meeting.
50
Lifestyle Officer
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Lifestyle Communities Ltd for the year ended 30 June 2021, I declare
that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
Andrew Cronin
Partner
PricewaterhouseCoopers
Melbourne
18 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
53
Lifestyle Communities Annual Report 2021
How’s the serenity ...
Inside the Kennedy Corner
Outdoor dining at Lifestyle Mount Duneed
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Consolidated Statement of Profit
or Loss and Other Comprehensive
Income
For the year ended 30 June 2021
$000’s
Development revenue
Home settlement revenue
Cost of sales
Gross profit from home settlements
Management and other revenue
Rental revenue
Deferred management fees
Utilities revenue
Finance revenue
Job Keeper
Total management and other revenue
Fair value adjustments
Less expenses
Development expenses (sales and marketing)
Community operating expenses
Deferred management fee expenses
Utilities expenses
Corporate overheads
Other expenses
Finance costs
Profit before income tax
Income tax expense
Profit from continuing operations
Note
2.1
2.1
2.1
2.1
2.1
2.2
2.1
2.1
2.1
2.1
2.1
2.1
2.4
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.
2021
102,716
(81,338)
21,378
25,043
7,342
2,732
68
802
35,987
108,590
(6,466)
(11,203)
(1,596)
(2,787)
(11,881)
-
(1,462)
130,560
(39,449)
91,111
87.30
87.06
2020
96,105
(75,238)
20,867
22,964
5,165
2,698
346
858
32,031
38,943
(6,456)
(9,720)
(2,179)
(2,905)
(9,694)
1,590
(1,347)
61,130
(18,312)
42,818
41.03
40.98
57
Lifestyle Communities Annual Report 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Consolidated Statement of
Financial Position
For the year ended 30 June 2021
Note
2021
2020
$000’s
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non current assets
Inventories
Other assets
Property, plant and equipment
Investment properties
Right of use assets
Total non current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non current liabilities
Trade and other payables
Interest bearing loans and borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Total non current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
4.3
2.6
3.3
2.7
2.7
3.4
3.1
2.8
2.4
5.2
2.8
4.4
2.4
4.5
4.6
4.6
2,300
1,086
83,745
1,543
88,674
41,498
874
13,252
636,455
523
692,602
781,276
43,793
211
1,712
1,275
46,991
50,230
190,000
405
190
115,365
356,190
403,181
378,095
63,859
3,472
310,764
378,095
16,381
1,094
45,109
563
63,147
28,822
1,237
9,112
493,602
733
533,506
596,653
33,588
168
244
1,073
35,073
41,629
145,000
616
163
82,799
270,207
305,280
291,373
63,784
2,188
225,401
291,373
58
The above statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2021
2021
$000’s
Balance at 1 July 2020
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Vesting of treasury shares
Employee share scheme expense
Dividends paid or provided for
Balance at 30 June 2021
2020
$000’s
Balance at 1 July 2019
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Vesting of treasury shares
Employee share scheme expense
Dividends paid or provided for
Balance at 30 June 2020
Note
Contributed
equity
63,784
Reserves
2,188
-
-
75
-
-
63,859
-
-
(75)
1,359
-
3,472
Contributed
equity
63,641
Reserves
2,196
-
-
143
-
-
63,784
-
-
(270)
262
-
2,188
4.7
Note
4.7
Retained
earnings
225,401
91,111
91,111
-
-
(5,748)
310,764
Retained
earnings
188,854
42,818
42,818
-
-
(6,271)
225,401
Total
equity
291,373
91,111
91,111
-
1,359
(5,748)
378,095
Total
equity
254,691
42,818
42,818
(127)
262
(6,271)
291,373
The above statement should be read in conjunction with the accompanying notes.
59
Lifestyle Communities Annual Report 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of
Cash Flows
For the year ended 30 June 2021
Note
$000’s
Cash flow from operating activities
Receipts from customers
Payments to suppliers and Employees 1
Job keeper received
Income tax paid
Interest received
Interest paid
Net cash provided by/(used in) operating activities
2.5
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of investment properties
Net cash provided by/(used in) investing activities
Cash flow from financing activities
Principal elements of lease payments
Proceeds from 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
2021
149,101
(172,218)
1,139
(5,792)
19
(4,175)
(31,926)
(5,560)
(15,573)
(21,133)
(274)
45,000
(5,748)
38,978
(14,081)
16,381
2,300
2020
138,783
(123,387)
521
(5,619)
109
(4,708)
5,699
(2,613)
(30,156)
(32,769)
(260)
45,000
(6,271)
38,469
11,399
4,982
16,381
1. Due to Lifestyle Communities’ accounting policies and legal structure, payments to suppliers and Employees includes all gross costs of infrastructure
construction (i.e. civil works, clubhouse and other facilities). Under some other structures these costs may be classified as investing cash flows. Therefore,
cash flows from operations will be negatively impacted when Lifestyle Communities is in the cash-intensive development phase of a community’s
construction. In FY21 payments to suppliers and Employees includes $60 million of such costs (FY20: $35.5m).
The above statement should be read in conjunction with the accompanying notes.
60
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 30 June 2021
How we have prepared this report
Basis of Preparation
1.
1.1
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.
Significant accounting policies adopted in the
preparation of these financial statements are
consistent with prior reporting periods.
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 thousand dollars or in certain cases, 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.
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.
61
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
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.
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:
(a) Significant accounting judgments
(i)
Income tax
Deferred tax assets and liabilities are based on the
assumption that no adverse change will occur in
the income tax legislation and the anticipation that
the Group will derive sufficient future assessable
income to enable the benefit to be realised
and comply with the conditions of deductibility
imposed by the law.
Deferred tax assets are recognised for deductible
temporary differences as management considers
that it is probable that future taxable profits will be
available to utilise those temporary differences.
(b) Critical accounting estimates and judgements
(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.
(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.
1.4 Joint operations
Under AASB 11 Joint Arrangements investments in joint
arrangements are classified as either joint operations
or joint ventures. The classification depends on the
contractual rights and obligations of each investor,
rather than the legal structure of the joint arrangement.
The Group recognises its direct right to the assets,
liabilities, revenues and expenses of joint operations
and its share of any jointly held or incurred assets,
liabilities, revenues and expenses. These have been
incorporated in the financial statements under the
appropriate headings. Details of the joint operation are
set out in note 6.2.
Revenues
The Group has five main revenue streams including
Home Settlement Revenue, Rental Revenue, Deferred
Management Fee revenue, Utilities Revenue and
Interest revenue. The Group met the eligibility
criteria for the Federal Government’s Job Keeper
income in March 2020 and recognised income from
April 2020 to September 2020. The Group did not
meet the eligibility criteria for extensions to the
JobKeeper program.
(i) Home settlement revenue
The Group develops and sells homes including a
share of the community infrastructure. Revenue
from home settlement is recognised at a point in
time with each home purchase agreement treated
as a single performance obligation to transfer
control of the home and community infrastructure
to the homeowner. Revenue is recognised for
the amount specified in the home purchase
agreement upon receipt of final settlement.
