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2023 ReportPeers and competitors of Lifestyle Communities Limited:
Altus GroupAnnual Report
for the year ended 30 June 2022
Lifestyle Communities Ltd
ABN: 11 078 675 153
Our story
and purpose
We’re champions for facilitating a
bigger life for our homeowners. A
cohort of like-minded retired, semi-
retired and working downsizers who
belong to a generation that’s seen
more change than any before; and
possibly any to come.
We build communities because our homeowners
have worked hard for what they have, and they
deserve beautifully designed and low maintenance
homes in concert with best-in-class amenities. We
create communities because our homeowners
haven’t given up on returning to a time when they
built strong communities around their own homes.
We nurture the homeowners within our communities
because they seek a space that’s truly their own, that
strikes the perfect balance between connection and
privacy, independence, and activity.
Like us, our homeowners rail against an earnestly
bland existence or disappearing into a sea of
sameness; the one-size-fits all approach that places
limitations on what’s possible. Which is why we
actively listen to them; to their hopes for now and
their dreams for the future, so the next time they ask,
“what’s next?” we’ve already been busy reimagining.
But, most of all, we champion bigger, more enhanced
lives for our homeowners because we know that
reducing their property footprint takes a giant leap
of faith. This is why we believe it’s a privilege to walk
alongside them as they elevate the next phase of
their lives.
Like us, we believe they’re just getting started.
After all, they’re the generation of change. And
they’re not done yet.
Cover image: Artist impression of Clubhouse at Lifestyle Woodlea
This page: Artist impression of Clubhouse at Lifestyle Meridian
Sc an the QR c ode to
vi e w our ‘ Li fe sty le Story ’
Lifestyle Wollert Clubhouse
Contents
Chair and Managing Director’s Review . . . . . . . . . . . . . . . . 1
Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Remuneration report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Auditor’s Independence Declaration . . . . . . . . . . . . . . . . 69
Consolidated Statement of Profit or Loss and Other
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Consolidated Statement of Financial Position . . . . . . . . 74
Consolidated Statement of Changes in Equity. . . . . . . . 75
Consolidated Statement of Cash Flows . . . . . . . . . . . . . 76
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . 77
The Director’s Declaration . . . . . . . . . . . . . . . . . . . . . . . . . 96
ASX Additional Information . . . . . . . . . . . . . . . . . . . . . . . 102
CHAIR AND MANAGING DIRECTOR’S REVIEW
CHAIR AND MANAGING DIRECTOR’S REVIEW
Chair and Managing Director’s Review
For the 2022 Financial Year
Dear fellow shareholders,
We are pleased to present the 2022 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 high-quality affordable housing for those
looking to downsize in Victoria.
FY22 was a unique period in the Company’s history.
Melbourne-wide lockdowns in the early part of the
year impacted home inspections, sales appointments,
and other face-to-face activities. Through this time,
we maintained our marketing presence and adjusted
our sales process to adapt to the virtual environment.
We continued to educate the ageing baby boomer
generation on the benefits of downsizing and the
improved standard of living they can enjoy as result of
the equity they release in the process. Increasing desire
to ‘seize the moment’ as restrictions eased resulted in
an increase in demand through the Christmas/New
Year period which continued through the remainder of
the financial year. We were delighted with the team’s
efforts to deliver 401 new home settlements in this
environment.
We now have over 4,500 homeowners living in our
communities and it was pleasing to get “back to
business” in the second half of the year. The events and
experiences that have been part of our DNA since the
beginning returned, as did our sporting carnivals, arts,
and other social groups. These efforts have translated
into increased referral rates and price growth on
resales of our established homes.
Our organisational culture was ever-present to assist
our team’s health and wellbeing, ensuring they were
supported and empowered. We onboarded several
new team members during the year as we prepare to
launch 7 new communities for development and sale
during FY23. Our recruitment strategy places a high
importance on recruiting to our values and culture to
ensure this is protected as we grow. In our recruitment
we are seeing a strong desire from candidates wanting
to work for a business with a strong culture and
purpose and this has assisted us in continuing to attract
high calibre candidates.
During the year we were excited to welcome first
homeowners to our latest community in Clyde, a
275-home community in Melbourne’s fast-growing
Southeast corridor. Construction has commenced
on our first integrated micro grid with 450kw of solar
panels and a 150kw centralised battery, all managed by
a fibre-optic communication system to optimise energy
management and costs for our homeowners. We plan
to embrace this technology at other new communities
commencing construction in the coming year. We
also opened our latest clubhouse design at Lifestyle
St Leonards, and we were humbled to again be
awarded the Urban Development Institute of Australia’s
Victorian award for excellence in special purpose living
for our community at Mount Dunned. This is the sixth
year in a row that we have received this coveted award.
We finished the year with 3,193 settled homes under
management across 19 operating communities.
In addition to the Phillip Island site announced in
August 2021, new land acquisitions at Merrifield,
Ocean Grove, and Leopold (Bellarine) during the year
increased our total portfolio of completed homes,
homes under development, and homes yet to be
developed to 5,391, which gives us a strong pipeline
of undeveloped land to underpin the growth of the
business for years to come. We continue to assess new
land acquisition opportunities that meet our investment
criteria, and our land acquisition plan remains focused
in Victoria where we continue to build on our brand
and referral network.
Underlying profit after tax rose 69% to $61.4 million
for the 2022 financial year with market-based
valuation changes lifting statutory profit after tax to
$89.9 million. New home settlements for FY22 were
401 (FY21: 255) and resale settlements attracting a
deferred management fee (DMF) were 143 (FY21:
105). Annuity income from site rentals and deferred
management fees increased by 25% to $40.6 million
(FY21: $32.4 million). The increase in cash flow from
community operations generated by the higher
number of homes under management has enabled the
Company to declare a final dividend of 6.0 cents per
share, bringing the full year dividend to 10.5 cents per
share, an increase of 31.3% from FY21.
The land lease sector underwent several corporate
transactions in FY22 which saw the continued
institutionalisation of the land lease asset class. This
contributed to the continued compression of rental
capitalisation rates as demand for assets remained
strong. We welcomed some new entrants into the land
lease market in Victoria and we are looking forward
to working with these new players as we collectively
continue to educate the sizeable addressable market
on the advantages of the land lease model and the
benefits of downsizing. A substantial proportion of
Victoria’s established housing stock is owned by
people over 50 and there is a huge opportunity for this
generation to free up equity by downsizing and at the
same time recycle their existing housing stock for first
home buyers.
It is these two macro themes that have underpinned
the Lifestyle Communities business model since it was
founded in 2003. On the one hand there is Australia’s
ageing population, a large proportion of which do not
have sufficient superannuation to adequately fund
their retirement. On the other hand, there are first
home buyers who are always in the market buying the
homes that our customers are selling, supported by
Government incentives and stimulus. The dynamic of
these two macro themes working in concert as well
as our average selling price at circa 75% to 80% of
the median house price for the relevant catchment,
underpins the resilience of the Lifestyle Communities
model through various property market cycles.
In FY22 we invested $1.6 million upgrading our IT
systems. This digital transformation included building a
new website, replacing our finance systems with SAP,
and introducing Salesforce to give us an end-to-end
view of our customers. A journey which can often be
more than 10 years. We recognise the important role
that high quality systems play in helping maintain our
personal touch with our customers as we continue
to grow and scale. Our newly launched homeowner
portal will provide our homeowners with a simple to
use platform to stay in touch, engage with content,
access benefits, book their facilities, and communicate
directly with us in real time from any device.
In March 2022 we were pleased to welcome
Claire Hatton to the Board. Claire has a mix of
experience in both public and private markets and a
background in technology. We are looking forward
to Claire’s contribution as she continues to evolve her
understanding of the Lifestyle Communities business
and our customer promise.
The Lifestyle Communities foundation continued
its commitment to support cancer-based charities
and match dollar-for-dollar any funds raised by
homeowners. During the year we donated over
$138,000. This brings the total donations by Lifestyle
Communities and our homeowners since the
foundation started to over $1 million. The foundation
is funded through allocating $50 for every home that
we have under management at the start of each year.
Another great attendance at the Mother’s Day classic
walk saw the Lifestyle Communities team achieve an
award for being the highest fundraiser. A very proud
achievement for all involved.
Our team has shown dedication and ingenuity
throughout the past year to achieve the pleasing
results outlined in this report. Although supply chain
disruptions, inflationary pressures, and rising interest
rates will present further challenges in FY23, we are
well placed to benefit from the lessons learned in
FY22 and the solid platform that we have established.
On behalf of the Board, we would like to thank all our
homeowners, our talented team, and our shareholders
for their great support during the 2022 financial year.
Philippa Kelly
Chair
17 August 2022
James Kelly
Managing Director
17 August 2022
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Lifestyle Communities Annual Report 2022 CHAIR AND MANAGING DIRECTOR’S REVIEW
Lifestyle Deanside display home
CHAIR AND MANAGING DIRECTOR’S REVIEW
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Lifestyle Communities Annual Report 2022
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DIRECTORS’ REPORT
DIRECTORS’ REPORT
Directors’ report
Our business
Our business has thrived by providing affordable,
contemporary housing for our homeowners in beautiful
community settings. To maintain this offering we
consistently monitor all settings, including local house
prices, national economic indicators, demographics,
design trends, environmental advances and customer
expectations.
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 2022 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
26
26 Communities – 19 in
operation and 7 in planning
or development
3,193 affordable homes
under management
Australian-based Board
50% female, 50% male
4,500+ homeowners live in
our communities
120 Employees –
68% female, 32% male
5,300+ homes in our
portfolio + pipeline
Our Values
Our
customer
is our only
truth
Play as
a team
Be
constantly
curious
Deliver
Delight
Everyday
Do it from
the heart
Own it,
sort it
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Our Board and Governance
Lifestyle Communities’ governance framework plays
a critical role in helping the business deliver on its
strategy. It provides the structure through which
business objectives are set, performance is monitored,
and risks are managed. It includes a framework for
decision making across the business and provides
guidance on the standards of behaviour expected of
Lifestyle Communities’ people.
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.
Reporting suite
Lifestyle Communities’ reporting suite for FY22 includes the following documents:
FY22 Annual Report
A review of Lifestyle Communities’ financial and operational performance for FY22,
the Group’s remuneration report and its financial statements.
FY22 Results Presentation
An overview of Lifestyle Communities’ operational and financial performance for the
financial year.
Corporate Governance Statement
An overview of Lifestyle Communities’ governance framework and practices.
Modern Slavery Statement
An overview of Lifestyle Communities’ approach to Modern Slavery risks in its
supply chain.
Copies of all of the above reports are available for download at:
lifestylecommunities.com.au
Philippa Kelly (Chair)
Non Executive Director
(LLB, F Fin, FAICD)
James Kelly
Managing Director
(BBldg)
Philippa was appointed to the Board of Lifestyle
Communities Limited as a Non Executive Director on
18 September 2013.
James was appointed Managing Director in September
2007 and is one of the founders of Lifestyle
Communities Limited.
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
governance and risk management, property,
and finance.
Philippa is currently an independent director
of AustralianSuper and Chair of its Investment
Committee. She is also a Non-executive Director of
oOh!media (ASX:OML) and Hub Australia. Philippa is
not related to James Kelly, Managing Director.
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 the Chair of the Blue Sky
Foundation, a foundation he set up to research and
focus on youth mental health.
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Directors have been in office since the start of the financial year to the date
of this report unless otherwise stated.
Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Honourable Nicola Roxon
David Blight
Non Executive Director
(BA/LLB (Hons), GAICD)
Non Executive Director
(BAppSc)
Mark Blackburn
Non Executive Director
(Dip of Bus (Acc) GAICD)
Claire Hatton
Non Executive Director
(BSc (BA), MBA, 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 started her professional life as an industrial
lawyer and has more than 20 years’ experience
in law and the public sector, with deep industry
knowledge of the health, government and professional
services sector.
Prior to her non-executive director career, she spent
15 years in federal politics, including serving as Federal
Attorney General and Federal Minister for Health and
Ageing in the Rudd & Gillard Governments.
Ms Roxon has been a non-executive director since
2014, serving on boards of not-for-profits, unlisted and
ASX listed companies. Nicola’s current roles are as
Chair of HESTA Superannuation Fund and VicHealth,
and as 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 the Sir
Zelman Cowen Centre at Victoria University.
David Blight was appointed to the Board of Lifestyle
Communities Limited as a Non-Executive Director on
15 June 2018. He is also Chair of the Remuneration and
Nomination Committee.
David has 39 years of experience in property
investment, development and fund management
in Australia and globally. He is currently the Chief
Investment Officer of ARA Private Funds, the private
equity real estate business of the ESR Group.
Prior to this he was the CEO and co- founder of ARA
Australia, the Australian business of Singapore based
ARA Asset Management, prior to it being acquired by
the ESR Group in January 2022.
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.
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.
Claire Hatton was appointed to the Board of Lifestyle
Communities Limited as a Non-Executive Director on
1st May 2022.
Claire has 20 years of experience working in digital
business and 25 years of senior international business
experience in travel and technology industries across
Australia, Asia, and the U.K.
Most recently, as an executive, Claire spent seven
years on the Google Australia and New Zealand
commercial leadership team.
Claire is a Non-Executive Director of Australian Pacific
Travel Group, and a Non-Executive Director of ASX-
listed company Tyro Payments Ltd (ASX: TYR). She
is also the Co-Founder and Director of Full Potential
Labs, a leadership development company working with
global technology firms.
Directors have been in office since the start of the financial year to the date
of this report unless otherwise stated.
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 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Company Secretaries
Darren Rowland
(B Bus (Acc), CA, GAICD)
Anita Addorisio
(MPA, FCPA, FGIA)
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 and professional services in Brisbane.
Melissa Norris
Resigned December 2021.
