ANNUAL REPORT
2019/2020
Contents
n OUR BUSINESS
n FY20 PERFORMANCE
n NSR STRATEGY
n NSR PORTFOLIO
n CHAIRMAN & MANAGING DIRECTORS’ REPORT
n INVESTMENT PARTNERS
n THE YEAR IN REVIEW
n BOARD OF DIRECTORS
n CORPORATE GOVERNANCE
n DIRECTORS’ REPORT
n FINANCIAL STATEMENTS
n INVESTOR RELATIONS
n CORPORATE DIRECTORY
Important Information
ABOUT THIS REPORT
ENTITIES
Welcome to National Storage REIT’s 2020 Annual
Report which reports our performance for the
financial year 1 July 2019 – 30 June 2020.
THE 2020 REPORTING SUITE INCLUDES:
Annual Report – a review of FY20 performance,
strategy and governance.
Financial Report – FY20 financial accounts and
detailed financial performance.
All of NSR’s reporting is available online at
www.nationalstorageinvest.com.au.
National Storage Holdings Limited ACN 166 572
845 (“NSH” or the “Company”) National Storage
Property Trust ARSN 101 227 712 (“NSPT”) together
form the stapled entity National Storage REIT (“NSR”
or the “Consolidated Group”).
RESPONSIBLE ENTITY OF NSPT
National Storage Financial Services Limited (NSFL)
ACN 600 787 246 AFSL 475 228
Level 16, 1 Eagle Street, Brisbane QLD 4000
Sustainability Report – outlines NSR’s approach to
sustainability. The 2020 Sustainability Report
will be released prior to National Storage REIT’s AGM
and will be available online at
www.nationalstorageinvest.com.au at that time.
DISCLAIMER
This is the Annual Report for National Storage REIT which comprises the
combined assets and operations of National Storage Holdings Limited
(ACN 166 572 845) (“NSH”) and the National Storage Property Trust (ARSN 101
227 712) (“NSPT”). This report has been prepared by NSH and NSFL (ACN 600 787
246 AFSL 475 228) as responsible entity for NSPT. National Storage REIT (ASX: NSR)
currently has stapled securities on issue on the Australian Securities Exchange
(“ASX”) each comprising one unit in NSPT and one ordinary share in NSH
(“Stapled Securities”).
The information contained in this report should not be taken as financial
product advice and has been prepared as general information only without
consideration of your particular investment objectives, financial circumstances
or particular needs. This report is not an invitation, offer or recommendation
(express or implied) to apply for or purchase or take any other action in respect
of Stapled Securities.
This report contains forward looking statements and forecasts, including
statements regarding future earnings and distributions. These forward looking
statements and forecasts are not guarantees of future performance, and
involve known and unknown risks, uncertainties and other factors, many of
which are beyond the control of NSH and/or NSFL, and which may cause
actual results or performance to differ materially from those expressed or implied
by the forward looking statements and forecasts contained in this report.
No representation is made that any of these statements or forecasts will come
to pass or that any forecast result will be achieved. Similarly, no representation
is given that the assumptions upon which forward looking statements and
forecasts may be based are reasonable. These forward looking statements and
forecasts are based on information available to NSH and/or NSFL as of the date
of this report. Except as required by law or regulation (including the ASX Listing
Rules) each of NSH and NSFL undertake no obligation to update or revise these
forward looking statements or forecasts.
Certain financial information in this report is prepared on a different basis to the
Financial Report, which is prepared in accordance with Australian Accounting
Standards. Any additional financial information in this report which is not
included in the Financial Report was not subject to independent audit or review
by Ernst & Young.
Annual Report 2019 / 2020
3
Our Business
National Storage is Australasia’s largest self-storage
provider, tailoring self-storage solutions to over 70,000
residential and commercial customers at 194 storage
centres across Australia and New Zealand. National
Storage REIT is the only publicly listed, pure play,
fully integrated, owner and operator of self-storage
centres in Australasia.
The National Storage offering spans self-storage,
business storage, climate-controlled wine storage
and trading, vehicle storage, vehicle and trailer
hire, packaging supplies and insurance. In addition
to the traditional self-storage offering, National
Storage provides value-add services for businesses
including receipt and dispatch, corporate account
management, forklifts and pallet jacks, and versatile,
adaptable spaces to suit customers' needs.
Storage centre
reflects our
Each National
commitment to quality, convenience and service.
At National Storage, you can expect secure,
clean and modern premises and a team of
professionals trained in the exacting task of providing
efficient storage.
Annual Report 2019 / 2020
5
FY20 Performance
Financial Highlights
$177.9m
Total Revenue
$121.8m
IFRS Profit
$67.7m
Underying Earnings1
8.3cps
Underlying Earnings
per Stapled Security
8.1cps
Distribution per
Stapled Security
$2.28b
Assets Under
Management (AUM)
FY19: $159.2m
FY19: $144.8m
FY19: $62.4m
FY19: 9.6cps
FY19: 9.6cps
FY19: $1.95b
12%
16%
9%
13.5%
15.6%
17%
Operational Highlights
188
Number of Centres
(30 June 2020)
946,000
Square Metres of Net
Lettable Area
95,600
Number of
Storage Units
77.8%
Like-for-like
Occupancy2
$195m
Like-for-like Revenue
per Available Metre
84.7%
New Zealand
Occupancy
FY19: 169
FY19: 887,000
FY19: 88,900
FY19: 81.2%
FY19: $203m
FY19: 85.7%
19
59,000
6,700
3.4%
4%
1%
Capital Strength
$2.64b
Total Asset Value
25%
Gearing
2.8
Weighted Average
Debt Tenor
$1.65
Net Tangible Assets
per Stapled Security
FY19: $2.39b
FY19: 33%
FY19: 4.0
FY19: $1.63
250m
8%
1.2 years
1%
1 Underlying earnings is a non-IFRS measure (unaudited).
2 Same centre 30 June 2018 (105 centres), excluding
WIne Ark, New Zealand and developng centres.
Annual Report 2019 / 2020
7
NSR Strategy
ORGANIC
GROWTH
ACQUISITIONS
DEVELOPMENT
AND EXPANSION
TECHNOLOGY
AND INNOVATION
NSR achieves organic
growth through
a combination of
occupancy and rate
increases assessed
on an individual
centre basis
NSR has executed
over 120 high-quality
acquisitions since its
IPO in 2013 – a growth
rate unmatched in the
Australasian market
NSR has a highly
developed and proven
in-house expertise which
enables it to identify,
negotiate and deliver
strategic development
and expansion projects
NSR leads the Australasian
storage industry with
new technology and
innovation projects
providing an important
competitive advantage
over its peers
Annual Report 2019 / 2020
9
9
FOUR PILLARS OF GROWTH NSR Portfolio
The National Storage portfolio continues to grow
across Australia and New Zealand with storage
centres conveniently located in capital cities and
regional areas that exhibit drivers of storage demand.
As at 30 June 2020.
*Map not to scale.
11
Annual Report 2019 / 2020 Portfolio Statistics
National Storage Bundall
PORTFOLIO DIVERSIFICATION BY NLA
PORTFOLIO DIVERSIFICATION BY VALUE
QLD
NSW
ACT
VIC
SA
WA
TAS
NT
NZ
28%
14%
3%
18%
6%
14%
2%
2%
13%
QLD
NSW
ACT
VIC
SA
WA
TAS
NT
NZ
27%
16%
4%
25%
5%
9%
2%
1%
11%
PORTFOLIO BY NLA
JUNE 2020
PORTFOLIO BY NLA
JUNE 2020
North Queensland
Sunshine Coast / Noosa
Gold Coast
Brisbane
Sydney
Canberra
Melbourne
Geelong
Adelaide
Tasmania
Perth
Darwin
Wollongong
Central Coast (NSW)
TOTAL
45,000
28,700
67,500
129,500
88,700
26,300
151,200
12,100
52,300
17,300
139,100
17,000
19,500
28,500
822,700
PORTFOLIO VALUATION
NSR Portfolio Vaue $2.28 billion
Weighted Average Primary Cap Rate 6.49%
Auckland
Hamilton
Wellington
Christchurch
Dunedin
Regional NZ
TOTAL
18,000
22,600
34,900
18,600
17,800
11,600
123,500
FY20 PORTFOLIO
COMPOSITION
JUNE 2020
Freehold
Leasehold
Managed
Licensed
TOTAL
170
14
2
2
188
13
Annual Report 2019 / 2020 Chairman &
Managing Directors’ Report
The 2019-2020 year has been, by any estimation, an
extraordinary year for all of us - no less so for NSR.
Our company has faced, along with the rest of
the world, many challenges, yet has continued
to deliver highly beneficial outcomes
for all
stakeholders. We have focused on our core “Four
Pillars” growth strategy - combining organic growth,
acquisitions, development and expansion activity
with a strong overriding
focus on technology
and innovation.
Over the last 12 months our results have continued the
robust growth trajectory of previous years, growing
revenue from $159 million to $178 million, with slightly
reduced occupancy - despite some significant
operating constraints as a result of the COVID-19
pandemic. Pleasingly, occupancy has rebounded
strongly post the first wave of COVID-19 and this
growth has continued through July and early August
2020. The strong performance of our business through
the COVID-19 pandemic further demonstrates the
resilience of self-storage as an asset class and the
proactive capability of the NSR team in responding
quickly and effectively to such challenges.
NSR delivered total shareholder return for FY20
of 10.1%, one of the best results of any A-REIT over
the last 12 months, and 43.9% for the 3 years to 30
June 2020.
remained united,
Operationally, our team has
relentless and strong
in the face of numerous
challenges, including recent highly publicised M&A
activity involving NSR, and the COVID-19 restrictions
which impacted all major markets in which NSR
operates. Our centre staff and head office teams
have performed admirably over this period with
all 188+ centres across Australia and New Zealand
remaining open and operational. NSR has not
requested or received any JobKeeper support and
has maintained full staffing and wage rates across
the organisation. Our staff, including centre, head
office and Senior Executive, have voluntarily taken
one day of annual leave per week throughout the
pandemic and thus made a significant contribution
to support their company at this difficult time. This
has ensured that any larger scale stand-downs
or redundancies have not been required across
the organisation, preserving the employment of
approximately 500 people across Australia and
New Zealand.
We have learnt to operate remotely using technology
to maintain our strong collaborative team-based
approach across different centres and regions, as
well as with our head office support team.
Our contact centre team has not only maintained
their performance targets over this period but
improved their conversion rates. This enabled us to
mitigate any occupancy losses during the worst of
the pandemic and then quickly return to positive
occupancy growth.
We rapidly implemented a contact-free move-in
process, allowing customers to book a storage unit,
e-sign their agreements and move in without any
direct physical staff contact. This has proven to be
extremely successful and very popular with many
customers moving in over the COVID-19 period and
beyond. Likewise, our new online box shop with boxes
and packaging ordered online and delivered to
your door has significantly increased packaging sales
over recent months.
Our acquisition activity has continued at pace,
with 22 acquisitions totalling $218 million executed
and integrated into the NSR portfolio over the
In addition, we have settled
last 12 months.
$134 million of new acquisitions since 1 July 2020
and have a further $100 million currently under
active negotiation. We have entered promising
in
new markets and expanded our coverage
Melbourne and Sydney as well as consolidated
our position as Australia and New Zealand’s
leading provider of tailored self-storage solutions.
From a development and expansion perspective,
NSR has 15 projects ranging from concept, to nearing
completion. Our commitment to industry leading
technology means that we are adopting the latest
in high tech innovations into new buildings including
our Bluetooth Smart Access keyless entry system
recently launched at our new Robina centre on the
Gold Coast. Our delivery methodology continues
to include on-balance sheet development and
expansion projects, joint ventures, turnkey and build-
to-own arrangements. FY20 delivered 5 new projects,
on time and on budget and this is a testament to our
accomplished development team.
NSR’s continuing focus on harnessing technology
and innovation to assist its business has been critical
to our success over the last 12 months. The ability
to react quickly to the challenges of COVID-19
and facilitate our staff working remotely, including
operating from three decentralised contact centre
locations, was pivotal in mitigating risks associated
with COVID-19. NSR’s new website, together with
other significant improvements to our technology
strategy, has further enhanced the robust nature of
our operating platform which supports our continued
growth into the future.
Our commitment to quality ESG outcomes continues
with solar PV systems now installed at over 120
centres. Phase 2 of this program is embracing other
energy efficient initiatives including LED lighting and
an expanded solar foot-print. This program will result
in further operational efficiencies minimising NSR's
environmental impact.
The achievement of the 2020 Canstar Blue Award
for Australia’s most satisfied self-storage customers
is a testament to NSR's commitment to excellence
in customer service and the provision of best value
storage solutions across Australia.
During the year we continued to evolve the suite
of employee benefit offerings to NSR employees,
leave program which
including a parental
considerably exceeds
the statutory allowance
provided by the Federal Government.
Annual Report 2019 / 2020
15
recently
in a strong position, having
From a capital management perspective NSR
is
raised
approximately $348 million by way of an institutional
placement and up-scaled security purchase plan.
This has reset NSR’s balance sheet and fortified
our financial position during these uncertain times.
We are well advanced in deploying this capital
into income producing core storage investments
across a number of acquisition opportunities and
development projects.
We would like to formally acknowledge the strong
guidance provided by our independent directors
and executive management
this
like to
most challenging year. We would also
express our gratitude to our staff, securityholders and
other stakeholders for their ongoing support without
which the above achievements would not have
been possible.
team during
Laurence Brindle
Independent Non-Executive Chairman
Andrew Catsoulis
Managing Director
National Storage Robina
Annual Report 2019 / 2020
17
Investment Partners
SPACER
National Storage has been an investor in Spacer since
2017. Spacer.com.au is Australia’s premier peer-to-
peer marketplace for self-storage, leveraging existing
infrastructure and assets by linking hosts (people
with space) with renters (people who need space).
Parkhound is a Spacer company and is the #1 parking
marketplace and app in Australia, helping both local
residents who have unused parking spaces, and
commercial property and carpark operators increase
utilisation whilst saving consumers time and money.
National Storage strives to be a leader in industry
evolution with its digital transformation and saw an
opportunity in partnering with Spacer given the rapid
growth of the sharing economy. The investment was
a strategic decision to stay ahead of any impacts of
disruption and technology on the storage industry.
National Storage
Fremantle
to work with
its
National Storage continues
current
investment partners, and engage with
a number of new investment partners, to assess
options for future acquisition, development and
redevelopment opportunities.
PERTH DEVELOPMENT PORTFOLIO
The Perth Development Portfolio is a construction
and management arrangement with one of Perth’s
leading self-storage construction companies, Parsons
Group. This venture continues to reinforce the
National Storage brand as a prominent player in the
Perth market. Various sites in and around Perth have
been identified as part of the arrangement, whereby
Parsons Group constructs quality self-storage centres
branded as National Storage. The arrangement will
see some centres acquired by National Storage
on completion, and others managed by Parsons
Group under the guidelines of the National Storage
operating platform. The partnership to date has
delivered multiple centres with Fremantle, Martin and
Port Kennedy added to the NSR portfolio over the
last year. The Frances Bay and Kelmscott centres are
owned by Parsons Group and managed by National
Storage. Additional centres are under construction
at East Perth and Byford. Other sites are currently in
due diligence and planning stages. National Storage
retains certain rights to purchase the assets under
this arrangement.
BRYAN FAMILY GROUP
(BFG, formerly known as Leyshon)
National Storage and BFG are currently
jointly
developing the site at Biggera Waters on the Gold
Coast with completion due in the first half of FY21.
National Storage and BFG extended their partnership
in FY20 to jointly acquire and develop a site at
Moorooka in Brisbane on which a high-quality storage
centre and service station will be developed in FY21.
National Storage Fremantle
Annual Report 2019 / 2020
19
The Year in Review
ASSET MANAGEMENT
The past year has seen a continued focus on our
revenue management platform with a
active
changeover to a new software program and provider.
The new program is predominantly automated and
uses artificial intelligence in a predictive modelling
capacity. The continued refinement of our advanced
revenue management modelling system, together
with a storage-specific data analytics platform
continues
to deliver efficiencies and enhance
scalability across the operating platform. With our
operational state structure
in place, significant
improvements were made through efficiency programs
and the rollout of a new revenue training package to
all centre and contact centre staff. Conversion rates
across all channels increased this year due to improved
data analysis and stronger operational leadership. As
the portfolio continues to grow, the NSR operating
model will continue to evolve in order to meet the
challenges of trading environments, and to optimise
operating
automation
and efficiency programs. Our ongoing strategic
partnerships with ParcelPoint and Hubbed, Australia’s
largest network of locations for parcel collection,
and U-Haul, a leading national trailer rental provider,
continue to drive foot traffic and generate awareness
of centres in local areas.
performance
through
ACQUISITIONS
National Storage has successfully transacted 20
acquisitions and 2 development sites in FY20 and
continues to pursue high-quality acquisitions across
Australia and New Zealand. The ability to acquire
and integrate strategic accretive acquisitions is one
of National Storage’s major competitive advantages
and a cornerstone of its growth strategy. This active
growth strategy also strengthens and scales the
National Storage operating platform which drives
efficiencies across the business.
NUMBER OF
CENTRES
TOTAL NLA
(SQM)
REGION
Brisbane
Gold Coast
Sunshine Coast / Noosa
Melbourne
Sydney
Perth
Launceston
Wellington (NZ)
2
2
1
6
3
3
2
1
TOTAL ACQUISITIONS
20
11,900
4,100
5,700
22,600
7,800
16,200
4,900
4,700
77,900
This year, we introduced a number of bulk buys in our
packaging range and revenue in this area has been
growing year-on-year. Other ancillary income streams
including insurance and vehicle/trailer hire continued
to increase across the year and deliver important
additional revenue to the model. The operations
management team maintain a focus on driving
Revenue per Available Square Metre (REVPAM) using
a balanced approach to rate per square metre
and occupancy growth on an individual centre and
unit type basis. At 30 June 2020, REVPAM across the
Australian portfolio on a like-for-like basis (105 owned
centres at June 2018, excluding developing centres)
was $195/sqm (June 2019: $203/sqm). Occupancy
across the portfolio on a like-for-like basis decreased
slightly to 77.8% (June 2019: 81.2%).
WINE ARK
Wine Ark, Australia’s largest wine storage provider is
part of the National Storage group and houses over
two million bottles of fine wine across 15 centres for
clients located in over 30 countries. There are few
businesses in Australia with more experience when
it comes to storing and managing premium wine.
Throughout FY20 Wine Ark continued to strengthen
in the greater
its relationship and
wine trade supporting the Wine Communicators
of Australia, Sommeliers Association of Australia,
Wine Australia and Commanderie de Bordeaux
(Australian Chapter).
involvement
21
National Storage Robina
Annual Report 2019 / 2020 MARKETING AND CUSTOMER EXPERIENCE
Growing awareness, engagement and conversion were once
again key drivers of the marketing strategy during the year.
National Storage has committed to investing in a new digital
presence in order to create a fresh, clean and simple customer
experience with a focus on ensuring that our e-commerce offering
is in line with industry best practice. The importance of delivering
an engaging and user-friendly online experience has seen the
business invest in the development of a new website. The launch
commenced in December 2019, enabling customers to book
and pay across all device types. We have since seen improved
online conversion rates and continue to user test the new site and
make changes to ensure an industry best online user experience.
This year we moved away from external digital agencies, and are
now managing our paid search, search engine optimisation (SEO)
and sponsorship campaigns internally. We employ an in-house
digital marketing team and have seen significant improvements
across all digital platforms in enquiry and conversion numbers. The
improved results combined with detailed analysis on customer
behaviour assist our decision-making process across all revenue
streams. Our improved social media and public relations strategy
has significantly increased online engagement. Our sponsorship
portfolio also continues to be an important focus, driving above
the line brand awareness and differentiation in both Australia and
New Zealand. As a result of the integration of our new Customer
Relationship Management (CRM) tool, we have commenced
regular Electronic Direct Mail (eDM) communication with
our customer databases, promoting retail campaigns and
packaging sales, along with important customer updates.
The
report.
the
sustainability
see
stand-alone
SUSTAINABILITY
release of National Storage’s
This year will
fourth
is
expected to be released by early October 2020, prior to
National Storage’s AGM and will be published online at
www.nationalstorageinvest.com.au. The
report will detail
National Storage’s performance across environmental, social
and governance aspects of the organisation as well as our
overall vision and strategy. This will ensure that we set realistic
and achievable goals and appropriate sustainability targets in
the short, medium and long-term.
report
Annual Report 2019 / 2020
Annual Report 2019 / 2020
23
23
Board of Directors
Laurence Brindle
Anthony Keane
Independent Non-Executive Chairman
BCom BE (Hons) MBA
Laurence has extensive experience in funds management, finance
and investment. Until 2009 he was an executive with Queensland
Investment Corporation (QIC). During his twenty one years with
QIC he served in various senior positions including Head of Global
Real Estate where he was responsible for a portfolio of $9 billion.
Laurence was also a long-term member of QIC’s Investment
Strategy Committee. He provides advice to a number of investment
institutions on real estate investment and funds management
matters. Laurence holds a Bachelor of Engineering (Honours) and
a Bachelor of Commerce from the University of Queensland, and
a Master of Business Administration from Cass Business School,
London where he graduated with distinction. He is a former
Chairman of the Shopping Centre Council of Australia and a former
director of Westfield Retail Trust and Scentre Group, which owns,
operates and develops Westfield shopping centres in Australia
and New Zealand. Laurence is also currently the Non-Executive
Chairman of the listed entity, Waypoint REIT. Laurence serves on the
Audit and Risk Committees and is Chairman of the Nomination and
Remuneration Committees
Independent Non-Executive Director
BSc (Maths) GradDipCorpFin
Anthony is an experienced finance and business executive with
an extensive background in banking and business management.
Prior to accepting his directorship with National Storage,
Anthony held numerous leadership roles with a major trading
bank principally in business, corporate and institutional banking.
He is actively involved in the business community through
Non-Executive Director and Advisory Board roles, and finance
advisory consultancies. He is a Director of Queensland Symphony
Orchestra Pty Ltd and EMvision Medical Devices Ltd. Anthony has
a Bachelor of Science (Mathematics) from University of Adelaide
and a Graduate Diploma in Corporate Finance from Swinburne.
He is a Fellow of the Financial Services Institute of Australasia, a
Graduate of the Australian Institute of Company Directors and
a Fellow of the CEO Institute. Anthony acts as Chairman of the
Audit and Risk Committees and is a member of the Nomination
and Remuneration Committees.
Howard Brenchley
Steven Leigh
Independent Non-Executive Director
BEc
Howard has over 30 years’ involvement in the Australian
property industry, as an analyst, investor and fund manager.
He is now a professional company director and consultant
to the property funds industry. Howard co founded Property
Investment Research Pty Ltd (PIR) in 1989, which during the 1990s
was considered a leading researcher of both listed and unlisted
property funds. In 1998 Howard was instrumental in establishing
the funds management business of APN Property Group Limited.
During this period he was responsible for the establishment and
operations of a number of funds investing both directly and
indirectly in real estate. Howard is currently a Non-Executive
Director of the ASX listed APN Property Group Limited (APD)
and is also a non executive director of APN Funds Management
Limited, responsible entity for ASX listed APN Industria REIT (ADI)
and APN Convenience Retail REIT (AQR). Until July 2017, APN
Funds Management Limited was also responsible entity for
Generation Healthcare REIT (GHC). Howard is a member of the
Audit and Risk Committees.
Independent Non-Executive Director
Grad Dip Proj Mgmt
Steven Leigh has more than 30 years’ experience in the real estate
investment management and development industry. He joined
QIC Global Real Estate in 1991 and was a key member of the senior
executive team that acquired and created through development a
portfolio of high-quality retail and commercial assets in Australia, USA
and the UK. Steven has had significant experience in the wholesale
funds management business through various market cycles and
conditions and has a strong background in retail, commercial
and industrial property with a particular focus on shopping centre
acquisitions and redevelopments. After time as the Managing Director
of Trinity Limited, and later Head of Australia for LaSalle Investment
Management, Steven re-joined QIC as Managing Director QIC
Global Real Estate in 2012 where he was responsible for the group’s
$20bn plus property portfolio. Steven is a Non-Executive Director of
ASX-listed company, Scentre Group Limited, is a founding member
of Male Champions of Change established by the Property Council
of Australia and he has qualifications in real estate valuation and
project management. Steven is a member of the Remuneration and
Nomination Committees.
Annual Report 2019 / 2020
25
Board of Directors / Executives
Andrew Catsoulis
Claire Fidler
Managing Director
BA LLB Grad Dip Project Mgmt (Hons)
A founder of the National Storage business, Andrew has over 25
years' of specific self-storage industry expertise including in the
areas of acquisitions, developments, integration and operation
of ‘greenfield’ and developed self-storage centres. Andrew is a
qualified solicitor who has been admitted to the Supreme Court
of Queensland. He has had extensive experience in the fields of
finance, commercial and property law during his tenure at major
law firms both in Australia and overseas. He is also a qualified
project manager and has considerable property development
experience both within the storage industry and in broader
markets. Andrew was instrumental in the successful acquisition
and integration of the original pre-existing Group portfolio and
led the Company through the IPO and planned and negotiated
the acquisition of the Southern Cross portfolio in 2016. He has
led the company in its growth from a single centre in 1996 to
over 190 centres today and has been primarily responsible for
charting its strategy over that period.
Executive Director & Company Secretary
LLB (Hons) BBus (Intl) GAICD FGIA
Claire was appointed an Executive Director in July 2017
and has been the principal Company Secretary of National
Storage since November 2015. She was appointed Head of
Legal & Governance in June 2020 and now oversees the legal,
governance and risk functions of the organisation. Claire holds
legal and international business qualifications and is admitted as
a solicitor of the Supreme Court of Queensland. Claire has twenty
years’ experience in corporate and commercial law, both in
private practise and in-house. She practiced in the litigation,
resources and corporate areas of two large law firms and as
Corporate Counsel and Company Secretary at Rio Tinto Coal
Australia, prior to joining National Storage. Claire has also worked
in corporate compliance with the Australian Securities and
Investments Commission. Claire is a Graduate of the Australian
Institute of Company Directors and a Fellow of the Governance
Institute of Australia and is a Non-Executive Director of Spacer
Marketplaces Pty Limited.
Chief Financial Officer
BBus CPA GAICD
in the energy sector
Stuart joined National Storage in late 2014, with extensive
experience
in coal and gas fired
power generation. He has held wide ranging finance and
including as Commercial
commercial management roles,
Manager for Energy Developments Limited. Prior to this, Stuart
was Commercial Manager on the delivery of a multi-site gas
fired power generation project and micro LNG plant. He has
in project financing, mergers and
significant experience
acquisitions and project development. Stuart holds a Bachelor of
Business, is a Certified Practising Accountant and is a graduate
of the Australian Institute of Company Directors.
Stuart Owen
Annual Report 2019 / 2020
27
Corporate Governance
The National Storage Boards are responsible
for ensuring that the organisation has an
appropriate corporate governance framework
in place to protect and enhance the entity’s
performance and build sustainable value for
securityholders. The corporate governance
framework is based on the ASX Corporate
Governance Council’s Corporate Governance
Principles and Recommendations. More
information is provided in NSR’s 2020 Corporate
Governance Statement, which can be found
online at www.nationalstorageinvest.com.au.
Annual Report 2019 / 2020
29
Directors’ Report
KEY HIGHLIGHTS
Group
Total Revenue
IFRS profit after tax
Earnings per stapled security
Underlying earnings(1)
Underlying earnings per stapled security(1)
Net operating cashflow
Distribution per security
Portfolio
Number of Centres owned/managed & licenced (Total)
Australian occupancy (2)
New Zealand occupancy
Like for like Revenue per available metre (REVPAM)(2)
Weighted Average Primary Cap Rate
Assets Under Management (AUM)(3)
Portfolio Valuation Uplift
Acquisitions / Centres(4,5)
NLA (sqm)
Balance Sheet
Total Assets(5)
Debt drawn(5)
Interest Rate Hedges(5)
Gearing
Weighted average cost of debt
Weighted average debt tenor (years)
NTA
FY20
FY19
Change
$177.9m
$121.8m
14.67cps
$67.7m
8.3cps
$89.5m
8.1cps
$159.2m
$144.8m
21.59cps
$62.4m
9.6cps
$93.3m
9.6cps
12%
(16%)
(32%)
9%
(13.5%)
(4%)
(15.6%)
At June
2020
184/4 (188)
77.8%
84.7%
$195
6.49%
$2.28b
$67m
$204m/20
946,000
At June
2019
163/6 (169)
81.2%
85.7%
$203
6.85%
$1.95b
$136m
$358m/35
887,000
At June
2020
$2.64b
$681m
$507m
25%
1.9%
2.8
$1.65
At June
2019
$2.39b
$848m
$470m
33%
3.1%
4.0
$1.63
Change
21(2) (19)
(3.4%)
(1.0%)
(4.0%)
(0.36%)
17%
(51%)
($154m)/(15)
7%
Change
10%
($167m)
$37m
(8%)
(1.2%)
(1.2)
1.2%
PRINCIPAL ACTIVITIES
NSR is the first and only internally managed and fully integrated owner and operator of self-storage
centres to be listed on the ASX. NSR is the largest self-storage owner/operator across Australia and New
Zealand, with 194 self-storage centres under operation, management or licence, tailoring storage to
over 70,000 customers.