The owner has legal title, physical control of the
asset, exposure to the majority of the risk and
rewards of ownership and the Group does not
hold any option or obligation to repurchase on
exit. Deposits received in advance from customers
are recognised as a contract liability until the
performance obligation has been met. The
construction cost of the homes and infrastructure
is capitalised to inventory during development
and then classified as costs of goods sold upon
settlement.
$000’s
Number of settlements
Home settlement revenue
Cost of sales
Gross profit from home settlements
Gross profit margin %
Development expenses ( sales,
marketing, and project management)
2021
255
2020
253
102,716
96,105
(81,338)
(75,238)
21,378
20.8%
(6,466)
20,867
21.7%
(6,456)
New home settlements were 255 in FY21
(FY20: 253) and this, combined with a change
in home and project mix, has translated into
higher revenue and gross margin from home
settlements. The gross profit margin percentage
decreased compared to the prior period due to
62
NOTES TO THE FINANCIAL STATEMENTS
the mix of homes being settled and the stage
of development each project is up to. Cost of
sales includes $28.1m for the share of community
infrastructure sold to each homeowner and
expensed upon settlement (FY20: $23.9m).
(ii) Community Operations
Rental revenue is derived under the Site Lease
Agreement granting the homeowners a right
to use the Land for their property. The rent is
calculated on a weekly basis per tenant as per
the contract. Rental revenue is recognised as it
is earned. Rental revenue meets the definition of
a lease arrangement and falls outside the scope
of AASB 15 and is therefore accounted for in
accordance with AASB 16 Leases. Community
operating expenses include salaries of onsite
community managers and all costs necessary to
ensure the efficient operation of the communities.
$000’s
Number of homes under management
at 30 June
Rental revenue
Community operating expenses
Net Community surplus
Margin
2021
2,792
25,043
(11,203)
13,840
55.26%
2020
2,537
22,964
(9,720)
13,244
57.67%
Rental revenue and community operating
expenses both increased during FY21 due to an
increased number of homes under management
as new communities commence operation and
homes progressively settle. Rental revenue is
contractually fixed to increase by the greater of
CPI or 3.5% annually however the Victorian State
Government legislated an embargo on rental
increases during the Covid 19 pandemic. This
meant the rental increase due to be implemented
on 1 July 2020 could not proceed. The increase
due on 1 July 2021 proceeded as expected. The
gross margin decreased due to the status of new
communities. Rent does not commence until
the clubhouse opens however costs commence
earlier, which has a short-term impact on overall
community margins. Clubhouses at Mount
Duneed, Kaduna Park, Wollert, and Deanside were
all opened during the year and rent commenced
at each community in the first week after
clubhouse opening.
(iii) Deferred management fee
The deferred management fee is a contribution
to the management and maintenance of the
community and assists in keeping weekly site
63
Lifestyle Communities Annual Report 2021
fees affordable. The deferred management fee is
considered highly susceptible to factors outside
the Group’s influence until realised, including the
timing and the amount of consideration received,
which is based on a percentage of the resale value
at the time the home is sold, the value of which
is at the homeowners discretion and subject
to prevailing market conditions. These factors
result in a degree of variability in the timing and
quantum of the expected consideration, and as
such revenue from deferred management fee
is recognised at a point in time upon the resale
settlement of the home when the vendor transfers
control of the home and community infrastructure
to the incoming homeowner. Revenue for deferred
management fees are recognised under AASB 15.
For all contracts entered into prior to 1 January
2009, the fee payable is 15% on the resale value of
the unit and after a period of occupation of a year
and one day.
For all contracts entered into post 1 January 2009,
the fee payable is up to 20% (the fee accumulates
by 4% per year over 5 years up to 20%) on the
resale value of the unit.
$000’s
Number of resales attracting a
deferred management fee
Deferred management fees
Deferred management fee expenses
2021
105
7,342
(1,596)
2020
80
5,165
(2,179)
121 resale settlements were achieved in FY21
(FY20:102) of which 105 resales attracted a
deferred management fee (FY20: 80). The
Company offers a smart buy guarantee whereby
no deferred management fee is payable if a
homeowner lists their property within the first
12 months. 4.3% of homeowners that settled in
FY21 used the Smart Buy Guarantee compared
with 6.2% in FY20.
At the end of FY21 there were 26 resale homes
available for sale and 31 resale homes sold and
awaiting settlement across the communities (30 of
these will attract a DMF).
Deferred management fee expenses are expenses
incurred to assist with sales and marketing of
resale homes. These costs reduced during the
period due to a restructure of the sales team
implemented during FY20.
NOTES TO THE FINANCIAL STATEMENTS
(iv) Utilities revenue
Lifestyle Communities operates embedded
networks for electricity, water and gas (where
applicable at each community). Utilities are
individually metred, billed to homeowners
monthly, and recorded as revenue in the
respective month. Lifestyle Communities adjusts
its rates to homeowners on a regular basis based
on usage and the price Lifestyle Communities
pays to the relevant wholesalers. It is the
Company’s intention to utilise its increasing scale
to negotiate favourable commercial outcomes for
homeowners and pass on the lowest possible cost
of utilities to homeowners. The Company does not
seek to make a profit from utilities.
$000’s
Utilities revenue
Utilities expenses
2021
2,732
2020
2,698
(2,787)
(2,905)
Utilities revenue is billed to homeowners monthly
and recorded as revenue in the respective month.
(v) JobKeeper
$000’s
JobKeeper
2021
802
2020
858
The Company’s revenue reduced by more than
30% in March 2020 compared to March 2019
and as such the Company qualified for the Federal
Government’s Job Keeper program from April
2020 through to September 2020. The Company
received $1.66 million during this period ($802k
in FY21 and $858k in FY20). The grant was
used to ensure that all our team were retained
during the period of significant disruption from
July to October when sales offices were shut,
office-based staff were sent home, development
capacity was reduced, and financial and operating
results were significantly affected. Our focus
during lockdown was to prepare the business
to bounce back quickly when restrictions were
eased. Maintaining our talented team was critical
to the business’ performance post lockdown.
(vi) Finance revenue and costs
Interest income is recognised in the income
statement as it accrues, using the effective
interest method.
$000’s
Interest income
2021
23
2020
52
Interest income reduced during the period
due to a reduction in interest rates and lower
cash holdings.
(a) Finance costs expensed
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. Establishment fees are amortised over
the life of the facility. The average interest rate
paid in FY21, including commitment fees, was
2.45% down from 2.83% in FY20.
$000’s
Interest on secured loans
Amortisation of loan facility fees
2021
1,237
225
2020
1,122
225
(a) Finance costs capitalised
Finance costs capitalised refers to interest
capitalised at the prevailing facility interest rate
as part of inventory during development and then
classified as costs of goods sold as a pro-rata
amount upon settlement of each home:
$000’s
Interest on secured loans
2021
3,065
2020
3,156
(vii) Corporate overheads
Corporate overheads include the Company’s
support functions such as the Executive Team,
People and Capabilities, Finance, Information
Technology and Legal. It also includes regulatory
and other compliance costs, the cost of the
Employee equity incentive plan, and the support
office located in South Melbourne.