Director’s interests
Director
James Kelly
Philippa Kelly
The Honourable Nicola Roxon
David Blight
Mark Blackburn
Claire Hatton (appointed 1 May 2022)
Fully paid
ordinary shares
7,077,001
75,000
7,000
11,000
8,000
760
There are no outstanding options over ordinary shares issued to Directors.
Non-Executive Directors’ Share Holding Policy
Lifestyle Communities introduced the Minimum Non-
Executive Director Shareholding Policy in FY20 which
requires all Non-Executive Directors to hold a minimum
shareholding in Lifestyle Communities equivalent to
100% of their annual base fee.
Anita joined the Lifestyle Communities team as
Company Secretary in December 2021. She is an
experienced finance professional with 20 years’
experience in senior finance roles within public and
private entities across IT technology, mining, industrial
and public practice sectors, including 7+ years ASX
listed company secretary experience.
Anita specialises in corporate governance, secretarial
support and statutory financial reporting. Her expertise
also extends to IPO’s, capital raisings, acquisitions,
takeovers and restructures.
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.
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 Ltd 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:
The Board meets as often as necessary to
discharge its responsibilities. This requires
Board members to attend Board meetings
each year, the Annual General Meeting,
Committee meetings and unscheduled
meetings as required.
Board meetings are typically held in
our South Melbourne office but also
include scheduled visits to projects under
development and established communities.
The Board also regularly meets with the
Executive Leadership team including
functional deep dive presentations and bi-
annual strategy sessions.
In addition to these meetings, Directors also
attend regular community visits outside of
the scheduled Board program. This includes
community events, town halls, and charity
functions. These visits enable Directors to
maintain the required deep understanding of
the activities and operations of the Company.
These events present further opportunities
for engagement with our homeowners
and our team.
Security Holders
Board of Directors (including ESG and Risk)
Audit Committee
Remuneration and
Nomination
Committee
Independent
Assurance
(external audit, legal
and other professional
advice)
Board reserved powers and delegation of authority
Managing Director
Leadership Team
Our Team
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Key Board activities during FY22
Key matters considered by the Board during FY22 are outlined below:
Chair’s matters
Board composition, succession planning,
performance and culture
Strategic matters
Portfolio and strategy
People, culture, social value and other
significant items
Capital allocation and funding
Monitoring and assurance matters
Includes matters and/or documents
required by the Group’s constitutional
documents, statute or by other external
regulation
Committee succession;
Board composition, evaluation and succession;
Board evaluation;
Director training and development;
Corporate governance updates;
Employee indemnification policy; and
Managing Director’s performance review.
Approving land acquisitions and commencement of construction at new
developments;
Approving t he strategic roadmap, 5-year plan and core business settings;
Risk Management Framework and risk appetite;
Quarterly reviews of each development in progress;
Climate change – external landscape and risk exposure;
Capital management framework and alternatives;
COVID-19 updates, including safety measures, wellbeing steps, workforce
planning and community support;
Economic and geopolitical landscape;
Innovation and technology update; and
Cyber resilience and risk review.
Culture and capability, including capability deep dives;
Succession planning;
Employee share scheme;
Employee Engagement Survey results, including actions that will be taken
based on the findings;
Inclusion and diversity update;
Payroll review;
Supplier payment terms; and
Gender pay gap review and reporting.
Dividend policy and dividend recommendations;
Capital prioritisation and portfolio development options;
Capital execution watch list;
Balance sheet and liquidity management;
Finance and business performance reports;
Annual group and individual project budgets;
5-year capital requirements; and
Funding updates and cash flow reporting.
Investor relations reports;
MD reports, including updates on safety and sustainability, financial and
operational performance, external affairs, markets, people and projects
Risk review session;
Non-financial risk management;
Approval of the MD’s remuneration;
Review and approval of half-year and full-year financial results;
Review and approval of the Annual Reporting suite;
Physical site visits;
Regular development updates; and
Director evaluations.
Board Committees
The Board has established two standing Committees, each operating under a separate Charter which sets out
their responsibilities. Copies of the charters are available on our website.
Board of Directors
Audit Committee
Areas of focus during FY22 included
Responsibilities
To assist the Board in fulfilling its
corporate governance and oversight
responsibilities relating to the integrity
of Lifestyle Communities’ financial
reporting and external audit functions.
Remuneration and Nomination
Committee
Responsibilities
To assist the Board in fulfilling
its responsibilities relating to the
composition and performance of
the Board, Board appointments and
succession planning.
To assist the Board in fulfilling its
responsibilities in relation to the
remuneration of the Chair and other
Non-executive Directors, performance
and remuneration of, and incentives for,
the Managing Director and Executive
Leadership Team, remuneration
strategies, practices and disclosures,
and management programs to
optimise the contributions of Lifestyle
Communities’ people and to support
and further corporate objectives.
Ensuring the integrity and reliability of financial reports and financial statements;
Ensuring that adequacy of the internal control framework of the Company and
that appropriate internal controls are implemented by management, including the
appropriateness of accounting judgments or choices;
Considering and reviewing the scope of work, reports and activities of the
external auditor, including the recommendations for the appointment of the
external auditor and the fees payable to the external auditor for audit and non-
audit work;
Overseeing and appraising the quality and effectiveness of the external audit
function, including the performance and independence of the external auditor;
Considering and reviewing the scope of work, reports and activities of
independent investment property valuers;
Complying with applicable legal and regulatory requirements;
Considering the requirement for any internal audit activities;
Reviewing the annual Corporate Insurance program and give consideration to the
level of cover required; and
Providing oversight and governance during the replacement of the company’s
finance system during the year.
The human resources and remuneration strategies, policies and practices
of the Group;
The remuneration framework for all employees of the Group including in
particular, benefits and recognition;
The contract terms, incentive arrangements, retirement and termination
entitlements for all Executive Managers;
Approval and governance of the Group’s equity incentive scheme;
Review and oversight of performance management and learning and development
plans under our bespoke ROADMAP framework;
The appointment of remuneration consultants;
The criteria for Board membership and identify specific individuals for nomination;
The processes for the review of the performance of individual Directors and the
Board as a whole;
The appointment and re-election of Directors;
Plans to manage the succession of the Managing Director and other
Executive Managers;
Wage and award compliance review;
Shareholder engagement;
Workforce planing, including gender diversity targets; and
Workplace Gender Equality Agency (WGEA) reporting.
See Remuneration Report on pages 50 to 68 for further information.
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
A spot of fishing at Lifestyle Ocean Grove
Meetings of Directors
The number of meetings of Directors (including meetings of committees of the Board)
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
14
14
14
14
14
3
3
14
14
14
14
14
3
3
4
–
–
2
4
1
1
4
–
–
2
4
1
1
7
–
7
7
–
–
–
7
–
7
7
–
–
–
Philippa Kelly
James Kelly
The Honourable Nicola Roxon
David Blight
Mark Blackburn
Claire Hatton*
Georgina Williams **
* Claire Hatton was appointed on 1 May 2022
** Georgina Williams resigned on 31 August 2021
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
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.
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 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 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
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E
P
X
E
People
D
N
S A
L
IL
K
S
Leadership
Finance
and Capital
Management
Mergers and
Acquisition
Technology
including Digital
Legal and
Compliance
Customer
Engagement
Sales and Consumer
Marketing
25%
50%
75%
100%
Risk
Management
Strategy
Property
Development
Property
Investment and
Management
Average tenure is 5.2 years
Workplace Health
and Safety
Government Affairs
and Public Policy
Sustainability and
Environment
Corporate
Governance
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The Company’s Key
Opportunities and Risks
Lifestyle Communities has 10 key enterprise risks and opportunities. These are reviewed
and stress tested on a quarterly basis. Each one has a cascade of operational, market
based, and financial risks and opportunities which are consolidated into these key
themes to allow for a portfolio view to be placed across the business.
Why it’s important
Commentary
Our Homeowners
It is important our homeowners have a
high level of satisfaction and safety, and
our communities are well managed.
Well managed communities provide a safe and connected living environment
for our 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.
We maintain a transparent marketing, sales, and contract process, undertake
careful selection of our community management teams, and maintaining our
community facilities, common areas, and gardens to a high standard. We have
a governance process set up at every community to receive regular feedback
from our homeowners.
Our Team’s Health, Safety and Wellbeing
If we expect our team to deliver the
highest levels of customer service and
experience it is crucial that we retain,
reward, and invest in our team and provide
them with a workplace that is happy,
healthy, and safe.
We regularly engage with our team and provide multiple forums for them
to share their feedback including employee engagement surveys and pulse
surveys on specific topics.
Our salaries and benefits are regularly benchmarked to ensure our team are
paid market rates.
We are growing our core capabilities through active talent management and
targeted professional employee development programs. We continue to invest
in our core systems and design processes that serve the business as we grow
without over-burdening the team with bureaucracy.
Our Corporate Culture
Our unique culture is critical to our
success. We must maintain and nurture
our culture as we grow.
Site Selection
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 for measuring the performance of our team.
We are a long-term business and our team are empowered and encouraged to
make decisions and act in the best interests of Lifestyle Communities and our
homeowners for the long term.
We select the best sites located close to
infrastructure and other public amenities.
We are patient in waiting for sites that
meet our investment criteria.
We maintain a comprehensive land pipeline. Our land acquisition strategy
incorporates extensive due diligence on potential new sites which incorporates
population demographics, local amenities, public transport and environmental
factors. We rely on the significant experience we have gained from acquiring
26 sites and developing most of these during the past 19 years.
Sales and Settlements
As an affordable housing provider, our
financial model relies on 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
the timing of settlements of new homes
(revenue is only recorded when a sale of a
home is settled).
Our approach is to price our homes at an average selling price less than 80%
of the median house price for the catchment and this helps us mitigate risk
during property cycles. This pricing strategy is a critical determiner in the site
selection process and the acquisition case.
Our customer centric focus helps us generate strong referral rates from
existing homeowners and this helps drive the speed of sales and settlements.
Why it’s important
Commentary
Community Development
Our homeowners are trusting us to build
them an amazing community and meet
the commitments we make to them
during the sales process
Financing and Capital Management
Our capital is precious and scarce.
We maintain a disciplined approach to
capital management and use a mix debt
and our existing equity pool to fund our
growth strategy.
Effective management of the construction program and multiple stakeholders
is important to ensure our customer promises are kept; high quality product is
delivered; cash flow is managed efficiently, and appropriate financial returns
are achieved. We manage our projects using a robust governance framework,
working with a panel of trusted suppliers, and taking a stage-by-stage approach
to construction.
We maintain our balance sheet settings with a margin of safety over and above
the requirements in our funding documents. Our goal is to maintain debt
facilities that have sufficient facility size, headroom and tenure to meet our
committed development plans. We closely monitor our cash flow forecasts
and tightly manage the commencement and rate of development of new
communities to ensure we have sufficient funds to meet our commitments as
and when they fall due.
Regulatory Compliance and Governance
It’s important to us to do the right thing
and have transparent and productive
relationships in the broader communities
where we operate. We pro-actively
engage with regulators and other
stakeholders to ensure our operating
and financial model is sustainable for
the long term.
We seek to avoid reputational and compliance incidents by implementing a
strong operating and control environment and seeking professional advice in
relation to the management of our 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.
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, Data Governance, and Business Continuity
It’s important we properly plan for and
appropriately respond to events which
might disrupt our service to homeowners
or our business more broadly.
We recognises the increasing risk of cyber-attacks, as more and more systems
and processes are moved online and into the cloud, and the impact they
can have on our operations and reputation. During the year, we undertook
an independent cyber risk review, penetration testing of our systems, and
a business impact assessment. We also conducted independent reviews of
our data management practices, and privacy policy. We continued to provide
mandatory training for all Employees and undertook a series of phishing
simulations to educate our team on the important role they play in helping
to mitigate cyber risks. We will continue to undertake cyber risk mitigation
activities and system improvements on a rolling basis.
Corporate and Environmental Sustainability
We’re a business for purpose. It’s
important we comply with regulatory,
societal and investor expectations
of corporate and environmental
sustainability, such as social responsibility
and climate change, to ensure our
business is sustainable for the long term.
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 an improved standard of living in
retirement.
We are committed to achieving this by integrating sustainability strategies into
our business and adopting innovative techniques and new technology where it
is commercially feasible to help us meet the expectations of the communities in
which we operate and our stakeholders more broadly.
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Enjoying tennis at Lifestyle Berwick Waters
Governance Policies
• Code of Conduct — articulates the behaviour
expected of Lifestyle Communities’ Directors
and employees, who are expected to align their
actions with the code and Lifestyle Communities’
values whenever they are representing Lifestyle
Communities.
• Communications and Continuous Disclosure
Policy — establishes our procedure for compliance
with Lifestyle Communities’ continuous disclosure
obligations and provides guidance for the
identification of material information and timely
disclosure of Lifestyle Communities’ activities to
the market.
• Diversity Policy — Contains our commitment to
creating and maintaining an inclusive workplace
that embraces and celebrates diversity and to
create positive experiences for all.
• Securities Trading Policy — prohibits Lifestyle
Communities Directors, employees, contractors
and their related parties from dealing in Lifestyle
Communities securities if they are in possession of
inside information and provides for open periods
during which Directors and employees may trade,
subject to any required approvals being obtained.
• Fraud, Corruption and Bribery (Prevention and
Awareness) Policy — Contains our commitment to
achieving the highest corporate standards and will
not tolerate unethical or unprofessional behaviour
including fraud, bribery and corruption.
• Procurement Policy and Supplier Code of
Conduct — defines the standard required
from third parties when working with Lifestyle
Communities, and confirms Lifestyle Communities’
commitment to a sound culture of compliance and
ethical behaviour.
• Enterprise Risk Management Framework —
provides guidance and direction on the
management of risk in Lifestyle Communities and
states Lifestyle Communities’ commitment to the
effective management of risk.
• Whistleblower Policy — encourages Lifestyle
Communities Directors, employees, contractors
and suppliers who have witnessed, or know about,
any misconduct or suspected misconduct to speak
up without fear of intimidation, disadvantage
or reprisal.