NSR has grown its portfolio of owned, managed and licenced centres from 62 centres in December
2013 to 194 centres at the date of this Directors’ Report, with additional centres expected to settle in
the coming months. NSR now manages approximately 95,000 storage units across approximately
950,000 square metres of net lettable area in Australia and New Zealand. Assets Under Management
(AUM) have increased by 17% during the Reporting Period to $2.28 billion as at 30 June 2020.
Of the 194 self-storage properties in the NSR portfolio at the date of this report, ownership is as follows:
•
•
•
•
176 self-storage centres owned by NSPT
14 self-storage centres operated as long-term leasehold centres (Leasehold Centres)
2 third party managed centres
2 licenced branding rights centres in New Zealand
NSR operates a focused business model encompassing a “Four Pillar” growth strategy, focussing on
Organic Growth, Acquisitions, Development and Expansion with an overarching focus on Technology
and Innovation.
1 Underlying earnings is a non-IFRS measure (unaudited), see table within Operating Results for reconciliation
2 Same centre 30 June 2018 (105 centres), excluding WineArk, New Zealand and developing centres
3 Investment properties (including Assets held for sale) net of finance lease liability
4 Excluding transaction costs
5 NZD/AUD exchange rate of 1.07
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
31
Annual Report 2019 / 2020
31
BUSINESS STRATEGY
CASH MANAGEMENT
NSR’s objective is to deliver investors a stable and growing income stream from a diversified portfolio of
high-quality self-storage assets and to drive income and capital growth through active asset and
portfolio management (including the acquisition, development or redevelopment and portfolio
recycling of self-storage centres).
The key drivers of the business are:
• Organic Growth - NSR achieves organic growth through a combination of occupancy and rate
increases assessed on an individual centre basis
• Acquisitions - NSR has executed over 120 high-quality acquisitions since its IPO in 2013 – a growth
rate unmatched in the Australasian market
• Development and Expansion - NSR has a highly developed and proven inhouse expertise which
enables it to identify, negotiate and deliver strategic development and expansion projects in an
efficient and effective manner
•
Technology and Innovation - NSR leads the Australasian storage industry with new technology
and innovation projects designed to improve operational efficiency and enhance the customer
and employee experience, providing an important competitive advantage over its peers
Further details on these key business drivers can be found elsewhere in the NSR 2020 Annual Report.
REVIEW AND RESULTS OF OPERATIONS
The Financial Statements of NSR are prepared in compliance with Australian Accounting Standards
and the requirements of the Corporations Act 2001 (Cth).
OPERATING RESULTS
IFRS Profit after tax for the Reporting Period was $121.8 million with EPS of 14.67 cents. Underlying
earnings(6), increased by 9% to $67.7 million. Underlying earnings(6) per stapled security was 8.3cps for
the 2020 financial year and was impacted by: delays in joint venture development income as a result
of the takeover activity in the three months up to COVID-19; and then COVID-19, which also impacted
on short term operational results. The impact on operations was relatively minor and manifested
through a drop in total occupancy (including Let-up centres) of approximately 2.5%, which has been
recouped as at the date of this Report with total occupancy increasing 2.7% since 1 July 2020.
$m
IFRS Profit after tax
Plus tax expense/(benefit)
Plus restructure and other non-recurring costs
Plus contracted gain in respect of sale of investment property
Plus amortisation of interest rate swap reset
Less fair value adjustment
Less lease diminution on leasehold investment properties
Underlying Earnings(6)
Weighted average securities on issue (refer Note 19)
Underlying earnings per stapled security(6)
FY20
$121.8
($2.3)
$3.7
$3.0
$7.8
($63.0)
($3.3)
$67.7
815,973,324
8.3cps
FY19
$144.8
$0.3
$1.5
$3.9
$0.1
($84.7)
($3.5)
$62.4
650,319,184
9.6cps
Total revenue increased by 12% to $177.9 million. Occupancy across the June 2018 portfolio (excluding
New Zealand and developing centres) suffered as a result of COVID-19 and decreased to 77.8%, down
from 81.2% at 30 June 2019. New Zealand occupancy was also impacted by COVID-19 and
decreased to 84.7%, down from 85.7% at 30 June 2020. This was offset by strong occupancy growth in
the Let-Up centres (those recently built or expanded) resulting in total occupancy reducing by 2.5%.
These results demonstrate the highly resilient nature of self-storage as an asset class and are a
testament to the proactive response provided by NSR’s management team, which limited the impact
of losses related to the COVID-19 pandemic. Given the challenging economic conditions that have
been experienced by many of its residential and businesses customers during COVID-19, it is
encouraging to see that NSR’s portfolio has quickly returned to positive occupancy growth in June, July
and August, recovering a large percentage of the occupancy that was lost during the initial COVID-19
lockdown. Same centre revenue per available metre (REVPAM) decreased to $195/sqm from
$203/sqm at June 2019 driven by the loss in occupancy due to COVID-19. Rate remained strong at
$252/sqm, a slight reduction from $254/sqm at June 2019. The COVID-19 situation remains
unpredictable and NSR will continue to monitor the situation closely and is well positioned to respond
quickly and effectively to any ongoing impacts on operating performance.
6 Underlying earnings is a non-IFRS measure (unaudited)
Cash and cash equivalents as at 30 June 2020 were $90.4 million compared to $178.8 million at 30 June
2019, which included cash raised by the capital raise undertaken on 26 June 2019 prior to the
repayment of debt facilities. Subsequent to 30 June 2020 the majority of the cash balance has been
utilised to facilitate further acquisitions and provisioned for payment of the distribution on 7 September
2020. Net operating cashflow for the year was $89.5 million (2019: $93.3 million).
During the year NSR successfully completed a capital raising of approximately $348 million by way of an
institutional placement and a Security Purchase Plan. The purpose of the equity raising was to
strengthen the balance sheet, replenish investment capacity and provide additional funding flexibility
to ensure the organisation had certainty of funding beyond the expected period of volatility as a result
of the COVID-19 pandemic. NSR took advantage of the Temporary Extra Placement Capacity of 25%
implemented under ASX Listing Rule 18.1.
An interim distribution of 4.7 cents per stapled security ($37.0 million)] was paid on 28 February 2020 with
an estimated final distribution of 3.4 cents per stapled security ($34.4 million) declared on 16 June 2020
with a payment date of 7 September 2020, totalling a full year distribution of 8.1 cents per stapled
security, against underlying earnings(6) per security of 8.3 cents.
During the Reporting Period NSR once again offered a Distribution Reinvestment Plan (DRP) which
enables eligible securityholders to receive part or all of their distribution by way of securities rather than
cash.
For the December 2019 interim distribution approximately 22% of eligible securityholders (by number of
securities) elected to receive their distributions as securities totalling approximately $8.1 million. The DRP
price was set at $2.1377 which resulted in 3,809,728 new securities being issued.
The June 2020 final distribution has seen approximately 21% of eligible securityholders (by number of
securities) elect to receive their distributions as securities totalling approximately $7.1 million. The DRP
price was set at $1.7945 which resulted in approximately 4,000,000 new securities being issued.
NSR’s finance facilities are structured on a “Club” arrangement involving the four major Australian
banks and a major Australian superannuation fund. During the year NSR introduced JP Morgan into the
banking group to increase the available banking limits and enhance the diversity of the funding group.
JP Morgan have committed a $100 million facility which is currently in the process of having a number
of conditions precedent to drawdown satisfied. The Consolidated Group’s borrowing facilities are AUD
$930 million and NZD $227 million. As at the Reporting Date AUD equivalent of approximately $461
million was undrawn and available. NSR actively manages its debt facilities and continues to increase
these when and where required to ensure that NSR has adequate capacity for future acquisitions and
working capital requirements. NSR’s weighted average debt tenor as at the Reporting Date is 2.8
years, a reduction from 4.0 years as at 30 June 2019. Debt refinancing activities were paused through
the M&A activities and COVID-19 and have recommenced with the aim of extending NSR’s debt tenor
beyond 4 years. NSR’s gearing level at 30 June 2020 was 25% against target gearing range of 25% -
40%, providing flexibility and the ability to act expeditiously on acquisition opportunities as they arise.
NSR maintains interest rate hedges in accordance with NSR’s hedging policy. This hedging policy is
reviewed on a regular basis. Additional interest rate hedges were entered into during the year to
continue the prudent management of NSR’s interest rate risks. Following the equity raising undertaken in
May 2020 NSR took advantage of the low interest rate environment and reset its Australian and New
Zealand swap book. The cost of the reset was $14.3 million with the average swap rate reduced by
approximately 0.4%. As at the Reporting Date interest rate hedges totalling A$507 million were in place
with expiry dates ranging from 0.25 years to 6.25 years.
ACQUISITIONS AND INVESTMENTS
NSR considers its ability to acquire and integrate quality self-storage assets to be one of the key drivers
of its growth strategy and success to date. NSR’s dedicated in-house acquisitions team has continued
to identify, facilitate and transact on acquisitions that are considered to be appropriate for inclusion in
the NSR portfolio. NSR critically assess each potential acquisition against criteria such as:
•
•
•
•
location and surrounding demographics of local catchment area;
competition and potential for future competition within the primary (3km) and secondary
(5km) competitive radial areas;
exposure to passing traffic – typically a minimum of 30,000 cars per day targeted;
build quality and opportunities for value adding such as expansion potential, surplus land,
occupancy runway or potential for rate per square metre improvement; and
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
33
33
Annual Report 2019 / 2020
• proximity to major drivers of storage demand such as retirement villages, new housing
development and / or medium density apartment or townhouse developments and major
shopping centres.
The year ended 30 June 2020 was impacted by the takeover activity as well as COVID-19. Despite
these challenges NSR continued with the execution of its focused acquisition strategy with a resultant
20 new centres and 2 development sites acquired during the Reporting period, totalling approximately
$220 million. Since Reporting Date to the date of this Directors’ Report a further seven centres valued at
$134 million have settled with one additional centre valued at $5 million expected to settle by the end
of September 2020.
NSR re-values all assets each Reporting Period through a combined process undertaken by both
external valuers and the Directors valuations, based on valuations and methodologies from
independent valuers (m3 Property and Urbis). During this process the weighted average primary
capitalisation rate reduced 36 basis points to 6.49% and the value of the 30 June 2019 portfolio
increased by $67 million or 3.5%. This is despite the valuation process being undertaken at the height of
the COVID-19 crisis and this timing negatively impacting on 30 June 2020 valuations. However, the said
impact was relatively minor and trading conditions have improved considerably since the time that the
valuations were completed, with a resultant improvement in valuations expected to be experienced in
the current period (subject to any further unforeseen impacts from the COVID-19 pandemic).
Acquisitions for the Year Ended 30 June 2020
Region
Brisbane
Gold Coast
Sunshine Coast
Sydney
Melbourne
Perth
Launceston
Wellington (NZ)
Total
Number of
Centres
2
2
1
3
6
3
2
1
NLA (Sqm)
11,900
4,100
5,700
7,800
22,600
16,200
4,900
4,700
20
77,900
INVESTMENT IN JOINT VENTURES AND ASSOCIATES
NSR was a cornerstone investor in the Australia Prime Storage Fund (APSF) with an equity interest of
24.9%. APSF was established to facilitate the development and ownership of premium self-storage
centres in select major cities around Australia over the life of the fund. APSF focused its activity in inner
city markets where there has been demand for a premium storage product, developing new
institutional grade assets with state-of-the-art facilities and freehold tenure.
In July 2019 NSR contracted with APSF to purchase the remaining three assets in the fund (Albion, Kelvin
Grove and Canterbury) for $64 million, which were subsequently settled. Following the sale of the last
centre the fund was wound up.
In June 2019, NSR with Bryan Family Group (“BFG”) acquired a combined commercial and self-storage
development site at Biggera Waters on the Gold Coast. Construction of a multi-level, state-of-the-art
self-storage facility has commenced and construction is expected to be completed in late (calendar
year) 2020.
NSR has been appointed to manage the Biggera Waters project and will generate income from its
provision of a range of services including design and development, project management and
corporate administration.
LIKELY DEVELOPMENTS
NSR continues to utilise its position as Australia's first and only ASX listed, pure play, fully integrated,
sector specific, self-storage REIT to continue to execute its stated “Four Pillars” strategy. This embodies:
• organic growth through increases in rate and occupancy at an individual centre level;
• growth by acquisition of quality storage centres across Australia and New Zealand;
• development and expansion activity focused on high quality new self-storage developments in
key locations and evaluating its existing portfolio for expansion, development or re-
development opportunities, while continuing to explore portfolio recycling opportunities; and
technology and innovation – harnessing new technology and innovation to bring further
efficiencies and economies of scale to NSR’s existing business model.
•
DIVIDENDS AND DISTRIBUTIONS
NSR has paid or declared distributions totalling 8.1 cents per stapled security for the Reporting Period,
comprising:
• An estimated final distribution of 3.4 cents per stapled security for the 6 months to 30 June 2020.
The distribution is expected to be paid on 7 September 2020 and is expected to contain a tax
deferred component.
• An interim distribution of 4.7 cents per stapled security for the period 1 July 2019 to 31
December 2019 which was paid on 28 February 2020 which included a tax deferred
component.
OPTIONS OVER STAPLED SECURITIES
No options over issued stapled securities or interests in a Controlled Entity have been granted in NSR
during the Reporting Period. There are no options in stapled securities outstanding as at the date of this
report.
ENVIRONMENTAL REGULATION
NSR’s operations are not regulated by any environmental law of the Commonwealth or a State or
Territory that is enacted specifically for NSR. However, as part of its operations, NSR must comply with
broader environmental laws. NSH management on behalf of NSR has in place procedures to identify
and ensure compliance with such laws including identifying and obtaining of necessary approvals,
consents or licences.
There have been no known material breaches during the Reporting Period of any environmental laws
to which NSR is subject.
ENVIRONMENTAL, ECONOMIC AND OTHER SUSTAINABILITY RISKS
NSR recognises that its operating activities and strategic goal of delivering securityholder growth and
returns expose it to potential risks. NSR management takes a pro-active approach to risk
management/elimination and recognises the importance of a strong risk culture which is instilled and
lead by the Board and the senior executive team so as to form a core tenet of the organisation.
Risk is managed centrally to minimise potential adverse effects on the financial performance of NSR
and protect long-term securityholder value, and its broader corporate reputation. A copy of NSR’s Risk
Management Policy can be found at www.nationalstorageinvest.com.au.
The Head of Legal & Governance is responsible for management of NSR’s risk function and in turn
reports to the Managing Director and the Risk Committee. The Risk Committee is charged with risk
oversight and reports to the full Board. The full Board is then actively involved in the ultimate review of
and determination of risk to within sensible tolerances.
Potential risks faced by NSR include but are not limited to:
RISK
Strategic Risk - Poor development and or execution of business strategy by the executive
management team can lead to the risk of loss and or poor performance. To mitigate this risk,
strategies are developed by the relevant responsible executive or senior officer. These are then
reviewed and discussed, as appropriate, by other executive officers and approved by the
Managing Director. Strategic decisions of a significant nature are further put before the Board and
discussed in detail and require Board approval. The senior executive team meets a number of times
each year to discuss strategy and ensure that it remains current and appropriate. This allows
management to ensure it is employing strategies that are updated for changes in the operating
environment of the business.
Economic Conditions - Fluctuations in economic conditions including consumer confidence may
adversely impact upon demand for storage space. Material macroeconomic events occurring or
any significant trading downturns due to factors beyond the control of management have the
potential to negatively impact on forecast trading performance. The results of NSR’s operating
activities are dependent on the performance of the properties in which it invests and those it
manages on behalf of other parties. This performance in turn depends on economic factors; these
include economic growth rates, inflation rates and taxation levels. There are also industry and
location specific risks to consider, including competitor behaviour. NSR mitigates the potential
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
34
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
35
35
Annual Report 2019 / 2020
RISK
impacts of fluctuating economic conditions by seeking to maintain a strong and conservative
balance sheet and financial position.
Operational Risk - Risk of loss due to its overall operations and management of other risks exists as a
function of any operating business. NSR aims to ensure that the necessary processes, training and
supervision are in place and effected to eliminate such loss wherever possible. The risk of loss from
system failures is reduced through system backups and disaster recovery (contingency) procedures,
which aim to ensure the maintenance of NSR’s critical data availability.
General commercial property risks - Risks commonly associated with commercial property
investment apply equally to NSR, including levels of occupancy, capital expenditure requirements,
development and refurbishment risk, environmental and compliance issues, changes to government
and planning regulations, including zoning and damage caused by flood or other extreme weather
(to the extent that it is not or could not be insured against). NSR utilises a comprehensive due
diligence process when acquiring centres to mitigate or eliminate risk where possible.
Tenure - Storage agreements are typically month to month and there is no guarantee customers will
renew or that other customers will be found to take their place upon departure. To mitigate this risk,
customer relationships are carefully managed to maximise duration of stay and highly developed
marketing and management systems are in place to maximise conversion of new customer enquiries
and to continue to maintain and build occupancy at an individual centre level.
Competition - Entry by new competing storage centres or discounting by existing storage centres
may adversely impact upon occupancy and rental rates on a centre specific basis. While there are
barriers to entry for new competition, NSR constantly monitors its competitors' activities to ensure
pricing and terms remain competitive.
Valuations - Valuations ascribed to NSR’s assets will be influenced by a number of ongoing factors
including supply and demand for self-storage centres and general property market conditions.
Valuations represent the analysis and opinion of qualified experts at a certain point in time. There is
no guarantee that a property will achieve a capital gain on its sale or that the value of the property
will not fall as a result of the assumptions on which the relevant valuations are based proving to be
incorrect.
Property liquidity - Self storage centres are property based illiquid assets and subject to supply and
demand factors dependent upon prevailing market conditions. As a result it may not be possible for
NSR to dispose of assets in a timely or price accretive fashion should the need to do so arise.
Future acquisitions and expansions - NSR may consider opportunities to make further acquisitions of
self-storage assets. NSR may also develop and expand the lettable area at a number of NSR’s
centres. The rate at which NSR is able to expand will reflect market forces and the availability of
capital at the time. Forecast distributions may be affected by such actions. The risks faced by NSR in
relation to any future development projects will depend on the terms of the transaction at the time.
There can be no assurance that NSR will successfully identify, acquire and integrate further self-
storage assets, or successfully implement acquisitions on time and on budget. Furthermore, there is
no guarantee that any acquisition will perform as expected. Future acquisitions may also expose
NSR to unanticipated business risks and liabilities.
Personnel risk - NSR relies upon the expertise and experience of the senior management team. As a
consequence, if the services of key personnel were no longer available this may have an adverse
impact on the financial performance of NSR. However, NSR’s senior management team are
considered internally to be stable and committed and succession planning is undertaken
periodically by the NSH Board and Managing Director.
Interest rate fluctuations and derivative exposure - Unfavourable movements in interest rates could
lead to increased interest expense to the extent that these rates are not hedged. NSR uses
derivative instruments to hedge a percentage of its exposure to interest rates however the interest
rate movements could still result in an adverse effect on financial performance.
Workplace health and safety - There is a risk that liability arising from occupational health and safety
matters at a property in NSR’s portfolio may be attributable to NSR as the registered proprietor. To
the extent that any liabilities may be incurred by NSR, this may impact upon the financial position
and performance of NSR (to the extent not covered by insurance). In addition, penalties may be
imposed upon NSR which may have an adverse impact on NSR. NSR has a dedicated focus on
health and safety including comprehensive reporting to assist in the mitigation or elimination of such
risks and keep our team members, customers and contractors safe.
Insurance risk - There is no certainty that appropriate insurance will be available for all risks on
acceptable commercial terms or that the cost of insurance premiums will not continue to rise. Some
risks are not able to be insured at acceptable premiums. Examples of losses that are generally not
insured against include war or acts of terrorism and natural phenomena. If any of NSR’s assets are
damaged or destroyed by an event for which NSR does not have cover, or a loss occurs which is in
excess of the insured amounts, NSR could incur a capital loss and lost income which could reduce
returns for holders of stapled securities. Any failure by the company or companies providing
insurance (or any reinsurance) may adversely affect NSR’s right of recovery under its insurance.
Funding - NSR’s ability to raise funds from either debt or equity sources in the future depends on a
number of factors, including the state of debt and equity markets, the general economic and
political climate and the performance, reputation and financial strength of NSR. Changes to any of
RISK
these underlying factors could lead to an increase in the cost of funding, limit the availability of
funding, and increase the risk that NSR may not be able to refinance its debt and/or interest rate
hedges before expiry or may not be able to refinance them on substantially the same terms as the
existing facility or hedge instruments. If alternative financing is not available, this could adversely
affect NSR’s ability to acquire new properties and to fund capital expenditure, and NSR may need to
realise assets at less than valuation, which may result in financial loss to NSR.
Leasehold interests - NSR holds lease agreements with certain third parties which allow it to operate
storage centres from these properties. Lease terms for these properties are typically long (greater
than 10 years). However, there is no guarantee that these lease arrangements will be able to be
renewed upon expiry or if so on suitable terms to NSR.
Environmental issues - Unforeseen environmental issues may affect the properties in the property
portfolio owned by NSR. These liabilities may be imposed irrespective of whether or not NSR is
responsible for the circumstances to which they relate. NSR may also be required to remediate sites
affected by environmental liabilities. The cost of remediation of sites could be substantial. If NSR is
not able to remediate the site properly, this may adversely affect its ability to sell the relevant
property or to use it as collateral for future borrowings. Material expenditure may also be required to
comply with new or more stringent environmental laws or regulations introduced in the future.
Data and Cyber Attack Loss – During the course of its operations, NSR is required to handle data from
various sources including sensitive customer data. As a result, there is the possibility that data could
be either damaged or lost. This creates the risk of potential legal exposure from both commercial
third parties and regulators depending on the nature and the extent of any possible loss or damage
to the data. There is also the risk that NSR could suffer a cyber attack from a third party that could
disrupt its operations and functionality or result in the leaking of sensitive data. NSR employs state of
the art cyber security systems, processes and consultants in order to attempt to minimise this risk.
Climate Change - Extreme weather events or progressive damage from climate related causes may
cause loss to NSR through either physical impact on storage centres or disrupting operations and
attendant income. NSR has enacted a specific regular review process for its centres to ensure such
impacts or their likelihood is mitigated to the maximum extent possible. Material expenditure may
also be required to comply with new or more stringent laws or regulations introduced in the future.
Impact of COVID-19 - The events relating to COVID-19 have resulted in unprecedented restrictions
and lockdowns, including in relation to domestic and international travel and general disruption to
business activities. These restrictions have been imposed by Australian and New Zealand state,
provincial and federal governments and international governments and regulatory authorities,
and/or implemented as a matter of best practice during the ongoing crisis. While all of NSR’s centres
have remained open and operational throughout the COVID-19 pandemic, the events relating to
COVID-19 may have a material adverse effect on, or cause a material adverse change to, NSR’s
business. Given the high degree of uncertainty surrounding the extent and duration of COVID-19, it is
not currently possible to assess the full impact of COVID-19 on the NSR business. There is also
continued uncertainty as to the duration and further impact of COVID-19 including (but not limited
to) in relation to government, regulatory or health authority actions, work stoppages, lockdowns,
quarantines, travel restrictions and the impact on global economies. There is no certainty that
property values or NSR’s business activities will normalise to a level existing prior to the impact of
COVID-19 (or how long such normalisation could take). If the duration of events surrounding COVID-
19 are prolonged, NSR may need to take additional measures in order to respond appropriately.
DIRECTORS
NATIONAL STORAGE HOLDINGS LIMITED
The NSH Directors in office during the Reporting Period, or appointed prior to the date of this Directors’
Report, and continuing as at the date of this Directors’ Report are set out below.
NAME
POSITION
Laurence Brindle
Non-Executive Chairman (Appointed 1 November 2013)
Andrew Catsoulis
Managing Director (Appointed 1 November 2013)
Anthony Keane
Non-Executive Director (Appointed 1 November 2013)
Howard Brenchley
Non-Executive Director (Appointed 21 November 2014)
Steven Leigh
Claire Fidler
Non-Executive Director (Appointed 21 November 2014)
Executive Director (Appointed 18 July 2017)
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
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Annual Report 2019 / 2020
NATIONAL STORAGE FINANCIAL SERVICES LIMITED (NSFL)
NSFL was appointed as responsible entity on 10 November 2015. The Directors of NSFL in office during
the Reporting Period, or appointed prior to the date of this Directors’ Report, and continuing as at the
date of this Directors’ Report are set out below.
NAME
POSITION
Laurence Brindle
Non-Executive Chairman (appointed 18 July 2014)
Andrew Catsoulis
Managing Director (appointed 18 July 2014)
Anthony Keane
Non-Executive Director (appointed 18 July 2014)
Howard Brenchley
Non-Executive Director (appointed 8 September 2015)
Steven Leigh
Claire Fidler
Non-Executive Director (appointed 8 September 2015)
Executive Director (appointed 18 July 2017)
DIRECTORS’ QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
Boards of National Storage Holdings Limited and National Storage Financial Services Limited
Laurence Brindle, Independent Non-executive Chairman
BCom, BE (Hons), MBA
Laurence has extensive experience in funds management, finance and investment. Until 2009 he was
an executive with Queensland Investment Corporation (QIC). During his twenty-one years with QIC he
served in various senior positions including Head of Global Real Estate where he was responsible for a
portfolio of $9 billion. Laurence was also a long term member of QIC’s Investment Strategy Committee.
He provides advice to a number of investment institutions on real estate investment and funds
management matters. Laurence holds a Bachelor of Engineering (Honours) and a Bachelor of
Commerce from the University of Queensland, and a Master of Business Administration from Cass
Business School, London where he graduated with distinction. He is a former Chairman of the Shopping
Centre Council of Australia and a former director of Westfield Retail Trust and Scentre Group, which
owns, operates and develops Westfield shopping centres in Australia and New Zealand. Laurence is
also currently the Non-executive Chairman of the listed entity, Waypoint REIT.
Laurence serves on the Audit and Risk Committees and is Chairman of the Nomination and
Remuneration Committees.
Andrew Catsoulis, Managing Director
BA, LLB, Grad Dip Proj Mgmt (Hons)
A founder of the National Storage business, Andrew has over 25 years of specific self-storage industry
expertise including in the areas of acquisitions, developments, integration and operation of ‘greenfield’
and developed self-storage centres. Andrew is a qualified solicitor who has been admitted to the
Supreme Court of Queensland. He has had extensive experience in the fields of finance, commercial
and property law during his tenure at major law firms both in Australia and overseas. He is also a
qualified project manager and has considerable property development experience both within the
storage industry and in broader markets. Andrew was instrumental in the successful acquisition and
integration of the original pre-existing Group portfolio and led the Company through the IPO and
planned and negotiated the acquisition of the Southern Cross portfolio in 2016. He has led the
company in its growth from a single centre in 1996 to over 190 centres today and has been primarily
responsible for charting its strategy over that period.
Anthony Keane, Independent Non-executive Director
BSc (Maths), Grad Dip Corp Fin
Anthony is an experienced finance and business executive with an extensive background in banking
and business management. Prior to accepting his directorship with National Storage, Anthony held
numerous leadership roles with a major trading bank principally in business, corporate and institutional
banking. He is actively involved in the business community through Non-Executive Director and Advisory
Board roles, and finance advisory consultancies. He is a Director of Queensland Symphony Orchestra
Pty Ltd and ASX-listed EMvision Medical Devices Ltd. Anthony has a Bachelor of Science (Mathematics)
from University of Adelaide and a Graduate Diploma in Corporate Finance from Swinburne. He is a
Fellow of the Financial Services Institute of Australasia, a Graduate of the Australian Institute of
Company Directors and a Fellow of the CEO Institute.
Howard Brenchley, Independent Non-executive Director
BEc
Howard has over 30 years’ involvement in the Australian property industry, as an analyst, investor and
fund manager. He is now a professional company director and consultant to the property funds
industry. Howard co-founded Property Investment Research Pty Ltd (PIR) in 1989, which during the
1990’s was considered a leading researcher of both listed and unlisted property funds. In 1998 Howard
was instrumental in establishing the funds management business of APN Property Group Limited. During
this period he was responsible for the establishment and operations of a number of funds investing both
directly and indirectly in real estate. Howard is currently a non-executive director of the ASX-listed APN
Property Group Limited (APD) and is also a non-executive director of APN Funds Management Limited,
responsible entity for ASX-listed APN Industria REIT (ADI) and APN Convenience Retail REIT (AQR). Until
July 2017, APN Funds Management Limited was also responsible entity for Generation Healthcare REIT
(GHC).
Howard is a member of the Audit and Risk Committees.
Steven Leigh, Independent Non-executive Director
Grad Dip Proj Mgmt
Steven Leigh has more than 30 years’ experience in the real estate investment management and
development industry. He joined QIC Global Real Estate in 1991 and was a key member of the senior
executive team that acquired and created through development a portfolio of high-quality retail and
commercial assets in Australia, USA and the UK. Steven has had significant experience in the wholesale
funds management business through various market cycles and conditions and has a strong
background in retail, commercial and industrial property with a particular focus on shopping centre
acquisitions and redevelopments. After time as the Managing Director of Trinity Limited, and later
Head of Australia for LaSalle Investment Management, Steven re-joined QIC as Managing Director of
QIC Global Real Estate in 2012 where he was responsible for the group’s $20bn plus property portfolio.