$000’s
Corporate overheads
2021
11,881
2020
9,694
Corporate costs increased compared to the prior
period due to increased headcount to support the
business growth, an increase in the cost of the
employee incentive scheme due to share price
growth, and an increase in insurance premiums
due to prevailing market conditions.
(viii) Depreciation, amortisation and impairment
Assets with an indefinite useful life are not
amortised but are tested annually for impairment
in accordance with AASB 136 Impairment of
Assets. Assets subject to annual depreciation
or amortisation are reviewed for impairment
whenever events or circumstances arise that
indicate that the carrying amount of the asset may
be impaired.
64
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
2.2 Fair Value Adjustments
Uplift in value arising from settled
homes during the year (255 new home
settlements FY20: 253)
The uplift created as a result of the
contractual rent increase
Movements as a result of changes to
valuation assumptions
Total Fair Value Adjustment
FY21
$ million
FY20
$ million
21.6
22.6
8.8
78.2
108.6
-
16.3
38.9
(a) Fair value adjustments—Investment Properties
Fair value adjustment results from valuing communities
at 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. More
information on fair value adjustments is contained
in note 3.1.
It remains the Company’s intention to settle
outstanding options with equity purchased on-market.
Income Tax Expense
2.4
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.
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:
Current and deferred tax balances attributable
to amounts recognised directly in equity are also
recognised directly in equity.
(a) Earnings used in calculating earnings per share
$000’s
Net profit
2021
91,111
2020
42,818
(b) Weighted average number of shares
$000’s
Ordinary shares
Treasury shares
Weighted average number of ordinary
shares for basic earnings per share
Effect of dilution:
Options
Weighted average number
of ordinary shares adjusted
for dilution
2021
2020
104,545
104,545
(178)
(196)
104,367
104,349
283
131
104,650
104,480
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.
65
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
(a) The major components of tax expense
(income) comprise:
(e) Deferred tax
Deferred tax relates to the following:
$000’s
Current tax
Deferred income tax
(over)/under provision in respect of
prior years
2021
6,883
32,566
-
2020
5,453
$000’s
Deferred tax assets
12,931
The balance comprises
(72)
Capital raising costs
39,449
18,312
Right of use liability
Tax losses
(b) Deferred income tax expense included in
income tax expense comprises
$000’s
Decrease / (increase) in deferred
tax assets
Increase in deferred tax liabilities
2021
(27)
32,593
32,566
2020
858
12,073
12,931
Deferred tax liabilities increased in line with the
increased fair value adjustment. This tax liability will
only be realised should an investment property be
disposed of on an individual basis, which the Company
views as unlikely.
Provision for Employee entitlements
Accruals and business expenses
Credited to equity—purchase of
treasury shares
Share based payments
Superannuation
Deferred tax liabilities
Interest capitalised
Investment property fair value
adjustments
Accrued income not assessable
Right of use asset
2021
2020
-
185
-
439
505
-
210
3
6
235
92
371
547
65
-
-
1,342
1,316
1,368
115,182
-
157
116,707
115,365
1,189
82,605
102
219
84,115
82,799
(c) Reconciliation of income tax to
accounting profit:
$000’s
Accounting profit before tax
Tax
Add / (less):
Tax effect of:
Share options expensed during year
Entertainment
Capital loss adjustments
Over provision for income tax in
prior year
2021
130,560
30.00%
39,168
263
18
-
-
Net deferred tax liability
2020
61,130
(f) Deferred tax assets not brought to account
30.00%
18,339
$000’s
Capital tax losses
2021
267
2020
267
78
25
(58)
(72)
Income tax expense
39,449
18,312
(d) Current tax liabilities
Current tax relates to the following:
$000’s
Opening balance
Income tax payable
Tax payments
Over provision in prior years
Current tax liabilities
2021
244
6,883
(5,415)
-
1,712
2020
974
5,453
(5,619)
(564)
244
66
NOTES TO THE FINANCIAL STATEMENTS
2.5 Cash Flow Information
(a) Reconciliation of result for the year to cashflows
from operating activities
$000’s
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)/decrease in other assets
(increase)/decrease in inventories
increase/(decrease) in trade and
other payables
increase/(decrease) in provisions
increase/(decrease) in current tax
increase/(decrease) in deferred tax
Net cash flow from
operating activities
2021
91,111
2020
42,818
1,342
434
1,359
999
434
262
(108,590)
(38,943)
24
(488)
(842)
(50,431)
(594)
228
1,467
32,566
(31,926)
(200)
(22,951)
13,663
(2,593)
(730)
13,428
5,699
2.6 Trade and other receivables
$000’s
Other receivables
2021
1,086
2020
1,094
(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 assets
$000’s
Security deposits
Other assets
Prepayments
Total
2021
413
1,273
731
2,417
2020
404
1,154
242
1,800
(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
$000’s
Trade payables
Customer deposits
GST payable
Other payables and accruals
Contracted land-current
Contracted land-non-current
Total
Note
(a)
(b)
(c)
(c)
(e)
(e)
2021
45
1,742
180
15,857
25,969
50,230
94,023
2020
2,523
656
616
13,011
16,782
41,629
75,217
(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 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.
(e) Contracted land
Includes amounts payable on five parcels of land for
contracts entered into prior to the reporting date
(including stamp duty). Two of the five contracts,
totalling $26 million are expected to settle in the 2022
financial year. The balance will settle progressively over
the subsequent 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.
67
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
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.
Investment properties
3. Our business assets
3.1
The Company’s investment properties comprise
of both the capitalisation of the rental revenue and
deferred management fee annuity stream together
with the fair value of the undeveloped land. The
undeveloped land is converted to a capitalised annuity
stream upon settlement of each home.
At 30 June 2020, the fair value has been determined
by a combination of the discounted annuity streams
associated with completed home units and the fair
value of the undeveloped land. The gain arising from
the change in the fair value of investment properties
has been recognised in the profit or loss.
(a) Reconciliation of carrying amounts at the
beginning and end of the period
$000’s
Opening balance
Additions (contracted land and
capitalised costs)
Net unrealised gain from fair value
adjustments
2021
493,602
34,263
2020
399,750
54,915
108,590
38,937
Closing balance
636,455
493,602
The Company’s Investment Property Valuation
Policy requires that each asset in the portfolio must
be externally valued at least every two years by an
independent external valuer who are considered
industry specialists in valuing these types of investment
properties. The independent valuer can only value an
investment property on three consecutive occasions.
For FY21, eleven of eighteen operating communities
have been externally valued by independent valuers
Colliers, M3 and Valued Care. For the remaining
communities, the Directors have estimated the fair
value internally utilising inputs from the independent
valuations.