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Lifestyle Communities Annual Report 2022
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Homeowner Referral Event
DIRECTORS’ REPORT
DIRECTORS’ REPORT
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;
• 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;
• 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; and
• 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 4,500
homeowners occupying 3,193 homes and a pipeline to
develop at least another 2,100+ 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; and
• Driving the implementation of ESG initiatives
and targets.
Material ESG Topics
In FY21 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. We have used this to guide our
ESG strategy and progress.
We remain cognisant of the broader ESG landscape
and are continuing to monitor developments in the
space, including the work being done by various
bodies on enterprise level and asset specific reporting
frameworks. Our approach is to continue to evolve our
business management and reporting approach each
year, assessing the most effective and most meaningful
measures for our business, without pre-empting the
outcomes of this important work.
During FY22 we continued to engage with our
stakeholders, listen to their feedback, and implement
initiatives to evolve our performance in the ESG space.
Further details on our progress during FY22 and our
continued stakeholder engagement are contained on
the following pages.
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Working with our stakeholders
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Our Homeowners
The 4,500+ homeowners that live in a
Lifestyle Community and everyone that
engages with our marketing material and
comes to a community to inspect.
Community
The communities of greater Melbourne
and Geelong, the Bellarine Peninsula,
Mornington Peninsula and the
communities of Shepparton and Warragul.
• Customer surveys
• Town hall meetings with James Kelly and
our homeowner experience team
• Homeowners committee meetings
• Meet and greet events
• Social media
• Mystery shopping
• Qualitative and quantitative research
• Social inclusion
• Health and wellbeing
• Desire for ownership and control
• Access to high quality facilities
• High quality service and ease and
convenience of interactions
• Affordability and transparency of
financial model
• Value for money
• Role of homeowners in how we respond
to their concerns
• Community engagement events
including face to face and virtual
information sessions and site tours
• Various communication channels
including digital, print and on-
road signage
• Attendance at peak body community
and industry conferences and events
• Social and traditional media
• The Lifestyle Communities foundation
making donations to cancer-
based charities
• Chronic shortage of affordable housing
• Inflation and increasing cost of living
• Built form and its impact on
the community
• Engagement with local communities
and businesses
• Climate change
Our Team
Our workforce of 120+ people, our
pipeline of emerging talent and
the hundreds of contractors and
subcontractors working across our
greenfield development projects and
operating communities everyday.
• Fortnightly all-staff video calls
with the MD
• Bi-Annual staff surveys
• Pulse surveys on specific topics
• Internal communication channels
including intranet, e-newsletters
• Quarterly all-staff summits
• Regular social events and
development days
• Commitment to and connection
with our purpose
• Health, safety and wellbeing
• Skills and capability development
• Access to flexible and hybrid
ways of working
• Diversity and inclusions, including
respect in the workplace
• Ongoing career opportunities
• Retention and attraction
of key talent
• Social events through social
committees or Lifestyle Communities
sanctioned events
• Spring and Autumn intra-community
sporting carnivals
• Significant investment in digital platforms,
improving experience and functionality
• Transparent contracts written in
plain English
• Average new home sales prices less than
80% of the median house price in the
relevant catchment
• Weekly site fee less than 25% of
the Aged Pension after receipt of
Commonwealth Rent Assistance
• Community engagement sessions
• Collegiate relationship with local
councils and community groups
• On-demand access to more than
5,000 online learning programs
• Personalised
development programs
• Flexible ways of working supported
by collaborative technologies
• Quarterly Lifestyle long weekends,
birthday days off, Christmas
shopping days
• Continuing to invest in homeowner
• Commissioned independent research
• Grow your family parental
experience events, particularly as Covid
restrictions were eased
• Commenced our partnership program
giving homeowners access to discounts
with approved third-party partners
focused on the costs of living retirement
with a specific focus on people living
solely on the Aged Pension.
leave policy
• Annual pay reviews incorporating
the increases to the Australian
Superannuation Guarantee
• New system functionality
supporting better ways of working
• Regular staff social events
promoting collaboration, inclusivity
and belonging
Government and Industry
Our partners in Federal, state and local
government and the urban development
community we are active in.
Business Partners
and Suppliers
More than 1,000 suppliers and
partners that provide the goods and
services we rely on to deliver amazing
service to our homeowners.
Investors and Banks
The institutional, superannuation, and
retail investors and the banks that provide
us with the capital to deliver long-term
sustainable growth.
• Industry partnerships and memberships
including representation by Lifestyle
team members on a number
of committees
• Regular meetings with major long-
term suppliers to ensure alignment
and objective setting
• Engagement and alignment
• Attendance and speaking at
industry events
between key suppliers and project
steering committees
• Meetings with government
• Regular communication regarding
• Annual program of engagement including
investor presentations and one-on-
one meetings
• Half year and full year results briefings
• Trading updates to keep the
market informed
• Investor day hosted at Lifestyle Deanside
• Regular site tours
• Annual general meeting conducted
stakeholders, officials and regulators
• Senior council engagement
at the planning stage of new
development projects
our future pipeline and future scopes
of work to be tendered
• Dedicated relationship managers and
virtually this year
check in meetings
• The investor centre on our website
• Proxy advisor and ESG engagement
• Chronic shortage of affordable housing
• Innovative and sustainable
• Financial instability in the industry
more broadly
housing solutions
• Future ready communities
• Increasing adoption of
renewable energy
• Supporting communities
through Covid-19
• Supply chain disruption
• Working with our supply chain
to deliver better outcomes
for all stakeholders, including
reducing environmental impact of
business activities
• Managing risks within supply chains
• Visibility and confidence of long-
term pipeline for suppliers
• Quality of relationships
• Project delivery and asset performance
• Organisational capability including
Executive Committee and Board
• Development opportunities
• Capital strategy and management
• Current and emerging risks
• ESG performance and initiatives
• Long-term value creation
• Continued investment in developing
new affordable communities
• Average new home sales prices less
than 80% of the median house price in
the relevant catchment
• Evolution in design
• Continued investment in renewable
energy technology
• Continued prioritisation of the health
and safety of our homeowners
• Participation in industry events and
government consultation
• Membership of industry bodies
• Committed to pay all appropriately
submitted and approved invoices
within 7 days regardless of
payment terms
• Balanced and fair supplier contracts
• Regular communication of
development pipeline to assist with
planning and forward ordering
• Worked with suppliers to bring
awareness and compliance with the
Modern Slavery Act
• Continued to execute strategic initiatives
and create longer term value for
security holders
• Maintained a strong balance sheet
• Delivered investor returns as a
result of asset quality and effective
cost management
• Continued to evolve our ESG strategy and
initiatives to make progress on material
topics including our 2035 operational net
zero commitment
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DIRECTORS’ REPORT
Affordable Housing
Our mission is to enable working, semi-retired and
retired people over 50 to live an independent life at an
affordable price.
Our product and operating model have been
deliberately designed to address the limited 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 an improved
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 19 years of organic growth. We have
two adages that form the backbone of everything we
do. They are:
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 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 are trained in adaptive sales
techniques. This ensures that the sales process is
thoughtful, considered, and not pressured.
Our marketing materials are transparent and reinforced
through a comprehensive set of Q&As. We encourage
all 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. Our
customer agreements 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. Copies of our
agreements are available on our website.
Our comprehensive touch point wheel maps every
interaction with our customers and focuses our team
on creating memorable experiences when in contact
with customers. The quantity of these touch points
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
FY22 was circa. 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. During
the year we conducted two “voice of the customer”
surveys which informed the topics for discussion at
our bi-annual community town hall meetings. A total
of 38 town hall meetings were conducted (2 each
per operating community) which were attended
by our Managing Director and members of the
leadership team.
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.
All complaints are recorded in the complaints register
which is reviewed by management on a monthly basis.
The Board receives regular reporting on customer
complaints including periodic themes and trends, and
specific updates on any material matters.
Homeowner Health and Wellbeing
Lifestyle Communities makes it easy to get involved in
a range of activities that support health and wellbeing.
Our dedicated 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 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.
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 our team’s engagement
and gather valuable feedback. In the most recent
survey, our team’s average score was 8.7 out of 10,
down from 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 lockdowns
forced us to adapt, there have been many initiatives
that have stayed with us as restrictions have eased.
All-company video calls every second Monday
morning is a great way to communicate, share major
milestones, keep in touch with our team, and celebrate
our successes. It also gives our emerging leaders an
opportunity to present and hone their communication
and presentation skills.
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 FY22 Lifestyle
Communities spent $184k (FY21:$117k) on over
165 external training and development courses
for our team.
In addition to reviewing and updating our parental
leave policy during the year we also introduced the
“Circle-In” program. Circle-In is a support hub for
parents, grandparents, and care givers within the
team. It provides access to resources and knowledge
articles, and allows team members to connect with
others at a similar life stage to share knowledge and
provide support.
Health, Wellbeing, and Safety
Our team is critical to our success and their
health, wellbeing and safety is of utmost priority.
Throughout FY22 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 FY22 we achieved zero fatality and life changing
injuries in our business, including the contractors
and subcontractors working on our sites, 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
Experience 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. For our leadership team and our
emerging leaders group we also provided specialist
training on coping with burnout and stress to assist
with continuing to lead through the lengthy period
that Covid has impacted our business. In addition,
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.
29
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
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
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.
Consistent with Lifestyle Communities’ long held
recognition of the strategic value of a diverse
workforce and inclusive workplace, a review of the
Group’s Diversity and Inclusion policy was undertaken
during FY22. This resulted in a refreshed policy
and suite of objectives which we believe effectively
reflect the intent and commitment of the Group.
We also reviewed and updated our parental leave
policy aligning with the recommendations of the
Workplace Gender Equality Agency (WGEA) in
some areas and delivering additional benefits in
others. It is our intention to apply for formal WGEA
certification in FY23.
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 2022
50% female, 50% male
50% female, 50% male
Executive Team 40% female, 40% male,
29% female, 71% male
20% any gender
Entire Workforce 40% female, 40% male,
68% female, 32% 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 leadership capabilities. The pool
presently comprises 68% women and 32% men,
helping to secure a strong pipeline of leadership talent
for the future.
We note that the actual results above our outside
of the target ranges. We will seek to address these
variances over time through our recruitment processes.
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. Our Supplier Code of Conduct 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; and
8. We pro-actively manage risk.
In FY22 Lifestyle Communities lodged its second
Modern Slavery Statement reaffirming our
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 FY23.
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.
Climate Change and Greenhouse Gas Emissions
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.
We have undertaken 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
rise by 3.7 degrees by 2100. These hazards include
both transition risks and physical risks as follows:
Transition risks
Physical risks
• Government policy including in
relation to changes in land use
• Reputation and changes in
market sentiment
• Commercial risks including the
cost of managing the transition
• Increasing temperatures
• Heatwaves
• Intense rainfall
• Storms and hail
• Bushfires
• Floods
• Drought
• Coastal inundation
The climate change risk assessment is helping us
plan for and mitigate the potential impacts of climate
change on our communities by assisting us to:
• Prioritise our maintenance capital spend towards
communities most at risk;
• Update our long-term planning
• Screen potential site acquisitions to avoid sites
most at risk;
• Inform our engineering and design of new
communities;
• Prioritise investigation of new technologies and
design techniques that held address specific risks.
Our Greenhouse Gas Emissions inventory is measured
in accordance with the GHG Protocol. 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.
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.
In FY22 we continued our progress towards our goal
of achieving net zero operational emissions for scope
1, 2 and 3 by no later than the year 2035, including
the commencement of construction on our first
integrated 450kw solar and 150 kw battery micro
grid at Lifestyle Meridian. We also continued to work
with independent sustainability consultants WSP to
update our greenhouse gas emissions inventory and
improve our knowledge and capability to help respond
to the issues, risks and opportunities that may impact
our business.
31
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
The table below shows total organisation greenhouse
gas emissions for the 2021 calendar year compared to
the 2019 baseline year:
(Tonnes of carbon)
2021
2020
2019
Scope 1 (direct emissions)
599
432
400
Scope 2 (Lifestyle electricity)
1,777
1,479
1,938
Total Lifestyle emissions
2,376
1,911
2,338
Scope 3 (homeowner electricity)
6,581
6,482
6,069
8,957
8,393
8,407
Change vs.
baseline
49.8%
(8.3)%
1.6%
8.4%
6.5%
Total Lifestyle and
homeowner emissions
Homes under management
(end of year)
GHG emissions per home
(tonnes)
2,816
2,625
2,393
17.7%
3.2
3.4
3.7
(13.5)%
Notes
1. The shift between scope 2 and scope 3 emissions was driven by Victoria’s
lockdown in 2020 and 2021 as community facilities were closed and
homeowners spent more time at home.
2. 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
to the right:
Average greenhouse gas emissions of
a Lifestyle house compared to a typical
home in Melbourne’s out suburbs.
Average Lifestyle House
3.2 tonnes
of carbon per annum
Typical 1-person house
in the suburbs
5.2 tonnes
of carbon per annum
Typical 2-person house
in the suburbs
8.1 tonnes
of carbon per annum
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.
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 remain committed to 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;
• We are mindful of the impact that increased costs
• CO2 footprint complete;
• Energy efficient design continuously reviewed and
improved with each new community developed;
• All Lifestyle Communities developed after 2016
of energy have on our homeowners, many of whom
are pensioners;
include 100% electric homes (no-gas);
• Our existing communities include significant on-site
• The target will commit us to taking positive
solar generation;
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; and
• We feel it is achievable.
• Lifestyle Meridian will be our first community to
include an integrated solar powered micro-grid with
centralised battery storage; and
• A further micro-grid has been committed to for
Woodlea and we are currently designing systems
for future development communities.