Steven is a non-executive director of ASX-listed company, Scentre Group Limited, and is a founding
member of Male Champions of Change established by the Property Council of Australia. He has
qualifications in real estate valuation and project management.
Steven is a member of the Remuneration and Nomination Committees.
Claire Fidler, Executive Director
LLB (Hons), B Bus (Int), GAICD, FGIA
Claire was appointed an Executive Director in July 2017 and has been the principal company secretary
of National Storage since November 2015. She was appointed Head of Legal & Governance in June
2020 and now oversees the legal, governance and risk functions of the organisation. Claire holds legal
and international business qualifications and is admitted as a solicitor of the Supreme Court of
Queensland. Claire has over 10 years’ experience in corporate and commercial law in private
practice, having practiced in the litigation, resources and corporate areas of two large law firms. Prior
to joining National Storage, Claire was Corporate Counsel and Company Secretary at Rio Tinto Coal
Australia. During this time, in addition to providing legal services to the business, she was responsible for
the corporate governance and ASX compliance of one of Rio Tinto’s listed subsidiaries as well as
managing the corporate secretarial responsibilities of over 50 subsidiaries within the group and
providing joint venture support. Claire has also worked in corporate compliance with the Australian
Securities and Investments Commission. Claire is a Graduate of the Australian Institute of Company
Directors and a Fellow of the Governance Institute of Australia and is a non-executive director of
Spacer Marketplaces Pty Limited.
DIRECTORSHIPS OF OTHER LISTED COMPANIES
Directorships of other listed companies held by current Directors in the three years immediately before
the end of the financial year are as follows:
NAME
Laurence Brindle
Howard Brenchley
COMPANY
Waypoint REIT (ASX:WPR)
(Previously Viva Energy REIT (ASX: VVR))
APN Property Group (ASX:APD)
APN Funds Management Limited,
responsible entity for:
APN Industria REIT (ASX:ADI)
APN Convenience Retail REIT (ASX:AQR)
And previously Generation Healthcare
REIT (ASX:GHC)
Scentre Group Limited (ASX: SCG)
EMvision Medical Devices Ltd (ASX:EMV)
PERIOD OF DIRECTORSHIP
10/07/2016 - Current
1998 - Current
03/12/2013 - Current
27/12/2017 - Current
12/08/2011 – July 2017
04/04/2019 – Current
11/12/2018 – Current
Anthony acts as Chairman of the Audit and Risk Committees and is a member of the Nomination and
Remuneration Committees.
Steven Leigh
Anthony Keane
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
38
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
39
39
Annual Report 2019 / 2020
DIRECTORS’ INTERESTS IN NSR SECURITIES
As at the date of this Directors’ Report, the interests of the Directors (including indirect interests) in the
stapled securities of NSR were:
DIRECTOR
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Howard Brenchley
Steven Leigh
Claire Fidler
DIRECTORS’ MEETINGS
DIRECT
-
10,000
473,935
-
-
-
INDIRECT
1,523,488
198,727
13,700,314
105,866
201,009
12,500
TOTAL
1,523,488
208,727
14,174,249
105,866
201,009
12,500
The number of meetings of directors of NSH (including meetings of sub-committees of directors) held
during the Reporting Period and the number of meetings attended by each director were as follows:
DIRECTOR
BOARD
AUDIT
COMMITTEE
RISK
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Howard Brenchley
Steven Leigh
Claire Fidler
Notes:
19 (19)
19 (19)
19 (19)
18 (19)
17 (19)
19 (19)
6 (6)
6 (6)
-
6 (6)
-
-
8 (8)
8 (8)
-
8 (8)
-
-
3 (3)
3 (3)
-
-
3 (3)
-
3 (3)
3 (3)
-
-
3 (3)
-
1. Figures in brackets indicate the number of meetings held whilst the director was in office or was
a member of the relevant Committee during the Reporting Period. Figures not in brackets
indicate the number of meetings or Committee meetings that the director attended.
2. Mr. Catsoulis and Ms Fidler attend Nomination, Remuneration, Risk and Audit Committee
3.
meetings by invitation.
The Company has an Investment Committee Charter to govern an Investment Committee.
The Board has determined that at this time, the full Board will act as the Investment Committee
and therefore there are no separate Investment Committee meetings noted.
COMPANY SECRETARY
NATIONAL STORAGE HOLDINGS LIMITED
NAME
APPOINTMENT DATE
Claire Fidler
26 November 2015
Patrick Rogers
1 November 2013 (resigned 15 May 2020)
NATIONAL STORAGE FINANCIAL SERVICES LIMITED
NAME
APPOINTMENT DATE
Claire Fidler
26 November 2015
Patrick Rogers
18 July 2014 (resigned 15 May 2020)
Claire Fidler
LLB (Hons), B Bus (Int), GAICD, FGIA
Refer to page 26
Patrick Rogers (resigned 15 May 2020)
LLB, B Bus – Accounting, FGIA
CORPORATE GOVERNANCE
NSH and the Responsible Entity have their own respective Boards and constitutions. The relationship
between NSH and the Responsible Entity is governed by a Cooperation Deed and Management
Agreement that allows NSH to provide key services to NSFL as Responsible Entity in exchange for a
monthly fee. These services include finance and administrative services, property management,
provision of staff and equipment.
The NSH and Responsible Entity Boards and NSH management are committed to achieving and
demonstrating to securityholders high standards of corporate governance and to ensure NSH acts in
the best interests of its securityholders balanced with its broader community obligations.
An important component of the NSR corporate governance structure is the ASX Corporate
Governance Principles and Recommendations (the “ASX Recommendations”). A statement of the
extent of NSR’s compliance with the ASX Recommendations can be viewed on the NSR website at
www.nationalstorageinvest.com.au. Full copies of all NSR governance policies and Charters can also
be found in the Governance section of the website.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the Directors and executive officers of the Company and its
group entities to the extent permitted by law, for the amount of any liability, loss, cost, charge,
damage, expense or other liability suffered by the Director or executive officer as an officer of the
Company or group entity or as a result of having been an officer of the Company or any Group entity.
This includes any liability arising out of or in connection with any negligence, breach of duty, or breach
of trust (“Indemnity”).
However, the Indemnity does not extend to a claim in the nature of:
(a)
(b)
a challenge to any rejection of a Director’s claim by the provider of the Company’s insurance
cover; or
a cross-claim or a third-party claim for contribution or indemnity in, and results directly from, any
Proceedings in respect of which the Director has made a claim under the Indemnity.
Deeds of indemnity to effect the above have been formally entered into by the Company and each
of the Directors.
The Deeds of Indemnity require the Company to obtain a back to back indemnity to the Company
from the Responsible Entity out of the assets of the NSPT. This has been procured by the Company and
is in place. The back to back indemnity requires the Responsible Entity to indemnify the Company for
any liability under the Directors/officers indemnity to the extent that the Company is not able to meet
that obligation. The indemnity does not extend to any payment made or due as a result of a breach
by the Company of its obligations under a Director/officer indemnity or to any payment which the
Company makes voluntarily but is not due and payable under the terms of a Director/officer indemnity.
The total amount of insurance contract premiums paid for Directors and Officers insurance for NSR
(including subsidiary entities) during the Reporting Period was $1,321,118.
No insurance premiums are paid out of the assets of the NSPT in regards to insurance cover provided to
either the Responsible Entity or the auditors of the NSPT. So long as the officers of the Responsible Entity
act in accordance with the constitution and the law, the officers remain indemnified out of the assets
of the NSPT against losses incurred while acting on behalf of the NSPT. The auditors of the NSPT are in no
way indemnified out of the assets of the NSPT.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as
part of the terms of its audit engagement agreement against claims by third parties arising from the
audit (for an unspecified amount). No payment has been made or claim received by NSR to indemnify
Ernst & Young during the Reporting Period or up to the date of this report.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
40
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
41
41
Annual Report 2019 / 2020
REMUNERATION REPORT (AUDITED) – NSH GROUP
MESSAGE FROM THE BOARD
The NSH Board is committed to ensuring that its remuneration arrangements are structured to support
and reinforce NSR’s overall business strategy, are consistent with the requirements of governance
standards and meet the expectations of investors and the community at large. By linking the Short
Term Incentive (“STI”) and Long Term Incentive (“LTI”) (at risk remuneration) of executive remuneration
to the drivers that support NSR’s business strategy including financial, governance, cultural and
community measures, the remuneration of executives is aligned with the creation of long-term value for
securityholders. The Board believes that the remuneration practices of NSR should fairly and
responsibly reward Key Management Personnel (“KMP”) having regard to their individual performance,
the performance of NSH and NSPT and the broader external environment as it relates to KMP reward.
The policy also aims to provide a platform for sustainable value creation for securityholders by
attracting, motivating and retaining quality KMP.
COVERAGE OF THIS REPORT
The following remuneration report has been prepared to provide information to NSR securityholders of
the remuneration details of the KMP of NSH involved in the management of NSH and the NSPT.
Directors of the Responsible Entity do not receive any remuneration from the Responsible Entity in
respect to their roles with the Responsible Entity. However, the director fees paid by NSR take into
account the complexity involved, and additional duties required to be undertaken, in relation to the
operation of the Responsible Entity as a subsidiary of NSH and as part of the consolidated governance
group. The Responsible Entity receives a fee for management services rendered.
This information has been audited as required by section 308(3C) of the Act.
KMP are defined as “those persons having authority and responsibility for planning, directing and
controlling the major activities of NSH, the Consolidated Group and the NSPT, directly or indirectly,
including any director (whether executive or otherwise) of NSH.”
Key management personnel covered in this report are as follows:
NON-EXECUTIVE AND EXECUTIVE DIRECTORS
Laurence Brindle - Chairman (non-executive)
Andrew Catsoulis – Managing Director (“MD”) (executive)
Anthony Keane - Director (non-executive)
Howard Brenchley - Director (non-executive)
Steven Leigh - Director (non-executive)
Claire Fidler – Director & Head of Legal and Governance (“HoLG”) (executive)
KEY MANAGEMENT PERSONNEL – SENIOR EXECUTIVES
Stuart Owen – Chief Financial Officer (“CFO”)
Patrick Rogers – General Counsel and Chief Risk Officer (“GC/CRO”)*
* Pat Rogers ceased employment effective 29 May 2020 with the responsibilities previously undertaken by Mr Rogers being allocated
across the balance of the executive team.
REMUNERATION GOVERNANCE
REMUNERATION COMMITTEE AND USE OF REMUNERATION CONSULTANTS
The Remuneration Committee’s activities are governed by its Charter, a copy of which is available at
www.nationalstorageinvest.com.au.
The responsibilities of the Remuneration Committee include:
•
Formulate and recommend remuneration policies to apply to the Company’s Managing
Director, senior executives and non-executive Directors;
Formulate the specific remuneration packages for senior executives (including base salary, STIs,
LTIs and other contractual benefits);
Review contractual rights of termination for senior executives;
Review the appropriateness of the Company’s succession planning policies;
Review management’s recommendation of the total proposed STI and LTI awards;
Administering the STI and LTI awards; and
Review management recommendations regarding the remuneration framework for the
company as a whole.
•
•
•
•
•
•
The deliberations of the Remuneration Committee, including any recommendations made on
remuneration issues, are considered by the full NSH Board. In making its recommendations to the
Board, the Remuneration Committee takes into account advice from independent remuneration
advisers on trends in remuneration for KMP. The independent remuneration advisors consider a range
of factors including the specific responsibilities assumed by KMP. An independent consultant has been
engaged by the Remuneration Committee on a biennial basis in the past to assess the directors and
senior executives’ current remuneration and remuneration structure and to provide a summary on
market practice relating to executive remuneration and remuneration structures. Even though an
independent consultant would ordinarily have been appointed during the Reporting Period, as a result
of COVID-19 and the uncertainty surrounding the pandemic, the Remuneration Committee opted not
to engage a consultant during that time. Subsequent to Reporting Date the Remuneration Committee
engaged SW Corporate, an independent remuneration consultant, to provide commentary on the
remuneration arrangements currently in place for the NSR executive management team, as well as
observations about the use of equity based components within incentive plans. The Remuneration
Committee also reviewed a number of other reports and commentary through industry bodies such as
the Governance Institute and the Australian Institute of Company Directors, as well as monitoring
comparator companies, to determine the current landscape. The advice from SW Corporate did not
constitute a remuneration recommendation as defined in the Corporations Act 2001 (Cth). SW
Corporate was paid $5,750 for its services, after the end of the financial year.
The Remuneration Committee comprises three independent non-executive directors and is chaired by
Laurence Brindle. The Remuneration committee met 3 times during the Reporting Period.
PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION
The objective of the remuneration policy is to ensure that Group remuneration is competitive, reflects
responsibilities of the officers and ensures that NSR is able to attract and retain executives and directors
with the skills and capabilities required to sustainably deliver NSR’s objectives.
The remuneration of directors and senior executives is reviewed at least annually by the Remuneration
Committee and the full NSH Board. External analysis and advice is sought by the Committee, where
considered appropriate, to ensure that the remuneration for directors and senior executives is
competitive in the market place and appropriate for the organisation.
The policy seeks to align executive reward with the achievement of strategic objectives and the
creation of value for securityholders. The primary tenets of the policy are:
•
•
•
•
•
•
•
Attract and retain high quality executives and to reward the capabilities and experience
brought to NSR by those executives.
Total reward for key executives is to have a significant “at risk” component.
The “at risk” component for key executives is to include both short term incentives (“STI”) and
long-term incentives (“LTI”) which have a strong focus on quantitative and non-quantitative
measures.
Provide industry competitive rewards linked to securityholder returns.
Provide recognition for contribution, complexity of role and responsibilities of the officer.
Remuneration policies and structures must be clear and transparent both to the executives and
Board of NSR and to securityholders.
Promote and encourage a strong, responsible and positive culture amongst all NSR employees.
In addition to the above tenets, the specific objectives of the NSR board for the year commencing 1
July 2020 include:
•
•
•
to adjust the TFR of the CFO and HoLG to reflect the expansion in the scope and scale of their
respective roles and their performance in the roles;
achieve a shift in the components of the executive team’s TAR such that there is a greater
weighting towards “at risk remuneration”; and
To achieve the introduction of partial equity based remuneration as part of the TAR for the
executive team.
TARGET MARKET POSITIONING
Total Annual Remuneration (TAR) is assessed against a broad comparator group and adjusted to
reflect factors such as the criticality and complexity of the role, experience, length of service and NSR’s
positioning within the group. The individual components of TAR, comprising Total Fixed Remuneration
(TFR), STI and LTI are individually assessed within this framework and structured to provide both short
term and long terms incentives to KMP that align with delivery of short term and long-term value to
securityholders.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
42
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
43
43
Annual Report 2019 / 2020
When selecting the comparator group the data is collected from a combination of sources including
audited Remuneration Reports of the selected companies. It provides an appropriate pool of data
that is statistically relevant. This data is then assessed against NSR’s current size, industry positioning and
other relevant factors to determine the appropriate information against which to assess NSR’s
remuneration framework.
NSR PERFORMANCE
NSR continued its recent successful growth strategy objectives over the reporting period with the
delivery of the acquisition of 20 storage facilities and 2 development sites totalling $218 million. These
acquisitions have been funded by way of the successful completion of a capital raising, providing $348
million, undertaken by a combination of an institutional placement and an upscaled Security Purchase
Plan. This continued the significant development of the business and delivered sustained increases in
earnings and assets under management by the successful implementation of NSR’s strategy. The
identification of development or expansion opportunities, of which NSR currently has 15 projects in
various stages of design and construction has continued and during the reporting period NSR has
successfully completed 2 new developments at Canterbury in Victoria, as part of the APSF Joint
Venture, and Robina on the Gold Coast.
NSR has established a strong track record of consistent growth in underlying earnings(7), net tangible
assets (NTA) and total assets under management (AUM). Despite the significant capital raisings
undertaken in the previous 18 months and the combined impacts of the prolonged takeover activity
and COVID-19 during the Reporting Period, underlying earnings(1) per stapled security remained strong
in the 12 months to 30 June 2020. NTA has increased 1% during the year to $1.65 per stapled security
and AUM by 17% to $2.28 billion over the 12 months to 30 June 2020. These results have been achieved
through the disciplined management of NSR’s operations and the continued success of its “Four Pillar”
growth strategy. The consistent and considered approach to driving underlying earnings through a
combination of organic growth from existing assets as well as acquisitions, developments and
expansion activity, overlayed by a focus on technology and innovation, has been instrumental in
achieving this result.
Underlying Earnings
y
t
i
r
u
c
e
s
r
e
p
s
t
n
e
C
10.0
9.0
8.0
7.0
6.0
5.0
4.0
8.2
8.7
7.5
9.2
9.6
9.6
8.3
CY 14
FY15
FY16
FY17
FY18
FY19
FY20
Earnings Per Securuty
Underlying Earnings
80.0
70.0
60.0
50.0
40.0
m
$
30.0
20.0
10.0
-
Underlying earnings per stapled security for the year ended 30 June 2020 was impacted by the
dilutionary effect of two capital raisings, namely the $174 million capital raise undertaken in June 2019
and the $348 million capital raise in May 2020. In addition, the design and development fee income
stream that NSR generates from joint venture and development activities was impacted by the
prolonged takeover activity and COVID-19, as some joint ventures and developments were deferred.
This revenue has been delayed rather than foregone as the quantum of projects has not reduced and
in fact, the joint venture and development pipeline remains as strong as ever.
NSR has maintained a distribution policy which targets distribution of 90% - 100% of underlying
earnings(7) to securityholders. During financial year 2020, NSR declared distributions totalling 8.1 cents
per stapled security, being at the upper end of the stated policy, delivering a DPS yield of 4.4%, slightly
below that of the ASX 200 A-REIT average of 5.0%. This was impacted by the relatively strong
performance of the NSR share price that closed at $1.85 on 30 June 2020, up from $1.77 (4.5%) over the
prior year.
FY20 Distribution Yield
A-REIT 200
NSR
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Source: Bloomberg. Market Data
NSR continues to deliver strong Total Shareholder Return “TSR” (a combination of share price growth
and distributions received by securityholders) over the past three years to 30 June 2020 of 44%. Over
the reporting period NSR delivered 10% TSR compared to the ASX 200 A-REIT TSR of minus 21%. This has
been achieved during a period of unprecedented uncertainty during the first six months of 2020 and
demonstrates the robustness and resilience of the NSR business model in particular, and the self-storage
industry as a whole.
Total Shareholder Return
A-REIT 200
NSR
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Source: Bloomberg
Note 1: Assumes Dividends are re-invested in underlying security
Note 2: Excludes securities not listed for the entire year
NSR listed in December 2013 with an issue price of $0.98. From that time to 30 June 2020 the stapled
security price has increased by 85% (closing price at 30 June 2020 of $1.84), and the market
capitalisation of the REIT has increased 517% to $1.87 billion (up 38% from $1.35 billion for the Reporting
Period).
NSR Stapled Security Price
$
2.50
2.30
2.10
1.90
1.70
1.50
1.30
1.10
2,500
2,000
1,500
1,000
500
-
m
$
'
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Share Price
7 Underlying earnings is a non-IFRS measure (unaudited). See page 32 of Directors’ Report for reconciliation of underlying earnings
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
44
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
45
45
Annual Report 2019 / 2020
Security price performance over the period 1 July 2014 to 30 June 2020 has shown a 49% increase. This
compares to an increase of 13% for the ASX 200 A-REIT index and 10% for the broader ASX 200 Index
over the same period.
Relative Performance
2.00
1.80
1.60
1.40
1.20
1.00
0.80
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n
2
0
NSR
S&P/ASX 200 A-REIT
S&P/ASX 200
NSR REMUNERATION FRAMEWORK
NON-EXECUTIVE DIRECTORS
Fees and payments to non-executive directors reflect the demands which are made on, and the
responsibilities of, the non-executive directors and their contribution towards the performance of NSR as
well as the complexity of the National Storage Property Trust, National Storage Financial Services
Limited and the operating business. The remuneration policy seeks to ensure that NSR attracts and
retains directors with appropriate experience and qualifications to oversee the operations of NSR on
behalf of the securityholders.
The number of meetings of directors is shown on page 40 of this report.
The Constitution of NSH specifies that the amount of the remuneration of the non-executive directors is
a yearly sum not exceeding the sum from time to time determined by the Company in a general
meeting. Under the ASX Listing Rules, the total amount paid to all NSH non-executive directors for their
services must not exceed in aggregate in any financial year the amount fixed by NSH’s annual general
meeting. The amount approved by securityholders at the 2019 Annual General meeting was
$1,200,000.
Annual NSH non-executive directors’ fees and Committee fees currently agreed to be paid by NSH
effective from 1 July 2020 are detailed below. These amounts are consistent with the previous period
and given COVID-19 pandemic impacts and the general economic conditions the Board has not
increased non-executive directors’ fees for the year commencing 1 July 2020. Non-executive directors
are not eligible to participate in NSR’s incentive plan.
NON-EXECUTIVE DIRECTORS
BASE FEE
AUDIT AND RISK
COMMITTEE FEES
Laurence Brindlea.
Anthony Keaneb.
Steven Leigh
Howard Brenchley
$122,500
$122,500
$122,500
$25,000
-
$10,000
REMUNERATION
AND NOMINATION
COMMITTEE
FEES
TOTAL
$6,000
$6,000
-
$295,000
$153,500
$128,500
$132,500
a. Chairman and chair of the Remuneration and Nomination Committees and receives a single fee for all roles
b. Chair of the of Audit and Risk Committees
Where applicable, NSH non-executive directors’ fees include superannuation at the required statutory
rate.
KEY MANAGEMENT PERSONNEL - EXECUTIVE DIRECTORS AND SENIOR EXECUTIVES
The primary objective of the remuneration arrangements for executive directors and senior executives
is to motivate, incentivise and retain key employees whilst creating maximum alignment with corporate
and stakeholder best interests. All remuneration paid to executive directors and senior executives
comprises four components:
• Base pay and benefits (including superannuation)
• Short-term performance incentives
• Long-term performance incentives
• Other remuneration (if applicable)
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
46
Base salary and benefits
The Managing Director and senior executives are paid a base salary that includes employer
contributions to superannuation funds. The remuneration of the Managing Director is reviewed annually
by the Remuneration Committee and the Board. Given the uncertainty caused by the COVID-19
pandemic and the economic conditions, the Remuneration Committee determined that the
Managing Director’s base remuneration would not be adjusted for the year commencing 1 July 2020
and as such there would be no increase in his fixed remuneration at this time. Consistent with NSR’s
abovementioned specific objectives for the coming year, the ’at risk’ component of the Managing
Director’s renumeration will be adjusted as shown on page 48 of this report to more align the at-risk
components with the market peer group.
The remuneration of senior executives is reviewed annually by the Managing Director who makes a
recommendation to the Remuneration Committee. The Committee then considers, but is not obliged
to accept, the recommendation of the Managing Director and takes whatever additional steps it
determines as appropriate to assess the senior executive salaries. There is no guarantee of base salary
increases included in any executive director or senior executive contracts or through the annual review
process.
The senior executive remuneration review undertaken for the year commencing 1 July 2020 has
determined that the previous all cash remuneration plan in place for key executives is no longer typical
in the market and recommended to the Remuneration Committee that introducing an equity
component as part of an overall revised incentive plan. Based on the Managing Director’s extensive
interaction with investors and stakeholders it is likely to be both well received by securityholders and
provide greater alignment between senior executive incentives and overall securityholder outcomes.
Over the last 12 months the executive management team has successfully dealt with numerous
significant internal and external challenges, to achieve an outcome which is acknowledged to be one
of the best performances in the A-REIT sector from both an operational and security price performance
perspective. These challenges have included:
i.
ii.
iii.
Internally, the departure of two key senior employees and the assumption of their
responsibilities by the remaining executive management team;
Externally, protecting securityholders’ best interests through the challenge of takeover activity
with three non-binding indicative offers (“NBIO’s”) received from various parties. This process
involved data room establishment and management, extensive Q&A and travel related due
diligence, multiple presentations with senior management and intense media and regulatory
scrutiny of the process; and
Responding quickly and effectively to the COVID-19 pandemic across multiple jurisdictions in
two countries, providing strong leadership with the successful implementation of quick and
decisive plans. The outcome of this comprehensive top down response was that all National
Storage centres remained operational throughout the pandemic with zero staff infections to
date, and well controlled and minimised impact on the business.
With the departure of the General Counsel and Chief Risk Officer during the Reporting Period, the roles
and responsibilities previously filled by Mr Rogers have been allocated across the remaining three senior
executives. This was taken into account in determining the base salaries for the remaining senior
executives for the year commencing 1 July 2020.
In addition, the proposed remuneration increases take into account the senior executives’ respective
highly demanding roles and their increasing tenure and growing competency in their respective areas.
The team assembled is highly competent, cohesive, collaborative and has the capacity to continue to
successfully manage and drive business growth well into the future. The executive team as a whole has
consistently demonstrated its willingness to make decisions in the best long term strategic, corporate
and securityholder interests of National Storage regardless of potential negative short-term impacts on
executive rewards. This has been seen as NSR has undertaken multiple capital raises since IPO, resulting
in significant dilution of its earnings per security, without ever changing its threshold predetermined
hurdles for executive achievement of STI / LTI. These capital raisings have been essential in order to
fund the company’s extraordinary growth trajectory from 62 to 194 centres, growing assets under
management from $294m to over $2.2 billion in the process. Primarily due to this factor, the executive
team over the last three financial years (2018-2020) has earned in aggregate approximately 45% of its
combined potential STI / LTI arrangements. During the same period NSR’s security price has increased
from $1.63 to $1.85 providing a total securityholder return of 44%.
The performance of National Storage against its peers has been at the highest level despite multiple
challenges encountered throughout the last 12 months including takeover activity, COVID-19 and
considerable media, regulatory and investor interest during this time. This is in no small part due to the
unrelenting and ongoing efforts of the executive team. It is also of note that throughout the COVID-19
pandemic NSR was able to manage the myriad of challenges to its business while not receiving any
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
47
47
Annual Report 2019 / 2020
Jobkeeper government assistance and ensuring its workforce remained fully engaged with no
reduction in general salaries and benefits.
Short and long term incentives
The at-risk components of the KMP’s total remuneration packages were recommended to increase to
reflect the feedback received from investors and proxy advisors as well as the deferred payment
structure associated scrip component of the STI and LTI as outlined below. The increased at-risk
components of STI and LTI should be considered to be genuinely at risk as evidenced by the fact that in
the past three financial years approximately 45% of total potential executive STI and LTI has been
earned by the current executive team. In addition, the fact that a component of the STI and LTI is to
be paid over a three year period acts as a further alignment and a retention tool.
The effect of this has seen aggregate fixed remuneration for the KMP for the year commencing 1 July
2020 reduce by 11.9% and aggregate total remuneration increase by11.5%, reflecting the higher at-risk
components of KMP remuneration when compared to the Reporting Period. This analysis includes the
position of General Counsel / Chief Risk Officer within the Reporting Period and excludes this position for
the year commencing 1 July 2020 with the roles and responsibilities having been absorbed by the
remaining KMP. The Managing Director and senior executives can potentially be paid a bonus as part
of their remuneration. Whether such a bonus is paid and the amount of such a bonus is at the
discretion of the Remuneration Committee and the Board. Any bonuses paid would fall into the
category of “other remuneration”.
Service agreements
Remuneration and other terms of employment for the KMP senior executives are formalised in service
agreements. The service agreements specify the components of remuneration, benefits and notice
periods. Termination benefits are designed to fall within the limits relevant to the Corporations Act 2001
(Cth) such that they do not require securityholder approval. However, in addition, all executive
contracts make any such benefits subject to the Corporations Act 2001 (Cth), all other applicable laws
and where necessary securityholder approval. They also contain provisions which allow NSH to reduce
any such payments to ensure compliance with the law.
The terms of employment for the KMP effective from 1 July 2020 period are set out in the table below.
NAME
TERM OF
AGREEMENT AND
NOTICE PERIOD
BASE SALARY
INCLUDING
SUPERANNUATION*
TERMINATION PAYMENTS
Andrew
Catsoulis
No fixed term
6 months
$1,075,000
• 6 months in lieu of notice if required by NSH.
• 6 months in the event of incapacity or illness.
Stuart Owen
No fixed term
6 months
$600,000
Claire Fidler
No fixed term
6 months
$400,000
• 6 months in lieu of notice if required by NSH.
• 6 months in the event of incapacity or illness.
• 1 months fixed remuneration plus 2 weeks for
each year of service – capped at 2 months
in the event of redundancy
• 6 months in lieu of notice if required by NSH.
• 6 months in the event of incapacity or illness.
• 1 months fixed remuneration plus 2 weeks for
each year of service – capped at 2 months
in the event of redundancy
* Base salaries are annual salaries for the financial year commencing 1 July 2020. They are reviewed annually by the
Remuneration Committee. Actual salaries paid in the year ended 30 June 2020 are shown on page 52.
The composition of TAR for the year ending 30 June 2021 for KMP is detailed in the table below.
ROLE
MD
CFO
HoLG
TFR
STI
LTI
STI as %
of TFR
LTI as %
of TFR
41.66%
55.56%
62.50%
29.17%
22.22%
18.75%
29.17%
22.22%
18.75%
70%
40%
30%
70%
40%
30%
This structure reflects and is consistent with NSR’s policy objectives for executive TAR for the year
commencing 1 July 2020 as outline above.