Fair Value Measurement, Valuation
Techniques, and Inputs
The fair value represents the amount at which the
assets could be exchanged between a knowledgeable
willing buyer and a knowledgeable willing seller in an
arm’s length transaction at the date of the valuation,
in accordance with Australian Accounting Standards.
In determining fair value, the expected net cash flows
applicable to each property have been discounted
to their present value using a market determined,
risk adjusted, discount rate applicable to the
respective asset.
The expected net cash flows applicable to each
property comprise of rental revenue and deferred
management fee.
Rental revenue is valued using the rent
capitalisation approach
Rental capitalisation rates are derived from a
combination of independent and Directors’ valuations.
The rates were taken directly from independent
valuations for the eleven communities independently
valued in the current year. In the remaining
communities (independently valued in the prior year)
the directors have adjusted the rental capitalisation
rates to reflect the mid-point of the rates adopted by
the three independent valuers for the eleven properties
that were valued in the current year.
Weekly rental rates were taken directly from the
valuations for the eleven communities independently
valued in the current year using contract weekly rates.
In relation to the remaining communities
(independently valued in the prior year) the Directors
have adjusted the rental rate adopted in the prior year
to take into account the 3.5% rental increase that was
applied on 1 July 2021. This approach is consistent with
the approach adopted by the independent valuers.
Deferred management fee revenue is valued using
the discounted cash flow approach
Deferred management fee valuations are derived
from a combination of independent and Directors’
valuations. Inputs, including discount rates, deferred
management fee annuity value, and management
expense rates are derived from independent
valuations. For the eleven communities independently
valued in the current year, the valuation per home
was taken directly from the independent valuations
and multiplied by the number of settled homes per
community at 30 June 2021. For the remaining
communities not independently valued this year, the
deferred management fee valuations were increased
by 4% which reflects an average of the increase
applied by the independent valuers to a representative
sample of mature communities.
68
NOTES TO THE FINANCIAL STATEMENTS
All rental income and deferred management fee income disclosed in the
Statement of Profit or Loss was generated from investment properties.
All management operating expenses relate to investment properties that
generated rental income.
Investment properties, other than those owned as part of a joint
operations, are subject to a first charge, forming in part the security of the
Group’s loans as disclosed in Note 4.4(d).
The investment properties are at various stages of completion and are
subject to further development until fully completed.
The following table shows the valuation assumptions used in measuring
the fair value of the investment properties.
FY21
FY20
Impact on fair
value as at
30-Jun-21
Weekly rentals ($)
198.39 – 211.01
191.68 – 202.98
Increase
Anticipated % expenses (as a percentage of rental income)
30.7% – 41.0%
30.7% – 41.0%
Nil
Rental capitalisation rate (%)
Rental values per unit ($)
5.5% – 5.75%
6.25 – 6.5%
115,062 – 216,724
95,773 – 121,615
Increase
Increase
Deferred management fee discount rates (%)
13.00% – 14.25%
13.00% – 14.25%
Nil
Deferred management fee values per unit ($)
36,000 – 88,172
31,229 – 82,742
Increase
Valuation of undeveloped land (per hectare) ($'million)
0.19 – 2.5
0.19 – 2.20
Nil
Capitalisation rate
Capitalisation rate refers to the rate at which the
annual free cash flow from weekly rental, net of costs,
is capitalised to ascertain its present value at a given
date. The weekly rental is contracted under the Site
Lease Agreement. The capitalisation rate reflects the
nature, location and tenancy profile of the property
together with current market evidence and sale of
comparable properties.
Generally, a change in the assumption made for
the adopted capitalisation rate is accompanied by
a directionally opposite change in the investment
property value. The adopted capitalisation rate forms
part of the income capitalisation approach.
Capitalisation approach
When calculating the income capitalisation approach,
the weekly rent has a strong interrelationship with the
adopted capitalisation rate given the methodology
involves assessing the total weekly income receivable
from the property and capitalising this in perpetuity
to derive a capital value. The below summary shows
the impact on valuation of movement in the various
key inputs:
• Increase in weekly rent = Increase in valuation
• Decrease in weekly rent = Decrease in valuation
• Increase (softening) of the capitalisation rate =
Decrease in valuation
• Decrease (tightening) of the capitalisation rate =
Increase in valuation
In theory, it is possible for the effects of movements
in these key inputs to add to or offset each other
depending on which way the assumptions move.
Deferred Management Fee Discount rate
The discount rate is determined using a number of
risk-based assumptions to reflect the risk profile of
deferred management fee income stream.
Discounted cash flow approach
The discounted cash flow approach involves
formulating a projection of the net cash flow from
deferred management fees over a specified time
horizon and discounting this cash flow at the end of the
projection period at an appropriate rate. The present
value of this discounted cash flow represents the fair
value of the property.
69
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
In assessing the value of the discounted cash flow,
a forecast model projects the likely cash flows to be
derived from the deferred management fees less
expenses using probability factors on the homeowners
length of time in the community and also the property
market growth rates.
When assessing a discounted cash flow valuation, the
adopted discount rate has a strong interrelationship
in deriving a fair value given the discount rate will
determine the rate in which the deferred management
fee is discounted to the present value.
Current year adjustments and impact of Covid
There are high levels of uncertainty regarding the
duration and impact of the Covid 19 global health
pandemic on the Victorian property market. There
remains ongoing risk to our homeowners, team
members, suppliers, and our supply chain. There also
remains risk of periodic shut down of our facilities,
development sites, and broader parts of the economy.
The Group has a pandemic management plan in place
and will continue to monitor the situation closely. Our
philosophy is to focus on the health and wellbeing
of our team, our homeowners, and our communities
as a priority. We are committed to take an informed
approach that is sensible, balanced and kind, having
regard to the expert medical advice of Australian
Authorities.
Some of the independent valuers have included
disclosures in their reports noting the high level of
uncertainty in relation to the impacts of Covid-19
and the limited market-based information available at
the time of issuing their reports. All have noted the
response of governments, businesses and individuals is
fluid and the impacts of future events may significantly
change expectations for the market and the land
lease sector. As such, valuers have recommended
that reliant parties keep the valuations under frequent
review. Directors regularly review transactions
in the market and maintain regular dialogue with
independent valuers.
Fair value measurements
3.2
(a) Fair value hierarchy
Assets and liabilities measured and recognised at fair
value have been determined by the following fair value
measurement hierarchy:
Level 1: Quoted prices (unadjusted) in active markets
for identical assets and liabilities.
Level 2: Input other than quoted prices included within
Level 1 that are observable for the asset or liability,
either directly or indirectly.
Level 3: Inputs for the asset or liability that are not
based on observable market data.
000’s
30 Jun 21
Recurring Fair Value
Measurements
Investment properties
Total assets measured at
fair value
30 Jun 20
Recurring Fair Value
Measurements
Investment properties
Total assets measured at
fair value
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
636,455
636,455
636,455
636,455
493,602
493,602
493,602
493,602
(b) Valuation techniques and inputs used in level 3
(i)
fair value measurements
Investment properties
Investment properties have been classified as
level 3 as it is an internally generated calculation
that contains some non-observable market inputs.