33
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Artist impression of the Clubhouse
Interior at Lifestyle Woodlea
Continuous Review and Improvement
During FY22 we commissioned several independent
reviews to assist us review and improve the
governance of the business, keep up to date with any
changes to legislation or stakeholder expectations,
and to continuously improve how we operate. Topics
covered by the independent reviews included:
• Workplace health and safety framework;
• Cyber risk, including penetration testing, phishing
simulations, and business impact assessment;
• Cost of living, with a particular focus on retirees
receiving the Aged Pension;
• Personal information, privacy policy, and data
management practices; and
• Wage Theft Act compliance.
Each of the reviews was presented to the Board
with a summary of findings and recommendations
for improvement which are being implemented
throughout the business. In FY23 we will continue
our rolling program of review and monitoring of the
implementation of the improvement recommendations.
The Lifestyle Communities Foundation
In 2014, one of the founding directors of Lifestyle
Communities, Dael Perlov, passed away from
pancreatic cancer at the age xof 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 at the
start of each year and matches dollar for dollar funds
raised by our homeowners for 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 National Breast Cancer
Foundation and many more.
In FY22, Lifestyle Communities donated a total of
$138k to cancer-based charities and our homeowners
and the Lifestyle team raised a further $121k, taking
total donations to $259k, a fantastic effort. Since
the program started a total of over $1 million has
been donated.
Donations to Cancer Based Charities
)
s
0
0
0
$
(
$300
$250
$200
$150
$100
$50
$0
121.5
64.9
76.2
42.0
99.1
114.2
126.9
138.2
2019
2020
2021
2022
25.4
57.2
33.4
67.4
2016
2017
42.0
47.3
2018
Lifestyle
Homeowners
35
36
Lifestyle Communities Annual Report 2022 Spotlight on Lifestyle Meridian — Our smartest community yet
THEY SAY PRACTICE
MAKES perfect ...
YOUR NEW HOME WILL BE SPOT ON.
Perfectly placed between the city, seas, and
trees, Lifestyle Meridian is our smartest and
most sustainable community yet.
Including next generation homes that have
been designed by boomers for boomers,
Lifestyle Meridian features multi-million-dollar
amenities, a homeowner concierge service,
plus a whole host of sustainable initiatives. This
clever community is powered for the future.
At the heart of this fully electric community is
450kw of solar panels and a 150kw battery
connected by optic fibre and controlled
centrally to maximise energy generation,
storage, and sharing across the community.
This community energy hub maximises bill
savings and allows energy sharing within the
community – effectively becoming its own
power plant and minimising energy drawn from
the grid. It even provides the power to charge
the community’s electric car.
The optic fibre network extends into the
homes, delivering high-speed internet, secure
connection to the security system at the front
gate, and number plate recognition for family
and friends.
In the gardens, we have installed an innovative
irrigation system designed to conserve water
and maximise efficiency. All gardens use
drip irrigation, delivering the water to where
it needs to be, reducing evaporation. The
irrigation system uses sensor technology
to turn on/off subject to weather patterns,
eliminating over-watering from rain events, and
giving the gardens extra water when needed
in the height of summer to prevent loss of
plants and trees.
Whether you’re looking for a sea change, tree
change, me change, or an e-change, Lifestyle
Meridian could be the perfect place for you.
450kW of
solar power
Energy Hub
maximises
bill savings
Fibre Optic
to the home
Wireless enabled
in the home
Eco friendly
car and
charging station
Innovative
irrigation system
to conserve water
DIRECTORS’ REPORT
DIRECTORS’ REPORT
Operating and Financial Review
Overview
The Company continued to successfully develop and manage its portfolio of affordable
communities during the 2022 financial year. Profit after tax attributable to shareholders was
$88.9 million (2021: $91.1 million).
Financial and Operating Highlights
FY22
FY21
Change
Change (%)
Key financial data
Revenue
Earnings before interest and tax
Net profit before tax
Net profit after tax
Underlying profit after tax
Operating cash flow
Community cash flow1
Earnings per share
Total dividend per share
Homes settled
Homes sold2
A$ millions
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$’000
Total number of homes (gross)
Total number of homes (after NCI)3
Total number of homeowners
Average age of homeowners
Number of resales settled4
No. of homes
No. of homes
No. of homes
Years
No. of homes
Average realised sales price resales (GST incl)5
A$’000
224.4
129.1
127.0
88.9
61.4
41.7
25.9
85.4
10.5
401
424
529
3,193
2,992
4,552
73
143
438
138.7
129.8
130.6
91.1
36.4
(31.9)
19.5
87.3
8.0
255
247
485
2,792
2,591
4,014
75
105
404
85.7
(0.5)
(3.6)
(2.2)
25.0
73.6
6.4
(1.9)
2.5
146
177
44
401
401
538
(2)
38
34
61.8%
(0.4)%
(2.8)%
(2.4)%
68.7%
230.7%
32.8%
(2.2)%
31.3%
57.3%
71.7%
9.1%
14.4%
15.5%
13.4%
(2.7)%
36.2%
8.4%
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. Net sales represent deposits on new homes less cancellations.
3. Gross number of homes adjusted for share of communities owned by non controlling interests (NCI).
4. Includes resales attracting a deferred management fee, there were a further 13 resales settled in FY22 (FY21: 16 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.
5. Average realised sales price of resales attracting a deferred management fee.
6. Included in the table above are several non IFRS measures including earnings before interest and tax, community cash flow,
underlying profit, 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 2022 financial year.
Fair Value Adjustments
At Lifestyle Communities our homeowners purchase
a proportionate share of the clubhouse, 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.
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 FY22, eight of nineteen 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 FY22, the Company recorded a fair value increase of
$92.6 million pre-tax and $64.8 million post tax. The
breakdown of the fair value increase for FY22 into the
components above is as follows:
Uplift in value arising from settled
homes during the year (401 new home
settlements FY21: 255)
The uplift created as a result of the
contractual rent increase
Movements as a result of changes to
valuation assumptions
Total Fair Value Adjustment
FY22
$ million
FY21
$ million
41.9
21.6
11.5
39.2
92.6
8.8
78.2
108.6
A combination of new home settlements achieved in
FY22, a continued compression in capitalisation rates
for land lease assets, and movements in the residential
property market, has resulted in a $92.6m uplift in
the value of the company’s property portfolio (FY21:
$108.6m). This has impacted the statutory profit
result for FY22. Capitalisation rates on the annuity
rental stream have compressed from a range of
5.5% – 5.75%, to a range of 4.87% – 5.25% across the
portfolio. The weighted average capitalisation rate is
5.18% (FY21: 5.57%).
More information on the valuation of the Company’s
investment properties is contained in Note 3.1 of the
financial statements.
Capital Management
As part of its continued focus on capital management,
in August 2021 the Company 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 was increased to
$375 million. All other material terms and covenants
remained unchanged. The additional headroom
will be used to fund the continued acquisition and
development of new sites. The group’s next debt
maturity is a $110 million tranche due in June 2025
with the balance expiring in August 2026.
39
40
Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
Lifestyle St Leonards
DIRECTORS’ REPORT
41
42
Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Debt Covenants and Key Metrics
Lifestyle has three main debt and lending covenants which are regularly stress tested. They are:
Update on communities
LVR<65%
FY22: 36.9%
ICR>2x
FY22: 6.2x
Secured
property %
>85%
FY22: 100%
Key debt metrics
Gross Assets
Interest bearing liabilities
Total debt facilities
Undrawn debt
Gearing
Cash interest paid on drawn debt
Weighted average cost of debt
Weighted average debt maturity
Annual interest coverage ratio
Annual loan to value ratio
% of debt fixed
Debt providers
$ millions
$ millions
$ millions
$ millions
%
$ millions
%
Years
Times
%
%
No.
FY22
1,006
245
375
130
34.9%
5.3
2.2%
3.8
6.2
36.9
0
3
FY21
Change
Change (%)
781
190
275
85
33.2%
4.2
2.5%
3.3
5.6
37.9
0
3
225.0
55.0
100.0
45.0
1.7
1.1
(0.3)
0.5
0.6
(1.0)
–
–
28.8%
28.9%
36.4%
52.9%
5.1%
26.2%
(12)%
15.2%
10.7%
(2.6)%
0.0%
0.0%
The Company recovers the majority of its interest costs through its development projects and
allocates interest to each project based on its respective debt draw during the construction
phase. Sales prices are set using forward estimates for interest rates which includes an
allowance for upward movement as interest rates normalise following their pandemic lows.
These interest rate assumptions are reviewed and retested every 3 months.
Dividends
A fully franked dividend of 5.0 cents per share was
paid on 7 October 2021 (representing the 2021 final
dividend). A fully franked dividend of 4.5 cents per
share was paid on 7 April 2022 (representing the 2022
interim dividend).
Since the end of the financial year the Directors
have resolved to pay a fully franked dividend of
6.0 cents per ordinary share (representing the 2022
final dividend).
The dividend has a record date of 5 September 2022
and a payment date of 6 October 2022. As at 30
June 2022 the franking account balance was $28.3
million (after allowing for the final dividend and tax
payable for FY22).
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
St Leonards
Clyde North (Meridian)
Pakenham East
Clyde
Woodlea
Phillip Island
Merrifield
Ocean Grove II
Bellarine (Leopold)
Total
New homes
Resales
Settled
FY22
Settled
FY21
Net sales
FY22
Net sales
FY21
Settled
FY22
Settled
FY21
Net sales
FY22
Net sales
FY21
Homes
sold not
settled
Total
homes
settled
Total
homes in
portfolio
13
8
5
12
17
7
12
5
7
4
5
14
10
2
20
13
7
17
22
9
8
8
8
6
6
15
14
2
1
21
11
8
17
23
12
8
7
6
5
15
16
2
4
1
1
3
12
10
6
14
19
8
13
6
9
5
7
15
12
2
228
136
182
217
300
186
141
154
164
151
216
209
220
184
167
105
88
116
29
7
2
42
34
88
94
8
34
55
91
36
24
7
1
72
57
69
64
109
29
9
21
58
44
34
82
58
21
44
50
122
123
228
136
182
217
300
186
141
154
164
151
216
209
220
191
169
246
266
359
274
175
230
180
260
187
190
160
401
255
418
248
156
121
160
138
267
3,193
5,391
An update on each of the communities in planning or
development at 30 June 2022 is as follows:
• Lifestyle Mount Duneed and Lifestyle Kaduna
Park are both fully sold. Final settlements for
Kaduna Park were completed in August 2022.
Final settlements for Mount Duneed are due in
September 2022;
• 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 60% sold;
• Lifestyle Deanside commenced construction 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 46% sold;
• Lifestyle St Leonards was acquired in November
2019 and construction commenced in August
2020. We welcomed first homeowners in June
2021. 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 first site is sold out and the second site will
launch for sale in the second half of FY23;
• Lifestyle Meridian, was acquired in May 2020
and settled in early July 2021. Civil works are well
underway, and construction of the clubhouse has
commenced. The community was launched for sale
in September 2021 and is 45% sold. We welcomed
first homeowners in May 2022;
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
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• The land for the future Lifestyle Community in
• An operating and trading business based in
Pakenham was acquired in February 2020. Planning
approval has been received and construction
is expected to commence in the second half of
FY23 with first customer homes settlements to
follow in FY24;
• The land for the future community at Clyde
Riverfield was acquired in June 2020 on 3-year
settlement terms. Given the strong performance
of Lifestyle Meridian we have brought forward
the settlement date to October 2022 and will
commence construction soon after;
• The land for the future community at Woodlea was
settled in April 2022. A planning permit has been
received and construction has commenced. Sales
are due to launch in September 2022;
• The contract for the future community on Phillip
Island was signed in August 2021 and settled in
September 2021. The planning application has been
submitted and we are working our way through the
planning process with council;
• Lifestyle Merrifield is located within the Merrifield
estate, one of Melbourne’s flagship master-planned
communities. Land settlement is expected in
approximately twelve months;
• A contract of sale to purchase a new site located
in Ocean Grove was executed in December 2021.
Land settlement is expected in approximately
eighteen months; and
• The contract for Lifestyle Bellarine was signed in
Australia, with no strategic intentions of engaging
in any tax planning involving the use of offshore
entities or low tax jurisdictions.
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 FY22 these totalled more than $31.3 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 2022 financial year:
Income Tax
Net GST
PAYG Withholding
State Taxes
Fringe Benefits Tax
Local council rates
FY22
9.6
2.9
3.9
13.5
0.2
1.2
31.3
FY21
5.8
(3.0)
4.0
6.2
0.1
1.2
14.3
Note: State Taxes (including Payroll Tax, Land Tax, Stamp Duty, and Growth
Area Infrastructure Contribution):
May 2022 and is due to settle in September 2022.
The community has an approved planning permit in
place and has civil works largely complete.
Commitment to shareholders and
an informed market
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; and
Lifestyle Communities is committed to ensuring that
the market as a whole is relevantly and consistently
informed by providing securityholders and the
market with timely, balanced, direct and equal access
to information issued by Lifestyle Communities,
to promote investor confidence in the integrity
of Lifestyle Communities and in the trading of its
securities.
Lifestyle Communities has a Communication and
Continuous Disclosure Policy that has adopted
practices that reflect the intent of the law, corporate
governance best practices, regulatory requirements,
and which best serve the interest of its shareholders
and other stakeholders.
All external communications that include any price
sensitive material are provided to the Board for
approval. In accordance with the Communication and
Continuous Disclosure Policy, all announcements will:
• Be factual;
• Don’t omit material information; and
• Be timely and expressed in a clear and
objective manner.
Lifestyle Communities’ Communication and
Continuous Disclosure Policy is available at
lifestylecommunities.com.au/corporategovernance.
Forward-looking statements
This annual report contains forward-looking
statements, which include all matters that are not
historical facts. Without limitation, indications of, and
guidance on, future earnings, performance and future
operational outcomes, are examples of forward-looking
statements. Forward-looking statements, including
projections or guidance on future earnings and
estimates, are provided as a general guide only and
should not be relied upon as an indication or guarantee
of future performance.
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
FY22, the Company spent an additional $41,000 with
PricewaterhouseCoopers on advice in relation to the
Company’s tax affairs and equity incentive scheme.