KMP senior executives may also be entitled to participate in the STI and LTI programs that are in place
from time to time. The incentive programs are at the discretion of the Board and do not constitute an
entitlement under the executive service agreements of the respective KMP. Total incentive programs
are assessed against a broad comparator group and adjusted to reflect factors such as the criticality
of the role, experience, length of service and NSR’s positioning within the comparator group including
the ASX200 A-REIT index.
New payment structure – Short and long term incentives
The Board regularly assesses the structure of the incentive plans based on market best practice and
feedback received from both investors and proxy advisors and has determined that going forward
payments made under these plans will be paid through a combination of cash and scrip, rather than
all cash, to further align executive remuneration with current investor expectations and returns. Based
on this the Board has determined that from 1 July 2020 the payment of any STI earned will be in the
form of 70% cash and 30% scrip and any LTI earned will be in the form of 30% cash and 70% scrip. The
quantum of scrip will be determined using the 30-day VWAP up to 30 June in the relevant year.
The scrip based component will be structured in three equal tranches, with tranche 1 being scrip issued
immediately and the remaining two tranches issued as rights to vest over a 2-year period. This provides
an upfront component to recognise the contributions made during the current year and a further
incentive for executive retention. The scrip components will be issued as follows:
•
•
•
T1 – issued immediately as scrip
T2 – issued as rights vesting on 30 June, 12 months from the end of the relevant financial year
T3 – issued as rights vesting on 30 June, 24 months from the end of the relevant financial year
The vesting of subsequent tranches will be subject to conditions around continuity of employment and
change in control such as:
•
•
•
•
•
•
Dismissal (termination for cause)
Resignation
Death or Total Permanent Disablement (termination for illness)
Retirement with the approval of the Board
Company initiated termination without cause e.g. retrenchment and redundancy
Change in control
Any scrip component earned as part of this payment structure will be submitted, if required, for
securityholder approval at a general meeting of securityholders.
Incentive program is effective from 1 July 2020.
Short Term Incentive (STI)
The STI contains four separate elements that will be assessed independently of the other elements. The
STI is an annual incentive and as outlined above is to be paid 70% cash and 30% scrip.
ELEMENT
Financial
Financial – Out
Performance*
Individual KPI’s
Strategic
PERCENTAGE
OF STI
CRITERIA
70%
10%
15%
15%
Achieve Underlying Earnings as determined by the Board
Exceeding Underlying Earnings targets
Individual performance criteria set in conjunction with MD / Board
Assessment in accordance with performance in the following
areas:
•
•
•
•
Implementation of major projects
Staff continuity
Risk Management
Innovation and enhancement of processes and procedures
Total
100% (Max)
* The Financial Out-Performance STI is only payable to the extent that the total STI payable does not exceed 100%.
The minimum STI payable is zero and maximum STI payable is $1,113,000 for FY21 in aggregate for all KMP.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
48
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
49
49
Annual Report 2019 / 2020
Long Term Incentive (LTI)
The LTI criteria have been set so as to align the interests of KMP with those of securityholders. The LTI
contains two separate components which are independently tested. The LTI is an annual incentive and
as outlined above is to be paid 30% cash and 70% scrip.
ELEMENT
PERCENTAGE
OF LTI
CRITERIA
Total Shareholder
Return
Earnings Per Share
Growth
70%
30%
Minimum total shareholder return above the 50th percentile in
comparison to the ASX 200 A-REIT index. The LTI becomes payable
in accordance with the sliding scale below once the 50th percentile
hurdle is met.
Earnings per share growth of 5% per annum.
For the purposes of determining the LTI attributable to Total Shareholder Return in any given period, the
following scale is applied:
NSR TSR v ASX 200 A-REIT INDEX
LTI PAYABLE
<50th percentile
50th percentile
>50th - <75th percentile
>= 75th percentile
0%
50%
Pro-rata from 50% - 100%
100%
The LTI is assessed over a rolling 3-year period and as such to be eligible for payment of the LTI, KMP
must have been employed by NSR for three years (or shorter period as determined by the Board). Post
three years’ service the LTI will be paid on an annual basis on the previous three years’ performance
against the pre-determined criteria. For the year commencing 1 July 2020 the Earnings Per Share
Growth target has been set at 8.0 cents per stapled security.
The minimum LTI payable is zero and maximum LTI payable is $1,113,000 for FY21 in aggregate for all
KMP.
Short and long term incentives in place during reporting period:
The KMP were eligible for payment of STI’s and LTI’s for the financial year ended 30 June 2020 in
accordance with the incentive program outlined in the 2019 Annual Report. The assessment criteria for
the program are consistent with those outlined on pages 38-39 above. Incentives achieved for the
year ending 30 June 2020 are payable in cash as described in the 2019 Annual Report.
The STI’s and LTI’s were agreed with the KMP to reward them for performance against both financial
and operational objectives. The minimum payable was zero and maximum payable was $1,500,000 for
FY20 in aggregate for all KMP.
The STI and LTI hurdles included:
1. Underlying earnings(8) equal to or exceeding 10.0 cents per security
2.
TSR over the three year period to 30 June 2020 being greater than the 50th percentile of the
comparator group (ASX A-REIT 200)
3. Rolling three-year compound EPS growth exceeding 5% (June 2020 target 10.7cps)
The Board has assessed the performance of the Company and the KMP against the performance
criteria and have determined that the following STI and LTI’s have been earned and are payable,
inclusive of statutory Superannuation amounts, for the period 1 July 2019 to 30 June 2020.
INCENTIVE OFFICER
STI
LTI
AMOUNT
$125,400
$47,025
$0
$18,525
$190,950
* Patrick Rogers ceased employment effective 29 May 2020
Andrew Catsoulis (MD)
Stuart Owen (CFO)
Patrick Rogers (GC/CRO)*
Claire Fidler (HoLG)
Total
%
EARNED
28.5%
28.5%
0%
28.5%
25.5%
AMOUNT
$308,000
$115,500
$0
$45,500
$469,000
%
EARNED
70.0%
70.0%
0.0%
70.0%
62.5%
TOTAL
$433,400
$162,525
$0
$64,025
$659,950
The Board continues to assess both short-term and long-term incentives against a strict set of criteria
and believes that delivering superior results to securityholders is required for KMP to achieve full
incentive payments.
Other Remuneration
The Board has determined that it is appropriate to recognise and reward the executive team with a
one-off discretionary bonus which will supplement the STI and LTI achieved during the Reporting Period,
such that KMP will individually earn 99% of their potential STI and LTI arrangements for the year ended
30 June 2020. Total KMP combined incentive payments for the period will represent approximately 89%
of total STI and LTI available across the KMP group. This decision has been made on the basis of their
extraordinary performance over that period. This discretionary payment will form part of 2021
remuneration and is not included in the 2020 Remuneration table on page 52.
Reasons for this increased and extraordinary workload have included:
• NSR having received three unsolicited NBIO’s from institutional counterparties which were
required to run in parallel through a full due diligence process;
• Having engaged in a high level of dialogue with its stakeholders including investors, analysts,
employees, various banks and regulators;
• NSR having undertaken significant capital raises over the period with additional regulatory
scrutiny and involvement from both ASX and ASIC as a result of temporary changes to
regulations; and
• Ongoing debt refinancing and related work which was undertaken personally by the senior
executive following a senior employee’s departure.
Over this period the executive team has maintained a highly driven, motivated and committed team
ethos, which has ensured that staff members across two countries have remained highly engaged,
resulting in minimised business disruption and impact to the business from COVID-19. This has been
reflected in NSR’s strong performance over this period with minimised loss of occupancy, and the
resilience of NSR’s security price.
The KMP bonus will be paid in cash and structured in part to act as a retention tool, as it will be paid in
two tranches, and subject to additional qualification criteria as set out below.
INCENTIVE OFFICER
Andrew Catsoulis (MD)
Stuart Owen (CFO)
Patrick Rogers (GC/CRO)*
Claire Fidler (HoLG)
Total
EARNED
UNDER
INCENTIVE
PLAN
$433,400
$162,525
$0
$64,025
$659,950
%
EARNED
DISCRETIO
NARY
AMOUNT
TOTAL
%
EARNED
49.3%
49.3%
0%
49.3%
44.0%
$440,000
$165,500
$0
$65,500
$873,400
$327,525
$0
$129,025
$670,000 $1,329,950
99.3%
99.3%
0.0%
99.3%
88.7%
* Patrick Rogers ceased employment effective 29 May 2020
The discretionary payment will be structured and paid in two equal tranches as follows:
•
•
T1 – paid immediately
T2 – paid on 1 July 2021 – forfeited if employee resigns prior or does not satisfy the criteria
below
Other factors required to qualify for the deferred payment are as follows:
• Good citizen – employee has not acted in a fashion which could reasonably be considered
to be contrary to the best interests of NSR
• Diligence – employee has performed their role in a diligent fashion
• Any other factors that the Board determines at its absolute discretion
The proposed discretionary bonus structure is seen as:
• A recognition of the outstanding efforts of the executive team in producing a strong result for
the period in the face of significant adversity;
This result being at the very top end of NSR’s peer related performance;
•
• An acknowledgement of the unbiased decision making undertaken by the executive team in
recommending various strategic actions which have placed NSR in a strong financial and
operational position leading into FY21.
8 Underlying earnings is a non-IFRS measure (unaudited). See page 32 of Directors’ Report for reconciliation of underlying earnings
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
50
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
51
51
Annual Report 2019 / 2020
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5
SECURITYHOLDINGS OF DIRECTORS AND EXECUTIVES
The movement during the Reporting Period in the number of stapled securities, directly, indirectly or
beneficially held by Directors and KMP senior executives, including parties related to them, is as follows:
BALANCE
30 JUNE 2019
GRANTED AS
REMUNERATION
ON
EXERCISE
OF OPTIONS
ACQUIRED
BALANCE
30 JUNE 2020
Directors of NSH
Laurence Brindle
Anthony Keane
Andrew Catsoulis
Howard Brenchley
Steven Leigh
Claire Fidler
1,523,488
179,618
14,019,249
56,757
81,900
10,146
Executives of NSH
Stuart Owen
Patrick Rogers*
Total
* Patrick Rogers ceased to be KMP effective 29 May 2020
-
5,163
15,876,321
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29,109
155,000
49,109
119,109
2,354
100,000
-
454,681
1,523,488
208,727
14,174,249
105,866
201,009
12,500
100,000
-
16,325,839
RELATED PARTY TRANSACTIONS
There were no other transactions with KMP and their related parties during the reporting period.
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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
53
53
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D
Annual Report 2019 / 2020
SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE
Acquisitions
Since Reporting Date the Group has settled seven storage centres in Western Australia (1 centre), New
South Wales (2 centres) and Queensland (4 centres), for a total combined purchase price of $133.9 million.
ROUNDING
The amounts contained in this Directors’ Report and in the Financial Report have been rounded to the
nearest $1,000 (unless otherwise stated) under the option available under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191. The Consolidated Group and NSPT Group are entities to
which the ASIC Instrument applies.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act
2001 (Cth) is set out on page 57.
Non-audit services
The following non-audit services were provided by the entity's auditor, Ernst & Young Australia. The
Directors of NSH are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The nature and
scope of each type of non-audit service provided means that auditor independence was not
compromised.
Ernst & Young Australia received or are due to receive $75,815 for the provision of Category 4 fees for other
services conducted during the financial year. Refer Note 20 of the financial statements.
FEES PAID TO AND INTERESTS HELD IN THE NSPT BY THE RESPONSIBLE ENTITY OR ITS ASSOCIATES
Fees paid to the Responsible Entity and its associates out of NSPT property during the year are disclosed in
the Statement of Comprehensive Income and are detailed in Note 17 to the financial statements.
No fees were paid to the Directors of the Responsible Entity during the year out of NSPT.
INTERESTS IN THE NSPT
The movement in units on issue by the NSPT during the year is set out in Note 13 to the financial statements.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
54
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
55
55
Annual Report 2019 / 2020
This Directors’ Report is made on 25 August 2020 in accordance with a resolution of the Board of Directors
of National Storage Holdings Limited and is signed for and on behalf of the Directors.
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Laurence Brindle
Chairman
National Storage Holdings Limited
Brisbane
Andrew Catsoulis
Managing Director
National Storage Holdings Limited
Brisbane
Auditor’s Independence Declaration to the Directors of National
Storage REIT and its controlled entities
As lead auditor for the audit of the financial report of National Storage REIT and its controlled entities
for the financial year ended 30 June 2020, I declare 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 National Storage REIT and the entities it controlled during the financial
year.
Ernst & Young
Ric Roach
Partner
25 August 2020
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2020
56
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
57
Annual Report 2019 / 2020
Financial Statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 30 June 2020
Revenue from rental income
Revenue from contracts with customers
Interest income
Total revenue
Employee expenses
Premises costs
Advertising and marketing costs
Insurance costs
Other operational expenses
Finance costs
Share of (loss) / profit from joint ventures and associates
Gain from fair value adjustments
Restructuring and other non-recurring costs
Notes
2020
$'000
2019
$'000
5
7
6
6
7
12
10.4
164,078
12,563
1,272
177,913
144,147
13,510
1,531
159,188
(32,085)
(22,481)
(4,277)
(4,084)
(14,895)
(39,401)
(491)
63,019
(3,704)
(28,744)
(19,141)
(4,243)
(2,607)
(11,891)
(33,747)
3,171
84,663
(1,538)
Profit before income tax
119,514
145,111
Income tax benefit / (expense)
8
2,265
(271)
Profit after tax
121,779
144,840
Profit / (loss) for the year attributable to:
Members of National Storage Holdings Limited
Non-controlling interest (unitholders of NSPT)
(5,981)
127,760
121,779
5,406
139,434
144,840
Basic and diluted earnings per stapled security (cents)
19
14.67
21.59
The above Consolidated Statement of Profit or Loss should be read in conjunction with the
accompanying notes.
59
Annual Report 2019 / 2020
59
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE
INCOME
For the year ended 30 June 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Notes
2020
$'000
2019
$'000
Profit after tax
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Net loss on cash flow hedges
Other comprehensive loss for the year, net of tax
2020
$'000
2019
$'000
121,779
144,840
(1,731)
(5,857)
(7,588)
858
(21,808)
(20,950)
Total comprehensive income for the year
114,191
123,890
Total comprehensive income for the year attributable to:
Members of National Storage Holdings Limited
Unitholders of National Storage Property Trust
(5,944)
120,135
114,191
5,391
118,499
123,890
The above Consolidated Statement of Other Comprehensive Income should be read in conjunction
with the accompanying notes.
60
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Income tax receivable
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right of use assets
Investment properties
Investment in joint ventures and associates
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Deferred revenue
Income tax payable
Provisions
Distribution payable
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
9.1
9.2
10.1
10.2
9.3
9.2
10.3
9.7
10.4
12
10.5
8
9.3
9.4
9.7
10.6
10.7
16
9.6
9.5
9.7
10.7
8
9.6
90,352
15,975
833
-
331
10,469
117,960
518
1,091
6,540
2,452,085
8,451
46,629
7,041
19
2,522,374
178,842
19,738
682
1,107
-
7,014
207,383
118
856
-
2,117,176
16,731
46,500
2,980
569
2,184,930
2,640,334
2,392,313
14,875
6,011
12,236
418
2,460
34,467
50
70,517
18,993
5,327
12,719
1,264
2,463
34,370
713
75,849
677,702
164,582
2,655
2,697
357
847,993
843,927
163,827
1,964
1,097
1,375
1,012,190
918,510
1,088,039
1,721,824
1,304,274
EQUITY
Non-controlling interest (unitholders of NSPT)
Contributed equity
Other reserves
Retained earnings
Total equity
13
14
1,578,615
133,169
10
10,030
1,721,824
1,188,147
100,143
(27)
16,011
1,304,274
The above Consolidated Statement of Financial Position should be read in conjunction with the
accompanying notes.
61
61
Annual Report 2019 / 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Attributable to securityholders of National Storage REIT
Contributed
equity
$'000
Notes
Retained
earnings
$'000
Other
reserves
$'000
Non-
controlling
interest
$'000
Total
equity
$'000
Balance at 1 July 2019
100,143
16,011
(27)
1,188,147 1,304,274
Profit / (loss) for the year
Other comprehensive income
Total comprehensive income
14
-
-
-
(5,981)
-
(5,981)
Issue of stapled securities
Costs associated with issue
of stapled securities
Deferred tax on cost of stapled
securities
Distributions
13
33,444
(598)
180
-
33,026
8
16
-
-
-
-
-
-
37
37
-
-
-
-
-
127,760
(7,625)
120,135
121,779
(7,588)
114,191
348,091
381,535
(6,252)
(6,850)
-
(71,506)
270,333
180
(71,506)
303,359
Balance at 30 June 2020
133,169
10,030
10
1,578,615 1,721,824
Balance at 1 July 2018
66,128
10,605
(12)
813,558
890,279
Profit for the year
Other comprehensive income
Total comprehensive income
14
-
-
-
5,406
-
5,406
-
(15)
(15)
139,434
(20,935)
118,499
144,840
(20,950)
123,890
Issue of stapled securities
Contract for future issue of equity
Costs associated with issue of
stapled securities
Deferred tax on cost of stapled
securities
Distributions
13
13
18,047
16,451
(690)
207
-
34,015
8
16
-
-
-
-
-
-
-
-
-
-
-
-
173,555
153,549
191,602
170,000
(6,562)
(7,252)
-
(64,452)
256,090
207
(64,452)
290,105
Balance at 30 June 2019
100,143
16,011
(27)
1,188,147 1,304,274
Notes
2020
$’000
2019
$’000
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Income tax paid
Net cash flows from operating activities
Investing activities
Purchase of investment properties
Proceeds on sale of investment property
Improvements to investment properties
Development of investment properties under construction
Purchase of property, plant and equipment
Purchase of intangible assets
Distribution received from joint ventures and associates
Return of capital on sale of units in joint venture
Investments in associates and joint ventures
Net cash flows used in investing activities
Financing activities
Proceeds from issue of stapled securities
Transaction costs on issue of stapled securities
Distributions paid to stapled security holders
Proceeds from borrowings
Repayment of borrowings
Payments associated with resetting interest rate swaps
Financing provided to joint ventures
Repayment of financing provided to joint ventures
Payment of principal and interest on lease liabilities
Interest and other finance costs paid
Net cash flows from financing activities
Net (decrease) / increase in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
9.1
10.3
12
12
12
13
16
9.5
17
9.1
190,954
(101,140)
1,202
(1,538)
89,478
(236,601)
5,091
(8,246)
(37,550)
(633)
(918)
10,319
-
(2,530)
(271,068)
361,877
(7,025)
(51,751)
267,558
(430,000)
(14,303)
(2,125)
6,950
(13,599)
(24,525)
93,057
(88,533)
43
178,842
90,352
174,782
(82,341)
2,024
(1,153)
93,312
(416,648)
26,961
(10,762)
(13,027)
(233)
(777)
5,064
3,000
(3,499)
(409,921)
345,425
(7,427)
(41,301)
398,876
(155,100)
(22,913)
(4,125)
-
(12,836)
(26,531)
474,068
157,459
50
21,333
178,842
The above Consolidated Statement of Changes in Equity should be read in conjunction with the
accompanying notes.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying
notes.
62
63
63
Annual Report 2019 / 2020 NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
1.
CORPORATE INFORMATION
National Storage REIT (“the Group” or “NSR”) is a joint quotation of National Storage Holdings Limited
(“NSH” or “the Company”) and its controlled entities (“NSH Group”) and National Storage Property Trust
(“NSPT” or “the Trust”) and its controlled entities (“NSPT Group”) on the Australian Securities Exchange
(“ASX”).
The Constitutions of NSH and NSPT ensure that, for so long as the two entities remain jointly quoted, the
number of shares in the Company and the number of units in the Trust shall be equal and that the
shareholders and unitholders be identical. Both the Company and the Responsible Entity (National
Storage Financial Services Limited) of the Trust must at all times act in the best interest of NSR. The
stapling arrangement will continue until either the winding up of the Company or the Trust, or termination
by either entity.
The financial report of NSR for the year ended 30 June 2020 was approved on 25 August 2020, in
accordance with a resolution of the Board of Directors of NSH.
The nature of the operations and principal activities of the Group are described in the Directors' Report.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”)
and the Corporations Act 2001. The financial statements have been prepared on a historical cost basis,
except for selected non-current assets, financial assets and financial liabilities for which the fair value
basis of accounting has been applied. NSH is a for-profit entity for the purpose of preparing the financial
statements.
The financial statements are presented in Australian Dollars (“AUD”) and all values are rounded to the
nearest thousand dollars ($’000) unless otherwise stated (refer to note 2(w)).
The accounting policies applied by NSR in these financial statements are the same as the 30 June 2019
financial statements except for the accounting policies impacted by new or amended accounting
standards detailed in this note.
The Group has elected to present only financial information relating to NSR within these financial
statements. A separate financial report for the NSPT Group has also been prepared for the year ended 30
June 2020. This is available at www.nationalstorageinvest.com.au.
(b) Compliance with IFRS
The consolidated financial statements of the Group comply with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board.
(c) Changes in accounting policy, disclosures, standards and interpretations
of Transactions Involving the Legal Form of a Lease. The Standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most
leases on the balance sheet.
The Group adopted AASB 16 Leases using the modified retrospective method from 1 July 2019.
Under this method, the Standard is applied retrospectively with the cumulative effect of initially applying
the Standard recognised at the date of initial application. The Group has not restated comparative
periods, as permitted under the specific transitional provisions in the Standard. The reclassification and
the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet
on 1 July 2019.
Adjustments recognised on adoption of AASB 16
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously
been classified as ‘operating leases’ under the principles of AASB 117 Leases. The liabilities were
measured at the present value of the remaining lease payment, discounted using the lessee’s
incremental borrowing rate as of 1 July 2019.
The adoption of AASB 16 at 1 July 2019 results in the recognition of following assets and liabilities:
Assets
Right of use assets
Liabilities
Lease liabilities
$’000
1,086
1,086
The Group recognised right of use assets and lease liabilities for those leases previously classified as
operating leases, except for short term leases and leases of low value assets. The right of use assets were
recognised based on the carrying amount of lease liabilities on application of the standard, using the
incremental borrowing rate at the date of initial application. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted using the incremental borrowing rate at
the date of initial application. A single discount rate was applied across the lease portfolios due to the
similar characteristics of each arrangement.
In applying AASB 16 for the first time, the Group has applied the short-term leases exemption to leases
with lease term that ends within 12 months of the date of initial application as a practical expedient
permitted by the standard. The Group had one premises lease that expired in April 2020, to which this
expedient was applied.
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June
2019:
Operating lease commitments as at 30 June 2019
Weighted average incremental borrowing rate as at 1 July 2019
Discounted operating lease commitments as at 1 July 2019
Less:
Commitments relating to short-term leases
Add:
Commitments relating to leases recognised for the first time under AASB 16
Lease liabilities as at 1 July 2019
$’000
1,382
2.93%
1,317
(385)
154
1,086
The Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that
are relevant to its operations and effective for the current year. The Group has applied AASB 16 Leases
for the first time in these financial statements.
The Group continues to recognise a lease liability on its leasehold investment properties previously
measured under AASB 117. They are now accounted for under AASB 16 and there was no impact on
these leases upon transition.
AASB 16 Leases
AASB 16 supersedes AASB 117 Leases, Interpretation 4: Determining whether an Arrangement contains a
Lease, Interpretation 115 Operating Leases - Incentives and Interpretation 127 Evaluating the Substance
64
65
65
Annual Report 2019 / 2020 Other standards, amendments and interpretations
The Group adopted AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a
Business from 1 July 2018 as detailed in note 2(g). The Group has also adopted AASB Interpretation 23
Uncertainty over Income Tax Treatments which has had no impact on these financial statements.
Several other amendments and interpretations apply for the first time in the reporting period, but do not
have a material impact on the consolidated financial report of the Group. The Group has not early
adopted any other standards.
Accounting standards and interpretations issued but not yet effective
Australian Accounting Standards and Interpretations relevant to the Group’s operations, that have
recently been issued or amended but are not yet effective or have not been adopted for the annual
reporting year ended 30 June 2020 are outlined in the following table:
Reference
Title
Summary and impact on Group
financial report
AASB 2019-1 Conceptual
Framework for
Financial
Reporting and
relevant
amending
standards
The revised Conceptual Framework
includes some new concepts, provides
updated definitions and recognition
criteria for assets and liabilities and clarifies
some important concepts including:
•
The objective of financial reporting
• Qualitative characteristics of useful
Application
date of
standard
Application
date for
Group
1 January
2020
1 July 2020
•
financial information
Financial statements and the reporting
entity
The elements of financial statements
Recognition and derecognition
•
•
• Measurement
•
Presentation and disclosure
• Concepts of capital and capital
AASB 2018-7 Amendments to
Australian
Accounting
Standards –
Definition of
Material
1 January
2020
1 July 2020
maintenance
The changes to the Conceptual
Framework may affect the application of
IFRS in situations where no standard applies
to a particular transaction or event.
This Standard amends AASB 101
Presentation of Financial Statements and
AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors to align
the definition of ‘material’ across the
standards and to clarify aspects of the
definition. This clarifies that materiality will
depend on the nature or magnitude of
information. An entity will need to assess
whether the information, either individually
or in combination with other information, is
material in the context of the financial
statements. A misstatement of information
is material if it could reasonably be
expected to influence decisions made by
the primary users.
Reference
Title
Summary and impact on Group
financial report
AASB 2014-10 Amendments to
Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and
its Associate or
Joint Venture
AASB 2014-10 amends AASB 10
Consolidated Financial Statements and
AASB 128 Investments in Associates and
Joint Ventures to address an inconsistency
between the requirements in AASB 10 and
those in AASB 128, in dealing with the sale
or contribution of assets between an
investor and its associate or joint venture.
Application
date of
standard
Application
date for
Group
1 January
2022
1 July 2022
Basis of consolidation
The Financial Statements of NSR as at 30 June
2020 comprises the consolidated financial
statements of the NSH Group and the NSPT
Group.
The financial statements for the Group are
prepared on the basis that NSH was the acquirer
of NSPT. The non-controlling interest is
attributable to stapled securityholders presented
separately in the statement of comprehensive
income and within equity in the statement of
financial position, separately from parent
shareholders’ equity.
Subsidiaries
Subsidiaries are all entities over which the Group
has control. The Group controls an entity when it
is exposed to, or has rights to, variable returns
from its involvement with the entity and has the
ability to affect those returns through the power
to direct the activities of the entity.
Consolidation of a subsidiary begins when the
Group obtains control over the subsidiary and
ceases when the Group loses control. The
acquisition method of accounting is used to
account for business combinations (see note
2(g).
Intercompany transactions, balances and
unrealised gains on transactions between group
entities are eliminated. Unrealised losses are also
eliminated unless the transaction provides
evidence of an impairment of the transferred
asset. Accounting policies of all subsidiaries are
consistent with the policies adopted by the
Group.
The Group treats transactions with non-
controlling interests that do not result in a loss of
control as transactions with equity owners of the
Group. A change in ownership interest results in
an adjustment between the carrying amounts of
the controlling and non-controlling interests to
reflect their relative interests in the subsidiary.
Any difference between the amount of the
adjustment to non-controlling interests and any
consideration paid or received is recognised in
a separate reserve within equity attributable to
owners of the parent entity.
Associates
Associates are all entities over which the Group
has significant influence but not control or joint
control. This is generally the case where the
Group holds between 20% and 50% of the
voting rights. Investments in associates are
accounted for using the equity method.
Joint arrangements
Under AASB 11 Joint Arrangements, investments
in joint arrangements are classified as either joint
operations or joint ventures. The classification
depends on the contractual rights and
obligations of each investor, rather than the
legal structure of the joint arrangement.
Investments in joint ventures are accounted for
using the equity method.
Equity method
Under the equity method, the investment in an
associate or a joint venture is initially recognised
at cost. The carrying amount of the investment is
adjusted to recognise changes in the Group’s
share of net assets since the acquisition date.
Goodwill relating to the associate or joint
venture is included in the carrying amount of the
investment and is neither amortised nor
individually tested for impairment.
The statement of profit or loss reflects the
Group’s share of the results of operations of the
associate or joint venture. Any change in other
comprehensive income of those investees is
presented as part of the Group’s other
comprehensive income. In addition, when there
has been a change recognised directly in the
equity of the associate or joint venture, the
Group recognises its share of any changes,
66
67
67
Annual Report 2019 / 2020 when applicable, in the statement of changes
in equity. Unrealised gains and losses resulting
from transactions between the Group and the
associate or joint venture are eliminated to the
extent of the interest in the associate or joint
venture.
The aggregate of the Group’s share of profit or
loss from associates and joint ventures is shown
on the face of the consolidated statement of
profit or loss and represents profit or loss after tax
and non-controlling interests in the subsidiaries of
associates or joint ventures.
Group exercises judgement, taking into
consideration all of the relevant facts and
circumstances when applying each step of the
model to contracts with their customers.
Revenue is recognised to the extent that it is
probable that the economic benefits will flow to
the Group and the revenue can be reliably
measured, regardless of when the payment is
received. Revenue is measured at the fair value
of the consideration received or receivable,
taking into account contractually defined terms
of payment and excluding taxes or duty.
The financial statements of associates and joint
ventures are prepared for the same reporting
period as the Group. When necessary,
adjustments are made to bring the accounting
policies in line with those of the Group.