The Company does not adjust some of the major
inputs obtained from the independent valuations
such as discount rates, the deferred management
fee annuity values, and the management
expense rates.
(c) Significant unobservable inputs used in level 3
(i)
fair value measurements
Investment properties
Rental capitalisation rates - rates were taken
directly from the valuations for the eleven
communities independently valued in the current
year. In relation to the remaining seven operating
communities (independently value in the prior
year) the Directors have adjusted the rental
capitalisation rates to reflect the mid point of the
rates adopted by the three independent valuers.
Deferred management fee annuity - the valuation
for this component is taken directly from
independent valuations for the eleven properties
independently valued in the current year. For the
remaining seven communities not independently
valued this year, the deferred management fee
valuations were increased by 4% which reflects
an average of the increase applied by the
independent valuers to a representative sample of
mature communities.
70
NOTES TO THE FINANCIAL STATEMENTS
Rental annuity - for all communities the Directors
have increased the rent by 3.5% to reflect the
increase that was applied on 1 July 2021 The next
rent increase is due on 1 July 2022.
Undeveloped land is measured at fair value, which
is reflective of the most recent purchase price
paid. Land is accrued upon an unconditional
contract, refer to Note 2.8.
(d) Valuation processes used for level 3 fair value
(i)
measurements
Investment properties
The Company obtains independent valuations of
each community at least every two years, refer
to Note 3.1.
(e) Sensitivity analysis for recurring level 3 fair
(i)
value measurements
Investment properties
The impact of changes to the inputs that
affect the valuation of investment properties is
assessed below.
Rental income
Rent is contractually fixed to increase by the greater of
CPI or 3.5% annually and was increased on 1 July 2021.
The next rent increase is due on 1 July 2022.
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
$000’s
2021
2020
2021
2020
Rental expense rate
+2%
–2%
Rental capitalisation rate
(7,773)
(5,524)
(7,773)
(5,524)
7,773
5,524
7,773
5,524
+0.50%
–0.50%
(20,539)
(12,783)
(20,539)
(12,783)
24,602
14,929
24,602
14,929
Deferred management fee
per unit
+5%
–5%
Land prices
(undeveloped land)
+10%
–10%
Rent revenue
+3.5%
–3.5%
5,479
4,319
5,479
4,319
(5,479)
(4,319)
(5,479)
(4,319)
9,661
8,635
9,661
8,635
(9,661)
(8,635)
(9,661)
(8,635)
11,470
6,650
11,470
6,650
(11,470)
(6,650)
(11,470)
(6,650)
71
Lifestyle Communities Annual Report 2021
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.
$000’s
Current
Housing
Civils and Infrastructure
Non current
Housing
Civils and Infrastructure
Total
2021
2020
46,894
36,851
83,745
1,745
39,753
41,498
125,243
27,321
17,788
45,109
2,756
26,066
28,822
73,931
Inventory expense
(a)
Inventories recognised as an expense for the year
ended 30 June 2021 totalled $81.3 million for the
Group (2020: $75.2 million). The expense has been
included in the cost of sales line item.
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:
$000’s
Buildings
2021
2020
40 years
40 years
Plant and equipment
4 to 25 years
4 to 25 years
Computer equipment
2 to 3 years
2 to 3 years
Motor vehicles
4 to 12 years
4 to 12 years
The assets’ residual values, useful lives and
amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
NOTES TO THE FINANCIAL STATEMENTS
(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:
000’s
Year ended 30 June 2021
Balance at the beginning of the year
Additions
Disposals
Depreciation
Balance at the end of the year
At 30 June 2021 Cost
Accumulated depreciation
Net Carrying Amount
000’s
Year ended 30 June 2020
Balance at the beginning of the year
Additions
Disposals
Depreciation
Balance at the end of the year
At 30 June 2020 Cost
Accumulated depreciation
Net Carrying Amount
Buildings
Plant and
Equipment
Motor Vehicles
Computer
Equipment
3,651
919
-
(108)
4,462
5,001
(539)
4,462
3,352
3,668
(45)
(700)
6,275
8,412
(2,137)
6,275
1,390
698
-
(269)
1,819
2,648
(829)
1,819
719
242
-
(265)
696
1,472
(776)
696
Buildings
Plant and
Equipment
Motor Vehicles
Computer
Equipment
3,078
811
(144)
(94)
3,651
4,082
(431)
3,651
3,076
782
-
(506)
3,352
4,857
(1,505)
3,352
864
689
-
(163)
1,390
1,950
(560)
1,390
624
331
-
(236)
719
1,230
(511)
719
Total
9,112
5,527
(45)
(1,342)
13,252
17,533
(4,281)
13,252
Total
7,642
2,613
(144)
(999)
9,112
12,119
(3,007)
9,112
Capital Management
4. How we fund the business and manage risks
4.1
When managing capital, management’s objective is
to ensure the entity continues as a going concern as
well as to maintain optimal returns to shareholders and
benefits for other stakeholders. Management also aims
to maintain a capital structure that ensures the lowest
cost of capital available to the entity by assessing the
cost of equity (share issue), cost of debt (borrowings)
or a combination of both.
• those to be measured subsequently at fair value
(through profit and loss), and
• those to be measured at amortised cost.
The classification depends on the entity’s business
model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses
will be recorded in the profit or loss.
4.2 Financial Risk Management Objectives
(ii) Recognition and derecognition
and Policies
The Group’s principal financial instruments comprise
bank loans, cash, trade and other receivables and
trade payables.
(i) Classification
The consolidated entity classifies its financial
assets in the following measurement categories:
The regular way purchases and sales of financial
assets are recognised on trade date, being the date
on which the Group commits to purchase or sell
the asset. Financial assets are derecognised when
the rights to receive cash flows from the financial
assets have expired or have been transferred and
the Group has transferred substantially all the risks
and rewards of ownership.
72
NOTES TO THE FINANCIAL STATEMENTS
(iii) Measurement
At initial recognition, the Group measures a
financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit
or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial
assets. Transaction costs of financial assets carried
at FVPL are expensed in profit and loss.
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.
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. 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):
$000’s
Financial assets
2021
2020
Cash and cash equivalents
2,300
16,381
Financial liabilities
Secured loans—bank finance
190,000
145,000
Net exposure
(187,700)
(128,619)
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:
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2021
2020
2021
2020
$
Consolidated
+1% (100 basis points)
(1,237)
(1,050)
(1,237)
(1,050)
−1% (100 basis points)
1,237
1,050
1,237
1,050
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.
73
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
Market risk
At balance date, the Group has no financial
instruments exposed to material market risks other
than interest rate risk.
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.
Credit risk
There are no significant concentrations of credit risk
within the Group.
Credit risk arises from the financial assets for the
Group, which comprise cash and cash equivalents,
and trade and other receivables. The Group’s exposure
to credit risk arises from potential default of the
counterparty, with a maximum exposure equal to the
carrying amount of these instruments. Exposure at
balance date has been assessed as minimal as the
financial assets have been assessed as having a high
likelihood of being received.