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.
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.
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 2022 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.
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:
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Lifestyle Communities Annual Report 2022 DIRECTORS’ REPORT
DIRECTORS’ REPORT
Lifestyle Ocean Grove
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 2022, 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 2022, the Company completed planned
settlement on contracted land at St Leonards. This
settlement was funded out of existing debt facilities
and increased the drawn debt to $266 million.
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.
Outlook for FY23 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 three 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.
With the land already in the pipeline, the Company
has the ability to deliver 1,400 to 1,700 new home
settlements between FY23 and FY25. FY23
settlements are expected to be similar to FY22 before
a step up in FY24 and FY25 as new projects come
online. Resale settlements attracting a DMF are
anticipated to be in the range of 550 to 750 over the
next 3 years.
The Company’s balance sheet and debt position is
robust. The Company has access to over $110 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
3,193 homes under management.
We are excited to launch Lifestyle Bellarine for sale
in September 2022. This project will commence the
next evolution of our homeowner experience strategy
which will seek to offer benefits and experiences to
Lifestyle Homeowners beyond the boundaries of their
direct community.
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Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
Remuneration report
REMUNERATION REPORT
Lifestyle Communities Team Summit 2022
Remuneration Report
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Lifestyle Communities Annual Report 2022
50
REMUNERATION REPORT
REMUNERATION REPORT
Our culture
IN N O VATIO
IN N O VATIO
N
N
N S I V ENES
N S I V ENES
O
O
P
P
S
S
E
E
S
S
R
R
SIO N
SIO N
S
S
A
A
P
P
E M
E M
P OWER
P OWER
M
M
E
E
N
N
T
T
C
C
A
A
R
R
E
E
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
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
How we operated
68% women
120
otal Emp l o y
T
e s
e
Gender split for emerging leaders
68%
32%
Women
Men
Gender split for executive team
32% men
Final Employee
engagement score of
8.7 10out
of
165
External courses attended
by team members for
professional development
29%
71%
Breakdown of
employees by age
Women
Men
18–25
6
5% of the workforce
Gender split for the Board
50%
50%
26–35
36–45
46–55
56–65
Women
Men
66+
3%4
25
21%
28
21%
25
23%
32
27%
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Lifestyle Communities Annual Report 2022
REMUNERATION REPORT
REMUNERATION REPORT
Remuneration report
Dear Shareholders,
On behalf of the Board, I am pleased to present the
Lifestyle Communities Remuneration Report for FY22.
In a challenging and unusual year, the team and hence
the business performed well, delivering 401 new home
settlements, strong resales and improved cash flows.
The Board continues to recognise Lifestyle
Communities’ strong culture and clear purpose as
a competitive advantage and a key differentiator
in attracting and retaining the best talent in our
industry. In line with this, the Board again approved
the implementation of Lifestyle Communities’ unique
employee share scheme which is available to all
permanent employees and creates strong alignment
across the business.
In the early days of the pandemic, Lifestyle
Communities made a clear commitment to retain its
workforce and maintain a focus on employee health,
safety, and wellbeing. This has continued through
FY22, underpinned by:
• Well-established flexible work policies, practices,
and technology;
• Support for teams to transition back into
the workplace;
• Our employee wellness program including our
focus on physical and mental health, wellbeing and
resilience; and
• Periodic employee pulse surveys to ensure
appropriate support was being provided.
These factors, together with the strong and effective
leadership from the ELT, resulted in a high employee
engagement measure of 8.7 out of 10.
The Board remains committed to a remuneration
framework designed to attract, motivate, and retain
the best talent with capabilities that enable our
customer-centric proposition, and align with our
culture and behavioural expectations. We regularly
review the settings to ensure the framework continues
to support the delivery of the business strategy, as well
as strengthening the alignment of short-term results
and long-term value creation.
Several enhancements to the framework
were implemented from 1 July 2021. These
changes included:
• Review and updating of the peer group for senior
executive and non-executive Director remuneration
benchmarking
• Enhancements to the Short-Term Incentive (STI)
framework to better align outcomes to Group
performance
• Introduction of a Long-Term Incentive (LTI)
performance period for the executive team
The Board believes that these enhancements will
further strengthen the alignment of executive and
stakeholder interests.
Consistent with our long held recognition of the
strategic value of a diverse workforce and inclusive
workplace, a review of the Group’s Diversity and
Inclusion policy was undertaken during FY22. This
resulted in a refreshed policy and suite of objectives
which we believe reflect the intent and commitment
of the Group. We also reviewed and updated our
Parental Leave policy aligning with, or exceeding, the
recommendations of the Workplace Gender Equality
Agency (WGEA). We intend to apply for certification as
a WGEA employer of choice in FY23.
Our focus as a Board is on balancing the delivery of
returns to investors with long-term sustainable business
performance. In determining the remuneration
outcomes for FY22, the Board took into consideration
business progress and achievements against FY22
strategic priorities, the performance of management as
well as market conditions. The outcomes are outlined
in this report and fairly reflect the performance of
the Lifestyle Communities business in the current
environment.
When reviewing the actual results, recognising the
challenges in setting FY22 budgets and performance
targets during the pandemic, the Board carefully
scrutinised the drivers and quality of the results,
summarised as follows:
• Delivery of 401 new home settlements
• Increased annuity income from a higher number
of homes under management, increased resale
settlements, and disciplined cost control
• Disciplined management of project
development budgets
• Successful implementation of the
Salesforce platform
The committee is in the process of finalising the
remuneration framework for FY23. We will be
maintaining most of the elements of the current
framework, but we will also be reviewing the key
elements of the STI and LTI to ensure the framework
remains fit for purpose and aligned to the business
priorities as we substantially increase production over
the next three years.
In closing, I’d like to thank fellow director Nicola Roxon
for her work as Remuneration Chair, in particular on
the evolving design of the Employee Incentive Scheme
with the introduction of LTI, and I look forward to her
continuing contribution on the Committee. I’d also like
to acknowledge the progress made by the team in
the delivery of strategic outcomes while at the same
time maintaining the inclusive culture and a genuine
desire to “do it from the heart”. It is a privilege to work
with the values-driven team at Lifestyle Communities
and to see the results for our homeowners and
security holders.
As in previous years we have maintained a values and
behaviour gateway for our team to meet before any
entitlement to performance incentives highlighting the
importance the Board places on our team continuing to
deliver for our customers in the right way.
David Blight
Chair, Remuneration and Nomination Committee
17 August 2022
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Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
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 Ltd (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.
2.2 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 FY22, an independent Remuneration Consultant
was engaged to conduct external benchmarking
for Director fees, Managing Director and executive
team remuneration packages, together with market
insights and trends for consideration by the Board and
Remuneration and Nomination Committee.
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;
• Oversight of the selection, appointment and
reappointment of Directors to the Board;
• Remuneration levels of the Managing Director and
other key management personnel; and
• The level of Non Executive Director fees.
Please refer to page 14 for focus areas of the
Committee during FY22.
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
Member Remuneration and
Nomination Committee
David Blight
Non-Executive Director
15 June 2018
Chair Remuneration and
Nomination Committee
Mark Blackburn
Non-Executive Director
1 December 2019
Chair Audit Committee
Claire Hatton
Non-Executive Director
1 May 2022
Member of Audit Committee
Executive
Director
James Kelly
Managing Director
Founder, 2003
Other Executive KMP
Darren Rowland
Chief Financial Officer and
Company Secretary
21 May 2019
Georgina Williams resigned as a Director on
31 August 2021.
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 below.
• 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; and
• 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 to
ensure optimum capability of all team members driven
and managed by our Executive Leadership Team (ELT).
This ROADMAP process is used as a behavioural gate
for the equity incentive scheme.
Performance Matrix
3.1 Changes to Key Management Personnel
To reflect the current organisational structure
and reviewing those persons with authority and
responsibility for planning, directing, and controlling
the activities of Lifestyle Communities, a change was
made to our Key Management Personnel. As a result
of the internal operating review, our Managing Director
James Kelly and Darren Rowland, Chief Financial
Officer and Company Secretary remain as Key
Management Personnel for FY22. The change reflects
the updated internal business decision making process
and delegated authority arrangements.
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 for measuring
the performance of 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.
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.
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.
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Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
REMUNERATION REPORT
6.2 Managing Directors’ Remuneration Strategy
Our Managing Director, James Kelly is a co-founder of
the business and a substantial shareholder in Lifestyle
Communities Ltd. Each year the Committee reviews
his overall remuneration package and also conducts
external benchmarking at least every two years.
James has elected not to participate in either the short-
term incentive plan or the long-term incentive plan by
virtue of his significant shareholding in the business.
As a result, the Managing Director’s compensation
comprises of only base salary, superannuation
contributions and a modest car allowance, and remains
significantly below market levels for comparable
businesses and roles. The Board made an adjustment
to James’ base salary in FY22, as detailed in Section 7.1.
The Committee and the Board remain comfortable
that James is fully aligned to the success of the
business due to his substantial shareholding in Lifestyle
Communities.
6.3 Components of Executive Remuneration
Component
Fixed remuneration
Base salary, superannuation, and other
benefits. (TFR)
Variable remuneration
Equity Incentive Scheme (EIS)
In FY22 the EIS structure, performance
measures and outcomes were amended for
the first time since its introduction in FY17 for
the ELT and Emerging Leaders Scheme.
The equity incentive scheme provides both a
short-term and long-term incentive to the ELT.
There is a pro-rata adjustment for any ELT
member who commences part way through a
financial year or works in a part time capacity.
There is no entitlement to the current year STI
nor LTI should the team member commence
from 1st April to 30th June of that year.
Performance measurement process
How we set remuneration
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.
Achievement of new home settlement
target range, business management
and strategic priority targets set by the
Board each financial year for both the STI
and LTI.
The Board and Remuneration and Nomination
Committee consider a range of factors in setting
the annual target measures and ranges for the EIS.
This includes the Company’s budget for new home
settlements, analyst forecasts and company culture.
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 changes to the Executive Incentive Scheme in
FY22 considered the following:
• The alignment of all Executive team members
to the same reward for effort and outcome as a
percentage of the fixed remuneration;
• Reward for effort and outcome better aligned to
current and future business outcomes;
• Enhanced alignment of the Executive team to
both developing communities and managing
communities; and
• Continuing to remain competitive in the market
with Executive variable remuneration structures.
6.4 Structure of the Equity Incentive Scheme
The Company operates three clearly defined incentive
schemes as shown below. The Employee Incentive
Scheme and the Emerging Leaders Incentive Scheme
are both short term annual incentives. The Executive
Incentive Scheme includes both a short term and long-
term incentive component. The schemes are designed
to focus team members on achieving and exceeding
various measures which are critical to the success and
growth of Lifestyle Communities.
In FY22 the Board approved changes to the structure
of the Emerging Leaders and Executive Incentive
Scheme to introduce additional performance
measures. The Employee Incentive Scheme remained
unchanged.
Each year the Board determines a target range for
each of the performance measures and the amount of
equity that will be made available.
Performance measures
Employee Incentive Scheme
STI
STI
STI
LTI
3-year
New Home Settlements
100%
Emerging Leaders Incentive Scheme
New Home Settlements
Cashflow from Community Operations
50%
50%
Executive Incentive Scheme
New Home Settlements
30%
Cashflow from
Community Operations
30%
Development Capital
Recovery
20%
Salesforce
Implementation
20%
New Home Settlements
Adjusted Return on Equity
50%
50%
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REMUNERATION REPORT
Executive Leadership Team (ELT) Short Term
Incentive (STI)
Following a market review, the Board enhanced the
structure of the ELT STI to ensure the following:
• The alignment of all ELT members to the same
reward for effort and outcome as a percentage
of fixed remuneration rather than a preset fixed
number of options. The previous structure could
have resulted in material disparities between ratios
of fixed remuneration to variable remuneration
between team members;
• We can retain our leading talent in a highly
competitive environment;
• Reward for effort and outcomes closely aligned to
our business outcomes; and
• Recognition of the strong business performance led
by the ELT to date.
The STI has a 1-year performance period and has
the following performance metrics
Metric
Description
Weighting
Outcome
a technology business, we recognise the important
role that high quality systems play in helping maintain
our personal touch with our customers as we continue
to grow. Our newly launched homeowner portal will
provide our homeowners with a simple to use platform
to stay in touch, engage with content, access benefits,
book their facilities, and communicate directly with
Lifestyle Communities in real time from any device.
Management and the Board considered cultural
measures including our engagement survey results
and other ESG metrics. Although there are many
strategic priorities, the Salesforce implementation was
determined as the most appropriate business priority
for the FY22 scheme.
The metrics are independent of each other, and
failure of one metric does not impact achievement of
the others.
The maximum STI achievable in FY22 equates to 40%
of total fixed remuneration (TFR) for each ELT member.
New Home Settlements
continues as one of the main
operational performance
metrics as it is a key driver
of earnings growth and
shareholder value.
Cashflow from Community
Operations is an important
operational metric focussed
on the efficient management
of our communities, costs and
resales.
Capital recovery focuses
on recovery of funds from
development projects
Project implementation
measured the efficient and
timely implementation of
the Salesforce system,
designed to enable efficient
scaling of the business whilst
maintaining our personal
touch with our homeowners
and future customers.
30% Achieved
ELT Long Term Incentive (LTI)
The LTI has a 3-year performance period, with the
following performance metrics.
Metric
Description
Weighting
Outcome
30% Achieved
20% Achieved
20% Achieved
50% In progress
50% In progress
New Home Settlements
remain as one of the
key drivers of business
performance and shareholder
value . Lifestyle Communities
provides guidance to the
market on a rolling 3-year
forward target.
Adjusted Return on
Equity (ROE) measures
the business’s efficiency in
deploying capital. Lifestyle
Communities uses an adjusted
ROE measure to remove the
volatility of movements in
property valuations driven by
external market factors which
are outside of management’s
control.