The Group assesses its revenue arrangements
against specific criteria to determine if it is
acting as principal or agent. The specific
recognition criteria described below must also
be met before revenue is recognised.
After application of the equity method, the
Group determines whether it is necessary to
recognise an impairment loss on its investment in
its associates or joint ventures. At each reporting
date, the Group determines whether there is
objective evidence that the investment in the
associate or joint venture is impaired. If there is
such evidence, the Group calculates the
amount of impairment as the difference
between the recoverable amount of the
associate or joint venture and its carrying value,
then recognises the loss as ‘Share of profit or loss
of joint ventures and associates’ in the
consolidated statement of profit or loss. Upon
loss of significant influence over an associate or
joint control over the joint venture, the Group
measures and recognises any retained
investment at its fair value. Any difference
between the carrying amount of the associate
or joint venture upon loss of significant influence
or joint control and the fair value of the retained
investment and proceeds from disposal is
recognised in profit or loss.
(d)
Revenue recognition
Revenue is recognised under AASB 15 Revenue
from Contracts with Customers and applies to all
revenue from contracts with customers, unless
those contracts are in the scope of other
standards.
The Group follows a five-step model to account
for revenue arising from contracts with
customers. Revenue is recognised at an amount
that reflects the consideration to which an entity
expects to be entitled to, in exchange for
transferring goods or services to a customer. The
The Group’s revenue is disaggregated in the
statement of profit or loss with the exception of
Revenue from Contracts with Customers which is
disaggregated into categories in note 5 that
depict how the nature, amount, timing and
uncertainty of revenue and cash flows are
affected by economic factors.
Revenue from rental income
Revenue from rental income relating to the
provision of storage space and commercial
units is recognised less any amount
contractually refundable to customers over the
term of the general agreement. The value of
discounts offered to customers at the end of an
incentive period is recognised over the
expected rental period.
Revenue from contracts with customers
Sale of goods and services
Revenue from the sale of goods is recognised
on fulfilment of performance obligations. The
Group recognises revenue at the point in time
when control of the asset is transferred to the
customer, generally on delivery of the goods or
service.
Agency fees and commission
The Group acts as an agent in the provision of
insurance services provided by a third party
insurance company to storage rental customers.
The Group’s contracts with customers for
agency fees and commissions consist of one
performance obligation. The Group recognises
revenue at the point in time when the
commission is generated and is receivable.
68
Design and development fees
The Group’s design and development fees to
customers consist of one performance
obligation. The Group recognises revenue from
design and development fees over the relevant
period of the performance obligations as the
Group’s performance creates or enhances an
asset that the customer controls.
Management fees
The Group’s contracts with customers for
management fees are recognised over the
period of the management agreement, in line
with recurring performance obligations.
Interest income
Interest income is recognised using the effective
interest method. When a receivable is impaired,
the Group reduces the carrying amount to its
recoverable amount, being the estimated
future cash flow discounted at the original
effective interest rate of the instrument and
continues unwinding the discount as interest
income. Interest income on impaired loans is
recognised using the original effective interest
rate.
(e)
Taxes
The Group comprises taxable and non-taxable
entities. A liability for current and deferred tax
expense is only recognised in respect of taxable
entities that are subject to income tax.
NSPT is a ‘flow through’ entity for Australian
income tax purposes and is an Attribution
Managed Investment Trust, such that the
determined tax components of NSPT will be
taxable in the hands of unitholders on an
attribution basis. NSPT’s subsidiary National
Storage New Zealand Property Trust (“NSNZPT”)
is an Australian registered trust which owns
investment property in New Zealand. For New
Zealand tax purposes NSNZPT is classed as a unit
trust and is subject to New Zealand income tax.
Current income tax
Current income tax assets and liabilities are
measured at the amount expected to be
recovered or paid to the taxation authorities.
The tax rates and laws used to compute the
amount are those that are enacted or
substantively enacted at the reporting date in
the countries where the Group operates and
generates taxable income.
Current income tax relating to items recognised
directly in equity is recognised in equity and not
in the statement of profit or loss.
Management periodically evaluates tax
positions where the interpretation of applicable
tax regulations is subjective and establishes
provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability
method, on temporary differences arising
between the tax bases of assets and liabilities
and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all
taxable temporary differences, except:
• When the deferred tax liability arises from
the initial recognition of goodwill or an asset
or liability in a transaction that is not a
business combination and, at the time of
the transaction, affects neither the
accounting profit nor taxable profit or loss.
•
In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interest in joint
arrangements, when the timing of the
reversal of temporary differences can be
controlled and it is probable that the
temporary difference will not reverse in the
foreseeable future.
The deferred tax liabilities in relation to
investment property is recognised dependent
upon the taxable impact in the relevant
jurisdiction. The Group assumes that the current
measurement at fair value will be recovered
entirely through a sale.
In New Zealand, as any capital gain on sale will
generally be exempt from tax, the deferred tax
liability in relation to these assets would
generally be calculated based on the amount
of any tax depreciation recovery.
Deferred tax assets are recognised for all
deductible temporary differences, the carry
forward of unused tax credits and unused tax
losses. Deferred tax assets are recognised to the
extent that it is probable that taxable profit will
be available against which the deductible
temporary differences, and the carry forward of
unused tax credits and unused tax losses can be
utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability
that is not a business combination and, at
the time of the transaction, affects neither
69
69
Annual Report 2019 / 2020 the accounting profit nor taxable profit or
loss.
•
In respect of deductible temporary
differences associated with investments in
subsidiaries, associates and interests in joint
arrangements, deferred tax assets are
recognised only to the extent that it is
probable that the temporary difference will
not reverse in the foreseeable future and
taxable profit will be available against
which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and adjusted
to the extent that it is probable that sufficient
taxable profit will be available to allow all or
part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
the year when the asset is realised or the liability
is settled, based on the tax rates and laws that
have been enacted or substantially enacted at
the reporting date.
Deferred tax relating to items recognised
outside profit or loss is recognised outside profit
or loss. Deferred tax items are recognised in
correlation to the underlying transaction either
in other comprehensive income or directly in
equity.
Deferred tax assets and liabilities are offset if a
legally enforceable right to offset current tax
assets and liabilities exists and when the
deferred tax balances relate to the same
taxation authority.
Tax consolidation legislation
NSH and its wholly-owned Australian controlled
entities have implemented the tax consolidation
legislation. As a consequence, these entities are
taxed as a single entity and the deferred tax
assets and liabilities of these entities are set off in
the consolidated financial statements.
Accounting for the tax consolidation legislation
is only relevant for the individual financial
statements of the parent entity (head entity) in
the tax consolidated group, but not for the
consolidated financial statements.
Goods and services tax (“GST”)
Revenue, expenses, assets, and liabilities are
recognised net of the amount of GST, except:
• When the GST incurred on a sale or
purchase of assets is not payable or
recoverable from the taxation authority, in
which case the GST is recognised as part of
the revenue or expense item or part of the
cost of acquisition of the asset, as
applicable.
• When receivables and payables are stated
with the amount of GST included.
The net amount of GST recoverable from, or
payable to, the taxation authority is included as
part of receivables or payables in the statement
of financial position. Commitments and
contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the
taxation authority.
Cash flows are included in the statement of
cash flows on a gross basis and the GST
component of cash flows arising from investing
and financing activities, which is recoverable
from, or payable to, the taxation authority is
classed as part of operating cash flows.
(f)
Foreign currencies
The Group’s consolidated financial statements
are presented in Australian dollars. For each
entity, the Group determines the functional
currency and items included in the financial
statements of each entity are measured using
that functional currency.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Group’s entities at their
respective functional currency spot rates at the
date the transaction first qualifies for
recognition. Monetary assets and liabilities
denominated in foreign currencies are
translated at the functional currency spot rates
of exchange at the reporting date.
Differences arising on settlement or translation of
monetary items are recognised in profit or loss
with the exception of monetary items that are
designated as part of the hedge of the Group’s
net investment of a foreign operation. These are
recognised in other comprehensive income until
the net investment is disposed of, at which time,
the cumulative amount is reclassified to profit or
loss. Tax charges and credits attributable to
exchange differences on those monetary items
are also recorded in other comprehensive
income.
70
Non-monetary items that are measured in terms
of historical cost in a foreign currency are
translated using the exchange rates at the
dates of the initial transactions. Non-monetary
items measured at fair value in a foreign
currency are translated using the exchange
rates at the date when the fair value is
determined.
The gain or loss arising on translation of non-
monetary items measured at fair value is treated
in line with the recognition of the gain or loss on
the change in fair value of the item (i.e.
translation differences on items whose fair value
gain or loss is recognised in other
comprehensive income or profit or loss are also
recognised in other comprehensive income or
profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of
foreign operations are translated into Australian
dollars at the rate of exchange prevailing at the
reporting date and their statements of profit or
loss are translated at exchange rates prevailing
at the dates of the transactions. The exchange
differences arising on translation for
consolidation are recognised in other
comprehensive income. On disposal of a
foreign operation, the component of other
comprehensive income relating to that
particular foreign operation is recognised in
profit or loss.
Any goodwill arising on the acquisition of a
foreign operation and any fair value
adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are
treated as assets and liabilities of the foreign
operation and translated at the spot rate of
exchange at the reporting date.
(g)
Business combinations and goodwill
The Group accounts for a transaction as a
business combination if it meets the definition
under AASB 3, which requires that the assets and
liabilities acquired constitute a business. A
business is defined as an integrated set of
activities and assets that is capable of being
conducted and managed for the purpose of
providing goods or services to customers,
generating investment income (such as
dividends or interest) or generating other
income from ordinary activities. In order to
determine an integrated set of activities, an
assessment of minimum business requirements
and what substantive processes have been
acquired, is applied.
As part of this assessment the Group has early
adopted the amendments to the definition of a
business under AASB 2018-6 and has applied the
optional fair value concentration test. If the
concentration test is passed, the set of activities
and assets is determined not to be a business
and therefore, the transaction is not accounted
for as a business combination but rather as an
asset acquisition.
Business combinations are accounted for using
the acquisition method. The cost of an
acquisition is measured as the aggregate of the
consideration transferred, which is measured at
acquisition date fair value, and the amount of
any non-controlling interests in the acquiree. For
each business combination, the Group elects
whether to measure the non-controlling interests
in the acquiree at fair value or at the
proportionate share of the acquiree’s
identifiable net assets. Acquisition related costs
are expensed as incurred and included in
business combination expenses in the statement
of profit or loss.
When the Group acquires a business, it assesses
the financial assets and liabilities assumed for
appropriate classification and designation in
accordance with the contractual terms,
economic circumstances and pertinent
conditions as at the acquisition date. This
includes the separation of embedded
derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred
by the acquirer will be recognised at fair value
at the acquisition date. Contingent
consideration classified as an asset or liability
that is a financial instrument and within the
scope of AASB 9 Financial Instruments, is
measured at fair value with the changes in fair
value recognised in the statement of profit or
loss.
Goodwill is initially measured at cost (being the
excess of the aggregate of the consideration
transferred and the amount recognised for non-
controlling interests and any previous interest
held over the net identifiable assets acquired
and liabilities assumed). If the fair value of the
net assets acquired is in excess of the
aggregate consideration transferred, the Group
re-assesses whether it has correctly identified all
of the assets acquired and all of the liabilities
assumed and reviews the procedures used to
measure the amounts to be recognised at the
acquisition date. If the reassessment still results in
71
71
Annual Report 2019 / 2020
an excess of the fair value of net assets
acquired over the aggregate consideration
transferred, then the gain is recognised in profit
or loss.
After initial recognition, goodwill is measured at
cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill
acquired in a business combination is, from the
acquisition date, allocated to each of the
Group’s cash-generating units that are
expected to benefit from the combination,
irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-
generating unit (“CGU”) and part of the
operation within that unit is disposed of, the
goodwill associated with the disposed operation
is included in the carrying amount of the
operation when determining the gain or loss on
disposal. Goodwill disposed in these
circumstances is measured based on the
relative values of the disposed operation and
the portion of the CGU retained.
(h)
Leases
The Group leases properties which are classified
as investment properties (note 10.4). The Group
also leases office premises and items of plant
and equipment.
From 1 July 2019, the Group assesses at contract
inception whether a contract is, or contains, a
lease. That is, if the contract conveys the right to
control the use of an identified asset for a period
of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and
measurement approach for all leases, except
for short term leases and leases of low value
assets. The Group recognises lease liabilities to
make lease payments and right of use assets
representing the right to use the underlying
assets.
Right of use assets
The Group recognises right of use assets at the
commencement date of the lease (i.e., the
date the underlying asset is available for use).
Right of use assets (excluding leasehold
investment properties) are measured at cost,
less any accumulated depreciation and
impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of
right of use assets includes the amount of lease
liabilities recognised, initial direct costs incurred,
and lease payments made at or before the
commencement date less any lease incentives
received. Right of use assets are depreciated on
a straight line basis over the shorter of the lease
term and the estimated useful lives of the assets.
Leasehold investment property assets are
measured at fair value as detailed in note 2(p).
If ownership of the leased asset transfers to the
Group at the end of the lease term or the cost
reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset. The right of use assets are
also subject to impairment as detailed in note
2(r).
Lease liabilities
At the commencement date of the lease, the
Group recognises lease liabilities measured at
the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments less any lease incentives
receivable, variable lease payments that
depend on an index or a rate, and amounts
expected to be paid under residual value
guarantees. The lease payments also
include the exercise price of a purchase option
reasonably certain to be exercised by the
Group and payments of penalties for
terminating the lease, if the lease term reflects
the Group exercising the option to terminate.
In calculating the present value of lease
payments, the Group uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments
made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification,
a change in the lease term, a change in the
lease payments (e.g., changes to future
payments resulting from a change in an index or
rate used to determine such lease payments) or
a change in the assessment of an option to
purchase the underlying asset.
Short term leases and leases of low value assets
The Group applies the short term lease
recognition exemption to its short term leases of
equipment (i.e. those leases that have a lease
term of 12 months or less from the
commencement date and do not contain a
purchase option). It also applies the lease of low
value assets recognition exemption to leases of
office equipment that are considered to be low
value. Lease payments on short term leases and
72
leases of low value assets are recognised on a
straight line basis over the lease term.
For the prior reporting period ended 30 June
2019, the determination of whether an
arrangement is a lease was based on the
substance of the arrangement at the inception
of the lease. The arrangement was, or
contained, a lease if fulfilment of the
arrangement was dependent on the use of a
specific asset or assets and the arrangement
conveyed the right to use the asset or assets.
Leases of investment property and property,
plant and equipment, where the group as
lessee had substantially all the risks and rewards
of ownership, were classified as finance leases.
Leasehold investment property and property,
plant and equipment finance leases were
capitalised at the lease’s inception at fair value.
The corresponding rental obligations, net of
finance charges, were included in other short-
term and long-term liabilities. Each lease
payment was allocated between the liability
and finance cost. The finance cost being
charged to the profit or loss over the lease
period. The investment properties acquired
under finance leases were carried at fair value
with changes in value presented in profit or loss.
The property, plant and equipment acquired
under finance leases was depreciated over the
asset’s useful life or over the shorter of the asset’s
useful life and the lease term if there was no
reasonable certainty that the Group will obtain
ownership at the end of the lease term.
Operating leases
Leases in which a significant portion of the risks
and rewards of ownership were not transferred
to the Group were classified as operating leases.
Payments made under operating leases (net of
any incentives received from the lessor) were
charged to profit or loss on a straight-line basis
over the period of the lease.
Group as a lessor
From 1 July 2019, leases in which the Group does
not transfer substantially all the risks and rewards
incidental to ownership of an asset are classified
as operating leases. Rental income arising is
accounted for on a straight line basis over the
lease terms and is included in revenue in the
statement of profit or loss due to its operating
nature. Initial direct costs incurred in negotiating
and arranging an operating lease are added to
the carrying amount of the leased asset and
recognised over the lease term on the same
basis as rental income. Contingent rents are
recognised as revenue in the period in which
they are earned.
For the prior reporting period ending 30 June
2019, lease income from operating leases where
the group was a lessor was recognised in
revenue less any amount contractually
refundable to customers over the term of lease.
(i)
Cash and cash equivalents
Cash and cash equivalents in the statement of
financial position comprise cash at bank, cash
on hand and term deposits that are readily
convertible to known amounts of cash and
which are subject to an insignificant risk of
change in value.
For the purposes of the statement of cash flows,
cash and cash equivalents consist of cash and
term deposits as defined above.
(j)
Inventories
Inventories are valued at the lower of cost and
net realisable value. Costs are assigned on a
first-in first-out basis. Net realisable value is the
estimated selling price in the ordinary course of
business, less the estimated costs necessary to
make the sale.
(k)
Financial assets
Initial recognition and measurement
At initial recognition, financial assets are
classified and measured at amortised cost, fair
value through other comprehensive income, or
fair value through profit or loss.
The classification of financial assets at initial
recognition depends on the financial asset’s
contractual cash flow characteristics and the
Group’s business model for managing them.
With the exception of trade receivables that do
not contain a significant financing component
or for which the Group has applied the practical
expedient, the Group initially measures a
financial asset at its fair value plus, in the case of
a financial asset not at fair value through profit
or loss, transaction costs. Trade receivables that
do not contain a significant financing
component or for which the Group has applied
the practical expedient are measured at the
transaction price determined under AASB 15.
73
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Annual Report 2019 / 2020 In order for a financial asset to be classified and
measured at amortised cost or fair value
through other comprehensive income, it needs
to give rise to cash flows that are solely
payments of principal and interest (“SPPI”) on
the principal amount outstanding. This
assessment is referred to as the SPPI test and is
performed at an instrument level.
The Group’s business model for managing
financial assets refers to how it manages its
financial assets in order to generate cash flows.
The business model determines whether cash
flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Subsequent measurement
Financial assets at amortised cost
The Group measures financial assets at
amortised cost if the financial asset is held with
the objective to collect contractual cash flows
and the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest on
the principal amount outstanding.
Financial assets held at amortised cost are
subsequently measured using the effective
interest method and are subject to impairment.
Gains and losses are recognised in profit or loss
when the asset is derecognised, modified or
impaired. The Group’s financial assets at
amortised cost includes trade and other
receivables, and deposits.
Financial assets at fair value through other
comprehensive income
The Group measures debt instruments at fair
value through other comprehensive income if
the financial asset is held with the objective of
both holding to collect contractual cash flows
and sale, and the contractual terms of the
financial asset give rise on specified dates to
cash flows that are solely payments of principal
and interest on the principal amount
outstanding.
For debt instruments at fair value through other
comprehensive income, interest income, foreign
exchange revaluation and impairment losses or
reversals are recognised in the statement of
profit or loss and computed in the same manner
as for financial assets measured at amortised
cost. The remaining fair value changes are
recognised in other comprehensive income.
Upon derecognition, the cumulative fair value
change recognised in other comprehensive
income is recycled to profit or loss.
Financial assets at fair value through profit or loss
This category includes financial assets held for
trading and financial assets designated upon
initial recognition at fair value through profit or
loss. Financial assets are classified as held for
trading if they are acquired for the purpose of
selling or repurchasing in the near term.
Derivatives, including separated embedded
derivatives are also classified as held for trading
unless they are designated as effective hedging
instruments. Financial assets at fair value through
profit or loss are carried in the statement of
financial position at fair value with net changes
in fair value recognised in the statement of profit
or loss.
Derecognition
Financial assets are derecognised when the
rights to receive cash flows from the assets have
expired and the Group has transferred
substantially all the risks and rewards of
ownership or control of the asset.
Impairment
The Group uses AASB 9’s incurred loss approach
with a forward-looking expected credit loss
(“ECL”) approach to recognise an ECL for all
debt instruments not held at fair value through
profit or loss. ECLs are based on the difference
between the contractual cash flows due in
accordance with the contract and all the cash
flows that the Group expects to receive,
discounted at an approximation of the original
effective interest rate. The expected cash flows
will include cash flows from the sale of collateral
held or other credit enhancements that are
integral to the contractual terms.
ECLs are recognised in two stages. For credit
exposures for which there has not been a
significant increase in credit risk since initial
recognition, ECLs are provided for credit losses
that result from default events that are possible
within the next 12-months (a 12-month ECL). For
those credit exposures for which there has been
a significant increase in credit risk since initial
recognition, a loss allowance is required for
credit losses expected over the remaining life of
the exposure, irrespective of the timing of the
default (a lifetime ECL).
For trade receivables and contract assets, the
Group applies a simplified approach in
calculating ECLs. Therefore, the Group does not
track changes in credit risk, but instead
recognises a loss allowance based on lifetime
74
ECLs at each reporting date. The Group assesses
this allowance based on its historical credit loss
experience, adjusted for forward-looking factors
specific to the debtors.
proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss
over the period of the borrowings using the
effective interest method.
The Group considers a financial asset to be at
risk of default when contractual payments are
90 days past due. However, in certain cases, the
Group may also consider a financial asset to be
in default when internal or external information
indicates that the Group is unlikely to receive
the outstanding contractual amounts in full
before taking into account any credit
enhancements held by the Group.
A financial asset is written off when there is no
reasonable expectation of recovering the
contractual cash flows.
(l)
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as
hedging instruments in an effective hedge, as
appropriate.
All financial liabilities are recognised initially at
fair value and, in the case of loans and
borrowings and payables, net of directly
attributable transaction costs. The Group’s
financial liabilities include trade and other
payables, loans and borrowings, and derivative
financial instruments.
Subsequent measurement
Financial liabilities at fair value through profit or
loss
This category includes financial liabilities held for
trading and financial liabilities designated upon
initial recognition as at fair value through profit
or loss.
Financial liabilities designated upon initial
recognition at fair value through profit or loss are
designated at the initial date of recognition,
and only if the criteria in AASB 9 are satisfied. The
Group has not designated any financial liability
as at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost. Any difference between the
Fees paid on the establishment of loan facilities
are capitalised as transaction costs of the loan
and subsequently amortised over the period of
the facility to which it relates.
Borrowing costs are recognised as an expense
when incurred unless they relate to the
acquisition, construction or production of a
qualifying asset or to upfront borrowing
establishment and arrangement costs, which
are deferred and amortised as an expense over
the life of the facility. Borrowing costs incurred
for the construction of any qualifying asset are
capitalised during the period of time that is
required to complete and prepare the asset for
its intended use or sale.
Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expired. When an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification is
treated as the derecognition of the original
liability and the recognition of a new liability. The
difference in the respective carrying amounts is
recognised in the statement of profit or loss.
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 reporting period.
(m) Derivative financial instruments and
hedge accounting
Initial recognition and measurement
The Group uses derivative financial instruments,
such as interest rate swaps, forward currency
exchange contracts and a net investment
hedge to hedge its foreign currency and interest
rate risks.
Derivatives are initially recognised at fair value
on the date a derivative contract is entered into
and are subsequently remeasured to their fair
value at the end of each reporting period.
The accounting for subsequent changes in fair
value depends on whether the derivative is
75
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Annual Report 2019 / 2020
designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group
designates certain derivatives as either:
•
•
•
Hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair
value hedges);
Hedges of a particular risk associated with
the cash flows of recognised assets and
liabilities and highly probable forecast
transactions (cash flow hedges); or
Hedges of a net investment in a foreign
operation (net investment hedges).
At the inception of a hedge relationship, the
Group formally designates and documents the
hedge relationship to which it wishes to apply
hedge accounting and the risk management
objective and strategy for undertaking the
hedge.
For hedges that were initially entered into prior
to 1 July 2018, the documentation includes
identification of the hedging instrument, the
hedged item or transaction, the nature of the
risk being hedged and how the Group will assess
the effectiveness of changes in the hedging
instrument’s fair value in offsetting the exposure
to changes in the hedged item’s fair value or
cash attributable to the hedged risk. Such
hedges are expected to be highly effective in
achieving offsetting changes in fair value or
cash flows and are assessed on an ongoing
basis to determine that they actually have been
highly effective throughout the financial
reporting periods for which they were
designated.
From 1 July 2018, the documentation includes
identification of the hedging instrument, the
hedged item, the nature of the risk being
hedged and how the Group will assess whether
the hedging relationship meets the hedge
effectiveness requirements (including the
analysis of sources of hedge ineffectiveness and
how the hedge ratio is determined). A hedging
relationship qualifies for hedge accounting if it
meets all of the following effectiveness
requirements:
•
•
•
There is ‘an economic relationship’ between
the hedged item and the hedging
instrument.
The effect of credit risk does not ‘dominate
the value changes’ that result from that
economic relationship.
The hedge ratio of the hedging relationship
is the same as that resulting from the
quantity of the hedged item that the Group
actually hedges and the quantity of the
hedging instrument that the Group actually
uses to hedge that quantity of hedged item.
The fair values of various derivative financial
instruments used for hedging purposes are
disclosed in note 9.8. Movements in the hedging
reserve in equity are shown in note 14. The full
fair value of a hedging derivative is classified as
a non-current asset or liability when the
remaining maturity of the hedged item is more
than 12 months. It is classified as a current asset
or liability when the remaining maturity of the
hedged item is less than 12 months. Trading
derivatives are classified as a current asset or
liability.
Fair value hedge
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are
recorded in profit or loss, together with any
changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk.
The gain or loss relating to the effective portion
of interest rate swaps hedging fixed rate
borrowings is recognised in profit or loss within
finance costs, together with changes in the fair
value of the hedged fixed rate borrowings
attributable to interest rate risk. The gain or loss
relating to the ineffective portion is recognised
in profit or loss within other income or other
expenses.
If the hedge no longer meets the criteria for
hedge accounting, the adjustment to the
carrying amount of a hedged item for which the
effective interest method is used is amortised to
profit or loss over the period to maturity using a
recalculated effective interest rate.
Cash flow hedge
The effective portion of changes in the fair value
of derivatives that are designated and qualify as
a cash flow hedge is recognised in other
comprehensive income and accumulated in
reserves in equity. The gain or loss relating to the
ineffective portion is recognised immediately in
profit or loss within interest income or finance
costs.
The Group uses forward currency contracts as
hedges of its exposure to foreign currency risk in
forecast transactions. The ineffective portion
relating to foreign currency contracts is
recognised as other operational expenses.
76
The Group designates only the spot element of
forward contracts as a hedging instrument. The
forward element is recognised in other
comprehensive income and accumulated in a
separate component of equity within the
hedging reserve.
The amounts accumulated in other
comprehensive income are accounted for
depending on the nature of the underlying
hedged transaction.
The amount accumulated in other
comprehensive income is reclassified to profit or
loss as a reclassification adjustment in the same
period or periods during which the hedged cash
flows affect profit or loss.
If cash flow hedge accounting is discontinued,
the amount that has been accumulated in
other comprehensive income must remain in
other comprehensive income if the hedged
future cash flows are still expected to occur.
Otherwise, the amount will be immediately
reclassified to profit or loss as a reclassification
adjustment. After discontinuation, once the
hedged cash flow occurs, any accumulated
amount remaining in other comprehensive
income must be accounted for depending on
the nature of the underlying transaction.
Hedges of a net investment
Hedges of a net investment in a foreign
operation, including a hedge of a monetary
item that is accounted for as part of the net
investment, are accounted for in a way similar
to cash flow hedges. Gains or losses on the
hedging instrument relating to the effective
portion of the hedge are recognised as other
comprehensive income while any gains or losses
relating to the ineffective portion are
recognised in the statement of profit or loss. On
disposal of the foreign operation, the
cumulative value of any such gains or losses
recorded in equity is transferred to the
statement of profit or loss.
(n) Assets held for sale
The Group classifies non-current assets and
disposal groups as held for sale if their carrying
amounts will be recovered principally through a
sale transaction rather than through continuing
use. Non-current assets and disposal groups
classified as held for sale are measured at the
lower of their carrying amount and fair value less
costs to sell. Costs to sell are the incremental
costs directly attributable to the disposal of an
asset or disposal group, excluding finance costs
and income tax expense.
The criteria for held for sale classification is met
only when the sale is highly probable and the
asset or disposal group is available for
immediate sale in its present condition. Actions
required to complete the sale should indicate
that it is unlikely that significant changes to the
sale will be made or that the decision to sell will
be withdrawn. Management must be
committed to the plan to sell the asset and the
sale expected to be completed within one year
from the date of the classification.
Property, plant and equipment and intangible
assets are not depreciated or amortised once
classified as held for sale. Assets and liabilities
classified as held for sale are presented
separately as current items in the statement of
financial position. A disposal group qualifies as a
discontinued operation if it is a component of
an entity that has been disposed of, or is
classified as held for sale, and:
•
•
•
Represents a separate major line of business
or geographical area of operations;
Is part of a single co-ordinated plan to
dispose of a separate major line of business
or geographical area of operations; or
Is a subsidiary acquired exclusively with a
view to resale.
Discontinued operations are excluded from the
results of continuing operations and are
presented as a single amount as profit or loss
after tax from discontinued operations in the
statement of profit or loss.
(o)
Property, plant and equipment
Property, plant and equipment is stated at
historical cost less depreciation. Historical cost
includes expenditure that is directly attributable
to the acquisition of the items. Subsequent costs
are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate,
only when it is probable that future economic
benefits associated with the item will flow to the
group and the cost of the item can be
measured reliably. The carrying amount of any
component asset is derecognised when
replaced. All repairs and maintenance are
charged to profit or loss during the reporting
period in which they are incurred.