Liquidity risk
The Group’s objective is to maintain a balance between
continuity of funding and flexibility through the use of a
bank facility. The Group ensures that there is sufficient
liquidity within the bank facility by maintaining internal
credit requirements that are more conservative than
the financier.
The Group’s debt as at balance date is outlined
at Note 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:
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.
$000’s
Cash and cash equivalents
2021
2,300
2020
16,381
4.4
Interest bearing loans and borrowings
$000’s
2021
2020
Secured loans—bank finance
190,000
145,000
(a) Secured loans bank finance maturity
The Company maintained its $275 million of senior
debt facilities under a common terms deed with The
Commonwealth Bank of Australia, National Australia
Bank and HSBC Bank Australia. The facilities comprise
a $165 million tranche with a maturity of March
2024 and a $110 million tranche with a maturity of
June 2025. There is also a $2 million facility for bank
guarantees used during developments held with The
Commonwealth Bank of Australia. As at reporting
date the Company has drawn $190 million of the $275
million facility. See note (d) 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.
$000’s
6 months or less1
1–2 years2
3–4 years3
2021
41,512
55,921
196,640
294,073
2020
31,086
45,682
149,762
226,530
(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.
(1) This amount is represented by the following financial liabilities:
• $1.7 million relates to customer deposits which typically convert to
settlement within six months or less (2020: $0.6 million).
• $11.9 million relates to trade and other payables, refer to Note 2.8 for
further detail (2020: $12.3 million).
• $26 million 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.
• $1.9 million relates to expected interest on the secured loan
(2) $50.2 million relates to amounts payable on three parcels of land for
contracts entered into prior to the reporting date (including stamp duty)
expected to settle within 1 - 2 years of the reporting date. $5.7 million
relates to expected interest on the secured loan.
(3) • $6.6 million relates to expected interest on the secured loan
• $190 million is the repayment of the existing loan balance
(d) Assets pledged as security
The $275 million 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
74
NOTES TO THE FINANCIAL STATEMENTS
• 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 (Brookfield), Tarneit
(Seasons) and Warragul.
Mortgage granted by Lifestyle Investments 2 Pty Ltd
over the properties at Shepparton, Hastings, Wollert
(Lyndarum), Geelong, Officer, Berwick Waters, Bittern,
Ocean Grove, Mount Duneed, Kaduna Park, Wollert
North, Deanside and St Leonards.
(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.
4.5 Contributed equity
$000’s
104,545,131 Ordinary shares
(30 June 2020: 104,545,131)
Ordinary Shares
177,934 Treasury shares
(30 June 2020: 196,063)
Total
2021
2020
64,523
(664)
64,523
(739)
4.6 Retained earnings and reserves
(a) Movements in retained earnings were as follows
$000’s
Opening balance
Profit for the year
Dividends paid
(b) Reserves
$000’s
Opening balance
Share based payments expense
Vesting of Employee shares
Closing balance
4.7 Dividends
(a) Dividends
$000’s
Dividends paid 5.5 cents per share
(2020: 6.0 cents per share) fully
franked
Dividends declared after balance
date and not recognised
Since balance date the directors have
approved a dividend of 5.0 cents per
share (2020: 2.5 cents per share) fully
franked at 30%
2021
225,401
91,111
(5,748)
310,764
2021
2,188
1,359
(75)
3,472
2020
188,854
42,818
(6,271)
225,401
2020
2,196
262
(270)
2,188
2021
5,750
2020
6,271
5,227
2,614
63,859
63,784
(b) Franking account balance
(i) Reconciliation of Ordinary shares
2021
2020
Number
$000
Number
$000
Opening balance
104,545,131
64,523
104,545,131
64,523
(ii) Reconciliation of Treasury shares
(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.
$000’s
Franking account balance
2021
25,001
2020
21,712
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%.
(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 FY21 community
management cash flows delivered a sufficient surplus
to declare and pay an interim fully franked dividend
of 3.0 cents per share ($3.1 million) and declare a
final fully franked dividend of 5.0 cents per share
($5.2 million).
75
Lifestyle Communities Annual Report 2021
The Group is not subject to externally imposed capital
requirements.
Total
5.2 Employee provisions
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.
Special consideration was given this year to the impact
of Covid-19 on the Group’s ability to declare a dividend.
Whilst there is ongoing uncertainty regarding the
Victorian property market and the impact of future
sales and settlement, the Group’s annuity income
stream from rent income and deferred management
fees, which are the primary contributor to the
dividend, remained robust. The Federal Government’s
JobKeeper subsidy was used to retain our team during
Victoria’s stage 4 lockdown and was explicitly excluded
from the Dividend calculation.
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.
NOTES TO THE FINANCIAL STATEMENTS
(iii) Retirement benefit obligations
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). The Equity Incentive Scheme is explained
in section 7 of the Remuneration Report and additional
information is contained in Note 5.3 below.
$000’s
Wages and salaries
Defined contribution superannuation
expense
Share based payments expense
Movement in employee provisions
$000’s
Current
Annual leave
Long service leave
Non current
Long service leave
2021
10,963
937
1,359
228
13,487
2020
9,814
770
262
215
11,061
2021
2020
871
404
190
699
374
163
5.3 Share based payments
(a) Recognised share based payment expenses
$000’s
Expenses arising pursuant to the EIS
2021
1,359
2020
262
(b) Equity Incentive Scheme, ‘EIS’
The Equity Incentive Scheme is explained in section
6.3 of the Remuneration Report.
76
NOTES TO THE FINANCIAL STATEMENTS
(c) Shares granted pursuant to the EIS
The following table outlines shares granted pursuant
to the EIS:
(Maximum potential)
Granted as
compensation
Value at
grant date ($)
149,000
864,200
Forfeited/
lapsed
No.
%
0
Final
entitlement
Value at grant
date (final
entitlement)
Vested
Balance at
30 June 2021
Vested &
No.
%
Exercised
exercisable Unvested
149,000
864,200 149,000
100
(32,973)
116,027
259,000
1,761,200
(259,000)
100
0
-
178,279
2,009,204
(11,545)
6
166,734
1,879,092
0
0
166,734
116,027 166,734
FY19 Options – granted
November 2019
FY20 Options – granted
November 2019
FY21 Options – granted
November 2020
2020
5.5 Auditors remuneration
$000’s
2021
2020
Amounts received or due and receivable for current
auditors:
An audit or review of the financial report of the entity
and any other entity in the consolidated group.
Other services in relation to the entity and any other
entity in the consolidated group – tax compliance,
general tax advice, GST advice and other agreed upon
procedures.
171
142
104
114
275
256
The auditor of Lifestyle Communities Limited is
PricewaterhouseCoopers who were appointed on the
18th November 2020.
6. How we structure the business
6.1 Related party disclosures
(a) Ultimate parent
Lifestyle Communities Limited is the ultimate
Australian parent entity.