The first three measures will be consistent for each
financial year going forward, with the fourth being
interchangeable to drive a specific priority intended
to improve the business in the future. For FY22, the
installation and integration of Salesforce was the most
significant business process transformation undertaken
by Lifestyle Communities to date. Whilst we are not
The metrics are independent of each other, and
failure of one metric does not impact achievement
of the other.
The maximum LTI achievable in FY22 equates to 80%
of TFR for each ELT member.
Equity is issued to team members in the form of zero-
priced conditional rights to receive ordinary shares
(“options”).
If the behavioural gate is passed, the number of options
that vest under a particular year’s scheme depends on
the achievement of the performance measure in that
financial year. If the behavioural or performance targets
are not passed, 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 performance year and
remain employed when 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 and before 1 April of the performance year
are entitled to a pro-rata incentive. ELT members
employed after 1 April in a financial year are not
eligible for the Executive Incentive Scheme for that
particular year.
The options allocated to the ELT and other emerging
leaders are subject to a staggered vesting schedule.
Options allocated to the ELT (excluding the Managing
Director) have the following service (or escrow)
conditions:
STI
• 50% of options awarded remain subject to
competency and behavioural requirements, and will
vest following completion of the independent audit
and confirmation by the Board;
• 50% of options awarded will vest after 12 months
of completion of the performance year and remain
subject to ongoing competency and behavioural
requirements.
LTI
• 50% of options awarded have a three-year
service condition, competency and behavioural
requirements, and will vest following completion
of the independent audit and confirmation by
the Board;
• 50% of options awarded have a four-year service
and ongoing competency and behavioural
requirements
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 relating 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:
• 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, whether
vesting occurs or not (regardless of if 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
and Directors from dealing in Lifestyle Communities
securities while in possession of inside information
that is not generally available to the public. The
policy requires all Employees to first obtain consent
from the Chief Financial Officer or Company
Secretary prior to trading. The Managing Director,
Non-Executive Directors and the Executive Team
are required to obtain consent from the Chair
prior to trading. The Chair seeks approval from the
Audit Committee Chair. The policy also prohibits
entering into any derivative or margin lending
arrangements over Lifestyle Communities securities
at any time; and
• 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.
59
60
Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
REMUNERATION REPORT
6.5 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
Closing share price (30 June)
Share price increase / (decrease)
Employee share scheme expense 1
New home settlements in the year
Total homes settled
Total portfolio (settled and unsettled)
Unit
$m
cps
$
%
$m
Homes
Homes
Homes
FY22
88.9
10.5
13.6
(13.0)%
2.9
401
3,193
5,391
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
Note:
1. Due to the Covid pandemic, the share options issued for FY21 were reduced by 40%. This, coupled with
share price growth, is the main driver of the increase in share scheme expense for FY22.
Remuneration Details for FY22
7.
7.1 Managing Director
The total remuneration for the Managing Director
(inclusive of superannuation) is $750,000 and
includes a $20,000 car allowance as compensation
for the extensive travel required between the
Company’s communities. The Managing Director
does not participate in any short term or long-term
incentive plans.
In FY22 the salary of the Managing Director increased
by $150,000 to $750,000. The increase was originally
recommended to the Board following benchmarking
undertaken in March 2020 however due to the
COVID pandemic it was not approved at the time. The
increase goes some way in bridging the gap between
the Managing Director’s total fixed remuneration and
comparable roles in the market.
In FY22 the Company undertook further external
benchmarking to align executive and Board salaries
with comparable roles in the market. As a result, the
Managing Director’s total fixed remuneration was
increased to $900,000 (inclusive of superannuation
and car allowance) with effect from 1 July 2022.
There were no other significant changes to the
Managing Director’s service agreement during FY22.
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.
There are no other termination payments provided for
in the Managing Director’s contract.
7.2 Executive Team (ELT)
Fixed remuneration for the executive team is reviewed
in the annual ROADMAP process. Increases to fixed
remuneration took into account performance and
external market and role benchmarking. The Executive
Incentive Scheme is a percentage of TFR for each ELT
member. This is detailed in section 6.3.
There were no material changes to Senior
Management service agreements during FY22.
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.
8. Non Executive Directors’ remuneration
All Non-Executive Directors receive 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 during FY22 were $210,000
per annum (including superannuation). Fees paid to
the other Non-Executive Directors were $90,000 per
annum plus an additional $15,000 per annum for each
committee Chair. Following external benchmarking in
FY22, an additional fee of $10,000 was approved for
members of each sub-committee.
The Remuneration and Nomination Committee
regularly reviews the level of fees paid to Non-
Executive Directors and the Managing Director.
External benchmarking occurs every two years.
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 tables disclose the remuneration of the
key management personnel of the Company for the
2022 financial year and for the previous financial year.
61
62
Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
REMUNERATION REPORT
2022
$000’s
Directors
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Resigned 31 August 2021
Mark Blackburn
Claire Hatton
Appointed 1 May 2022
Consolidated remuneration
Key management personnel
Darren Rowland
Consolidated remuneration
2021
$000’s
Directors
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Georgina Williams
Resigned 31 August 2021
Mark Blackburn
Consolidated remuneration
Key management personnel
Darren Rowland
Chris Paranthoiene
Yvonne Slater
Richard Parker
Simon Goninon
Consolidated remuneration
Salary
and fees
Annual and
long service
leave (1)
Super
Equity-based
payments (2)
Performance
related
Take
home pay (3)
Total
7254
191
93
104
16
95
7
1,231
383
1,614
84
84
19
103
25
19
0
0
2
10
1
57
28
85
834
210
93
104
18
105
8
1,372
717
2,089
–
–
–
–
–
–
–
–
40.0%
13.7%
750
210
93
104
18
105
8
1,288
411
1,699
0
287
287
Salary
and fees
Annual and
long service
leave (1)
Super
Equity-based
payments (2)
Performance
related
Take
home pay (3)
Total
575
114
80
85
73
78
1,005
345
325
248
294
229
2,446
25
11
0
0
7
7
50
25
25
22
26
21
169
600
125
80
85
80
85
1,055
470
438
348
408
327
3,046
–
17.3%
18.5%
23.3%
19.9%
20.2%
12.8%
600
125
80
85
80
85
1,055
370
350
270
320
250
2,615
0
81
81
81
81
66
390
0
18
7
(3)
7
11
40
1. Annual leave and long service leave represents movements in provisions for unused leave entitlements at 30 June.
2. Equity based payments represents the fair value of the options granted to key management personnel in FY21 and FY22 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.
4. Included in James Kelly’s salary and fees is a $20,000 car allowance.
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63
64
Lifestyle Communities Annual Report 2022
REMUNERATION REPORT
REMUNERATION REPORT
Shares held at the
beginning of the year
Purchased
on market
Options
exercised
Sold
Shares held at the
end of the year
Grow your family
Shares
$000
Directors
James Kelly
Philippa Kelly
David Blight
Nicola Roxon
Claire Hatton
Mark Blackburn
Management
Darren Rowland
9,077,001
75,000
5,000
6,000
–
2,400
2,500
6,000
1,000
760
5,600
(2,000,000)
7,077,001
75,000
11,000
7,000
760
8,000
2,500
Georgina Williams holdings as at the date of resignation were 8,000 shares
11. Remuneration report voting at Annual General Meeting
Lifestyle Communities Limited received 99.24% of votes in support of its
remuneration report at the 2021 Annual General Meeting.
At Lifestyle Communities we think of our team as our family. And
we want to support them as they grow their own family.
Key features of our Growing your Family Policy
Primary carer
Secondary carer
✔ No minimum service period
✔ 18 weeks paid leave at full pay
✔ Option to apply for unpaid leave of
✔ No minimum service period
✔ 8 weeks paid leave at full pay
✔ Option to apply for unpaid leave of
up to 24 months
up to 24 months
✔ 10 keeping in touch days at full pay
✔ 20 days paid transition leave
if transitioning back after
paid leave ends
✔ Continued payment of
superannuation whilst on leave
(paid or unpaid)
65
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Lifestyle Communities Annual Report 2022 REMUNERATION REPORT
REMUNERATION REPORT
67
Lifestyle Communities Annual Report 2022
68
Mother’s Day Classic event
AUDITOR’S INDEPENDENCE DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
Lifestyle Mt Duneed
Auditor’s Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Lifestyle Communities Limited for the year ended 30 June 2022, I
declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Lifestyle Communities Limited and the entities it controlled during the
period.
Andrew Cronin
Partner
PricewaterhouseCoopers
Melbourne
17 August 2022
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.
69
70
Lifestyle Communities Annual Report 2022
AUDITOR’S INDEPENDENCE DECLARATION
Sunset over Lifestyle Bittern
AUDITOR’S INDEPENDENCE DECLARATION
71
Lifestyle Communities Annual Report 2022
72
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Consolidated Statement of Profit
or Loss and Other Comprehensive
Income
For the year ended 30 June 2022
$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
JobKeeper
Total management and other revenue
Fair value adjustments
Less expenses
Development expenses (sales and marketing)
Management rental expenses
Deferred management fee expenses
Utilities expenses
Corporate overheads
Employee share scheme
IT Implementation costs
Tyabb planning application
Finance costs
Profit before income tax
Income tax expense
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
Profit from continuing operations
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.
2022
180,291
(142,844)
37,447
29,712
10,906
3,311
186
–
44,115
92,600
(8,619)
(12,694)
(1,985)
(3,436)
(13,245)
(2,876)
(1,595)
(1,086)
(1,600)
127,026
(38,155)
88,871
85.40
85.06
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)
(10,522)
(1,359)
–
–
(1,462)
130,560
(39,449)
91,111
87.30
87.06
Consolidated Statement of Financial
Position
For the year ended 30 June 2022
$000’s
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets 1
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 1
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
Note
2022
2021
4.3
2.6
3.3
2.7
3.3
2.7
3.4
3.1
2.8
2.4
5.2
2.8
4.4
5.2
2.4
4.5
4.6
4.6
1,893
963
86,755
1,230
90,841
48,924
1,275
14,610
850,247
314
915,370
1,006,211
104,756
269
1,404
961
107,390
55,148
245,000
136
310
144,770
445,364
552,754
453,457
57,726
6,028
389,703
453,457
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
1. At 30 June 2022 the ratio of current assets to current liabilities is negative. This is due to an accrual in trade payables for four parcels of land which will
settle in the 2023 financial year. The settlement of this land will be funded using the headroom in the existing debt facility.
The above statement should be read in conjunction with the accompanying notes.
73
74
Lifestyle Communities Annual Report 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Changes
in Equity
For the year ended 30 June 2022
Consolidated Statement of
Cash Flows
For the year ended 30 June 2022
2022
$000’s
Balance at 1 July 2021
Profit for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Treasury shares purchased
Vesting of treasury shares
Employee share scheme expense
Employee share trust contribution
Dividends paid or provided for
Balance at 30 June 2022
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
Note
Contributed
equity
63,859
Reserves
3,472
–
–
(6,256)
123
–
–
–
57,726
–
–
–
(123)
2,876
(197)
–
6,028
Contributed
equity
63,784
Reserves
2,188
–
–
75
–
–
63,859
–
–
(75)
1,359
–
3,472
4.7
Note
4.7
Retained
earnings
310,764
88,871
88,871
–
–
–
–
(9,932)
389,703
Retained
earnings
225,401
91,111
91,111
–
–
(5,748)
310,764
Total
equity
378,095
88,871
88,871
(6,256)
–
2,876
(197)
(9,932)
453,457
Total
equity
291,373
91,111
91,111
–
1,359
(5,748)
378,095
The above statement should be read in conjunction with the accompanying notes.
Note
2.4
2.1
2.5
$000’s
Cash flow from operating activities
Receipts from customers
Payments to suppliers and Employees 1
JobKeeper received
Income tax paid
Interest received
Interest paid
Net cash provided by/(used in) operating activities
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
Purchase of treasury shares for employee share scheme
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
2022
243,346
(187,306)
–
(9,059)
35
(5,284)
41,732
(3,067)
(77,599)
(80,666)
(285)
(6,256)
55,000
(9,932)
38,527
(407)
2,300
1,893
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
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 FY22 payments to suppliers and Employees includes $43.5 million of such costs (FY21: $60m).
The above statement should be read in conjunction with the accompanying notes.
75
76
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 30 June 2022
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.
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 Arrangement
Under AASB 11 Joint Arrangement 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 JobKeeper income in
March 2020 and recognised income from April 2020
to September 2020.
(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
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 Margin
Development expenses (sales,
marketing, and project management)
2022
401
2021
255
180,291
102,716
(142,844)
(81,338)
37,447
20.8%
(8,619)
21,378
20.8%
(6,466)
New home settlements were 401 in FY22 (FY21:
255) and this, combined with a change in home
and project mix, has translated into higher revenue
and gross profit from home settlements. Cost of
sales includes $52.1m for the share of community
infrastructure sold to each homeowner and
expensed upon settlement (FY21: $28.1m).
77
78
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
(ii) Community Operations
Rental revenue is derived under the Site Lease
Agreement granting the homeowners a right to
use the Land for their property for 90 years. 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.
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 homes under management
at 30 June
2022
3,193
2021
2,792
$000’s
Number of resales
Rental revenue
29,712
25,043
Community operating expenses
(12,694)
(11,203)
Net Community surplus
Margin
17,018
57.3%
13,840
55.3%
Rental revenue and community operating
expenses both increased during FY22 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. The gross margin increased
due to the status of new communities. Rent
does not commence until the clubhouse opens
however costs commence earlier, which had
a dilutive impact on the margin in FY21 due to
the number of communities operating prior to
clubhouse opening.
2022
143
10,906
(1,985)
2021
105
7,342
(1,596)
Deferred management fees
Deferred management fee expenses
156 resale settlements were achieved in FY22
(FY21:121) of which 143 resales attracted a
deferred management fee (FY21: 105). 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. 2.3% of homeowners that settled in
FY22 used the Smart Buy Guarantee compared
with 4.3% in FY21.