Depreciation is calculated on a straight-line
basis over the estimated useful life of the assets
as follows:
•
•
Leasehold improvements - remaining length
of lease term
Plant and equipment - 2.5 to 20 years
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Annual Report 2019 / 2020
Each asset’s residual value and useful life is
reviewed, and adjusted if appropriate, at the
end of each reporting period.
An asset’s carrying amount is written down
immediately to its recoverable amount if the
asset’s carrying amount is greater than its
estimated recoverable amount (note 2(r)).
Gains and losses on disposals are determined by
comparing proceeds with carrying amount.
These are included in profit or loss.
(p)
Investment properties
Freehold investment properties
Investment properties are measured initially at
cost, including transaction costs. Subsequent to
initial recognition, investment properties are
stated at fair value, which reflects market
conditions at the reporting date. Gains or losses
arising from changes in the fair values of
investment properties are included in profit or
loss in the period in which they arise.
Fair values are determined by a combination of
independent valuations and Director valuations.
The independent valuations are performed by
an accredited independent valuer. Investment
properties are independently valued on a
rotational basis, every three years, unless
required by the underlying financing or the
Directors determine a more frequent valuation
cycle.
For properties subject to an independent
valuation report, the Directors verify all major
inputs to the valuation and review the results
with the independent valuer. The Director
valuations are completed by the NSH Group
Board. The valuations are determined using the
same techniques and similar estimates to those
applied by the independent valuer.
Investment properties are derecognised either
when they have been disposed of or when they
are permanently withdrawn from use and no
future economic benefit is expected from their
disposal. The difference between the net
disposal proceeds and the carrying amount of
the asset is recognised in the statement of profit
or loss in the period of derecognition.
Transfers are made to or from investment
property only when there is a change in use.
Leasehold investment properties
The Group, as lessee, has properties that in
accordance with AASB 140 Investment Property,
qualify for recognition as investment properties.
Under this treatment, for each property, the
present value of the minimum lease payments is
determined and carried as a lease liability and
the fair value of the lease to the NSH Group is
recorded each period as investment property.
Gains or losses arising from changes in the fair
values of investment properties are included in
profit or loss in the period in which they arise,
including the corresponding tax effect. Fair
values are determined using the same valuation
process applied to freehold investment
property.
From 1 July 2019, lease payments are
accounted for under AASB 16, see note 2(h),
and for the prior reporting period under AASB
117. Under both approaches the Lease
payments are allocated between the principal
component of the lease liability and interest
expense as to achieve a constant rate of
interest on the remaining balance of the liability.
Interest expense is recognised in finance costs in
the consolidated statements of profit and loss
and within payment of lease liabilities within the
consolidated statements of cash flows.
(q)
Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. The cost
of intangible assets acquired in a business
combination is their fair value at the date of
acquisition. Following initial recognition,
intangible assets are carried at cost less any
accumulated amortisation and accumulated
impairment losses. Internally generated
intangibles, excluding capitalised development
costs, are not capitalised and the related
expenditure is reflected in profit or loss in the
period in which the expenditure is incurred.
The useful lives of intangible assets are assessed
as either finite or indefinite. Intangible assets with
finite lives are amortised over the useful
economic life and assessed for impairment
whenever there is an indication that the
intangible asset may be impaired. The
amortisation period and the amortisation
method for an intangible asset with a finite
useful life are reviewed at least at the end of
each reporting period.
Changes in the expected useful life or the
expected pattern of consumption of future
economic benefits embodied in the asset are
considered to modify the amortisation period or
method, as appropriate, and are treated as
78
changes in accounting estimates and adjusted
on a prospective basis. The amortisation
expense on intangible assets with finite lives is
recognised in the statement of profit or loss as
the expense category that is consistent with the
function of the intangible assets.
Intangible assets with indefinite useful lives, such
as goodwill, are not amortised but are tested for
impairment at each reporting period, either
individually or at the CGU level. The assessment
of indefinite life is reviewed at each reporting
period to determine whether the indefinite life
continues to be supportable. If not, the change
in useful life from indefinite to finite is made on a
prospective basis. Gains or losses arising from
derecognition of an intangible asset are
measured as the difference between the net
disposal proceeds and the carrying amount of
the asset and are recognised in the statement
of profit or loss when the asset is derecognised.
Research costs are expensed as incurred.
Development expenditure on an individual
project is recognised as an intangible asset
when the Group can demonstrate:
•
The technical feasibility of completing the
intangible asset so that the asset will be
available for use or sale;
Its intention to complete and its ability and
intention to use or sell the asset;
• How the asset will generate future
•
•
•
economic benefits;
The availability of resources to complete the
asset; and
The ability to measure reliably the
expenditure during development.
Following initial recognition of the development
expenditure as an asset, the asset is carried at
cost less any accumulated amortisation and
accumulated impairment losses. Amortisation of
the asset begins when development is
complete and the asset is available for use. It is
amortised over the period of expected future
benefit. Amortisation is recorded in other
operational expenses. During the period of
development, the asset is tested for impairment
annually.
(r)
Impairment of assets
Goodwill and intangible assets that have an
indefinite useful life are not subject to
amortisation and are tested annually for
impairment or more frequently if events or
changes in circumstances indicate that they
might be impaired. Other assets are tested for
impairment whenever events or changes in
circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less
costs of disposal and value in use. For the
purposes of assessing impairment, assets are
grouped at the lowest levels for which there are
separately identifiable cash inflows which are
largely independent of the cash inflows from
other assets or groups of assets (CGU’s). Non-
financial assets other than goodwill that have
been impaired in previous periods are reviewed
for possible reversal of the impairment at the
end of each reporting period.
(s)
Provisions
Provisions are recognised when the Group has a
present obligation (legal or constructive) as a
result of a past event, it is probable that an
outflow of resources embodying economic
benefits will be required to settle the obligation
and a reliable estimate can be made of the
amount of the obligation. When the Group
expects some or all of a provision to be
reimbursed, the reimbursement is recognised as
a separate asset, but only when the
reimbursement is virtually certain.
Provisions are measured at the present value of
management’s best estimate of the
expenditure required to settle the present
obligation at the end of the reporting period.
The discount rate used to determine the present
value is a pre-tax rate that reflects current
market assessments of the time value of money
and the risks specific to the liability. The increase
in the provision due to the passage of time is
recognised as interest expense.
In accordance with lease agreements, the
Group must restore the leased premises in a
number of leasehold premises to its original
condition at lease expiry. A provision has been
recognised for the obligation to remove
leasehold improvements from the leased
premises (note 10.7).
(t)
Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-
monetary benefits, and accumulating annual
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Annual Report 2019 / 2020
leave which are expected to be settled within
12 months of the reporting date are recognised
in respect of employees' services up to the
reporting date. They are measured at the
amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits obligations
The Group does not expect its long service
leave benefits to be settled wholly within 12
months of each reporting date. The Group
recognises a liability for long service leave
measured as the present value of expected
future payments to be made in respect of
services provided by employees up to the
reporting date using the projected unit credit
method. Consideration is given to previous
experience of employee departures, and
periods of service. Expected future payments
are discounted using market yields at the
reporting date on the applicable corporate
bonds with terms to maturity and currencies that
match, as closely as possible, the estimated
future cash outflows.
Retirement benefit obligations
All employees can direct the Group to make
contributions to a defined contribution plan of
their choice. Contributions to defined
contribution superannuation funds are
recognised as an expense as they become
payable. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a
reduction in the future payments is available.
(u) Contributed equity
Stapled securities are classified as equity. Issued
and paid up capital is recognised at the fair
value of the consideration received by the
Group. Incremental costs directly attributable to
the issue of securities are shown in equity as a
deduction, net of tax, from the proceeds.
(v) Dividends and distributions to
securityholders
The Group recognises a liability to make cash or
non-cash distributions to equity holders when
the distribution is authorised and is no longer at
the discretion of the Company or the
Responsible Entity. A corresponding amount is
recognised directly in equity.
Non-cash distributions are measured at the fair
value of the assets to be distributed with fair
value re-measurement recognised directly in
equity. Any difference between the carrying
amount of the liability and the carrying amount
of the assets distributed is recognised in the
statement of profit or loss.
(w) Rounding of amounts
The Group is of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191, relating to the
‘rounding off’ of amounts in the financial
statements. Amounts in the financial statements
have been rounded off to the nearest thousand
dollars, or in certain cases, the nearest dollar.
(x)
Parent entity financial information
The financial information for the parent entity,
NSH, disclosed in note 21 has been prepared on
the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries
Investments in subsidiaries are accounted for at
cost in the financial statements of NSH.
Tax consolidation legislation
NSH and its wholly-owned entities have
implemented the tax consolidation legislation.
The head entity, NSH, and the controlled entities
that are in the tax consolidated group, account
for their own current and deferred tax amounts.
These tax amounts are measured as if each
entity in the tax consolidated group continues to
be a stand-alone tax payer in its own right.
In addition to its own current and deferred tax
amounts, NSH also recognises the current tax
liabilities (or assets) and the deferred tax assets
arising from unused tax losses and unused tax
credits assumed from controlled entities in the
tax consolidated group.
The entities have also entered into a tax funding
agreement under which the wholly-owned
entities fully compensate NSH for any current tax
payable assumed and are compensated by
NSH for any current tax receivable and deferred
tax assets relating to unused tax losses or unused
tax credits that are transferred to NSH under the
tax consolidation legislation. The funding
amounts are determined by reference to the
amounts recognised in the wholly-owned
entities' financial statements. The amounts
receivable/payable under the tax funding
agreement are due upon receipt of the funding
advice from the head entity. The head entity
may also require payment of interim funding
amounts to assist with its obligations to pay tax
instalments.
80
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities
are recognised as current amounts receivable
from or payable to other entities in the Group.
(y)
Fair value measurement
The Group measures financial instruments, such
as derivatives, and non-financial assets such as
investment properties, at fair value at each
balance sheet date.
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date. The fair value
measurement is based on the presumption that
the transaction to sell the asset or transfer the
liability takes place either:
•
•
In the principal market for the asset or
liability; or
In the absence of a principal market, in the
most advantageous market for the asset or
liability.
The principal or the most advantageous market
must be accessible by the group.
The fair value of an asset or liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest. A fair value
measurement of a non-financial asset takes into
account a market participant's ability to
generate economic benefits by using the asset
in its highest and best use or by selling it to
another market participant.
The Group uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data is available to measure fair value,
maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial
statements are categorised within the fair value
hierarchy, based on the lowest level input that is
significant to the fair value measurement as a
whole:
•
•
Level 1 — Quoted (unadjusted) market
prices in active markets for identical assets
or liabilities
Level 2 — Valuation techniques for which
the lowest level input that is significant to
•
the fair value measurement is directly or
indirectly observable
Level 3 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is unobservable
For assets and liabilities that are recognised in
the financial statements on a recurring basis, the
Group determines whether transfers have
occurred between levels in the hierarchy by re-
assessing categorisation (based on the lowest
level input that is significant to the fair value
measurement as a whole) at the end of each
reporting period.
For further details on fair value measurement
refer to notes 9.8 and 10.8.
3.
SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of the Group’s consolidated
financial statements requires management to
make judgements, estimates and assumptions
that affect the reported amounts of revenues,
expenses, assets and liabilities, and the
accompanying disclosures, and the disclosure
of contingent assets and liabilities. Uncertainty
about these assumptions and estimates could
result in outcomes that require a material
adjustment to the carrying amount of the assets
or liabilities affected in future periods.
Judgements
In the process of applying the Group’s
accounting policies, management has made
the following judgements, which have a
significant effect on the amounts recognised in
the consolidated financial statements:
Significant judgements
Acquisition of storage centre assets
For the acquisition of storage centres, the
Group’s policy is to review the nature of the
transaction and assess if the transaction should
be accounted for under AASB 3 Business
Combinations or AASB 140 Investment Properties
as a purchase of investment property. The key
assessment is whether the transaction
constitutes a purchase of a ‘business’, and if so,
it will be accounted for under AASB 3. If it is
determined that the transaction does not meet
this definition, the transaction is accounted for
as a purchase of an asset under AASB 140, as an
81
81
Annual Report 2019 / 2020
acquisition of a storage centre(s) held for rental
return and capital appreciation.
As described in note 2(c), the Group has
adopted the amendments to a definition of a
business contained in AASB 2018-6. This provides
clarity on what is considered as a business and
adds an operational concentration test that
simplifies the assessment of whether an acquired
set of activities and assets is not a business.
For the years ended 30 June 2020 and 30 June
2019, the Group has assessed that all of its
storage centre acquisitions do not meet the
definitions set out in AASB 3 and are therefore
accounted for as purchases of investment
property per AASB 140.
Determining the lease term of contracts with
renewal and termination options – Group as
lessee
The Group determines the lease term as the
non-cancellable term of the lease, together with
any periods covered by an option to extend the
lease if it is reasonably certain to be exercised,
or any periods covered by an option to
terminate the lease, if it is reasonably certain not
to be exercised.
The Group has several lease contracts that
include extension and termination options. The
Group applies judgement in evaluating whether
it is reasonably certain to exercise the option to
renew or terminate the lease considering factors
that create an economic incentive to exercise
either the renewal or termination clause. The
Group included the extension period as part of
the lease term for leases of investment property.
The Group typically exercises its option to renew
these leases due to the economic value derived
from the operating business located at these
premises. The renewal period for the lease of
head office premises is not included as part of
the lease term as there is no reasonable
certainty that this will be exercised at the end of
the initial contractual term.
Deferred income tax
Deferred tax assets are recognised by the
Group for unused tax losses to the extent that it
is probable that taxable profit will be available
against which the losses can be utilised.
Judgement is required to determine the amount
of deferred tax assets that can be recognised,
based upon the likely timing and the level of
future taxable profits.
Classification of joint arrangements
The NSPT Group holds a 25% interest in the
Bundall Storage Trust, and the NSH Group holds
a 25% interest in the Bundall Commercial Trust
and the TBF & NS trust.
In each arrangement, investments are classified
as joint ventures as all parties are subject to a
Securityholders Agreement that has been
contractually structured such that each party
has equal representation on the advisory board
responsible for the overall direction and
supervision of each trust. Decisions about the
relevant activities require the unanimous
consent of the parties sharing control.
Estimates and assumptions
The key assumptions at the reporting date
concerning the future, and other key sources of
estimation uncertainty, that have significant risk
of causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year, are described below.
Assumptions and estimates are based on
parameters available when the consolidated
financial statements were prepared. Existing
circumstances and assumptions about the
future developments may change due to
market changes or circumstances arising
beyond the Group’s control. Such changes are
reflected in the assumptions when they occur.
Revaluation of investment properties
The Group carries its investment properties at fair
value, with changes in fair value being
recognised in the statement of profit or loss
under fair value adjustments. Fair values are
determined by a combination of independent
valuations assessed on a rotational basis and
Director valuations, determined using the same
techniques and similar estimates to those
applied by the independent valuer. The key
assumptions used to determine the fair value of
the properties and the sensitivity analyses are
provided in note 10.8.
Impairment of non-financial assets – intangibles
An impairment exists when the carrying value of
an asset or CGU exceeds its recoverable
amount, which is the higher of its fair value less
costs to sell and its value in use. The fair value
less costs to sell calculation is based on the fair
value of the Group’s stapled securities as listed
on the Australian Securities Exchange which has
been assessed as one CGU for goodwill
impairment assessment purposes, less costs of
disposal.
82
4.
SEGMENT INFORMATION
During the 2020 and 2019 financial years, the Group operated wholly within one business segment
being the operation and management of storage centres in Australia and New Zealand.
The Managing Director is the Group’s chief operating decision maker and monitors the operating results
on a portfolio wide basis. Monthly management reports are evaluated based upon the overall
performance of NSR consistent with the presentation within the consolidated financial statements. The
Group’s financing (including finance costs and interest income) are managed on a Group basis and
not allocated to operating segments.
The operating results presented in the statement of profit or loss represent the same segment
information as reported in internal management information.
Geographic information
Revenue from external customers
Australia
New Zealand
Total
2020
$'000
2019
$'000
156,188
20,453
176,641
144,621
13,036
157,657
The revenue information above excludes interest income and is based on the location of storage
centres.
Geographic information
Non-current operating assets
Australia
New Zealand
Total
2020
$'000
2019
$'000
2,172,640
283,211
2,455,851
1,881,060
239,518
2,120,578
Non-current assets for this purpose consists of property, plant and equipment, investment properties
and intangible assets (excluding goodwill).
The Group has no individual customer which represents greater than 10% of total revenue.
5.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers
Sale of goods and services
Agency fees and commissions
Design and development fees
Management fees
Total revenue from contracts with customers
2020
$'000
5,465
3,295
2,868
935
12,563
2019
$'000
5,137
2,330
3,544
2,499
13,510
83
83
Annual Report 2019 / 2020 6.
EXPENSES
8.
INCOME TAX
Other operational expenses
Professional fees
Information technology costs
Cost of packaging and other products sold
Communications costs
Bank charges
Motor vehicle expenses
Depreciation
Amortisation of intangible assets
Travel and entertainment costs
Other expenses
Total other operational expenses
Employee expenses
Wages and salaries
Post-employment benefits
Other employee costs
Total employee expenses
7.
INTEREST INCOME AND FINANCE COSTS
Interest income
Bank interest
Interest income from related parties
Total interest income
Notes
10.5
2020
$'000
2,337
2,448
2,650
1,686
1,270
631
1,108
490
754
1,521
14,895
25,580
2,157
4,348
32,085
2020
$'000
340
932
1,272
2019
$'000
2,025
1,904
1,839
1,688
965
771
395
584
630
1,090
11,891
22,069
1,955
4,720
28,744
2019
$'000
797
734
1,531
Finance costs
Interest on borrowings
Reclassification from cash flow hedge reserve to
statement of profit or loss (see note 14)
Interest on lease liabilities relating to investment property
Interest on other lease liabilities
Total finance costs
23,599
25,838
7,764
7,925
113
39,401
94
7,815
-
33,747
NSPT is a ‘flow through’ entity for Australian income tax purposes and is an Attribution Managed
Investment Trust, such that the determined tax components of NSPT will be taxable in the hands of
unitholders on an attribution basis. NSPT’s subsidiary National Storage New Zealand Property Trust
(“NSNZPT”) is an Australian registered trust which owns investment property in New Zealand. For New
Zealand tax purposes NSNZPT is classed as a unit trust and is subject to New Zealand income tax at a
rate of 28%.
The major components of income tax (benefit) / expense for the years ended 30 June 2020 and 30
June 2019 are:
Consolidated statement of profit or loss
Current tax
Deferred tax
Adjustment in relation to prior periods
Total income tax (benefit) / expense
Notes
2020
$'000
2019
$'000
1,453
(2,908)
(810)
(2,265)
1,703
(1,491)
59
271
Deferred tax relating to items recognised in other comprehensive
income during the year
Net gain/ (loss) on revaluation of cash flow hedges
14
413
(290)
Deferred tax relating to items recognised in statement of changes
in equity during the year
Cost of issuing share capital
(180)
(207)
Reconciliation of tax expense and accounting profit multiplied by
Australia’s domestic tax rate for 2020 and 2019:
Profit before tax
Deduct profit before tax from Trusts owning Australian properties
Accounting profit before income tax
119,514
(95,034)
24,480
145,111
(136,002)
9,109
Tax at the Australian tax rate of 30% (2019 – 30%)
7,344
2,733
Non-deductible / assessable amounts
Deductible / non-assessable amounts
Adjustments in respect of previous years
Effect of lower tax rates in New Zealand
Recognition of previously unrecognised tax losses
Income tax (benefit) / expense
1,876
(9,962)
(810)
(688)
(25)
(2,265)
498
(2,594)
59
(83)
(342)
271
84
85
85
Annual Report 2019 / 2020 9.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group holds the following financial instruments:
Financial assets
At amortised cost
Cash and cash equivalents
Trade and other receivables
Deposits
Measured at fair value
Derivatives used for hedging
Total financial assets
Financial liabilities
At amortised cost
Trade and other payables
Borrowings
Lease liabilities
Measured at fair value
Derivatives used for hedging
Total financial liabilities
Notes
2020
$'000
2019
$'000
9.1
9.2
9.3
9.3
9.4
9.5
9.7
9.6
90,352
16,493
2,293
109,138
178,842
19,856
1,178
199,876
19
569
109,157
200,445
14,875
681,063
170,593
866,531
18,993
847,838
169,154
1,035,985
407
2,088
866,938
1,038,073
The Group’s approach to financial risk management is discussed in note 15. The maximum exposure to
credit risk at the end of the reporting period is the carrying amount of each class of financial asset
mentioned above.
All derivatives relate to interest rate swaps and forward currency exchange contracts held by the
group. These have been designated as cash flow hedges and are presented as current assets or
liabilities if they are expected to be settled within 12 months after the end of the reporting period.
Deferred tax benefit included in income tax benefit comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Movement of deferred tax asset on carry forward losses shown in
current tax expense
Exchange variations
Movement in deferred tax asset recognised in other comprehensive
income
Movement in deferred tax asset recognised in statement of changes
in equity
Total deferred tax benefit
Deferred tax assets and liabilities
Deferred tax assets
The balance comprises temporary differences attributable to:
Lease liabilities
Employee benefits
Accrued expenses
Carry forward losses
Make good provisions
Revaluation of cash flow hedges
Revaluation of investment property assets
Other
Total deferred tax assets
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Right of use assets
Trade and other receivables
Intangibles
Revaluations of investment properties
Unrealised foreign exchange losses
Total deferred tax liabilities
Net deferred tax assets
Reconciliation to statement of financial position
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
2020
$'000
2019
$'000
(30,963)
28,502
(85,700)
84,230
(241)
27
(487)
(31)
(413)
290
180
(2,908)
207
(1,491)
306,214
596
451
1,283
649
3
2,419
388
312,003
274,105
669
516
1,499
434
425
2,970
422
281,040
1,878
125
215
305,438
3
307,659
-
532
305
278,276
44
279,157
4,344
1,883
7,041
(2,697)
4,344
2,980
(1,097)
1,883
The Group offsets tax assets and liabilities if it has a legally enforceable right to set off current tax assets
and current tax liabilities and the deferred tax asset and deferred tax liabilities relate to income taxes
levied by the same tax authority.
The group has the following gross tax losses which arose in Australia:
Recognised group tax losses
Unrecognised group tax losses
Total
2020
$'000
4,278
4,244
8,522
2019
$'000
4,998
4,325
9,323
These losses are available for offsetting against future taxable profits of the NSH Australian tax group.
These losses are subject to the satisfaction of the same business test and a reduced rate of utilisation
under the 'available fraction' rules (see note 3).
86
87
87
Annual Report 2019 / 2020 9.1.
Cash and cash equivalents
Classification as trade and other receivables
Current assets
Cash on hand
Cash at bank
Total cash and cash equivalents
2020
$'000
2019
$'000
2
90,350
90,352
50
178,792
178,842
Cash flow reconciliation of net profit after tax to net cash flows from operations
Profit after income tax
Income tax (benefit) / expense
Profit before tax
Adjustments to reconcile profit before tax to net cash flows:
Depreciation
Amortisation of intangible assets presented within restructuring and
other non-recurring costs
Derecognition of intangible assets
Fair value adjustments
Share of loss / (profit) from joint ventures and associates
Loss on disposal of property, plant and equipment
Interest income
Finance costs
Changes in operating assets and liabilities:
(Increase)/ decrease in receivables
Increase in inventories
Increase in other assets
(Decrease) / increase in payables
(Decrease) / increase in deferred revenue
(Decrease) / increase in provisions
Cash flows from operating activities
Interest received
Income tax paid
Net cash flows from operating activities
9.2.
Trade and other receivables
Current
Trade receivables
Other receivables
Receivables from related parties
Allowance for expected credit losses on trade receivables
17
Notes
Non-current
Other receivables
Total current and non-current
2020
$'000
2019
$'000
121,779
(2,265)
119,514
144,840
271
145,111
1,108
395
490
651
(63,019)
491
-
(1,272)
39,401
584
-
(84,663)
(3,171)
8
(1,531)
33,746
(2,530)
(151)
(2,341)
(1,796)
(483)
(249)
89,814
1,202
(1,538)
89,478
2020
$'000
4,035
4,681
7,448
(189)
15,975
1,118
(26)
(1,780)
2,128
135
387
92,441
2,024
(1,153)
93,312
2019
$'000
3,770
4,223
11,880
(135)
19,738
518
118
16,493
19,856
88
Trade receivables are amounts due from customers for rental income, goods sold or services performed
in the ordinary course of business. Other receivables are held to collect contractual cash flows of solely
payments of principal and interest. If collection is expected in one year or less, they are classified as
current assets. If not, they are presented as non-current assets.
The allowance for expected credit losses represents an estimate of receivables that are not considered
to be recoverable. The Group recognises an expected loss provision based on lifetime expected credit
losses at each reporting date. The Group applies significant judgement in assessing this allowance
based on its historical credit loss experience, adjusted for forward-looking factors specific to the
receivable, and wider economic factors including counter party risk.
See note 17 for terms and conditions relating to related party receivables.
See below for the movements in the allowance for expected credit losses in the Group.
At 1 July
Charge for the year
Utilised
At 30 June
The age of trade receivables not impaired was as follows:
0 to 3 months
3 to 6 months
Over 6 months
2020
$'000
135
107
(53)
189
2020
$'000
3,096
589
161
3,846
2019
$'000
23
165
(53)
135
2019
$'000
3,534
82
19
3,635
The carrying amounts of current receivables are assumed to be the same as their fair values, due to
their short-term nature. The fair value of non-current receivables approximates carrying value.
9.3. Other assets
Current
Deposits
Prepayments
Non-current
Financial assets (derivatives)
Total current and non-current
For details on the classification of financial instruments see note 9.
2020
$'000
2,293
8,176
10,469
2019
$'000
1,178
5,836
7,014
19
569
10,488
7,583
89
89
Annual Report 2019 / 2020 9.4.
Trade and other payables
Current
Trade payables
Accrued expenses
GST and employment taxes payable
Other payables
Total
2020
$'000
939
11,457
1,067
1,412
14,875
2019
$'000
3,486
6,706
2,644
6,157
18,993
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables and
accruals are paid when amounts fall due. The carrying amounts of trade and other payables are
assumed to be the same as their fair values, due to their short-term nature.
9.5.
Borrowings
Non-current
Bank finance facilities
Non-amortised borrowing costs
Total borrowings
2020
$'000
2019
$'000
681,063
(3,361)
677,702
847,838
(3,911)
843,927
The Group has non-current borrowing facilities denominated in Australian Dollars (“AUD”) and New
Zealand Dollars (“NZD”). All facilities are interest only facilities with any drawn balances payable at
maturity. Drawn amounts and facility limits are as follows:
Bank finance facilities (AUD)
Drawn amount
Facility limit
Bank finance facilities (NZD)
Drawn amount
Facility limit
AUD equivalent of NZD facilities
Drawn amount
Facility limit
2020
$'000
2019
$'000
485,000
830,000
663,800
680,000
209,750
226,750
192,250
196,750
196,063
211,954
184,038
188,346
The major terms of these agreements are as follows:
• At 30 June 2020 maturity dates on these facilities range from 23 July 2021 to 23 December 2026. (30
June 2019: maturity dates from 23 July 2020 to 23 December 2026).
The interest rate applied is the bank bill rate plus a margin depending on the gearing ratio.
Security has been granted over the Group's freehold investment properties.
•
•
The Group has a bank overdraft facility with a limit of $3m that was undrawn at 30 June 2020 and 30
June 2019. During the year ended 30 June 2020, the Group refinanced part of the existing debt
facilities, and increased its club banking facilities by AUD $150m and NZD $30m. (Year ended 30 June
2019 the Group converted an existing AUD facility of $25m into an NZD facility of $25.75m and facilities
increased by $100m AUD and $50m NZD).
The Group have complied with the financial covenants of their borrowing facilities during the 2020 and
2019 reporting periods (see note 16). The fair value of borrowings approximates carrying value. Details
of the exposure to risk arising from current and non-current borrowings are set out in note 15.
Interest rate swaps
The Group has the following interest rate swaps in place as at the end of the reporting period:
Interest rate swaps (AUD) at face value
Current interest rate swaps
Future interest rate swaps
Interest rate swaps (NZD) at face value
Current interest rate swaps
Future interest rate swaps
AUD equivalent of NZD interest rate swaps
Current interest rate swaps
Future interest rate swaps
2020
$'000
2019
$'000
460,000
25,000
400,000
275,000
50,000
-
73,500
50,000
46,737
-
70,361
47,864
Interest rate swaps in place at the end of the reporting period have maturity dates ranging from 23
September 2020 to 23 September 2026 (2019: 23 September 2019 to 23 September 2026).
During the current and prior year, the Group reset the interest rates associated with AUD and NZD
denominated interest rate swaps. For the year ended 30 June 2020 this resulted in a cash outflow of
$14.3m (30 June 2019: $22.9m) which reduced the Group’s financial liability presented in note 9.8.
The cumulative change in fair value of these hedging instruments is carried in a separate reserve in
equity (cash flow hedge reserve of NSPT presented within non-controlling interest in the Group’s
consolidated statement of changes in equity). This balance will be amortised from the hedge reserve to
finance costs in the statement of profit and loss in future reporting periods corresponding to when the
underlying hedged item impacts profit or loss. For the year ended 30 June 2020 $7.8m (30 June 2019:
$0.1m) has been recognised in finance costs relating to this item (see note 7).