$000’s
Opening balance
Issued during the year
Exercised during the year
Forfeited/lapsed during the year
Closing balance
2021
131
178
(14)
(12)
283
408
(18)
(259)
131
Of the 166,734 unvested options, 97,814 are planned
to vest in September 2021, 27,420 are planned to vest
on 30 June 2022, and 41,500 are planned to vest on
30 June 2022. All unvested options have ongoing
service, competency and behavioural requirements.
The weighted average exercise price of options is
nil. The weighted average share price at the date
of exercise for share options exercised during the
period was $10.91 and the expiry date for all options
outstanding at the end of the year is 10 years from the
date of grant.
5.4 Key Management Personnel Remuneration
Key management personnel remuneration included
within Employee expenses for the year is shown below:
$000’s
Short term Employee benefits
Post employment benefits
Share based payments
2021
2,447
168
391
3,006
2020
2,476
172
70
2,718
77
Lifestyle Communities Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS
(b)
Subsidiaries
The percentage of ownership interest held is equivalent to the percentage
voting rights for all subsidiaries.
Lifestyle Investments 1 Pty Ltd
Lifestyle Developments 1 Pty Ltd
Lifestyle Management 1 Pty Ltd
Brookfield Management Trust ( Trustee:
Brookfield Village Management Pty Ltd)
Australia
Australia
Australia
Australia
Brookfield Development Trust ( Trustee: Brookfield Village Development Pty Ltd)
Australia
Lifestyle Communities Investments
Cranbourne Pty Ltd
Cameron Street Developments Unit Trust
Lifestyle Investments 2 Pty Ltd
Lifestyle Developments 2 Pty Ltd
Lifestyle Management 2 Pty Ltd
Lifestyle Chelsea Heights Pty Ltd
Australia
Australia
Australia
Australia
Australia
2021
%
2020
%
2021
$
2020
$
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
50
8,751,551
8,751,551
-
-
-
-
-
2
2
2
-
-
-
-
-
-
2
2
2
-
(c) Loans from related parties
There are no loans from related parties.
(d) Transactions with related parties
There were no transactions with related parties in the
current or prior years.
6.2 Joint Operations
The Group has a 50% interest in the joint
arrangements at Chelsea Heights and Casey Fields
together with BGDU Pty Ltd. and Tradewynd Pty Ltd
respectively to develop and manage the communities.
The principal place of business of the joint operation is
in Victoria, Australia.
The agreements related to the joint arrangements
require unanimous consent from all parties for all
relevant activities. The two partners have direct
rights to the assets of the partnership and are jointly
and severally liable for the liabilities incurred by the
partnership. This entity is therefore classified as a
joint operation and the Group recognises its direct
right to the jointly held assets, liabilities, revenues
and expenses.
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
8,751,557
8,751,557
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.
78
NOTES TO THE FINANCIAL STATEMENTS
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.
6.4 Parent entity
Required disclosures relating to Lifestyle Communities
Limited as a parent entity:
Consolidated Statement of Financial Position
$000’s
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/(loss)
Profit for the year
Other comprehensive income
Total comprehensive income
2021
2020
226,618
228,642
(29,347)
157,772
62,732
3,472
4,667
70,871
185,509
187,875
(5,314)
111,404
62,658
2,188
11,625
76,471
7,474
-
7,474
12,225
(539)
11,686
7.
Information not recognised in the
financial statements
Lessor Commitments
7.1
Operating lease commitments receivable
The Group has entered into commercial property
leases with its residents in relation to its investment
property portfolio, consisting of the Group’s land.
The residential site leases provide for future lease
commitments receivable as disclosed below.
These non-cancellable leases have remaining terms
of between 81 and 90 years and are transferable.
All leases include a clause to enable upward revision
of the rental charge on an annual basis according to
prevailing market conditions.
79
Lifestyle Communities Annual Report 2021
Future minimum rentals receivable under
non-cancellable operating leases as at balance date
were as follows:
$000’s
No later than 1 year
Between 1 year and 5 years
2021
30,059
120,237
2020
26,620
103,271
Greater than 5 years
2,406,086
2,095,038
Total minimum lease payments
2,556,382
2,224,929
Minimum lease payments were determined by
measuring the current year’s rentals and measuring this
over the standard 90 year lease agreement.
7.2 Commitments
Commitments for future development costs not
recognised in the financial statements at balance date
are $310 million. These commitments include future
construction costs committed for Kaduna Park, Mount
Duneed, Deanside, Wollert, St Leonards and Meridian.
The Group also has a commitment of $26.4 million
for the acquisition of two parcels of land subject to
conditional contracts.
7.3 Contingencies
There are no contingencies at reporting date.
7.4 Events Occurring After the Reporting Date
In July 2021, the Company completed planned
settlements on contracted land parcels at Wollert
and Clyde. These settlements were funded out of
existing debt facilities and increased the drawn debt to
$227 million.
On the 12th of August, the Company executed a
contract to acquire an additional site at Phillip Island.
The land is expected to settle in September 2021 with
construction anticipated to commence in mid-2022.
As part of its continued focus on capital management,
the Company has agreed terms with its lending group,
The Commonwealth Bank of Australia, National
Australia Bank and HSBC Bank Australia, to extend
the headroom in its debt facility by $100 million. The
combined facility limit will be $375 million. All other
material terms and covenants remain unchanged. The
additional headroom will be used to fund the continued
acquisition and development of new sites.
The Group had no other matters or circumstances
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.
Lifestyle Seasons
The Director’s Declaration
THE DIRECTOR’S DECLARATION
The directors of the Company declare that:
1. The consolidated financial statements and notes for the year ended 30 June 2021 are in
accordance with the Corporations Act 2001 and:
a. Comply with Accounting Standards, which, as stated in basis of preparation Note 1.1 to
the consolidated financial statements, constitutes explicit and unreserved compliance
with International Financial Reporting Standards (IFRS); and
b. Give a true and fair view of the financial position and performance of the
consolidated Group;
2. The Chief Executive Officer and Chief Finance Officer have given the declarations
required by Section 295A that:
a. The financial records of the Company for the financial year have been properly
maintained in accordance with section 286 of the Corporations Act 2001;
b. The consolidated financial statements and notes for the financial year comply with the
Accounting Standards; and
c. The consolidated financial statements and notes for the financial year give a true
and fair view.
3.
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.
The Company has entered into a deed of cross guarantee under which the Company and its
subsidiaries guarantee the debts of each other, refer to Note 6.3.
At the date of this declaration, there are reasonable grounds to believe that the companies
which are party to this deed of cross guarantee will be able to meet any obligations or
liabilities to which they are, or may become subject to, by virtue of the deed.
Signed in accordance with a resolution of the Board of Directors.
Philippa Kelly
Chair
James Kelly
Managing Director
Melbourne, 18 August 2021
82
THE DIRECTOR’S DECLARATION
Independent auditor’s report
To the members of Lifestyle Communities Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Lifestyle Communities Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2021
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the financial statements, which include significant accounting policies and other
explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
83
Lifestyle Communities Annual Report 2021
THE DIRECTOR’S DECLARATION
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
• Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
• Amongst other relevant topics,
we communicated the
following key audit matter to
the Audit Committee:
(cid:16)(cid:16) Fair valuation of investment
properties
•
This is further described in the
Key audit matters section of
our report.