At the end of FY22 there were 15 resale homes
available for sale and 27 resale homes sold and
awaiting settlement across the communities (21 of
these will attract a DMF).
Deferred management fee expenses are expenses
incurred to assist with sales and marketing of
resale homes.
(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
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
(iv) Utilities revenue
Lifestyle Communities operates embedded
networks for electricity, water and gas (where
applicable at each community). Utilities are
individually metered, 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
2022
3,311
2021
2,732
(3,436)
(2,787)
Utilities revenue is billed to homeowners monthly
and recorded as revenue in the respective month.
(v) JobKeeper
$000’s
JobKeeper
2022
–
2021
802
The Company received $802k JobKeeper funds
in FY21. 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
Finance revenue
2022
35
2021
23
(b) 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
2022
4,620
2021
3,065
(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
Employee Share Scheme
2022
13,245
2,876
2021
10,522
1,359
Corporate costs increased compared to the prior
period due to increased resources required to
support business growth, and increased insurance
costs as the portfolio and team grows.
The cost of the employee share scheme increased
due to share price growth impacting the fair value
of the options at the time of the granting of the
FY22 options and the introduction of the long-
term incentive scheme for the leadership team.
(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 FY22, including commitment fees, was
2.23% down from 2.45% in FY21.
(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.
$000’s
Interest on secured loans
Amortisation of loan facility fees
2022
1,218
382
2021
1,237
225
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.
79
80
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
2.2 Fair Value Adjustments
Uplift in value arising from settled
homes during the year (401 new home
settlements FY21: 255)
The uplift created as a result of the
contractual rent increase
Movements as a result of changes to
valuation assumptions
Total Fair Value Adjustment
FY22
$ million
FY21
$ million
41.9
21.6
Treasury shares are purchased and held in an employee
share trust to satisfy options issued to employees
under the employee share scheme. It remains the
company’s intention to settle all outstanding options
with equity purchased on market rather than issue
new equity.
11.5
39.2
92.6
8.8
78.2
108.6
Income Tax Expense
2.4
Current income tax expense 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.
(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.
2.3 Earning per share
The following reflects the income and weighted
average number of shares used in the basic and diluted
earnings per share computations:
(a) Earnings used in calculating earnings per share
$000’s
Net profit
2022
88,871
2021
91,111
(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
2022
104,545
(484)
104,061
2021
104,545
(178)
104,367
424
283
104,485
104,650
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.
The over provision of $0.8m relates to the change in
tax legislation during the Covid period which allowed
for an instant asset write-off for the period March
2020 until 31 December 2020.
Deferred tax balances
Deferred tax assets and liabilities are recognised for
temporary differences at the applicable tax rates
when the assets are expected to be recovered or
liabilities are settled. No deferred tax asset or liability
is recognised in relation to temporary differences
if they arose in a transaction, other than a business
combination, that at the time of the transaction did not
affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
when it is probable that future taxable amounts will
be available to utilise those temporary differences
and losses.
Current and deferred tax balances attributable
to amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation
The parent entity and its wholly owned subsidiaries
have implemented tax consolidation and have formed
an income tax-consolidated Group from 18 March
2011. This means that: each entity recognises their
own current and deferred tax amounts in respect
of the transactions, events and balances of the
entity; and the parent entity assumes the current tax
liabilities and deferred tax assets arising in respect of
tax losses, arising in the subsidiary, and recognises a
contribution to (or distribution from) the subsidiaries.
The tax consolidated Group also has a tax sharing
agreement in place to limit the liability of subsidiaries
in the tax-consolidated Group, arising under the joint
and several liability provisions of the tax consolidation
system, in the event of default by the parent entity to
meet its payment obligations.
(a) The major components of tax expense
(income) comprise:
(e) Deferred tax
Deferred tax relates to the following:
$000’s
Current tax
Deferred income tax
2022
9,581
28,574
38,155
2021
6,883
$000’s
Deferred tax assets
32,566
The balance comprises
39,449
Right of use liability
(b) Deferred income tax expense included in
income tax expense comprises
$000’s
Decrease / (increase) in deferred
tax assets
Increase in deferred tax liabilities
2022
(280)
29,854
29,574
2021
(27)
32,593
32,566
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.
(c) Reconciliation of income tax to
accounting profit:
Provision for Employee entitlements
Accruals and business expenses
Share based payments
Superannuation
Deferred tax liabilities
Interest capitalised
Investment property fair value
adjustments
Employee share scheme
Fixed assets
Right of use asset
Net deferred tax liability
2022
2021
121
381
1,110
–
10
185
439
505
210
3
1,622
1,342
1,904
142,963
1,368
115,182
709
722
94
146,392
144,770
–
157
116,707
115,365
$000’s
Accounting profit before tax
Tax
Add / (less):
Tax effect of:
2022
127,026
30%
38,108
2021
(f) Deferred tax assets not brought to account
130,560
$000’s
30%
Capital tax losses
39,168
2022
–
2021
267
Share options expensed during year
Entertainment
Income tax expense
–
47
263
18
38,155
39,449
(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
2022
1,712
9,581
(9,059)
(830)
1,404
2021
244
6,883
(5,415)
–
1,712
81
82
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
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
2022
88,871
2021
91,111
1,709
591
2,876
1,342
434
1,359
(92,600)
(108,590)
123
434
(10,437)
21,262
(194)
(308)
29,405
41,732
24
(842)
(50,431)
(594)
228
1,467
32,566
(31,926)
2.6 Trade and other receivables
$000’s
Other receivables
2022
963
2021
1,086
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)
(d)
(e)
(e)
2022
20
1,377
496
37,842
65,021
55,148
159,904
2021
45
1,742
180
15,857
25,969
50,230
94,023
(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.
Other receivables includes unbilled rental revenue
which is deducted from final resale settlements
together with an NES revenue accrual booked to
account for the timing of utility income.
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.
(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
2022
372
1,508
625
2,505
2021
413
1,273
731
2,417
(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.
(d) Other payables
Other payables includes accruals for the operations
and developments and have increased during the
year inline with the increased activity levels. Included
in other payables at 30 June is a $8.2m Bellarine
infrastructure accrual together with a $10.7m
St Leonards accrual accounting for the portion of
project expenses not yet complete on settled homes.
(e) Contracted land
Includes amounts payable on six parcels of land for
contracts entered into prior to the reporting date
(including stamp duty). Four of the six contracts,
totalling $65 million are expected to settle in the
2023 financial year which is the reason why the ratio
of current assets to current liabilities is negative. The
other two parcels of land will settle during FY24.
All purchases will be funded from existing debt
facilities. 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.
The consolidated entity operates within one operating
segment, being the property management and
development 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 2022, 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
2022
636,455
121,192
2021
493,602
34,263
92,600
108,590
Closing balance
850,247
636,455
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 FY22, eight of nineteen 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.
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 eight 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 rate adopted by two out of the
three independent valuers for the properties that were
valued in the current year.
Weekly rental rates were taken directly from the
valuations for the eight 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 3.7% rental increase that was
applied on 1 July 2022. 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 eight 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 2022. For the remaining communities
not independently valued this year, the deferred
management fee valuations remained consistent with
the prior year noting the independent valuations and
83
84
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
other market evidence supported that the valuations
had not materially changed.
forming in part the security of the Group’s loans as
disclosed in Note 4.4(d).
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,
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.
Weekly rentals ($)
FY22
209.27 – 218.82
Anticipated % expenses (as a percentage of rental income)
33.0% – 51.3%
Rental capitalisation rate (%)
Rental values per unit ($)
4.9% – 5.25%
114,394 – 161,884
115,062 – 216,724
Deferred management fee discount rates (%)
12.00% – 13.75%
13.00% – 14.25%
Deferred management fee values per unit ($)
36,000 – 88,172
36,000 – 88,172
Valuation of undeveloped land (per hectare) ($'million)
1.3 – 5.4
0.19 – 2.5
FY21
198.39 – 211.01
30.7% – 41.0%
5.5% – 5.75%
Impact on fair value
as at 30-Jun-22
Increase
Decrease
Increase
Increase
Increase
Nil
Increase
Valuation summary
Last
independent
valuation date
Jun-22
Jun-22
Jun-22
Jun-22
Jun-21
Jun-21
Jun-22
Jun-21
Jun-22
Jun-21
Jun-21
Jun-21
Jun-22
Jun-21
Jun-21
Jun-21
Jun-21
Dec-20
Aug-21
Brookfield
Seasons
Warragul
Casey Fields
Shepparton
Chelsea Heights
Hastings
Lyndarum
Geelong
Officer
Berwick Waters
Bittern
Ocean Grove
Mt Duneed
Kaduna Park
Wollert North
Deanside
St Leonards
Meridian
Pakenham East
Clyde
Woodlea
Cowes
Merrifield
Ocean Grove II
Bellarine
Cap rate (%)
DMF discount rate (%) Net rental per home
Valuation ($m)
FY21
5.60%
5.60%
5.60%
5.60%
5.50%
5.75%
5.50%
5.60%
5.60%
5.50%
5.50%
5.50%
5.60%
5.50%
5.50%
5.50%
5.75%
5.60%
FY22
5.25%
5.25%
5.25%
4.87%
5.25%
5.25%
5.25%
5.25%
4.87%
5.25%
5.25%
5.25%
4.87%
5.25%
5.25%
5.25%
5.25%
5.25%
5.25%
FY22
12.0%
12.0%
12.0%
13.5%
13.8%
13.0%
13.8%
13.0%
13.5%
13.8%
13.0%
13.0%
13.5%
13.8%
13.0%
13.0%
13.0%
13.0%
14.0%
FY21
14.3%
14.3%
13.0%
13.0%
13.8%
13.0%
13.8%
13.0%
13.3%
13.8%
13.0%
13.0%
13.0%
13.8%
13.0%
13.0%
13.0%
13.0%
FY21
7,847
7,083
6,834
7,404
7,972
6,854
7,374
6,443
7,164
6,880
7,612
7,751
7,326
8,104
7,479
11,920
6,901
7,372
FY22
7,881
6,011
7,235
7,884
7,107
7,618
6,810
7,400
7,662
7,865
8,014
8,235
7,782
7,799
7,391
8,235
7,157
7,644
7,163
FY22
FY21
Land cost
43.1
24.3
31.0
25.4
54.7
24.4
28.3
25.8
28.1
28.6
43.6
42.7
40.4
27.1
25.9
22.2
27.2
30.2
23.0
1.4
22.2
16.7
45.7
22.7
35.4
29.6
57.9
26.3
29.9
30.1
36.2
30.2
46.1
45.1
49.8
37.6
32.7
30.4
34.0
42.5
26.0
15.6
22.2
16.6
31.1
21.9
42.9
11.9
6.8
3.7
2.5
3.4
3.2
6.2
7.4
7.1
5.5
7.0
12.1
7.4
17.6
11.1
14.5
14.7
25.1
29.5
23.0
15.6
22.2
16.6
31.1
21.9
42.9
11.9
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.
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.
85
86
Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Level 3: Inputs for the asset or liability that are not
based on observable market data.
000’s
30 Jun 22
Recurring Fair Value
Measurements
Investment properties
Total assets
measured at fair value
30 Jun 21
Recurring Fair Value
Measurements
Investment properties
Total assets
measured at fair value
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
850,247
850,247
850,247
850,247
636,455
636,455
636,455
636,455
(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.
Rental annuity - for all communities the Directors
have increased the rent by 3.7% to reflect the
increase that was applied on 1 July 2022. The next
rent increase is due on 1 July 2023.
For land not yet settled, the value is accrued if
the contract is unconditional. Refer to note 2.8 for
more information.
(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 2022
by 3.7%. The next rent increase is due on 1 July 2023.
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
$000’s
2022
2021
2022
2021
(c) Significant unobservable inputs used in level 3
Rental expense rate
(i)
fair value measurements
Investment properties
Rental capitalisation rates - rates were taken
directly from the valuations for the eight
communities independently valued in the current
year. In relation to the remaining eleven operating
communities (independently value in the prior
year) the Directors have adjusted the rental
capitalisation rates to reflect the rate adopted by
two out of the three independent valuers for the
properties that were valued in the current year.
Deferred management fee annuity - the valuation
for this component is taken directly from
independent valuations for the eight properties
independently valued in the current year. For the
remaining eleven communities not independently
valued this year, the deferred management fee
valuations remained consistent with the prior
year noting the independent valuations and other
market evidence supported that the valuations had
not materially changed.
+2%
–2%
(9,970)
(7,773)
(9,970)
(7,773)
9,970
7,773
9,970
7,773
Rental capitalisation rate
+0.50%
–0.50%
(27,415)
(20,539)
(27,415)
(20,539)
33,287
24,602
33,287
24,602
Deferred management fee
per unit
+5%
–5%
Land prices
(undeveloped land)
+10%
–10%
6,507
5,479
6,507
5,479
(6,507)
(5,479)
(6,507)
(5,479)
16,050
9,661
16,050
9,661
(16,050)
(9,661)
(16,050)
(9,661)
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
2022
2021
Depreciation is calculated on a straight-line basis over
the estimated useful life of the assets as follows:
48,561
38,194
86,755
4,136
44,788
48,924
46,894
36,851
83,745
1,745
39,753
41,498
$000’s
Buildings
2022
40 years
2021
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.
Total
135,679
125,243
Inventory expense
(a)
Inventories recognised as an expense for the year
ended 30 June 2022 totalled $142.8 million for the
Group (2021: $81.3 million). The expense has been
included in the cost of sales line item.
(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:
3.4 Property, plant and equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and any accumulated
impairment losses.