Hedge of net investments in foreign operations
Included in borrowings at 30 June 2020, amounts totalling NZD $51.9m (AUD $48.5m) have been
designated as a hedge of the net investments against the value of the New Zealand tangible assets
(2019: NZD $47.9m, (AUD $45.9m)). These borrowings are being used to hedge the Group’s exposure to
the NZD foreign exchange risk on these investments. Gains or losses on the retranslation of this
borrowing are transferred to other comprehensive income to offset any gains or losses on translation of
the net investments in the subsidiaries. There is no hedge ineffectiveness in the years ended 30 June
2020 or 30 June 2019 recognised in the statement of profit or loss.
90
91
91
Annual Report 2019 / 2020
9.6. Other liabilities
Current financial liabilities
Interest rate swaps
Forward currency exchange contract
Non-current financial liabilities
Interest rate swaps
Total current and non-current
Notes
9.8
9.8
2020
$’000
2019
$’000
50
-
50
239
474
713
9.8
357
1,375
407
2,088
Amounts recognised in statement of profit or loss:
Depreciation expense of right of use assets
Interest expense on lease liabilities
Expenses relating to short term leases presented within premises costs
Lease diminution on leasehold investment properties presented within
fair value adjustments
Total
30 June
2020
$’000
30 June
2019
$’000
711
8,038
416
-
7,815
567
3,326
12,491
3,548
11,930
For details on the classification of financial instruments see note 9.
Group as a lessor
9.7.
Right of use assets and lease liabilities
The right of use assets and lease liabilities have arisen upon adoption of AASB 16 from 1 July 2019. Refer
to note 2c for further information.
a) Right of use assets
Adjustments on the adoption of AASB 16
Additions in the year ended 30 June 2020
Depreciation charge
Closing balance at 30 June 2020
b)
Lease liabilities
Premises
leases
$'000
-
6,165
(423)
5,742
Equipment
leases
$'000
1,072
-
(282)
790
Advertising
leases
$'000
14
-
(6)
8
Total
$'000
1,086
6,165
(711)
6,540
Current lease liabilities
Lease liabilities relating to right of use assets
Lease liabilities relating to right of use assets presented as leasehold
investment properties
Total current lease liabilities
Non-current lease liabilities
Lease liabilities relating to right of use assets
Lease liabilities relating to right of use assets presented as leasehold
investment properties
Total non-current lease liabilities
Total lease liabilities
30 June
2020
$’000
1 July
2019
$’000
980
271
5,031
6,011
5,327
5,598
5,722
815
158,860
164,582
163,827
164,642
170,593
170,295
The Group has several lease contracts that include extension and termination options. The Group has
included the extension period as part of the lease term for leases of investment property in the table
above. The Group has an option to extend its lease of head office, this has not been included as part
of the lease term as there is no reasonable certainty that this will be exercised at the end of the initial
contractual term. Had the extension period been recognised the Group’s lease liabilities at 30 June
2020 would have increased by $3.4m.
92
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2020 are as
follows:
Within one year
After one year but not more than five years
More than five years
Total
9.8.
Financial instruments fair value measurement
30 June
2020
$’000
4,385
11,891
10,562
26,838
30 June
2019
$’000
4,144
13,309
12,247
29,700
Fair value hierarchy
This note explains the judgements and estimates made in determining the fair values of the financial
instruments recognised in the financial statements, as detailed in notes 9.1 to 9.7. To provide an
indication about the reliability of the inputs used in determining fair value, financial instruments are
classified into the following three levels.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices at the end
of the reporting period. The quoted market price used for any financial assets held is the current bid
price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the use of
observable market data and rely as little as possible on entity-specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
Specific fair valuation techniques used to determine fair values include:
•
•
The fair value of interest rate swaps is calculated as the present value of the estimated future cash
flows based on observable yield curves, adjusted for counterparty or own credit risk.
The fair value of forward currency exchange contracts is based on market observable inputs to
obtain a present value. Incorporated into the calculation are various inputs including the credit
quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective
currencies, currency basis spreads between the respective currencies, interest rate curves and
forward rate curves of the underlying commodity.
The resulting fair value estimates for interest rate swaps are included in level 2.
93
93
Annual Report 2019 / 2020
10.3. Property, plant and equipment
At cost
Accumulated depreciation
Total property, plant and equipment
2020
$'000
2019
$'000
2,538
(1,447)
1,091
1,911
(1,055)
856
Reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of
the current financial period is shown below:
Plant and equipment
Carrying amount at beginning of the year
Additions
Disposals
Depreciation
Effect of movement in foreign exchange
Carrying amount at end of the year
2020
$'000
856
633
-
(397)
(1)
1,091
2019
$'000
1,024
233
(8)
(395)
2
856
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
At 30 June 2020
Derivatives used for hedging - interest
rate swaps
Non-current financial assets
Current financial liabilities
Non-current financial liabilities
At 30 June 2019
Derivatives used for hedging –
forward currency exchange contract
Current financial liabilities
Derivatives used for hedging - Interest
rate swaps
Non-current financial assets
Current financial liabilities
Non-current financial liabilities
9.3
9.6
9.6
9.6
9.3
9.6
9.6
-
-
-
-
-
-
-
-
-
19
(50)
(357)
(388)
(474)
569
(239)
(1,375)
(1,045)
-
-
-
-
-
-
-
-
-
19
(50)
(357)
(388)
(474)
569
(239)
(1,375)
(1,045)
There were no transfers between levels of fair value hierarchy during the years ended 30 June 2020 and
30 June 2019.
10.
NON-FINANCIAL ASSETS AND LIABILITIES
This note provides information about the Group’s non-financial assets and liabilities including:
• An overview of all non-financial assets and liabilities held by the Group;
•
•
Specific information about each type of non-financial asset and non-financial liability; and
Information about determining the fair value of the non-financial assets and liabilities, including
areas of judgement, estimates and other assumptions.
10.1.
Inventories
2020
$’000
2019
$’000
Finished goods - at lower of cost and net realisable value
833
682
10.2. Assets held for sale
Current assets
Opening balance at 1 July
Item reclassified from freehold investment properties
Item reclassified to freehold investment properties
Disposals during the year
Closing balance at 30 June
Notes
10.4
10.4
2020
$'000
2019
$'000
1,107
-
-
(1,107)
-
5,713
2,068
(5,713)
(961)
1,107
As at 30 June 2019, the Group held an agreement for the sale of commercial investment property in
Dunedin, New Zealand for NZD $1.3m less cost of sale of NZD $0.1m (AUD $1.1m). This transaction settled
on 20 September 2019.
94
95
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Annual Report 2019 / 2020
10.4.
Investment properties
10.5.
Intangible assets
Notes
10.8
10.8
10.2
10.2
Leasehold investment properties
Freehold investment properties in operation
Freehold investment properties under construction
Total investment properties
Leasehold investment properties
Opening balance at 1 July
Property acquisitions
Improvements to investment properties
Reassessment of lease terms
Lease diminution, presented as fair value adjustments
Net loss from other fair value adjustments
Closing balance at 30 June
Freehold investment properties in operation
Opening balance at 1 July
Property acquisitions
Disposal of freehold investment property
Improvements to investment properties
Items reclassified to freehold investment property under
construction
Items reclassified from freehold investment property
under construction
Items reclassified to assets held for sale
Items reclassified from assets held for sale
Net gain from fair value adjustments
Effect of movement in foreign exchange
Closing balance at 30 June
Freehold investment property under construction
Opening balance at 1 July
Property acquisitions
Development costs
Items reclassified to freehold investment properties
Items reclassified from freehold investment properties
Effect of movement in foreign exchange
Closing balance at 30 June
Gains for the year in profit or loss (recognised in fair value
adjustments)
Realised gains
Realised losses – lease diminution of leasehold property
Unrealised gains associated with investment property
Movement in provisions presented in fair value adjustments
2020
$'000
201,202
2019
$'000
215,279
2,180,299 1,874,698
27,199
2,452,085 2,117,176
70,584
215,279
-
439
82
(3,326)
(11,272)
201,202
207,664
10,911
417
8,196
(3,548)
(8,361)
215,279
1,874,698 1,377,924
381,319
(26,000)
9,301
216,104
(3,984)
7,661
(4,188)
-
17,448
-
-
78,338
(5,778)
26,972
(2,068)
5,713
97,232
4,305
2,180,299 1,874,698
27,199
15,061
42,090
(17,448)
4,188
(506)
70,584
7,210
33,122
13,839
(26,972)
-
-
27,199
2020
$'000
2019
$'000
2,944
(3,326)
64,122
(721)
63,019
2,737
(3,548)
86,134
(660)
84,663
Notes
2020
$'000
2019
$'000
Goodwill
Opening and closing net book value
Other intangible assets
Opening net book value
Additions
Derecognition losses presented within restructuring and
other non-recurring costs
Amortisation
Closing net book value
6
Total intangible assets
43,954
43,954
2,546
1,270
(651)
(490)
2,675
2,051
1,079
-
(584)
2,546
46,629
46,500
Impairment testing of goodwill
Goodwill has been allocated to the listed group (NSR). Management have determined that the listed
group, which is considered one operating segment (see note 4), is the appropriate CGU against which
to allocate these intangible assets owing to the synergies arising from combining the portfolios of the
Group.
The recoverable amount of the listed group has been determined based on the fair value less costs of
disposal method using the fair value quoted on an active market. As at 30 June 2020, NSR had
1,013,740,178 stapled securities quoted on the Australian Securities Exchange at $1.845 per security
providing a market capitalisation of $1,870m. This amount is in excess of the carrying amount of the
Group’s net assets at 30 June 2020. Had the security price decreased by 5% the market capitalisation
would still have been in excess of the carrying amount.
10.6. Deferred revenue
Deferred revenue from rental income
2020
$'000
2019
$'000
12,236
12,719
Deferred rent revenue from rental income represents funds received in advance from customers.
Included within net gain from fair value adjustments are realised gains of $3m relating to the divestment
of freehold investment properties during the year ended 30 June 2020 (30 June 2019: realised gain of
$2.7m relating to leasehold investment properties and $1.1m relating to freehold investment properties).
96
97
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Annual Report 2019 / 2020
10.7. Provisions
Current
Make good provisions
Annual leave
Long service leave
Non-current
Make good provisions
Long service leave
Reconciliation of movement in make good provisions
As at 1 July
Arising during the year
Changes in discount rates
Unwinding of discount rates
Utilised
As at 30 June
2020
$'000
619
905
936
2,460
2,506
149
2,655
2,189
660
22
254
-
3,125
2019
$'000
301
1,166
996
2,463
1,888
76
1,964
1,592
318
342
94
(157)
2,189
The Group is required to restore the leased premises in a number of leasehold properties to their original
condition at the end of lease term. A provision has been recognised for the present value of the
estimated expenditure required to remove any leasehold improvements.
10.8. Non-financial assets fair value measurement
The Group has classified its non-financial assets held at fair value into the three levels prescribed in note
9.8 to provide an indication about the reliability of inputs used to determine fair value.
Notes
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
At 30 June 2020
Leasehold investment properties
Freehold investment properties
At 30 June 2019
Assets held for sale
Leasehold investment properties
Freehold investment properties
10.4
10.4
10.2
10.4
10.4
Recognised fair value measurements
-
-
-
-
-
-
-
-
-
-
201,202
201,202
2,180,299 2,180,299
2,381,501 2,381,501
1,107
-
-
1,107
-
215,279
1,107
215,279
1,874,698 1,874,698
2,089,977 2,091,084
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels at the end of the
reporting period. There were no transfers between levels 1 and 2 or between levels 2 and 3 for recurring
fair value measurements during the year. In the prior year ended 30 June 2019 the Group transferred
$1.1m from level 3 to level 2 and $5.7m from level 2 to level 3 following the reclassification of assets
between freehold investment properties and assets held for sale (see note 10.2).
Fair value measurements using significant observable inputs (level 2)
The fair value of assets held for sale is determined using valuation techniques which maximise the use of
observable market data. For the year ended 30 June 2019, the Group valued assets classified as held
for sale at the contractually agreed sale price less estimated cost of sale or other observable evidence
of market value.
Fair value measurements using significant unobservable inputs (level 3)
Valuation techniques used to determine level 3 fair values and valuation process
Investment properties, principally storage buildings, are held for rental to customers requiring self-
storage facilities and are carried at fair value. Changes in fair values are presented in profit or loss as
fair value adjustments.
Fair values are determined by a combination of independent valuations and Director valuations. The
independent valuations are performed by an accredited independent valuer. Investment properties
are independently valued on a rotational basis every three years unless the underlying financing
requires a more frequent valuation cycle. For properties subject to an independent valuation report the
Directors verify all major inputs to the valuation and review the results with the independent valuer. The
Director valuations are completed by the NSH Group Board. The valuations are determined using the
same techniques and similar estimates to those applied by the independent valuer.
The Group obtains the majority of its external independent valuations at each financial year end. The
Group’s policy is to maintain the valuation of the investment property valued in the preceding year at
external valuation, unless there is an indication of a significant change to the property’s valuation
inputs.
At 30 June 2020, the Group has completed updated valuations for all leasehold and freehold
investment properties held at 31 December 2019 to reflect the changes observed in current market
conditions which impact the key inputs of property valuations. Freehold investment properties acquired
in the last six months have been held at acquisition price.
The table below details the percentage of the number of investment properties subject to internal and
external valuations at 30 June 2020 and 30 June 2019.
At 30 June 2020
Leasehold
Freehold
At 30 June 2019
Leasehold
Freehold
External valuation %
Internal valuation %
38%
31%
23%
38%
62%
69%
77%
62%
Valuation inputs and relationship to fair value
Description
Valuation
technique
Significant unobservable
inputs
Range at 30
June 2020
Range at 30
June 2019
Investment
properties -
leasehold
Capitalisation
method
Primary capitalisation rate
Secondary capitalisation rate
Sustainable occupancy
Stabilised average EBITDA
7.3% to 18.0%
7.8% to 19.0%
85% to 95%
$331,546
7.5% to 40.5%
8.0% to 41.0%
83% to 93%
$364,642
Investment
properties -
freehold
Capitalisation
method
Primary capitalisation rate
5.5% to 8.2%
6.0% to 8.2%
Secondary capitalisation rate
Sustainable occupancy
Stabilised average EBITDA
6.0% to 8.6%
73% to 95%
$923,427
6.5% to 9.3%
74% to 98%
$912,261
Under the income capitalisation method, a property’s fair value is estimated based upon a
combination of current earnings before interest, tax, depreciation and amortisation (“EBITDA”)
generated by the property, which is divided by the primary capitalisation rate (the investor's required
rate of return) and additional EBITDA (stabilised EBITDA less current EBITDA) divided by the secondary
capitalisation rate. Stabilised EBITDA reflects the estimated EBITDA generated once a property reaches
a sustainable level of operations. The value attributed to the secondary capitalisation is then
98
99
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Annual Report 2019 / 2020
discounted to account for the estimated time and the additional costs required to deliver this
additional value.
11.
INFORMATION RELATING TO SUBSIDIARIES
The capitalisation rates are derived from recent sales of similar properties. The secondary capitalisation
rate is typically higher than the primary capitalisation rate to reflect the additional risk associated with
these cashflows. Generally, an increase in stabilised average EBITDA will result in an increase in fair
value of an investment property. An increase in the vacancy rate will result in a reduction of the
stabilised average EBITDA. Investment properties are valued on a highest and best use basis. The
current use of all of the investment properties (self-storage) is considered to be the highest and best
use.
The capitalisation rate adopted reflects the inherent risk associated with the property. For example, if
the lease expiry profile of a particular property is short, the capitalisation rate is likely to be higher to
reflect additional risk to income. The higher capitalisation rate then reduces the valuation of the
property.
The following tables present the sensitivity of investment property fair values to changes in input
assumptions.
At 30 June 2020:
Unobservable inputs
Primary capitalisation rate
Secondary capitalisation
rate
Sustainable occupancy
Stabilised average EBITDA
At 30 June 2019:
Leasehold
Freehold
Increase/
(decrease)
in input
Increase/
(decrease)
In fair value
$’000
Increase/
(decrease)
in input
Increase/ (decrease)
in fair value
$’000
1% / (1%)
(2,000) / 2,530
1% / (1%)
(226,290) / 311,570
2% / (2%)
(3,300) /5,190
2% / (2%)
(123,160) / 218,030
Interest in joint ventures
5% / (5%)
5% / (5%)
5,130 / (4,410)
1,750 / (1,770)
5% / (5%)
5% / (5%)
119,620 / (107,750)
99,000 / (95,190)
Unobservable inputs
Leasehold
Freehold
Increase/
(decrease)
in input
Increase/
(decrease)
In fair value
$’000
Increase/
(decrease)
in input
Increase/ (decrease)
in fair value
$’000
Primary capitalisation rate
Secondary capitalisation
rate
Sustainable occupancy
Stabilised average EBITDA
1% / (1%)
(3,790) / 4,710
1% / (1%)
(188,200) / 254,780
2% / (2%)
(2,830) / 4,370
2% / (2%)
(90,560) / 156,620
5% / (5%)
5% / (5%)
7,370 / (5,740)
2,530 / (2,530)
5% / (5%)
5% / (5%)
114,620 / (81,010)
83,770 / (74,650)
The ultimate holding company of the Group is National Storage Holdings Limited. This entity is domiciled
in Australia.
The consolidated financial statements of the Group as at 30 June 2020 include:
Name of controlled entity
National Storage (Operations) Pty Ltd
National Storage Financial Services Limited
Wine Ark Pty Ltd
Southern Cross Storage Operations Pty Ltd
National Storage Investments Pty Ltd
National Storage Limited
National Storage Investment Trust
National Storage Victorian Property Trust
National Storage New Zealand Property Trust*
National Storage Southern Trust
Place of
incorporation
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Equity interest
2020
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
In addition, the result of NSPT has been consolidated due to the stapling arrangement between NSPT
and NSH which constitutes NSR. Equity attributable to NSPT is presented as non-controlling interest.
* NSNZPT is an Australian registered trust which holds investment properties in New Zealand
12.
INTEREST IN JOINT VENTURES AND ASSOCIATES
Opening balance at 1 July
Acquisition of shareholding / capital contribution in joint venture
Share of (loss) / profit from joint ventures
Distributions received from joint venture
Disposal of units in joint venture
Closing balance at 30 June
2020
$'000
4,343
2,030
(243)
-
-
6,130
2019
$'000
7,432
3,499
1,476
(5,064)
(3,000)
4,343
The NSPT Group holds a 25% interest in the Bundall Storage Trust, and the NSH Group holds a 25%
interest in the Bundall Commercial Trust and the TBF & NS Trust.
During the year ended 30 June 2020, the Group subscripted to 25% of the units in the TBF & NS Trust for
$2m. The TBF & NS Trust subsequently purchased a development site for a storage centre and
commercial property in Queensland, Australia. As at 30 June 2020, this centre remains under
construction.
The Bundall Commercial Trust derives rental property income from the leasing of commercial units and
the Bundall Storage Trust develops investment property. As at 30 June 2020, the Bundall Storage Trust
has one storage centre investment property under construction.
During the prior year ended 30 June 2019, the Group made an additional equity contribution of $1.3m
into the Bundall Storage Trust and $2.2m into the Bundall Commercial Trust. The Group also acquired
two storage centre investment property assets from the Bundall Storage Trust for $43.7m and sold a
development site to the Bundall Storage Trust for $8.2m and associated commercial units to the Bundall
Commercial Trust for $17.8m. There was no change in the share of the Group’s interest following these
transactions.
100
101
101
Annual Report 2019 / 2020
During the year ended 30 June 2019, the Group sold its units in FKS Investments No.2 Unit Trust for $3m.
These investments are classified as joint ventures as all parties are subject to a Securityholders
Agreement that has been contractually structured such that the parties to the agreement have equal
representation on the advisory board responsible for the overall direction and supervision of each trust.
Interest in associates
Opening balance at 1 July
Capital contribution in associate
Share of profit from associates*
Distributions from associate
Closing balance at 30 June
2020
$'000
12,388
500
(248)
(10,319)
2,321
2019
$'000
10,693
-
1,695
-
12,388
* Included within share of profit from associates in the year ended 30 June 2019 was $1.9m representing NSR’s share
of fair value gains related to investment properties held by associates. For the year ended 30 June 2020, there were
no gains included within share of profit from associates.
As at 30 June 2019, the Group owned 24.9% of the Australia Prime Storage Fund (“APSF”). During the
year ended 30 June 2020, the Group purchased three storage centre investment properties in Australia
from APSF for $64m. Following these transactions, the Group received distributions from APSF totalling
$10.3m and the APSF entities were subsequently dissolved.
The Group holds a 25.9% (30 June 2019: 24%) holding in Spacer Marketplaces Pty Ltd (“Spacer”).
Spacer operate online peer-to-peer marketplaces for self-storage and parking. During the year ended
30 June 2020, the Group made a capital contribution of $0.5m into Spacer as part of an equity raise.
See note 17 for fees received and purchases from joint ventures and associates. None of the Group’s
joint ventures or associates are listed on any public exchange.
13.
CONTRIBUTED EQUITY
Issued and paid up capital
Contract for future issue of equity
Total contributed equity
2020
$'000
133,169
-
133,169
2019
$'000
83,692
16,451
100,143
Number of stapled securities on Issue
2020
2019
Opening balance at 1 July
Institutional and retail placements
Distribution reinvestment plan
Closing balance at 30 June
673,928,751 559,107,042
329,205,527 105,677,937
9,143,772
1,013,740,898 673,928,751
10,606,620
Capital raises
On 25 June 2019 in the prior year, the Group announced a fully underwritten $170m equity raising.
Proceeds were received on 28 June 2019 resulting in the issue of 99,415,205 new stapled securities on 1
July 2019. On 25 June 2019, the Group also announced a non-underwritten security purchase plan. This
completed on 30 July 2019, raising $13.5m and resulted in the issue of 7,917,735 new stapled securities.
On 5 May 2020, the Group announced a fully underwritten $300m equity raising and non-underwritten
security purchase plan raising $48.3m. This resulted in the issue of 191,082,083 new stapled securities on
11 May 2020 and 30,789,784 new stapled securities on 9 June 2020. The issue price represented a
discount of 7.1% on the last closing price of NSR stapled securities on 4 May 2020.
Distribution reinvestment plan
During the year, 10,606,620 (2019: 9,143,772) stapled securities were issued to securityholders
participating in the Group’s Distribution Reinvestment Plan for consideration of $19.7m (2019:
$16.2m). The stapled securities were issued at the volume weighted average market price of the
Group's stapled securities over a period of ten trading days, less a 2% discount.
Terms and conditions of contributed equity
Stapled securities
A stapled security represents one share in NSH and one unit in NSPT. Stapled securityholders have the
right to receive declared dividends from NSH and distributions from NSPT and are entitled to one vote
per stapled security at securityholders’ meetings. Holders of stapled securities can vote their shares and
units in accordance with the Corporations Act 2001, either in person or by proxy, at a meeting of either
NSH or NSPT. The stapled securities have no par value.
In the event of the winding up of NSH and NSPT, stapled securityholders have the right to participate in
the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on
stapled securities held. Ordinary stapled securityholders rank after all creditors in repayment of capital.
There is no current on or off market security buy-back.
14.
OTHER RESERVES
Foreign currency translation reserve
Opening balance at 1 July
Foreign exchange translation differences
Closing balance at 30 June
2020
$'000
(27)
37
10
2019
$'000
(12)
(15)
(27)
The financial statements for the Group are prepared on the basis that NSH was the acquirer of NSPT. On
this basis, foreign currency translation reserve movements relating to the NSH Group are presented
within other reserves. The movements below in foreign currency translation reserve and cashflow hedge
reserve relating to the NSPT Group are presented within non-controlling interest in the Group’s
consolidated statement of changes in equity.
Foreign currency translation reserve
Opening balance at 1 July
Net investment hedge
Foreign exchange translation differences
Closing balance at 30 June
Cash flow hedge reserve
Opening balance at 1 July
Revaluation of cash flow hedges
Reclassification to statement of profit or loss (see note 7)
Taxation impact on revaluation
Closing balance at 30 June
Other reserves
NSPT Group
2020
$'000
2019
$'000
758
1,127
(2,895)
(1,010)
(115)
(1,591)
2,464
758
(23,881)
(13,208)
7,764
(413)
(29,738)
(2,073)
(22,189)
91
290
(23,881)
(30,748)
(23,123)
102
103
103
Annual Report 2019 / 2020
The hedging reserve is used to record gains or losses on derivatives that are designated as cash flow
hedges and recognised in other comprehensive income, as described in note 2(m). Amounts are
reclassified to profit or loss in the period when the associated hedged transaction takes place.
Fair value measurement
For information about the methods and assumptions used in determining fair values of derivatives refer
to note 9.8.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in market prices. Market risk comprises of three types of risk: interest rate risk,
currency risk and other price risk, such as equity price and commodity risk. Financial instruments
affected by market risk include loans and borrowings, deposits, debt and equity investments, and
derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at 30 June 2020 and 30 June
2019. The sensitivity analysis has been prepared on the basis that the amount of net debt, the ratio of
fixed to floating interest rates of debt and derivatives and the proportion of financial instruments in
foreign currencies are all constant on the basis of hedge designations in place at 30 June 2020.
The analysis excludes the impact of movements in market variables on provisions and the non-financial
assets and liabilities of foreign operations.
The following assumptions have been made in calculating sensitivity analysis:
•
•
The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in
respective market risks. This is based on the financial assets held at 30 June 2020 and 30 June 2019
including the effect of hedge accounting.
The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges
and hedges of a net investment in a foreign subsidiary at 30 June 2020 for the effects of the
assumed changes of the underlying risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Group’s exposure to the risk of changes in market
interest rates relate primarily to their long-term debt obligations with floating interest rates.
The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans
and borrowings. To manage this, the Group enters into interest rate swaps, in which it agrees to
exchange, at specified intervals, the difference between fixed and variable rate interest amounts
calculated by reference to an agreed-upon notional principal amount. At 30 June 2020, after taking
into account the effect of interest rate swaps, 74.4% (2019: 55.8%) of the Group’s borrowings are at a
fixed rate of interest.
In the year ended 30 June 2020, the Group reset the interest rates associated with AUD and NZD
denominated interest rate swaps designated as cash flow hedges. This resulted in a cash outflow of
$14.3m which reduced the Group’s financial liability as presented in note 9.8. (30 June 2019: $22.9m). In
accordance with AASB 9 Financial instruments, as the nature of the underlying hedged instrument is
unchanged the fair value of this outflow remains in the cash flow hedge reserve and will be amortised
to the statement of profit or loss in future periods relating to the profile of the original instrument.
Taxation impact on revaluation applies only to cash flow hedges held in NSNZPT, a sub-trust of NSPT,
which is subject to New Zealand tax legislation. Deferred tax does not apply to cash flow hedges held
in the NSPT Group under current Australian tax legislation.
The cash flow hedge is included in non-controlling interest in the Consolidated Group.
15.
FINANCIAL RISK MANAGEMENT
This note outlines the Group’s exposure to financial risks and how these risks could affect future financial
performance.
The Group’s overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the business. The Group
uses derivative financial instruments such as interest rate swaps to hedge certain market risk exposures.
Risk management for the Group is carried out by the NSH Board and key management personnel of
NSH. The NSH Board of Directors analyses, on behalf of the Group, interest rate exposure and evaluates
treasury management strategies in the context of the most recent economic conditions and forecasts.
Derivatives
Derivatives are only used for economic hedging purposes and not as trading or speculative
instruments. The Group has the following derivative financial instruments:
Forward currency exchange contract designated as
cash flow hedges presented in:
Current liabilities
Interest rate swaps designated as cash flow hedges
presented in:
Non-current assets
Current liabilities
Non-current liabilities
Net liability
Notes
2020
$'000
2019
$'000
9.6
-
(474)
9.3
9.6
9.6
19
(50)
(357)
(388)
569
(239)
(1,375)
(1,045)
Classification of derivatives
All derivatives have been designated as cash flow hedges. They are presented as current assets or
liabilities if they are expected to be settled within 12 months after the end of the reporting period.
The Group’s accounting policy for cash flow hedges is set out in note 2(m). For hedged forecast
transactions that result in the recognition of a non-financial asset, the Group has included related
hedging gains and losses in the initial measurement of the cost of the asset. The ineffectiveness
recognised in the statement of profit or loss was immaterial.
104
105
105
Annual Report 2019 / 2020
Interest rate sensitivity
The following table demonstrates the sensitivity to a possible change in interest rates on the portion of
loans and borrowings affected, after the impact of hedge accounting. With all other variables held
constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as
follows:
Increase/ decrease
in basis points
Effect on profit
before tax
$'000
2020
Australian dollar denominated debt
New Zealand dollar denominated debt
Australian dollar denominated debt
New Zealand dollar denominated debt
2019
Australian dollar denominated debt
New Zealand dollar denominated debt
Australian dollar denominated debt
New Zealand dollar denominated debt
+50
+50
-50
-50
+50
+50
-50
-50
(852)
(692)
852
692
(718)
(254)
718
254
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently
observable market environment.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate
because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign
exchange rates relates primarily to the Group’s operating activities (when revenue or expense is
denominated in a foreign currency), and the Group’s net investment in foreign subsidiaries.