•
For the purpose of our audit
we used overall Group
materiality of $2.6 million,
which represents
approximately 5% of the
Group’s profit before tax,
adjusted for the impact of
items as described below.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the
financial report as a whole.
• We adjusted profit before tax
for the impact of the fair value
gain caused by the changes in
market based assumptions
used in the valuation of the
Group’s investment
properties, because of the
volatility in results arising
from such changes. We chose
Group profit before tax,
84
THE DIRECTOR’S DECLARATION
adjusted for the above items,
because in our view, it is most
representative of the Group’s
performance from ongoing
operating activities.
• We utilised a 5% threshold
based on our professional
judgement, noting it is within
the range of commonly
acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
We developed an understanding of the relevant internal
controls associated with the Group’s approach to fair
valuation of investment properties.
We performed the following procedures, amongst
others:
● Evaluated the Group’s compliance with its policy
on performing external valuations of properties at
least once in every two years and rotation of
valuation firms.
● Agreed the fair values of properties to the external
valuations and assessed the competency,
capability and objectivity of the relevant valuers.
● Performed tests to assess appropriateness of
certain input data used in the valuations. These
tests included, amongst others:
-
-
For a sample of contracts with residents
across the portfolio, comparing the rental
income used in the valuation to
underlying contracts.
For a sample, comparing data for
operating and capital expenditure and
resident data used in the valuations to
Fair valuation of investment properties
(Refer to note 3.1) [$636.5m]
The fair value of investment properties comprises
the discounted income streams consisting of rental
income and deferred management fees associated
with completed home units and the fair value of
undeveloped land.
The fair valuation of investment property is
inherently subjective and impacted by, among other
factors, prevailing market conditions, the individual
nature and condition of each property, its location
and the expected future income for each property.
The following key assumptions are used in the
valuation of investment properties, amongst others:
capitalisation rate
●
● discount rate
●
● deferred management fee values per unit.
operating and capital expenditure
The Group’s valuation policy requires all properties
to be valued by external valuation experts at least
once every two years. In the period between external
valuations, the Directors perform internal
valuations.
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Lifestyle Communities Annual Report 2021
THE DIRECTOR’S DECLARATION
Key audit matter
How our audit addressed the key audit matter
This was a key audit matter because of the:
●
●
financial significance of the investment
property balance in the Consolidated
Statement of Financial Position and of the
impact of changes in the fair value of
investment properties on the Group’s profit
or loss.
subjectivity and sensitivity of valuations to
key input assumptions, specifically
capitalisation and discount rates and
deferred management fee values per unit.
This is further exacerbated by the impacts
of COVID-19, that resulted in the external
valuations obtained by the Group noting
the high level of ongoing uncertainty and
the limited market-based information
available at the time of issuing their reports
(refer Note 3.1).
observable historic data maintained by
the Group.
● Conducted enquiries with the external
valuation experts to develop an understanding
of the approach and methodology applied to
the valuations and the risk factors considered
applicable to the Group, including the
disclosures in the external valuations
regarding uncertainties caused by COVID-19
and the valuers’ response thereto. We were
assisted by PwC real estate valuation experts
for a sample of these enquiries.
● Assessed the appropriateness of key
assumptions used in the valuations by
reference to available market and other
evidence, as relevant.
● Evaluated the reasonableness of related
disclosures made in Note 3.1 in light of the
requirements of Australian Accounting
Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2021, 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 on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
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.
86
THE DIRECTOR’S DECLARATION
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 the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 41 to 50 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Lifestyle Communities Limited for the year ended 30 June
2021 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.
PricewaterhouseCoopers
Andrew Cronin
Partner
Melbourne
18 August 2021
87
Lifestyle Communities Annual Report 2021
ASX Additional Information
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
1 August 2021.
(a) Distribution of equity securities
(i) Ordinary share capital
104,545,131 fully paid ordinary shares are held
by 3,283 individual shareholders
(b) Substantial shareholders
The number of substantial shareholders and
their associates are set out below:
Fully paid ordinary
shareholders
Brahman Capital
Management Pty Ltd
Number
Current at (last
notification date)
%
9,363,012
8.96% 9 July 2021
James Kelly
9,077,001
8.68% 19 August 2020
(d) Twenty largest holders of quoted
equity securities
1
2
3
4
5
JP Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Brahman Pure Alpha Pte Ltd
Citicorp Nominees Pty Limited
6 Masonkelly Pty Ltd
7
8
9
BNP Paribas Noms Pty Ltd
Netwealth Investments Limited
Daken Investments Pty Ltd
10 Kelly Superannuation Fund Pty Ltd
11 Australian Foundation Investment
Australian Super
8,889,379
8.50% 10 March 2021
Company Limited
Voting rights
All ordinary shares carry one vote per share without
restriction.
(c) The number of shareholders by range of units
and unmarketable parcel holders
12 Armada Investments Pty Ltd
13 BNP Paribas Nominees Pty Ltd
14
Tracey Ryan Investments Pty Ltd
15 Sandhurst Trustees Ltd
Ordinary fully
paid shares
19,101,303
11,283,622
10,859,305
9,265,125
6,438,603
6,266,265
4,125,697
3,525,931
3,149,539
2,116,801
2,000,000
1,608,229
1,509,713
1,333,900
1,191,452
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 and over
Total
Unmarketable
Minimum $500.00 parcel at
$17 per share
Total
holders
% of issued
capital
Units
1,751
1,022
223
241
46
628,508
2,545,400
1,654,975
7,030,287
92,685,961
3,283
104,545,131
221
1,034
0.6%
2.4%
1.6%
6.7%
88.7%
100.0%
0.0%
16 Australian Shareholder Nominees Pty Ltd
17 One Managed Investment Funds Ltd
18 BNP Paribas Nominees Pty Ltd Hub24 Custodial
660,644
Serv Ltd
19 Maxima Ethan Pty Ltd
20 BS Carter Investments Pty Ltd
517,069
487,362
Securities exchange
The Company is listed on the Australian
Securities Exchange.
88
ASX ADDITIONAL INFORMATION
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
Philippa Kelly – Non Executive Chair
James Kelly – Managing Director
The Honourable Nicola Roxon – Non Executive Director
Georgina Williams – Non Executive Director
David Blight – Non Executive Director
Mark Blackburn – Non Executive Director
Darren Rowland
Melissa Norris
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
PricewaterhouseCoopers
2 Riverside Quay Southbank VIC 3006
Australia
89
Lifestyle Communities Annual Report 2021
Welcome to Lifestyle
Keeping our gardens neat and tidy at
Lifestyle Mount Duneed
Level 1/9 – 17 Raglan Street
South Melbourne VIC 3205
1300 50-55-60
lifestylecommunities.com.au