$000’s
Year ended 30 June 2022
Balance at the beginning of the year
Additions
Depreciation
Balance at the end of the year
At 30 June 2022 Cost
Accumulated depreciation
Net Carrying Amount
$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
Buildings
Plant and
Equipment
Motor Vehicles
Computer
Equipment
4,462
275
(129)
4,608
5,276
(668)
4,608
6,275
2,040
(1,000)
7,315
10,452
(3,137)
7,315
1,819
134
(233)
1,720
2,782
(1,062)
1,720
696
618
(347)
967
2,090
(1,123)
967
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
Total
13,252
3,067
(1,709)
14,610
20,600
(5,990)
14,610
Total
9,112
5,527
(45)
(1,342)
13,252
17,533
(4,281)
13,252
87
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Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
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.
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.
4.2 Financial Risk Management Objectives
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:
• 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.
(ii) Recognition and derecognition
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.
(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.
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
2022
2021
Cash and cash equivalents
1,893
2,300
Financial liabilities
Secured loans—bank finance
245,000
190,000
Net exposure
(243,107)
(187,700)
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:
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:
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2022
2021
2022
2021
$000s
Consolidated
+1% (100 basis points)
(1,835)
(1,237)
(1,835)
(1,237)
−1% (100 basis points)
1,835
1,237
1,835
1,237
When determining the parameters for a possible
change in interest rate risk, management has taken into
consideration the current economic environment at
balance sheet date and historical movements.
A proportion of the impact on post tax profit is
deferred due to the capitalisation of interest to
inventory which is recognised when units are sold.
Market risk
At balance date, the Group has no financial
instruments exposed to material market risks other
than interest rate risk.
Credit risk
There are no significant concentrations of credit risk
within the Group.
Credit risk arises from the financial assets for the
Group, which comprise cash and cash equivalents,
and trade and other receivables. The Group’s exposure
to credit risk arises from potential default of the
counterparty, with a maximum exposure equal to the
carrying amount of these instruments. Exposure at
balance date has been assessed as minimal as the
financial assets have been assessed as having a high
likelihood of being received.
$000’s
6 months or less1
6–12 months2
1–2 years3
3–4 years4
2022
71,253
19,987
64,430
255,829
411,489
2021
41,512
–
55,921
196,640
294,073
(1) This amount is represented by the following financial liabilities:
• $45 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;
• $21.7 million relates to trade and other payables, refer to Note 2.8 for
further detail (2021: $11.9 million);
• $3 million relates to expected interest on the secured loan; and
• $1.4 million relates to customer deposits which typically convert to
settlement within six months or less (2021: $1.7 million).
(2) $20 million relates to one parcel of land for a contract entered into prior
to the reporting date (including stamp duty) expected to settle within 6-
12 months of the reporting date.
(3) $75.1 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. $9.3 million
relates to expected interest on the secured loan.
(4) $10.8 million relates to expected interest on the secured loan which is
$245 million.
The above commitments will be funded using cash
received from new home sales and the company’s
existing debt facilities. 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.
89
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Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
2022
2021
(b) Franking account balance
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.
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, St Leonards and Meridian.
$000’s
Cash and cash equivalents
2022
1,893
2021
2,300
4.4
Interest bearing loans and borrowings
$000’s
Secured loans—bank finance
2022
245,000
2021
190,000
(a) Secured loans bank finance maturity
In August 2021, the Company extended its contracts
with The Commonwealth Bank of Australia, National
Australia Bank and HSBC Bank Australia to secure an
additional $100 million of senior debt facilities and
extend the tenor. The total facility now comprises
$375 million of senior debt facilities under a common
terms deed. The new facilities comprise a $110 million
tranche with a maturity of June 2025 and a $265
million tranche with a maturity of August 2026. As at
reporting date the Company has drawn $245 million
of the $375 million facility. There is also a $2 million
facility for bank guarantees used during developments
held with The Commonwealth Bank of Australia.
(b) Fair values
Unless disclosed below, the carrying amount of
the Group’s current and non-current borrowings
approximate their fair value.
(c) Assets pledged as security
The $375 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
• 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.
(d) 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 2021: 104,545,131)
Ordinary Shares
484,212 Treasury shares
(30 June 2021: 177,934)
Total
64,523
(6,797)
64,523
(664)
57,726
63,859
(i) Reconciliation of Ordinary shares
2022
2021
Number
$000
Number
$000
Opening balance
104,545,131
64,523
104,545,131
64,523
(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.
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
Employee share trust contribution
Closing balance
2022
310,764
88,871
(9,932)
389,703
2022
3,472
2,876
(123)
(197)
6,028
2021
225,401
91,111
(5,748)
310,764
2021
2,188
1,359
(75)
–
3,472
4.7 Dividends
(a) Dividends
$000’s
Dividends paid 4.5 cents per share
(2021: 5.5 cents per share) fully
franked
Dividends declared after balance
date and not recognised
Since balance date the directors have
approved a dividend of 6.0 cents per
share (2021: 5.0 cents per share) fully
franked at 30%
2022
4,705
2021
5,750
6,273
5,227
$000’s
Franking account balance
2022
29,519
2021
25,001
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 after an appropriate
allowance for a share of the corporate overheads. In
FY22 community management cash flows delivered
a sufficient surplus to declare and pay an interim fully
franked dividend of 4.5 cents per share ($4.7 million)
and declare a final fully franked dividend of 6.0 cents
per share ($6.3 million).
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.
5. How we remunerate our Employees
and auditors
5.1 Employee benefits expense
(i) Short term Employee benefit obligations
Liabilities arising in respect of wages and salaries,
annual leave and any other Employee benefits
expected to be settled wholly within twelve months
of the reporting date are measured at their nominal
amounts based on remuneration rates which are
expected to be paid when the liability is settled. The
expected cost of short-term Employee benefits in the
form of compensated absences such as annual leave
is recognised in the provision for Employee benefits.
All other short-term Employee benefit obligations are
presented as payables.
(ii) Long term Employee benefit obligations
The provision for Employee benefits in respect of
long service leave and annual leave which are not
expected to be settled wholly within twelve months
of reporting date, are measured at the present value
of the estimated future cash outflow to be made in
respect of services provided by Employees up to the
reporting date.
Employee benefit obligations are presented as current
liabilities in the Statement of Financial Position if
the entity does not have an unconditional right to
defer settlement for at least twelve months after
the reporting date, regardless of when the actual
settlement is expected to occur.
(iii) Retirement benefit obligations
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 6.3 of the Remuneration Report and
additional information is contained in Note 5.3 below.
$000’s
Wages and salaries
The Group is not subject to externally imposed capital
requirements.
Defined contribution superannuation
expense
Share based payments expense
Movement in employee provisions
Total
2022
11,322
988
2,876
(194)
14,992
2021
10,963
937
1,359
228
13,487
91
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Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
5.2 Employee provisions
$000’s
Current
Annual leave
Long service leave
Non current
Long service leave
2022
2021
643
318
310
871
404
190
5.3 Share based payments
(a) Recognised share based payment expenses
$000’s
Expenses arising pursuant to the EIS
2022
2,876
2021
1,359
(b) Equity Incentive Scheme, ‘EIS’
The Equity Incentive Scheme is explained in section
6.3 of the Remuneration Report.
(c) Shares granted pursuant to the EIS
The following table outlines shares granted pursuant
to the EIS:
(Maximum potential)
Granted as
compensation
Value at
grant date ($)
149,000
864,200
Forfeited/
lapsed
No.
–
%
–
Value at
grant
date (final
entitlement)
Final
entitlement
Vested
Balance at
30 June 2022
No.
%
Exercised
Vested &
exercisable
Unvested
149,000
864,200
149,000 100% (80,353)
68,647
-
166,734
1,879,092
(6,750)
(4)%
–
–
143,984
86% (31,342)
112,642
16,000
300,481
6,558,159 (73,563)
(24)%
226,918
4,954,503
–
–
–
–
226,918
FY19 Options -
granted Nov 2019
FY21 Options –
granted Nov 2020
FY22 Options –
granted Nov 2021
All options issued in relation to the employee incentive scheme for FY20 have
lapsed as the performance hurdles were not met.
$000’s
Opening balance
Issued during the year
Exercised during the year
Forfeited/lapsed during the year
Closing balance
2022
283
300
(79)
(80)
424
2021
131
178
(14)
(12)
283
Of the 242,918 unvested options, 113,246 are planned
to vest in September 2022, 52,745 are planned to vest
on 30 June 2023, and 38,463 are planned to vest on
30 September 2024 and 38,464 are planned to vest
on 30 June 2025. All unvested options have ongoing
service, competency and behavioural requirements
and vesting is at the discretion of the Board.
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 $19.58 and the expiry date for all options
outstanding at the end of the year is 10 years from the
date of grant.
292,984
(111,695)
181,289
242,918
5.4 Auditors remuneration
$000’s
2022
2021
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.
185
171
41
104
226
275
The auditor of Lifestyle Communities Limited is
PricewaterhouseCoopers who were appointed on the
18th November 2019.
6. How we structure the business
6.1 Related party disclosures
(a) Ultimate parent
Lifestyle Communities Limited is the ultimate
Australian parent entity.
Subsidiaries
(b)
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
2022
%
2021
%
2022
$
2021
$
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 arrangement
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 above-mentioned 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.
93
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Lifestyle Communities Annual Report 2022 NOTES TO THE FINANCIAL STATEMENTS
THE DIRECTOR’S DECLARATION
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
2022
2021
262,450
264,570
226,618
228,643
(50,622)
(29,347)
(191,456)
(157,772)
57,727
6,028
9,359
73,114
13,751
62,732
3,472
4,667
70,871
7,474
–
7,474
Total comprehensive income
13,751
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.
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
2022
35,551
142,204
2021
30,059
120,237
Greater than 5 years
2,836,150
2,406,086
Total minimum lease payments
3,013,905
2,556,382
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 $269 million. These commitments include future
construction costs committed for Kaduna Park, Mount
Duneed, Deanside, Wollert, St Leonards, Meridian
and Woodlea.
7.3 Contingencies
There are no contingencies at reporting date.
7.4 Events Occurring After the Reporting Date
In July 2022, the Company completed planned
settlement on contracted land at St Leonards. This
settlement was funded out of existing debt facilities
and increased the drawn debt to $266 million.
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.
The Director’s Declaration
The directors of the Company declare that:
1. The consolidated financial statements and notes for the year ended 30 June 2022 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 Managing Director 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.
These non-cancellable leases have remaining terms of
between 81 and 90 years. All leases include a clause
to enable upward revision of the rental charge on an
annual basis according to prevailing market conditions.
Philippa Kelly
Chair
James Kelly
Managing Director
Melbourne, 17 August 2022
95
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Lifestyle Communities Annual Report 2022 THE DIRECTOR’S DECLARATION
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 2022 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2022
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
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.
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:
−− 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 $4.4 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
adjusted for the above items,
because in our view, it is most
97
98
Lifestyle Communities Annual Report 2022
THE DIRECTOR’S DECLARATION
THE DIRECTOR’S DECLARATION
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
Fair valuation of investment properties
(Refer to note 3.1) [$850.2 m]
We performed the following procedures, amongst others:
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
operating and capital expenditure
deferred management fee values per
unit.
The Group’s valuation policy requires 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.
• Developed an understanding of the relevant
internal controls associated with the Group’s
approach to fair valuation of investment
properties and assessed compliance with its
policy on external valuations and rotation of
valuation firms.
•
•
For properties subject to external valuations, we
agreed the fair values recognised in the financial
report to the external valuations and assessed
the competency, capability and objectivity of the
relevant valuers.
Together with PwC real estate valuation experts,
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.
• Assessed the methodology used in the internal
valuations and agreed them to the values
adopted in the financial report.
•
Performed tests to assess the appropriateness of
certain input data used in the valuations. These
tests included, amongst others:
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.
o For a sample of contracts with residents
across the portfolio, comparing the
rental income used in the valuation to
underlying contracts.
o For a sample, comparing data for
operating and capital expenditure and
resident data used in the valuations to
observable historic data maintained by
the Group.
•
Together with input from PwC real estate
valuation experts, 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 2022, 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
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100
Lifestyle Communities Annual Report 2022
THE DIRECTOR’S DECLARATION
ASX ADDITIONAL INFORMATION
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of 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 55 to 65 of the directors’ report for the
year ended 30 June 2022.
In our opinion, the remuneration report of Lifestyle Communities Limited for the year ended 30 June
2022 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
17 August 2022
ASX Additional Information
On-Market Buyback
There is no current on-market buy-back in relation to
the Company’s securities.
Restricted Securities
There is no restricted securities on issue at
30 June 2022.
(c) The number of shareholders by range of units
and unmarketable parcel holders
Total
holders
% of issued
capital
Units
2,153
1,007
201
229
35
726,479
2,464,228
1,464,486
6,698,634
0.7%
2.4%
1.4%
6.4%
93,191,304
89.1%
3,625
104,545,131
100.0%
294
2,310
0.0%
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
$16.64 per share
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 2022.
(a) Distribution of equity securities
(i) Ordinary share capital
104,545,131 fully paid ordinary shares are held
by 3,625 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
7,077,001
6.77% 14 September 2021
Australian Super
8,889,379
8.50% 10 March 2021
Challenger Limited
7,507,284
7.18% 25 January 2022
Voting rights
At meeting of members or classes of members :
(a) each member entitled to vote may vote in person
or by proxy, attorney or respective:
(b) on a show of hands, every person present who is a
member or proxy, attorney or representative of a
member has one vote; and
(c) on a poll, every person present who is a member
or a proxy, attorney or representative of a
member has:
(i) for each fully paid share held by person, or
in respect of which he/she is appointed a
proxy, attorney or representative, one vote
for the share;
(ii) for each partly paid share, only the fraction of
one vote which the amount paid ( not credited)
on the share bears to the total amounts
paid and payable on the share ( excluding
amounts credited).
Subject to any rights or restrictions attached to any
shares or class of shares.
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Lifestyle Communities Annual Report 2022
ASX ADDITIONAL INFORMATION
ASX ADDITIONAL INFORMATION
(d) Twenty largest holders of quoted equity securities
Corporate Information
1
2
3
4
5
6
JP Morgan Nominees Australia Pty Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Brahman Pure Alpha Pte Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
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