The Group hedges its exposure to fluctuations on the translation into Australian dollars of its foreign
operations by holding net borrowings in foreign currencies.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in New Zealand Dollar
exchange rate with all other variables held constant. The impact on the Group’s profit before tax is due
to changes in the fair value of monetary assets and liabilities. The impact on the Group’s pre-tax equity
is due to net investment hedges.
2020
2019
Change in
NZD rate
+5%
-5%
+5%
-5%
Effect on profit
before tax
$'000
(1,574)
1,574
(165)
183
Effect on pre-
tax equity
$'000
(3,629)
4,509
(2,412)
2,649
The movement in the profit before tax is a result of a change in the fair value of the monetary assets
and liabilities denominated in NZD.
The movement in pre-tax equity arises from changes in NZD borrowings in the hedge of net investments
in New Zealand operations and cash flow hedges. These movements will offset the translation of New
Zealand operations’ net assets into AUD.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating
activities (primarily trade receivables) and from its financing activities, including deposits with banks
and other financial instruments.
Trade receivables
The exposure to credit risk for trade and other receivables is influenced mainly by the individual
characteristics of each customer. The Group’s customer credit risk is managed by requiring customers
to pay monthly rentals in advance. Customer credit risk is reduced through a contractual lien over the
contents stored in the rented units. The terms of the storage agreement provide for the auction of the
customer’s stored contents to recover any unpaid amounts. Outstanding customer receivables are
regularly monitored and credit concerns reviewed.
The allowance for expected credit losses represents an estimate of trade receivables that are not
considered to be recoverable. For the year ended 30 June 2020, the Group has recognised an
expected loss provision of $189,000 (30 June 2019: $135,000) based on lifetime expected credit losses at
each reporting date. The Group assesses this allowance based on its historical credit loss experience,
adjusted for forward-looking factors specific to classification groups of receivables.
Cash and cash equivalents
The Group’s credit risk on cash and cash equivalents is limited as the counterparties are banks with high
credit-ratings assigned by international credit-rating agencies. The maximum exposure to credit risk for
the components of the statement of financial position at 30 June 2020 and 30 June 2019 is the carrying
amounts as indicated in the statement of financial position.
Guarantees
Credit risk also arises in relation to financial guarantees given to certain parties (refer to notes 18, 21,
and 22). Such guarantees are only provided in exceptional circumstances and are subject to specific
Board approval.
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The objective of managing liquidity risk is to ensure, as far as possible, the group will have sufficient
liquidity to meet its liabilities when they fall due, under both normal and stressed conditions. NSH on
behalf of the Group has established a number of policies and processes for managing liquidity risk.
These include:
• Continuously monitoring cash flows on a daily basis as well as forecasting cash flows on a medium
and long-term basis.
• Monitoring the maturity profiles of financial assets and liabilities in order to match cashflows.
• Maintaining adequate reserves and support facilities.
• Monitoring liquidity ratios and all constituent elements of working capital.
• Maintaining adequate borrowing and finance facilities.
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Expiring within one year (bank overdraft)
Expiring beyond one year (loans)
2020
$'000
3,000
360,891
363,891
2019
$'000
3,000
20,508
23,508
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without
notice. All other secured bank loans may be drawn at any time and is subject to an annual review.
Further details of the bank loans are detailed in notes 9.5 and 16.
106
107
107
Annual Report 2019 / 2020
Maturity of financial liabilities
The tables below summarise the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments. As amounts disclosed in the table are the contractual undiscounted cash
flows including future interest payments, these balances will not necessarily agree with the amounts
disclosed on the statement of financial position.
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
At 30 June 2020
Non-derivatives
Trade and other payables
Borrowings
Lease liabilities
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
558
-
-
-
558
-
-
-
14,037
4,026
3,576
34,467
56,106
280
12,046
10,876
-
23,202
-
655,188
17,386
-
672,574
-
61,876
267,308
-
14,875
733,136
299,146
34,467
329,184 1,081,624
(480)
688
208
(1,159)
1,651
492
(4,137)
4,195
58
(412)
93
(319)
(6,188)
6,627
439
558
56,314
23,694
672,632
328,865 1,082,063
At 30 June 2019
Non-derivatives
Trade and other payables
Borrowings
Lease liabilities
Distribution payable
Total non-derivatives
Derivatives
Inflows
Outflows
Total derivatives
On
demand
$'000
Less than
3 months
$'000
3 to 12
months
$'000
1 to 5
years
$'000
Over 5
years
$'000
Total
$'000
236
-
-
-
236
18,757
6,272
3,236
34,370
62,635
-
17,527
9,982
-
27,509
-
573,698
53,552
-
627,250
-
355,223
237,618
-
18,993
952,720
304,388
34,370
592,841 1,310,471
-
-
-
(1,365)
1,645
280
(3,459)
5,020
1,561
(14,600)
16,116
1,516
(3,412)
2,643
(769)
(22,836)
25,424
2,588
236
62,915
29,070
628,766
592,072 1,313,059
Changes in liabilities arising from financing activities
Derivatives:
Forward currency
exchange contract
Current financial liabilities
Interest rate swap
Current financial liabilities
Non-current financial
liabilities
1 July
2019
$'000
474
239
1,375
Distributions payable
34,370
(51,751)
-
Non-current
borrowings
Lease liabilities
Current liabilities
Non-current liabilities
Total liabilities from
financing activities
843,927
(163,181)
(4,333)
5,598
164,642
(5,674)**
-
-
-
Cash
flows
$'000
Foreign
exchange
movement
$'000
Change
in fair
value
$'000
New
leases
$’000
Other
$'000
30 June
2020
$'000
392
-
-
-
-
(866)
(189)
(36)
(982)
-
-
-
-
-
-
-
-
-
50
357
51,848*
34,467
1,289
677,702
667
5,498
5,420
6,011
(5,558) 164,582
-
-
-
-
1,050,625
(220,214)
(4,369)
(2,037)
6,165
52,999 883,169
The opening balances at 1 July 2019 above are stated after the adoption of AASB 16 Leases.
*Other balances presented above represent distributions declared in the year: $71.5m (see note
16), less units issued under the distribution reinvestment plan which do not result in a cash outflow:
$19.7m (see note 13).
**Relates to principal portion of lease liability payment. Total lease payments for the year ended 30
June 2020 were $13.6m as disclosed in the Consolidated Statement of Cashflows.
Derivatives:
Forward currency exchange
contract
interest rate swaps
Current financial liabilities
Non-current financial liabilities
1 July
2018
$'000
-
3
4,380
Cash
flows
$'000
Foreign
exchange
movement
$'000
Change in
fair value
$'000
Other*
$'000
30 June
2019
$'000
-
-
-
-
-
20
474
236
(3,025)
-
-
-
474
239
1,375
Distributions payable
Non-current borrowings
27,396
596,410
(41,301)
242,842
-
3,714
Lease liabilities
Current lease liabilities
Non-current liabilities
Total liabilities from
financing activities
4,446
156,942
(4,820)
-
-
-
-
-
-
-
48,275
961
34,370
843,927
5,701
6,885
5,327
163,827
789,577
196,721
3,734
(2,315)
61,822
1,049,539
108
109
109
Annual Report 2019 / 2020
16.
CAPITAL MANAGEMENT
Franking credit balance
The Group’s objectives when managing capital are two-fold, to safeguard its ability to continue as a
going concern, and to maintain an optimal structure to reduce the cost of capital and maximise long
term value for the securityholder.
In order to achieve these objectives, the Group’s capital management strategy aims to ensure that it
meets financial covenants attached to interest-bearing loans and borrowings. Breaches in meeting a
financial covenant could permit the lender to immediately call loans and borrowings. There have been
no breaches of financial covenants relating to any loans and borrowings in the current or prior year.
The Group manages its capital structure and makes adjustments to reflect changes in economic
conditions and the requirements of its financial covenants. To maintain or adjust the capital structure,
the Group may adjust the distribution payment to securityholders, return capital to securityholders or
issue new securities.
The Group monitors capital using a gearing ratio, represented by net debt divided by total assets less
cash and short term deposits and lease liabilities. The Group’s target is to keep the gearing ratio
between 25% and 40%. Net debt includes borrowings, less cash and short-term deposits.
Interest bearing loans
Less: cash and short term deposits
Net debt
Total assets
Less cash and short term deposits
Less lease liabilities
Gearing ratio
Notes
9.5
9.1
9.7
2020
$'000
2019
$'000
681,063
(90,352)
590,711
847,838
(178,842)
668,996
2,640,334 2,392,313
(178,842)
(90,352)
(169,154)
(170,593)
2,379,389 2,044,317
25%
33%
Loan covenants
Financial covenants under the terms of the Group’s borrowing agreement require the Group to ensure
that the gearing ratio does not exceed 55% and the ratio of operating earnings adjusted for interest,
tax, depreciation and finance amortisation costs equals or exceeds a multiple of two. The Group has
complied with these covenants throughout the reporting period.
Dividends and distributions
Distributions have been made and declared as noted below.
NSPT interim distribution of 4.7 cents per unit paid on
28 February 2020 (2019: 4.5 cents per unit)
NSPT final distribution of 3.4 cents per unit payable
on 7 September 2020 (2019: 5.1 cents per unit)
NSPT Group
2020
$'000
2019
$'000
37,039
30,082
34,467
71,506
34,370
64,452
There are no proposed distributions not recognised as a liability for the year ended 30 June 2020.
The Directors of NSH have not declared an interim or final dividend for the year ended 30 June 2020.
Franking credits available for subsequent financial
years based on a tax rate of 30% (2019: 30%)
2020
$'000
2019
$'000
4,166
2,828
The above amounts are calculated from the balance of the NSH franking account at the end of the
reporting period.
The NSPT Group does not have franking credits as distributions are paid from NSPT which is not liable to
pay income tax provided all taxable income is distributed.
17.
RELATED PARTY TRANSACTIONS
The following tables provide the total amount of transactions that have been entered into with related
parties for the relevant financial years.
Transactions with Related Parties
Revenue
from
related
parties
$
Purchases
from
related
parties
$
Amount
owed by
related
parties
$
-
502,919
2,288,726
8,976,530
4,131,488
2,232,654
-
167,407
-
-
-
-
-
-
-
-
Amount
owed to
related
parties
$
-
-
-
-
-
-
50
-
-
-
-
-
Australia Prime Storage Fund
Bundall Commercial Trust
Bundall Storage Trust
2020
2019
2020
2019
490,195
808,702
891,365
587,569
2020
510,121
2019 3,260,320
Bundall Storage Operations Pty Ltd
Spacer Marketplaces Pty Ltd
2020
2019
2020
2019
-
12,661
-
-
78,459
50,879
-
-
The TBF & NS Trust
2020 1,027,993
-
2019
-
-
1,027,993
-
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made on terms equivalent to those that prevail in
arm’s length transactions.
As at 30 June 2020, the Group had receivables outstanding of $2,225,000 (30 June 2019: $8,725,000)
with the Bundall Commercial Trust and $2,700,000 (30 June 2019: $1,025,000) with the Bundall Storage
Trust relating to amounts drawn down under facility agreements between the entities. The facility
agreements are interest bearing on commercial rates and been classed as a current receivable in the
statement of financial position. All other outstanding balances are unsecured and interest free.
There have been no guarantees provided or received for any related party receivables or payables.
For the years ended 30 June 2020 and 30 June 2019, the Group has not recorded any impairment of
receivables relating to amounts owed by related parties.
110
111
111
Annual Report 2019 / 2020
Key management personnel compensation
19.
EARNINGS PER STAPLED SECURITY (“EPS”)
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Consolidated Group
2020
$'000
3,248
134
522
329
4,233
2019
$'000
3,430
126
281
-
3,837
The amounts disclosed in the table are the amounts recognised as an expense during the reporting
period relating to key management personnel. Detailed remuneration disclosures are provided in the
remuneration report which is included in the Directors’ Report.
18.
COMMITMENTS AND CONTINGENCIES
Capital commitments
As at 30 June 2020, the Group held commitments to purchase three freehold investment properties for
$39m following construction of the assets.
As at 30 June 2020, the Group has contractual commitments in place for the construction of self-
storage centres of $10.6m Australia and NZD $1.7m (AUD $1.6m) in New Zealand (see note 5), (30 June
2019: $13.6m Australia and NZD $6.0m (AUD $5.7m) in New Zealand). As at 30 June 2020, the Group
held a commitment with a third party, to supply and install solar panels on a number of NSR storage
centres. As at 30 June 2020, the Group has a commitment to additional expenditure of $1.1m, to be
paid on agreed milestones subject to the completion of the project. (30 June 2019: $4.9m).
There is no other capital expenditure contracted for at the end of the reporting period but not
recognised as a liability. There are no other contingent assets or liabilities for the Group.
Lease liability commitments
For details of lease liability commitments see note 9.7.
Guarantees and contingent liabilities
The Group’s parent entity has provided bank guarantees of $9m (2019: $8.9m) to third party lessors.
The Group did not have any contingent liabilities as at 30 June 2020 or 30 June 2019.
Basic earnings per stapled security is calculated as net profit attributable to stapled security holders,
adjusted to exclude costs of servicing equity (other than distributions) divided by the weighted average
number of stapled securities on issue during the period under review.
Diluted earnings per stapled security adjust the figures used in the determination of basic earnings per
share to take into account:
•
The after tax effect of interest and other financing costs associated with dilutive potential stapled
securities; and
The weighted average number of additional stapled securities that would have been outstanding
assuming the conversion of all dilutive potential stapled securities.
•
2020
2019
Restated
Weighted average number of securities on issue during the year
Adjustment under AASB 133 to reflect discount to market price
on issue of new capital
Weighted average number of securities used to calculate basic
and diluted earnings per stapled securities
815,973,324
650,319,184
14,178,656
20,677,528
830,151,980
670,996,712
Reconciliation of earnings used in calculating earnings per
stapled securities
Net profit attributable to members ($’000)
121,779
144,840
Basic and diluted earnings per stapled securities (cents)
14.67
21.59
As required by AASB 133 Earnings per share, for capital raises during the year ended 30 June 2020, the
weighted average number of securities on issue used to calculate statutory basic and diluted earnings
per stapled securities has been adjusted to reflect the difference between the issue price and the fair
value of securities prior to issue. No actual securities were issued relating to this adjustment.
The weighted average number of stapled securities for the year ended 30 June 2019 used to calculate
basic and diluted earnings per stapled securities has also been restated on this basis.
20.
AUDITORS’ REMUNERATION
The auditor of the Group is Ernst & Young Australia.
2020
$
2019
$
Amounts received or due and receivable by Ernst & Young Australia for:
Category 1 – Fees for auditing the statutory financial report of the group
and any other group entity
Category 2 – Fees for assurance services that are required by legislation
to be provided by the auditor
Category 3 - Fees for other assurance services under other legislation or
contractual arrangements where there is discretion on service provider
Category 4- Fees for other services
Total auditors’ remuneration
610,802
513,100
-
-
27,400
75,815
714,017
62,950
143,250
719,300
112
113
113
Annual Report 2019 / 2020
21.
INFORMATION RELATING TO THE PARENT ENTITY
Consolidated statement of financial position
Summary financial information
The individual financial statements for NSH, the parent entity, show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Loss after tax
Total comprehensive income / (loss)
2020
$’000
104,527
118,384
(7,669)
(8,919)
2019
$’000
264,270
274,096
(194,762)
(196,012)
109,465
78,084
131,421
(21,956)
109,465
98,397
(20,313)
78,084
(1,642)
(1,642)
(3,041)
(3,041)
Guarantees entered into by the parent entity
The Group’s parent entity has provided bank guarantees of $8.7m (2019: $8.9m) to third party lessors.
In addition, there are cross guarantees given by National Storage Holdings Limited, National Storage
(Operations) Pty Ltd, Southern Cross Storage Operations Pty Ltd, and National Storage Pty Ltd as
described in note 22. No deficiencies of assets exist in any of these companies.
Contingent liabilities of the parent entity
The parent entity of Group did not have any contingent liabilities as at 30 June 2020 or 30 June 2019.
22.
DEED OF CROSS GUARANTEE
As at 30 June 2020 and 30 June 2019, National Storage Holdings Limited, National Storage (Operations)
Pty Ltd, Southern Cross Storage Operations Pty Ltd and National Storage Pty Ltd are parties to a deed
of cross guarantee under which each company guarantees the debts of the others. By entering into
the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial
report and Directors’ report under ASIC Corporations (wholly-owned companies) instrument 2016/785
issued by the Australian Securities and Investments Commission.
Set out below is a consolidated statement of comprehensive income and statement of financial
position of the entities that are parties to a deed of cross guarantee.
Consolidated statement of comprehensive income
Profit / (loss) before income tax
Income tax benefit
Profit / (loss) after tax
Retained earnings at the beginning of the year
Dividends received
Retained earnings at the end of the year
2020
$'000
(12,098)
3,902
(8,196)
2019
$'000
1,146
1,472
2,618
10,944
800
3,548
7,676
650
10,944
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right of use assets
Investment properties
Investments
Intangibles
Deferred tax asset
Total non-current assets
2020
$'000
12,915
28,956
769
331
9,812
52,783
118
1,051
6,540
954,353
5,932
30,356
6,982
1,005,332
2019
$'000
172,824
34,327
606
-
6,804
214,561
118
817
-
870,175
5,932
30,256
2,951
910,249
Total assets
1,058,115 1,124,810
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Deferred revenue
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Retained profits
Total equity
7,358
5,251
10,781
-
1,774
25,164
1,250
893,457
3,274
897,981
195,300
4,586
11,569
601
2,072
214,128
1,250
797,826
2,265
801,341
923,146 1,015,469
134,969
109,341
131,421
3,548
134,969
98,397
10,944
109,341
23.
EVENTS AFTER REPORTING PERIOD
For the period from 1 July 2020 to the date of this report the Group purchased seven storage centre
investment properties for a total cost of $133.9m.
114
115
115
Annual Report 2019 / 2020 there are reasonable grounds to believe that NSR will be able to pay its debts as
and when they become due and payable.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(b)
(c)
(d)
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of National Storage Holdings Limited, the
Directors state that:
1.
In the opinion of the Directors:
(a)
the financial statements and notes of the Group for the year ended 30 June 2020
are in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the consolidated entity’s financial position as
at 30 June 2020 and of its performance for the year ended on that date;
and
complying with Accounting Standards and the Corporations Regulations
2001;
the financial statements and notes also comply with International Financial
Reporting Standards as disclosed in note 2(b); and
as at the date of this declaration, there are reasonable grounds to believe that
the members of the Closed Group identified in Note 22 will be able to meet any
obligations or liabilities to which they are or may become subject, by virtue of the
Deed of Cross Guarantee.
2.
This declaration has been made after receiving the declarations required to be made
to the Directors by the Chief Executive Officer and Chief Financial Officer in
accordance with section 295A of the Corporations Act 2001 for the financial year
ended 30 June 2020.
On behalf of the Board,
Laurence Brindle
Director
25 August 2020
Brisbane
Andrew Catsoulis
Managing Director
25 August 2020
Brisbane
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of National Storage
REIT
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of National Storage REIT (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2020, the consolidated statement of profit or loss, consolidated statement of other
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, notes to the financial statements, including a summary of
significant accounting policies, and the directors' declaration.
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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1. Investment property valuation
Why significant
How our audit addressed the key audit matter
2. Carrying value of goodwill
Investment properties represent approximately
93% of the Group’s total assets. These assets are
carried at fair value, which is assessed by the
directors with reference to either external
independent property valuations or internal
valuations, and are based on market conditions
existing at reporting date.
This was considered a key audit matter due to
the number of judgments required in
determining fair value. These judgments include
assessing the capitalisation rates, sustainable
occupancy and stabilised average EBITDA
(earnings before interest, tax, depreciation and
amortisation). The COVID-19 pandemic has given
rise to market uncertainty which impacts
judgments and inputs used to determine fair
value and in turn gives rise to valuation
uncertainty.
Disclosure relating to investment properties and
the associated significant judgments are included
in Notes 2 (p), 3, 10.4, and 10.8 to the financial
report.
Our audit procedures included the following:
Why significant
How our audit addressed the key audit matter
• With the involvement of our real estate
valuation specialists, we assessed the
suitability of the valuation methodologies,
the competence, qualifications and
objectivity of both the Group’s internal
valuers and external valuation experts, and
the assumptions used in the valuations.
These assumptions and inputs included
capitalisation rates, occupancy rates
including forecast occupancy levels, and
stabilised average EBITDA. We evaluated
how the Group’s valuation experts
considered the impact of COVID-19 on the
key assumptions and inputs in their
valuations;
• Agreed a sample of the source data used in
the valuations to supporting tenancy
schedules and accounting sub-ledgers;
• Tested the mathematical accuracy of the
internal valuation model, including assessing
key valuation inputs with reference to those
applied by the external valuation experts and
where relevant we assessed the
reasonableness of comparable transactions
used in the valuation process;
• Where relevant, we evaluated the movement
in the capitalisation rates, occupancy rates,
and stabilised average EBITDA across the
portfolio based on our knowledge of the
property portfolio, published industry reports
and comparable external valuations; and
• We considered the adequacy of disclosures in
relation to the valuation methods and
principles disclosed in Note 2 (p) Summary of
significant accounting policies - Investment
properties, Note 3 Significant accounting
judgements, estimates and assumptions,
Note 10.4 Investment properties and Note
10.8 Non-financial assets fair value
measurement.
The goodwill balance of $43.9 million, relates to
the acquisition of portfolios of investment
properties purchased in previous periods. The
goodwill is tested for impairment annually.
Impairment testing involves the application of
subjective judgment about future business
performance and the application of valuation
methodologies in accordance with Australian
Accounting Standards. Accordingly, this was
considered a key audit matter.
Our audit procedures included the following:
• We considered whether the impairment
testing methodology applied by the Group,
including the determination of cash
generating units to which goodwill was
allocated, met the requirements of Australian
Accounting Standards;
• We assessed the Group’s appropriateness in
respect of the determination of the CGU to
which the goodwill is allocated;
• We evaluated the suitability of the valuation
methodology and validated the inputs to
calculate the fair value less costs of disposal
as disclosed in Note 10.5 Intangible assets;
• We considered the adequacy of the
disclosures in Note 10.5 of the financial
report.
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information included in the National Storage REIT 2020 Annual Report, 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, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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Independent Auditor's Report
National Storage REIT
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In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
•
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 42 to 53 of the directors' report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of National Storage REIT for the year ended 30 June 2020,
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.
Ernst & Young
Ric Roach
Partner
Brisbane
25 August 2020
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Annual Report 2019 / 2020
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange and not shown elsewhere in this
report is as follows. The information is current as at 31 July 2020 unless stated below:
(a) Distribution of equity securities
Analysis of numbers of ordinary fully paid stapled security holders by size of holding:
Holding
1
1,001
5,001
10,001
100,001
Total
- 1,000
- 5,000
- 10,000
- 100,000
- And over
Total
holders
1,330
1,767
1,245
2,668
149
7,159
There were 347 holders of less than a marketable parcel of stapled securities, representing 24,326 units.
(b) Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Perpetual Trustee Company Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
BNP Paribas Noms Pty Ltd (DRP)
Citicorp Nominees Pty Limited (Colonial First State Inv A/C)
Storcat Pty Ltd (Andrew Catsoulis Family A/C)
HSBC Custody Nominees (Australia) Limited – GSCO ECA
National Nominees Limited (N A/C)
Buttonwood Nominees Pty Ltd
Hooks Enterprises Pty Ltd (Hoeksema Superfund A/C)
HSBC Custody Nominees (Australia) Limited – A/C 2
Alex Queensland Pty Ltd (Catsoulis Development A/C)
Brispot Nominees Pty Ltd (House Head Nominee A/C)
Australian Executor Trustees Limited (IPS Super A/C)
Dynamic Supplies Investments Pty Ltd
BNP Paribas Noms (NZ) Ltd (DRP)
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd (DRP A/C)
Stapled Securities
Number
held
384,533,556
203,962,487
82,136,928
82,042,294
27,541,991
25,620,419
15,186,077
10,163,195
7,812,878
7,737,938
5,500,000
4,278,903
3,980,000
3,827,199
2,932,388
2,929,208
2,831,438
2,779,614
2,691,986
2,342,188
880,830,687
% of issued
securities
37.93
20.12
8.10
8.09
2.72
2.53
1.50
1.00
0.77
0.76
0.54
0.42
0.39
0.38
0.29
0.29
0.28
0.27
0.27
0.23
86.89
122
Unquoted equity securities
There are no unquoted securities.
(c) Substantial shareholders
Substantial securityholders, as at 14 July 2020, are set out below:
Name
Abacus Storage Funds Management Limited
Vanguard Investments Australia Ltd
MFS Investment Management
Number
held
82,042,294
70,245,586
53,078,824
Percentage
8.1%
6.9%
5.2%
(d) Voting rights
The voting rights attached to the ordinary fully paid stapled securities is one vote per stapled security.
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Annual Report 2019 / 2020 Investor Relations
National Storage REIT is listed on the Australian
Securities Exchange under the code NSR.
NATIONAL STORAGE REIT SECURITIES
A stapled security comprises:
• one share in National Storage Holdings
Limited; and
• one unit in the National Storage Property Trust,
stapled and traded together as one stapled
security.
CONTACT DETAILS
All changes of name, address, TFN, payment
instructions and document requests should be
directed to the registry.
SECURITIES REGISTRY
Computershare Investor Services Pty Limited
GPO Box 2975 Melbourne VIC 3001 Australia
Telephone: 1300 850 505 (Australia only)
International: +61 (0)3 9415 4000
Email using the online form: https://www-au.
computershare.com/Investor/#Contact/Enquiry
ELECTRONIC INFORMATION
By becoming an electronic investor and registering
your email address, you can receive via email
notifications and announcements, distribution
statements, taxation statements and annual reports.
SECURE ACCESS TO YOUR SECURITYHOLDING
You will need to have your securityholder reference
number or holder identification number (SRN/HIN)
available to access your holding details.
ONLINE
You can access your securityholding information
via link in the Investor Centre section of the
corporate website, www.nationalstorageinvest.
com.au, or via the Investor Centre link on registry
website at www. computershare.com. au. To view
your securityholding, you will need your SRN/HIN
and will be asked to verify your registered postcode
(inside Australia) or your country of residence
(outside Australia).
PHONE
You can confirm your holding balance, request
forms and access distribution and trading
information by phoning: 1300 850 505
(Australia only) or calling International:
+61 (0)3 9415 4000 (outside Australia).
DISTRIBUTION DETAILS
Distributions are expected to be paid within
8 to 10 weeks following the end of each semi
annual distribution period, which occur in June
and December each year. To ensure timely
receipt of your distributions, please consider
the following:
Direct Credit
NSR encourages securityholders to receive
distribution payments by direct credit. If you
wish to register for direct credit or update your
payment details, log in to your holding online
or telephone the registry on 1300 850 505
for assistance.
Tax File Number (TFN)
You are not required by law to provide your TFN,
Australian Business Number (ABN) or exemption
status. However, if you do not provide your TFN,
ABN or exemption, withholding tax at the highest
marginal rate for Australian resident members may
be deducted from distributions paid to you. If you
wish to update your TFN, ABN or exemption status,
log in to your holding online or telephone the registry
on 1300 850 505 for assistance.
UNPRESENTED CHEQUES
If you believe you have unpresented cheques,
please contact the registry and request a search
to assist in recovering your funds. If you wish to
register for direct credit or update your payment
details, log in to your holding online or telephone
the registry on 1300 850 505 for assistance.
ANNUAL TAXATION STATEMENT AND TAX GUIDE
The Annual Taxation Statement and Tax Guide
are dispatched to securityholders in August
each year. A copy of the Tax Guide is available
at www.nationalstorageinvest.com.au.
INVESTOR FEEDBACK
If you have any fund specific queries or
feedback please telephone NSR Investor
Relations on 1800 683 290. Please direct any
complaints in writing to NSR Company Secretary
at GPO Box 3239, Brisbane QLD 4001, Australia.
NSR CALENDAR
August
Full Year Results and Annual Report released.
September
Distribution paid for the six months ended 30 June.
Annual tax statements released.
Notice of Annual General Meeting released.
October
Annual General Meeting.
February
Half Year Results released.
Distribution paid for six months ended 31 December.
The dates listed above are indicative only
and subject to change.
Annual Report 2019 / 2020
125
Corporate Directory
National Storage Holdings Limited ACN 166 572 845 (“NSH” or the “Company”)
National Storage Property Trust ARSN 101 227 712 (“NSPT”)
together form the stapled entity National Storage REIT (“NSR” or the “Consolidated Group”)
RESPONSIBLE ENTITY OF NSPT
National Storage Financial Services Limited
(NSFSL)
ACN 600 787 246 AFSL 475 228
Level 16, 1 Eagle Street, Brisbane QLD 4000
DIRECTORS
Laurence Brindle
Anthony Keane
Howard Brenchley
Steven Leigh
Andrew Catsoulis
Claire Fidler
COMPANY SECRETARY
Claire Fidler
REGISTERED OFFICE
Level 16, 1 Eagle Street
Brisbane QLD 4000
PRINCIPAL PLACE OF BUSINESS
Level 16, 1 Eagle Street
Brisbane QLD 4000
SHARE REGISTRY
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Stapled Securities are quoted on the
Australian Securities Exchange (ASX)
AUDITORS
Ernst & Young
111 Eagle Street
Brisbane QLD 4000
Bluetooth Smart Access
Annual Report 2019 / 2020
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